1.Short title; findings;
purpose
(a)This Act may be cited
as the 7(a) Loan Program
Reauthorization Act of 2006
.
(b)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)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.
2.Reauthorization and
maximum amounts
(a)7(a)
authorization for fiscal years 2007 through 2009Section 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)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)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)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)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)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).
3.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)
(i)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)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).
.
4.Alternative size
standardSection 3(a) of the
Small Business Act (15 U.S.C. 632(a)) is amended by adding at the end the
following:
(4)
(A)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)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.
.
5.Minority small
business development
(a)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:
37.Minority small
business development
(a)Office of
minority small business developmentThere 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 developmentThe 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 appropriationsThere 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)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.
.
6.National preferred
lenders program
(a)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)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)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)
(i)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)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)
(i)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)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)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)
(i)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)Any suspension or
revocation under clause (i) shall not affect any guarantee in effect on the
date of such suspension or
revocation.
.
(b)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
.