[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1734 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 1734

   To amend the Small Business Investment Act of 1958, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 22, 1997

Mr. LaFalce (for himself, Mr. Sisisky, and Mr. Weygand) introduced the 
 following bill; which was referred to the Committee on Small Business

_______________________________________________________________________

                                 A BILL


 
   To amend the Small Business Investment Act of 1958, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, That this Act may be 
cited as the ``Certified Development Company Enhancement and 
Improvement Act of 1997''.
    Sec. 2. Section 20 of the Small Business Act (15 U.S.C. 631 note) 
is amended by inserting the following new subsection:
    ``(r) The following program levels are authorized in financings as 
provided in section 7(a)(13) and section 504 of the Small Business 
Investment Act of 1958:
            ``(1) $3,000,000,000 for fiscal year 1998;
            ``(2) $3,500,000,000 for fiscal year 1999; and
            ``(3) $4,500,000,000 for fiscal year 2000.''.
    Sec. 3. Section 503 of the Small Business Investment Act of 1958 
(15 U.S.C. 697) is amended--
            (1) by striking subsection (b)(7)(A) and inserting the 
        following:
                    ``(A) assesses and collects a fee, which shall be 
                payable by the borrower, in an amount equal to 0.9375 
                percent per year of the outstanding balance of the 
                loan; and'';
            (2) by striking from subsection (d)(2) ``equal to 50 basis 
        points'' and inserting ``equal to not more than 50 basis 
        points,'';
            (3) by adding the following at the end of subsection 
        (d)(2): ``The amount of the fee authorized herein shall be 
        established annually by the Administration in the minimal 
        amount necessary to reduce 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 debentures under 
        this Act to zero.''; and
            (4) by striking from subsection (f) ``1997'' and inserting 
        ``2000''.
    Sec. 4. Section 508(a) of the Small Business Investment Act of 1958 
(15 U.S.C. 697e(a)) is amended by striking ``not more than 15''.
    Sec. 5. Section 508(b)(2) of the Small Business Investment Act of 
1958 (15 U.S.C. 697e(b)(2)) is amended by striking paragraphs (A) and 
(B) and inserting:
                    ``(A) is an active certified development company in 
                good standing and has been an active participant in the 
                accredited lenders program during the entire 12-month 
                period preceding the date on which the company submits 
                an application under paragraph (1), except that the 
                Administration may waive this requirement if the 
                company is qualified to participate in the accredited 
                lenders program;
                    ``(B) has a history (i) of submitting to the 
                Administration adequately analyzed debenture guarantee 
                application packages and (ii) of properly closing 
                section 504 loans and servicing its loan portfolio; 
                and''.
    Sec. 6. Section 508(c) of the Small Business Investment Act of 1958 
(15 U.S.C. 697e(c)) is amended to read as follows:
    ``(c) Loss Reserve.--
            ``(1) Establishment.--A company designated as a premier 
        certified lender shall establish a loss reserve for financing 
        approved pursuant to this section.
            ``(2) Amount.--The amount of the loss reserve shall be 
        equal to 10 percent of the amount of the company's exposure as 
        determined under subsection (b)(2)(C).
            ``(3) Assets.--The loss reserve shall be comprised of any 
        combination of the following types of assets:
                    ``(A) segregated funds on deposit in an account or 
                accounts with a federally insured depository 
                institution or institutions selected by the company, 
                subject to a collateral assignment in favor of, and in 
                a format acceptable to, the Administration; or
                    ``(B) irrevocable letter or letters of credit, with 
                a collateral assignment in favor of, and a commercially 
                reasonable format acceptable to, the Administration.
            ``(4) Contributions.--The company shall make contributions 
        to the loss reserve, either cash or letters of credit as 
        provided above, in the following amounts and at the following 
        intervals:
                    ``(A) 50 percent when a debenture is closed;
                    ``(B) 25 percent additional not later than 1 year 
                after a debenture is closed; and
                    ``(C) 25 percent additional not later than 2 years 
                after a debenture is closed.
            ``(5) Replenishment.--If a loss has been sustained by the 
        Administration, any portion of the loss reserve, and other 
        funds provided by the premier company as necessary, may be used 
        to reimburse the Administration for the company's 10 percent 
        share of the loss as provided in subsection (b)(2)(C). If the 
        company utilizes the reserve, within 30 days it shall replace 
        an equivalent amount of funds.
            ``(6) Disbursements.--The Administration shall allow the 
        certified development company to withdraw from the loss reserve 
        amounts attributable to any debenture which has been repaid.''.
    Sec. 7. Section 508 of the Small Business Investment Act of 1958 
(15 U.S.C. 697e) is amended by inserting the following after subsection 
(d) and by redesignating subsections (e) to (i) as (f) to (j):
    ``(e) Program Goals.--Certified development companies participating 
in this program shall establish a goal of processing a minimum of at 
least 50 percent of their loan applications for section 504 assistance 
pursuant to the premier certified lender program authorized in this 
section.''.
    Sec. 8. Section 508(g) of the Small Business Investment Act of 1958 
(15 U.S.C. 697(g)), as redesignated herein, is amended by striking 
``State or local'' and inserting ``certified''.
    Sec. 9. Section 508(h) of the Small Business Investment Act of 1958 
(15 U.S.C. 697e(h)), as redesignated herein, is amended--
            (1) by striking ``EFFECT OF SUSPENSION OR DESIGNATION'' and 
        inserting ``EFFECT OF SUSPENSION OR REVOCATION''; and
            (2) by striking ``under subsection (f)'' and inserting 
        ``under subsection (g)''.
    Sec. 10. Section 508(i) of the Small Business Investment Act of 
1958 (15 U.S.C. 697e(i)), as redesignated herein, is amended to read as 
follows:
                    ``(i) Regulations.--Not later than 90 days after 
                the date of enactment of this section, the 
                Administration shall promulgate regulations to carry 
                out this section. Not later than 120 days after the 
                date of enactment, the Administration shall issue 
                program guidelines and implement the changes made 
                herein.''.
    Sec. 11. Section 508(j) of the Small Business Investment Act of 
1958 (15 U.S.C. 697e(j)), as redesignated herein, is amended by 
striking ``other lenders'' and inserting ``other lenders, specifically 
comparing default rates and recovery rates on liquidations''.
    Sec. 12. Section 217(b) of Public Law 103-403 (108 Stat. 4185) is 
repealed.
    Sec. 13. Section 508(d) of the Small Business Investment Act of 
1958 (15 U.S.C. 697e(d)) is amended by striking ``to approve loans'' 
and inserting ``to approve, authorize, close, service, and liquidate 
loans''.
    Sec. 14. Section 502(1) of the Small Business Investment Act of 
1958 (15 U.S.C. 696(1)) is amended to read as follows:
            ``(1) The proceeds of any such loan shall be used solely by 
        such borrower or borrowers to assist an identifiable small-
        business or businesses and for a sound business purpose 
        approved by the Administration.''.
    Sec. 15. Section 502 of the Small Business Investment Act of 1958 
(15 U.S.C. 696) is amended by adding the following new subsection:
            ``(5) Not to exceed 25 per centum of the project may be 
        leased by the assisted small business: Provided, That the 
        tenant is a small business concern: And provided further, That 
        the assisted small business shall be required to occupy and use 
        not less than 55 per centum of the space in the project after 
        the execution of any leases authorized in this section.''.
    Sec. 16. Section 502(3) of the Small Business Investment Act of 
1958 (15 U.S.C. 696(3)) is amended by inserting the following new 
paragraphs:
                    ``(D) Seller financing.--Seller provided financing 
                may be used to meet the requirements of--
                            ``(i) paragraph (B), if the seller 
                        subordinates his interest in the property to 
                        the debenture guaranteed by the Administration; 
                        and
                            ``(ii) not to exceed 50 percent of the 
                        amounts required by paragraph (C).
                    ``(E) Collateral requirements.--Collateral provided 
                by the small business concern shall be valued in an 
                amount estimated as the reasonable value of the 
                property by a willing buyer and a willing seller and 
                shall include property not a part of the project being 
                financed only if the Administration determines to 
                impose such a requirement on a case-by-case basis.''.
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