1.This Act may be cited as the
Accounts Receivable Insurance Program
Act
.
2.Congress finds the following:
(1)Small
manufacturers are hurt much more than their larger competitors when delays in
payments of accounts receivable occur. These small firms hold millions of
dollars in outstanding receivables. Especially in an economic slowdown, many
larger firms delay payments to their downstream suppliers causing disruptions
in the domestic industrial supply chain, creating a greater need to insure
payment on terms.
(2)As the number and
size of accounts receivables outstanding increases, these businesses have fewer
resources to buy raw materials, hire workers, and access adequate lines of
credit. Small manufacturers and their creditors need additional assurance that
customers will pay their accounts on reasonable terms.
(3)Failure of payment
to downstream suppliers in a reasonable amount of time has had a significant
negative impact on the cash flow of small suppliers. The moment a lender sees
that a supplier is involved in a financially troubled industry such as the auto
industry, they move the supplier into a high risk category or will not extend
credit. Government guaranteed account receivables insurance would allow the
middle-market companies access to credit lines they need to continue day-to-day
operations.
3.For the purpose of this Act the following
definitions apply:
(1)The term financial institution means an
establishment engaged in financial transactions (transactions involving the
creation, liquidation, or change in ownership of financial assets) and/or in
facilitating financial transactions.
(2)The term insurance institution means an
establishment that is primarily engaged in one of the following:
(A)Underwriting
(assuming the risk, assigning premiums, and so forth) annuities and insurance
policies.
(B)Facilitating such
underwriting by selling insurance policies, and by providing other insurance
and employee-benefit related services.
(3)The
term guarantee has the same meaning as is given the term
loan guarantee in section 502(3) of the Federal Credit Reform Act
of 1990 (2 U.S.C. 661a(3)).
(4)The
term Secretary means the Secretary of the Treasury.
4.Accounts
receivable insurance
(a)There is established within the Department of the
Treasury a government-backed private accounts receivable insurance program to
assist small manufacturers in the underwriting and guarantee of payment on
terms through the insurance of their accounts receivable.
(b)
(1)The
Secretary shall, to the extent amounts are made available under subsection (c),
insure accounts receivable underwritten by financial or insurance institutions
for small manufacturing businesses.
(2)
(A)A small
manufacturing business shall submit an application to a financial or insurance
institution for participation in the program established under this section at
such time, in such manner, and accompanied by such information as the Secretary
may require.
(B)A financial or
insurance institution shall not deny an application solely based on a small
manufacturing business’s lack of short term positive cash flow or solely on the
nature of their customers’ industry classification.
(3)If
a small manufacturing business defaults on any portion of an obligation
guaranteed under paragraph (1)—
(A)the financial or
insurance institution shall have the right to demand payment of the unpaid
amount from the Secretary in exchange for payment of a fee equal to .5 percent
of such amount; and
(B)within such period
as the Secretary shall specify, the Secretary shall pay to the financial or
insurance institution the remaining balance of the obligation, unless the
Secretary determines that such small business or institution has not taken
reasonable steps to seek collection of such obligation in a reasonably timely
manner, which steps shall include—
(i)exhausting all
efforts to enforce all terms and penalties set forth in the underlying
contract;
(ii)making successive
efforts by registered mail or other similar method on a regular schedule;
and
(iii)pursuing legal
action.
(4)A
financial or insurance institution shall not be eligible for a guarantee under
paragraph (1) if such institution insured the accounts receivable of a small
manufacturing business for less than 80 percent of the value of such accounts
receivable insured.
(c)Funding
as may be necessary, not to exceed $500,000,000, for the cost of guarantees
under this section shall be available to the Secretary, without further
appropriation or fiscal year limitation, for the costs of such program. All
funds received by the Secretary in connection with purchases made pursuant to
paragraph (1), including interest payments, dividend payments, and proceeds
from the sale of any financial instrument, shall be paid into the general fund
of the Treasury for reduction of the public debt.
(d)The
Secretary may not enter into any contracts or agreements with financial
institutions to make any guarantees under this section after December 31, 2011,
or on the date that is 1 year after the date of the enactment of this Act,
whichever is later.
(e)Not
later than 90 days after the date of the enactment of this Act, the Secretary
shall issue regulations to carry out the purposes of this section.