[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 895 Reported in Senate (RS)]





                                                       Calendar No. 166

104th CONGRESS

  1st Session

                                 S. 895

                          [Report No. 104-129]

_______________________________________________________________________

                                 A BILL

To amend the Small Business Act to reduce the level of participation by 
 the Small Business Administration in certain loans guaranteed by the 
                Administration, and for other purposes.

_______________________________________________________________________

               August 5 (legislative day, July 10), 1995

                       Reported with an amendment





                                                       Calendar No. 166
104th CONGRESS
  1st Session
                                 S. 895

                          [Report No. 104-129]

To amend the Small Business Act to reduce the level of participation by 
 the Small Business Administration in certain loans guaranteed by the 
                Administration, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                 June 8 (legislative day, June 5), 1995

 Mr. Bond (for himself, Mr. Bumpers, Mr. Wellstone, Mr. Burns, and Ms. 
Snowe) introduced the following bill; which was read twice and referred 
                   to the Committee on Small Business

               August 5 (legislative day, July 10), 1995

                Reported by Mr. Bond, with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

_______________________________________________________________________

                                 A BILL


 
To amend the Small Business Act to reduce the level of participation by 
 the Small Business Administration in certain loans guaranteed by the 
                Administration, and for other purposes.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
<DELETED>SECTION 1. SHORT TITLE.</DELETED>

<DELETED>    This Act may be cited as the ``Small Business Lending 
Enhancement Act of 1995''.</DELETED>

<DELETED>SEC. 2. REDUCED LEVEL OF PARTICIPATION IN GUARANTEED 
              LOANS.</DELETED>

<DELETED>    Section 7(a)(2) of the Small Business Act (15 U.S.C. 
636(a)(2)) is amended to read as follows:</DELETED>
        <DELETED>    ``(2) Level of participation in guaranteed 
        loans.--</DELETED>
                <DELETED>    ``(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--</DELETED>
                        <DELETED>    ``(i) 75 percent of the balance of 
                        the financing outstanding at the time of 
                        disbursement of the loan, if such balance 
                        exceeds $100,000; or</DELETED>
                        <DELETED>    ``(ii) 80 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 $100,000.</DELETED>
                <DELETED>    ``(B) Reduced participation upon 
                request.--</DELETED>
                        <DELETED>    ``(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.</DELETED>
                        <DELETED>    ``(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.</DELETED>
                <DELETED>    ``(C) Interest rate under preferred 
                lenders program.--</DELETED>
                        <DELETED>    ``(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.</DELETED>
                        <DELETED>    ``(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--</DELETED>
                                <DELETED>    ``(I) complete authority 
                                to make and close loans with a 
                                guarantee from the Administration 
                                without obtaining the prior specific 
                                approval of the Administration; 
                                and</DELETED>
                                <DELETED>    ``(II) authority to 
                                service and liquidate such 
                                loans.''.</DELETED>

<DELETED>SEC. 3. GUARANTEE FEES.</DELETED>

<DELETED>    (a) Amount of Fees.--Section 7(a)(18) of the Small 
Business Act (15 U.S.C. 636(a)(18)) is amended to read as 
follows:</DELETED>
        <DELETED>    ``(18) Guarantee fees.--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, in an amount equal 
        to the sum of--</DELETED>
                <DELETED>    ``(A) 3 percent of the amount of the 
                deferred participation share of the loan that is less 
                than or equal to $250,000;</DELETED>
                <DELETED>    ``(B) if the deferred participation share 
                of the loan exceeds $250,000, 4 percent of the 
                difference between--</DELETED>
                        <DELETED>    ``(i) $500,000 or the total 
                        deferred participation share of the loan, 
                        whichever is less; and</DELETED>
                        <DELETED>    ``(ii) $250,000; and</DELETED>
                <DELETED>    ``(C) if the deferred participation share 
                of the loan exceeds $500,000, 5 percent of the 
                difference between--</DELETED>
                        <DELETED>    ``(i) the total deferred 
                        participation share of the loan; and</DELETED>
                        <DELETED>    ``(ii) $500,000.''.</DELETED>
<DELETED>    (b) Repeal of Provisions Allowing Retention of Fees by 
Lenders.--Section 7(a)(19) of the Small Business Act (15 U.S.C. 
636(a)(19)) is amended--</DELETED>
        <DELETED>    (1) in subparagraph (B)--</DELETED>
                <DELETED>    (A) by striking ``shall (i) develop'' and 
                inserting ``shall develop''; and</DELETED>
                <DELETED>    (B) by striking ``, and (ii)'' and all 
                that follows through the end of the subparagraph and 
                inserting a period; and</DELETED>
        <DELETED>    (2) by striking subparagraph (C).</DELETED>

<DELETED>SEC. 4. ESTABLISHMENT OF ANNUAL FEE.</DELETED>

<DELETED>    (a) In General.--Section 7(a) of the Small Business Act 
(15 U.S.C. 636(a)) is amended by adding at the end the following new 
paragraph:</DELETED>
        <DELETED>    ``(23) Annual fee.--In carrying out this 
        subsection, the Administration shall, in accordance with such 
        terms and procedures as the Administration shall establish by 
        regulation, assess and collect an annual fee, which shall be 
        payable by the participating lender, in an aggregate amount 
        equal to not more than 0.4 percent of the outstanding balance 
        of the deferred participation share of the loan.''.</DELETED>
<DELETED>    (b) Conforming Amendment.--Section 5(g)(4)(A) of the Small 
Business Act (15 U.S.C. 634(g)(4)(A)) is amended--</DELETED>
        <DELETED>    (1) by striking the first sentence and inserting 
        the following: ``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.''; and</DELETED>
        <DELETED>    (2) by striking ``fees'' each place such term 
        appears and inserting ``fee''.</DELETED>

<DELETED>SEC. 5. TECHNICAL AMENDMENT.</DELETED>

<DELETED>    Section 3 of the Small Business Act (15 U.S.C. 632) is 
amended by adding at the end the following new subsection:</DELETED>
<DELETED>    ``(o) Participating Lender.--For purposes of this Act, the 
term `participating lender' means any bank or other financial 
institution that enters into an agreement with the Administration 
described section 7(a) to provide financing in accordance with that 
section.''.</DELETED>
SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Lending Enhancement 
Act of 1995''.

SEC. 2. REDUCED LEVEL OF PARTICIPATION IN GUARANTEED LOANS.

    Section 7(a)(2) of the Small Business Act (15 U.S.C. 636(a)(2)) is 
amended to read as follows:
            ``(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 $100,000; or
                            ``(ii) 80 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 $100,000.
                    ``(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) authority to service and 
                                liquidate such loans.''.

SEC. 3. GUARANTEE FEES.

    (a) Amount of Fees.--Section 7(a)(18) of the Small Business Act (15 
U.S.C. 636(a)(18)) is amended to read as follows:
            ``(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, in an amount equal to the sum 
                of--
                            ``(i) 2.5 percent of the amount of the 
                        deferred participation share of the loan that 
                        is less than or equal to $250,000;
                            ``(ii) if the deferred participation share 
                        of the loan exceeds $250,000, 3 percent of the 
                        difference between--
                                    ``(I) $500,000 or the total 
                                deferred participation share of the 
                                loan, whichever is less; and
                                    ``(II) $250,000; and
                            ``(iii) if the deferred participation share 
                        of the loan exceeds $500,000, 3.5 percent of 
                        the difference between--
                                    ``(I) $750,000 or the total 
                                deferred participation share of the 
                                loan, whichever is less; and
                                    ``(II) $500,000.
                    ``(B) Exception for certain loans.--Notwithstanding 
                subparagraph (A), if the total deferred participation 
                share of a loan guaranteed under this subsection is 
                less than or equal to
                 $80,000, the guarantee fee collected under 
subparagraph (A) shall be in an amount equal to 2 percent of the total 
deferred participation share of the loan.
                    ``(C) Discretionary increase.--Notwithstanding 
                subparagraphs (A) and (B), during the 90-day period 
                beginning on the first day of any fiscal year, the 
                Administration may increase the guarantee fee collected 
                under this paragraph by an amount not to exceed 0.375 
                percent of the total deferred participation share of 
                the loan, if the Administration--
                            ``(i) determines that such action is 
                        necessary to meet projected borrower demand for 
                        loans under this subsection during that fiscal 
                        year, based on the subsidy cost of the loan 
                        program under this subsection and amounts 
                        provided in advance for such program in 
                        appropriations Acts; and
                            ``(ii) not less than 15 days prior to 
                        imposing any such increase, notifies the 
                        Committees on Small Business of the Senate and 
                        the House of Representatives of the 
                        determination made under clause (i).''.
    (b) Repeal of Provisions Allowing Retention of Fees by Lenders.--
Section 7(a)(19) of the Small Business Act (15 U.S.C. 636(a)(19)) is 
amended--
            (1) in subparagraph (B)--
                    (A) by striking ``shall (i) develop'' and inserting 
                ``shall develop''; and
                    (B) by striking ``, and (ii)'' and all that follows 
                through the end of the subparagraph and inserting a 
                period; and
            (2) by striking subparagraph (C).

SEC. 4. ESTABLISHMENT OF ANNUAL FEE.

    (a) In General.--Section 7(a) of the Small Business Act (15 U.S.C. 
636(a)) is amended by adding at the end the following new paragraph:
            ``(23) Annual fee.--
                    ``(A) In general.--With respect to each loan 
                guaranteed under this subsection, the Administration 
                shall, in accordance with such terms and procedures as 
                the Administration shall establish by regulation, 
                assess and collect an annual fee in an amount equal to 
                0.5 percent of the outstanding balance of the deferred 
                participation share of the loan.
                    ``(B) Payer.--The annual fee assessed under 
                subparagraph (A) shall be payable by the participating 
                lender and shall not be charged to the borrower.''.
    (b) Conforming Amendment.--Section 5(g)(4)(A) of the Small Business 
Act (15 U.S.C. 634(g)(4)(A)) is amended--
            (1) by striking the first sentence and inserting the 
        following: ``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.''; and
            (2) by striking ``fees'' each place such term appears and 
        inserting ``fee''.

SEC. 5. NOTIFICATION REQUIREMENT.

    (a) In General.--Section 7(a) of the Small Business Act (15 U.S.C. 
636(a)) is amended by adding at the end the following new paragraph:
            ``(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.''.

SEC. 6. DEVELOPMENT COMPANY DEBENTURES.

    Section 503(b) of the Small Business Investment Act of 1958 (15 
U.S.C. 697(b)) is amended--
            (1) in paragraph (5), by striking ``and'' at the end;
            (2) in paragraph (6), by striking the period at the end and 
        inserting ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(7) with respect to each loan made from the proceeds of 
        such debenture, the Administration--
                    ``(A) assesses and collects a fee, which shall be 
                payable by the borrower, in an amount equal to 0.0625 
                percent per year of the outstanding balance of the 
                loan; and
                    ``(B) uses the proceeds of such fee to offset the 
                cost (as such term is defined in section 502 of the 
                Federal Credit Reform Act of 1990) to the 
                Administration of making guarantees under subsection 
                (a).''.