(This measure has not been amended since it was introduced. The summary has been expanded because action occurred on the measure.)
Small Business Financing Improvements Act of 2008 - Title I: 7(a) Loan Program - (Sec. 101) Amends the Small Business Act to require trust certificates representing all or a portion of one or more small business loans guaranteed by the Small Business Administration (SBA) to be based on and backed by a trust or pool approved by the SBA Administrator and composed solely of the guaranteed portion of such loan(s). Makes the interest rate on such certificates either: (1) the lowest rate on any loan in the pool; or (2) the weighted average rate of all the pooled loans.
(Sec. 102) Directs the SBA to establish an optional loan size standard applicable to both 7(a) (SBA-guaranteed general business loans) borrowers and 504 (loans to small businesses funded by the SBA through certified development companies) borrowers, using net worth and average net income as loan size standards in lieu of industry standards.
Title II: 504 CDC Program - (Sec. 201) Provides definitions of "development company," "certified development company," and "rural area" under the Small Business Investment Act of 1958.
(Sec. 202) Provides criteria required before a development company may issue debentures for the financing of SBA-backed loans (and thereby be considered a certified development company, or CDC), including: (1) size (fewer than 500 employees, with an exception); (2) primary purpose and function; (3) nonprofit status; (4) good standing in the state in which it conducts business; (4) membership, board of directors, and professional management and staff; (5) area of operations; and (6) use of proceeds. Provides ethical requirements, including prohibited conflicts of interest in approved loans under the Certified Development Company Economic Development Loan Program.
(Sec. 204) Adds as an eligible purpose (public policy goal) of the SBA's development company loan program the expansion of businesses in low-income communities that would be eligible for new market tax credit investments under the Internal Revenue Code.
(Sec. 205) Allows a small business or corporation owned by more than one individual to qualify as minority-owned or veteran-owned for purposes of qualifying for a public policy goal loan if 51% or more of the business interest belongs to one or more individuals who are a minority or a veteran.
(Sec. 206) Allows CDC loan financing to include a limited amount of refinancing for debt not previously guaranteed by the SBA, if the project involves expansion of a small business which has existing indebtedness collateralized by fixed assets.
(Sec. 207) Allows small business borrowers using SBA loans for plant acquisition, construction, conversion, and expansion to contribute more equity to a project funded partially through a CDC, and to use the excess equity to reduce the amount of the non-CDC-funded portion of the loan.
(Sec. 208) Requires a CDC which elects not to foreclose and liquidate defaulted loans, or is determined ineligible to do so, to contract with a third party to carry out such foreclosures and liquidations. Provides for SBA reimbursement of such expenses.
(Sec. 209) Allows CDC borrowers to include administrative and closing costs (except attorney fees) within their loan amounts.
(Sec. 210) Authorizes a small business whose CDC or 7(a) loan includes the acquisition of a facility or construction of a new facility to lease up to 50% of the space in such facility.
Title III: Small Business Investment Company Program - (Sec. 301) Revises the maximum amount of outstanding leverage made available to: (1) any single company licensed under the Small Business Investment Company (SBIC) Program; and (2) two or more such companies that are commonly controlled and not under capital impairment.
(Sec. 302) Revises an SBIC company's maximum aggregate investment limit in a single business.
[Congressional Bills 110th Congress]
[From the U.S. Government Printing Office]
[H.R. 7175 Introduced in House (IH)]
110th CONGRESS
2d Session
H. R. 7175
To amend the Small Business Act to improve the section 7(a) lending
program, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 27, 2008
Ms. Velazquez (for herself, Mr. Chabot, Mr. David Davis of Tennessee,
Ms. Clarke, and Mr. Cuellar) introduced the following bill; which was
referred to the Committee on Small Business
_______________________________________________________________________
A BILL
To amend the Small Business Act to improve the section 7(a) lending
program, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Small Business
Financing Improvements Act of 2008''.
(b) Table of Contents.--
Sec. 1. Short title; table of contents.
TITLE I--7(a) LOAN PROGRAM
Sec. 101. Loan pooling.
Sec. 102. Alternative size standard.
TITLE II--504 CDC PROGRAM
Sec. 201. Definitions.
Sec. 202. Eligibility of development companies to be designated as
certified development companies.
Sec. 203. Definition of rural areas.
Sec. 204. Businesses in low-income areas.
Sec. 205. Combinations of certain goals.
Sec. 206. Refinancing.
Sec. 207. Additional equity injections.
Sec. 208. Loan liquidations.
Sec. 209. Closing costs.
Sec. 210. Uniform leasing policy.
TITLE III--SMALL BUSINESS INVESTMENT COMPANY PROGRAM
Sec. 301. Simplified maximum leverage limits.
Sec. 302. Simplified aggregate investment limitations.
TITLE I--7(a) LOAN PROGRAM
SEC. 101. LOAN POOLING.
Section 5(g)(1) of the Small Business Act (15 U.S.C. 634(g)(1)) is
amended--
(1) by inserting ``(A)'' before ``The Administration'';
(2) by striking the colon and all that follows and
inserting a period; and
(3) by adding at the end the following:
``(B) A trust certificate issued under subparagraph (A) shall be
based on, and backed by, a trust or pool approved by the Administrator
and composed solely of the guaranteed portion of such loans.
``(C) The interest rate on a trust certificate issued under
subparagraph (A) shall be either--
``(i) the lowest interest rate on any individual loan in
the pool; or
``(ii) the weighted average interest rate of all loans in
the pool, subject to such limited variations in loan
characteristics as the Administrator determines appropriate to
enhance marketability of the pool certificates.''.
SEC. 102. ALTERNATIVE SIZE STANDARD.
Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) is
amended by adding at the end the following:
``(5) Optional size standard.--
``(A) In general.--The Administrator shall
establish an optional size standard for business loan
applicants under section 7(a) and development company
loan applicants under title V of the Small Business
Investment Act of 1958, which uses maximum tangible net
worth and average net income as an alternative to the
use of industry standards.
``(B) Interim rule.--Until the date on which the
optional size standards established under subparagraph
(A) are in effect, the alternative size standard in
section 121.301(b) of title 13, Code of Federal
Regulations, or any successor thereto, may be used by
business loan applicants under section 7(a) and
development company loan applicants under title V of
the Small Business Investment Act of 1958.''.
TITLE II--504 CDC PROGRAM
SEC. 201. DEFINITIONS.
Section 103(6) of the Small Business Investment Act of 1958 (15
U.S.C. 662(6)) is amended to read as follows:
``(6) the term `development company' means an entity
incorporated under State law with the authority to promote and
assist the growth and development of small business concerns in
the areas in which it is authorized to operate by the
Administration, and the term `certified development company'
means a development company which the Administration has
determined meets the criteria of section 506;''.
SEC. 202. ELIGIBILITY OF DEVELOPMENT COMPANIES TO BE DESIGNATED AS
CERTIFIED DEVELOPMENT COMPANIES.
Section 506 of the Small Business Investment Act of 1958 (15 U.S.C.
697c) is amended to read as follows:
``SEC. 506. CERTIFIED DEVELOPMENT COMPANIES.
``(a) Authority To Issue Debentures.--A development company may
issue debentures pursuant to this Act if the Administration certifies
that the company meets the following criteria:
``(1) Size.--The development company is required to be a
small concern with fewer than 500 employees and not under the
control of any entity which does not meet the Administration's
size standards as a small business, except that any development
company which was certified by the Administration prior to
December 31, 2005 may continue to issue debentures.
``(2) Purpose.--The primary purpose of the development
company is to benefit the community by fostering economic
development to create and preserve jobs and stimulate private
investment.
``(3) Primary function.--The primary function of the
development company is to accomplish its purpose by providing
long-term financing to small businesses by the utilization of
the Certified Development Company Economic Development Loan
Program. It may also provide or support such other local
economic development activities to assist the community.
``(4) Non-profit status.--The development company is a non-
profit corporation, except that a development company certified
by the Administration prior to January 1, 1987, may retain its
status as a for-profit corporation.
``(5) Good standing.--The development company is in good
standing in its State of incorporation and in any other State
in which it conducts business, and is in compliance with all
laws, including taxation requirements, in its State of
incorporation and in any other State in which it conducts
business.
``(6) Membership.--The development company should have at
least 25 members (or stockholders if the corporation is a for-
profit entity), none of whom may own or control more than 20
percent of the company's voting membership, consisting of
representation from each of the following groups (none of which
are in a position to control the development company):
``(A) Government organizations that are responsible
for economic development.
``(B) Financial institutions that provide
commercial long-term fixed asset financing.
``(C) Community organizations that are dedicated to
economic development.
``(D) Businesses.
``(7) Board of directors.--The development company has a
board of directors that--
``(A) is elected from the membership by the
members;
``(B) should represent at least 3 of the 4 groups
enumerated in subsection (a)(6) with no group is in a
position to control the company; and
``(C) meets on a regular basis to make policy
decisions for such company.
``(8) Professional management and staff.--The development
company has full-time professional management, including a
chief executive officer to manage daily operations, and a full-
time professional staff qualified to market the Certified
Development Company Economic Development Loan Program and
handle all aspects of loan approval and servicing, including
liquidation, if appropriate. The development company is
required to be independently managed and operated to pursue its
economic development mission and to employ its chief executive
officer directly, with the following exceptions:
``(A) A development company may be an affiliate of
another local non-profit service corporation
(specifically excluding another development company)
whose mission is to support economic development in the
area in which the development company operates. In such
a case:
``(i) The development company may satisfy
the requirement for full-time professional
staff by contracting with a local non-profit
service corporation (or one of its non-profit
affiliates), or a governmental or quasi-
governmental agency, to provide the required
staffing.
``(ii) The development company and the
local non-profit service corporation may have
partially common boards of directors.
``(B) A development company in a rural area (as
defined in section 501(f)) shall be deemed to have
satisfied the requirements of a full-time professional
staff and professional management ability if it
contracts with another certified development company
which has such staff and management ability and which
is located in the same general area to provide such
services.
``(C) A development company that has been certified
by the Administration as of December 31, 2005, and that
has contracted with a for-profit company to provide
services as of such date may continue to do so.
``(b) Area of Operations.--The Administration shall specify the
area in which an applicant is certified to provide assistance to small
businesses under this title, which may not initially exceed its State
of incorporation unless it proposes to operate in a local economic area
which is required to include part of its State of incorporation and may
include adjacent areas within several States. After a development
company has demonstrated its ability to provide assistance in its area
of operations, it may request the Administration to be allowed to
operate in one or more additional States as a multi-State certified
development company if it satisfies the following criteria:
``(1) Each additional State is contiguous to the State of
incorporation, except the States of Alaska and Hawaii shall be
deemed to be contiguous to any State abutting the Pacific
ocean.
``(2) It demonstrates its proficiency in making and
servicing loans under the Certified Development Company
Economic Development Loan Program by--
``(A) requesting and receiving designation as an
accredited lender under section 507 or a premier
certified lender under section 508; and
``(B) meeting or exceeding performance standards
established by the Administration.
``(3) The development company adds to the membership of its
State of incorporation additional membership from each
additional State and the added membership meets the
requirements of subsection (a)(6).
``(4) The development company adds at least one member to
its board of directors in the State of incorporation, providing
that added member was selected by the membership of the
development company.
``(5) The company meets such other criteria or complies
with such conditions as the Administration deems appropriate.
``(c) Processing of Expansion Applications.--The Administration
shall respond to the request of a certified development company for
certification as a multi-State company on an expedited basis within 30
days of receipt of a completed application if the application
demonstrates that the development company meets the requirements of
subsection (b)(1) through (b)(4).
``(d) Use of Funds Limited to State Where Generated.--Any funds
generated by a not-for-profit development company from making loans
under the Certified Development Company Economic Development Loan
Program which remain after payment of staff, operating and overhead
expenses shall be retained by the development company as a reserve for
future operations, for expanding its area of operations in a local
economic area as authorized by the Administration, or for investment in
other local economic development activity in the State from which the
funds were generated.
``(e) Ethical Requirements.--
``(1) In general.--Certified development companies, their
officers, employees and other staff, shall at all times act
ethically and avoid activities which constitute a conflict of
interest or appear to constitute a conflict of interest. No one
may serve as an officer, director or chief executive officer of
more than one certified development company.
``(2) Prohibited conflict in project loans.--As part of a
project under the Certified Development Company Economic
Development Loan Program, no certified development company may
recommend or approve a guarantee of a debenture by the
Administration that is collateralized by a subordinated lien
position on the property being constructed or acquired and also
provide, or be affiliated with a corporation or other entity,
for-profit or non-profit, which provides, financing
collateralized by a prior lien on the same property. Upon
approval by the Administrator, a business development company
that was participating as a first mortgage lender, either
directly or through an affiliate, for the Certified Development
Company Economic Development Loan Program in either fiscal
years 2004 or 2005 may continue to do so.
``(3) Other economic development activities.--Operation of
multiple programs to assist small business concerns in order
for a certified development company to carry out its economic
development mission shall not be deemed a conflict of interest,
but notwithstanding any other provision of law, no development
company may accept funding from any source, including but not
limited to any department or agency of the United States
Government--
``(A) if such funding includes any conditions,
priorities or restrictions upon the types of small
businesses to which they may provide financial
assistance under this title; or
``(B) if it includes any conditions or imposes any
requirements, directly or indirectly, upon any
recipient of assistance under this title unless the
department or agency also provides all of the financial
assistance to be delivered by the development company
to the small business and such conditions, priorities
or restrictions are limited solely to the financial
assistance so provided.''.
SEC. 203. DEFINITION OF RURAL AREAS.
Section 501 of the Small Business Investment Act of 1958 (15 U.S.C.
695) is amended by adding at the end the following new subsection:
``(f) As used in subsection (d)(3)(D), the term `rural' shall
include any area other than--
``(1) a city or town that has a population greater than
50,000 inhabitants; and
``(2) the urbanized area contiguous and adjacent to such a
city or town.''.
SEC. 204. BUSINESSES IN LOW-INCOME AREAS.
Section 501(d)(3) of the Small Business Investment Act of 1958 (15
U.S.C. 695(d)(3)) is amended by inserting after ``business district
revitalization'' the following: ``or expansion of businesses in low-
income communities that would be eligible for new market tax credit
investments under section 45D of the Internal Revenue Code of 1986 (26
U.S.C. 45D)''.
SEC. 205. COMBINATIONS OF CERTAIN GOALS.
Section 501(e) of the Small Business Investment Act of 1958 (15
U.S.C. 695(e)) is amended by adding at the end the following:
``(7) A small business concern that is unconditionally
owned by more than one individual, or a corporation whose stock
is owned by more than one individual, is deemed to achieve a
public policy goal under subsection (d)(3) if a combined
ownership share of at least 51 percent is held by individuals
who are in one of the groups listed as public policy goals
specified in subsection (d)(3)(C) or (d)(3)(E).''.
SEC. 206. REFINANCING.
Section 502 of the Small Business Investment Act of 1958 (15 U.S.C.
696) is amended by adding at the end the following:
``(7) Permissible debt refinancing.--Any financing approved
under this title may also include a limited amount of debt
refinancing for debt that was not previously guaranteed by the
Administration. If the project involves expansion of a small
business which has existing indebtedness collateralized by
fixed assets, a limited amount may be refinanced and added to
the expansion cost, providing--
``(A) the proceeds of the indebtedness were used to
acquire land, including a building situated thereon, to
construct a building thereon or to purchase equipment;
``(B) the borrower has been current on all payments
due on the existing debt for at least the past year;
and
``(C) the financing under the Certified Development
Company Economic Development Loan Program will provide
better terms or rate of interest than now exists on the
debt.''.
SEC. 207. ADDITIONAL EQUITY INJECTIONS.
Clause (ii) of section 502(3)(B) of the Small Business Investment
Act of 1958 (15 U.S.C. 696(3)(B)) is amended to read as follows:
``(ii) Funding from institutions.--
``(I) If a small business concern
provides the minimum contribution
required under paragraph (C), not less
than 50 percent of the total cost of
any project financed pursuant to
clauses (i), (ii), or (iii) of
subparagraph (C) shall come from the
institutions described in subclauses
(I), (II), and (III) of clause (i).
``(II) If a small business concern
provides more than the minimum
contribution required under paragraph
(C), any excess contribution may be
used to reduce the amount required from
the institutions described in
subclauses (I), (II), and (III) of
clause (i) except that the amount from
such institutions may not be reduced to
an amount less than the amount of the
loan made by the Administration.''.
SEC. 208. LOAN LIQUIDATIONS.
Section 510 of the Small Business Investment Act of 1958 (15 U.S.C.
697g) is amended--
(1) by redesignating subsection (e) as subsection (g); and
(2) by inserting after subsection (d) the following:
``(e) Participation.--
``(1) Mandatory.--Any certified development company which
elects not to apply for authority to foreclose and liquidate
defaulted loans under this section or which the Administration
determines to be ineligible for such authority shall contract
with a qualified third-party to perform foreclosure and
liquidation of defaulted loans in its portfolio. The contract
shall be contingent upon approval by the Administration with
respect to the qualifications of the contractor, the terms and
conditions of liquidation activities, and the ability to
reimburse such contractor.
``(2) Commencement.--The provisions of this subsection
shall not require any development company to liquidate
defaulted loans until the Administration has adopted and
implemented a program to compensate and reimburse development
companies as provided under subsection (f).
``(f) Compensation and Reimbursement.--
``(1) Reimbursement of expenses.--The Administration shall
reimburse each certified development company for all expenses
paid by such company as part of the foreclosure and liquidation
activities if the expenses--
``(A) were approved in advance by the
Administration either specifically or generally; or
``(B) were incurred by the company on an emergency
basis without Administration prior approval but which
were reasonable and appropriate.
``(2) Compensation for results.--The Administration shall
develop a schedule to compensate and provide an incentive to
qualified State or local development companies which foreclose
and liquidate defaulted loans. The schedule shall be based on a
percentage of the net amount recovered but shall not exceed a
maximum amount. The schedule shall not apply to any foreclosure
which is conducted pursuant to a contract between a development
company and a qualified third-party to perform the foreclosure
and liquidation.''.
SEC. 209. CLOSING COSTS.
Paragraph (4) of section 503(b) of the Small Business Investment
Act of 1958 (15 U.S.C. 697(b)) is amended to read as follows:
``(4) the aggregate amount of such debenture does not
exceed the amount of loans to be made from the proceeds of such
debenture plus, at the election of the borrower under the
Certified Development Company Economic Development Loan
Program, other amounts attributable to the administrative and
closing costs of such loans, except for the borrower's attorney
fees;''.
SEC. 210. UNIFORM LEASING POLICY.
(a) In General.--Section 502 of the Small Business Investment Act
of 1958 (15 U.S.C. 696) is amended--
(1) by striking paragraphs (4) and (5) and inserting the
following:
``(4) Limitation on leasing.--If the use of a loan under
this section includes the acquisition of a facility or the
construction of a new facility, the small business concern
assisted--
``(A) shall permanently occupy and use not less
than a total of 50 percent of the space in the
facility; and
``(B) may, on a temporary or permanent basis, lease
to others not more than 50 percent of the space in the
facility.''; and
(2) by redesignating paragraph (6) as paragraph (5).
(b) Policy for 7(a) Loans.--Section 7(a)(28) of the Small Business
Act (15 U.S.C. 636(a)(28)) is amended to read as follows:
``(28) Limitation on leasing.--If the use of a loan under
this subsection includes the acquisition of a facility or the
construction of a new facility, the small business concern
assisted--
``(A) shall permanently occupy and use not less
than a total of 50 percent of the space in the
facility; and
``(B) may, on a temporary or permanent basis, lease
to others not more than 50 percent of the space in the
facility.''.
TITLE III--SMALL BUSINESS INVESTMENT COMPANY PROGRAM
SEC. 301. SIMPLIFIED MAXIMUM LEVERAGE LIMITS.
Section 303(b) of the Small Business Investment Act of 1958 (15
U.S.C. 683(b)) is amended--
(1) by striking paragraph (2) and inserting the following:
``(2) Maximum leverage.--
``(A) In general.--The maximum amount of
outstanding leverage made available to any one company
licensed under section 301(c) of this Act may not
exceed the lesser of--
``(i) 300 percent of such company's private
capital; or
``(ii) $150,000,000.
``(B) Multiple licenses under common control.--The
maximum amount of outstanding leverage made available
to two or more companies licensed under section 301(c)
of this Act that are commonly controlled (as determined
by the Administrator) and not under capital impairment
may not exceed $225,000,000.''; and
(2) by striking paragraph (4).
SEC. 302. SIMPLIFIED AGGREGATE INVESTMENT LIMITATIONS.
Section 306(a) of the Small Business Investment Act of 1958 (15
U.S.C. 686(a)) is amended to read as follows:
``(a) Percentage Limitation on Private Capital.--If any small
business investment company has obtained financing from the
Administration and such financing remains outstanding, the aggregate
amount of securities acquired and for which commitments may be issued
by such company under the provisions of this title for any single
enterprise shall not, without the approval of the Administration,
exceed 10 percent of the sum of--
``(1) the private capital of such company; and
``(2) the total amount of leverage projected by the company
in the company's business plan that was approved by the
Administration at the time of the grant of the company's
license.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Small Business.
Ms. Velazquez moved to suspend the rules and pass the bill.
Considered under suspension of the rules. (consideration: CR H10224-10228)
DEBATE - The House proceeded with forty minutes of debate on H.R. 7175.
At the conclusion of debate, the chair put the question on the motion to suspend the rules. Mr. Chabot objected to the vote on the grounds that a quorum was not present. Further proceedings on the motion were postponed. The point of no quorum was withdrawn.
Considered as unfinished business. (consideration: CR H10411-10412)
Passed/agreed to in House: On motion to suspend the rules and pass the bill Agreed to by the Yeas and Nays: (2/3 required): 374 - 6 (Roll no. 675).(text: CR 9/27/2008 H10224-10226)
Roll Call #675 (House)On motion to suspend the rules and pass the bill Agreed to by the Yeas and Nays: (2/3 required): 374 - 6 (Roll no. 675). (text: CR 9/27/2008 H10224-10226)
Roll Call #675 (House)Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line
Motion to reconsider laid on the table Agreed to without objection.
Received in the Senate.