1.
This Act may be cited as the
Small Business Intermediary Lending
Pilot Program Act of 2005
.
2.
Congress finds the
following:
(1)
Small and emerging businesses, particularly startups and
businesses that lack sufficient or conventional collateral, continue to face
barriers accessing midsized loans in amounts between $35,000 and $200,000, with
affordable terms and conditions.
(2)
Consolidation in the banking industry has resulted in a decrease
in the number of small, locally controlled banks with not more than
$100,000,000 in assets and has changed the method by which banks make small
business credit decisions with—
(A)
credit scoring techniques replacing relationship-based lending,
which often works to the disadvantage of small or startup businesses that do
not conform with a bank's standardized credit formulas; and
(B)
less flexible terms and conditions, which are often necessary for
small and emerging businesses.
(3)
In the environment described in paragraphs (1) and (2), nonprofit
intermediary lenders, including community development corporations, provide
financial resources that supplement the small business lending and investments
of a bank by—
(A)
providing riskier, up front, or subordinated capital;
(B)
offering flexible terms and underwriting procedures; and
(C)
providing technical assistance to businesses in order to reduce
the transaction costs and risk exposure of banks.
(4)
Several Federal programs, including the Microloan Program under
section 7(m) of the Small Business Act
(15 U.S.C. 636(m)) and the Intermediary Relending Program of the Department of
Agriculture, have demonstrated the effectiveness of working through nonprofit
intermediaries to address the needs of small business concerns that are unable
to access capital through conventional sources.
(5)
More than 1,000 nonprofit intermediary lenders in the United
States are—
(A)
successfully providing financial and technical assistance to
small and emerging businesses;
(B)
working with banks and other lenders to leverage additional
capital for their business borrowers; and
(C)
creating employment opportunities for low income individuals
through their lending and business development activities.
3.
Small business intermediary lending pilot program
(a)
Section 7 of the Small Business
Act (15 U.S.C. 636) is amended by inserting after subsection (k) the
following:
(l)
Small business intermediary lending program
(1)
For purposes of this subsection—
(A)
the term intermediary means a private, nonprofit
entity that seeks to borrow, or has borrowed, funds from the Administration to
provide midsize loans to small business concerns under this subsection,
including—
(i)
a private, nonprofit community development corporation;
(ii)
a consortium of private, nonprofit organizations or nonprofit
community development corporations;
(iii)
a quasi-governmental economic development entity (such as a
planning and development district), other than a State, county, or municipal
government; and
(iv)
an agency of or nonprofit entity established by a Native
American Tribal Government; and
(B)
the term midsize loan means a fixed rate loan of
not less than $35,000 and not more than $200,000, made by an intermediary to a
startup, newly established, or growing small business concern.
(2)
There is established a 3-year small business intermediary
lending pilot program (referred to in this section as the
Program
), under which the Administration may provide direct
loans to eligible intermediaries, for the purpose of making fixed interest rate
midsize loans to startup, newly established, and growing small business
concerns.
(3)
The purposes of the small business intermediary lender pilot
program are—
(A)
to assist small business concerns in those areas suffering from
a lack of credit due to poor economic conditions;
(B)
to create employment opportunities for low income
individuals;
(C)
to establish a midsize loan program to be administered by the
Administration to provide loans to eligible intermediaries to enable such
intermediaries to provide small scale loans, particularly loans in amounts
averaging not more than $150,000, to startup, newly established, or growing
small business concerns for working capital or the acquisition of materials,
supplies, or equipment;
(D)
to test the effectiveness of nonprofit intermediaries—
(i)
as a delivery system for a midsize loan program; and
(ii)
in addressing the credit needs of small businesses and
leveraging other sources of credit; and
(E)
to determine the advisability and feasibility of implementing a
midsize loan program nationwide.
(4)
Eligibility for participation
An intermediary shall be eligible to receive loans under the
Program if the intermediary has at least 1 year of experience making loans to
startup, newly established, or growing small business concerns.
(5)
(A)
Each intermediary desiring a loan under this subsection shall
submit an application to the Administration that describes—
(i)
the type of small business concerns to be assisted;
(ii)
the size and range of loans to be made;
(iii)
the geographic area to be served and its economic, poverty, and
unemployment characteristics;
(iv)
the status of small business concerns in the area to be served
and an analysis of the availability of credit; and
(v)
the qualifications of the applicant to carry out this
subsection.
(B)
Notwithstanding subsection (a)(3), no loan may be made to an
intermediary under this subsection if the total amount outstanding and
committed to the intermediary from the business loan and investment fund
established by this Act would, as a result of such loan, exceed $1,000,000
during the participation of the intermediary in the Program.
(C)
Loans made by the Administration under this subsection shall be
for a maximum term of 20 years.
(D)
Applicable interest rates
Loans made by the Administration to an intermediary under the
Program shall bear an annual interest rate equal to 1.00 percent.
(E)
The Administration may not charge any fees or require
collateral with respect to any loan made to an intermediary under this
subsection.
(F)
Any loan to a small business concern under this subsection
shall not exceed 75 percent of the total cost of the project funded by such
loan, with the remaining funds being leveraged from other sources,
including—
(i)
banks or credit unions;
(ii)
community development financial institutions; and
(iii)
other sources with funds available to the intermediary
lender.
(G)
The Administration shall not require the repayment of principal
or interest on a loan made to an intermediary under the Program during the
first 2 years of the loan.
(6)
Program funding for midsize loans
(A)
Under the Program, the Administration may provide loans, on a
competitive basis, to not more than 20 intermediaries.
(B)
Equitable distribution of intermediaries
The Administration shall select and provide funding under the
Program to such intermediaries as will ensure geographic diversity and
representation of urban and rural communities.
(7)
(A)
Not later than 30 months after the date of enactment of the
Small Business Intermediary Lending Pilot Program Act of 2005, the
Administration shall submit a report containing an evaluation of the
effectiveness of the Program to—
(i)
the Committee on Small Business and Entrepreneurship of the
Senate; and
(ii)
the Committee on Small Business of the House of
Representatives.
(B)
Not later than 12 months after the date of enactment of the
Small Business Intermediary Lending Pilot Program Act of 2005, and annually
thereafter, the Administration shall submit a report containing an evaluation
of the effectiveness of the Program to the Committees described in subparagraph
(A).
(C)
The reports submitted under subparagraphs (A) and (B) shall
include—
(i)
the numbers and locations of the intermediaries receiving funds
to provide midsize loans;
(ii)
the amounts of each loan to an intermediary;
(iii)
the numbers and amounts of midsize loans made by intermediaries
to small business concerns;
(iv)
the repayment history of each intermediary;
(v)
a description of the loan portfolio of each intermediary,
including the extent to which it provides midsize loans to small business
concerns in rural and economically depressed areas;
(vi)
an estimate of the number of low income individuals who have
been employed as a direct result of the Program; and
(vii)
any recommendations for legislative changes that would improve
the operation of the Program.
.
(b)
Not later than 180 days after the date of enactment of this Act,
the Administrator shall issue regulations to carry out the amendment made by
section 7(l) of the Small Business Act, as added by subsection (a).
(c)
Authorization of appropriations
(1)
There are authorized to be appropriated to the Small Business
Administration such sums as may be necessary for each of the fiscal years 2006
through 2008 to provide $20,000,000 in loans under section 7(l) of the
Small Business Act, as added by
subsection (a).
(2)
Any amounts appropriated pursuant to paragraph (1) shall remain
available until expended.