[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2594 Introduced in Senate (IS)]








109th CONGRESS
  2d Session
                                S. 2594

   To amend the Small Business Act to reauthorize the loan guarantee 
    program under section 7(a) of that Act, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 6, 2006

  Mr. Kerry (for himself, Mr. Pryor, and Ms. Landrieu) introduced the 
 following bill; which was read twice and referred to the Committee on 
                  Small Business and Entrepreneurship

_______________________________________________________________________

                                 A BILL


 
   To amend the Small Business Act to reauthorize the loan guarantee 
    program under section 7(a) of that Act, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; FINDINGS; PURPOSE.

    (a) Short Title.--This Act may be cited as the ``7(a) Loan Program 
Reauthorization Act of 2006''.
    (b) Findings.--Congress finds the following:
            (1) According to a recent study by the United States 
        Chamber of Commerce and Business Loan Express, availability of 
        financing remains 1 of the top obstacles to the start-up and 
        growth of small businesses in the United States, particularly 
        for minorities who are still more likely to use credit cards to 
        finance their businesses and fear denial from lenders.
            (2) In pursuing its mission of aiding small businesses, the 
        Small Business Administration (referred to in this Act as the 
        ``Administration'') helps small businesses access capital by 
        guaranteeing loans and venture capital offered through 
        partnerships with private-sector lenders and investors.
            (3) The loan guaranty program under section 7(a) of the 
        Small Business Act is the largest loan program of the 
        Administration, and it is intended to serve small business 
        borrowers who could not otherwise obtain long-term credit under 
        suitable terms and conditions from the private sector without a 
        guarantee from the Administration.
            (4) Loans under section 7(a) of the Small Business Act have 
        terms of up to 25 years, allowing small businesses to reduce 
        their monthly payments and maximize their cash flow.
            (5) Loan proceeds can be used for most business purposes, 
        including working capital, equipment, furniture and fixtures, 
        land and buildings, leasehold improvements, and debt 
        refinancing.
            (6) In helping qualified small businesses to obtain the 
        long-term loans they need for start-up and expansion, loans 
        under section 7(a) of the Small Business Act create and retain 
        jobs and promote economic development in communities throughout 
        the United States.
            (7) In fiscal year 2005, almost 96,000 small businesses 
        were approved for loans under section 7(a) of the Small 
        Business Act, injecting more than $15,000,000,000 of capital 
        into local communities throughout the United States, and 
        creating or retaining an estimated 460,000 jobs.
    (c) Purposes.--The purpose and intent of this Act are--
            (1) to reauthorize the loan program under section 7(a) of 
        the Small Business Act for 3 years, with appropriate funding 
        levels to adequately address the capital needs of small 
        businesses in the United States;
            (2) to provide small businesses that need financing for 
        fixed assets through the loan program under title V of the 
        Small Business Investment Act of 1958, and for working capital 
        and equipment financing through the loan program under section 
        7(a) of the Small Business Act, the option of utilizing both 
        loan guaranty programs to their maximum amount;
            (3) to increase the proportion of small business loans to 
        minorities and women, addressing concerns that African 
        Americans, Hispanics, Asians and women have been receiving far 
        fewer small business loans relative to their share of the 
        population and that there has been no statistically significant 
        improvement since fiscal year 2001;
            (4) to establish a National Preferred Lenders Program for 
        qualified lenders who would like to operate in other States, 
        streamlining and making uniform the application and approval 
        process;
            (5) to ensure that lenders who operate nationally are 
        qualified by creating eligibility criteria and standards; and
            (6) to ensure that lenders who fail to meet the approved 
        eligibility criteria of the National Preferred Lenders Program 
        are held accountable to the communities they serve.

SEC. 2. REAUTHORIZATION AND MAXIMUM AMOUNTS.

    (a) 7(a) Authorization for Fiscal Years 2007 Through 2009.--Section 
20 of the Small Business Act (15 U.S.C. 631 note) is amended--
            (1) by redesignating subsection (j) as subsection (f); and
            (2) by adding at the end the following:
    ``(g) Fiscal Year 2007.--For fiscal year 2007, for the program 
authorized under section 7(a), the Administrator is authorized to make 
$18,500,000,000 in general business loans, and there are authorized to 
be appropriated to the Administrator such sums as may be necessary to 
carry out such program.
    ``(h) Fiscal Year 2008.--For fiscal year 2008, for the program 
authorized under section 7(a), the Administrator is authorized to make 
$19,500,000,000 in general business loans, and there are authorized to 
be appropriated to the Administrator such sums as may be necessary to 
carry out such program.
    ``(i) Fiscal Year 2009.--For fiscal year 2009, for the program 
authorized under section 7(a), the Administrator is authorized to make 
$20,500,000,000 in general business loans, and there are authorized to 
be appropriated to the Administrator such sums as may be necessary to 
carry out such program.''.
    (b) Maximum Amount and Coordination of SBA Loans.--
            (1) In general.--Section 7(a)(3)(A) of the Small Business 
        Act (15 U.S.C. 636(a)(3)(A)) is amended by striking ``would 
        exceed $1,500,000 (or if the gross loan amount would exceed 
        $2,000,000)'' and inserting ``(excluding any amounts 
        outstanding or committed under title V of the Small Business 
        Investment Act of 1958) would exceed $2,250,000 (or if the 
        gross loan amount would exceed $3,000,000)''.
            (2) Reporting.--Not later than 90 days after the date of 
        enactment of this Act, and annually thereafter, the 
        Administrator shall submit a report to Congress that--
                    (A) includes the number of small business concerns 
                (as that term is defined in section 3 of the Small 
                Business Act (15 U.S.C. 632)) that have financings 
                under both section 7(a) of the Small Business Act (15 
                U.S.C. 636(a)) and title V of the Small Business 
                Investment Act of 1958 (15 U.S.C. 695 et seq.) during 
                the preceding year; and
                    (B) describes the total amount and general 
                performance of the financings described in subparagraph 
                (A).

SEC. 3. FEES.

    Section 7(a)(23) of the Small Business Act (15 U.S.C. 636(a)(23)) 
is amended by striking subparagraph (C) and inserting the following:
                    ``(C) Lowering of fees.--
                            ``(i) In general.--If the fees paid by all 
                        small business borrowers and by lenders for 
                        guarantees under this subsection, or the sum of 
                        such fees plus any amount appropriated to carry 
                        out this subsection, as applicable, is more 
                        than the amount necessary to equal the cost to 
                        the Administration of making such guarantees, 
                        the Administrator shall reduce fees paid by 
                        small business borrowers and lenders under 
                        clauses (i) through (iv) of paragraph (18)(A) 
                        and subparagraph (A) of this paragraph.
                            ``(ii) Maximum.--The fees paid by small 
                        business borrowers and lenders for guarantees 
                        under this subsection may not be increased 
                        above the maximum level authorized under the 
                        amendments made by division K of the 
                        Consolidated Appropriations Act, 2005 (Public 
                        Law 108-447; 118 Stat. 3441).''.

SEC. 4. ALTERNATIVE SIZE STANDARD.

    Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) is 
amended by adding at the end the following:
    ``(4) Optional Size Standard.--
            ``(A) In general.--The Administrator shall establish, by 
        rule, an optional size standard for business loan applicants 
        under section 7(a) and development company loan applicants 
        under title V of the Small Business Investment Act of 1958, 
        which utilizes maximum tangible net worth and average net 
        income as an alternative to the use of industry standards.
            ``(B) Interim rule.--Until the date on which the optional 
        size standards established under subparagraph (A) are in 
        effect, the alternative size standard in section 121.301(b) of 
        title 13, Code of Federal Regulations, or any successor thereto 
        shall apply to business loan applicants under section 7(a) and 
        development company loan applicants under title V of the Small 
        Business Investment Act of 1958.''.

SEC. 5. MINORITY SMALL BUSINESS DEVELOPMENT.

    (a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is 
amended--
            (1) by redesignating section 37 as section 38; and
            (2) by inserting after section 36 the following:

``SEC. 37. MINORITY SMALL BUSINESS DEVELOPMENT.

    ``(a) Office of Minority Small Business Development.--There is 
established in the Administration an Office of Minority Small Business 
Development, which shall be administered by the Associate Administrator 
for Minority Small Business Development (in this section referred to as 
the `Associate Administrator') appointed under section 4(b)(1).
    ``(b) Associate Administrator for Minority Small Business 
Development.--The Associate Administrator--
            ``(1) shall be either--
                    ``(A) an appointee in the Senior Executive Service 
                who is a career appointee; or
                    ``(B) an employee in the competitive service.
            ``(2) shall be responsible for the formulation, execution, 
        and promotion of policies and programs of the Administration 
        that provide assistance to small business concerns owned and 
        controlled by minorities;
            ``(3) shall act as an ombudsman for full consideration of 
        minorities in all programs of the Administration (including 
        those under section 7(j) and 8(a));
            ``(4) shall work with the Associate Deputy Administrator 
        for Capital Access to increase the proportion of loans and loan 
        dollars, and investments and investment dollars, going to 
        minorities through the finance programs under this Act and the 
        Small Business Investment Act of 1958 (including subsections 
        (a), (b), and (m) of section 7 of this Act and the programs 
        under part A and B of title III and title V of the Small 
        Business Investment Act of 1958);
            ``(5) shall work with the Associate Deputy Administrator 
        for Entrepreneurial Development to increase the proportion of 
        counseling and training that goes to minorities through the 
        entrepreneurial development programs of the Administration;
            ``(6) shall work with the Associate Deputy Administrator 
        for Government Contracting and Minority Enterprise Development 
        to increase the proportion of contracts, including through the 
        Small Business Innovation Research Program and the Small 
        Business Technology Transfer Program, to minorities;
            ``(7) shall work with the partners of the Administration, 
        trade associations, and business groups to identify and carry 
        out policies and procedures to more effectively market the 
        resources of the Administration to minorities;
            ``(8) shall work with the Office of Field Operations to 
        ensure that district offices and regional offices have adequate 
        staff, funding, and other resources to market the programs of 
        the Administration to meet the objectives described in 
        paragraphs (4) through (7); and
            ``(9) shall report to and be responsible directly to the 
        Administrator.
    ``(c) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section--
            ``(1) $5,000,000 for fiscal year 2007;
            ``(2) $5,000,000 for fiscal year 2008; and
            ``(3) $5,000,000 for fiscal year 2009.''.
    (b) Conforming Amendments.--Section 4(b)(1) of the Small Business 
Act (15 U.S.C. 633(b)(1)) is amended in sixth sentence, by striking 
``Minority Small Business and Capital Ownership Development'' and all 
that follows through the end of the sentence and inserting ``Minority 
Small Business Development.''.

SEC. 6. NATIONAL PREFERRED LENDERS PROGRAM.

    (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:
            ``(32) National preferred lenders program.--
                    ``(A) Definitions.--In this paragraph--
                            ``(i) the term `national preferred lender' 
                        means a lender authorized by the Administrator 
                        to participate in the National Preferred 
                        Lenders Program;
                            ``(ii) the term `National Preferred Lenders 
                        Program' means the program established under 
                        subparagraph (B); and
                            ``(iii) the term `Preferred Lenders 
                        Program' has the meaning given the term in 
                        paragraph (2)(C)(ii).
                    ``(B) Establishment of program.--In addition to the 
                Preferred Lenders Program, the Administrator shall 
                establish a National Preferred Lenders Program, under 
                which the Administrator may authorize a preferred 
                lender to operate in any area served by a district 
                office of the Administration.
                    ``(C) Eligibility criteria.--
                            ``(i) In general.--Not later than 60 days 
                        after the date of enactment of this paragraph, 
                        the Administrator shall establish, by rule, 
                        eligibility criteria for national preferred 
                        lenders.
                            ``(ii) Considerations.--The eligibility 
                        criteria established by the Administrator under 
                        clause (i) may include consideration of whether 
                        the lender has--
                                    ``(I) satisfactorily operated as a 
                                preferred lender in areas encompassing 
                                all or part of the territory in not 
                                fewer than 5 district offices of the 
                                Administration for a minimum of 3 years 
                                in each territory;
                                    ``(II) centralized loan approval, 
                                servicing, and liquidation functions 
                                and processes that are satisfactory to 
                                the Administration;
                                    ``(III) uniform written policies 
                                and procedures relating to loans under 
                                this subsection, including the 
                                processing of loans under the Preferred 
                                Lenders Program;
                                    ``(IV) an average rate of 
                                performance in currency rate, default 
                                rate, and recovery rate for loans made 
                                under the Preferred Lenders Program 
                                that is equal to or better than the 
                                national average rate of performance in 
                                such categories for all loans under 
                                this subsection; and
                                    ``(V) received a generally 
                                satisfactory or substantially 
                                satisfactory compliance review rating 
                                from the Administrator in its most 
                                recent audit and examination as a 
                                preferred lender and a small business 
                                lending company, if applicable, or an 
                                in compliance rating, as a result of a 
                                follow-up review.
                    ``(D) Delegated authority.--
                            ``(i) In general.--The Administrator shall 
                        authorize a national preferred lender to take 
                        certain action relating to the servicing of 
                        loans on behalf of the Administrator under 
                        section 5(b)(7), including authorizing the 
                        lender--
                                    ``(I) to make and close a loan 
                                guaranteed by the Administrator, 
                                without obtaining the prior specific 
                                approval of the Administrator; and
                                    ``(II) to service and liquidate a 
                                loan, without obtaining the prior 
                                specific approval of the Administrator 
                                for routine servicing and liquidation 
                                activities.
                            ``(ii) Limitation.--In exercising any 
                        authority delegated under clause (i), a 
                        national preferred lender may not take any 
                        action that creates an actual or apparent 
                        conflict of interest.
                    ``(E) Corrective action.--If a national preferred 
                lender fails to continue to meet the eligibility 
                criteria established under subparagraph (C)(i), the 
                Administrator shall notify the lender of the deficiency 
                and allow a reasonable period of time for the lender to 
                correct the deficiency.
                    ``(F) Suspension or revocation.--
                            ``(i) In general.--The Administrator shall 
                        suspend or revoke the authorization of a 
                        national preferred lender to participate in the 
                        National Preferred Lenders Program, if the 
                        Administrator determines that the lender--
                                    ``(I) is not adhering to the rules 
                                and regulations of the Administration 
                                applicable to such lender; or
                                    ``(II) after the date on which a 
                                period of time for correction of 
                                deficiencies under subparagraph (F) 
                                expires, has failed to meet the 
                                eligibility criteria established under 
                                subparagraph (C)(i).
                            ``(ii) Outstanding guarantees.--Any 
                        suspension or revocation under clause (i) shall 
                        not affect any guarantee in effect on the date 
                        of such suspension or revocation.''.
    (b) Conforming Amendment.--Section 7(a)(2)(C) of the Small Business 
Act (15 U.S.C. 636(a)(2)(C)) is amended--
            (1) in the subparagraph heading, by inserting ``and 
        national preferred lenders program'' before the period at the 
        end; and
            (2) by inserting ``or the National Preferred Lenders 
        Program under paragraph (32)'' after ``Preferred Lenders 
        Program''.
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