1.
(a)This Act may be cited as the Local Development Business Loan Program Act of
2005
.
(b)In
this Act, the term Administrator means the Administrator of the
Small Business Administration.
2.Development
Company Loan Programs
(a)Title V of the Small Business Investment Act of 1958 (15
U.S.C. 695 et seq.) is amended by adding at the end the following:
511.The programs authorized
by this title shall be known as the Local Development Business Loan
Program
.
.
(b)The Administrator may use informational materials
created, or that were in the process of being created, before the date of
enactment of this Act that do not refer to a program under title V of the Small
Business Investment Act of 1958 (15 U.S.C. 695 et seq.) as the Local
Development Business Loan Program
.
(c)Any informational materials created by the
Administrator on or after the date of enactment of this Act shall refer to any
program under title V of the Small Business Investment Act of 1958 (15 U.S.C.
695 et seq.) as the Local Development Business Loan
Program
.
3.Section 20 of
the Small Business Act (15 U.S.C. 631 note) is amended by adding at the end the
following:
(f)For the program authorized under section 7(a)(13) of this
Act and the Local Development Business Loan Program under the Small Business
Investment Act of 1958, the Administrator is authorized to make $8,000,000,000
in financings, and there are authorized to be appropriated to the Administrator
such sums as may be necessary to carry out such programs.
(g)For the program authorized under section 7(a)(13) of this
Act and the Local Development Business Loan Program under the Small Business
Investment Act of 1958, the Administrator is authorized to make $8,500,000,000
in financings, and there are authorized to be appropriated to the Administrator
such sums as may be necessary to carry out such
programs.
.
4.Section 510 of
the Small Business Investment Act of 1958 (15 U.S.C. 697g) is amended—
(1)by redesignating subsection (e) as
subsection (g); and
(2)by inserting after subsection (d) the
following:
(e)
(1)Any qualified State or local development company which
elects not to apply for authority to foreclose and liquidate defaulted loans
under this section, or which the Administrator determines to be ineligible for
such authority, shall contract with a qualified third-party to perform
foreclosure and liquidation of defaulted loans in its portfolio. The contract
shall be contingent upon approval by the Administrator with respect to the
qualifications of the contractor and the terms and conditions of liquidation
activities.
(2)The
provisions of this subsection shall not require any development company to
liquidate defaulted loans until the Administrator has adopted and implemented a
program to compensate and reimburse development companies, as provided under
subsection (f).
(f)Compensation
and reimbursement
(1)Reimbursement
of expensesThe Administrator shall reimburse each qualified
State or local development company for all expenses paid by such company as
part of the foreclosure and liquidation activities, if the expenses—
(A)were approved in
advance by the Administrator, either specifically or generally; or
(B)were incurred by
the development company on an emergency basis without prior approval from the
Administrator, if the Administrator determines that the expenses were
reasonable and appropriate.
(2)The Administrator shall develop a schedule to
compensate and provide an incentive to qualified State or local development
companies that foreclose and liquidate defaulted loans. The schedule shall be
based on a percentage of the net amount recovered, but shall not exceed a
maximum amount. The schedule shall not apply to any foreclosure which is
conducted pursuant to a contract between a development company and a qualified
third party to perform the foreclosure and
liquidation.
.
5.Additional
equity injectionsSection
502(3)(B)(ii) of the Small Business Investment Act of 1958 (15 U.S.C.
696(3)(B)(ii)) is amended to read as follows:
(ii)Funding from
institutionsIf a small business concern—
(I)provides the
minimum contribution required under subparagraph (C), not less than 50 percent
of the total cost of any project financed under clause (i), (ii), or (iii) of
subparagraph (C) shall come from the institutions described in subclauses (I),
(II), and (III) of clause (i); and
(II)provides more
than the minimum contribution required under subparagraph (C), any excess
contribution may be used to reduce the amount required from the institutions
described in subclauses (I), (II), and (III) of clause (i), except that the
amount from such institutions may not be reduced to an amount that is less than
the amount of the loan made by the
Administrator.
.
6.Businesses in
low-income areasSection
501(d)(3)(A) of the Small Business Investment Act of 1958 (15 U.S.C.
695(d)(3)(A)) is amended by inserting after business district
revitalization,
the following: or expansion of businesses in
low-income communities which would be eligible for a new markets tax credit
pursuant to section 45D(a) of the Internal Revenue Code of 1986, or
implementing regulations issued thereunder,
.
7.Combinations of
certain goalsSection 501(e)
of the Small Business Investment Act of 1958 (15 U.S.C. 695(e)) is amended by
adding at the end the following:
(7)A small business
concern that is unconditionally owned by more than 1 individual, or a
corporation, the stock of which is owned by more than 1 individual, shall be
deemed to have achieved a public policy goal required under subsection (d)(3)
if a combined ownership share of not less than 51 percent is held by
individuals who are in 1 of the groups described in subparagraph (C) or (E) of
subsection
(d)(3).
.
8.Maximum 504 and
7(a) loan eligibilitySection
502(2) of the Small Business Investment Act of 1958 (15 U.S.C. 696(2)) is
amended by adding at the end the following:
(C)Notwithstanding any other provision of law, financing
under this title may be provided to a borrower in the maximum amount provided
in this subsection, and a loan guarantee under section 7(a) of the Small
Business Act may be provided to the same borrower in the maximum amount
provided in section 7(a)(3)(A) of such Act, to the extent that the borrower
otherwise qualifies for such
assistance.
.
9.Section 502 of the Small Business Investment
Act of 1958 (15 U.S.C. 696) is amended by adding at the end the
following:
(7)Permissible
debt refinancing
(A)Any financing approved under this title may include a
limited amount of debt refinancing.
(B)If
the project involves expansion of a small business concern which has existing
indebtedness collateralized by fixed assets, any amount of existing
indebtedness that does not exceed 1/2 of the project cost
of the expansion may be refinanced and added to the expansion cost, providing
that—
(i)the proceeds of
the indebtedness were used to acquire land, including a building situated
thereon, to construct a building thereon, or to purchase equipment;
(ii)the borrower has
been current on all payments due on the existing debt for at least the
preceding year; and
(iii)the financing
under section 504 will provide better terms or rate of interest than exists on
the debt at the time of
refinancing.
.
10.
(a)Section 503(d) of the Small Business Investment Act of
l958 (15 U.S.C. 697(d)) is amended—
(1)by striking
paragraph (2);
(2)by redesignating
paragraph (3) as paragraph (2); and
(3)in paragraph (2),
as so redesignated, by striking 0.125 percent
and inserting
0.185 percent
.
(b)The amendments made by subsection (a) shall take effect and
apply to loans under section 503(d) of the Small Business Investment Act of
l958 (15 U.S.C. 697(d)) approved on or after 30 days after the date of
enactment of this Act.
11.Section 501(e)(2)
of the Small Business Investment Act of 1958 (15 U.S.C. 695(e)(2)) is amended
by striking outstanding
.
12.Section 103 of the
Small Business Investment Act of 1958 (15 U.S.C. 662) is amended—
(1)by striking paragraph (6) and inserting the
following:
(6)the term
development company means an entity incorporated under State law
with the authority to promote and assist the growth and development of small
business concerns in the areas in which it is authorized to operate by the
Administrator;
;
(2)in paragraph
(16), by striking and
at the end;
(3)in paragraph
(17), by striking the period at the end and inserting ; and
;
and
(4)by adding at the
end the following:
(18)the term
certified development company
means a development company that
the Administrator has certified meets the criteria of section
506.
.
13.Repeal of
sunset on reserve requirements for premier certified lendersSection 508(c)(6)(B) of the Small Business
Investment Act of 1958 (15 U.S.C. 697e(c)(6)(B)) is amended—
(1)in the heading,
by striking Temporary
reduction
and inserting Reduction
; and
(2)by striking
Notwithstanding subparagraph (A), during the 2-year period beginning on
the date that is 90 days after the date of enactment of this subparagraph,
the
and inserting The
.
14.Eligibility of
development companies to be designated as certified development companies and
authority to issue debentures; and providing an area of operational authority,
funding restrictions, and ethical requirementsSection 506 of the Small Business Investment
Act of 1958 (15 U.S.C. 697c) is amended—
(1)in the heading,
by striking Restrictions on
development company assistance
and inserting
Certified development
companies
; and
(2)by inserting before Notwithstanding
any other provision of law
the following:
(a)Authority to
issue debenturesA development company may issue debentures under
this title if the Administrator certifies that the company meets the following
criteria:
(1)
(A)Except as provided in subparagraph (B), the development
company shall be a small business concern with fewer than 500 employees, and
shall not be under the control of any entity that does not meet the size
standards established by the Administrator for a small business concern.
(B)Any
development company that was certified by the Administrator before December 31,
2005, may continue to issue debentures under this title.
(2)A
primary purpose of the development company shall be to benefit the community by
fostering economic development to create and preserve jobs and stimulate
private investment.
(3)A primary function of the development company shall be
to accomplish its purpose by providing long term financing to small business
concerns under the Local Development Business Loan Program. The development
company may also provide or support other local economic development activities
to assist the community.
(4)
(A)Except as provided in subparagraph (B), the development
company shall be a nonprofit corporation.
(B)A
development company certified by the Administrator before January 1, 1987, may
continue to issue debentures under this title and retain its status as a
for-profit enterprise.
(5)The development company—
(A)shall be in good
standing in the State in which such company is incorporated and in any other
State in which it conducts business; and
(B)shall be in
compliance with all laws, including taxation requirements, in the State in
which such company is incorporated and in any other State in which it conducts
business.
(6)Membership of
development companyThere shall be—
(A)not fewer than 25
members of the development company (or owners or stockholders, if the
corporation is a for-profit entity) none of whom may own or control more than
10 percent of the voting membership of the company; and
(B)at least 1 member
of the development company (none of whom is in a position to control the
development company) from each of the following:
(i)Government
organizations that are responsible for economic development.
(ii)Financial
institutions that provide commercial long term fixed asset financing.
(iii)Community
organizations that are dedicated to economic development.
(iv)Businesses.
(7)
(A)The development company shall have a board of
directors.
(B)Each member of the board of directors shall be—
(i)a
member of the development company; and
(ii)elected by a
majority of the members of the development company.
(C)Representation
of organizations and institutions
(i)There shall be at least 1 member of the board of
directors from not fewer than 3 of the 4 organizations and institutions
described in paragraph (6)(B), none of whom is in a position to control the
development company.
(ii)Not more than 50 percent of the members of the board
of directors shall be from any 1 of the organizations and institutions
described in paragraph (6)(B).
(D)The
board of directors of the development company shall meet on a regular basis to
make policy decisions for such company.
(8)Professional
management and staff
(A)The development company shall have full-time professional
management, including a chief executive officer to manage daily operations and
a full-time professional staff qualified to market the Local Development
Business Loan Program and handle all aspects of loan approval and servicing,
including liquidation, if appropriate.
(B)Independent
management and operationExcept as provided in paragraph (9), the
development company shall be independently managed and operated to pursue the
economic development purpose of the company and shall employ directly the chief
executive officer.
(9)Management and
operation exceptions
(A)A
development company may be an affiliate of another local nonprofit service
corporation (other than a development company), a purpose of which is to
support economic development in the area in which the development company
operates.
(B)A
development company may satisfy the requirement for full-time professional
staff under paragraph (8)(A) by contracting for the required staffing
with—
(i)a
local nonprofit service corporation;
(ii)a nonprofit
affiliate of a local nonprofit service corporation;
(iii)an entity
wholly or partially operated by a governmental agency; or
(iv)another entity
approved by the Administration.
(C)A
development company and a local nonprofit service corporation with which it is
affiliated may have in common some, but not all, members of their respective
board of directors.
(D)A development company in a rural area may satisfy the
requirements of a full-time professional staff and professional management
ability under paragraph (8)(A) by contracting for such services with another
certified development company that—
(i)has such staff
and management ability; and
(ii)is located in
the same State as the development company or in a State that is contiguous to
the State in which the development company is located.
(E)A development company that, on or before December 31,
2005, was certified by the Administrator and had contracted with a for-profit
company to provide staffing and management services, may continue to do
so.
(b)Any funds generated by a certified development company from
making loans under section 503 or 504 that remain unexpended after payment of
staff, operating, and overhead expenses shall be retained by the certified
development company as a reserve for—
(1)future
operations;
(2)expanding the
area in which the certified development company operates through the methods
authorized by this Act; or
(3)investment in
other local economic development activity in the State from which such funds
were generated.
(c)
(1)A certified development company and the officers,
employees, and other staff of the company shall at all times act ethically and
avoid activities which constitute a conflict of interest or appear to
constitute a conflict of interest.
(2)Prohibited
conflict in project loans
(A)No certified development company may—
(i)recommend or
approve a guarantee of a debenture by the Administrator under the Local
Business Development Loan Program that is collateralized by a second lien
position on the property being constructed or acquired; and
(ii)provide, or be
affiliated with a corporation or other entity which provides, financing
collateralized by a first lien on the same property.
(B)During
the 2-year period beginning on the date of enactment of this subsection, a
certified development company that was participating as a first mortgage lender
for the Local Business Development Loan Program in either of fiscal years 2004
or 2005 may continue to do so.
(3)Other economic
development activitiesIt shall not be a conflict of interest for
a certified development company to operate multiple programs to assist small
business concerns as part of carrying out its economic development
purpose.
(d)
(1)Notwithstanding
any other provision of law, the Administrator shall permit a certified
development company to make loans in any State that is contiguous to the State
of incorporation of that certified development company, only if such
company—
(A)is—
(i)an
accredited lender under section 507; or
(ii)a
premier certified lender under section 508;
(B)has a membership
that contains not fewer than 25 members from each State in which the company
makes loans;
(C)has a board of
directors that contains not fewer than 1 member from each State in which the
company makes loans; and
(D)maintains not
fewer than 1 loan committee, which shall have not fewer than 1 member from each
State in which the company makes loans; and
(E)submits to the
Administrator, in writing—
(i)a
notice of the intention of the company to make loans in multiple States;
(ii)the names of the
States in which the company intends to make loans;
(iii)a detailed
statement of how the company will comply with this paragraph, including a list
of the members described in subparagraph (B).
(2)The
Administrator shall verify whether a certified development company satisfies
the requirements of paragraph (1) on an expedited basis and, not later than 30
days after the date on which the Administrator receives the statement described
in paragraph (1)(E)(iii), the Administrator shall determine whether such
company satisfies such criteria and provide notice to such company.
(3)Loan committee
participationFor any loan made by a company described in
paragraph (1), not fewer than 1 member of the loan committee from the State in
which the loan is to be made shall participate in the review of such
loan.
(4)A company described in paragraph (1) may maintain an
aggregate accounting of all revenue and expenses of the company for purposes of
this title.
(5)Notwithstanding
any other provision of law, a person may serve on the board of directors, but
not as an officer, of more than 1 certified development company if none of the
certified development companies on which the person serves as a member of the
board of directors are located or operate in the same area.
(6)Local job
creation requirementsAny certified development company making
loans in multiple States shall satisfy any applicable job creation or retention
requirements separately for each such State. Such a company shall not count
jobs created or retained in 1 State towards any applicable job creation or
retention requirement in another State.
(7)For purposes of this subsection, the States of Alaska and
Hawaii shall be deemed to be contiguous to any State abutting the Pacific
ocean.
(e)Restrictions on
development company
assistance
.
15.Section 503 of the
Small Business Investment Act of 1958 (15 U.S.C. 697) is amended—
(1)in subsection
(a)(1), by striking qualified State or local development company
and inserting certified development company
; and
(2)by striking
subsection (e) and inserting the following:
(e)Notwithstanding any
other provision of law, a certified development company is authorized to
prepare applications for deferred participation loans under section 7(a) of the
Small Business Act, to service such loans, and to charge a reasonable fee for
servicing such
loans.
.
16.Section 503(b) of the
Small Business Investment Act of 1958 (15 U.S.C. 697(b)) is amended by striking
paragraph (4) and inserting the following:
(4)the aggregate
amount of such debenture does not exceed the amount of the loans to be made
from the proceeds of such debenture plus, at the election of the borrower,
other amounts attributable to the administrative and closing costs of such
loans, except for the attorney fees of the
borrower;
.
17.Section 501 of the Small
Business Investment Act of 1958 (15 U.S.C. 695) is amended by adding at the end
the following:
(f)As used in this
title, the term rural
shall include any area that is not—
(1)a city or town
that has a population greater than 50,000 inhabitants; or
(2)the urbanized
area contiguous and adjacent to a city or town described in paragraph
(1).
.
18.Regulations and
effective date
(a)Except as provided in
subsection (b), the Administrator shall—
(1)publish proposed rules to implement this
Act and the amendments made by this Act not later than 120 days after the date
of enactment of this Act; and
(2)publish such rules in final form not later
than 120 days after the date of publication under paragraph (1).
(b)As soon as is practicable after the date of enactment
of this Act, the Administrator shall promulgate regulations to implement
section 506(d) of the Small Business Investment Act of 1958, as added by
section 14 of this Act. Such regulations shall become effective not later than
120 days after the date of enactment of this Act.
(c)
(1)Except as provided in paragraph (2) and section 10(b),
this Act and the amendments made by this Act shall become effective 240 days
after the date of enactment of this Act, regardless of whether the
Administrator has promulgated the regulations required under subsection
(a).
(2)Section 506(d) of the Small Business Investment Act of
1958, as added by section 14 of this Act, shall become effective 120 days after
the date of enactment of this Act, regardless of whether the Administrator has
promulgated the regulations required under subsection (b).