[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9311 Introduced in House (IH)]
<DOC>
117th CONGRESS
2d Session
H. R. 9311
To authorize the Community Advantage Loan Program of the Small Business
Administration, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 16, 2022
Ms. Chu introduced the following bill; which was referred to the
Committee on Small Business
_______________________________________________________________________
A BILL
To authorize the Community Advantage Loan Program of the Small Business
Administration, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Community Advantage Loan Program
Permanency Act of 2022''.
SEC. 2. FINDINGS.
Congress finds that--
(1) capital access remains one of the largest barriers to
overcome for socially and economically disadvantaged business
owners as well as for the smallest small businesses;
(2) according to the Double Jeopardy: COVID-19's
Concentrated Health and Wealth Effects in Black Communities
study conducted by the Federal Reserve banks, in 2020--
(A) firms owned by people of color are more likely
to have weak capitalizations, limited bank
relationships, and little in cash reserves; and
(B) 51 percent of Black-owned businesses have less
than 3 months of cash reserves in case of an emergency,
which is nearly 7 percentage points higher than their
peers;
(3) according to the Small Business Credit Survey conducted
by the Federal Reserve banks, in 2021--
(A) 31 percent of firms that sought financing
received the full financing sought by the firm;
(B) firms owned by people of color were least
likely to receive the full amount of financing sought
by the firm, with 15 percent of Asian-owned businesses,
16 percent of Black-owned businesses, and 19 percent of
Hispanic-owned businesses receiving full financing, as
opposed to 35 percent of non-Hispanic White-owned
businesses receiving full financing; and
(C) firms with fewer employees were also least
likely to receive the full financing sought by the
firm, with 23 percent of businesses with 1 to 4
employees and 37 percent of businesses with 5 to 49
employees receiving full financing, as opposed to 55
percent of businesses with 50 to 499 employees
receiving full financing;
(4) the Community Advantage Pilot Program of the Small
Business Administration has helped increase lending backed by
the Administration to firms owned by people of color, women,
and veterans and firms classified as start ups; and
(5) from fiscal year 2018 to fiscal year 2022--
(A) 13 percent of loans under the Community
Advantage Pilot Program went to Black business owners,
while 4 percent of loans under the loan program under
section 7(a) of the Small Business Act (15 U.S.C.
636(a)) (in this section referred to as the ``7(a) loan
program'') went to Black business owners;
(B) 15 percent of loans under the Community
Advantage Pilot Program went to Hispanic business
owners, while 8 percent of loans under the 7(a) loan
program went to Hispanic business owners;
(C) 20 percent of loans under the Community
Advantage Pilot Program went to women business owners,
while 17 percent of loans under the 7(a) loan program
went to women business owners; and
(D) 9 percent of loans under the Community
Advantage Pilot Program went to veteran business
owners, while 5 percent of loans under the 7(a) loan
program went to veteran business owners; and
(6) from fiscal year 2020 to fiscal year 2021, 14 percent
of loans under the Community Advantage Pilot Program went to
startup business owners, while 7 percent of loans under the
7(a) loan program went to startup business owners.
SEC. 3. COMMUNITY ADVANTAGE LOAN PROGRAM.
(a) In General.--Section 7(a) of the Small Business Act (15 U.S.C.
636(a)) is amended by adding at the end the following:
``(38) Community advantage loan program.--
``(A) Purposes.--The purposes of the Community
Advantage Loan Program are--
``(i) to create a mission-oriented loan
guarantee program that builds on the
demonstrated success of the Community Advantage
Pilot Program of the Administration, as
established in 2011, to reach more underserved
small business concerns;
``(ii) to increase lending to small
business concerns in underserved and rural
markets, including veterans and members of the
military community, socially and economically
disadvantaged individuals, as described in
paragraphs (5) and (6)(A) of section 8(a),
respectively, women, and new businesses;
``(iii) to ensure that the program under
this subsection expands inclusion and more
broadly meets congressional intent to reach
borrowers who are unable to get credit
elsewhere on reasonable terms and conditions;
``(iv) to help underserved small business
concerns become bankable by utilizing the small
dollar financing and business support
experience of mission-oriented lenders;
``(v) to allow certain mission-oriented
lenders, primarily financial intermediaries
focused on economic development in underserved
markets, access to guarantees for loans under
this subsection (in this paragraph referred to
as `7(a) loans') of not more than $350,000 and
provide management and technical assistance to
small business concerns as needed;
``(vi) to provide certainty for the lending
partners that make loans under this subsection
and to attract new lenders;
``(vii) to encourage collaboration between
mission-oriented and conventional lenders under
this subsection in order to support underserved
small business concerns; and
``(viii) to assist covered institutions
with providing business support services and
technical assistance to small business
concerns, when needed.
``(B) Definitions.--In this paragraph--
``(i) the term `Community Advantage Network
Partner'--
``(I) means a nonprofit, mission-
oriented organization that acts as a
Referral Agent to covered institutions
in order to expand the reach of the
program to small businesses in
underserved markets; and
``(II) does not include a covered
institution making loans under the
program;
``(ii) the term `covered institution' means
an entity that--
``(I) is--
``(aa) a development
company, as defined in section
103 of the Small Business
Investment Act of 1958 (15
U.S.C. 662), participating in
the 504 Loan Guaranty program
established under title V of
that Act (15 U.S.C. 695 et
seq.);
``(bb) a nonprofit
intermediary, as defined in
subsection (m)(11),
participating in the microloan
program under subsection (m);
``(cc) a non-Federally
regulated entity or a lending
institution certified as a
community development financial
institution by the Community
Development Financial
Institutions Fund established
under section 104(a) of the
Riegle Community Development
and Regulatory Improvement Act
of 1994 (12 U.S.C. 4703(a)); or
``(dd) an eligible
intermediary, as defined in
subsection (l)(1),
participating in the
Intermediary Lending Program
established under subsection
(l)(2); and
``(II) has approved and disbursed
10 similarly sized loans in the
preceding 24-month period and is
servicing not less than 10 similarly
sized loans to small business concerns
in the portfolio of the entity;
``(iii) the term `existing business' means
a small business concern that has been in
existence for not less than 2 years on the date
on which a loan is made to the small business
concern under the program;
``(iv) the term `new business' means a
small business concern that has been in
existence for not more than 2 years on the date
on which a loan is made to the small business
concern under the program;
``(v) the term `program' means the
Community Advantage Loan Program established
under subparagraph (C);
``(vi) the term `Referral Agent' has the
meaning given the term in section 103.1(f) of
title 13, Code of Federal Regulations, or any
successor regulation;
``(vii) the term `rural area' means any
county that the Bureau of the Census has
defined as mostly rural or completely rural in
the most recent decennial census; and
``(viii) the term `small business concern
in an underserved market' means a small
business concern--
``(I) that is located in--
``(aa) a low- to moderate-
income community;
``(bb) a HUBZone, as that
term is defined in section
31(b);
``(cc) a rural area; or
``(dd) any area for which a
disaster declaration or
determination described in
subparagraph (A), (B), (C), or
(E) of subsection (b)(2) has
been made that has not
terminated more than 2 years
before the date (or later, as
determined by the
Administrator) on which a loan
is made to the small business
concern under the program,
except that, in the case of a
major disaster described in
subsection (b)(2)(A), that
period shall be 5 years;
``(II) for which more than 50
percent of the employees reside in a
low- or moderate-income community;
``(III) that is a new business;
``(IV) owned and controlled by
socially and economically disadvantaged
individuals, as described in paragraphs
(5) and (6)(A) of section 8(a),
respectively, which the Administrator,
in carrying out the program, shall
presume includes Black Americans,
Hispanic Americans, Native Americans,
Asian Pacific Americans, and other
minorities;
``(V) owned and controlled by
women;
``(VI) owned and controlled by
veterans or spouses of veterans;
``(VII) owned and controlled by a
member of an Indian Tribe individually
identified (including parenthetically)
in the most recent list published
pursuant to section 104 of the
Federally Recognized Indian Tribe List
Act of 1994 (25 U.S.C. 5131);
``(VIII) owned and controlled by an
individual who has completed a term of
imprisonment in a Federal, State, or
local jail or prison;
``(IX) owned and controlled by an
individual with a disability, as that
term is defined in section 3 of the
Americans with Disabilities Act of 1990
(42 U.S.C. 12102); or
``(X) as otherwise determined by
the Administrator.
``(C) Establishment.--There is established a
Community Advantage Loan Program under which the
Administration may guarantee loans made by covered
institutions under this subsection, with an emphasis on
loans made to small business concerns in underserved
markets.
``(D) Program levels.--In fiscal year 2023 and each
fiscal year thereafter, not more than 10 percent of the
number of loans guaranteed under this subsection may be
guaranteed under the program.
``(E) Grandfathering of existing lenders.--Any
covered institution that actively participated in the
Community Advantage Pilot Program of the Administration
and is in good standing, as determined by the
Administration, on the day before the date of enactment
of this paragraph--
``(i) shall retain designation in the
program;
``(ii) shall not be required to submit an
application to participate in the program; and
``(iii) for the purpose of determining the
loan loss reserve amount of the covered
institution, shall have participation in the
Community Advantage Pilot Program included in
the calculation under subparagraph (J).
``(F) Requirement to make loans to underserved
markets.--Not less than 70 percent of loans made by a
covered institution under the program shall consist of
loans made to small business concerns in underserved
markets.
``(G) Maximum loan amount.--The maximum loan amount
for a loan guaranteed under the program is $350,000.
``(H) Interest rates.--The maximum allowable
interest rate prescribed by the Administration on any
financing made on a deferred basis pursuant to the
program shall not exceed the maximum allowable interest
rate under sections 120.213 and 120.214 of title 13,
Code of Federal Regulations, or any successor
regulations.
``(I) Refinancing of community advantage program
loans.--A loan guaranteed under the program or
guaranteed under the Community Advantage Pilot Program
of the Administration may be refinanced into another
7(a) loan made by lender that does not participate in
the program.
``(J) Loan loss reserve requirements.--
``(i) Loan loss reserve account for covered
institutions.--A covered institution--
``(I) with not more than 5 years of
participation in the program shall
maintain a loan loss reserve account
with an amount equal to 5 percent of
the outstanding amount of the
unguaranteed portion of the loan
portfolio of the covered institution
under the program; and
``(II) with more than 5 years of
participation in the program shall
maintain a loan loss reserve account
with an amount equal to the average
repurchase rate of the covered
institution over the preceding 36-month
period.
``(ii) Additional loan loss reserve amount
for selling loans on the secondary market.--In
addition to the amount required in the loan
loss reserve account under clause (i), a
covered institution that sells a program loan
on the secondary market shall be required to
maintain the following additional amounts in
the loan loss reserve account:
``(I) An amount equal to 2 percent
of the guaranteed portion of each
program loan sold on the secondary
market for lenders with less than 5
years experience selling program loans
on the secondary market.
``(II) An amount equal to the
average repurchase rate for loans sold
by the lender on the secondary market
over the preceding 36 months for
lenders with more than 5 years
experience selling program loans on the
secondary market.
``(iii) Recalculation.--The loan loss
reserve required under clauses (i) and (ii)
shall be recalculated on October 1 of each
year.
``(K) Training.--The Administration--
``(i) shall provide accessible upfront and
ongoing training for covered institutions
making loans under the program to support
program compliance and improve the interface
between the covered institutions and the
Administration, which shall include--
``(I) guidance for following the
regulations of the Administration; and
``(II) guidance specific to
mission-oriented lending that is
intended to help lenders effectively
reach and support underserved small
business concerns, including management
and technical assistance delivery;
``(ii) shall ensure that the training
described in clause (i) is provided for free or
at a low-cost;
``(iii) may enter into a contract to
provide the training described in clause (i)
with an organization with expertise in lending
under this subsection and primarily
specializing in mission-oriented lending, and
lending to underserved markets; and
``(iv) shall provide training for the
employees and contractors of the Administration
that regularly engage with covered institutions
or borrowers in the program.
``(L) Community advantage outreach and education.--
The Administrator--
``(i) shall develop and implement a program
to promote to, conduct outreach to, and educate
prospective covered institutions about the
program, with a focus on women- and minority-
owned covered institutions.
``(ii) may enter into a contract with 1 or
more nonprofit organizations experienced in
working with and training mission driven
lenders to provide the outreach and education
described in clause (i).
``(M) Community advantage network partner
participation.--
``(i) In general.--A covered institution
that uses a Community Advantage Network Partner
shall abide by policies and procedures of the
Administration concerning the use of Referral
Agent fees permitted by the Administration and
disclosure of those fees.
``(ii) Payment of fees.--Notwithstanding
any other provision of law, all fees described
in clause (i) shall be paid by the covered
institution to the Community Advantage Network
Partner upon disbursement of the applicable
program loan.
``(N) Delegated authority.--A covered institution
is not eligible to receive delegated authority from the
Administration under the program until the covered
institution has approved and fully disbursed not less
than 10 loans under the program and the Administration
had evaluated the ability of the covered institution to
fulfill program requirements.
``(O) Reporting.--
``(i) Weekly reports.--
``(I) In general.--The
Administration shall report on the
website of the Administration, as part
of the weekly reports on lending
approvals under this subsection--
``(aa) on and after the
date of enactment of this
paragraph, the number and
dollar amount of loans
guaranteed under the Community
Advantage Pilot Program of the
Administration; and
``(bb) on and after the
date on which the
Administration begins to
approve loans under the
program, the number and dollar
amount of loans guaranteed
under the program.
``(II) Separate accounting.--The
number and dollar amount of loans
reported in a weekly report under
subclause (I) for loans guaranteed
under the Community Advantage Pilot
Program of the Administration and under
the program shall include a breakdown
by the categories of race, ethnicity,
and gender of the owners of the small
business concerns, by whether the small
business concern is a new or existing
small business concern, and by whether
the small business concern is located
in an urban or rural area, and broken
down by--
``(aa) loans of not more
than $50,000;
``(bb) loans of more than
$50,000 and not more than
$150,000;
``(cc) loans of more than
$150,000 and not more than
$250,000; and
``(dd) loans of more than
$250,000 and not more than
$350,000.
``(ii) Annual reports.--
``(I) In general.--For each fiscal
year in which the program is in effect,
the Administration shall submit to the
Committee on Small Business and
Entrepreneurship of the Senate and the
Committee on Small Business of the
House of Representatives, and make
publicly available on the internet,
information about loans provided under
the program and under the Community
Advantage Pilot Program of the
Administration.
``(II) Contents.--Each report
submitted and made publicly available
under subclause (I) shall include--
``(aa) the number and
dollar amounts of loans
provided to small business
concerns under the program,
including a breakdown by--
``(AA) the gender
of the owners of the
small business concern;
``(BB) the race and
ethnicity of the owners
of the small business
concern, disaggregated
in a manner that
captures all the racial
groups specified in the
American Community
Survey conducted by the
Bureau of the Census;
``(CC) whether the
small business concern
is located in an urban
or rural area; and
``(DD) whether the
small business concern
is an existing business
or a new business, as
provided in the weekly
reports on lending
approvals under this
subsection;
``(bb) the proportion of
loans described in item (aa)
compared to--
``(AA) other 7(a)
loans of any amount;
``(BB) other 7(a)
loans of similar
amounts;
``(CC) express
loans provided under
paragraph (31) of
similar amounts; and
``(DD) other 7(a)
loans of similar
amounts provided to
small business concerns
in underserved markets;
``(cc) a comparison of the
number and dollar amounts of
loans provided to small
business concerns under the
program and under each category
of loans described in item
(aa), broken down by--
``(AA) loans of not
more than $50,000;
``(BB) loans of
more than $50,000 and
not more than $150,000;
``(CC) loans of
more than $150,000 and
not more than $250,000;
and
``(DD) loans of
more than $250,000 and
not more than $350,000;
``(dd) the number and
dollar amounts of loans
provided to small business
concerns under the program by
State, and the jobs created or
retained within each State;
``(ee) a list of covered
institutions participating in
the program and the Community
Advantage Pilot Program of the
Administration, including--
``(ff) the name, location,
and contact information, such
as the website and telephone
number, of each covered
institution;
``(gg) a breakdown by the
number and dollar amount of the
loans approved for small
business concerns; and
``(hh) the benchmarks
established by the Community
Advantage Working Group under
subparagraph (O)(i).
``(III) Timing.--An annual report
required under this clause shall--
``(aa) be submitted and
made publicly available not
later than December 1 of each
year; and
``(bb) cover the lending
activity for the fiscal year
that ended on September 30 of
that same year.
``(P) GAO report.--Not later than 5 years after the
date of enactment of this paragraph, the Comptroller
General of the United States shall submit to the
Administrator, the Committee on Small Business and
Entrepreneurship of the Senate, and the Committee on
Small Business of the House of Representatives a
report--
``(i) assessing--
``(I) the extent to which the
program fulfills the requirements of
this paragraph; and
``(II) the performance of covered
institutions participating in the
program; and
``(ii) providing recommendations on the
administration of the program and the findings
under subclauses (I) and (II) of clause (i).
``(Q) Community advantage working group.--
``(i) In general.--Not later than 90 days
after the date of enactment of this paragraph,
the Administrator shall establish a Community
Advantage Working Group, which shall--
``(I) include--
``(aa) a geographically
diverse representation of
members from among covered
institutions participating in
the program; and
``(bb) representatives from
the Office of Capital Access of
the Administration, including
the Office of Credit Risk
Management, the Office of
Financial Assistance, and the
Office of Economic Opportunity;
``(II) develop recommendations on
how the Administration can effectively
manage, support, and promote the
program and the mission of the program;
``(III) establish metrics of
success and benchmarks that reflect the
mission and population served by
covered institutions under the program,
which the Administration shall use to
evaluate the performance of those
covered institutions;
``(IV) establish criteria assessing
the business support services and
technical assistance needs of borrowers
and methods to assess lender expertise
to provide necessary services and
assistance; and
``(V) institute regular and
sustainable systems of communication
between the Administration and covered
institutions participating in the
program.
``(ii) Report.--Not later than 1 year after
the date of enactment of this paragraph, 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 that
includes--
``(I) the recommendations of the
Community Advantage Working Group
established under clause (i); and
``(II) a recommended plan and
timeline for implementation of those
recommendations.
``(R) Regulations.--
``(i) In general.--Not later than 180 days
after the date of enactment of this paragraph,
the Administrator shall promulgate regulations
governing the program, including metrics for
lender performance, metrics of success and
benchmarks of the program, and criteria for
appropriate management and technical
assistance.
``(ii) Updates.--The Administrator shall
consult the report issued under subparagraph
(P)(ii) and, not later than 180 days after
submission of the report, promulgate any
necessary changes to existing regulations of
the Administration based on the recommendations
contained in the report.
``(S) Authorization of appropriations.--There is
authorized to be appropriated such sums as may be
necessary to conduct outreach and education described
in subparagraph (L).''.
(b) Participation.--Section 7(a)(2) of the Small Business Act (15
U.S.C. 636(a)(2)) is amended--
(1) in subparagraph (A), in the matter preceding clause
(i), by striking ``and (F)'' and inserting ``(F), and (G)'';
and
(2) by adding at the end the following:
``(G) Participation in the community advantage loan
program.--In an agreement to participate in a loan on a
deferred basis under paragraph (38), the participation
by the Administration shall be--
``(i) 80 percent of the balance of the
financing outstanding at the time of the
disbursement of the loan, if that balance is
more than $150,000 and not more than $350,000;
or
``(ii) 90 percent of the balance of the
financing outstanding at the time of the
disbursement of the loan, if that balance is
not more than $150,000.''.
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