[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2595 Introduced in Senate (IS)]








109th CONGRESS
  2d Session
                                S. 2595

  To amend the Small Business Investment Act of 1958 to modernize the 
                  treatment of development companies.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 6, 2006

 Mr. Kerry (for himself and Mr. Pryor) 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 Investment Act of 1958 to modernize the 
                  treatment of development companies.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS; DEFINITIONS.

    (a) Short Title.--This Act may be cited as the ``504 Loan Program 
Modernization Act of 2006''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents; definitions.
Sec. 2. Findings and purposes.
Sec. 3. Authorizations for 504 Loan Program.
Sec. 4. Certified development company economic development.
Sec. 5. Definitions.
Sec. 6. Eligibility of development companies to be designated as 
                            certified development companies; authority 
                            to issue debentures; providing an area of 
                            operational authority, funding 
                            restrictions, and ethical requirements.
Sec. 7. Conforming amendments.
Sec. 8. Definition of rural areas.
Sec. 9. Businesses in low-income areas.
Sec. 10. Combinations of certain goals.
Sec. 11. Repeal of sunset on reserve requirements for premier certified 
                            lenders.
Sec. 12. Refinancing.
Sec. 13. Fees.
Sec. 14. Additional equity injections.
Sec. 15. Loan liquidations.
Sec. 16. Closing costs.
Sec. 17. Maximum 504 and 7(a) loan eligibility.
Sec. 18. Technical correction.
Sec. 19. Premier Certified Lenders Program report.
Sec. 20. Regulations.
    (c) Definitions.--In this Act--
            (1) the terms ``Administration'' and ``Administrator'' 
        means the Small Business Administration and the Administrator 
        thereof, respectively;
            (2) the term ``Premier Certified Lenders Program'' means 
        the program established under section 508(a) of the Small 
        Business Investment Act of 1958 (15 U.S.C. 697e(a)); and
            (3) the term ``504 Loan Program'' means the program to 
        provide financing to small business concerns by guarantees of 
        loans under title V of the Small Business Investment Act of 
        1958 (15 U.S.C. 695 et seq.), which are funded by debentures 
        guaranteed by the Administrator.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress finds that--
            (1) in pursuing its mission of aiding small businesses, the 
        Administration provides small businesses with access to credit, 
        primarily by guaranteeing loans through its 7(a) and 504 Loan 
        Programs;
            (2) the 504 Loan Program provides long-term, fixed-rate 
        financing to growing small businesses for expansion or 
        modernization, primarily of real estate and large equipment;
            (3) the 504 financing is delivered through certified 
        development companies (in this section referred to as 
        ``CDCs''), about 270 typically preexisting nonprofit 
        corporations, established to contribute to the economic 
        development of their communities;
            (4) during the 5 years preceding the date of enactment of 
        this Act, 504 loans have slightly increased to Hispanics and 
        Asians, but have been flat-level funded to African Americans, 
        with 2 percent of the loans, and have decreased in loans to 
        women, from 19 percent to 15 percent;
            (5) the CDC industry and the 504 Loan Program have 
        experienced unprecedented structural changes, such as the shift 
        of all 504 loan processing, loan servicing and liquidation from 
        70 Administration district offices to 1 or 2 centers in the 
        country;
            (6) in 2004, the Administration adopted regulations that 
        allowed for Statewide and multistate CDC operations, resulting 
        in increased competition and program growth in many areas of 
        the country, with limited accountability measures to ensure 
        that CDCs are investing in local economic development 
        activities in each State as they expand; and
            (7) such changes require Congress to examine the 504 Loan 
        Program and the industry and set a statutory course that 
        ensures that the intent and the mission of CDCs and the 504 
        Loan Program for the future are clearly established as local 
        economic development.
    (b) Purposes.--The purpose and intent of this Act are--
            (1) to make a clear distinction between nonprofit and for-
        profit lending practices through the preservation of the CDCs 
        as non-profit economic development intermediaries that are an 
        essential element in Congress' and the Administration's mission 
        to assist small businesses to foster local economic development 
        through job creation and investment in all our communities;
            (2) to reconfirm the statutory intent of CDCs as originally 
        established in 1958 to provide small business programs, 
        services, and assistance that for-profit lenders do not 
        provide;
            (3) to direct the Administration within 90 days of the date 
        of enactment of this Act to report to the Committee on Small 
        Business and Entrepreneurship of the Senate and the Committee 
        on Small Business of the House of Representatives on how the 
        Administration could implement 1 closing, rather than 2 in the 
        504 Loan Program, and potentially save the borrower thousands 
        in funds and retain outstanding participation of private 
        lenders;
            (4) to direct the Administration to report on the 
        utilization of the Premier Certified Lender Program over the 
        past 3 years, specifically outlining how many 504 loans have 
        been processed through the program, what difficulties have been 
        encountered in making these loans, and how the number of loans 
        in the program could be increased or streamlined;
            (5) to establish the expansion of business in low-income 
        communities as a separate public policy goal to highlight the 
        need for CDCs to include such goal as a primary objective in 
        future projects and outreach to underserved populations;
            (6) to ensure accountability as CDC operations expand into 
        contiguous States through timely authorizations by the 
        Administrator to operate in multistates and require that CDCs 
        use excess funds for local economic development projects in the 
        area of operations where such funds were generated and submit 
        an annual report to the Administrator of such projects in each 
        State of operation;
            (7) to provide small businesses which need both long-term 
        fixed asset financing through the 504 Loan Program and shorter 
        term working capital and equipment financing through the 7(a) 
        loan program the option of utilizing both Administration loan 
        guaranty programs to their maximum amount;
            (8) to direct the Administration to require that 504 
        defaulted loan liquidations and recoveries be processed by CDCs 
        or their designated third-party contractors, and that CDCs be 
        compensated for the cost of such liquidation activities; and
            (9) to direct the Administration to establish an incentive 
        program directed to CDCs that foreclose and liquidate defaulted 
        loans.

SEC. 3. AUTHORIZATIONS FOR 504 LOAN PROGRAM.

    Section 20 of the Small Business Act (20 U.S.C. 631 note) is 
amended by adding at the end the following:
    ``(f) Fiscal Year 2007.--For the program authorized under section 
7(a)(13) and the 504 Loan Program, 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 are necessary to carry 
out such programs.
    ``(g) Fiscal Year 2008.--For the program authorized under section 
7(a)(13) and the 504 Loan Program, the Administrator is authorized to 
make $9,500,000,000 in financings, and there are authorized to be 
appropriated to the Administrator such sums as are necessary to carry 
out such programs.
    ``(h) Fiscal Year 2009.--For the program authorized under section 
7(a)(13) and the 504 Loan Program, the Administrator is authorized to 
make $10,500,000,000 in financings, and there are authorized to be 
appropriated to the Administrator such sums as are necessary to carry 
out such programs.''.

SEC. 4. CERTIFIED DEVELOPMENT COMPANY ECONOMIC DEVELOPMENT.

    Section 504 of the Small Business Investment Act of 1958 (15 U.S.C. 
697a) is amended--
            (1) by striking the section heading and inserting the 
        following: ``private debenture sales and program name'';
            (2) by redesignating subsections (a) and (b) as subsections 
        (b) and (c), respectively; and
            (3) by inserting before subsection (b) the following:
    ``(a) Program Name.--The program to provide financing to small 
business concerns by guarantees of loans under this title, which are 
funded by debentures guaranteed by the Administrator shall be known as 
the `Certified Development Company Economic Development Loan Program' 
or the `504 Loan Program'.''.

SEC. 5. DEFINITIONS.

    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 which the Administrator has determined 
        meets the criteria of section 506.''.

SEC. 6. ELIGIBILITY OF DEVELOPMENT COMPANIES TO BE DESIGNATED AS 
              CERTIFIED DEVELOPMENT COMPANIES; AUTHORITY TO ISSUE 
              DEBENTURES; PROVIDING AN AREA OF OPERATIONAL AUTHORITY, 
              FUNDING RESTRICTIONS, AND ETHICAL REQUIREMENTS.

    Section 506 of the Small Business Investment Act of 1958 (15 U.S.C. 
697c) is amended to read as follows:

``SEC. 506. CERTIFIED DEVELOPMENT COMPANIES.

    ``(a) Authority to Issue Debentures.--A development company may 
issue debentures under this title if the Administrator certifies that 
the company meets the following criteria:
            ``(1) Size.--
                    ``(A) In general.--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) Exception.--Any development company that was 
                certified by the Administrator prior to December 31, 
                2005, may continue to issue debentures under this 
                title.
            ``(2) Purpose.--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) Primary function.--A primary function of the 
        development company shall be to accomplish its purpose by 
        providing long term financing to small business concerns under 
        the 504 Loan Program. The development company may also provide 
        or support other local economic development activities to 
        assist the community.
            ``(4) Nonprofit status.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the development company shall be a 
                nonprofit corporation.
                    ``(B) Exception.--A development company certified 
                by the Administrator prior to January 1, 1987, may 
                continue to issue debentures under this title and 
                retain its status as a for-profit enterprise.
            ``(5) Good standing.--The development company 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 company.--There shall--
                    ``(A) be not fewer than 25 members of the 
                development company (or owners or stockholders, if the 
                corporation is a for-profit entity)--
                            ``(i) none of whom may own or control more 
                        than 10 percent of the voting membership of the 
                        company; and
                            ``(ii) all of whom shall be residents of 
                        the area of operations of the development 
                        company, as specified by the Administrator 
                        under subsection (b); and
                    ``(B) be at least 1 member of the development 
                company from each of--
                            ``(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; and
                            ``(iv) businesses.
            ``(7) Board of directors.--
                    ``(A) In general.--The development company shall 
                have a board of directors.
                    ``(B) Members of board.--Each member of the board 
                of directors of the development company shall be--
                            ``(i) a member of the development company;
                            ``(ii) elected by the members of the 
                        development company; and
                            ``(iii) a resident of the area of 
                        operations of the development company, as 
                        specified by the Administrator under subsection 
                        (b).
                    ``(C) Representation of organizations and 
                institutions.--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.
                    ``(D) Meetings.--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) In general.--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 
                504 Loan Program and handle all aspects of loan 
                approval and servicing, including liquidation, if 
                appropriate.
                    ``(B) Independence.--Except as provided in 
                subparagraph (C), the development company shall be 
                independently managed and operated to pursue the 
                economic development mission of the company and shall 
                employ its chief executive officer directly.
                    ``(C) Exceptions.--
                            ``(i) Affiliation.--A development company 
                        may be an affiliate of another local nonprofit 
                        service corporation (other than a development 
                        company) whose mission is to support economic 
                        development in the area in which the 
                        development company operates.
                            ``(ii) Members of board.--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 boards of directors.
                            ``(iii) Staffing.--Except as provided in 
                        clause (iv), a development company may satisfy 
                        the requirement for full-time professional 
                        staff under subparagraph (A) by contracting for 
                        the required staffing with an entity with which 
                        the development company is affiliated, 
                        including--
                                    ``(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 Administrator.
                            ``(iv) Rural areas.--A development company 
                        located in a rural area, as defined in section 
                        501(f), may satisfy the requirements of a full-
                        time professional staff and professional 
                        management ability under subparagraph (A) by 
                        contracting with another certified development 
                        company that has such staff and management 
                        ability and is located in the same general area 
                        in which the development company is located.
                            ``(v) For-profit companies.--A development 
                        company that was certified by the Administrator 
                        prior to January 1, 2006, and that has 
                        contracted with a for-profit company to provide 
                        professional staff as of such date may continue 
                        to contract for staffing with a for-profit 
                        company.
    ``(b) Area of Operations.--
            ``(1) In general.--The Administrator shall specify the area 
        in which an applicant is certified to provide assistance to 
        small business concerns under this title.
            ``(2) Initial area.--The Administrator shall not authorize 
        an applicant to provide assistance under paragraph (1) outside 
        of the State of incorporation of the development company when 
        first authorizing an applicant to provide assistance under this 
        title, unless it proposes to operate in a local economic area 
        under subsection (c).
    ``(c) Local Economic Area Requirement and Exemption.--
            ``(1) Definition.--In this subsection, the term `local 
        economic area' means an area, as determined by the 
        Administrator, that--
                    ``(A) is in a State other than the State in which a 
                development company is incorporated;
                    ``(B) shares a border with the area of operations 
                of the development company; and
                    ``(C) is a part of a local trade area (including a 
                city that is bisected by a State line and a 
                metropolitan statistical area that is bisected by a 
                State line) that is contiguous to the area of 
                operations of the development company.
            ``(2) Exemption.--An applicant operating in a local 
        economic area shall not be deemed to be operating in a 
        multistate area, and shall not be required to comply with the 
        requirements of multistate operation.
    ``(d) Multistate Operation.--After a development company has 
demonstrated its ability to provide financial assistance in its area of 
operations, it may request the Administrator to authorize the 
development company to operate as a multistate certified development 
company and to finance small business concerns under this title in a 
State other than the State in which the development company is 
incorporated, if --
            ``(1) such State is contiguous to the State in which the 
        development company is incorporated, except that the States of 
        Alaska and Hawaii shall be deemed to be contiguous to any State 
        abutting the Pacific ocean;
            ``(2) the development company demonstrates its proficiency 
        in making and servicing loans under the 504 Loan Program by--
                    ``(A) requesting and receiving designation as an 
                accredited lender under section 507 or a premier 
                certified lender under section 508; and
                    ``(B) meeting or exceeding performance standards 
                established by the Administrator;
            ``(3) the development company adds additional members of 
        the development company from such State that--
                    ``(A) meet the requirements of subsection (a)(6); 
                and
                    ``(B) are residents of such State;
            ``(4) the development company adds at least 1 member to its 
        board of directors from such State; and
            ``(5) the development company meets such other criteria or 
        comply with such conditions as the Administrator may require.
    ``(e) Processing of Expansion Applications.--Not later than 30 days 
after the date of receipt of an application under subsection (d), the 
Administrator shall determine whether the development company meets the 
requirements of subsection (d) and accept or reject the request of a 
development company for approval as a multistate company in writing.
    ``(f) Use of Excess Funds.--Any funds generated by a development 
company from making 504 loans which remain after payment of staff, 
operating and overhead expenses shall be retained by the development 
company as a reserve for--
            ``(1) future operations;
            ``(2) expanding the area in which the certified development 
        company operates or proposes to operate as a multistate 
        development company under subsection (d); or
            ``(3) investment in other local community or economic 
        development activity in the State from which such funds were 
        generated or in a local economic area which includes part of 
        the State of incorporation.
    ``(g) Ethical Requirements.--
            ``(1) Definitions.--In this subsection--
                    ``(A) the term `close relative' means a spouse, 
                parent, child, sibling, or the spouse of a parent, 
                child, or sibling; and
                    ``(B) the term `position of control' means an 
                officer, member of the board of directors, manager, 
                chief executive officer, agent involved in the loan 
                process, key employee or similar management position of 
                a certified development company and, if the development 
                company is a for-profit entity, a holder of 20 percent 
                or more of the value of the stock of the certified 
                development.
            ``(2) Conflict of interest.--A certified development 
        company, and the officers, employees, and other staff of a 
        certified development company, shall at all times act ethically 
        and avoid activities which constitute a conflict of interest or 
        appear to constitute a conflict of interest.
            ``(3) Control of multiple companies.--
                    ``(A) In general.--No person, either directly or 
                indirectly, may hold a position of control on more than 
                1 certified development company.
                    ``(B) Relatives.--No close relative of an 
                individual who holds a position of control in a 
                certified development company may hold a position of 
                control in a certified development company, except for 
                the certified development company in which the 
                individual serves.
            ``(4) Prohibited conflict in project loans.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), no certified development company 
                may--
                            ``(i) recommend or approve a guarantee of a 
                        debenture by the Administrator as part of a 
                        project under the 504 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 directly or 
                        indirectly provides financing collateralized by 
                        a first lien on the same property.
                    ``(B) Exception.--A business development company 
                that was participating as a first mortgage lender under 
                the 504 Loan Program in fiscal year 2004 or 2005, 
                either directly or through an affiliate, may continue 
                to do so.
            ``(5) Other economic development activities.--
                    ``(A) Multiple programs.--Operation of multiple 
                programs to assist small business concerns in order for 
                a certified development company to carry out its 
                economic development mission shall not be deemed a 
                conflict of interest for purposes of this section.
                    ``(B) Other sources of funding.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), and notwithstanding any other 
                        provision of law, no certified development 
                        company may accept funding from any source, 
                        including any department or agency of the 
                        Federal Government--
                                    ``(I) if such funding includes any 
                                conditions, priorities or restrictions 
                                upon the types of small business 
                                concerns to which the certified 
                                development company may provide 
                                financial assistance under this title; 
                                or
                                    ``(II) if such funding includes any 
                                conditions or imposes any requirements, 
                                directly or indirectly, upon any 
                                recipient of assistance under this 
                                title.
                            ``(ii) Exception.--Clause (i) shall not 
                        apply if the source of funding described in 
                        clause (i) provides all of the financial 
                        assistance to be delivered by the certified 
                        development company to the small business 
                        concern and such conditions, priorities, or 
                        restrictions are limited solely to the 
                        financial assistance so provided.
    ``(h) Reporting.--A certified development company shall submit an 
annual report to the Administration regarding--
            ``(1) the use of excess funds by the company under 
        subsection (f); and
            ``(2) the involvement of the company with local economic 
        development activities in every State in which the certified 
        development company operates.''.

SEC. 7. CONFORMING AMENDMENTS.

    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.''.

SEC. 8. DEFINITION OF RURAL AREAS.

    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 section, the terms `rural' and `rural area' 
include any area other than--
            ``(1) a city or town that has a population greater than 
        50,000 inhabitants; and
            ``(2) the urbanized area contiguous and adjacent to such a 
        city or town.''.

SEC. 9. BUSINESSES IN LOW-INCOME AREAS.

    Section 501(d)(3) of the Small Business Investment Act of 1958 (15 
U.S.C. 695(d)(3)) is amended--
            (1) in subparagraph (G), by striking ``or'' at the end;
            (2) in subparagraph (H), by striking the period at the end 
        and inserting ``, or''; and
            (3) by adding at the end the following:
                    ``(I) expansion of businesses in low-income 
                communities (defined as any area which would be 
                eligible for new markets tax credits under section 
                45D(a) of the Internal Revenue Code of 1986, or 
                regulations issued thereunder).''.

SEC. 10. COMBINATIONS OF CERTAIN GOALS.

    Section 501(d) of the Small Business Investment Act of 1958 (15 
U.S.C. 695(d)) is amended by inserting before the undesignated matter 
at the end the following:
            ``(4) A small business concern which is owned by more than 
        1 individual, or a corporation whose stock is owned by more 
        than 1 individual, shall be deemed to have achieved a public 
        policy goal under paragraph (3) if not less than 51 percent of 
        the small business concern is owned by individuals who are in 1 
        or a combination of the groups described as public policy goals 
        in subparagraph (C) and (E) of paragraph (3).''.

SEC. 11. REPEAL OF SUNSET ON RESERVE REQUIREMENTS FOR PREMIER CERTIFIED 
              LENDERS.

    Section 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 subparagraph 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 the enactment of this subparagraph, the'' and 
        inserting ``The''.

SEC. 12. REFINANCING.

    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) In general.--Any financing approved under 
                this title may also include a limited amount of debt 
                refinancing, as described in subparagraph (B).
                    ``(B) Expansions.--If the project for which a 
                financing under this title is sought involves the 
                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, if--
                            ``(i) the existing indebtedness was not 
                        financed under the 504 Loan Program or under 
                        section 7(a) of the Small Business Act;
                            ``(ii) the proceeds of the indebtedness 
                        were used to acquire land, including a building 
                        situated thereon, to construct a building 
                        thereon or to purchase equipment;
                            ``(iii) the borrower has been current on 
                        all payments due on the existing debt for the 
                        1-year period prior to the date on which the 
                        application is submitted; and
                            ``(iv) the financing under the 504 Loan 
                        Program will provide better terms or rate of 
                        interest than exists on the existing debt.''.

SEC. 13. FEES.

    (a) In General.--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 ``0.155 percent''.
    (b) Reporting.--Not later than 2 years after the effective date 
under subsection (c), the Administrator shall submit to the Committee 
on Small Business and Entrepreneurship of the Senate and the Committee 
on Small Business of the House of Representatives a report assessing 
the impact of the change in fees under subsection (a)(3) in fostering 
economic development.
    (c) Effective Date.--The amendments made by subsection (a) shall 
take effect and apply to loans approved under the 504 Loan Program, on 
or after the date that is 30 days after the date of enactment of this 
Act.
    (d) Recomputation.--Notwithstanding any other provision of law, the 
Administrator shall recalculate the amount of the fee to be paid by a 
borrower under section 503(b)(7) of the Small Business Investment Act 
of 1958 (15 U.S.C. 697(b)(7)) such that the cost of making guarantees 
under the 504 Loan Program is zero after the effective date under 
subsection (c).

SEC. 14. ADDITIONAL EQUITY INJECTIONS.

    Section 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 institutions.--If a 
                        small business concern that is required to 
                        provide a contribution under clause (i), (ii) 
                        or (iii) of subparagraph (C)--
                                    ``(I) provides the minimum amount 
                                required under such subparagraph, not 
                                less than 50 percent of the total cost 
                                of the project shall come from 
                                financing provided by an institution 
                                described in subclause (I), (II), or 
                                (III) of clause (i) of this 
                                subparagraph; or
                                    ``(II) provides more than the 
                                minimum amount required under such 
                                subparagraph, any contribution in 
                                excess of such minimum amount may be 
                                used to reduce the amount required from 
                                an institution described in subclause 
                                (I), (II), or (III) of clause (i) of 
                                this subparagraph, except that the 
                                amount from such institution may not be 
                                reduced to an amount equal to or less 
                                than the amount of the loan made by the 
                                Administrator.''.

SEC. 15. LOAN LIQUIDATIONS.

    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) Participation.--
            ``(1) Mandatory.--
                    ``(A) In general.--Any certified development 
                company that elects not to apply for authority to 
                foreclose and liquidate defaulted loans under this 
                section, or that the Administrator determines to be 
                ineligible for such authority, shall contract with a 
                third-party to perform foreclosure and liquidation of 
                defaulted loans in its portfolio.
                    ``(B) Approval of qualifications and terms.--A 
                contract under subparagraph (A) shall be contingent 
                upon approval by the Administrator of the 
                qualifications of the contractor and the terms and 
                conditions of liquidation activities.
            ``(2) Commencement.--This subsection shall not require any 
        certified development company to liquidate defaulted loans 
        until after the date on which the Administrator implements a 
        program to compensate and reimburse certified development 
        companies under subsection (f).
    ``(f) Compensation and Reimbursement.--
            ``(1) Reimbursement of expenses.--The Administrator shall 
        reimburse each certified development company for all expenses 
        paid by such company as part of 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 certified development 
                company on an emergency basis without prior approval 
                from the Administrator, if the Administrator determines 
                that the expenses were reasonable and appropriate.
            ``(2) Compensation for results.--The Administrator shall 
        develop a schedule to compensate and provide an incentive to 
        certified development companies that foreclose and liquidate 
        defaulted loans, which schedule shall--
                    ``(A) be based on a percentage of the net amount 
                recovered;
                    ``(B) not exceed a maximum amount; and
                    ``(C) not apply to any foreclosure which is 
                conducted under a contract between a development 
                company and a qualified third-party to perform the 
                foreclosure and liquidation.''.

SEC. 16. CLOSING COSTS.

    Section 503(b)(4) of the Small Business Investment Act of 1958 (15 
U.S.C. 697(b)(4)) is amended to read as follows:
            ``(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;''.

SEC. 17. MAXIMUM 504 AND 7(A) LOAN ELIGIBILITY.

    Section 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) Combination financing.--Financing under the 
                504 Loan Program 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, up to the maximum 
                amount provided in section 7(a)(3)(A) of such Act.''.

SEC. 18. TECHNICAL CORRECTION.

    Section 501(e)(2) of the Small Business Investment Act of 1958 (15 
U.S.C. 695(e)(2)) is amended by striking ``outstanding''.

SEC. 19. PREMIER CERTIFIED LENDERS PROGRAM REPORT.

    (a) In General.--Not later than 90 days after the date of enactment 
of this Act, the Administrator shall submit to the Committee on Small 
Business and Entrepreneurship of the Senate and the Committee on Small 
Business of the House of Representatives a report regarding the 
operation of the Premier Certified Lenders Program, during the 3-year 
period ending on the date of enactment of this Act.
    (b) Contents.--The report submitted under subsection (a) shall--
            (1) include the number of loans made under the Premier 
        Certified Lenders Program;
            (2) describe any difficulties encountered in making such 
        loans; and
            (3) make recommendations, if any, regarding how to increase 
        the number of loans made under the Premier Certified Lenders 
        Program or streamline such program.

SEC. 20. REGULATIONS.

    The Administrator shall--
            (1) publish proposed regulations 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 regulations in final form not later than 
        120 days after the date on which proposed regulations are 
        published under paragraph (1).
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