110 HR 7175 IH: Small Business Financing
U.S. House of Representatives
2008-09-27
text/xml
EN
Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
1.Short title; table of
contents
(a)This Act may be cited
as the Small Business Financing
Improvements Act of 2008
.
(b)
Sec. 1. Short title; table of contents.
Title I—7(a) loan
program
Sec. 101. Loan pooling.
Sec. 102. Alternative size standard.
Title II—504 CDC program
Sec. 201. Definitions.
Sec. 202. Eligibility of development companies to be designated
as certified development companies.
Sec. 203. Definition of rural areas.
Sec. 204. Businesses in low-income areas.
Sec. 205. Combinations of certain goals.
Sec. 206. Refinancing.
Sec. 207. Additional equity injections.
Sec. 208. Loan liquidations.
Sec. 209. Closing costs.
Sec. 210. Uniform leasing policy.
Title III—Small Business Investment Company Program
Sec. 301. Simplified maximum leverage limits.
Sec. 302. Simplified aggregate investment
limitations.
<enum>I</enum><header>7<enum-in-header>(a)</enum-in-header>
loan program</header>
<section id="HA841D464C9A44DBA8800C4CAF43C7CA1"><enum>101.</enum><header>Loan
pooling</header><text display-inline="no-display-inline">Section 5(g)(1) of the
Small Business Act (<external-xref legal-doc="usc" parsable-cite="usc/15/634">15 U.S.C. 634(g)(1)</external-xref>) is amended—</text>
<paragraph id="H9796D013F2FD43CAB07D06533449B4FE"><enum>(1)</enum><text>by inserting
<quote>(A)</quote> before <quote>The Administration</quote>;</text>
</paragraph><paragraph id="HBB06F7A1146D4346A95E56DD81A798D7"><enum>(2)</enum><text>by striking the
colon and all that follows and inserting a period; and</text>
</paragraph><paragraph id="H2AF5666F695248CAAB33F0DB7475FB67"><enum>(3)</enum><text>by adding at the
end the following:</text>
<quoted-block display-inline="no-display-inline" id="HA7F45BB8FED1407196173492B73343A2" style="OLC">
<subparagraph id="H7848AE78F83941FB87B762134D1CEBE5" indent="up2"><enum>(B)</enum><text display-inline="yes-display-inline">A
trust certificate issued under subparagraph (A) shall be based on, and backed
by, a trust or pool approved by the Administrator and composed solely of the
guaranteed portion of such loans.</text>
</subparagraph><subparagraph id="HAB63F807EFB4400789C6FC41F73B92D" indent="up2"><enum>(C)</enum><text>The interest rate on a trust
certificate issued under subparagraph (A) shall be either—</text>
<clause id="H3AEE9BA35D0A4B190000ACCDF3E057D8"><enum>(i)</enum><text>the lowest interest rate on any
individual loan in the pool; or</text>
</clause><clause id="H1DF1A74E547E4CF58F2BE901C6381578"><enum>(ii)</enum><text>the weighted average interest rate of
all loans in the pool, subject to such limited variations in loan
characteristics as the Administrator determines appropriate to enhance
marketability of the pool
certificates.</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></section><section id="H91603D93BB9F4E7CA2318235AE48A058"><enum>102.</enum><header>Alternative
size standard</header><text display-inline="no-display-inline">Section 3(a) of
the Small Business Act (<external-xref legal-doc="usc" parsable-cite="usc/15/632">15 U.S.C. 632(a)</external-xref>) is amended by adding at the end the
following:</text>
<quoted-block display-inline="no-display-inline" id="H4E12201816374CFA94AA4ED8339DBE98" style="OLC">
<paragraph id="H2EDBF6B6BCBA4362942D8738A6006700"><enum>(5)</enum><header>Optional size
standard</header>
<subparagraph id="H9FBE037C607C4DFCA92C4B99323F35BF"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">The Administrator
shall establish 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 uses maximum tangible net worth and
average net income as an alternative to the use of industry standards.</text>
</subparagraph><subparagraph id="H37D09FC52F1A438BA0EBBEEEEBB02F3"><enum>(B)</enum><header>Interim
rule</header><text>Until the date on which the optional size standards
established under subparagraph (A) are in effect, the alternative size standard
in <external-xref legal-doc="regulation" parsable-cite="cfr/13/121.301">section 121.301(b)</external-xref> of title 13, Code of Federal Regulations, or any
successor thereto, may be used by business loan applicants under section 7(a)
and development company loan applicants under title V of the Small Business
Investment Act of
1958.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</section><enum>II</enum><header>504
CDC program</header>
<section id="H483D1489AE2241248500A0C1E67996FE"><enum>201.</enum><header>Definitions</header><text display-inline="no-display-inline">Section 103(6) of the Small Business
Investment Act of 1958 (<external-xref legal-doc="usc" parsable-cite="usc/15/662">15 U.S.C. 662(6)</external-xref>) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HDFD02F77DF17460998376C2CCA23E1AD" style="OLC">
<paragraph id="H23984D0D2D8F412FAED622671137C077"><enum>(6)</enum><text display-inline="yes-display-inline">the term <term>development company</term>
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 Administration, and the term
<term>certified development company</term> means a development company which
the Administration has determined meets the criteria of section
506;</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="HBF7FB1886C274A89A4E73078019646D7"><enum>202.</enum><header>Eligibility of
development companies to be designated as certified development
companies</header><text display-inline="no-display-inline">Section 506 of the
Small Business Investment Act of 1958 (<external-xref legal-doc="usc" parsable-cite="usc/15/697c">15 U.S.C. 697c</external-xref>) is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="H7C2089E635EA48FBA53EE0ACE3FABB3" style="OLC">
<section id="H3BC6DCAFF2AD483B006010006D988DC6"><enum>506.</enum><header>Certified
Development Companies</header>
<subsection id="H1E0A639EFD874BB10027A3E025ABE649"><enum>(a)</enum><header>Authority To
issue debentures</header><text display-inline="yes-display-inline">A
development company may issue debentures pursuant to this Act if the
Administration certifies that the company meets the following criteria:</text>
<paragraph id="HB6496C76C69F441CBE5250D21DA7734"><enum>(1)</enum><header>Size</header><text>The
development company is required to be a small concern with fewer than 500
employees and not under the control of any entity which does not meet the
Administration’s size standards as a small business, except that any
development company which was certified by the Administration prior to December
31, 2005 may continue to issue debentures.</text>
</paragraph><paragraph id="HB0087F95949D45B4B96EDF6BCAF7F6AB"><enum>(2)</enum><header>Purpose</header><text>The
primary purpose of the development company is to benefit the community by
fostering economic development to create and preserve jobs and stimulate
private investment.</text>
</paragraph><paragraph id="H74D68124072F4284AEF6F9002C2466F5"><enum>(3)</enum><header>Primary
function</header><text display-inline="yes-display-inline">The primary function
of the development company is to accomplish its purpose by providing long-term
financing to small businesses by the utilization of the Certified Development
Company Economic Development Loan Program. It may also provide or support such
other local economic development activities to assist the community.</text>
</paragraph><paragraph id="H74CDE73A5036499196009F2C079EAB18"><enum>(4)</enum><header>Non-profit
status</header><text>The development company is a non-profit corporation,
except that a development company certified by the Administration prior to
January 1, 1987, may retain its status as a for-profit corporation.</text>
</paragraph><paragraph id="H4B0154488FF1402A8FB22E93F52D4827"><enum>(5)</enum><header>Good
standing</header><text>The development company is in good standing in its State
of incorporation and in any other State in which it conducts business, and is
in compliance with all laws, including taxation requirements, in its State of
incorporation and in any other State in which it conducts business.</text>
</paragraph><paragraph id="HC688B72124E945C1B796C0B3EE12E0DA"><enum>(6)</enum><header>Membership</header><text>The
development company should have at least 25 members (or stockholders if the
corporation is a for-profit entity), none of whom may own or control more than
20 percent of the company's voting membership, consisting of representation
from each of the following groups (none of which are in a position to control
the development company):</text>
<subparagraph id="HE90FF26084644419B1E935F7EB8915C"><enum>(A)</enum><text>Government
organizations that are responsible for economic development.</text>
</subparagraph><subparagraph id="H0748E1F57B174CFBA4696FD700A1F9EF"><enum>(B)</enum><text>Financial
institutions that provide commercial long-term fixed asset financing.</text>
</subparagraph><subparagraph id="HA6DA3A7300B947B399B7E607EA517D1C"><enum>(C)</enum><text>Community
organizations that are dedicated to economic development.</text>
</subparagraph><subparagraph id="HFBE0AE8D4BF34647BECB0D1F026C62B"><enum>(D)</enum><text>Businesses.</text>
</subparagraph></paragraph><paragraph id="H0C221C1F63A14B57AA09872D90DE02CA"><enum>(7)</enum><header>Board of
directors</header><text>The development company has a board of directors
that—</text>
<subparagraph id="HDBF809729EB3498EA5F24702B005EC2"><enum>(A)</enum><text>is elected from the
membership by the members;</text>
</subparagraph><subparagraph id="H04E5F12A10314768B06CC8A2C9D8F57F"><enum>(B)</enum><text>should represent
at least 3 of the 4 groups enumerated in subsection (a)(6) with no group is in
a position to control the company; and</text>
</subparagraph><subparagraph id="HD28E4388B6D74A7284F337CF36CACE84"><enum>(C)</enum><text>meets on a regular
basis to make policy decisions for such company.</text>
</subparagraph></paragraph><paragraph id="HAFF1AE78F83049F4A63BDEC4088768D4"><enum>(8)</enum><header>Professional
management and staff</header><text display-inline="yes-display-inline">The
development company has full-time professional management, including a chief
executive officer to manage daily operations, and a full-time professional
staff qualified to market the Certified Development Company Economic
Development Loan Program and handle all aspects of loan approval and servicing,
including liquidation, if appropriate. The development company is required to
be independently managed and operated to pursue its economic development
mission and to employ its chief executive officer directly, with the following
exceptions:</text>
<subparagraph id="H7658359832734972BDCD99D18F45A2AE"><enum>(A)</enum><text>A development
company may be an affiliate of another local non-profit service corporation
(specifically excluding another development company) whose mission is to
support economic development in the area in which the development company
operates. In such a case:</text>
<clause id="HA50F74206AE448829BDD5E001F812F38"><enum>(i)</enum><text>The development
company may satisfy the requirement for full-time professional staff by
contracting with a local non-profit service corporation (or one of its
non-profit affiliates), or a governmental or quasi-governmental agency, to
provide the required staffing.</text>
</clause><clause id="H1AF6FF373FCC4934B000B2C900009C06"><enum>(ii)</enum><text>The development
company and the local non-profit service corporation may have partially common
boards of directors.</text>
</clause></subparagraph><subparagraph id="HB2DB9E29ED324D04832CA35E7D5142DC"><enum>(B)</enum><text>A development
company in a rural area (as defined in section 501(f)) shall be deemed to have
satisfied the requirements of a full-time professional staff and professional
management ability if it contracts with another certified development company
which has such staff and management ability and which is located in the same
general area to provide such services.</text>
</subparagraph><subparagraph id="H18006684C01E413EA100E95259D61935"><enum>(C)</enum><text>A development
company that has been certified by the Administration as of December 31, 2005,
and that has contracted with a for-profit company to provide services as of
such date may continue to do so.</text>
</subparagraph></paragraph></subsection><subsection id="H87A902EE08D44F80B46D12C61525F8D9"><enum>(b)</enum><header>Area of
operations</header><text>The Administration shall specify the area in which an
applicant is certified to provide assistance to small businesses under this
title, which may not initially exceed its State of incorporation unless it
proposes to operate in a local economic area which is required to include part
of its State of incorporation and may include adjacent areas within several
States. After a development company has demonstrated its ability to provide
assistance in its area of operations, it may request the Administration to be
allowed to operate in one or more additional States as a multi-State certified
development company if it satisfies the following criteria:</text>
<paragraph id="HC01B70BB27DA48698E00F7CEF91E3CC"><enum>(1)</enum><text>Each additional
State is contiguous to the State of incorporation, except the States of Alaska
and Hawaii shall be deemed to be contiguous to any State abutting the Pacific
ocean.</text>
</paragraph><paragraph id="H0996FA974B9E4C30B0D78C4CEB4FA689"><enum>(2)</enum><text display-inline="yes-display-inline">It demonstrates its proficiency in making
and servicing loans under the Certified Development Company Economic
Development Loan Program by—</text>
<subparagraph id="HEFA4C303329441D7AEDF04E862FEBA72"><enum>(A)</enum><text>requesting and
receiving designation as an accredited lender under section 507 or a premier
certified lender under section 508; and</text>
</subparagraph><subparagraph id="H4C6D0F9DA4E74633834158D3C510A68D"><enum>(B)</enum><text>meeting or
exceeding performance standards established by the Administration.</text>
</subparagraph></paragraph><paragraph id="H814E73D3304747409742961E019BE68B"><enum>(3)</enum><text>The development
company adds to the membership of its State of incorporation additional
membership from each additional State and the added membership meets the
requirements of subsection (a)(6).</text>
</paragraph><paragraph id="H18CDADB2316944DFB3DC607866385206"><enum>(4)</enum><text>The development
company adds at least one member to its board of directors in the State of
incorporation, providing that added member was selected by the membership of
the development company.</text>
</paragraph><paragraph id="HDD8F2140B2B449049FB710E061B4A49E"><enum>(5)</enum><text>The company meets
such other criteria or complies with such conditions as the Administration
deems appropriate.</text>
</paragraph></subsection><subsection id="HEA09E980694049C49C527BC62D4FCC"><enum>(c)</enum><header>Processing of
expansion applications</header><text>The Administration shall respond to the
request of a certified development company for certification as a multi-State
company on an expedited basis within 30 days of receipt of a completed
application if the application demonstrates that the development company meets
the requirements of subsection (b)(1) through (b)(4).</text>
</subsection><subsection id="H36EF5074A0604784AF97420077476D62"><enum>(d)</enum><header>Use of funds
limited to State where generated</header><text display-inline="yes-display-inline">Any funds generated by a not-for-profit
development company from making loans under the Certified Development Company
Economic Development Loan Program which remain after payment of staff,
operating and overhead expenses shall be retained by the development company as
a reserve for future operations, for expanding its area of operations in a
local economic area as authorized by the Administration, or for investment in
other local economic development activity in the State from which the funds
were generated.</text>
</subsection><subsection id="H6BC4E451E02C4771AAEF9230BECD9000"><enum>(e)</enum><header>Ethical
requirements</header>
<paragraph id="H2E53D9DEF54B46A5B27F4989FCA33323"><enum>(1)</enum><header>In
general</header><text>Certified development companies, their officers,
employees and other staff, shall at all times act ethically and avoid
activities which constitute a conflict of interest or appear to constitute a
conflict of interest. No one may serve as an officer, director or chief
executive officer of more than one certified development company.</text>
</paragraph><paragraph id="H61F21A2A84EC405A8EF5AE0077918E5B"><enum>(2)</enum><header>Prohibited
conflict in project loans</header><text display-inline="yes-display-inline">As
part of a project under the Certified Development Company Economic Development
Loan Program, no certified development company may recommend or approve a
guarantee of a debenture by the Administration that is collateralized by a
subordinated lien position on the property being constructed or acquired and
also provide, or be affiliated with a corporation or other entity, for-profit
or non-profit, which provides, financing collateralized by a prior lien on the
same property. Upon approval by the Administrator, a business development
company that was participating as a first mortgage lender, either directly or
through an affiliate, for the Certified Development Company Economic
Development Loan Program in either fiscal years 2004 or 2005 may continue to do
so.</text>
</paragraph><paragraph id="H61C484FFEB704910BBE0152EBF04AE"><enum>(3)</enum><header>Other economic
development activities</header><text>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, but notwithstanding any other provision of law, no development
company may accept funding from any source, including but not limited to any
department or agency of the United States Government—</text>
<subparagraph id="H8F6900B208444BEF91D2E737DF154F37"><enum>(A)</enum><text>if such funding
includes any conditions, priorities or restrictions upon the types of small
businesses to which they may provide financial assistance under this title;
or</text>
</subparagraph><subparagraph id="HD8D18D2E27D54136AF5F00288E4BDFEB"><enum>(B)</enum><text>if it includes any
conditions or imposes any requirements, directly or indirectly, upon any
recipient of assistance under this title unless the department or agency also
provides all of the financial assistance to be delivered by the development
company to the small business and such conditions, priorities or restrictions
are limited solely to the financial assistance so
provided.</text>
</subparagraph></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="HFB09F00FF88B4F78B5A78C58ECE91391"><enum>203.</enum><header>Definition of
rural areas</header><text display-inline="no-display-inline">Section 501 of the
Small Business Investment Act of 1958 (<external-xref legal-doc="usc" parsable-cite="usc/15/695">15 U.S.C. 695</external-xref>) is amended by adding at
the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HDF311BF55C544F3EBCCAE5226B2942DF" style="OLC">
<subsection id="H36921891FFE94F29A885D8309CBC7D83"><enum>(f)</enum><text display-inline="yes-display-inline">As used in subsection (d)(3)(D), the term
<term>rural</term> shall include any area other than—</text>
<paragraph id="H2B62094FB297496B85006E7D1B50E573"><enum>(1)</enum><text>a city or town
that has a population greater than 50,000 inhabitants; and</text>
</paragraph><paragraph id="H4907A149A4AF4F6D86E958C5678F66B3"><enum>(2)</enum><text>the urbanized area
contiguous and adjacent to such a city or
town.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="H72666414D9EB4BC2A7B06D4C6F644D00"><enum>204.</enum><header>Businesses in
low-income areas</header><text display-inline="no-display-inline">Section
501(d)(3) of the Small Business Investment Act of 1958 (<external-xref legal-doc="usc" parsable-cite="usc/15/695">15 U.S.C. 695(d)(3)</external-xref>) is
amended by inserting after <quote>business district revitalization</quote> the
following: <quote>or expansion of businesses in low-income communities that
would be eligible for new market tax credit investments under section 45D of
the Internal Revenue Code of 1986 (<external-xref legal-doc="usc" parsable-cite="usc/26/45D">26 U.S.C. 45D</external-xref>)</quote>.</text>
</section><section id="H00A3DD95E98742598D38E7F492C7B739"><enum>205.</enum><header>Combinations of
certain goals</header><text display-inline="no-display-inline">Section 501(e)
of the Small Business Investment Act of 1958 (<external-xref legal-doc="usc" parsable-cite="usc/15/695">15 U.S.C. 695(e)</external-xref>) is amended by
adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="H0D03FA7E6116410A95F1AA27BEC9E54" style="OLC">
<paragraph id="H3EBB32494F7742479927EDE1C2A73320"><enum>(7)</enum><text display-inline="yes-display-inline">A small business concern that is
unconditionally owned by more than one individual, or a corporation whose stock
is owned by more than one individual, is deemed to achieve a public policy goal
under subsection (d)(3) if a combined ownership share of at least 51 percent is
held by individuals who are in one of the groups listed as public policy goals
specified in subsection (d)(3)(C) or
(d)(3)(E).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="H298B7B8251D545D6B5C213FDA9F3334"><enum>206.</enum><header>Refinancing</header><text display-inline="no-display-inline">Section 502 of the Small Business Investment
Act of 1958 (<external-xref legal-doc="usc" parsable-cite="usc/15/696">15 U.S.C. 696</external-xref>) is amended by adding at the end the
following:</text>
<quoted-block display-inline="no-display-inline" id="H3F2A062168294E3999F879584E6BC62F" style="OLC">
<paragraph id="H961D4139F1EB4753A02909C938A2CDD6"><enum>(7)</enum><header>Permissible debt
refinancing</header><text display-inline="yes-display-inline">Any financing
approved under this title may also include a limited amount of debt refinancing
for debt that was not previously guaranteed by the Administration. If the
project involves expansion of a small business which has existing indebtedness
collateralized by fixed assets, a limited amount may be refinanced and added to
the expansion cost, providing—</text>
<subparagraph id="HCE7CA11F8AFB4DEEA754FDBB559B3056"><enum>(A)</enum><text>the proceeds of
the indebtedness were used to acquire land, including a building situated
thereon, to construct a building thereon or to purchase equipment;</text>
</subparagraph><subparagraph id="HEE5355530E7E4B25AFD022828B9B9B38"><enum>(B)</enum><text>the borrower has
been current on all payments due on the existing debt for at least the past
year; and</text>
</subparagraph><subparagraph id="H30C4ED94A8644FECBDD800C67727FAA5"><enum>(C)</enum><text display-inline="yes-display-inline">the financing under the Certified
Development Company Economic Development Loan Program will provide better terms
or rate of interest than now exists on the
debt.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="HFECEBB1A50EF4D8AA01114690469C482"><enum>207.</enum><header>Additional
equity injections</header><text display-inline="no-display-inline">Clause (ii)
of section 502(3)(B) of the Small Business Investment Act of 1958 (15 U.S.C.
696(3)(B)) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H644B95C04F63490EBF83E7A8A53F402F" style="OLC">
<clause id="HBBEF2ACC45994A16A554F922E961B152"><enum>(ii)</enum><header>Funding from
institutions</header>
<subclause id="HA79A2E932B104D6C89EAFCA1FB75002C"><enum>(I)</enum><text display-inline="yes-display-inline">If a small business concern provides the
minimum contribution required under paragraph (C), not less than 50 percent of
the total cost of any project financed pursuant to clauses (i), (ii), or (iii)
of subparagraph (C) shall come from the institutions described in subclauses
(I), (II), and (III) of clause (i).</text>
</subclause><subclause id="HF2C7F25BE9F64471AA1EF405819BF434"><enum>(II)</enum><text>If a small
business concern provides more than the minimum contribution required under
paragraph (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 less than the amount of the loan made by the
Administration.</text>
</subclause></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="HEDF4C3A61E4B45980098555200AADB9D"><enum>208.</enum><header>Loan
liquidations</header><text display-inline="no-display-inline">Section 510 of
the Small Business Investment Act of 1958 (<external-xref legal-doc="usc" parsable-cite="usc/15/697g">15 U.S.C. 697g</external-xref>) is amended—</text>
<paragraph id="H4937A0AAED3748BABC62593DDCEF21AD"><enum>(1)</enum><text>by redesignating
subsection (e) as subsection (g); and</text>
</paragraph><paragraph id="H9CF0036D799749B186BA16238BC6EBDF"><enum>(2)</enum><text>by inserting after
subsection (d) the following:</text>
<quoted-block display-inline="no-display-inline" id="HEFEAD4C04F2642AD0023D747B2B29224" style="OLC">
<subsection id="H8FA5AC6BA66247C69910D8AD4757D32F"><enum>(e)</enum><header>Participation</header>
<paragraph id="H6CF0264D8F2642FEB564BC18C95CF02"><enum>(1)</enum><header>Mandatory</header><text display-inline="yes-display-inline">Any certified development company which
elects not to apply for authority to foreclose and liquidate defaulted loans
under this section or which the Administration 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 Administration with respect to the
qualifications of the contractor, the terms and conditions of liquidation
activities, and the ability to reimburse such contractor.</text>
</paragraph><paragraph id="H477F606E5D394B5884C761ABF4A56ECE"><enum>(2)</enum><header>Commencement</header><text>The
provisions of this subsection shall not require any development company to
liquidate defaulted loans until the Administration has adopted and implemented
a program to compensate and reimburse development companies as provided under
subsection (f).</text>
</paragraph></subsection><subsection id="H1541374B0B1E40A88174673B5B74CCFF"><enum>(f)</enum><header>Compensation and
reimbursement</header>
<paragraph id="HB772EA05D836468BB0F2C2DBF11D759B"><enum>(1)</enum><header>Reimbursement of
expenses</header><text>The Administration shall reimburse each certified
development company for all expenses paid by such company as part of the
foreclosure and liquidation activities if the expenses—</text>
<subparagraph id="HD6C02D9A497A43EEA2A796196D5D08F7"><enum>(A)</enum><text>were approved in
advance by the Administration either specifically or generally; or</text>
</subparagraph><subparagraph id="H2B06EF8C1D384013ADBDDA486E360083"><enum>(B)</enum><text>were incurred by
the company on an emergency basis without Administration prior approval but
which were reasonable and appropriate.</text>
</subparagraph></paragraph><paragraph id="HD2D7BF1774834B96875E4EBFF24F1619"><enum>(2)</enum><header>Compensation for
results</header><text>The Administration shall develop a schedule to compensate
and provide an incentive to qualified State or local development companies
which 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.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></section><section display-inline="no-display-inline" id="H6A0682A8EFF9407599D82314AFC64E90" section-type="subsequent-section"><enum>209.</enum><header>Closing
costs</header><text display-inline="no-display-inline">Paragraph (4) of section
503(b) of the Small Business Investment Act of 1958 (<external-xref legal-doc="usc" parsable-cite="usc/15/697">15 U.S.C. 697(b)</external-xref>) is
amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="HCFEF3A8752A045AF9043A3CF08A05708" style="OLC">
<paragraph id="H2075CAF061A048F9A51DD207DC87294F"><enum>(4)</enum><text display-inline="yes-display-inline">the aggregate amount of such debenture does
not exceed the amount of loans to be made from the proceeds of such debenture
plus, at the election of the borrower under the Certified Development Company
Economic Development Loan Program, other amounts attributable to the
administrative and closing costs of such loans, except for the borrower’s
attorney
fees;</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</section><section id="H1973A8C1AE0947A3BBB24469C1324F87"><enum>210.</enum><header>Uniform leasing
policy</header>
<subsection id="HFD96997C6E984A5790A039E74F8FEFF6"><enum>(a)</enum><header>In
general</header><text>Section 502 of the Small Business Investment Act of 1958
(<external-xref legal-doc="usc" parsable-cite="usc/15/696">15 U.S.C. 696</external-xref>) is amended—</text>
<paragraph id="HA97FEA221DDB46658CC9801E4531257F"><enum>(1)</enum><text>by striking
paragraphs (4) and (5) and inserting the following:</text>
<quoted-block id="H942AE6CB5022454F93BF00AE7E691EBA" style="OLC">
<paragraph id="H75C84FD85EE5458789C8B0C7B1DA686F"><enum>(4)</enum><header>Limitation on
leasing</header><text>If the use of a loan under this section includes the
acquisition of a facility or the construction of a new facility, the small
business concern assisted—</text>
<subparagraph id="H1297E761073440CE828BA6B1C66402E4"><enum>(A)</enum><text>shall permanently
occupy and use not less than a total of 50 percent of the space in the
facility; and</text>
</subparagraph><subparagraph id="H20E2A793016044D7B5FC6B00363813E2"><enum>(B)</enum><text>may, on a
temporary or permanent basis, lease to others not more than 50 percent of the
space in the facility.</text>
</subparagraph></paragraph><after-quoted-block>;
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="H6740A8C886CB4A31B8EB5052AF2F33F6"><enum>(2)</enum><text>by redesignating
paragraph (6) as paragraph (5).</text>
</paragraph></subsection><subsection id="H57DF7DFEBABF4DDB9C001BC74EB6D721"><enum>(b)</enum><header>Policy for
7<enum-in-header>(a)</enum-in-header> loans</header><text>Section 7(a)(28) of
the Small Business Act (<external-xref legal-doc="usc" parsable-cite="usc/15/636">15 U.S.C. 636(a)(28)</external-xref>) is amended to read as
follows:</text>
<quoted-block id="H3DF3A4755CF7434D8C1C24E247437CB" style="OLC">
<paragraph id="HED0B5D7CB2A248C69DF00000F14C69F0"><enum>(28)</enum><header>Limitation on
leasing</header><text>If the use of a loan under this subsection includes the
acquisition of a facility or the construction of a new facility, the small
business concern assisted—</text>
<subparagraph id="HE5B6F988A726411B858341E54FEB7D1D"><enum>(A)</enum><text>shall permanently
occupy and use not less than a total of 50 percent of the space in the
facility; and</text>
</subparagraph><subparagraph id="H87027F795C3A4C45A5B261414B2557D"><enum>(B)</enum><text>may, on a temporary
or permanent basis, lease to others not more than 50 percent of the space in
the
facility.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><enum>III</enum><header>Small Business
Investment Company Program</header>
<section id="HC880B2764D7B458DAB074D765B1B2E31"><enum>301.</enum><header>Simplified
maximum leverage limits</header><text display-inline="no-display-inline">Section 303(b) of the Small Business
Investment Act of 1958 (<external-xref legal-doc="usc" parsable-cite="usc/15/683">15 U.S.C. 683(b)</external-xref>) is amended—</text>
<paragraph id="HF8421126729D410293C2E5D78800A4D"><enum>(1)</enum><text>by
striking paragraph (2) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="H71D0620F6ACF4C69B5AAD3881FA7A103" style="OLC">
<paragraph id="H65CF87046FE34B42A53C00C79B0070F6"><enum>(2)</enum><header>Maximum
leverage</header>
<subparagraph id="H9E29BDEAC2E1484AA067FD6E8216B231"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">The maximum amount of
outstanding leverage made available to any one company licensed under section
301(c) of this Act may not exceed the lesser of—</text>
<clause id="HC1D956E6DC3D4E43981DD5338CC83D61"><enum>(i)</enum><text>300 percent of
such company’s private capital; or</text>
</clause><clause id="H6EB7F00295E04BA89F65F2BC3CEE44"><enum>(ii)</enum><text>$150,000,000.</text>
</clause></subparagraph><subparagraph id="H539116811314466EA682C249ED5E2499"><enum>(B)</enum><header>Multiple
licenses under common control</header><text>The maximum amount of outstanding
leverage made available to two or more companies licensed under section 301(c)
of this Act that are commonly controlled (as determined by the Administrator)
and not under capital impairment may not exceed
$225,000,000.</text>
</subparagraph></paragraph><after-quoted-block>;
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="HA91375D82FF5433898314EAB53E8EE8"><enum>(2)</enum><text>by
striking paragraph (4).</text>
</paragraph></section><section id="H6C42F61ED5A8471AA6642F004ED2D469"><enum>302.</enum><header>Simplified
aggregate investment limitations</header><text display-inline="no-display-inline">Section 306(a) of the Small Business
Investment Act of 1958 (<external-xref legal-doc="usc" parsable-cite="usc/15/686">15 U.S.C. 686(a)</external-xref>) is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H98CEFDDE6BE144128EF8C2172771DFA2" style="OLC">
<subsection id="HBFF374F0DEFF4AF2A184EC444B0080E7"><enum>(a)</enum><header>Percentage
Limitation on Private Capital</header><text display-inline="yes-display-inline">If any small business investment company
has obtained financing from the Administration and such financing remains
outstanding, the aggregate amount of securities acquired and for which
commitments may be issued by such company under the provisions of this title
for any single enterprise shall not, without the approval of the
Administration, exceed 10 percent of the sum of—</text>
<paragraph id="H7D0ABFA987E84CC6A7FBD4BDDF1413"><enum>(1)</enum><text>the private capital
of such company; and</text>
</paragraph><paragraph id="HFC0AD97A74EB42A6A0DF9108D563510"><enum>(2)</enum><text>the total amount of
leverage projected by the company in the company’s business plan that was
approved by the Administration at the time of the grant of the company’s
license.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</section>