This compilation includes
PL 108‑447, approved 12/8/04.
SMALL BUSINESS ACT
(Public Law 85‑536, as amended)
§ 1. This Act may be cited as the "Small Business Act".
§ 2. (a) The essence of the American economic system of private enterprise is free competition. Only through full and free competition can free markets, free entry into business, and opportunities for the expression and growth of personal initiative and individual judgment be assured. The preservation and expansion of such competition is basic not only to the economic well‑being but to the security of this Nation. Such security and well‑being cannot be realized unless the actual and potential capacity of small business is encouraged and developed. It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small‑business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation.
(b) (1) It is the declared policy of the Congress that the Federal Government, through the Small Business Administration, acting in cooperation with the Department of Commerce and other relevant State and Federal agencies, should aid and assist small businesses, as defined under this Act, to increase their ability to compete in international markets by—
(A) enhancing their ability to export;
(B) facilitating technology transfers;
(C) enhancing their ability to compete effectively and efficiently against imports;
(D) increasing the access of small businesses to long‑term capital for the purchase of new plant and equipment used in the production of goods and services involved in international trade;
(E) disseminating information concerning State, Federal, and private programs and initiatives to enhance the ability of small businesses to compete in international markets; and
(F) ensuring that the interests of small businesses are adequately represented in bilateral and multilateral trade negotiations.
(2) The Congress recognizes that the Department of Commerce is the principal Federal agency for trade development and export promotion and that the Department of Commerce and the Small Business Administration work together to advance joint interests. It is the purpose of this Act to enhance, not alter, their respective roles.
(c) It is the declared policy of the Congress that the Government, through the Small Business Administration, should aid and assist small business concerns which are engaged in the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural related industries; and the financial assistance programs authorized by this Act are also to be used to assist such concerns.
(d) (1) The assistance programs authorized by sections 7(i) and 7(j) of this Act are to be utilized to assist in the establishment, preservation, and strengthening of small business concerns and improve the managerial skills employed in such enterprises, with special attention to small business concerns (1) located in urban or rural areas with high proportions of unemployed or low‑income individuals; or (2) owned by low‑income individuals; and to mobilize for these objectives private as well as public managerial skills and resources.
(2) (A) With respect to the programs authorized by section 7(j) of this Act, the Congress finds—
(i) that ownership and control of productive capital is concentrated in the economy of the United States and certain groups, therefore, own and control little productive capital;
(ii) that certain groups in the
(iii) that the broadening of small business ownership among groups that presently own and control little productive capital is essential to provide for the well‑being of this Nation by promoting their increased participation in the free enterprise system of the United States;
(iv) that such development of business ownership among groups that presently own and control little productive capital will be greatly facilitated through the creation of a small business ownership development program, which shall provide services, including, but not limited to, financial, management, and technical assistance.
(v) that the power to let Federal contracts pursuant to section 8(a) of the Small Business Act can be an effective procurement assistance tool for development of business ownership among groups that own and control little productive capital; and
(vi) that the procurement authority under section 8(a) of the Small Business Act shall be used only as a tool for developing business ownership among groups that own and control little productive capital.
(B) It is therefore the purpose of the programs authorized by section 7(j) of this Act to—
(i) foster business ownership and development by individuals in groups that own and control little productive capital; and
(ii) promote the competitive viability of such firms in the marketplace by creating a small business and capital ownership development program to provide such available financial, technical, and management assistance as may be necessary.
(e) Further, it is the declared policy of the Congress that the Government should aid and assist victims of floods and other catastrophes, and small‑business concerns which are displaced as a result of federally aided construction programs.
(f) (1) With respect to the Administration's business development programs the Congress finds—
(A) that the opportunity for full participation in our free enterprise system by socially and economically disadvantaged persons is essential if we are to obtain social and economic equality for such persons and improve the functioning of our national economy;
(B) that many such persons are socially disadvantaged because of their identification as members of certain groups that have suffered the effects of discriminatory practices or similar invidious circumstances over which they have no control;
(C) that such groups include, but are not limited to, Black Americans, Hispanic Americans, Native Americans, Indian tribes, Asian Pacific Americans, Native Hawaiian Organizations, and other minorities;
(D) that it is in the national interest to expeditiously ameliorate the conditions of socially and economically disadvantaged groups;
(E) that such conditions can be improved by providing the maximum practicable opportunity for the development of small business concerns owned by members of socially and economically disadvantaged groups;
(F) that such development can be materially advanced through the procurement by the United States of articles, equipment, supplies, services, materials, and construction work from such concerns; and
(G) that such procurements also benefit the
(2) It is, therefore, the purpose of section 8(a) to—
(A) promote the business development of small business concerns owned and controlled by socially and economically disadvantaged individuals so that such concerns can compete on an equal basis in the American economy;
(B) promote the competitive viability of such concerns in the marketplace by providing such available contract, financial, technical, and management assistance as may be necessary; and
(C) clarify and expand the program for the
procurement by the
(g) In administering the disaster loan program authorized by section 7 of this Act, to the maximum extent possible, the Administration shall provide assistance and counseling to disaster victims in filing applications, providing information relevant to loan processing, and in loan closing and prompt disbursement of loan proceeds and shall give the disaster program a high priority in allocating funds for administrative expenses.
(h) (1) With respect to the programs and activities authorized by this Act, the Congress finds that—
(A) women owned business has become a major contributor to the American economy by providing goods and services, revenues, and jobs;
(B) over the past two decades there have been substantial gains in the social and economic status of women as they have sought economic equality and independence;
(C) despite such progress, women, as a group, are subjected to discrimination in entrepreneurial endeavors due to their gender;
(D) such discrimination takes many overt and subtle forms adversely impacting the ability to raise or secure capital, to acquire managerial talents, and to capture market opportunities;
(E) it is in the national interest to expeditiously remove discriminatory barriers to the creation and development of small business concerns owned and controlled by women;
(F) the removal of such barriers is essential to provide a fair opportunity for full participation in the free enterprise system by women and to further increase the economic vitality of the Nation;
(G) increased numbers of small business concerns owned and controlled by women will directly benefit the United States Government by expanding the potential number of suppliers of goods and services to the Government; and
(H) programs and activities designed to assist small business concerns owned and controlled by women must be implemented in such a way as to remove such discriminatory barriers while not adversely affecting the rights of socially and economically disadvantaged individuals.
(2) It is, therefore, the purpose of those programs and activities conducted under the authority of this Act that assist women entrepreneurs to‑‑
(A) vigorously promote the legitimate interests of small business concerns owned and controlled by women;
(B) remove, insofar as possible, the discriminatory barriers that are encountered by women in accessing capital and other factors of production; and
(C) require that the Government engage in a systematic and sustained effort to identify, define and analyze those discriminatory barriers facing women and that such effort directly involve the participation of women business owners in the public/private sector partnership.
(i) PROHIBITION ON THE USE OF FUNDS FOR INDIVIDUALS NOT LAWFULLY WITHIN THE UNITED STATES.—None of the funds made available pursuant to this Act may be used to provide any direct benefit or assistance to any individual in the United States if the Administrator or the official to which the funds are made available receives notification that the individual is not lawfully within the United States.
(j) CONTRACT BUNDLING.—In complying with the statement of congressional policy expressed in subsection (a), relating to fostering the participation of small business concerns in the contracting opportunities of the Government, each Federal agency, to the maximum extent practicable, shall—
(1) comply with congressional intent to foster the participation of small business concerns as prime contractors, subcontractors, and suppliers;
(2) structure its contracting requirements to facilitate competition by and among small business concerns, taking all reasonable steps to eliminate obstacles to their participation; and
(3) avoid unnecessary and unjustified bundling of contract requirements that precludes small business participation in procurements as prime contractors.
§ 3 (a) (1) For the purposes of this Act, a small‑business concern, including but not limited to enterprises that are engaged in the business of production of food and fiber, ranching and raising of livestock, aquaculture, and all other farming and agricultural related industries, shall be deemed to be one which is independently owned and operated and which is not dominant in its field of operation: Provided, That notwithstanding any other provision of law, an agricultural enterprise shall be deemed to be a small business concern if it (including its affiliates) has annual receipts not in excess of $750,000.
(2) ESTABLISHMENT OF SIZE STANDARDS.—
(A) IN GENERAL.—In addition to the criteria specified in paragraph (1), the Administrator may specify detailed definitions or standards by which a business concern may be determined to be a small business concern for the purposes of this Act or any other Act.
(B) ADDITIONAL CRITERIA.—The standards described in paragraph (1) may utilize number of employees, dollar volume of business, net worth, net income, a combination thereof, or other appropriate factors.
(C) REQUIREMENTS.—Unless specifically authorized by statute, no Federal department or agency may prescribe a size standard for categorizing a business concern as a small business concern, unless such proposed size standard—
(i) is proposed after an opportunity for public notice and comment;
(ii) provides for determining—
(I) the size of a manufacturing concern as measured by the manufacturing concern's average employment based upon employment during each of the manufacturing concern's pay periods for the preceding 12 months;
(II) the size of a business concern providing services on the basis of the annual average gross receipts of the business concern over a period of not less than 3 years;
(III) the size of other business concerns on the basis of data over a period of not less than 3 years; or
(IV) other appropriate factors; and
(iii) is approved by the Administrator.
(3) When establishing or approving any size standard pursuant to paragraph (2), the Administrator shall ensure that the size standard varies from industry to industry to the extent necessary to reflect the differing characteristics of the various industries and consider other factors deemed to be relevant by the Administrator.
(b) for purposes of this Act, any reference to an agency or department of the United States, and the term " Federal agency", shall have the meaning given the term "agency" by section 551(1) of title 5, United States Code, but does not include the United States Postal Service or the General Accounting Office.
(c) (1) For purposes of this Act, a qualified employee trust shall be eligible for any loan guarantee under section 7(a) with respect to a small business concern on the same basis as if such trust were the same legal entity as such concern.
(2) For purposes of this Act, the term "qualified employee trust" means, with respect to a small business concern, a trust—
(A) which forms part of an employee stock ownership plan (as defined in section 4975(e)(7) of the Internal Revenue Code of 1954)—
(i) which is maintained by such concern, and
(ii) which provides that each participant in the plan is entitled to direct the plan as to the manner in which voting rights under qualifying employer securities (as defined in section 4975(e)(8) of such Code) which are allocated to the account of such participant are to be exercised with respect to a corporate matter which (by law or charter) must be decided by a majority vote of outstanding common shares voted; and
(B) in the case of any loan guarantee under section 7(a), the trustee of which enters into an agreement with the Administrator which is binding on the trust and on such small business concern and which provides that—
(i) the loan guaranteed under section 7(a) shall be used solely for the purchase of qualifying employer securities of such concern,
(ii) all funds acquired by the concern in such purchase shall be used by such concern solely for the purposes for which such loan was guaranteed,
(iii) such concern will provide such funds as may be necessary for the timely repayment of such loan, and the property of such concern shall be available as security for repayment of such loan, and
(iv) all qualifying employer securities acquired by such trust in such purchase shall be allocated to the accounts of participants in such plan who are entitled to share in such allocation, and each participant has a nonforfeitable right, not later than the date such loan is repaid, to all such qualifying employer securities which are so allocated to the participant's account.
(3) Under regulations which may be prescribed by the Administrator, a trust may be treated as a qualified employee trust with respect to a small business concern if—
(A) the trust is maintained by an employee organization which represents at least 51 percent of the employees of such concern, and
(B) such concern maintains a plan—
(i) which is an employee benefit plan which is designed to invest primarily in qualifying employer securities (as defined in section 4975(e)(8) of the Internal Revenue Code of 1954),
(ii) which provides that each participant in the plan is entitled to direct the plan as to the manner in which voting rights under qualifying employer securities which are allocated to the account of such participant are to be exercised with respect to a corporate matter which (by law or charter) must be decided by a majority vote of the outstanding common shares voted,
(iii) which provides that each participant who is entitled to distribution from the plan has a right, in the case of qualifying employer securities which are not readily tradable on an established market, to require that the concern repurchase such securities under a fair valuation formula, and
(iv) which meets such other requirements (similar to requirements applicable to employee stock ownership plans as defined in section 4975(e)(7) of the Internal Revenue Code of 1954) as the Administrator may prescribe, and
(C) in the case of a loan guarantee under section 7(a), such organization enters into an agreement with the Administration which is described in paragraph (2)(B).
(d) For purposes of section 7 of this Act, the term "qualified Indian tribe" means an Indian tribe as defined in section 4(a) of the Indian Self-Determination and Education Assistance Act, which owns and controls 100 per centum of a small business concern.
(e) For purposes of section 7 of this Act, the term "public or private organization for the handicapped" means one—
(1) which is organized under the laws of the United States or of any State, operated in the interest of handicapped individuals, the net income of which does not inure in whole or in part to the benefit of any shareholder or other individual;
(2) which complies with any applicable occupational health and safety standard prescribed by the Secretary of Labor; and
(3) which, in the production of commodities and in the provision of services during any fiscal year in which it received financial assistance under this subsection, employs handicapped individuals for not less than 75 per centum of the man‑hours required for the production or provision of the commodities or services.
(f) For purposes of section 7 of this Act, the term “handicapped individual” means an individual—
(1) who has a physical, mental, or emotional impairment, defect, ailment, disease, or disability of a permanent nature which in any way limits the selection of any type of employment for which the person would otherwise be qualified or qualifiable; or
(2) who is a service-disabled veteran.
(g) For purposes of section 7 of this Act, the term "energy measures" includes—
(1) solar thermal energy equipment which is either of the active type based upon mechanically forced energy transfer or of the passive type based on convective, conductive, or radiant energy transfer or some combination of these types;
(2) photovoltaic cells and related equipment;
(3) a product or service the primary purpose of which is conservation of energy through devices or techniques which increase the energy efficiency of existing equipment, methods of operation, or systems which use fossil fuels, and which is on the Energy Conservation Measures list of the Secretary of Energy or which the Administrator determines to be consistent with the intent of this subsection;
(4) equipment the primary purpose of which is production of energy from wood, biological waste, grain or other biomass source of energy;
(5) equipment the primary purpose of which is industrial cogeneration of energy, district heating, or production of energy from industrial waste;
(6) hydroelectric power equipment;
(7) wind energy conversion equipment; and
(8) engineering, architectural, consulting, or other professional services which are necessary or appropriate to aid citizens in using any of the measures described in paragraph (1) through (7).
(h) For purposes of this Act, the term "credit elsewhere" means the availability of credit from non‑Federal sources on reasonable terms and conditions taking into consideration the prevailing rates and terms in the community in or near where the concern transacts business, or the homeowner resides, for similar purposes and periods of time.
(i) For purposes of section 7 of this Act, the term "homeowners" includes owners and lessees of residential property and also includes personal property.
(j) For the purposes of this Act, the term "small agricultural cooperative" means an association (corporate or otherwise) acting pursuant to the provisions of the Agricultural Marketing Act (12 U.S.C. 1141(j), whose size does not exceed the size standard established by the Administration for other similar agricultural small business concerns. In determining such size, the Administration shall regard the association as a business concern and shall not include the income or employees of any member shareholder of such cooperative.
(k) For the purposes of this Act, the term "disaster" means a sudden event which causes severe damage including, but not limited to, floods, hurricanes, tornadoes, earthquakes, fires, explosions, volcanoes, windstorms, landslides or mudslides, tidal waves, commercial fishery failures or fishery resource disasters (as determined by the Secretary of Commerce under section 308(b) of the Interjurisdictional Fisheries Act of 1986), ocean conditions resulting in the closure of customary fishing waters, riots, civil disorders or other catastrophes, except it does not include economic dislocations.
(l) For purposes of this Act—
(1) The term "computer crime" means—
(A) any crime committed against a small business concern by means of the use of a computer; and
(B) any crime involving the illegal use of, or tampering with, a computer owned or utilized by a small business concern.
(m) For purposes of this Act, the term "simplified acquisition threshold" has the meaning given such term in section 4(11) of the Office of Federal Procurement Policy Act (41 USC 403(11)).
(n) For the purposes of this Act, a small business concern is a small business concern owned and controlled by women if—
(1) at least 51 percent of small business concern is owned by one or more women or, in the case of any publicly owned business at least 51 percent of the stock of which is owned by one or more women; and
(2) the management and daily business operations of the business are controlled by one or more women.
(o) DEFINITIONS OF BUNDLING OF CONTRACT REQUIREMENTS AND RELATED TERMS.—In this Act:
(1) BUNDLED CONTRACT.—The term “bundled contract” means a contract that is entered into to meet requirements that are consolidated in a bundling of contract requirements.
(2) BUNDLING OF CONTRACT REQUIREMENTS.—The term “bundling of contract requirements” means consolidating 2 or more procurement requirements for goods or services previously provided or performed under separate smaller contracts into a solicitation of offers for a single contract that is likely to be unsuitable for award to a small-business concern due to—
(A) the diversity, size, or specialized nature of the elements of the performance specified;
(B) the aggregate dollar value of the anticipated award;
(C) the geographical dispersion of the contract performance sites; or
(D) any combination of the factors described in subparagraphs (A), (B), and (C).
(3) SEPARATE SMALL CONTRACT.—The term “separate smaller contract”, with respect to a bundling of contract requirements, means a contract that has been performed by 1 or more small business concerns or was suitable for award to 1 or more small business concerns.
(p) DEFINITIONS RELATING TO HUBZONES.—In this Act:
(1) HISTORICALLY UNDERUTILIZED BUSINESS ZONE.—The term “historically underutilized business zone” means any area located within 1 or more—
(A) qualified census tracts;
(B) qualified nonmetropolitan counties;
(C) lands within the external boundaries of an Indian reservation;
(D) redesignated areas; or
(E) base closure areas.
(2) HUBZONE.—The term “HUBZone” means a historically underutilized business zone.
(3) HUBZONE SMALL BUSINESS CONCERN.—The term “HUBZone small business concern” means—
(A) a small business concern that is at least
51 percent owned and controlled by
(B) a small business concern that is—
(i) an Alaska Native Corporation owned and controlled by Natives (as determined pursuant to section 29(e)(1) of the Alaska Native Claims Settlement Act (43 U.S.C. 1626(e)(1))); or
(ii) a direct or indirect subsidiary corporation, joint venture, or partnership of an Alaska Native Corporation qualifying pursuant to section 29(e)(1) of the Alaska Native Claims Settlement Act (43 U.S.C. 1626(e)(1)), if that subsidiary, joint venture, or partnership is owned and controlled by Natives (as determined pursuant to section 29(e)(2) of the Alaska Native Claims Settlement Act (43 U.S.C. 1626(e)(2)));
(C) a small business concern—
(i) that is wholly owned by 1 or more Indian tribal governments, or by a corporation that is wholly owned by 1 or more Indian tribal governments; or
(ii) that is owned in part by 1 or more Indian tribal governments, or by a corporation that is wholly owned by 1 or more Indian tribal governments, if all other owners are either United States citizens or small business concerns;
(D) a small business concern that is—
(i) wholly owned by a community development corporation that has received financial assistance under Part 1 of Subchapter A of the Community Economic Development Act of 1981 (41 U.S.C. 9805 et seq.); or
(ii) owned in part by 1 or more community development corporations, if all other owners are either United States citizens or small business concerns; or
(E) a small business concern that is—
(i) a small
agricultural cooperative organized or incorporated in the
(ii) wholly owned by 1 or more small
agricultural cooperatives organized or incorporated in the
(iii) owned in part by 1 or more small
agricultural cooperatives organized or incorporated in the
(4) QUALIFIED AREAS—
(A) QUALIFIED CENSUS TRACT.—The term “qualified census tract” has the meaning given that term in section 42(d)(5)(C)(ii) of the Internal Revenue Code of 1986.
(B) QUALIFIED NONMETROPOLITAN COUNTY.—The term “qualified nonmetropolitan county” means any county—
(i) that was not located in a metropolitan statistical area (as defined in section 143(k)(2)(B) of the Internal Revenue Code of 1986) at the time of the most recent census taken for purposes of selecting qualified census tracts under section 42(d)(5)(C)(ii) of the Internal Revenue Code of 1986; and
(ii) in which—
(I) the median household income is less than 80 percent of the nonmetropolitan State median household income, based on the most recent data available from the Bureau of the Census of the Department of Commerce; or
(II) the unemployment rate is not less than
140 percent of the average unemployment rate for the
(C) REDESIGNATED AREA.—The term “redesignated
area” means any census tract that ceases to be qualified under subparagraph (A)
and any nonmetropolitan county that ceases to be qualified under subparagraph
(B), except that a census tract or a nonmetropolitan county may be a
“redesignated area” only until the later of—
(i) the date on
which the Census Bureau publicly releases the first results from the 2010
decennial census; or
(ii) 3 years after the date on which the census tract or nonmetropolitan county ceased to be so qualified.
(D) BASE CLOSURE AREA.—The term “base closure area” means lands within the external boundaries of a military installation that were closed through a privatization process under the authority of—
(i) the Defense
Base Closure and Realignment Act of 1990
(part A of title XXIX of division B of Public Law 101-510; 10 U.S.C. 2687
note);
(ii) title II of the Defense Authorization
Amendments and Base Closure and Realignment Act (Public Law 100-526; 10 U.S.C.
2687 note);
(iii) section 2687 of title 10, United States
Code; or
(iv) any other provision of law authorizing or directing the Secretary of Defense or the Secretary of a military department to dispose of real property at the military installation for purposes relating to base closures of [sic] redevelopment, while retaining the authority to enter into a leaseback of all or a portion of the property for military use.
(5) QUALIFIED HUBZONE SMALL BUSINESS CONCERN—
(A) IN GENERAL.—A HUBZone small business concern is “qualified”, if—
(i) the small business concern has certified in writing to the Administrator (or the Administrator otherwise determines, based on information submitted to the Administrator by the small business concern, or based on certification procedures, which shall be established by the Administration by regulation) that—
(I) it is a HUBZone small business concern—
(aa) pursuant to subparagraph (A), (B), (C), (D) or (E) of paragraph (3), and that its principal office is located in a HUBZone and not fewer than 35 percent of its employees reside in a HUBZone; or
(bb) pursuant to paragraph (3)(C), and not fewer than 35 percent of its employees engaged in performing a contract awarded to the small business concern on the basis of a preference provided under section 31(b) reside within any Indian reservation governed by 1 or more of the tribal government owners, or reside within any HUBZone adjoining any such Indian reservation;
(II) the small business concern will attempt to maintain the applicable employment percentage under subclause (I) during the performance of any contract awarded to the small business concern on the basis of a preference provided under section 31(b); and
(III) with respect to any subcontract entered into by the small business concern pursuant to a contract awarded to the small business concern under section 31, the small business concern will ensure that—
(aa) in the case of a contract for services (except construction), not less than 50 percent of the cost of contract performance incurred for personnel will be expended for its employees or for employees of other HUBZone small business concerns;
(bb) in the case of a contract for procurement of supplies (other than procurement from a regular dealer in such supplies), not less than 50 percent of the cost of manufacturing the supplies (not including the cost of materials) will be incurred in connection with the performance of the contract in a HUBZone by 1 or more HUBZone small business concerns;
(cc) in the case of a contract for the procurement by the Secretary of Agriculture of agricultural commodities, none of the commodity being procured will be obtained by the prime contractor through a subcontractor for the purchase of the commodity in substantially the final form in which it is to be supplied to the Government; and
(ii) no certification made or information provided by the small business concern under clause (i) has been, in accordance with the procedures established under section 31(c)(1)—
(I) successfully challenged by an interested party; or
(II) otherwise determined by the Administrator to be materially false.
(B) CHANGE IN PERCENTAGES.—The Administrator may utilize a percentage other than the percentage specified in under [sic] item (aa) or (bb) of subparagraph (A)(i)(III), if the Administrator determines that such action is necessary to reflect conventional industry practices among small business concerns that are below the numerical size standard for businesses in that industry category.
(C) CONSTRUCTION AND OTHER CONTRACTS.—The Administrator shall promulgate final regulations imposing requirements that are similar to those specified in items (aa) and (bb) of subparagraph (A)(i)(III) on contracts for general and specialty construction, and on contracts for any other industry category that would not otherwise be subject to those requirements. The percentage applicable to any such requirement shall be determined in accordance with subparagraph (B).
(D) LIST OF QUALIFIED SMALL BUSINESS CONCERNS.—The Administrator shall establish and maintain a list of qualified HUBZone small business concerns, which list shall, to the extent practicable—
(i) once the Administrator has made the certification required by subparagraph (A)(i) regarding a qualified HUBZone small business concern and has determined that subparagraph (A)(ii) does not apply to that concern, include the name, address, and type of business with respect to each such small business concern;
(ii) be updated by the Administrator not less than annually; and
(iii) be provided upon request to any Federal agency or other entity.
(6) NATIVE AMERICAN SMALL BUSINESS CONCERNS.—
(A) ALASKA NATIVE CORPORATION.—The term “Alaska Native Corporation” has the same meaning as the term “Native Corporation” in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602).
(B) ALASKA NATIVE VILLAGE.—The term “Alaska Native Village” has the same meaning as the term “Native village” in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602).
(C) INDIAN RESERVATION.—The term “Indian reservation”—
(i) has the same meaning as the term “Indian country” in section 1151 of title 18, United States Code, except that such term does not include—
(I) any lands that are located within a State in which a tribe did not exercise governmental jurisdiction on the date of enactment of this paragraph, unless that tribe is recognized after that date of enactment by either an Act of Congress or pursuant to regulations of the Secretary of the Interior for the administrative recognition that an Indian group exists as an Indian tribe (part 83 of title 25, Code of Federal Regulations); and
(II) lands taken into trust or acquired by an Indian tribe after the date of enactment of this paragraph if such lands are not located within the external boundaries of an Indian reservation or former reservation or are not contiguous to the lands held in trust or restricted status on that date of enactment; and
(ii) in the State of
(I) are within the jurisdictional areas of an Oklahoma Indian tribe (as determined by the Secretary of the Interior); and
(II) are recognized by the Secretary of the Interior as eligible for trust land status under part 151 of title 25, Code of Federal Regulations (as in effect on the date of enactment of this paragraph).
(7) AGRICULTURAL COMMODITY.—The term “agricultural commodity” has the same meaning as in section 102 of the Agricultural Trade Act of 1978 (7 U.S.C. 5602).
(q) DEFINITIONS RELATING TO VETERANS.—In this Act, the following definitions apply:
(1) SERVICE-DISABLED VETERAN.—The term “service-disabled veteran” means a veteran with a disability that is service-connected (as defined in section 101(16) of title 38, United States Code).
(2) SMALL BUSINESS CONCERN OWNED AND CONTROLLED BY SERVICE-DISABLED VETERANS.—The term “small business concern owned and controlled by service-disabled veterans” means a small business concern—
(A) not less than 51 percent of which is owned by one or more service-disabled veterans or, in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more service-disabled veterans; and
(B) the management and daily business operations of which are controlled by one or more service-disabled veterans or, in the case of a veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran.
(3) SMALL BUSINESS CONCERN OWNED AND CONTROLLED BY VETERANS.—The term “small business concern owned and controlled by veterans” means a small business concern—
(A) not less than 51 percent of which is owned by one or more veterans or, in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more veterans; and
(B) the management and daily business operations of which are controlled by one or more veterans.
(4) VETERAN.—The term “veteran” has the meaning given the term in section 101(2) of title 38, United States Code.
(r) DEFINITIONS
RELATING TO SMALL BUSINESS LENDING COMPANIES.—As used in section 23 of this
Act:
(1) SMALL BUSINESS LENDING COMPANY.—The term
“small business lending company” means a business concern that is authorized by
the Administrator to make loans pursuant to section 7(a) and whose lending
activities are not subject to regulation by any Federal or State regulatory
agency.
(2) NON-FEDERALLY REGULATED SBA LENDER.—The
term “non-Federally regulated SBA lender” means a business concern if—
(A) such concern is authorized by the
Administrator to make loans under section 7;
(B) such concern is subject to regulation by
a State; and
(C) the lending activities of such concern are not regulated by any Federal banking authority.
§ 4. (a) In order to carry out the policies of
this Act there is hereby created an agency under the name "Small Business
Administration" (herein referred to as the Administration), which
Administration shall be under the general direction and supervision of the
President and shall not be affiliated with or be within any other agency or
department of the Federal Government. The principal office of the
Administration shall be located in the
(b) (1) The management of the Administration shall be vested in an Administrator who shall be appointed from civilian life by the President, by and with the advice and consent of the Senate, and who shall be a person of outstanding qualifications known to be familiar and sympathetic with small‑business needs and problems. The Administrator shall not engage in any other business, vocation, or employment than that of serving as Administrator. In carrying out the programs administered by the Small Business Administration including its lending and guaranteeing functions, the Administrator shall not discriminate on the basis of sex or marital status against any person or small business concern applying for or receiving assistance from the Small Business Administration, and the Small Business Administration shall give special consideration to veterans of the Armed Forces of the United States and their survivors or dependents. The President also may appoint a Deputy Administrator, by and with the advice and consent of the Senate. The Administrator is authorized to appoint five Associate Administrators (including the Associate Administrator specified in section 201 of the Small Business Investment Act of 1958) to assist in the execution of the functions vested in the Administration. One of the Associate Administrators shall be designated at the time of his appointment as the Associate Administrator for Minority Small Business and Capital Ownership Development who shall be an employee in the competitive service or in the Senior Executive Service and a career appointee and shall be responsible to the Administrator for the formulation and execution of the policies and programs under sections 7(j) and 8(a) of this Act which provide assistance to minority small business concerns. The Deputy Administrator shall be Acting Administrator of the Administration during the absence or disability of the Administrator or in the event of a vacancy in the office of the Administrator.
(2) The Administrator also shall be responsible for—
(A) establishing and maintaining an external small business economic data base for the purpose of providing the Congress and the Administration information on the economic condition and the expansion or contraction of the small business sector. To that end, the Administrator shall publish on a regular basis national small business economic indices and, to the extent feasible, regional small business economic indices, which shall include, but need not be limited to, data on—
(i) employment, layoffs, and new hires;
(ii) number of business establishments and the types of such establishments such as sole proprietorships, corporations, and partnerships;
(iii) number of business formations and failures;
(iv) sales and new orders;
(v) back orders;
(vi) investment in plant and equipment;
(vii) changes in inventory and rate of inventory turnover;
(viii) sources and amounts of capital investment, including debt, equity, and internally generated funds;
(ix) debt to equity ratios;
(x) exports;
(xi) number and dollar amount of mergers and acquisitions by size of acquiring and acquired firm; and
(xii) concentration ratios; and
(B) publishing annually a report giving a comparative analysis and interpretation of the historical trends of the small business sector as reflected by the data acquired pursuant to subparagraph (A) of this subsection.
(3) RISK MANAGEMENT DATABASE.—
(A) ESTABLISHMENT.—The Administration shall establish, within the management system for the loan programs authorized by subsections (a) and (b) of section 7 of this Act and title V of the Small Business Investment Act of 1958, a management information system that will generate a database capable of providing timely and accurate information in order to identify loan underwriting, collections, recovery, and liquidation problems.
(B) INFORMATION TO BE MAINTAINED.—In addition to such other information as the Administration considers appropriate, the database established under subparagraph (A) shall, with respect to each loan program described in subparagraph (A), include information relating to—
(i) the identity of the institution making the guaranteed loan or issuing the debenture;
(ii) the identity of the borrower;
(iii) the total dollar amount of the loan or debenture;
(iv) the total dollar amount of government exposure in each loan;
(v) the district of the Administration in which the borrower has its principal office;
(vi) the principal line of business of the borrower, as identified by Standard Industrial Classification Code (or any successor to that system);
(vii) the delinquency rate for each program (including number of instances and days overdue);
(viii) the number and amount of repurchases, losses, and recoveries in each program;
(ix) the number of deferrals or forbearances in each program (including days and number of instances);
(x) comparisons on the basis of loan program, lender, Administration district and region, for all the data elements maintained; and
(xi) underwriting characteristics of each loan that has entered into default, including term, amount and type of collateral, loan-to-value and other actual and projected ratios, line of business, credit history, and type of loan.
(C) DEADLINE FOR OPERATIONAL CAPABILITY.—The database established under subparagraph (A) shall—
(i) be operational not later than June 30, 1997; and
(ii) capture data beginning on the first day of the second quarter of fiscal year 1997 beginning after such date and thereafter.
(c) (1) There are hereby established in the Treasury the following revolving funds: (A) a disaster loan fund which shall be available for financing functions performed under sections 5(e), 7(b)(1), 7(b)(2), 7(b)(3), 7(b)(4), and 7(c)(2) of this Act; and (B) a business loan and investment fund which shall be available for financing functions performed under sections 5(g), 7(a), and 8(a) of this Act, and titles III, IV and V of the Small Business Investment Act of 1958.
(2) All repayments of loans and debentures, payments of interest and other receipts arising out of transactions heretofore or hereafter entered into by the Administration (A) pursuant to sections 5(e), 7(b)(1), 7(b)(2), 7(b)(3), 7(b)(4), 7(b)(5), 7(b)(6), 7(b)(7), 7(b)(8), 7(c)(2), and 7(g) of this Act shall be paid into a disaster loan fund; and (B) pursuant to sections 5(g), 7(a), 7(e), 7(h), 7(i), 7(l), 7(m), and 8(a) of this Act, and titles III, IV and V of the Small Business Investment Act of 1958, shall be paid into the business loan and investment fund.
(3) Unexpended balances of appropriations made to the fund pursuant to this subsection, as in effect immediately prior to the effective date of this paragraph, shall be allocated, together with related assets and liabilities, to the funds established by paragraph (1) in such amounts as the Administrator shall determine.
(4) The Administration shall submit to the Committees on Appropriations, Senate Select Committee on Small Business, and the Committee on Small Business of the House of Representatives, as soon as possible after the beginning of each calendar quarter, a full and complete report on the status of each of the funds established by paragraph (1). Business‑type budgets for each of the funds established by paragraph (1) shall be prepared, transmitted to the Committees on Appropriations, the Senate Select Committee on Small Business and the Committee on Small Business of the House of Representatives and considered, and enacted in the manner prescribed by law (Sections 102, 103 and 104 of the Government Corporation Control Act (31 USC 847‑849)) for wholly owned Government corporations.
(5) (A) The
Administration is authorized to make and issue notes to the Secretary of the
Treasury for the purpose of obtaining funds necessary for discharging
obligations under the revolving funds created by section 4(c)(1) of this Act and
for authorized expenditures out of the funds.
Such notes shall be in such form and denominations and have such
maturities and be subject to such terms and conditions as may be prescribed by
the Administration with the approval of the Secretary of the Treasury. Such
notes shall bear interest at a rate fixed by the Secretary of the Treasury,
taking into consideration the current average market yield of outstanding
marketable obligations of the
(B) (i) Moneys in the funds established in subsection (c)(1) not needed for current operations may be paid into miscellaneous receipts of the Treasury.
(ii) Following the close of each fiscal year, the Administration shall pay into the miscellaneous receipts of the United States Treasury the actual interest that the Administration collects during that fiscal year on all financings made under this Act.
(C) Except on those loan disbursements on which interest is paid under subsection (B)(ii), the Administration shall pay into miscellaneous receipts of the Treasury, following the close of each fiscal year, interest received by the Administration on financing functions performed under this Act and titles III and V of the Small Business Investment Act of l958 providing the capital used to perform such functions originated from appropriated funds. Such payments shall be treated by the Department of the Treasury as interest income, not as retirement of indebtedness.
(D) There are authorized to be appropriated, in any fiscal year, such sums as may be necessary for losses and interest subsidies incurred by the funds established by subsection (c)(l), but not previously reimbursed.
(d) There is hereby created the Loan Policy Board of the Small Business Administration, which shall consist of the following members, all ex officio. The Administrator, as Chairman, the Secretary of the Treasury, and the Secretary of Commerce. Either of the said Secretaries may designate an officer of his Department, who has been appointed by the President by and with the advice and consent of the Senate, to act in his stead as a member of the Loan Policy Board with respect to any matter or matters. The Loan Policy Board shall establish general policies (particularly with reference to the public interest involved in the granting and denial of applications for financial assistance by the Administration and with reference to the coordination of the functions of the Administration with other activities and policies of the Government), which shall govern the granting and denial of applications for financial assistance by the Administration.
(e) PROHIBITION ON THE PROVISION OF ASSISTANCE.—Notwithstanding any other provision of law, the Administration is prohibited from providing any financial or other assistance to any business concern or other person engaged in the production or distribution of any product or service that has been determined to be obscene by a court of competent jurisdiction.
(f) CERTIFICATION OF COMPLIANCE WITH CHILD SUPPORT OBLIGATIONS.—
(1) IN GENERAL.—For financial assistance approved after the promulgation of final regulations to implement this section, each recipient of financial assistance under this Act, including a recipient of a direct loan or a loan guarantee, shall certify that the recipient is not more than 60 days delinquent under the terms of any—
(A) administrative order;
(B) court order; or
(C) repayment agreement entered into between the recipient and the custodial parent or State agency providing child support enforcement services,
that requires the recipient to pay child support, as such term is defined in section 462(b) of the Social Security Act.
(2) ENFORCEMENT.—Not later than 6 months after the date of enactment of this subsection, the Administration shall promulgate such regulations as may be necessary to enforce compliance with the requirements of this subsection.
(g) GIFTS.—
(1) IN GENERAL.—The Administrator may, for purposes of this Act, the Small Business Investment Act of 1954 [sic; should be 1958], and title IV of the Women’s Business Ownership Act of 1988, solicit, accept, hold, administer, utilize, and dispose of gifts, devises, and bequests of cash, property (including tangible, intangible, real, and personal), subsistence, and services. Notwithstanding any other provision of law, the Administrator may utilize gifts, devises, or bequests for marketing and outreach activities, including the cost of promotional materials and wearing apparel.
(2) AUDITS.—Any gift, devise, or bequest of
cash accepted by the Administrator shall be held in a separate account and
shall be subject to semi-annual audits by the Inspector General of the
Administration who shall report his findings to the Congress.
(3) CONFLICTS OF INTEREST.—No gift, devise,
or bequest shall be solicited or accepted under the authority of this
subsection if such solicitation or acceptance would, in the determination of
the General Counsel, create a conflict of interest.
(4) ACCEPTANCE OF SERVICES AND FACILITIES
FOR DISASTER LOAN PROGRAM.—The Administrator may accept the services and
facilities of Federal, State, and local agencies and groups, both public and
private, and utilize such gratuitous services and facilities as may, from time
to time, be necessary, to further the objectives of section 7(b).
(h) CO-SPONSORSHIP
OF EVENTS.—
(1) AUTHORIZATION.—The Administrator, after
consultation with the General Counsel, may provide assistance for the benefit
of small business through Administration-sponsored activities, through
cosponsored activities with any eligible entity, or through such other
activities that the Administrator determines to be appropriate, including
recognition events.
(2) ELIGIBLE ENTITY.—For purposes of this
subsection, the term “eligible entity” means any for-profit or not-for-profit
entity, any Federal, State, or local government official, or any Federal,
State, or local government entity.
(3) PROHIBITION ON ENDORSEMENTS.—The
Administrator shall ensure that the Administration and any eligible entities
that cosponsor activities receive appropriate recognition for such
cosponsorship, and that such recognition does not constitute or imply an
endorsement by the Administration of any product or service of such entity.
(4) AUTHORITY TO CHARGE
FEES.—Notwithstanding any other provision of law, the Administrator may charge
a participant in any activity sponsored or cosponsored by the Administration a
minimal fee, and retain and use such fee to cover the costs of such activity.
(5) LIMITED DELEGATION.—The Administrator
may not delegate the authority described in this subsection except to the
Deputy Administrator, an Associate Administrator, or an Assistant Administrator.
(6) REPORT TO CONGRESS.—The Inspector
General of the Administration shall report semi-annually to Congress on the
Administrator’s use of authority under this subsection.
(7) RULEMAKING.—Not later than 180 days after the date of enactment of this subsection, the Administrator shall promulgate regulations to carry out the provisions of this subsection.
§ 5 (a) The Administration shall have power to adopt, alter, and use a seal, which shall be judicially noticed. The Administrator is authorized, subject to the civil service and classification laws, to select, employ, appoint, and fix the compensation of such officers, employees, attorneys, and agents as shall be necessary to carry out the provisions of this Act; to define their authority and duties; and to pay the costs of qualification of certain of them as notaries public. The Administration, with the consent of any board, commission, independent establishment or executive department of the Government, may avail itself on a reimbursable or non‑reimbursable basis of the use of information, services, facilities (including any field service thereof), officers, and employees thereof, in carrying out the provisions of this Act.
(b) In the performance of, and with respect to, the functions, powers, and duties vested in him by this Act the Administrator may—
(1) sue and be sued in any court of record of a State having general jurisdiction, or in any United States district court, and jurisdiction is conferred upon such district court to determine such controversies without regard to the amount in controversy; but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Administrator or his property;
(2) under regulations prescribed by him, assign or sell at public or private sale, or otherwise dispose of for cash or credit, in his discretion and upon such terms and conditions and for such consideration as the Administrator shall determine to be reasonable, any evidence of debt, contract, claim, personal property, or security assigned to or held by him in connection with the payment of loans granted under this Act, and to collect or compromise all obligations assigned to or held by him and all legal or equitable rights accruing to him in connection with the payment of such loans until such time as such obligations may be referred to the Attorney General for suit or collection;
(3) deal with, complete, renovate, improve, modernize, insure, or rent, or sell for cash or credit upon such terms and conditions and for such consideration as the Administrator shall determine to be reasonable, any real property conveyed to or otherwise acquired by him in connection with the payment of loans granted under this Act;
(4) pursue to final collection, by way of compromise or otherwise, all claims against third parties assigned to the Administrator in connection with loans made by him. This shall include authority to obtain deficiency judgments or otherwise in the case of mortgages assigned to the Administrator. Section 3709 of the Revised Statutes, as amended (41 U.S.C., sec. 5), shall not be construed to apply to any contract of hazard insurance or to any purchase or contract for services or supplies on account of property obtained by the Administrator as a result of loans made under this Act if the premium therefor or the amount thereof does not exceed $1,000. The power to convey and to execute in the name of the Administrator deeds of conveyance, deeds of release, assignments and satisfactions of mortgages, and any other written instrument relating to real property or any interest therein acquired by the Administrator pursuant to the provisions of this Act may be exercised by the Administrator or by any officer or agent appointed by him without the execution of any express delegation of power or power of attorney. Nothing in this section shall be construed to prevent the Administrator from delegating such power by order or by power of attorney, in his discretion, to any officer or agent he may appoint;
(5) acquire, in any lawful manner, any property (real, personal, or mixed, tangible or intangible), whenever deemed necessary or appropriate to the conduct of the activities authorized in sections 7(a) and 7(b);
(6) make such rules and regulations as he deems necessary to carry out the authority vested in him by or pursuant to this Act;
(7) in addition to any powers, functions, privileges and immunities otherwise vested in him, take any and all actions (including the procurement of the services of attorneys by contract in any office where an attorney or attorneys are not or cannot be economically employed full time to render such services) when he determines such actions are necessary or desirable in making, servicing, compromising, modifying, liquidating, or otherwise dealing with or realizing on loans made under the provisions of this Act: Provided, That with respect to deferred participation loans, the Administrator may, in the discretion of and pursuant to regulations promulgated by the Administrator, authorize participating lending institutions to take actions relating to loan servicing on behalf of the Administrator, including determining eligibility and creditworthiness and loan monitoring, collection, and liquidation;
(8) pay the transportation expenses and per diem in lieu of subsistence expenses, in accordance with the Travel Expense Act of 1949, for travel of any person employed by the Administration to render temporary services not in excess of six months in connection with any disaster referred to in section 7(b) from place of appointment to, and while at, the disaster area and any other temporary posts of duty and return upon completion of the assignment: Provided That the Administrator may extend the six-month limitation for an additional six months if the Administrator determines the extension is necessary to continue efficient disaster loan making activities;
(9) accept the services and facilities of Federal, State, and local agencies and groups, both public and private, and utilize such gratuitous services and facilities as may, from time to time, be necessary, to further the objectives of section 7(b);
(10) upon purchase by the Administration of any deferred participation entered into under section 7 of this Act, continue to charge a rate of interest not to exceed that initially charged by the participating institution on the amount so purchased for the remaining term of the indebtedness;
(11) make such investigations as he deems
necessary to determine whether a recipient of or participant in any assistance
under this Act or any other person has engaged or is about to engage in any
acts or practices which constitute or will constitute a violation of any
provision of this Act, or of any rule or regulation under this Act, or of any
order issued under this Act. The
Administration shall permit any person to file with it a statement in writing,
under oath or otherwise as the Administration shall determine, as to all the
facts and circumstances concerning the matter to be investigated. For the purpose of any investigation, the
Administration is empowered to administer oaths and affirmations, subpena [sic]
witnesses, compel their attendance, take evidence, and require the production
of any books, papers, and documents which are relevant to the inquiry. Such attendance of witnesses and the
production of any such records may be required from any place in the
(12) impose, retain, and use only those fees which are specifically authorized by law or which are in effect on September 30, 1994, and in the amounts and at the rates in effect on such date, except that the Administrator may, subject to approval in appropriations Acts, impose, retain, and utilize, additional fees—
(A) not to exceed $100 for each loan servicing action (other than a loan assumption) requested after disbursement of the loan, including any substitution of collateral, release or substitution of a guarantor, reamortization, or similar action;
(B) not to exceed $300 for loan assumptions;
(C) not to exceed 1 percent of the amount of requested financings under title III of the Small Business Investment Act of 1958 for which the applicant requests a commitment from the Administration for funding during the following year; and
(D) to recover the direct, incremental cost involved in the production and dissemination of compilations of information produced by the Administration under the authority of this Act and the Small Business Investment Act of 1958;
(13) collect, retain and utilize, subject to approval in appropriations Acts, any amounts collected by fiscal transfer agents and not used by such agent as payment of the cost of loan pooling or debenture servicing operations, except that amounts collected under this paragraph and paragraph (12) shall be utilized solely to facilitate the administration of the program that generated the excess amounts; and
(14) require any lender authorized to make
loans under section 7 of this Act to pay examination and review fees, which
shall be deposited in the account for salaries and expenses of the
Administration, and shall be available for the costs of examinations, reviews,
and other lender oversight activities.
(c) To such extent as he finds necessary to carry out the provisions of this Act, the Administrator is authorized to procure the temporary (not in excess of one year) or intermittent services of experts or consultants or organizations thereof, including stenographic reporting services, by contract or appointment, and in such cases such services shall be without regard to the civil‑service and classification laws and, except in the case of stenographic reporting services by organizations, without regard to section 3709 of the Revised Statutes, as amended (41 U.S.C., § 5). Any individual so employed may be compensated at a rate not in excess of the daily equivalent of the highest rate payable under section 5332 of title 5, United States Code, including traveltime, and, while such individual is away from his or her home or regular place of business, he or she may be allowed travel expenses (including per diem in lieu of subsistence) as authorized by section 5703 of title 5, United States Code.
(d) Section 3648 of the Revised Statutes (31 U.S.C. 529) shall not apply to prepayments of rentals made by the Administration on safety deposit boxes used by the Administration for the safeguarding of instruments held as security for loans or for the safeguarding of other documents.
(e) (1) Subject to the requirements and conditions contained in this subsection, upon application by a small business concern which is the recipient of a loan made under this Act, the Administration may undertake the small business concern's obligation to make the required payments under such loan or may suspend such obligation if the loan was a direct loan made by the Administration. While such payments are being made by the Administration pursuant to the undertaking of such obligation or while such obligation is suspended, no such payment with respect to the loan may be required from the small business concern.
(2) The Administration may undertake or suspend for a period of not to exceed 5 years any small business concern's obligation under this subsection only if—
(A) without such undertaking or suspension of the obligation, the small business concern would, in the sole discretion of the Administration, become insolvent or remain insolvent;
(B) with the undertaking or suspension of the obligation, the small business concern would, in the sole discretion of the Administration, become or remain a viable small business entity; and
(C) the small business concern executes an agreement in writing satisfactory to the Administration as provided by paragraph (4).
(3) Notwithstanding the provisions of sections 7(a)(4)(C) and 7(i)(l) of this Act, the Administration may extend the maturity of any loan on which the Administration undertakes or suspends the obligation pursuant to this subsection for a corresponding period of time.
(4) (A) Prior to the undertaking or suspension by the Administration of any small business concern's obligation under this subsection, the Administration, consistent with the purposes sought to be achieved herein, shall require the small business concern to agree in writing to repay to it the aggregate amount of the payments which were required under the loan during the period for which such obligation was undertaken or suspended, either—
(i) by periodic payments not less in amount or less frequently falling due than those which were due under the loan during such period, or
(ii) pursuant to a repayment schedule agreed upon by the Administration and the small business concern, or
(iii) by a combination of the payments described in clause (i) and clause (ii).
(B) In addition to requiring the small business concern to execute the agreement described in subparagraph (A), the Administration shall, prior to the undertaking or suspension of the obligation, take such action, and require the small business concern to take such action as the Administration deems appropriate in the circumstances, including the provision of such security as the Administration deems necessary or appropriate to insure that the rights and interests of the lender (Small Business Administration or participant) will be safeguarded adequately during or after the period in which such obligation is so undertaken or suspended.
(5) The term "required payments" with respect to any loan means payments of principal and interest under the loan.
(f) (1) The guaranteed portion of any loan made pursuant this Act may be sold by the lender, and by any subsequent holder, consistent with regulations on such sales as the Administration shall establish, subject to the following limitations:
(A) prior to the Administration's approval of the sale, or upon any subsequent resale, of any loan guaranteed by the Administration, if the lender certifies that such loan has been properly closed and that the lender has substantially complied with the provisions of the guarantee agreement and the regulations of the Administration, the Administration shall review and approve only materials not previously approved;
(B) all fees due the Administration on a guaranteed loan shall have been paid in full prior to any sale; and
(C) each loan, except each loan made under section 7(a)(14), shall have been fully disbursed to the borrower prior to any sale.
(2) After a loan is sold in the secondary market, the lender shall remain obligated under its guarantee agreement with the Administration, and shall continue to service the loan in a manner consistent with the terms and conditions of such agreement.
(3) The Administration shall develop such procedures as are necessary for the facilitation, administration, and promotion of secondary market operations, and for assessing the increase of small business access to capital at reasonable rates and terms as a result of secondary market operations. Beginning on March 31, 1997, the sale of the unguaranteed portion of any loan made under section 7(a) shall not be permitted until a final regulation that applies uniformly to both depository institutions and other lenders is promulgated by the Administration setting forth the terms and conditions under which such sales can be permitted, including maintenance of appropriate reserve requirements and other safeguards to protect the safety and soundness of the program.
(4) Nothing in this subsection or subsection (g) of this section shall be interpreted to impede or extinguish the right of the borrower or the successor in interest to such borrower to prepay (in whole or in part) any loan made pursuant to section 7(a) of this Act, the guaranteed portion of which may be included in such trust or pool, or to impede or extinguish the rights of any party pursuant to section 7(a)(6)(C) or subsection (e) of this section.
(g) (1) The Administration is authorized to issue trust certificates representing ownership of all or a fractional part of the guaranteed portion of one or more loans which have been guaranteed by the Administration under this Act, or under section 502 of the Small Business Investment Act of 1958 (15 U.S.C. 660): Provided, That such trust certificates shall be based on and backed by a trust or pool approved by the Administration and composed solely of the entire guaranteed portion of such loans.
(2) The Administration is authorized, upon such terms and conditions as are deemed appropriate, to guarantee the timely payment of the principal of and interest on trust certificates issued by the Administration or its agent for purposes of this subsection. Such guarantee shall be limited to the extent of principal and interest on the guaranteed portions of loans which compose the trust or pool. In the event that a loan in such trust or pool is prepaid, either voluntarily or in the event of default, the guarantee of timely payment of principal and interest on the trust certificates shall be reduced in proportion to the amount of principal and interest such prepaid loan represents in the trust or pool. Interest on prepaid or defaulted loans shall accrue and be guaranteed by the Administration only through the date of payment on the guarantee. During the term of the trust certificate, it may be called for redemption due to prepayment or default of all loans constituting the pool.
(3) The full faith and credit of the
(4) (A) The Administration may collect a fee for any loan guarantee sold into the secondary market under subsection (f) in an amount equal to not more than 50 percent of the portion of the sale price that exceeds 110 percent of the outstanding principal amount of the portion of the loan guaranteed by the Administration. Any such fee imposed by the Administration shall be collected by the Administration or by the agent which carries out on behalf of the Administration the central registration functions required by subsection (h) of this section and shall be paid to the Administration and used solely to reduce the subsidy on loans guaranteed under section 7(a) of this Act: Provided, That such fee shall not be charged to the borrower whose loan is guaranteed: and Provided further, That nothing herein shall preclude any agent of the Administration from collecting a fee approved by the Administration for the functions described in subsection (h)(2).
(B) The Administration is authorized to impose and collect, either directly or through a fiscal and transfer agent, a reasonable penalty on late payments of the fee authorized under subparagraph (A) in an amount not to exceed 5 percent of such fee per month plus interest.
(C) The Administration may contract with an agent to carry out, on behalf of the Administration, the assessment and collection of the annual fee established under section 7(a)(23). The agent may receive, as compensation for services, any interest earned on the fee while in the control of the agent before the time at which the agent is contractually required to remit the fee to the Administration.
(5) (A) In the event the Administration pays a claim under a guarantee issued under this subsection, it shall be subrogated fully to the rights satisfied by such payment.
(B) No State or local law, and no Federal law, shall preclude or limit the exercise by the Administration of its ownership rights in the portions of loans constituting the trust or pool against which the trust certificates are issued.
(h) (1) Upon the adoption of final rules and regulations, the Administration shall—
(A) provide for a central registration of all loans and trust certificates sold pursuant to subsections (f) and (g) of this section;
(B) contract with an agent to carry out on behalf of the Administration the central registration functions of this section and the issuance of trust certificates to facilitate pooling. Such agent shall provide a fidelity bond or insurance in such amounts as the Administration determines to be necessary to fully protect the interest of the Government;
(C) prior to any sale, require the seller to disclose to a purchaser of the guaranteed portion of a loan guaranteed under this Act and to the purchaser of a trust certificate issued pursuant to subsection (g), information on terms, conditions, and yield of such instrument. As used in this paragraph, if the instrument being sold is a loan, the term "seller" does not include (A) an entity which made the loan or (B) any individual or entity which sells three or fewer guaranteed loans per year; and
(D) have the authority to regulate brokers and dealers in guaranteed loans and trust certificates sold pursuant to subsections (f) and (g) of this section.
(2) The agent described in paragraph (1)(B) may be compensated through any of the fees assessed under this section and any interest earned on any funds collected by the agent while such funds are in the control of the agent and before the time at which the agent is contractually required to transfer such funds to the Administration or to the holders of the trust certificates, as appropriate.
(3) Nothing in this subsection shall prohibit the utilization of a book-entry or other electronic form of registration for trust certificates. The Administration may, with the consent of the Secretary of the Treasury, use the book-entry system of the Federal Reserve System.
§ 6. (a) All
moneys of the Administration not otherwise employed may be deposited with the
Treasury of the
(b) The Administrator shall contribute to the employees' compensation fund, on the basis of annual billings as determined by the Secretary of Labor, for the benefit payments made from such fund on account of employees engaged in carrying out functions financed by the revolving fund established by section 4(c) of this Act. The annual billings shall also include a statement of the fair portion of the cost of the administration of such fund, which shall be paid by the Administrator into the Treasury as miscellaneous receipts.
§ 7. (a) LOANS TO SMALL BUSINESS CONCERNS; ALLOWABLE PURPOSES; QUALIFIED BUSINESS; RESTRICTIONS AND LIMITATIONS.—The Administration is empowered to the extent and in such amounts as provided in advance in appropriation Acts to make loans for plant acquisition, construction, conversion, or expansion, including the acquisition of land, material, supplies, equipment, and working capital, and to make loans to any qualified small business concern, including those owned by qualified Indian tribes, for purposes of this Act. Such financings may be made either directly or in cooperation with banks or other financial institutions through agreements to participate on an immediate or deferred (guaranteed) basis. These powers shall be subject, however, to the following restrictions, limitations, and provisions:
(1) IN GENERAL.—
(A) CREDIT ELSEWHERE.—No financial assistance shall be extended pursuant to this subsection if the applicant can obtain credit elsewhere. No immediate participation may be purchased unless it is shown that a deferred participation is not available; and no direct financing may be made unless it is shown that a participation is not available.
(B) BACKGROUND CHECKS.—Prior to the approval of any loan made pursuant to this subsection, or section 503 of the Small Business Investment Act of 1958, the Administrator may verify the applicant’s criminal background, or lack thereof, through the best available means, including, if possible, use of the National Crime Information Center computer system at the Federal Bureau of Investigation.
(2) LEVEL OF PARTICIPATION IN GUARANTEED LOANS.—
(A) IN GENERAL.—Except as provided in subparagraph (B), in an agreement to participate in a loan on a deferred basis under this subsection (including a loan made under the Preferred Lenders Program), such participation by the Administration shall be equal to—
(i) 75 percent of the balance of the financing outstanding at the time of disbursement of the loan, if such balance exceeds $150,000; or
(ii) 85 percent of the balance of the financing outstanding at the time of disbursement of the loan, if such balance is less than or equal to $150,000.
(B) REDUCED PARTICIPATION UPON REQUEST.—
(i) IN GENERAL.—The guarantee percentage specified by subparagraph (A) for any loan under this subsection may be reduced upon the request of the participating lender.
(ii) PROHIBITION.—The Administration shall not use the guarantee percentage requested by a participating lender under clause (i) as a criterion for establishing priorities in approving loan guarantee requests under this subsection.
(C) INTEREST RATE UNDER PREFERRED LENDERS PROGRAM.—
(i) IN GENERAL.—The maximum interest rate for a loan guaranteed under the Preferred Lenders Program shall not exceed the maximum interest rate, as determined by the Administration, applicable to other loans guaranteed under this subsection.
(ii) PREFERRED LENDERS PROGRAM DEFINED.—For purposes of this subparagraph, the term "Preferred Lenders Program" means any program established by the Administrator, as authorized under the proviso in section 5(b)(7), under which a written agreement between the lender and the Administration delegates to the lender—
(I) complete authority to make and close loans with a guarantee from the Administration without obtaining the prior specific approval of the Administration; and
(II) complete authority to service and liquidate such loans without obtaining the prior specific approval of the Administration for routine servicing and liquidation activities, but shall not take any actions creating an actual or apparent conflict of interest.
(D) PARTICIPATION UNDER EXPORT WORKING CAPITAL PROGRAM.—Notwithstanding subparagraph (A), in an agreement to participate in a loan on a deferred basis under the Export Working Capital Program established pursuant to paragraph (14)(A), such participation by the Administration shall not exceed 90 percent.
(3) No loan shall be made under this subsection—
(A) if the total amount outstanding and committed (by participation or otherwise) to the borrower from the business loan and investment fund established by this Act would exceed $1,500,000 (or if the gross loan amount would exceed $2,000,000), except as provided in subparagraph (B);
(B) if the total amount outstanding and committed (on a deferred basis) solely for the purposes provided in paragraph (16) to the borrower from the business loan and investment fund established by this Act would exceed $1,750,000, of which not more than $1,250,000 may be used for working capital, supplies or financings under section 7(a)(14) for export purposes; and
(C) if effected either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate basis if the amount would exceed $350,000.
(4) INTEREST RATES AND PREPAYMENT CHARGES.—
(A) INTEREST RATES.—Notwithstanding the provisions of the constitution of any State or the laws of any State limiting the rate or amount of interest which may be charged, taken, received, or reserved, the maximum legal rate of interest on any financing made on a deferred basis pursuant to this subsection shall not exceed a rate prescribed by the Administration, and the rate of interest for the Administration's share of any direct or immediate participation loan shall not exceed the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities of such loans and adjusted to the nearest one‑eighth of 1 per centum, and an additional amount as determined by the Administration, but not to exceed 1 per centum per annum: Provided, That for those loans to assist any public or private organization for the handicapped or to assist any handicapped individual as provided in paragraph (10) of this subsection, the interest rate shall be 3 per centum per annum.
(B) PAYMENT OF ACCRUED INTEREST.—
(i) IN GENERAL.—Any bank or other lending institution making a claim for payment on the guaranteed portion of a loan made under this subsection shall be paid the accrued interest due on the loan from the earliest date of default to the date of payment of the claim at a rate not to exceed the rate of interest on the loan on the date of default, minus one percent.
(ii) LOANS SOLD ON SECONDARY MARKET.—If a loan described in clause (i) is sold on the secondary market, the amount of interest paid to a bank or other lending institution described in that clause from the earliest date of default to the date of payment of the claim shall be no more than the agreed upon rate, minus one percent.
(iii) APPLICABILITY.—Clauses (i) and (ii) shall not apply to loans made on or after October 1, 2000.
(C) PREPAYMENT CHARGES.—
(i) IN GENERAL.—A borrower who prepays any loan guaranteed under this subsection shall remit to the Administration a subsidy recoupment fee calculated in accordance with clause (ii) if—
(I) the loan is for a term of not less than 15 years;
(II) the prepayment is voluntary;
(III) the amount of prepayment in any calendar year is more than 25 percent of the outstanding balance of the loan; and
(IV) the prepayment is made within the first 3 years after disbursement of the loan proceeds.
(ii) SUBSIDY RECOUPMENT FEE.—The subsidy recoupment fee charged under clause (i) shall be—
(I) 5 percent of the amount of prepayment, if the borrower repays during the first year after disbursement;
(II) 3 percent of the amount of prepayment, if the borrower prepays during the second year after disbursement; and
(III) 1 percent of the amount of prepayment, if the borrower prepays during the third year after disbursement.
(5) No such loans including renewals and extensions thereof may be made for a period or periods exceeding twenty-five years, except that such portion of a loan made for the purpose of acquiring real property or constructing, converting, or expanding facilities may have a maturity of twenty‑five years plus such additional period as is estimated may be required to complete such construction, conversion, or expansion.
(6) All loans made under this subsection shall be of such sound value or so secured as reasonably to assure repayment: Provided, however, That—
(A) for loans to assist any public or private organization or to assist any handicapped individual as provided in paragraph (10) of this subsection any reasonable doubt shall be resolved in favor of the applicant;
(B) recognizing that greater risk may be associated with loans for energy measures as provided in paragraph (12) of this subsection, factors in determining "sound value" shall include, but not be limited to, quality of the product or service; technical qualifications of the applicant or his employees; sales projections; and the financial status of the business concern: Provided further, That such status need not be as sound as that required for general loans under this subsection; and
(C) [Repealed]
On that portion of the loan used to refinance existing indebtedness held by a bank or other lending institution, the Administration shall limit the amount of deferred participation to 80 per centum of the amount of the loan at the time of disbursement: Provided further, That any authority conferred by this subparagraph on the Administration shall be exercised solely by the Administration and shall not be delegated to other than Administration personnel.
(7) The Administration may defer payments on the principal of such loans for a grace period and use such other methods as it deems necessary and appropriate to assure the successful establishment and operation of such concern.
(8) The Administration may make loans under this subsection to small business concerns owned and controlled by disabled veterans (as defined in section 4211(3) of title 38, United States Code).
(9) The Administration may provide loans under this subsection to finance residential or commercial construction or rehabilitation for sale: Provided, however, That such loans shall not be used primarily for the acquisition of land.
(10) The Administration may provide guaranteed loans under this subsection to assist any public or private organization for the handicapped or to assist any handicapped individual, including service-disabled veterans, in establishing, acquiring, or operating a small business concern.
(11) The Administration may provide loans under this subsection to any small business concern, or to any qualified person seeking to establish such a concern when it determines that such loan will further the policies established in section 2(c) of this Act, with particular emphasis on the preservation or establishment of small business concerns located in urban or rural areas with high proportions of unemployed or low‑income individuals or owned by low‑income individuals.
(12) (A) The Administration may provide loans under this subsection to assist any small business concern, including start up, to enable such concern to design architecturally or engineer, manufacture, distribute, market, install, or service energy measures: Provided, however, That such loan proceeds shall not be used primarily for research and development.
(B) The Administration may provide deferred participation loans under this subsection to finance the planning, design, or installation of pollution control facilities for the purposes set forth in section 404 of the Small Business Investment Act of 1958. Notwithstanding the limitation expressed in paragraph (3) of this subsection, a loan made under this paragraph may not result in a total amount outstanding and committed to a borrower from the business loan and investment fund of more than $1,000,000.
(13) The Administration may provide financings under this subsection to State and local development companies for the purposes of, and subject to the restrictions in, title V of the Small Business Investment Act of 1958.
(14) (A) The Administration may provide extensions of credit, standby letters of credit, revolving lines of credit for export purposes and other financing to enable small business concerns, including small business export trading companies and small business export management companies, to develop foreign markets. A bank or participating lending institution may establish the rate of interest on extensions and revolving lines of credit as may be legal and reasonable.
(B) When considering loan or guarantee
applications, the Administration shall give weight to export‑related
benefits, including opening new markets for
(C) The Administration shall aggressively market its export financing program to small businesses.
(15) (A) The Administration may guarantee loans under this subsection to qualified employee trusts with respect to a small business concern for the purpose of purchasing stock of the concern under a plan approved by the Administrator which, when carried out, results in the qualified employee trust owning at least 51 per centum of the stock of the concern.
(B) The plan requiring the Administrator's approval under subparagraph (A) shall be submitted to the Administration by the trustee of such trust with its application for the guarantee. Such plan shall include an agreement with the Administrator which is binding on such trust and on the small business concern and which provides that—
(i) not later than the date the loan guaranteed under subparagraph (A) is repaid (or as soon thereafter as is consistent with the requirements of section 401(a) of the Internal Revenue Code of 1954), at least 51 per centum of the total stock of such concern shall be allocated to the accounts of at least 51 per centum of the employees of such concern who are entitled to share in such allocation,
(ii) there will be periodic reviews of the role in the management of such concern of employees to whose accounts stock is allocated, and
(iii) there will be adequate management to assure management expertise and continuity.
(C) In determining whether to guarantee any loan under this paragraph, the individual business experience or personal assets of employee‑owners shall not be used as criteria, except inasmuch as certain employee‑owners may assume managerial responsibilities, in which case business experience may be considered.
(D) For purposes of this paragraph, a corporation which is controlled by any other person shall be treated as a small business concern if such corporation would, after the plan described in subparagraph (B) is carried out, be treated as a small business concern.
(E) The Administration shall compile a separate list of applications for assistance under this paragraph, indicating which applications were accepted and which were denied, and shall report periodically to the Congress on the status of employee‑owned firms assisted by the Administration.
(16) INTERNATIONAL TRADE.—
(A) IN GENERAL.—If the Administrator
determines that a loan guaranteed under this subsection will allow an eligible
small business concern that is engaged in or adversely affected by
international trade to improve its competitive position, the Administrator may
make such loan to assist such concern in—
(i) the financing
of the acquisition, construction, renovation, modernization, improvement, or
expansion of productive facilities or equipment to be used in the United States
in the production of goods and services involved in international trade; or
(ii) the refinancing of existing indebtedness
that is not structured with reasonable terms and conditions.
(B) SECURITY.—Each loan made under this
paragraph shall be secured by a first lien position or first mortgage on the
property or equipment financed by the loan or on other assets of the small
business concern.
(C) ENGAGED IN INTERNATIONAL TRADE.—For
purposes of this paragraph, a small business concern is engaged in
international trade if, as determined by the Administrator, the small business
concern is in a position to expand existing export markets or develop new
export markets.
(D) ADVERSELY AFFECTED BY INTERNATIONAL
TRADE.—For purposes of this paragraph, a small business concern is adversely
affected by international trade if, as determined by the Administrator, the
small business concern—
(i) is
confronting increased competition with foreign firms in the relevant market;
and
(ii) is injured by such competition.
(E) FINDINGS BY CERTAIN FEDERAL AGENCIES.—For purposes of subparagraph (D)(ii) the Administrator shall accept any finding of injury by the International Trade Commission or any finding of injury by the Secretary of Commerce pursuant to chapter 3 of title II of the Trade Act of 1974.
(17) The Administration shall authorize lending institutions and other entities in addition to banks to make loans authorized under this subsection.
(18) GUARANTEE FEES.—
(A) IN GENERAL.—With respect to each loan
guaranteed under this subsection (other than a loan that is repayable in 1 year
or less), the Administration shall collect a guarantee fee, which shall be
payable by the participating lender, and may be charged to the borrower, as
follows:
(i) A guarantee
fee not to exceed 2 percent of the deferred participation share of a total loan
amount that is not more than $150,000.
(ii) A guarantee fee not to exceed 3 percent
of the deferred participation share of a total loan amount that is more than
$150,000, but not more than $700,000.
(iii) A guarantee fee not to exceed 3.5 percent
of the deferred participation share of a total loan amount that is more than
$700,000.
(iv) In addition to the fee under clause (iii), a guarantee fee equal to 0.25 percent of any portion of the deferred participation share that is more than $1,000,000.
(B) RETENTION OF CERTAIN FEES.—Lenders participating in the programs established under this subsection may retain not more than 25 percent of a fee collected under subparagraph (A)(i).
(C) [Deleted.]
(19) (A) In addition to the Preferred Lenders Program authorized by the proviso in section 5(b)(7), the Administration is authorized to establish a Certified Lenders Program for lenders who establish their knowledge of Administration laws and regulations concerning the guaranteed loan program and their proficiency in program requirements. The designation of a lender as a certified lender shall be suspended or revoked at any time that the Administration determines that the lender is not adhering to its rules and regulations or that the loss experience of the lender is excessive as compared to other lenders, but such suspension or revocation shall not affect any outstanding guarantee.
(B) In order to encourage all lending institutions and other entities making loans authorized under this subsection to provide loans of $50,000 or less in guarantees to eligible small business loan applicants, the Administration shall develop and allow participating lenders to solely utilize a uniform and simplified loan form for such loans.
(C) Authority to liquidate loans.—
(i) IN GENERAL.—The Administrator may permit lenders participating in the Certified Lenders Program to liquidate loans made with a guarantee from the Administration pursuant to a liquidation plan approved by the Administrator.
(ii) Automatic approval.—If the Administrator does not approve or deny a request for approval of a liquidation plan within 10 business days of the date on which the request is made (or with respect to any routine liquidation activity under such a plan, within 5 business days) such request shall be deemed to be approved.
(20) (A) The Administration is empowered to make loans either directly or in cooperation with banks or other financial institutions through agreements to participate on an immediate or deferred (guaranteed) basis to small business concerns eligible for assistance under subsection (j)(10) and section 8(a). Such assistance may be provided only if the Administration determines that—
(i) the type and amount of such assistance requested by such concern is not otherwise available on reasonable terms from other sources;
(ii) with such assistance such concern has a reasonable prospect for operating soundly and profitably within a reasonable period of time;
(iii) the proceeds of such assistance will be used within a reasonable time for plant construction, conversion, or expansion, including the acquisition of equipment, facilities, machinery, supplies, or material or to supply such concern with working capital to be used in the manufacture of articles, equipment, supplies, or material for defense or civilian production or as may be necessary to insure a well‑balanced national economy; and
(iv) such assistance is of such sound value as reasonably to assure that the terms under which it is provided will not be breached by the small business concern.
(B) (i) No loan shall be made under this paragraph if the total amount outstanding and committed (by participation or otherwise) to the borrower would exceed $750,000.
(ii) Subject to the provisions of clause (i), in agreements to participate in loans on a deferred (guaranteed) basis, participation by the Administration shall be not less than 85 per centum of the balance of the financing outstanding at the time of disbursement.
(iii) The rate of interest on financings made on a deferred (guaranteed) basis shall be legal and reasonable.
(iv) Financings made pursuant to this paragraph shall be subject to the following limitations:
(I) No immediate participation may be purchased unless it is shown that a deferred participation is not available.
(II) No direct financing may be made unless it is shown that a participation is unavailable.
(C) A direct loan or the Administration's share of an immediate participation loan made pursuant to this paragraph shall be any secured debt instrument—
(i) that is subordinated by its terms to all other borrowings of the issuer;
(ii) the rate of interest on which shall not exceed the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities of such loan and adjusted to the nearest one‑eighth of 1 per centum;
(iii) the term of which is not more than twenty‑five years; and
(iv) the principal on which amortized at such rate as may be deemed appropriate by the Administration, and the interest on which is payable not less often than annually.
(21) (A) The Administration may make loans on a guaranteed basis under the authority of this subsection—
(i) to a small business concern that has been (or can reasonably be expected to be) detrimentally affected by—
(I) the closure (or substantial reduction) of a Department of Defense installation; or
(II) the termination (or substantial reduction) of a Department of Defense program on which such small business was a prime contractor or subcontractor (or supplier) at any tier; or
(ii) to a qualified individual or a veteran seeking to establish (or acquire) and operate a small business concern.
(B) Recognizing that greater risk may be associated with a loan to a small business concern described in subparagraph (A)(i), any reasonable doubts concerning the firm's proposed business plan for transition to nondefense-related markets shall be resolved in favor of the loan applicant when making any determination regarding the sound value of the proposed loan in accordance with paragraph (6).
(C) Loans pursuant to this paragraph shall be authorized in such amounts as provided in advance in appropriation Acts for the purposes of loans under this paragraph.
(D) For purposes of this paragraph a qualified individual is—
(i) a member of the Armed Forces of the
(ii) an employee of a prime contractor, subcontractor, or supplier at any tier of a Department of Defense program whose employment is involuntarily terminated (or voluntarily terminated pursuant to a program offering inducements to encourage voluntary separation or early retirement) due to the termination (or substantial reduction) of a Department of Defense program.
(E) JOB CREATION AND COMMUNITY BENEFIT.—In providing assistance under this paragraph, the Administration shall develop procedures to ensure, to the maximum extent practicable, that such assistance is used for projects that—
(i) have the greatest potential for—
(I) creating new jobs for individuals whose employment is involuntarily terminated due to reductions in Federal defense expenditures; or
(II) preventing the loss of jobs by employees of small business concerns described in subparagraph (A)(i); and
(ii) have substantial potential for stimulating new economic activity in communities most affected by reductions in Federal defense expenditures.
(22) The Administration is authorized to permit participating lenders to impose and collect a reasonable penalty fee on late payments of loans guaranteed under this subsection in an amount not to exceed 5 percent of the monthly loan payment per month plus interest.
(23) YEARLY FEE.—
(A) IN GENERAL.—With respect to each loan approved under this subsection, the Administration shall assess, collect, and retain a fee, not to exceed 0.55 percent per year of the outstanding balance of the deferred participation share of the loan, in an amount established once annually by the Administration in the Administration’s annual budget request to Congress, as necessary to reduce to zero the cost to the Administration of making guarantees under this subsection. As used in this paragraph, the term “cost” has the meaning given that term in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a).
(B) PAYER.—The yearly fee assessed under subparagraph (A) shall be payable by the participating lender and shall not be charged to the borrower.
(C) LOWERING OF BORROWER FEES.—If the
Administration determines that fees paid by lenders and by small business
borrowers for guarantees under this subsection may be reduced, consistent with
reducing to zero the cost to the Administration of making such guarantees—
(i) the
Administration shall first consider reducing fees paid by small business
borrowers under clauses (i) through (iii) of
paragraph (18)(A), to the maximum extent possible; and
(ii) fees paid by small business borrowers shall not be increased above the levels in effect on the date of enactment of this subparagraph.
(24) NOTIFICATION REQUIREMENT.—The Administration shall notify the Committees on Small Business of the Senate and the House of Representatives not later than 15 days before making any significant policy or administrative change affecting the operation of the loan program under this subsection.
(25) LIMITATION ON CONDUCTING PILOT PROJECTS.—
(A) IN GENERAL.—Not more than 10 percent of the total number of loans guaranteed in any fiscal year under this subsection may be awarded as part of a pilot program which is commenced by the Administrator on or after October 1, 1996.
(B) PILOT PROGRAM DEFINED.—In this paragraph, the term "pilot program" means any lending program initiative, project, innovation, or other activity not specifically authorized by law.
(C) LOW DOCUMENTATION LOAN PROGRAM.—The Administrator may carry out the low documentation loan program for loans of $100,000 or less only through lenders with significant experience in making small business loans. Not later than 90 days after the date of enactment of this subsection, the Administrator shall promulgate regulations defining the experience necessary for participation as a lender in the low documentation loan program.
(26) CALCULATION OF SUBSIDY RATE.—All fees, interest, and profits received and retained by the Administration under this subsection shall be included in the calculations made by the Director of the Office of Management and Budget to offset the cost (as that term is defined in section 502 of the Federal Credit Reform Act of 1990) to the Administration of purchasing and guaranteeing loans under this Act.
(27) Repealed.
(28) LEASING.—In addition to such other lease arrangements as may be authorized by the Administration, a borrower may permanently lease to one or more tenants not more than 20 percent of any property constructed with the proceeds of a loan guaranteed under this subsection, if the borrower permanently occupies and uses not less than 60 percent of the total business space in the property.
(29) REAL ESTATE APPRAISALS.—With respect to a loan under this subsection that is secured by commercial real property, an appraisal of such property by a State licensed or certified appraiser—
(A) shall be required by the Administration in connection with any such loan for more than $250,000; or
(B) may be required by the Administration or the lender in connection with any such loan for $250,000 or less, if such appraisal is necessary for appropriate evaluation of creditworthiness.
(30) OWNERSHIP REQUIREMENTS.—Ownership requirements to determine the eligibility of a small business concern that applies for assistance under any credit program under this Act shall be determined without regard to any ownership interest of a spouse arising solely from the application of the community property laws of a State for purposes of determining marital interests.
(31) EXPRESS LOANS.
(A) DEFINITIONS.—As used in this paragraph:
(i) The term
“express lender” means any lender authorized by the Administration to
participate in the Express Loan Program.
(ii) The term “express loan” means any loan
made pursuant to this paragraph in which a lender utilizes to the maximum
extent practicable its own loan analyses, procedures, and documentation.
(iii) The term “Express Loan Program” means the
program for express loans established by the Administration under paragraph
(25)(B), as in existence on April 5, 2004, with a guaranty rate of not more
than 50 percent.
(B) RESTRICTION TO EXPRESS LENDER.—The
authority to make an express loan shall be limited to those lenders deemed
qualified to make such loans by the Administration. Designation as an express lender for purposes
of making an express loan shall not prohibit such lender from taking any other
action authorized by the Administration for that lender pursuant to this
subsection.
(C) GRANDFATHERING OF EXISTING LENDERS.—Any
express lender shall retain such designation unless the Administration
determines that the express lender has violated the law or regulations
promulgated by the Administration or modifies the requirements to be an express
lender and the lender no longer satisfies those requirements.
(D) MAXIMUM LOAN AMOUNT.—The maximum loan
amount under the Express Loan Program is $350,000.
(E) OPTION TO PARTICIPATE.—Except as otherwise provided in this paragraph, the Administration shall take no regulatory, policy, or administrative action, without regard to whether such action requires notification pursuant to paragraph (24), that has the effect of requiring a lender to make an express loan pursuant to subparagraph (D).
(b) Except as to agricultural enterprises as defined in section 18(b)(1) of this Act, the Administration also is empowered to the extent and in such amounts as provided in advance in appropriation Acts—
(1) (A) to make such loans (either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred (guaranteed) basis as the Administration may determine to be necessary or appropriate to repair, rehabilitate or replace property, real or personal, damaged or destroyed by or as a result of natural or other disasters,: Provided, That such damage or destruction is not compensated for by insurance or otherwise: And provided further, That the Administration may increase the amount of the loan by up to an additional 20 per centum if it determines such increase to be necessary or appropriate in order to protect the damaged or destroyed property from possible future disasters by taking mitigating measures, including, but not limited to, construction of retaining walls and sea walls, grading and contouring land, relocating utilities and modifying structures;
(B) to refinance any mortgage or other lien against a totally destroyed or substantially damaged home or business concern: Provided, That no loan or guarantee shall be extended unless the Administration finds that (i) the applicant is not able to obtain credit elsewhere; (ii) such property is to be repaired, rehabilitated, or replaced; (iii) the amount refinanced shall not exceed the amount of physical loss sustained; and (iv) such amount shall be reduced to the extent such mortgage or lien is satisfied by insurance or otherwise; and
(C) during fiscal years 2000 through 2004, to establish a predisaster mitigation program to make such loans (either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred (guaranteed) basis), as the Administrator may determine to be necessary or appropriate, to enable small businesses to use mitigation techniques in support of a formal mitigation program established by the Federal Emergency Management Agency, except that no loan or guarantee may be extended to a small business under this subparagraph unless the Administration finds that the small business is otherwise unable to obtain credit for the purposes described in this subparagraph;
(2) to make such loans (either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred (guaranteed) basis as the Administration may determine to be necessary or appropriate to any small business concern or small agricultural cooperative located in an area affected by a disaster, if the Administration determines that the concern or the cooperative has suffered a substantial economic injury as a result of such disaster and if such disaster constitutes—
(A) a major disaster, as determined by the President under the Disaster Relief and Emergency Assistance Act; or
(B) a natural disaster, as determined by the Secretary of Agriculture pursuant to the Consolidated Farmers Home Administration Act of 1961 (7 U.S.C. 1961); or
(C) a disaster, as determined by the Administrator of the Small Business Administration; or
(D) if no disaster declaration has been issued pursuant to subparagraph (A), (B), or (C), the Governor of a State in which a disaster has occurred may certify to the Small Business Administration that small business concerns or small agricultural cooperatives (1) have suffered economic injury as a result of such disaster, and (2) are in need of financial assistance which is not available on reasonable terms in the disaster stricken area. Upon receipt of such certification, the Administration may then make such loans as would have been available under this paragraph if a disaster declaration had been issued.
Provided, That no loan or guarantee shall be extended pursuant to this paragraph (2) unless the Administration finds that the applicant is not able to obtain credit elsewhere.
(3) (A) In this paragraph—
(i) the term “essential employee” means an individual who is employed by a small business concern and whose managerial or technical expertise is critical to the successful day-to-day operations of that small business concern;
(ii) the term “period of military conflict” has the meaning given the term in subsection (n)(1); and
(iii) the term “substantial economic injury” means an economic harm to a business concern that results in the inability of the business concern—
(I) to meet its obligations as they mature;
(II) to pay its ordinary and necessary operating expenses; or
(III) to market, produce, or provide a product or service ordinarily marketed, produced, or provided by the business concern.
(B) The Administration may make such disaster loans (either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred basis) to assist a small business concern that has suffered or that is likely to suffer substantial economic injury as the result of an essential employee of such small business concern being ordered to active military duty during a period of military conflict.
(C) A small business concern described in subparagraph (B) shall be eligible to apply for assistance under this paragraph during the period beginning on the date on which the essential employee is ordered to active duty and ending on the date that is 90 days after the date on which such essential employee is discharged or released from active duty.
(D) Any loan or guarantee extended pursuant to this paragraph shall be made at the same interest rate as economic injury loans under paragraph (2).
(E) No loan may be made under this paragraph, either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred basis, if the total amount outstanding and committed to the borrower under this subsection would exceed $1,500,000, unless such applicant constitutes a major source of employment in its surrounding area, as determined by the Administration, in which case the Administration, in its discretion, may waive the $1,500,000 limitation.
(F) For purposes of assistance under this paragraph, no declaration of a disaster area shall be required.
[THE FOLLOWING PARAGRAPHS PRECEDING SUBSECTION 7(c)
APPLY TO THE ENTIRE SUBSECTION 7(b).]
No
loan under this subsection, including renewals and extensions thereof, may be
made for a period or periods exceeding thirty years: Provided, That the Administrator may
consent to a suspension in the payment of principal and interest charges on,
and to an extension in the maturity of, the Federal share of any loan under
this subsection for a period not to exceed five years, if (A) the borrower
under such loan is a homeowner or a small business concern, (B) the loan was
made to enable (i) such homeowner to repair or replace his home, or (ii) such
concern to repair or replace plant or equipment which was damaged or destroyed
as the result of a disaster meeting the requirements of clause (A) or (B) of paragraph (2) of this
subsection, and (C) the Administrator determines such action is necessary to
avoid severe financial hardship: Provided further, That the provisions of paragraph (1) of
subsection (c) of this section shall not be applicable to any such loan having
a maturity in excess of twenty years.
Notwithstanding the provisions of any other law, the interest rate on
the Administration's share of any loan made under subsection (b), except as
provided in subsection (c), shall not exceed the average annual interest rate
on all interest‑bearing obligations of the United States then forming a
part of the public debt as computed at the end of the fiscal year next
preceding the date of the loan and adjusted to the nearest one‑eighth of
1 per centum plus one‑quarter of 1 per centum: Provided, however, That the interest
rate for loans made under paragraphs (1) and (2) hereof shall not exceed the
rate of interest which is in effect at the time of the occurrence of the
disaster. In agreements to participate
in loans on a deferred basis under this subsection, such participation by the
Administration shall not be in excess of 90 per centum of the balance of the
loan outstanding at the time of disbursement. Notwithstanding any other
provision of law, the interest rate on the Administration's share of any loan
made pursuant to paragraph (1) of this subsection to repair or replace a
primary residence and/or replace or repair damaged or destroyed personal
property, less the amount of compensation by insurance or otherwise, with respect
to a disaster occurring on or after July 1, 1976, and prior to October 1, 1978,
shall be: 1 per centum on the amount of
such loan not exceeding $10,000, and 3 per centum on the amount of such loan
over $10,000 but not exceeding $40,000. The interest rate on the
Administration's share of the first $250,000 of all other loans made pursuant
to paragraph (1) of this subsection, with respect to a disaster occurring on or
after
In the administration of the disaster loan program under paragraphs (1), (2), and (4) of this subsection, in the case of property loss or damage or injury resulting from a major disaster as determined by the President or a disaster as determined by the Administrator which occurs on or after January 1, 1971, and prior to July 1, 1973, the Small Business Administration, to the extent such loss or damage or injury is not compensated for by insurance or otherwise—
(A) may make any loan for repair,
rehabilitation, or replacement of property damaged or destroyed without regard
to whether the required financial assistance is otherwise available from
private sources;
(B) may, in the case of the total destruction
or substantial property damage of a home or business concern, refinance any
mortgage or other liens outstanding against the destroyed or damaged property
if such property is to be repaired, rehabilitated, or replaced, except that (1)
in the case of a business concern, the amount refinanced shall not exceed the
amount of the physical loss sustained, and (2) in the case of a home, the
amount of each monthly payment of principal and interest on the loan after
refinancing under this clause shall be not less than the amount of each such
payment made prior to such refinancing;
(C) may, in the case of a loan made under
clause (A) or a mortgage or other lien
refinanced under clause (B) in connection with the destruction of, or
substantial damage to, property owned and used as a residence by an individual
who by reason of retirement, disability, or other similar circumstances relies
for support on survivor, disability, or retirement benefits under a pension,
insurance, or other program, consent to the suspension of the payments of the
principal of that loan, mortgage, or lien during the lifetime of that
individual and his spouse for so long as the Administration determines that
making such payments would constitute a substantial hardship;
(D) shall, notwithstanding the provisions of any other law and upon presentation by the applicant of proof of loss or damage or injury and a bona fide estimate of cost of repair, rehabilitation, or replacement, cancel the principal of any loan made to cover a loss or damage or injury resulting from such disaster, except that—
(i) with
respect to a loan made in connection with a disaster occurring on or after
January 1, 1971, but prior to January 1, 1972, the total amount so canceled
shall not exceed $2,500, and the interest on the balance of the loan shall be
at a rate of 3 per centum per annum; and
(ii) with respect to a loan made in
connection with a disaster occurring on or after January 1, 1972, but prior to
July 1, 1973, the total amount so canceled shall not exceed $5,000, and the
interest on the balance of the loan shall be at a rate of 1 per centum per
annum.
With respect to any loan referred to in clause (D) which is outstanding on the date of enactment of this paragraph, the Administrator shall—
(i) make such
change in the interest rate on the balance of such loan as is required under
that clause effective as of such date of enactment; and
(ii) in applying the limitation set forth in
that clause with respect to the total amount of such loan which may be
canceled, consider as part of the amount so canceled any part of such loan which
was previously canceled pursuant to section 231 of the Disaster Relief Act of
1970.
Whoever wrongfully
misapplies the proceeds of a loan obtained under this subsection shall be
civilly liable to the Administrator in an amount equal to one‑and‑one‑half
times the original principal amount of the loan.
(E) A State grant made on or prior to July 1,
1979, shall not be considered compensation for the purpose of applying the
provisions
of section 312(a) of the Disaster Relief and Emergency Assistance Act to a
disaster loan under paragraph (1), (2), or (4) of this subsection.
(c) (1) The
Administration may further extend the maturity of or renew any loan made
pursuant to this section, or any loan transferred to the Administration
pursuant to Reorganization Plan Numbered 2 of 1954, or Reorganization Plan
Numbered 1 of 1957, for additional periods not to exceed ten years beyond the
period stated therein, if such extension or renewal will aid in the orderly
liquidation of such loan.
(2) During any period in which principal and
interest charges are suspended on the Federal share of any loan, as provided in
subsection (b), the Administrator shall, upon the request of any person, firm,
or corporation having a participation in such loan, purchase such participation,
or assume the obligation of the borrower, for the balance of such period, to
make principal and interest payments on the non‑Federal share of such
loan: Provided, That no such payments shall be made by the Administrator
in behalf of any borrower unless (i) the
Administrator determines that such action is necessary in order to avoid a
default, and (ii) the borrower agrees to make payments to the Administration in
an aggregate amount equal to the amount paid in its behalf by the
Administrator, in such manner and at such times (during or after the term of
the loan) as the Administrator shall determine having due regard to the
purposes sought to be achieved by this paragraph.
(3) With respect to a disaster occurring on or after October 1, 1978, and prior to the effective date of this Act, on the Administration's share of loans made pursuant to paragraph (1) of subsection (b)—
(C) if the loan proceeds are to repair or
replace property damaged or destroyed and if the applicant is a business
concern which is able to obtain sufficient credit elsewhere, the interest rate
shall not exceed the current average market yield on outstanding marketable
obligations of the United States with remaining periods to maturity
comparable
to the average maturities of such loans and adjusted to the nearest one‑eighth
of 1 percent, and an additional amount as determined by the Administration, but
not to exceed 1 percent: Provided,
That three years after such loan is fully disbursed and every two years
thereafter for the term of the loan, if the Administration determines that the
borrower is able to obtain a loan from non‑Federal sources at reasonable
rates and terms for loans of similar purposes and periods of time, the borrower
shall, upon request by the Administration, apply for and accept such a
loan in sufficient amount to repay the Administration: Provided further,
That no loan under subsection (b)(1) shall be made, either directly or in
cooperation with banks or other lending institutions through agreements to
participate on an immediate or deferred basis, if the total amount outstanding
and committed to the borrower under such subsection would exceed $500,000 for
each disaster, unless an applicant constitutes a major source of employment in
an area suffering a disaster, in which case the Administration, in its
discretion, may waive the $500,000 limitation.
(4) Notwithstanding the provisions of any other law, the interest rate on the Federal share of any loan made under subsection (b) shall be—
(A) in the case of a homeowner unable to
secure credit elsewhere, the rate prescribed by the Administration but not more
than one‑half the rate determined by the Secretary of the Treasury taking
into consideration the current average market yield on outstanding marketable obligations
of the United States with remaining periods to maturity comparable to the
average maturities of such loans plus an additional charge of not to exceed 1
per centum per annum as determined by the Administrator, and adjusted to the
nearest one‑eighth of 1 per centum but not to exceed 8 per centum per
annum;
(B) in the case of a homeowner able to secure
credit elsewhere, the rate prescribed by the Administration but not more than
the rate determined by the Secretary of the Treasury taking into consideration
the current average market yield on outstanding marketable obligations of the
United States with remaining periods to maturity comparable to the average
maturities of such loans plus an additional charge of not to exceed 1 per
centum per annum as determined by the Administrator, and adjusted to the
nearest one‑eighth of 1 per centum;
(C) in the case of a business concern unable
to obtain credit elsewhere, not to exceed 8 per centum per annum;
(D) in the case of a business concern able to
obtain credit elsewhere, the rate prescribed by the Administration but not in
excess of the rate prevailing in private market for similar loans and not more
than the rate prescribed by the Administration as the maximum interest rate for
deferred participation (guaranteed) loans under section 7(a) of this Act. Loans under this subparagraph shall be
limited to a maximum term of three years.
(5) Notwithstanding the provisions of any other law, the interest rate on the Federal share of any loan made under subsection (b)(1) and (b)(2) on account of a disaster commencing on or after October 1, 1982, shall be—
(A) in the case of a homeowner unable to
secure credit elsewhere, the rate prescribed by the Administration but not more
than one‑half the rate determined by the Secretary of the Treasury taking
into consideration the current average market yield on outstanding marketable
obligations of the United States with remaining periods to maturity comparable
to the average maturities of such loan plus an additional charge of not to
exceed 1 per centum per annum as determined by the Administrator, and adjusted
to the nearest one‑eighth of 1 per centum, but not to exceed 4 per centum
per annum;
(B) in the case of a homeowner able to secure
credit elsewhere, the rate prescribed by the Administration but not more than
the rate determined by the Secretary of the Treasury taking into consideration
the current average market yield on outstanding marketable obligations of the
United States with remaining periods to maturity comparable to the average
maturities of such loans plus an additional charge of not to exceed 1 per
centum per annum as determined by the Administrator; and adjusted to the
nearest one‑eighth of 1 per centum, but not to exceed 8 per centum per annum;
(C) in the case of a business or other
concern, including agricultural cooperatives, unable to obtain credit
elsewhere, not to exceed 4 per centum per annum;
(D) in the case of a business concern able to
obtain credit elsewhere, the rate prescribed by the Administration but not in
excess of the lowest of (i) the rate prevailing in
the private market for similar loans, (ii) the rate prescribed by the
Administration as the maximum interest rate for deferred participation
(guaranteed) loans under section 7(a) of this Act, or (iii) 8 per centum per
annum. Loans under this subparagraph
shall be limited to a maximum term of three years.
(6) Notwithstanding the provisions of any
other law, such loans, subject to the reductions required by subparagraphs (A)
and (B) of paragraph 7(b)(1), shall be in amounts equal to 100 per centum of
loss. The interest rates for loans made
under paragraphs 7(b)(1) and (2), as determined pursuant to paragraph (5),
shall be the rate of interest which is in effect on the date of the disaster
commenced: Provided, That no loan
under paragraphs 7(b)(1) and (2) shall be made, either directly or in
cooperation with banks or other lending institutions through agreements to
participate on an immediate or deferred (guaranteed) basis, if the total amount
outstanding and committed to the borrower under subsection 7(b) would exceed
$500,000 for each disaster unless an applicant constitutes a major source of
employment in an area suffering a disaster, in which case the Administration,
in its discretion, may waive the $500,000 limitation. Employees of concerns sharing a common
business premises shall be aggregated in determining "major source of
employment" status for nonprofit applicants owning such premises. Provided
further, That the Administration, subject to the reductions required by
subparagraphs (A) and (B) of paragraph 7(b)(1), shall not reduce the amount of
eligibility for any homeowner on account of loss of real estate to less than
$100,000 for each disaster nor for any homeowner or lessee on account of loss
of personal property to less than $20,000 for each disaster, such sums being in
addition to any eligible refinancing: Provided
further, That the Administration
shall not require collateral for loans of $10,000 or less which are made under
paragraph (1) of subsection (b).
With respect to any loan which is outstanding on the date of
enactment of this paragraph and which was made on account of a disaster
commencing on or after October 1, 1982, the Administrator shall make such
change in the interest rate on the balance of such loan as is required herein
effective as of the date of enactment.
(7) The Administration shall not withhold
disaster assistance pursuant to this paragraph to nurseries who are victims of
drought disasters. As used in section
7(b)(2) the term "an area affected by a disaster" includes any
county, or county contiguous thereto, determined to be a disaster by the
President, the Secretary of Agriculture or the Administrator of the Small
Business Administration.
(d) The Administration shall not fund any
Small Business Development Center or any variation thereof, except as
authorized in section 21 of this Act.
(e) [RESERVED].
(f) [RESERVED].
(g) [Repealed].
(h) (1) The Administration also is empowered, where other financial assistance is not available on reasonable terms, to make such loans (either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred basis) as the Administration may determine to be necessary or appropriate—
(A) to assist any public or private organization—
(i) which is
organized under the laws of the United States or of any State, operated in the
interest of handicapped individuals, the net income of which does not inure in
whole or in part to the benefit of any shareholder or other individual;
(ii) which complies with any applicable
occupational health and safety standard prescribed by the Secretary of Labor;
and
(iii) which, in the production of commodities
and in the provision of services during any fiscal year in which it receives
financial assistance under this subsection, employs handicapped individuals for
not less than 75 per centum of the man‑hours required for the production
or provision of the commodities or services; or
(B) to assist any handicapped individual in
establishing, acquiring, or operating a small business concern.
(2) The Administration's share of any loan
made under this subsection shall not exceed $350,000, nor may any such loan be
made if the total amount outstanding and committed (by participation or
otherwise) to the borrower from the business loan and investment fund
established by section 4(c)(1)(B) of this Act would exceed $350,000. In agreements to participate in loans on a
deferred basis under this subsection, the Administration's participation may
total 100 per centum of the balance of the loan at the time of
disbursement. The Administration's share
of any loan made under this subsection shall bear interest at the rate of 3 per
centum per annum. The maximum term of
any such loan, including extensions and renewals thereof, may not exceed
fifteen years. All loans made under this
subsection shall be of such sound value or so secured as reasonably to assure
repayment: Provided, however,
That any reasonable doubt shall be resolved in favor of the applicant.
(3) For purposes of this subsection, the
term "handicapped individual" means a person who has a physical,
mental, or emotional impairment, defect, ailment, disease, or disability of a
permanent nature which in any way limits the selection of any type of
employment for which the person would otherwise be qualified or qualifiable.
(i) (1) The Administration also is empowered to make, participate (on an immediate basis) in, or guarantee loans, repayable in not more than fifteen years, to any small business concern, or to any qualified person seeking to establish such a concern, when it determines that such loans will further the policies established in section 2(b) of this Act, with particular emphasis on the preservation or establishment of small business concerns located in urban or rural areas with high proportions of unemployed or low‑income individuals, or owned by low‑income individuals: Provided, however, That no such loans shall be made, participated in, or guaranteed if the total of such Federal assistance to a single borrower outstanding at any one time would exceed $100,000. The Administration may defer payments on the principal of such loans for a grace period and use such other methods as it deems necessary and appropriate to assure the successful establishment and operation of such concern. The Administration may, in its discretion, as a condition of such financial assistance, require that the borrower take steps to improve his management skills by participating in a management training program approved by the Administration: Provided, however, That any management training program so approved must be of sufficient scope and duration to provide reasonable opportunity for the individuals served to develop entrepreneurial and managerial self‑sufficiency.
(2) The Administration shall encourage, as
far as possible, the participation of the private business community in the
program of assistance to such concerns, and shall seek to stimulate new private
lending activities to such concerns through the use of the loan guarantees,
participations in loans, and pooling arrangements authorized by this
subsection.
(3) To insure an equitable distribution
between urban and rural areas for loans between $3,500 and $100,000 made under
this subsection the Administration is authorized to use the agencies and
agreements and delegations developed under title III of the Economic
Opportunity Act of 1964, as amended, as it shall determine necessary.
(4) The Administration shall provide for the
continuing evaluation of programs under this subsection, including full
information on the location, income characteristics, and types of businesses
and individuals assisted, and on new private lending activity stimulated, and
the results of such evaluation together with recommendations shall be included
in the report required by section 10(a) of this Act.
(5) Loans made pursuant to this subsection (including immediate participation in and guarantees of such loans) shall have such terms and conditions as the Administration shall determine, subject to the following limitations—
(A) there is reasonable assurance of
repayment of the loan;
(B) the financial assistance is not otherwise
available on reasonable terms from private sources or other Federal, State, or
local programs;
(C) the amount of the loan, together with
other funds available, is adequate to assure completion of the project or
achievement of the purposes for which the loan is made;
(D) the loan bears interest at a rate not
less than (i) a rate determined by the Secretary of
the Treasury, taking into consideration the average market yield on outstanding
Treasury obligations of comparable maturity, plus (ii) such additional charge,
if any, toward covering other costs of the program as the Administration may
determine to be consistent with its purposes:
Provided, however, That the rate of interest charged on loans
made in redevelopment areas designated under the Public Works and Economic
Development Act of 1965 (42 U.S.C. 3108 et seq.) shall not exceed the rate
currently applicable to new loans made under section 201 of that Act (42 U.S.C.
3141); and
(E) fees not in excess of amounts necessary
to cover administrative expenses and probable losses may be required on loan
guarantees.
(6) The Administration shall take such steps
as may be necessary to insure that, in any fiscal year, at least 50 per centum
of the amounts loaned or guaranteed pursuant to this subsection are allotted to
small business concerns located in urban areas identified by the Administration
as having high concentrations of unemployed or low‑income individuals or
to small business concerns owned by low‑income individuals. The Administration shall define the meaning of
low‑income as it applies to owners of small business concerns eligible to
be assisted under this subsection.
(7) No financial assistance shall be
extended pursuant to this subsection where the Administration determines that
the assistance will be used in relocating establishments from one area to
another if such relocation would result in an increase in unemployment in the
area of original location.
(j) (1) The
Administration shall provide financial assistance to public or private
organizations to pay all or part of the cost of projects designed to provide
technical or management assistance to individuals or enterprises eligible for
assistance under sections 7(i), 7(j)(10), and 8(a) of
this Act, with special attention to small businesses located in areas of high
concentration of unemployed or low‑income individuals, to small
businesses eligible to receive contracts pursuant to section 8(a) of this Act.
(2) Financial assistance under this subsection may be provided for projects, including, but not limited to—
(A) planning and research, including
feasibility studies and market research;
(B) the identification and development of new
business opportunities;
(C) The furnishing of centralized services
with regard to public services and Federal Government programs including
programs authorized under sections 7(i), 7(j)(10),
and 8(a) of this Act;
(D) the establishment and strengthening of
business service agencies, including trade associations and cooperatives; and
(E) the furnishing of business counseling,
management training, and legal and other related services, with special
emphasis on the development of management training programs using the resources
of the business community, including the development of management training
opportunities in existing business, and with emphasis in all cases upon
providing management training of sufficient scope and duration to develop
entrepreneurial and managerial self‑sufficiency on the part of the individuals
served.
(3) The Administration shall encourage the
placement of subcontracts by businesses with small business concerns located in
areas of high concentration of unemployed or low‑income individuals, and
with small businesses eligible to receive contracts pursuant to section 8(a) of
this Act. The Administration may provide
incentives and assistance to such businesses that will aid in the training and
upgrading of potential subcontractors or other small business concerns eligible
for assistance under sections 7(i), 7(j), and 8(a) of
this Act.
(A) [Repealed].
(B) [Repealed].
(4) The Administration shall give preference
to projects which promote the ownership, participation in ownership, or
management of small businesses owned by low‑income individuals and small
businesses eligible to receive contracts pursuant to section 8(a) of this Act.
(5) The financial assistance authorized for
projects under this subsection includes assistance advanced by grant,
agreement, or contract.
(6) The Administration is authorized to make
payments under grants and contracts entered into under this subsection in lump
sum or installments, and in advance or by way of reimbursement, and in the case
of grants, with necessary adjustments on account of overpayments or
underpayments.
(7) To the extent feasible, services under
this subsection shall be provided in a location which is easily accessible to
the individuals and small business concerns served.
(8) [Repealed].
(9) The Administration shall take such steps
as may be necessary and appropriate, in coordination and cooperation with the
heads of other Federal departments and agencies, to insure that contracts,
subcontracts, and deposits made by the Federal Government or with programs
aided with Federal funds are placed in such way as to further the purposes of
sections 7(i), 7(j), and 8(a) of this Act.
(10) There is established within the Administration a small business and capital ownership development program (hereinafter referred to as the "Program") which shall provide assistance exclusively for small business concerns eligible to receive contracts pursuant to section 8(a) of this Act. The program, and all other services and activities authorized under section 7(j) and 8(a) of this Act, shall be managed by the Associate Administrator for Minority Small Business and Capital Ownership Development under the supervision of, and responsible to, the Administrator.
(A) The program shall—
(i) assist small business concerns participating in the Program (either through public or private organizations) to develop and maintain comprehensive business plans which set forth the Program Participant's specific business targets, objectives, and goals developed and maintained in conformity with subparagraph (D).
(ii) provide for such other nonfinancial services as deemed necessary for the establishment, preservation, and growth of small business concerns participating in the Program, including but not limited to (I) loan packaging, (II) financial counseling, (III) accounting and bookkeeping assistance, (IV) marketing assistance, and (V) management assistance;
(iii) assist small business concerns participating in the Program to obtain equity and debt financing;
(iv) establish regular performance monitoring and reporting systems for small business concerns participating in the Program to assure compliance with their business plans;
(v) analyze and report the causes of success and failure of small business concerns participating in Program; and
(vi) provide assistance necessary to help small business concerns participating in the Program to procure surety bonds, with such assistance including, but not limited to (I) the preparation of application forms required to receive a surety bond, (II) special management and technical assistance designed to meet the specific needs of small business concerns participating in the Program and which have received or are applying to receive a surety bond, and (III) preparation of all forms necessary to receive a surety bond guarantee from the Administration pursuant to title IV, part B of the Small Business Investment Act of l958.
(B) Small business concerns eligible to receive contracts pursuant to section 8(a) of this Act shall participate in the Program.
(C) (i) A small business concern participating in any program or activity conducted under the authority of this paragraph or eligible for the award of contracts pursuant to section 8(a) on September 1, 1988, shall be permitted continued participation and eligibility in such program or activity for a period of time which is the greater of—
(I) 9 years less the number of years since the award of its first contract pursuant to section 8(a); or
(II) its original fixed program participation term (plus any extension thereof) assigned prior to the effective date of this paragraph plus eighteen months.
(ii) Nothing contained in this subparagraph shall be deemed to prevent the Administration from instituting a termination or graduation pursuant to subparagraph (F) or (H) for issues unrelated to the expiration of any time period limitation.
(D) (i) Promptly after certification under paragraph (11) a Program Participant shall submit a business plan (hereinafter referred to as the "plan") as described in clause (ii) of this subparagraph for review by the Business Opportunity Specialist assigned to assist such Program Participant. The plan may be a revision of a preliminary business plan submitted by the Program Participant or required by the Administration as a part of the application for certification under this section and shall be designed to result in the Program Participant eliminating the conditions or circumstances upon which the Administration determined eligibility pursuant to section 8(a)(6). Such plan, and subsequent modifications submitted under clause (iii) of this subparagraph, shall be approved by the business opportunity specialist prior to the Program Participant being eligible for award of a contract pursuant to section 8(a).
(ii) The plans submitted under this subparagraph shall include the following:
(I) An analysis of market potential, competitive environment, and other business analyses estimating the Program Participant's prospects for profitable operations during the term of program participation and after graduation.
(II) An analysis of the Program Participant's strengths and weaknesses with particular attention to correcting any financial, managerial, technical, or personnel conditions which are likely to impede the small business concern from receiving contracts other than those awarded under section 8(a).
(III) Specific targets, objectives, and goals, for the business development of the Program Participant during the next and succeeding years utilizing the results of the analyses conducted pursuant to subclauses (I) and (II).
(IV) A transition management plan outlining specific steps to assure profitable business operations after graduation (to be incorporated into the Program Participant's plan during the first year of the transitional stage of Program participation.
(V) Estimates of contract awards pursuant to section 8(a) and from other sources, which the Program Participant will require to meet the specific targets, objectives, and goals for the years covered by its plan. The estimates established shall be consistent with the provisions of subparagraph (I) and section 8(a).
(iii) Each Program Participant shall annually review its currently approved plan with its Business Opportunity Specialist and modify such plan as may be appropriate. Any modified plan shall be submitted to the Administration for approval. The currently approved plan shall be considered valid until such time as a modified plan is approved by the Business Opportunity Specialist. Annual reviews pertaining to years in the transitional stage of program participation shall require, as appropriate, a written verification that such Program Participant has complied with the requirements of subparagraph (I) relating to attaining business activity from sources other that contracts awarded pursuant to section 8(a).
(iv) Each Program Participant shall annually forecast its needs for contract awards under section 8(a) for the next program year and the succeeding program year during the review of its business plan, conducted pursuant to clause (iii). Such forecast shall be known as the section 8(a) contract support level and shall be included in the Program Participant's business plan. Such forecast shall include—
(I) the aggregate dollar value of contract support to be sought on a noncompetitive basis under section 8(a), reflecting compliance with the requirements of subparagraph (I) relating to attaining business activity from sources other than contracts awarded pursuant to section 8(a),
(II) the types of contract opportunities being sought, identified by Standard Industrial Classification (SIC) Code or otherwise,
(III) an estimate of the dollar value of contract support to be sought on a competitive basis, and
(IV) such other information as may be requested by the Business Opportunity Specialist to provide effective business development assistance to the Program Participant.
(E) A small business concern participating in the program conducted under the authority of this paragraph and eligible for the award of contracts pursuant to section 8(a) shall be denied all such assistance if such concern—
(i) voluntarily elects not to continue participation;
(ii) completes the period of Program participation as prescribed by paragraph (15);
(iii) is terminated pursuant to a termination proceeding conducted in accordance with section 8(a)(9); or
(iv) is graduated pursuant to a graduation proceeding conducted in accordance with section 8(a)(9).
(F) For purposes of this section and section 8(a), the term "terminated" and the term "termination" means the total denial or suspension of assistance under this paragraph or under section 8(a) prior to the graduation of the participating small business concern or prior to the expiration of the maximum program participation term. An action for termination shall be based upon good cause, including—
(i) the failure by such concern to maintain its eligibility for Program participation;
(ii) the failure of the concern to engage in business practices that will promote its competitiveness within a reasonable period of time as evidenced by, among other indicators, a pattern of unjustified delinquent performance or terminations for default with respect to contracts awarded under the authority of section 8(a);
(iii) a demonstrated pattern of failing to make required submissions or responses to the Administration in a timely manner;
(iv) the willful violation of any rule or regulation of the Administration pertaining to material issues;
(v) the debarment of the concern or its disadvantaged owners by any agency pursuant to subpart 9.4 of title 48, Code of Federal Regulations (or any successor regulation); or
(vi) the conviction of the disadvantaged owner or an officer of the concern for any offense indicating a lack of business integrity including any conviction for embezzlement, theft, forgery, bribery, falsification or violation of section 16. For purposes of this clause, no termination action shall be taken with respect to a disadvantaged owner solely because of the conviction of an officer of the concern (who is other than a disadvantaged owner) unless such owner conspired with, abetted, or otherwise knowingly acquiesced in the activity or omission that was the basis of such officer's conviction.
(G) The Director of the Division may initiate a termination proceeding by recommending such action to the Associate Administrator for Minority Small Business and Capital Ownership Development. Whenever the Associate Administrator, or a designee of such officer, determines such termination is appropriate, within 15 days after making such a determination the Program Participant shall be provided a written notice of intent to terminate, specifying the reasons for such action. No Program Participant shall be terminated from the Program pursuant to subparagraph (F) without first being afforded an opportunity for a hearing in accordance with section 8(a)(9).
(H) For the purposes of sections 7(j) and 8(a) the term "graduated" or "graduation" means that the Program Participant is recognized as successfully completing the program by substantially achieving the targets, objectives, and goals contained in the concern's business plan thereby demonstrating its ability to compete in the marketplace without assistance under this section or section 8(a).
(I) (i) During the developmental stage of its participation in the Program, a Program Participant shall take all reasonable efforts within its control to attain the targets contained in its business plan for contracts awarded other than pursuant to section 8(a) (hereinafter referred to as "business activity targets."). Such efforts shall be made a part of the business plan and shall be sufficient in scope and duration to satisfy the Administration that the Program Participant will engage [sic] a reasonable marketing strategy that will maximize its potential to achieve its business activity targets.
(ii) During the transitional stage of the Program a Program Participant shall be subject to regulations regarding business activity targets that are promulgated by the Administration pursuant to clause (iii).
(iii) The regulations referred to in clause (ii) shall:
(I) establish business activity targets applicable to Program Participants during the fifth year and each succeeding year of Program Participation; such targets, for such period of time, shall reflect a reasonably consistent increase in contracts awarded other than pursuant to section 8(a), expressed as a percentage of total sales; when promulgating business activity targets the Administration may establish modified targets for Program Participants that have participated in the Program for a period of longer than four years on the effective date of this subparagraph;
(II) require a Program Participant to attain its business activity targets;
(III) provide that, before the receipt of any contract to be awarded pursuant to section 8(a), the Program Participant (if it is in the transitional stage) must certify that it has complied with the regulations promulgated pursuant to subclause (II), or that it is in compliance with such remedial measures as may have been ordered pursuant to regulations issued under subclause (V);
(IV) require the Administration to review each Program Participant's performance regarding attainment of business activity targets during periodic reviews of such Participant's business plan; and
(V) authorize the Administration to take appropriate remedial measures with respect to a Program Participant that has failed to attain a required business activity target for the purpose of reducing such Participant's dependence on contracts awarded pursuant to section 8(a); such remedial actions may include, but are not limited to assisting the Program Participant to expand the dollar volume of its competitive business activity or limiting the dollar volume of contracts awarded to the Program Participant pursuant to section 8(a); except for actions that would constitute a termination, remedial measures taken pursuant to this subclause shall not be reviewable pursuant to section 8(a)(9).
(J) (i) The Administration shall conduct an evaluation of a Program Participant's eligibility for continued participation in the Program whenever it receives specific and credible information alleging that such Program Participant no longer meets the requirements for Program eligibility. Upon making a finding that a Program Participant is no longer eligible, the Administration shall initiate a termination proceeding in accordance with subparagraph (F). A Program Participant's eligibility for award of any contract under the authority of section 8(a) may be suspended pursuant to subpart 9.4 of title 48, Code of Federal Regulations (or any successor regulation).
(ii) (I) Except as authorized by subclause (II) or (III), no award shall be made pursuant to section 8(a) to other than a small business concern.
(II) In determining the size of a small business concern owned by a socially and economically disadvantaged Indian tribe (or a wholly owned business entity of such tribe), each firm's size shall be independently determined without regard to its affiliation with the tribe, any entity of the tribal government, or any other business enterprise owned by the tribe, unless the Administrator determines that one or more such tribally owned business concerns have obtained, or are likely to obtain, a substantial unfair competitive advantage within an industry category.
(III) Any joint venture established under the authority of section 602(b) of Public Law 100‑656, the "Business Opportunity Development Reform Act of 1988", shall be eligible for award of a contract pursuant to section 8(a).
(11) (A) The Associate Administrator for Minority Small Business and Capital Ownership Development shall be responsible for coordinating and formulating policies relating to Federal Assistance to small business concerns eligible for assistance under section 7(i) of this Act and small business concerns eligible to receive contracts pursuant to section 8(a) of this Act.
(B) (i) Except as provided in clause (iii), no individual who was determined pursuant to section 8(a) to be socially and economically disadvantaged before the effective date of this subparagraph shall be permitted to assert such disadvantage with respect to any other concern making application for certification after such effective date.
(ii) Except as provided in clause (iii), any individual upon whom eligibility is based pursuant to section 8(a)(4) shall be permitted to assert such eligibility for only one small business concern.
(iii) A socially and economically disadvantaged Indian tribe may own more than one small business concern eligible for assistance pursuant to section 7(j)(10) and section 8(a) if—
(I) the Indian tribe does not own another firm in the same industry which has been determined to be eligible to receive contracts under this program, and
(II) the individuals responsible for the management and daily operations of the concern do not manage more than two Program Participants.
(C) No concern, previously eligible for the award of contracts pursuant to section 8(a), shall be subsequently recertified for program participation if its prior participation in the program was concluded for any of the reasons described in paragraph (10)(E).
(D) A concern eligible for the award of contracts pursuant to this subsection shall remain eligible for such contracts if there is a transfer of ownership and control (as defined pursuant to section 8(a)(4)) to individuals who are determined to be socially and economically disadvantaged pursuant to section 8(a). In the event of such a transfer, the concern, if not terminated or graduated, shall be eligible for a period of continued participation in the program not to exceed the time limitations prescribed in paragraph (15).
(E) There is established a Division of Program Certification and Eligibility (hereinafter referred to in this paragraph as the "Division") that shall be made part of the Office of Minority Small Business and Capital Ownership Development. The Division shall be headed by a Director who shall report directly to the Associate Administrator for Minority Small Business and Capital Ownership Development. The Division shall establish field offices within such regional offices of the Administration as may be necessary to perform efficiently its functions and responsibilities.
(F) Subject to the provisions of section 8(a)(9), the functions and responsibility of the Division are to—
(i) receive, review and evaluate applications for certification pursuant to paragraphs (4), (5), (6) and (7) of section 8(a);
(ii) advise each program applicant within 15 days after the receipt of an application as to whether such application is complete and suitable for evaluation and, if not, what matters must be rectified;
(iii) render recommendations on such applications to the Associate Administrator for Minority Small Business and Capital Ownership Development;
(iv) review and evaluate financial statements and other submissions from concerns participating in the program established by paragraph (10) to ascertain continued eligibility to receive subcontracts pursuant to section 8(a);
(v) make a request for the initiation of termination or graduation proceedings, as appropriate, to the Associate Administrator for Minority Small Business and Capital Ownership Development;
(vi) make recommendations to the Associate Administrator for Minority Small Business and Capital Ownership Development concerning protests from applicants that have been denied program admission;
(vii) decide protests regarding the status of a concern as a disadvantaged concern for purposes of any program or activity conducted under the authority of subsection (d) of section 8, or any other provision of Federal law that references such subsection for a definition of program eligibility; and
(viii) implement such policy directives as may be issued by the Associate Administrator for Minority Small Business and Capital Ownership Development pursuant to subparagraph (I) regarding, among other things, the geographic distribution of concerns to be admitted to the program and the industrial make‑up of such concerns.
(G) An applicant shall not be denied admission into the program established by paragraph (10) due solely to a determination by the Division that specific contract opportunities are unavailable to assist in the development of such concern unless—
(i) the Government has not previously procured and is unlikely to procure the types of products or services offered by the concern; or
(ii) the purchases of such products or services by the Federal Government will not be in quantities sufficient to support the developmental needs of the applicant and other Program Participants providing the same or similar items or services.
(H) Not later than 90 days after receipt of a completed application for Program certification, the Associate Administrator for Minority Small Business and Capital Ownership Development shall certify a small business concern as a Program Participant or shall deny such application.
(I) Thirty days before the conclusion of each fiscal year, the Director of the Division shall review all concerns that have been admitted into the Program during the preceding 12‑month period. The review shall ascertain the number of entrants, their geographic distribution and industrial classification. The Director shall also estimate the expected growth of the Program during the next fiscal year and the number of additional Business Opportunity Specialists, if any, that will be needed to meet the anticipated demand for the Program. The findings and conclusions of the Director shall be reported to the Associate Administrator for Minority Small Business and Capital Ownership Development by September 30 of each year. Based on such report and such additional data as may be relevant, the Associate Administrator shall, by October 31 of each year, issue policy and program directives applicable to such fiscal year that—
(i) establish priorities for the solicitation of program applications from underrepresented regions and industry categories;
(ii) assign staffing levels and allocate other program resources as necessary to meet program needs; and
(iii) establish priorities in the processing and admission of new Program Participants as may be necessary to achieve an equitable geographic distribution of concerns and a distribution of concerns across all industry categories in proportions needed to increase significantly contract awards to small business concerns owned and controlled by socially and economically disadvantaged individuals. When considering such increase the Administration shall give due consideration to those industrial categories where Federal purchases have been substantial but where the participation rate of such concerns has been limited.
(12) (A) The Administration shall segment the Capital Ownership Development Program into two stages: a developmental stage; and a transitional stage.
(B) The developmental stage of program participation shall be designed to assist the concern in its effort to overcome its economic disadvantage by providing such assistance as may be necessary and appropriate to access its markets and to strengthen its financial and managerial skills.
(C) The transitional stage of program participation shall be designed to overcome, insofar as practicable, the remaining elements of economic disadvantage and to prepare such concern for graduation from the program.
(13) A Program Participant, if otherwise eligible, shall be qualified to receive the following assistance during the stages of program participation specified in paragraph 12:
(A) Contract support pursuant to section 8(a).
(B) Financial assistance pursuant to section 7(a)(20).
(C) A maximum of two exemptions from the requirements of section 1(a) of the Act entitled "An Act providing conditions for the purchase of supplies and the making of contracts by the United States, and for other purposes", approved June 30, 1936 (49 Stat. 2036), which exemptions shall apply only to contracts awarded pursuant to section 8(a) and shall only be used to allow for contingent agreements by a small business concern to acquire the machinery, equipment, facilities, or labor needed to perform such contracts. No exemption shall be made pursuant to this subparagraph if the contract to which it pertains has an anticipated value in excess of $10,000,000. This subparagraph shall cease to be effective on October 1, 1992.
(D) A maximum of five exemptions from the requirements of the Act entitled "An Act requiring contracts for the construction, alteration and repair of any public building or public work of the United States to be accompanied by a performance bond protecting the United States and by an additional bond for the protection of persons furnishing material and labor for the construction, alteration, or repair of said public buildings or public works", approved August 24, 1935 (49 Stat. 793), which exemptions shall apply only to contracts awarded pursuant to section 8(a), except that, such exemptions may be granted under this subparagraph only if—
(i) the Administration finds that such concern is unable to obtain the requisite bond or bonds from a surety and that no surety is willing to issue a bond subject to the guarantee provision of title IV of the Small Business Investment Act of 1958 (15 U.S.C. 692 et seq.);
(ii) the Administration and the agency providing the contracting opportunity have provided for the protection of persons furnishing materials or labor to the Program Participant by arranging for the direct disbursement of funds due to such persons by the procuring agency or through any bank the deposits of which are insured by the Federal Deposit Insurance Corporation; and
(iii) the contract to which it pertains does not exceed $3,000,000 in amount. This subparagraph shall cease to be effective on October 1, 1994.
(E) Financial assistance whereby the Administration may purchase in whole or in part, and on behalf of such concerns, skills training or upgrading for employees or potential employees of such concerns. Such assistance may be made without regard to section 18(a). Assistance may be made by direct payment to the training provider or by reimbursing the Program Participant or the Participant's employee, if such reimbursement is found to be reasonable and appropriate. For purposes of this subparagraph the term "training provider" shall mean an institution of higher education, a community or vocational college, or an institution eligible to provide skills training or upgrading under the Job Training Partnership Act or title I of the Workforce Investment Act of 1998. The Administration shall, in consultation with the Secretary of Labor, promulgate rules and regulations to implement this subparagraph that establish acceptable training and upgrading performance standards and provide for such monitoring or audit requirements as may be necessary to ensure the integrity of the training effort. No financial assistance shall be granted under the subparagraph unless the Administrator determines that—
(i) such concern has documented that it has first explored the use of existing cost‑free or cost‑subsidized training programs offered by public and private sector agencies working with programs of employment and training and economic development;
(ii) no more than five employees or potential employees of such concern are recipients of any benefits under this subparagraph at any one time;
(iii) no more than $2,500 shall be made available for any one employee or potential employee;
(iv) the length of training or upgrading financed by this subparagraph shall be no less than one month nor more than six months;
(v) such concern has given adequate assurance it will employ the trainee or upgraded employee for at least six months after the training or upgrading financed by this subparagraph has been completed and each trainee or upgraded employee has provided a similar assurance to remain within the employ of such concern for such period; if such concern, trainee, or upgraded employee breaches this agreement, the Administration shall be entitled to and shall make diligent efforts to obtain from the violating party the repayment of all funds expended on behalf of the violating party, such repayment shall be made to the Administration together with such interest and costs of collection as may be reasonable; the violating party shall be barred from receiving any further assistance under this subparagraph;
(vi) the training to be financed may take place either at such concern's facilities or at those of the training provider; and
(vii) such concern will maintain such records as the Administration deems appropriate to ensure that the provisions of this paragraph and any other applicable law have not been violated.
(F) The transfer of technology or surplus
property owned by the
(G) Training assistance whereby the Administration shall conduct training sessions to assist individuals and enterprises eligible to receive contracts under section 8(a) in the development of business principles and strategies to enhance their ability to successfully compete for contracts in the marketplace.
(H) Joint ventures, leader‑follow arrangements, and teaming agreements between the Program Participant and other Program Participants and other business concerns with respect to contracting opportunities for the research, development, full‑scale engineering or production of major systems. Such activities shall be undertaken on the basis of programs developed by the agency responsible for the procurement of the major system, with the assistance of the Administration.
(I) Transitional management business planning training and technical assistance.
(J) Program Participants in the developmental stage of Program participation shall be eligible for the assistance provided by subparagraphs (A), (B), (C), (D), (E), (F), and (G).
(14) Program Participants in the transitional stage of Program participation shall be eligible for the assistance provided by subparagraphs (A), (B), (F), (G), (H), and (I) of paragraph (13).
(15) Subject to the provisions of paragraph (10)(C), a small business concern may receive developmental assistance under the Program and contracts under section 8(a) for a total period of not longer than nine years, measured from the date of its certification under the authority of such section, of which—
(A) no more than four years may be spent in the developmental stage of Program Participation; and
(B) no more than five years may be spent in the transitional stage of Program Participation.
(16) (A) The Administrator shall develop and implement a process for the systematic collection of data on the operations of the Program established pursuant to paragraph (10).
(B) Not later than April 30 of each year, the Administrator shall submit a report to the Congress on the Program that shall include the following:
(i) The average personal net worth of individuals who own and control concerns that were initially certified for participation in the Program during the immediately preceding fiscal year. The Administrator shall also indicate the dollar distribution of net worths, at $50,000 increments, of all such individuals found to be socially and economically disadvantaged. For the first report required pursuant to this paragraph the Administrator shall also provide the data specified in the preceding sentence for all eligible individuals in the Program as of the effective date of this paragraph.
(ii) A description and estimate of the benefits and costs that have accrued to the economy and the Government in the immediately preceding fiscal year due to the operations of those business concerns that were performing contracts awarded pursuant to section 8(a).
(iii) A compilation and evaluation of those business concerns that have exited the Program during the immediately preceding three fiscal years. Such compilation and evaluation shall detail the number of concerns actively engaged in business operations, those that have ceased or substantially curtailed such operations, including the reasons for such actions, and those concerns that have been acquired by other firms or organizations owned and controlled by other than socially and economically disadvantaged individuals. For those businesses that have continued operations after they exited from the Program, the Administrator shall also separately detail the benefits and costs that have accrued to the economy during the immediately preceding fiscal year due to the operations of such concerns.
(iv) A listing of all participants in the Program during the preceding fiscal year identifying, by State and by Region, for each firm: the name of the concern, the race or ethnicity, and gender of the disadvantaged owners, the dollar value of all contracts received in the preceding year, the dollar amount of advance payments received by each concern pursuant to contracts awarded under section 8(a), and a description including (if appropriate) an estimate of the dollar value of all benefits received pursuant to paragraphs (13) and (14) and section 7(a)(20) during such year.
(v) The total dollar value of contracts and options awarded during the preceding fiscal year pursuant to section 8(a) and such amount expressed as a percentage of total sales of (I) all firms participating in the Program during such year; and (II) of firms in each of the nine years of program participation.
(vi) A description of such additional resources or program authorities as may be required to provide the types of services needed over the next two‑year period to service the expected portfolio of firms certified pursuant to section 8(a).
(vii) The total dollar value of contracts and options awarded pursuant to section 8(a), at such dollar increments as the Administrator deems appropriate, for each four digit standard industrial classification code under which such contracts and options were classified.
(C) The first report required by subparagraph (B) shall pertain to fiscal year 1990.
(k) In carrying out its functions under subsections 7(i), 7(j) and 8(a) of this Act, the Administration is authorized—
(1) to utilize, with their consent, the services and facilities of Federal agencies without reimbursement, and, with the consent of any State or political subdivision of a State, accept and utilize the services and facilities of such State or subdivision without reimbursement;
(2) to accept, in the name of the Administration, and employ or dispose of in furtherance of the purposes of this Act, any money or property, real, personal, or mixed, tangible, or intangible, received by gift, devise, bequest, or otherwise;
(3) to accept voluntary and uncompensated services, notwithstanding the provisions of section 3679(b) of the Revised Statutes (31 U.S.C. 665(b)); and
(4) to employ experts and consultants or organizations thereof as authorized by section 15 of the Administrative Expenses Act of 1946 (5 U.S.C. 55a), except that no individual may be employed under the authority of this subsection for more than one hundred days in any fiscal year; to compensate individuals so employed at rates not in excess of the daily equivalent of the highest rate payable under section 5332 of title 5, United States Code, including traveltime; and to allow them, while away from their homes or regular places of business, travel expenses (including per diem in lieu of subsistence) as authorized by section 5 of such Act (5 U.S.C. 73b‑2) for persons in the Government service employed intermittently, while so employed: Provided, however, that contracts for such employment may be renewed annually.
(l) [RESERVED].
(m) MICROLOAN PROGRAM
(1) (A) PURPOSES. The purposes of the Microloan Program are—
(i) to assist women, low-income, veteran (within the meaning of such term under section 3(q)), and minority entrepreneurs and business owners, and other such individuals possessing the capability to operate successful business concerns; and
(ii) to assist small business concerns in those areas suffering from a lack of credit due to economic downturns;
(iii) to establish a microloan program to be administered by the Small Business Administration--
(I) to make loans to eligible intermediaries to enable such intermediaries to provide small-scale loans, particularly loans in amounts averaging not more than $10,000, to startup, newly established, or growing small business concerns for working capital or the acquisition of materials, supplies, or equipment;
(II) to make grants to eligible intermediaries that, together with non-Federal matching funds, will enable such intermediaries to provide intensive marketing, management, and technical assistance to microloan borrowers;
(III) to make grants to eligible nonprofit entities that, together with non-Federal matching funds, will enable such entities to provide intensive marketing, management, and technical assistance to assist low-income entrepreneurs and other low-income individuals obtain private sector financing for their businesses, with or without loan guarantees; and
(IV) to report to the Committees on Small Business of the Senate and the House of Representatives on the effectiveness of the microloan program and the advisability and feasibility of implementing such a program; and
(iv) to establish a welfare-to-work microloan initiative, which shall be administered by the Administration, in order to test the feasibility of supplementing the technical assistance grants provided under clauses (ii) and (iii) of subparagraph (B) to individuals who are receiving assistance under the State program funded under part A of title IV of the Social Security Act (42 U.S.C. 601 et seq.), or under any comparable State funded means tested program of assistance for low-income individuals, in order to adequately assist those individuals in—
(I) establishing small businesses; and
(II) eliminating their dependence on that assistance.
(B) ESTABLISHMENT. There is established a microloan program, under which the Administration may—
(i) make direct loans to eligible intermediaries, as provided under paragraph (3), for the purpose of making short-term, fixed interest rate microloans to startup, newly established, and growing small business concerns under paragraph (6);
(ii) in conjunction with such loans and subject to the requirements of paragraph (4), make grants to such intermediaries for the purpose of providing intensive marketing, management, and technical assistance to small business concerns that are borrowers under this subsection; and
(iii) subject to the requirements of paragraph (5), make grants to nonprofit entities for the purpose of providing marketing, management, and technical assistance to low-income individuals seeking to start or enlarge their own businesses, if such assistance includes working with the grant recipient to secure loans in amounts not to exceed $35,000 from private sector lending institutions, with or without a loan guarantee from the nonprofit entity.
(2) ELIGIBILITY FOR PARTICIPATION.—An intermediary shall be eligible to receive loans and grants under subparagraphs (B)(i) and (B)(ii) of paragraph (1) if it—
(A) meets the definition in paragraph (10); and
(B) has at least 1 year of experience making microloans to startup, newly established, or growing small business concerns and providing, as an integral part of its microloan program, intensive marketing, management, and technical assistance to its borrowers.
(3) LOANS TO INTERMEDIARIES.—
(A) INTERMEDIARY APPLICATIONS.
(i) IN GENERAL.—As part of its application for a loan, each intermediary shall submit a description to the Administration of—
(I) the type of businesses to be assisted;
(II) the size and range of loans to be made;
(III) the geographic area to be served and its economic and unemployment characteristics;
(IV) the status of small business concerns in the area to be served and an analysis of their credit and technical assistance needs;
(V) any marketing, management, and technical assistance to be provided in connection with a loan made under this subsection;
(VI) the local economic credit markets, including the costs associated with obtaining credit locally;
(VII) the qualifications of the applicant to carry out the purpose of this subsection; and
(VIII) any plan to involve other technical assistance providers (such as counselors from the Service Corps of Retired Executives or small business development centers) or private sector lenders in assisting selected small business concerns.
(ii) SELECTION OF INTERMEDIARIES.—In selecting intermediaries to participate in the program established under this subsection, the Administration shall give priority to those applicants that provide loans in amounts averaging not more than $10,000.
(B) INTERMEDIARY CONTRIBUTION.—As a condition of any loan made to an intermediary under subparagraph (B)(i) of paragraph (1), the Administration shall require the intermediary to contribute not less than 15 percent of the loan amount in cash from non-Federal sources.
(C) LOAN LIMITS.—Notwithstanding subsection (a)(3), no loan shall be made under this subsection if the total amount outstanding and committed to one intermediary (excluding outstanding grants) from the business loan and investment fund established by this Act would, as a result of such loan, exceed $750,000 in the first year of such intermediary's participation in the program, and $3,500,000 in the remaining years of the intermediary's participation in the program.
(D) (i) IN GENERAL.—The Administrator shall, by regulation, require each intermediary to establish a loan loss reserve fund, and to maintain such reserve fund until all obligations owed to the Administration under this subsection are repaid.
(ii) LEVEL OF LOAN LOSS RESERVE FUND.—
(I) IN GENERAL.—Subject to subclause (III), the Administrator shall require the loan loss reserve fund of an intermediary to be maintained at a level equal to 15 percent of the outstanding balance of the notes receivable owed to the intermediary.
(II) REVIEW OF LOAN LOSS RESERVE.—After the initial 5 years of an intermediary’s participation in the program authorized by this subsection, the Administrator shall, at the request of the intermediary, conduct a review of the annual loss rate of the intermediary. Any intermediary in operation under this subsection prior to October 1, 1994, that requests a reduction in its loan loss reserve shall be reviewed based on the most recent 5-year period preceding the request.
(III) REDUCTION OF LOAN LOSS RESERVE.—Subject to the requirements of clause IV, the Administrator may reduce the annual loan loss reserve requirement of an intermediary to reflect the actual average loan loss rate for the intermediary during the preceding 5-year period, except that in no case shall the loan loss reserve be reduced to less than 10 percent of the outstanding balance of the notes receivable owed to the intermediary.
(IV) REQUIREMENTS.—The Administrator may reduce the annual loan loss reserve requirement of an intermediary only if the intermediary demonstrates to the satisfaction of the Administrator that—
(aa) the average annual loss rate for the intermediary during the preceding 5-year period is less than 15 percent; and
(bb) that no other factors exist that may impair the ability of the intermediary to repay all obligations owed to the Administration under this subsection.
(E) UNAVAILABILITY OF COMPARABLE CREDIT.—An intermediary may make a loan under this subsection of more than $20,000 to a small business concern only if such small business concern demonstrates that it is unable to obtain credit elsewhere at comparable interest rates and that it has good prospects for success. In no case shall an intermediary make a loan under this subsection of more than $35,000, or have outstanding or committed to any 1 borrower more than $35,000.
(F) LOAN DURATION; INTEREST RATES.—
(i) LOAN DURATION.—Loans made by the Administration under this subsection shall be for a term of 10 years.
(ii) APPLICABLE INTEREST RATES.—Except as provided in clause (iii), loans made by the Administration under this subsection to an intermediary shall bear an interest rate equal to 1.25 percentage points below the rate determined by the Secretary of the Treasury for obligations of the United States with a period of maturity of 5 years, adjusted to the nearest one-eighth of 1 percent.
(iii) RATES APPLICABLE TO CERTAIN SMALL LOANS.—Loans made by the Administration to an intermediary that makes loans to small business concerns and entrepreneurs averaging not more than $7,500, shall bear an interest rate that is 2 percentage points below the rate determined by the Secretary of the Treasury for obligations of the United States with a period of maturity of 5 years, adjusted to the nearest one-eighth of 1 percent.
(iv) RATES APPLICABLE TO MULTIPLE SITES OR OFFICES.—The interest rate prescribed in clause (ii) or (iii) shall apply to each separate loanmaking site or office of 1 intermediary only if such site or office meets the requirements of that clause.
(v) RATE BASIS.—The applicable rate of interest under this paragraph shall—
(I) be applied retroactively for the first year of an intermediary's participation in the program, based upon the actual lending practices of the intermediary as determined by the Administration prior to the end of such year; and
(II) be based in the second and subsequent years of an intermediary's participation in the program, based upon the actual lending practices of the intermediary during the term of the intermediary's participation in the program.
(vii)[sic] COVERED INTERMEDIARIES.—The interest rates prescribed in this subparagraph shall apply to all loans made to intermediaries under this subsection on or after October 28, 1991.
(G) DELAYED PAYMENTS.—The Administration shall not require repayment of interest or principal of a loan made to an intermediary under this subsection during the first year of the loan.
(H) FEES; COLLATERAL.—Except as provided in subparagraphs (B) and (D), the Administration shall not charge any fees or require collateral other than an assignment of the notes receivable of the microloans with respect to any loan made to an intermediary under this subsection.
(4) MARKETING, MANAGEMENT AND TECHNICAL ASSISTANCE GRANTS TO INTERMEDIARIES.—Grants made in accordance with subparagraph (B)(ii) of paragraph (1) shall be subject to the following requirements:
(A) GRANT AMOUNTS.—Except as otherwise provided in subparagraph (C) and subject to subparagraph (B), each intermediary that receives a loan under subparagraph (B)(i) of paragraph (1) shall be eligible to receive a grant to provide marketing, management, and technical assistance to small business concerns that are borrowers under this subsection. Except as provided in subparagraph (C), each intermediary meeting the requirements of subparagraph (B) may receive a grant of not more than 25 percent of the total outstanding balance of loans made to it under this subsection.
(B) CONTRIBUTION.—As a condition of any grant made under subparagraph (A), except for a grant made to an intermediary that provides not less than 50 percent of its loans to small business concerns located in or owned by one or more residents of an economically distressed area, the Administration shall require the intermediary to contribute an amount equal to 25 percent of the amount of the grant, obtained solely from non-Federal sources. In addition to cash or other direct funding, the contribution may include indirect costs or in-kind contributions paid for under non-Federal programs.
(C) ADDITIONAL TECHNICAL ASSISTANCE GRANTS FOR MAKING CERTAIN LOANS.—
(i) IN GENERAL.—In addition to grants made under subparagraph (A), each intermediary shall be eligible to receive a grant equal to 5 percent of the total outstanding balance of loans made to the intermediary under this subsection if—
(I) the intermediary provides not less than 25 percent of its loans to small business concerns located in or owned by one or more residents of an economically distressed area; or
(II) the intermediary has a portfolio of loans made under this subsection that averages not more than $10,000 during the period of the intermediary's participation.
(ii) PURPOSES.—A grant awarded under clause (i) may be used to provide marketing, management, and technical assistance to small business concerns that are borrowers under this subsection.
(iii) CONTRIBUTION EXCEPTION.—The contribution requirements in subparagraph (B) do not apply to grants made under this subparagraph.
(D) ELIGIBILITY FOR MULTIPLE SITES OR OFFICES.—The eligibility for a grant described in subparagraph (A) or (C) shall be determined separately for each loan-making site or office of 1 intermediary.
(E) ASSISTANCE TO CERTAIN SMALL BUSINESS CONCERNS.—
(i) IN GENERAL.—Each intermediary may expend an amount not to exceed 25 percent of the grant funds received under paragraph (1)(B)(ii) to provide information and technical assistance to small business concerns that are prospective borrowers under this subsection.
(ii) TECHNICAL ASSISTANCE.—An intermediary may expend not more than 25 percent of the funds received under paragraph (1)(B)(ii) to enter into third party contracts for the provision of technical assistance.
(F) SUPPLEMENTAL GRANT—
(i) IN GENERAL.—The Administration may accept any funds transferred to the Administration from other departments or agencies of the Federal Government to make grants in accordance with this subparagraph and section 202(b) of the Small Business Reauthorization Act of 1997 to participating intermediaries and technical assistance providers under paragraph (5), for use in accordance with clause (iii) to provide additional technical assistance and related services to recipients of assistance under a State program described in paragraph (1)(A)(iv) at the time they initially apply for assistance under this subparagraph.
(ii) ELIGIBLE RECIPIENTS; GRANT AMOUNTS.—In making grants under this subparagraph, the Administration may select, from among participating intermediaries and technical assistance providers described in clause (i), not more than 20 grantees in fiscal year 1998, not more than 25 grantees in fiscal year 1999, and not more than 30 grantees in fiscal year 2000, each of whom may receive a grant under this subparagraph in an amount not to exceed $200,000 per year.
(iii) USE OF GRANT AMOUNTS.—Grants under this subparagraph—
(I) are in addition to other grants provided under this subsection and shall not require the contribution of matching amounts as a condition of eligibility; and
(II) may be used by a grantee—
(aa) to pay or reimburse a portion of child care and transportation costs of recipients of assistance described in clause (i), to the extent such costs are not otherwise paid by State block grants under the Child Care Development Block Grant Act of 1990 (42 U.S.C. 9958 et seq.); and
(bb) for marketing, management, and technical assistance to recipients of assistance described in clause (i).
(iv) MEMORANDUM OF UNDERSTANDING.—Prior to accepting any transfer of funds under clause (i) from a department or agency of the Federal Government, the Administration shall enter into a Memorandum of Understanding with the department or agency, which shall—
(I) specify the terms and conditions of the grants under this subparagraph; and
(II) provide for appropriate monitoring of expenditures by each grantee under this subparagraph and each recipient of assistance described in clause (i) who receives assistance from a grantee under this subparagraph, in order to ensure compliance with this subparagraph by those grantees and recipients of assistance.
(5) PRIVATE SECTOR BORROWING TECHNICAL ASSISTANCE GRANTS. Grants made in accordance with subparagraph (B)(iii) of paragraph (1) shall be subject to the following requirements:
(A) GRANT AMOUNTS. Subject to the requirements of subparagraph (B), the Administration may make not more than 55 grants annually, each in amounts not to exceed $200,000 for the purposes specified in subparagraph (B)(iii) of paragraph (1).
(B) CONTRIBUTION. As a condition of any grant made under subparagraph (A), the Administration shall require the grant recipient to contribute an amount equal to 20 percent of the amount of the grant, obtained solely from non-Federal sources. In addition to cash or other direct funding, the contribution may include indirect costs or in-kind contributions paid for under non-Federal programs.
(6) LOANS TO SMALL BUSINESS CONCERNS FROM ELIGIBLE INTERMEDIARIES.—
(A) IN GENERAL.—An eligible intermediary shall make short-term, fixed rate loans to startup, newly established, and growing small business concerns from the funds made available to it under subparagraph (B)(i) of paragraph (1) for working capital and the acquisition of materials, supplies, furniture, fixtures, and equipment.
(B) PORTFOLIO REQUIREMENT.—To the extent practicable, each intermediary that operates a microloan program under this subsection shall maintain a microloan portfolio with an average loan size of not more than $15,000.
(C) INTEREST LIMIT.—Notwithstanding any provision of the laws of any State or the constitution of any State pertaining to the rate or amount of interest that may be charged, taken, received or reserved on a loan, the maximum rate of interest to be charged on a microloan funded under this subsection shall not exceed the rate of interest applicable to a loan made to an intermediary by the Administration—
(i) in the case of a loan of more than $7,500 made by the intermediary to a small business concern or entrepreneur by more than 7.75 percentage points; and
(ii) in the case of a loan of not more than $7,500 made by the intermediary to a small business concern or entrepreneur by more than 8.5 percentage points.
(D) REVIEW RESTRICTION.—The Administration shall not review individual microloans made by intermediaries prior to approval.
(E) ESTABLISHMENT OF CHILD CARE OR TRANSPORTATION BUSINESS.—In addition to other eligible small businesses concerns [sic], borrowers under any program under this subsection may include individuals who will use the loan proceeds to establish for-profit or nonprofit child care establishments or business providing for-profit transportation services.
(7) PROGRAM FUNDING FOR MICROLOANS.—
(A) NUMBER OF PARTICIPANTS.—Under the program authorized by this subsection, the Administration may fund, on a competitive basis, not more than 300 intermediaries.
(B) ALLOCATION.—
(i) MINIMUM ALLOCATION.— Subject to the availability of appropriations, of the total amount of new loan funds made available for award under this subsection in each fiscal year, the Administration shall make available for award in each State (including the district of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, and American Samoa) an amount equal to the sum of—
(I) the lesser of—
(aa) $800,000; or
(bb) 1/55 of the total amount of new loan funds made available for award under this subsection for that fiscal year; and
(II) any additional amount, as determined by the Administration.
(ii) REDISTRIBUTION.—If, at the beginning of the third quarter of a fiscal year, the Administration determines that any portion of the amount made available to carry out this subsection is unlikely to be made available under clause (i) during that fiscal year, the Administration may make that portion available for award in any one or more States (including the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, and American Samoa) without regard to clause (i).
(8) EQUITABLE DISTRIBUTION OF INTERMEDIARIES.—In approving microloan program applicants and providing funding to intermediaries under this subsection, the Administration shall select and provide funding to such intermediaries as will ensure appropriate availability of loans for small businesses in all industries located throughout each State, particularly those located in urban and in rural areas.
(9) GRANTS FOR MANAGEMENT, MARKETING, TECHNICAL ASSISTANCE, AND RELATED SERVICES—
(A) IN GENERAL.—The Administration may procure technical assistance for intermediaries participating in the Microloan Program to ensure that such intermediaries have the knowledge, skills, and understanding of microlending practice necessary to operate successful microloan programs.
(B) ASSISTANCE AMOUNT.—The Administration shall transfer 7 percent of its annual appropriation for loans and loan guarantees under this subsection to the Administration's Salaries and Expense Account for the specific purpose of providing 1 or more technical assistance grants to experienced microlending organizations and national and regional nonprofit organizations that have demonstrated experience in providing training support for microenterprise development and financing to achieve the purpose set forth in subparagraph (A).
(C) WELFARE-TO-WORK.—Of amounts made available to carry out the welfare-to-work microloan initiative under paragraph (1)(A)(iv) in any fiscal year, the Administration may use not more than 5 percent to provide technical assistance, either directly or through contractors, to welfare-to-work microloan initiative grantees, to ensure that, as grantees they have the knowledge, skills, and understanding of microlending and welfare-to-work transition, and other related issues, to operate a successful welfare-to-work microloan initiative.
(10) REPORT TO CONGRESS. On November 1, 1995, the Administration shall submit to the Committees on Small Business of the Senate and the House of Representatives a report, including the Administration's evaluation of the effectiveness of the first 3 1/2 years of the microloan program and the following:
(A) the numbers and locations of the intermediaries funded to conduct microloan programs;
(B) the amounts of each loan and each grant to intermediaries;
(C) a description of the matching contributions of each intermediary;
(D) the numbers and amounts of microloans made by the intermediaries to small business concern borrowers;
(E) the repayment history of each intermediary;
(F) a description of the loan portfolio of each intermediary including the extent to which it provides microloans to small business concerns in rural areas; and
(G) any recommendations for legislative changes that would improve program operations.
(11) DEFINITIONS. For purposes of this subsection—
(A) the term "intermediary" means
(i) a private, nonprofit entity;
(ii) a private nonprofit community development corporation;
(iii) a consortium of private, nonprofit organizations or nonprofit community development corporations;
(iv) a quasi-governmental economic development entity (such as a planning and development district), other than a State, county, municipal government, or any agency thereof, if--
(I) no application is received from an eligible nonprofit organization; or
(II) the Administration determines that the needs of a region or geographic area are not adequately served by an existing, eligible nonprofit organization that has submitted an application; or
(v) an agency of or nonprofit entity established by a Native American Tribal Government,
that seeks to borrow or has borrowed funds from the Small Business Administration to make microloans to small business concerns under this subsection;
(B) the term "microloan" means a short-term, fixed rate loan of not more than $35,000, made by an intermediary to a startup, newly established, or growing small business concern;
(C) the term "rural area" means any political subdivision or unincorporated area--
(i) in a nonmetropolitan county (as defined by the Secretary of Agriculture) or its equivalent thereof; or
(ii) in a metropolitan county or its equivalent that has a resident population of less than 20,000 if the Small Business Administration has determined such political subdivision or area to be rural; and
(D) the term "economically distressed area", as used in paragraph (4), means a county or equivalent division of local government of a State in which the small business concern is located, in which, according to the most recent data available from the Bureau of the Census, Department of Commerce, not less than 40 percent of residents have an annual income that is at or below the poverty level.
(12) DEFERRED PARTICIPATION LOAN PILOT.—In lieu of making direct loans to intermediaries as authorized in paragraph (1)(B), during fiscal years 1998 through 2000, the Administration may, on a pilot program basis, participate on a deferred basis of not less than 90 percent and not more than 100 percent on loans made to intermediaries by a for-profit or nonprofit entity or by alliances of such entities, subject to the following conditions:
(A) NUMBER OF LOANS.—In carrying out this paragraph, the Administration shall not participate in providing financing on a deferred basis to more than 10 intermediaries in urban areas or more than 10 intermediaries in rural areas.
(B) TERM OF LOANS.—The term of each loan shall be 10 years. During the first year of the loan, the intermediary shall not be required to repay any interest or principal. During the second through fifth years of the loan, the intermediary shall be required to pay interest only. During the sixth through tenth years of the loan, the intermediary shall be required to make interest payments and fully amortize the principal.
(C) INTEREST RATE.—The interest rate on each loan shall be the rate specified by paragraph (3)(F) for direct loans.
(13) EVALUATION OF WELFARE-TO-WORK MICROLOAN INITIATIVE.—On January 31, 1999, and annually thereafter, the Administration shall submit to the Committees on Small Business of the House of Representatives and the Senate a report on any monies distributed pursuant to paragraph (4)(F).
(n) REPAYMENT DEFERRED FOR ACTIVE DUTY RESERVISTS.—
(1) DEFINITIONS.—In this subsection:
(A) ELIGIBLE RESERVIST.—The term “eligible reservist” means a member of a reserve component of the Armed Forces ordered to active duty during a period of military conflict.
(B) ESSENTIAL EMPLOYEE.—The term “essential employee” means an individual who is employed by a small business concern and whose managerial or technical expertise is critical to the successful day-to-day operations of that small business concern.
(C) PERIOD OF MILITARY CONFLICT.—The term “period of military conflict” means—
(i) a period of war declared by the Congress;
(ii) a period of national emergency declared by the Congress or by the President; or
(iii) a period of a contingency operation, as defined in section 101(a) of title 10, United States Code.
(D) QUALIFIED BORROWER.—The term “qualified borrower” means—
(i) an individual who is an eligible reservist and who received a direct loan under subsection (a) or (b) before being ordered to active duty; or
(ii) a small business concern that received a direct loan under subsection (a) or (b) before an eligible reservist, who is an essential employee, was ordered to active duty.
(2) DEFERRAL OF DIRECT LOANS.—
(A) IN GENERAL.—The Administration shall, upon written request, defer repayment of principal and interest due on a direct loan made under subsection (a) or (b), if such loan was incurred by a qualified borrower.
(B) PERIOD OF DEFERRAL.—The period of deferral for repayment under this paragraph shall begin on the date on which the eligible reservist is ordered to active duty and shall terminate on the date that is 180 days after the date such eligible reservist is discharged or released from active duty.
(C) INTEREST RATE REDUCTION DURING DEFERRAL.—Notwithstanding any other provision of law, during the period of deferral described in subparagraph (B), the Administration may, in its discretion, reduce the interest rate on any loan qualifying for a deferral under this paragraph.
(3) DEFERRAL OF LOAN GUARANTEES AND OTHER FINANCINGS.—The Administration shall—
(A) encourage intermediaries participating in the program under subsection (m) to defer repayment of a loan made with proceeds made available under that subsection, if such loan was incurred by a small business concern that is eligible to apply for assistance under subsection (b)(3); and
(B) not later than 30 days after the date of the enactment of this subsection, establish guidelines to—
(i) encourage lenders and other intermediaries to defer repayment of, or provide other relief relating to, loan guarantees under subsection (a) and financings under section 504 of the Small Business Investment Act of 1958 that were incurred by small business concerns that are eligible to apply for assistance under subsection (b)(3), and loan guarantees provided under subsection (m) if the intermediary provides relief to a small business concern under this paragraph; and
(ii) implement a program to provide for the deferral of repayment or other relief to any intermediary providing relief to a small business borrower under this paragraph.
§ 8. (a) (1) It shall be the duty of the Administration and it is hereby empowered, whenever it determines such action is necessary or appropriate—
(A) to enter into contracts with the United States Government and any department, agency, or officer thereof having procurement powers obligating the Administration to furnish articles, equipment, supplies, services, or materials to the Government or to perform construction work for the Government. In any case in which the Administration certifies to any officer of the Government having procurement powers that the Administration is competent and responsible to perform any specific Government procurement contract to be let by any such officer, such officer shall be authorized in his discretion to let such procurement contract to the Administration upon such terms and conditions as may be agreed upon between the Administration and the procurement officer. Whenever the Administration and such procurement officer fail to agree, the matter shall be submitted for determination to the Secretary or the head of the appropriate department or agency by the Administrator. Not later than 5 days from the date the Administration is notified of a procurement officer's adverse decision, the Administration may notify the contracting officer of the intent to appeal such adverse decision, and within 15 days of such date the Administrator shall file a written request for a reconsideration of the adverse decision with the Secretary of the department or agency head. For the purposes of this subparagraph, a procurement officer's adverse decision includes a decision not to make available for award pursuant to this subsection a particular procurement requirement or the failure to agree on the terms and conditions of a contract to be awarded noncompetitively under the authority of this subsection. Upon receipt of the notice of intent to appeal, the Secretary of the department or the agency head shall suspend further action regarding the procurement until a written decision on the Administrator's request for reconsideration has been issued by such Secretary or agency head, unless such officer makes a written determination that urgent and compelling circumstances which significantly affect interests of the United States will not permit waiting for a reconsideration of the adverse decision. If the Administrator's request for reconsideration is denied, the Secretary of the department or agency head shall specify the reasons why the selected firm was determined to be incapable to perform the procurement requirement, and the findings supporting such determination, which shall be made a part of the contract file for the requirement. A contract may not be awarded under this subsection if the award of the contract would result in a cost to the awarding agency which exceeds a fair market price;
(B) to arrange for the performance of such procurement contracts by negotiating or otherwise letting subcontracts to socially and economically disadvantaged small business concerns for construction work, services, or the manufacture, supply, assembly of such articles, equipment, supplies, materials, or parts thereof, or servicing or processing in connection therewith, or such management services as may be necessary to enable the Administration to perform such contracts;
(C) to make an award to a small business concern owned and controlled by socially and economically disadvantaged individuals which has completed its period of Program Participation as prescribed by section 7(j)(15), if—
(i) the contract will be awarded as a result of an offer (including price) submitted in response to a published solicitation relating to a competition conducted pursuant to subparagraph (D); and
(ii) the prospective contract awardee was a Program Participant eligible for award of the contract on the date specified for receipt of offers contained in the contract solicitation; and
(D) (i) A contract opportunity offered for award pursuant to this subsection shall be awarded on the basis of competition restricted to eligible Program Participants if—
(I) there is a reasonable expectation that at least two eligible Program Participants will submit offers and that award can be made at a fair market price, and
(II) the anticipated award price of the contract (including options) will exceed $5,000,000 in the case of a contract opportunity assigned a standard industrial classification code for manufacturing and $3,000,000 (including options) in the case of all other contract opportunities.
(ii) The Associate Administrator for Minority Small Business and Capital Ownership Development, on a nondelegable basis, is authorized to approve a request from an agency to award a contract opportunity under this subsection on the basis of a competition restricted to eligible Program Participants even if the anticipated award price is not expected to exceed the dollar amounts specified in clause (i)(II). Such approvals shall be granted only on a limited basis.
(2) Notwithstanding subsections (a) and (c) of the first section of the Act entitled "An Act requiring contracts for the construction, alteration, and repair of any public building or public work of the United States to be accompanied by a performance bond protecting the United States and by additional bond for the protection of persons furnishing material and labor for the construction, alteration, or repair of said public buildings or public works," approved August 24, 1935 (49 Stat. 793), no small business concern shall be required to provide any amount of any bond as a condition of receiving any subcontract under this subsection if the Administrator determines that such amount is inappropriate for such concern in performing such contract: Provided, That the Administrator shall exercise the authority granted by the paragraph only if—
(A) the Administration takes such measures as it deems appropriate for the protection of persons furnishing materials and labor to a small business receiving any benefit pursuant to this paragraph;
(B) the Administration assists, insofar as practicable, a small business receiving the benefits of this paragraph to develop, within a reasonable period of time, such financial and other capability as may be needed to obtain such bonds as the Administration may subsequently require for the successful completion of any program conducted under the authority of this subsection;
(C) the Administration finds that such small business is unable to obtain the requisite bond or bonds from a surety and that no surety is willing to issue such bond or bonds subject to the guarantee provisions of Title IV of the Small Business Investment Act of 1958; and
(D) the small business is determined to be a startup concern and such concern has not been participating in any program conducted under the authority of this subsection for a period exceeding one year.
The authority to waive bonds provided in this paragraph (2) may not be exercised after September 30, 1988.
(3) (A) Any Program Participant selected by the Administration to perform a contract to be let noncompetitively pursuant to this subsection shall, when practicable, participate in any negotiation of the terms and conditions of such contract.
(B) (i) For purposes of paragraph (1) a "fair market price" shall be determined by the agency offering the procurement requirement to the Administration, in accordance with clauses (ii) and (iii).
(ii) The estimate of a current fair market price for a new procurement requirement, or a requirement that does not have a satisfactory procurement history, shall be derived from a price or cost analysis. Such analysis may take into account prevailing market conditions, commercial prices for similar products or services, or data obtained from any other agency. Such analysis shall consider such cost or pricing data as may be timely submitted by the Administration.
(iii) The estimate of a current fair market price for a procurement requirement that has a satisfactory procurement history shall be based on recent award prices adjusted to insure comparability. Such adjustments shall take into account differences in quantities, performance times, plans, specifications, transportation costs, packaging and packing costs, labor and materials costs, overhead costs, and any other additional costs which may be deemed appropriate.
(C) An agency offering a procurement requirement for potential award pursuant to this subsection shall, upon the request of the Administration, promptly submit to the Administration a written statement detailing the method used by the agency to estimate the current fair market price for such contract, identifying the information, studies, analyses, and other data used by such agency. The agency's estimate of the current fair market price (and any supporting data furnished to the Administration) shall not be disclosed to any potential offeror (other than the Administration).
(D) A small business concern selected by the Administration to perform or negotiate a contract to be let pursuant to this subsection may request the Administration to protect the agency's estimate of the fair market price for such contract pursuant to paragraph (1)(A).
(4) (A) For purposes of this section, the term "socially and economically disadvantaged small business concern" means any small business concern which meets the requirements of subparagraph (B) and—
(i) which is at least 51 per centum unconditionally owned by—
(I) one or more socially and economically disadvantaged individuals,
(II) an economically disadvantaged Indian tribe (or a wholly owned business entity of such tribe), or
(III) an economically disadvantaged Native Hawaiian organization, or
(ii) in the case of any publicly owned business, at least 51 per centum of the stock of which is unconditionally owned by—
(I) one or more socially and economically disadvantaged individuals,
(II) an economically disadvantaged Indian tribe (or a wholly owned business entity of such tribe), or
(III) an economically disadvantaged Native Hawaiian organization.
(B) A small business concern meets the requirements of this subparagraph if the management and daily business operations of such small concern are controlled by one or more—
(i) socially and economically disadvantaged individuals described in subparagraph (A)(i)(I) or subparagraph (A)(ii)(I), or
(ii) members of an economically disadvantaged Indian tribe described in subparagraph (A)(i)(II) or subparagraph (A)(ii)(II) or
(iii) Native Hawaiian organizations described in subparagraph (A)(i)(III) or subparagraph (A)(ii)(III).
(C) Each Program Participant shall certify, on an annual basis, that it meets the requirements of this paragraph regarding ownership and control.
(5) Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.
(6) (A) Economically disadvantaged individuals are those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged. In determining the degree of diminished credit and capital opportunities the Administration shall consider, but not be limited to, the assets and net worth of such socially disadvantaged individual. In determining the economic disadvantage of an Indian tribe, the Administration shall consider, where available, information such as the following: the per capita income of members of the tribe excluding judgment awards, the percentage of the local Indian population below the poverty level, and the tribe's access to capital markets.
(B) Each Program Participant shall annually submit to the Administration—
(i) a personal financial statement for each disadvantaged owner;
(ii) a record of all payments made by the Program Participant to each of its disadvantaged owners or to any person or entity affiliated with such owners; and
(iii) such other information as the Administration may deem necessary to make the determinations required by this paragraph.
(C) (i) Whenever, on the basis of information provided by a Program Participant pursuant to subparagraph (B) or otherwise, the Administration has reason to believe that the standards to establish economic disadvantage pursuant to subparagraph (A) have not been met, the Administration shall conduct a review to determine whether such Program Participant and its disadvantaged owners continue to be impaired in their ability to compete in the free enterprise system due to diminished capital and credit opportunities when compared to other concerns in the same business area, which are not socially disadvantaged.
(ii) If the Administration determines, pursuant to such review, that a Program Participant and its disadvantaged owners are no longer economically disadvantaged for the purpose of receiving assistance under this subsection, the Program Participant shall be graduated pursuant to section 7(j)(10)(G) subject to the right to a hearing as provided for under paragraph (9).
(D) (i) Whenever, on the basis of information provided by a Program Participant pursuant to subparagraph (B) or otherwise, the Administration has reason to believe that the amount of funds or other assets withdrawn from a Program Participant for the personal benefit of its disadvantaged owners or any person or entity affiliated with such owners may have been unduly excessive, the Administration shall conduct a review to determine whether such withdrawal of funds or other assets was detrimental to the achievement of the targets, objectives, and goals contained in such Program Participant's business plan.
(ii) If the Administration determines, pursuant to such review, that funds or other assets have been withdrawn to the detriment of the Program Participant's business, the Administration shall—
(I) initiate a proceeding to terminate the Program Participant pursuant to section 7(j)(10)(F), subject to the right to a hearing under paragraph (9); or
(II) require an appropriate reinvestment of funds or other assets and such other steps as the Administration may deem necessary to ensure the protection of the concern.
(E) Whenever the Administration computes personal net worth for any purpose under this paragraph, it shall exclude from such computation—
(i) the value of investments that disadvantaged owners have in their concerns, except that such value shall be taken into account under this paragraph when comparing such concerns to other concerns in the same business area that are owned by other than socially disadvantaged persons;
(ii) the equity that disadvantaged owners have in their primary personal residences, except that any portion of such equity that is attributable to unduly excessive withdrawals from a Program Participant or a concern applying for program participation shall be taken into account.
(7) (A) No small business concern shall be deemed eligible for any assistance pursuant to this subsection unless the Administration determines that with contract, financial, technical, and management support the small business concern will be able to perform contracts which may be awarded to such concern under paragraph (1)(C) and has reasonable prospects for success in competing in the private sector.
(B) Limitations established by the Administration in its regulations and procedures restricting the award of contracts pursuant to this subsection to a limited number of standard industrial classification codes in an approved business plan shall not be applied in a manner that inhibits the logical business progression by a participating small business concern into areas of industrial endeavor where such concern has the potential for success.
(8) All determinations made pursuant to paragraph (5) with respect to whether a group has been subjected to prejudice or bias shall be made by the Administrator after consultation with the Associate Administrator for Minority Small Business and Capital Ownership Development. All other determinations made pursuant to paragraphs (4), (5), (6), and (7) shall be made by the Associate Administrator for Minority Small Business and Capital Ownership Development under the supervision of, and responsible to, the Administrator.
(9) (A) Subject to the provisions of subparagraph (E), the Administration, prior to taking any action described in subparagraph (B), shall provide the small business concern that is the subject of such action, an opportunity for a hearing on the record, in accordance with chapter 5 of title 5, United States Code.
(B) The actions referred to in subparagraph (A) are—
(i) denial of program admission based upon a negative determination pursuant to paragraph (4), (5), or (6);
(ii) a termination pursuant to section 7(j)(10)(F);
(iii) a graduation pursuant to section 7(j)(10)(G); and
(iv) the denial of a request to issue a waiver pursuant to paragraph (21)(B).
(C) The Administration's proposed action, in any proceeding conducted under the authority of this paragraph, shall b