Emerging Business Enterprises

(a)

Designation

Section 3 of the Small Business Act (15 U.S.C. 632) is amended by adding at the end the following:

(dd)

Emerging Business Enterprises

(1)

In general

Not later than the date that is 1 year after the date of enactment of this paragraph, for each industry category for which the Administrator established a size standard under this subsection, the Administrator shall by rule establish procedures for designating a small business concern in that industry category as an emerging business enterprise. Such procedures shall include the criteria under paragraph (2), and a process for appealing decisions of the Administrator on designations. Such a designation shall expire on the date that the small business concern is no longer in compliance with such criteria, except that— (A)in the case of an emerging business enterprise that receives a designation as such but which existed as a business entity prior to such designation, the designation shall not expire by reason of the emerging business enterprise being more than 5 years old; instead, the designation shall expire on the date that is 5 years after the date of the designation; and (B)if the emerging business enterprise exceeds the size limitation described in the criterion under paragraph (2)(A) following designation as an emerging business enterprise, the designation shall expire only if the size is 50 percent or more of the maximum size of a small business concern within that industry category.

The rulemaking under this paragraph shall include a procedure for self certification as an emerging business enterprise, for annual submission of documentation establishing eligibility for designation as an emerging business enterprise, and for periodic audits of emerging business enterprises based on such documentation.

(2)

Criteria for designation

The Administrator shall establish criteria for designation of an emerging business enterprise, which shall include the following: (A)

Number of employees

That the small business concern employs, in the Administrator’s determination a number of employees that is less than the larger of— (i)not more than 10 percent of the number of employees that a small business concern within that industry category may employ, if that small business concern is so classified by reason of a size standard under section 3(a) pertaining to the number of employees of the concern; or (ii)25 employees. (B)

Age of business

That the small business concern is, in the Administrator’s determination, not more than 5 years old. (C)

Salary requirements

That the small business concern does not, in the Administrator’s determination, pay to an individual who owns any part of the concern or who is in a management position a salary greater than 200 percent of the mean annual salary for Managers of Companies and Enterprises or the equivalent from the most recent Employment and Wage Estimates developed by the Secretary of Labor. (3)

Public notification

The Administrator shall take appropriate action to publicize the establishment of the procedures for designations under this paragraph, including by conducting outreach to eligible small business concerns. (4)

Contractor training

The Administrator shall provide for training regarding Federal procurement on an Internet Web site of the Administrator, which shall be available to the public at no charge.

(b)

Contracting preference

Section 15(g)(2) of the Small Business Act (15 U.S.C. (g)(2)) is amended by adding at the end the following:

(G)

Emerging Business Enterprises

(i)

In general

The head of each Federal agency shall, after consultation with the Administrator, establish goals for participation by emerging business enterprises designated under section 3(a)(6) in not less than 5 percent of all contracts, including prime contracts and subcontracts, for each fiscal year. The head of the agency may give preference in making contract awards to such emerging business enterprises and shall make consistent efforts to annually expand participation by emerging business enterprises from each industry category in procurement contracts of the agency. (ii)

Reports

(I)

Reports from agencies

At the conclusion of each fiscal year, the head of each Federal agency shall report to the Administrator on the extent of participation by emerging business enterprises in procurement contracts of such agency. Such reports shall contain appropriate justifications for failure to meet the goals established under this subparagraph. (II)

Reports to Congress

The Administrator shall annually compile and analyze the reports submitted by the individual agencies pursuant to subclause (I) and shall submit to the President and the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the House of Representatives the compilation and analysis, which shall include the following: (aa)The goals in effect for each agency and the agency's performance in attaining such goals. (bb)An analysis of any failure to achieve individual agency goals and the actions planned by such agency (and approved by the Administrator) to achieve the goals in the succeeding fiscal year. (cc)The total number and dollar value of prime contracts and subcontracts awarded to emerging business enterprises. (III)

Annual Presidential report on the state of small business

The President shall include the information required by subclause (II) in each annual report to the Congress on the state of small business prepared pursuant to section 303(a) of the Small Business Economic Policy Act of 1980 (15 U.S.C. 631b(a)).

(c)

Amendments to SBA Express

Section 7(a)(31) of the Small Business Act (15 U.S.C. 636(a)(31)) is amended by adding at the end the following:

(G)

Emerging business enterprises

(i)

In general

The Administrator may make a loan under the Express Loan Program to an emerging business enterprise designated under section 3(dd), except that such loans shall be made in accordance with the terms of this subparagraph. (ii)

Guaranty rate

The guaranty rate of such a loan shall be in accordance with the following: (I)Except as otherwise provided in this clause, 65 percent. (II)Except as provided in subclause (III), if, in a report submitted under clause (iii), the total number of loans made and the total amount loaned by a lender is greater by 10 percent than the prior fiscal year, 75 percent. (III)If, in a report submitted under clause (iii), the total rate of default on loans issued under subclauses (I) and (II) is greater by 10 percent than the prior year, 50 percent in the succeeding fiscal year. (iii)

Reports

On the date that is 1 year after the end of the first fiscal year for which a loan is first guaranteed under this subparagraph, and annually thereafter, each lender making a loan guaranteed under this section shall report to the Administrator the total number of loans made during the preceding fiscal year, the total amount loaned, and the default rate for all guaranteed loans. (iv)

Verification

A lender making a loan guaranteed under this section shall verify the status of a business concern as an emerging business enterprise before issuing a loan. (v)

Sanction

If a business concern has received a loan under this subparagraph and that business concern has fraudulently misrepresented its status as an emerging business enterprise, that business concern shall repay the amount of the loan to the lender (from which amount the lender shall repay the amount of any guarantee paid on the loan), and shall in addition pay a fine in an amount determined by the Administrator.