[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2482 Reported in Senate (RS)]

<DOC>





                                                       Calendar No. 158
118th CONGRESS
  1st Session
                                S. 2482

 To amend the Small Business Act to authorize the Community Advantage 
   Loan Program of the Small Business Administration, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 25, 2023

Mr. Cardin, from the Committee on Small Business and Entrepreneurship, 
 reported the following original bill; which was read twice and placed 
                            on the calendar

_______________________________________________________________________

                                 A BILL


 
 To amend the Small Business Act 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Community 
Advantage Loan Program Act of 2023''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
               TITLE I--COMMUNITY ADVANTAGE LOAN PROGRAM

Sec. 101. Community Advantage Loan Program.
               TITLE II--SMALL BUSINESS LENDING COMPANIES

Sec. 201. Short title.
Sec. 202. Findings.
Sec. 203. Lending criteria.
Sec. 204. Affiliation and franchise directory.
Sec. 205. Loan authorization.
Sec. 206. Oversight of small business lending companies.
Sec. 207. Office of Credit Risk Management.
Sec. 208. Denied loan or loan modification request.
Sec. 209. Direct lending.
Sec. 210. Restriction on refinancing debt.
Sec. 211. GAO study.

SEC. 2. DEFINITIONS.

    In this Act:
            (1) Administration.--The term ``Administration'' means the 
        Small Business Administration.
            (2) Administrator.--The term ``Administrator'' means the 
        Administrator of the Administration.

               TITLE I--COMMUNITY ADVANTAGE LOAN PROGRAM

SEC. 101. 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;
                            ``(ii) to increase lending to small 
                        business concerns in underserved and rural 
                        markets, including to 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 (referred to in this paragraph 
                        as `7(a) loans') and provide management and 
                        technical assistance to small business concerns 
                        as needed; and
                            ``(vi) to assist covered institutions with 
                        providing business support services and 
                        technical assistance to small business 
                        concerns, when needed.
                    ``(B) Definitions.--In this paragraph:
                            ``(i) Community advantage network 
                        partner.--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 business concerns in 
                                underserved markets; and
                                    ``(II) does not include a covered 
                                institution making loans under the 
                                program.
                            ``(ii) Covered institution.--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 certified as a 
                                        community development financial 
                                        institution by the Community 
                                        Development Financial 
                                        Institutions Fund established 
                                        under section 104(a) of the 
                                        Community Development Banking 
                                        and Financial Institutions Act 
                                        of 1994 (12 U.S.C. 4703(a)); or
                                            ``(dd) an eligible 
                                        intermediary, as defined in 
                                        subsection (l)(1), 
                                        participating in the small 
                                        business 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) Existing business.--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) New business.--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) Program.--The term `program' means 
                        the Community Advantage Loan Program 
                        established under subparagraph (C).
                            ``(vi) Referral agent.--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) Rural area.--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.
                            ``(viii) Small business concern in an 
                        underserved market.--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;
                                            ``(dd) a community that has 
                                        been designated as an 
                                        empowerment zone or enterprise 
                                        community under section 1391 of 
                                        the Internal Revenue Code of 
                                        1986;
                                            ``(ee) a community that has 
                                        been designated as a qualified 
                                        opportunity zone under section 
                                        1400Z-1 of the Internal Revenue 
                                        Code of 1986; or
                                            ``(ff) a community that has 
                                        been designated as a promise 
                                        zone by the Secretary of 
                                        Housing and Urban Development;
                                    ``(II) for which more than 50 
                                percent of the employees reside in a 
                                low- or moderate-income community;
                                    ``(III) that is a new business; or
                                    ``(IV) that is owned and controlled 
                                by veterans or spouses of veterans.
                    ``(C) Establishment.--There is established a 
                Community Advantage Loan Program under which the 
                Administration may guarantee loans closed 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 2024 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 was licensed by the 
                Administrator as a Community Advantage small business 
                lending company, or that participated in the Community 
                Advantage Pilot Program of the Administration, during 
                the period beginning on May 1, 2023, and ending on 
                September 30, 2023, and was in good standing during 
                that period, as determined by the Administration--
                            ``(i) shall be designated as participants 
                        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 60 percent of loans closed by a 
                covered institution under the program shall consist of 
                loans made to small business concerns in underserved 
                markets.
                    ``(G) Maximum loan amount; collateral.--
                            ``(i) Maximum loan amount.--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), the maximum 
                                loan amount for a loan guaranteed under 
                                the program is $350,000.
                                    ``(II) Experienced lenders.--
                                            ``(aa) In general.--The 
                                        Administrator may approve not 
                                        more than 8 covered 
                                        institutions (referred to in 
                                        this subclause as the 
                                        `experienced lenders'), each of 
                                        which has not less than 5 years 
                                        of experience making loans 
                                        under the Community Advantage 
                                        Pilot Program of the 
                                        Administration or the program 
                                        established under this 
                                        paragraph, to be eligible to 
                                        make loans under this 
                                        subclause.
                                            ``(bb) Maximum loan 
                                        amount.--Subject to item (dd), 
                                        an experienced lender may make 
                                        a loan guaranteed under the 
                                        program in an amount that is 
                                        not more than $750,000.
                                            ``(cc) Participation by the 
                                        administration.--With respect 
                                        to an agreement to participate 
                                        in a loan made under this 
                                        subclause on a deferred basis, 
                                        the participation by the 
                                        Administration shall be--

                                                    ``(AA) 75 percent 
                                                of the balance of the 
                                                financing outstanding 
                                                at the time of the 
                                                disbursement of the 
                                                loan, if that balance 
                                                is more than $350,000;

                                                    ``(BB) as described 
                                                in clause (i) of 
                                                paragraph (2)(G), if 
                                                the balance of the 
                                                financing outstanding 
                                                at the time of the 
                                                disbursement of the 
                                                loan is as described in 
                                                that clause; or

                                                    ``(CC) as described 
                                                in clause (ii) of 
                                                paragraph (2)(G), if 
                                                the balance of the 
                                                financing outstanding 
                                                at the time of the 
                                                disbursement of the 
                                                loan is as described in 
                                                that clause.

                                            ``(dd) Requirements to make 
                                        loans in certain amounts.--Not 
                                        less than 60 percent of loans 
                                        closed by each experienced 
                                        lender under the program shall 
                                        consist of loans in an amount 
                                        that is not more than $350,000.
                            ``(ii) Collateral.--
                                    ``(I) In general.--A covered 
                                institution shall not be required to 
                                take collateral with respect to a loan 
                                guaranteed under the program if the 
                                amount of that loan is not more than 
                                $50,000.
                                    ``(II) Policies and procedures of 
                                covered institution.--In determining 
                                the amount of collateral required with 
                                respect to a loan guaranteed under the 
                                program, a covered institution may use 
                                the collateral policies and procedures 
                                of the covered institution with respect 
                                to similarly sized commercial loans 
                                closed by the covered institution that 
                                are not guaranteed by the 
                                Administration.
                    ``(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 a 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, except that such amount shall 
                                not be less than 3 percent of the 
                                outstanding amount of the unguaranteed 
                                portion of the loan portfolio of the 
                                covered institution under the program.
                            ``(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) For a covered institution 
                                with less than 5 years of experience 
                                selling program loans on the secondary 
                                market, an amount equal to 3 percent of 
                                the guaranteed portion of each program 
                                loan sold on the secondary market.
                                    ``(II) For a covered institution 
                                with more than 5 years of experience 
                                selling program loans on the secondary 
                                market, an amount equal to the average 
                                repurchase rate for loans sold by the 
                                covered institution on the secondary 
                                market over the preceding 36 months, 
                                except that such amount shall be not 
                                less than 2 percent of the guaranteed 
                                portion of each program loan sold into 
                                the secondary market.
                            ``(iii) Recalculation.--On October 1 of 
                        each year, the Administrator shall recalculate 
                        the loan loss reserve required under clauses 
                        (i) and (ii).
                    ``(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 small business 
                                concerns in underserved markets, 
                                including management and technical 
                                assistance delivery;
                            ``(ii) may enter into a contract to provide 
                        the training described in clause (i) with an 
                        organization--
                                    ``(I) with expertise in lending 
                                under this subsection; and
                                    ``(II) primarily specializing in--
                                            ``(aa) mission-oriented 
                                        lending; and
                                            ``(bb) lending to small 
                                        business concerns in 
                                        underserved markets; and
                            ``(iii) shall provide training for the 
                        employees and contractors of the Administration 
                        that regularly engage with covered institutions 
                        or borrowers under 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; and
                            ``(ii) may enter into a contract with 1 or 
                        more nonprofit organizations experienced in 
                        working with and training mission-oriented 
                        lenders to provide the promotion, 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 satisfied the following applicable 
                requirements:
                            ``(i) For a covered institution actively 
                        participating in the Community Advantage Pilot 
                        Program of the Administration, as of the day 
                        before the date of enactment of this 
                        paragraph--
                                    ``(I) the covered institution has 
                                approved and fully disbursed not fewer 
                                than 10 loans under that Pilot Program; 
                                and
                                    ``(II) the Administration has 
                                evaluated the ability of the covered 
                                institution to fulfill program 
                                requirements.
                            ``(ii) For any covered institution not 
                        described in clause (i)--
                                    ``(I) the covered institution has 
                                approved and fully disbursed not fewer 
                                than 20 loans under the program; and
                                    ``(II) the Administration has 
                                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 demographic information of the 
                                owners of the small business concerns, 
                                by whether the small business concern 
                                is a new business or an existing 
                                business, 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;
                                            ``(dd) loans of more than 
                                        $250,000 and not more than 
                                        $350,000; and
                                            ``(ee) loans of more than 
                                        $350,000 and not more than 
                                        $750,000.
                            ``(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 
                                                demographic information 
                                                of the owners of the 
                                                small business concern;

                                                    ``(BB) whether the 
                                                small business concern 
                                                is located in an urban 
                                                or rural area; and

                                                    ``(CC) 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) the number and 
                                        dollar amounts of loans 
                                        provided to small business 
                                        concerns under each category 
                                        described in subitems (AA), 
                                        (BB), and (CC) of item (aa), 
                                        which shall be 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;

                                                    ``(DD) loans of 
                                                more than $250,000 and 
                                                not more than $350,000; 
                                                and

                                                    ``(EE) loans of 
                                                more than $350,000 and 
                                                not more than $750,000;

                                            ``(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; and
                                            ``(ee) a list of covered 
                                        institutions participating in 
                                        the program and the Community 
                                        Advantage Pilot Program of the 
                                        Administration, including--

                                                    ``(AA) the name, 
                                                location, and contact 
                                                information, such as 
                                                the website and 
                                                telephone number, of 
                                                each covered 
                                                institution; and

                                                    ``(BB) a breakdown 
                                                by the number and 
                                                dollar amount of the 
                                                loans approved for 
                                                small business 
                                                concerns.

                                    ``(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) 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 submitted under subparagraph 
                        (P) and, not later than 180 days after the date 
                        on which the Comptroller General of the United 
                        States submits the report, promulgate any 
                        necessary changes to existing regulations of 
                        the Administration based on the recommendations 
                        contained in the report.''.
    (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.--Subject to subparagraph (G)(i)(II)(cc) of 
                paragraph (38), in an agreement to participate in a 
                loan on a deferred basis under that paragraph, 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.''.

               TITLE II--SMALL BUSINESS LENDING COMPANIES

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Modernizing SBA's Business Loan 
Programs Act of 2023''.

SEC. 202. FINDINGS.

    Congress finds that--
            (1) in 1982, the Administration placed a moratorium on 
        licensing new small business lending companies because the 
        Administration lacked the resources to effectively service and 
        supervise additional small business lending companies;
            (2) according to the Office of the Inspector General of the 
        Administration, the reduction in staff in the Office of Credit 
        Risk Management of the Administration from 42 full-time 
        employees to 29 full-time employees could affect the fiscal 
        year 2023 goals of the Administration for oversight reviews;
            (3) the Administration has finalized a rulemaking to lift 
        the moratorium on the licensing new small business lending 
        companies and establish a new Community Advantage small 
        business lending company license, and there is no cap on the 
        number of small business lending companies licenses that could 
        be issued by the Administration;
            (4) the increased costs and fees for an existing Community 
        Advantage lender in the Community Advantage Pilot Program of 
        the Administration to obtain and maintain a Community Advantage 
        small business lending company license could be cost 
        prohibitive for a majority of current Community Advantage 
        lenders to transition to a Community Advantage small business 
        lending company;
            (5) on May 1, 2023, the Administration announced that the 
        Community Advantage Pilot Program would sunset on September 30, 
        2023, and the authority of a Community Advantage lender to make 
        loans under section 7(a) of the Small Business Act (15 U.S.C. 
        636(a)) under the pilot program will terminate;
            (6) the Administration does not have adequate resources to 
        issue either more than 3 new small business lending company 
        licenses or new Community Advantage small business lending 
        company licenses, as the Office of Credit Risk Management does 
        not have the capacity to assume additional oversight 
        responsibilities; and
            (7) in order to increase small dollar lending in 
        underserved areas, the Community Advantage Pilot Program should 
        be made permanent, giving lenders certainty to continue to make 
        loans under section 7(a) of the Small Business Act (15 U.S.C. 
        636(a)).

SEC. 203. LENDING CRITERIA.

    (a) 7(a) Loans.--Section 7(a)(1) of the Small Business Act (15 
U.S.C. 636(a)(1)) is amended by adding at the end the following:
                    ``(D) Underwriting requirements.--
                            ``(i) In general.--With respect to a loan 
                        guaranteed under this subsection--
                                    ``(I) the applicant (including an 
                                operating company) shall be 
                                creditworthy;
                                    ``(II) the loan must be so sound as 
                                to reasonably assure repayment; and
                                    ``(III) subject to the approval of 
                                the Administrator, the Director of the 
                                Office of Credit Risk Management may 
                                require additional criteria.
                            ``(ii) Lending criteria for loans of 
                        $350,000 or more.--With respect to a loan 
                        guaranteed under this section that is not less 
                        than $350,000, the Administration and lenders 
                        shall, as applicable, consider the following:
                                    ``(I) Credit history of the 
                                applicant (and the operating company, 
                                if applicable), and the associates and 
                                guarantors of the applicant.
                                    ``(II) Experience and depth of 
                                management.
                                    ``(III) Strength of the business.
                                    ``(IV) Past earnings, projected 
                                cash flow, and future prospects.
                                    ``(V) Ability to repay the loan 
                                with earnings from the business of the 
                                applicant.
                                    ``(VI) Sufficient invested equity 
                                to operate on a sound financial basis.
                                    ``(VII) Potential for long-term 
                                success.
                                    ``(VIII) Nature and value of 
                                collateral (although inadequate 
                                collateral may not be the sole reason 
                                for denial of a loan application).
                                    ``(IX) The effect any affiliate of 
                                the applicant may have on the ultimate 
                                repayment ability of the applicant.
                            ``(iii) Lending criteria for loans of less 
                        than $350,000.--With respect to a loan 
                        guaranteed under this section that is less than 
                        $350,000--
                                    ``(I) lenders shall use appropriate 
                                and generally acceptable commercial 
                                credit analysis processes and 
                                procedures consistent with those used 
                                for similarly-sized commercial loans 
                                that are not guaranteed by the 
                                Administration;
                                    ``(II) the Administration and 
                                lenders may use a business credit 
                                scoring model; and
                                    ``(III) the Administration and 
                                lenders shall, as applicable, 
                                consider--
                                            ``(aa) the credit score or 
                                        credit history of the applicant 
                                        (and the operating company, if 
                                        applicable), and the associates 
                                        and guarantors of the 
                                        applicant;
                                            ``(bb) the earnings or cash 
                                        flow of the applicant;
                                            ``(cc) any equity or 
                                        collateral of the applicant; 
                                        and
                                            ``(dd) the effect any 
                                        affiliates of the applicant may 
                                        have on the ultimate repayment 
                                        ability of the applicant.''.
    (b) 504/CDC Loans.--Section 502 of the Small Business Investment 
Act of 1958 (15 U.S.C. 696) is amended by adding at the end the 
following:
            ``(8) Underwriting requirements.--
                    ``(A) In general.--With respect to a loan made 
                under this section--
                            ``(i) the applicant (including an operating 
                        company) shall be creditworthy; and
                            ``(ii) the loan must be so sound as to 
                        reasonably assure repayment.
                    ``(B) Lending criteria.--With respect to a loan 
                made under this section--
                            ``(i) lenders and certified development 
                        companies shall use appropriate and generally 
                        acceptable commercial credit analysis processes 
                        and procedures consistent with those used for 
                        similarly-sized commercial loans that are not 
                        guaranteed by the Administration;
                            ``(ii) the Administration, lenders, and 
                        certified development companies may use a 
                        business credit scoring model; and
                            ``(iii) the Administration, lenders, and 
                        certified development companies shall, as 
                        applicable, consider--
                                    ``(I) the credit score or credit 
                                history of the applicant (and the 
                                operating company, if applicable), and 
                                the associates and guarantors of the 
                                applicant;
                                    ``(II) the earnings or cash flow of 
                                the applicant; and
                                    ``(III) any equity or collateral of 
                                the applicant.''.

SEC. 204. AFFILIATION AND FRANCHISE DIRECTORY.

    (a) Affiliation Principles.--
            (1) Business loans.--Section 7(a)(1) of the Small Business 
        Act (15 U.S.C. 636(a)(1)), as amended by section 203(a) of this 
        Act, is amended by adding at the end the following:
                    ``(E) Affiliation principles.--Affiliation under 
                any of the circumstances described below is sufficient 
                to establish affiliation for applicants for a loan 
                guaranteed under this subsection:
                            ``(i) Affiliation based on ownership.--
                                    ``(I) In general.--For determining 
                                affiliation based on equity ownership, 
                                a concern is an affiliate of an 
                                individual, concern, or entity that 
                                owns or has the power to control more 
                                than 50 percent of the voting equity of 
                                the concern.
                                    ``(II) Other officers.--If no 
                                individual, concern, or entity is found 
                                to control a concern under subclause 
                                (I), the Administrator shall deem the 
                                board of directors, president, or chief 
                                executive officer (or other officers, 
                                managing members, or partners who 
                                control the management of the concern) 
                                to be in control of the concern.
                                    ``(III) Minority shareholder.--The 
                                Administrator shall deem a minority 
                                shareholder of a concern to be in 
                                control of the concern if that 
                                individual or entity has the ability, 
                                under the charter, by-laws, or 
                                shareholder agreement of the concern, 
                                to prevent a quorum or otherwise block 
                                action by the board of directors or 
                                shareholders of the concern.
                            ``(ii) Affiliation arising under stock 
                        options, convertible securities, and agreements 
                        to merge.--
                                    ``(I) In general.--In determining 
                                the size of a concern, the 
                                Administrator shall--
                                            ``(aa) consider stock 
                                        options, convertible 
                                        securities, and agreements to 
                                        merge (including agreements in 
                                        principle) to have a present 
                                        effect on the power to control 
                                        a concern; and
                                            ``(bb) treat options, 
                                        convertible securities, and 
                                        agreements described in item 
                                        (aa) as though the rights 
                                        granted have been exercised.
                                    ``(II) Agreements to open or 
                                continue negotiations.--An agreement to 
                                open or continue negotiations towards 
                                the possibility of a merger or a sale 
                                of stock at some later date is not 
                                considered an `agreement in principle' 
                                and is not given present effect.
                                    ``(III) Conditions precedent.--
                                Stock options, convertible securities, 
                                and agreements that are subject to 
                                conditions precedent that are incapable 
                                of fulfillment, speculative, 
                                conjectural, or unenforceable under 
                                State or Federal law, or where the 
                                probability of the transaction (or 
                                exercise of the rights) occurring is 
                                shown to be extremely remote, are not 
                                given present effect.
                                    ``(IV) Termination of control.--
                                            ``(aa) In general.--An 
                                        individual, concern, or other 
                                        entity that controls 1 or more 
                                        other concerns cannot use stock 
                                        options, convertible 
                                        securities, or agreements to 
                                        appear to terminate such 
                                        control before actually doing 
                                        so.
                                            ``(bb) Divesting.--The 
                                        Administrator shall not give 
                                        present effect to the ability 
                                        of an individual, concern, or 
                                        other entity to divest all or 
                                        part of their ownership 
                                        interest in a concern in order 
                                        to avoid a finding of 
                                        affiliation.
                            ``(iii) Affiliation based on management.--
                        Affiliation arises where--
                                    ``(I) the chief executive officer 
                                or president of the applicant concern 
                                (or other officers, managing members, 
                                or partners who control the management 
                                of the concern) also controls the 
                                management of 1 or more other concerns;
                                    ``(II) a single individual, 
                                concern, or entity that controls the 
                                board of directors or management of 1 
                                concern also controls the board of 
                                directors or management of 1 of more 
                                other concerns; or
                                    ``(III) a single individual, 
                                concern, or entity controls the 
                                management of the applicant concern 
                                through a management agreement.
                            ``(iv) Affiliation based on identity of 
                        interest.--
                                    ``(I) Definition.--In this clause, 
                                the term `close relative' means--
                                            ``(aa) a spouse, parent, 
                                        child, or sibling; and
                                            ``(bb) the spouse of any 
                                        individual described in item 
                                        (aa).
                                    ``(II) Close relatives.--
                                Affiliation arises when there is an 
                                identity of interest between close 
                                relatives with identical or 
                                substantially identical business or 
                                economic interests, such as where the 
                                close relatives operate concerns in the 
                                same or similar industry in the same 
                                geographic area.
                                    ``(III) Aggregated interests.--If 
                                the Administrator determines that 
                                interests described in subclause (II) 
                                should be aggregated, an individual or 
                                firm may rebut that determination with 
                                evidence showing that the interests 
                                deemed to be affiliated are in fact 
                                separate.
                            ``(v) Affiliation based on franchise and 
                        license agreements.--
                                    ``(I) In general.--The restraints 
                                imposed on a franchisee or licensee by 
                                its franchise or license agreement 
                                generally shall not be considered in 
                                determining whether the franchisor or 
                                licensor is affiliated with an 
                                applicant franchisee or licensee, if 
                                the applicant franchisee or licensee 
                                has the right to profit from its 
                                efforts and bears the risk of loss 
                                commensurate with ownership.
                                    ``(II) Nature of agreement.--For 
                                purposes of subclause (I), the 
                                Administrator shall only consider the 
                                franchise or license agreements of the 
                                applicant concern.
                            ``(vi) Determining the concern's size.--In 
                        determining the size of a concern, the 
                        Administrator counts the receipts, employees, 
                        or the alternate size standard (if applicable) 
                        of the concern whose size is at issue and all 
                        of the domestic and foreign affiliates of the 
                        concern, regardless of whether the affiliates 
                        are organized for profit.
                            ``(vii) Exceptions to affiliation.--The 
                        exceptions to affiliation described in section 
                        121.103(b) of title 13, Code of Federal 
                        Regulations, or any successor regulation, shall 
                        apply.''.
            (2) 504/CDC loans.--Section 502 of the Small Business 
        Investment Act of 1958 (15 U.S.C. 696), as amended by section 
        203(b) of this Act, is amended by adding at the end the 
        following:
            ``(9) Affiliation principles.--Affiliation under any of the 
        circumstances described below is sufficient to establish 
        affiliation for applicants for a loan under this section:
                    ``(A) Affiliation based on ownership.--
                            ``(i) Ownership of another business.--When 
                        the applicant owns more than 50 percent of 
                        another business, the applicant and the other 
                        business are affiliated.
                            ``(ii) Ownership by other businesses.--
                                    ``(I) In general.--When a business 
                                owns more than 50 percent of an 
                                applicant, the business that owns the 
                                applicant is affiliated with the 
                                applicant.
                                    ``(II) Other business owned by 
                                owner of applicant.--If a business 
                                entity owner that owns more than 50 
                                percent of an applicant also owns more 
                                than 50 percent of another business 
                                that operates in the same 3-digit North 
                                American Industry Classification System 
                                subsector as the applicant, then the 
                                business entity owner, the other 
                                business, and the applicant are all 
                                affiliated.
                            ``(iii) Ownership by individuals.--When an 
                        individual owns more than 50 percent of the 
                        applicant and the individual also owns more 
                        than 50 percent of another business entity that 
                        operates in the same 3-digit North American 
                        Industry Classification System subsector as the 
                        applicant, the applicant and the individual 
                        owner's other business entity are affiliated.
                            ``(iv) Less than 50 percent.--When an 
                        applicant does not have an owner that owns more 
                        than 50 percent of the applicant, if an owner 
                        of 20 percent or more of the applicant also 
                        owns more than 50 percent of another business 
                        entity that operates in the same 3-digit North 
                        American Industry Classification System 
                        subsector as the applicant, the applicant and 
                        the owner's other business entity are 
                        affiliated.
                            ``(v) Spouse and minor children.--Ownership 
                        interests of spouses and minor children shall 
                        be combined when determining amount of 
                        ownership interest.
                            ``(vi) Percentage of ownership.--When 
                        determining the percentage of ownership that an 
                        individual owns in a business, the 
                        Administrator shall consider the pro rata 
                        ownership of entities.
                    ``(B) Affiliation arising under stock options, 
                convertible securities, and agreements to merge.--
                            ``(i) In general.--The Administrator 
                        shall--
                                    ``(I) consider stock options, 
                                convertible securities, and agreements 
                                to merge (including agreements in 
                                principle) to have a present effect on 
                                the ownership of an entity; and
                                    ``(II) treat options, convertible 
                                securities, and agreements described in 
                                subclause (I) as though the rights 
                                granted have been exercised.
                            ``(ii) Agreements to open or continue 
                        negotiations.--An agreement to open or continue 
                        negotiations towards the possibility of a 
                        merger or a sale of stock at some later date is 
                        not considered an `agreement in principle' and 
                        is not given present effect.
                            ``(iii) Conditions precedent.--Stock 
                        options, convertible securities, and agreements 
                        that are subject to conditions precedent that 
                        are incapable of fulfillment, speculative, 
                        conjectural, or unenforceable under State or 
                        Federal law, or where the probability of the 
                        transaction (or exercise of the rights) 
                        occurring is shown to be extremely remote, are 
                        not given present effect.
                            ``(iv) Ability to divest.--The 
                        Administrator shall not give present effect to 
                        individuals', concerns', or other entities' 
                        ability to divest all or part of their 
                        ownership interest to avoid a finding of 
                        affiliation.
                    ``(C) Determining the concern's size.--In 
                determining the size of a concern, the Administrator 
                counts the receipts, employees, or the alternate size 
                standard (if applicable) of the concern whose size is 
                at issue and all of the domestic and foreign affiliates 
                of the concern, regardless of whether the affiliates 
                are organized for profit.
                    ``(D) Exceptions to affiliation.--The exceptions to 
                affiliation described in section 121.103(b) of title 
                13, Code of Federal Regulations, or any successor 
                regulation, shall apply.''.
    (b) Franchise Directory.--Not later than 30 days after the date of 
enactment of this Act, the Administration shall publish and maintain on 
the website of the Administration a Franchise Directory, which shall 
contain a list that lenders and certified development companies may use 
in evaluating whether a franchise is eligible for financing from the 
Administration.

SEC. 205. LOAN AUTHORIZATION.

    (a) 7(a) Loans.--Section 7(a)(1) of the Small Business Act (15 
U.S.C. 636(a)(1)), as amended by section 204(a) of this Act, is amended 
by adding at the end the following:
                    ``(F) Loan authorization.--
                            ``(i) In general.--With respect to a loan 
                        made or guaranteed under this subsection, the 
                        Administration shall issue a written agreement 
                        providing the terms and conditions under which 
                        the Administration will make or guarantee the 
                        loan.
                            ``(ii) Not a contract.--A written agreement 
                        issued under clause (i) is not a contract to 
                        make a loan.''.
    (b) 504/CDC Loans.--Section 502 of the Small Business Investment 
Act of 1958 (15 U.S.C. 696), as amended by section 204(b) of this Act, 
is amended by adding at the end the following:
            ``(10) Loan authorization.--
                    ``(A) In general.--With respect to a loan made 
                under this section, the Administration shall issue a 
                written agreement providing the terms and conditions 
                under which the Administration will make the loan.
                    ``(B) Not a contract.--A written agreement issued 
                under subparagraph (A) is not a contract to make a 
                loan.''.

SEC. 206. OVERSIGHT OF SMALL BUSINESS LENDING COMPANIES.

    (a) Definition.--Section 3(r) of the Small Business Act (15 U.S.C. 
632(r)) is amended, in the matter preceding paragraph (1), by striking 
``As used in section 23 of this Act'' and inserting ``In this Act''.
    (b) Capital Requirements; Maximum Number.--Section 7(a)(1) of the 
Small Business Act (15 U.S.C. 636(a)(1)), as amended by section 205(a) 
of this Act, is amended by adding at the end the following:
                    ``(G) Additional provisions relating to small 
                business lending companies.--
                            ``(i) Maximum number.--
                                    ``(I) In general.--Not more than 17 
                                small business lending companies may be 
                                authorized to make loans under this 
                                subsection at any time.
                                    ``(II) Existing small business 
                                lending companies.--
                                            ``(aa) In general.--Except 
                                        as provided in subclause (III), 
                                        each of the 14 small business 
                                        lending companies authorized to 
                                        make loans under this 
                                        subsection as of June 1, 2023 
                                        shall retain such authorization 
                                        on and after the date of 
                                        enactment of this subparagraph.
                                            ``(bb) Loss of 
                                        authorization.--With respect to 
                                        a lender that, as of the date 
                                        of enactment of this 
                                        subparagraph, is authorized as 
                                        a Community Advantage small 
                                        business lending company, that 
                                        lender shall, beginning on that 
                                        date of enactment--

                                                    ``(AA) no longer 
                                                have that 
                                                authorization; and

                                                    ``(BB) be 
                                                designated as a lender 
                                                under the Community 
                                                Advantage Loan Program 
                                                established under 
                                                paragraph (38).

                                    ``(III) Transfer or sale.--The 
                                Administrator shall have the discretion 
                                to authorize the transfer or sale of a 
                                license of a small business lending 
                                company to make loans under this 
                                subsection to another small business 
                                lending company.
                                    ``(IV) Limitation of delegated 
                                authority.--
                                            ``(aa) In general.--
                                        Notwithstanding paragraph (31), 
                                        any small business lending 
                                        company that the Administration 
                                        authorizes after June 1, 2023 
                                        to make loans under this 
                                        subsection shall be ineligible 
                                        for delegated authority from 
                                        the Administration to process, 
                                        close, service, and liquidate 
                                        certain loans made under this 
                                        subsection for the 5-year 
                                        period beginning on the date on 
                                        which the Administration 
                                        authorizes the small business 
                                        lending company to make loans 
                                        under this subsection.
                                            ``(bb) Existing sblcs.--
                                        Item (aa) shall not apply with 
                                        respect to each of the 14 small 
                                        business lending companies 
                                        authorized to make loans under 
                                        this subsection as of June 1, 
                                        2023.
                            ``(ii) Minimum capital requirements.--
                                    ``(I) In general.--Except as 
                                provided in subclauses (II) and (III), 
                                to be authorized to make loans under 
                                this subsection, a small business 
                                lending company shall comply with the 
                                minimum capital requirements in effect 
                                on January 3, 2021.
                                    ``(II) Approved on or after january 
                                4, 2021.--Any small business lending 
                                company authorized by the 
                                Administration to make loans under this 
                                subsection on or after January 4, 2021, 
                                including in the event of a change of 
                                ownership or control, shall maintain, 
                                at a minimum, the greater of--
                                            ``(aa) unencumbered paid-in 
                                        capital and paid-in surplus of 
                                        not less than $5,000,000; or
                                            ``(bb) an amount equal to 
                                        10 percent of the aggregate of 
                                        its share of all outstanding 
                                        loans.
                                    ``(III) Requirements on and after 
                                january 4, 2024.--On and after January 
                                4, 2024, each small business lending 
                                company that makes or acquires a loan 
                                under this subsection shall maintain, 
                                at a minimum, the greater of--
                                            ``(aa) unencumbered paid-in 
                                        capital and paid-in surplus of 
                                        not less than $5,000,000; or
                                            ``(bb) an amount equal to 
                                        10 percent of the aggregate of 
                                        its share of all outstanding 
                                        loans.
                            ``(iii) Criteria for licensing small 
                        business lending companies.--The Administrator 
                        shall use uniform terms for the licensing of 
                        business concerns as small business lending 
                        companies and the participation of those 
                        companies in the programs under this 
                        subsection.''.
    (c) Annual Stress Testing and Reviews.--Section 23(d) of the Small 
Business Act (15 U.S.C. 650(d)) is amended--
            (1) in paragraph (1), by inserting ``In general.--'' after 
        ``(1)'';
            (2) in paragraph (2), by inserting ``Hearing.--'' after 
        ``(2)'';
            (3) by redesignating paragraphs (3) and (4) as paragraphs 
        (4) and (5), respectively;
            (4) by inserting after paragraph (2) the following:
            ``(3) Special supervisory authorities related to small 
        business lending companies.--
                    ``(A) Review and revocation of authority.--
                            ``(i) In general.--The Director of the 
                        Office of Credit Risk Management (in this 
                        paragraph referred to as the `Director')--
                                    ``(I) may review and revoke the 
                                authority of a small business lending 
                                company to make, service, or liquidate 
                                business loans under section 7(a) for 
                                performance, excessive losses, or 
                                predatory lending;
                                    ``(II) shall review and may revoke 
                                the authority of a small business 
                                lending company to make, service, or 
                                liquidate business loans under section 
                                7(a) if--
                                            ``(aa) the early default 
                                        rate for the small business 
                                        lending company exceeds the 
                                        average default rate for all 
                                        small business lending 
                                        companies participating in the 
                                        loan program under section 
                                        7(a);
                                            ``(bb) the small business 
                                        lending company fails to comply 
                                        with the requirements under 
                                        subparagraph (B); or
                                            ``(cc) the Director finds 
                                        in an audit conducted under 
                                        subparagraph (C)(ii) that the 
                                        small business lending company 
                                        is not in compliance with 1 or 
                                        more of the requirements 
                                        described in subparagraph (C); 
                                        and
                                    ``(III) shall revoke the authority 
                                of a small business lending company to 
                                make, service, or liquidate business 
                                loans under section 7(a) if the 
                                Director has determined the small 
                                business lending company has failed to 
                                comply with the requirements in 
                                subclause (II) or (III) of subparagraph 
                                (B)(ii) for 2 or more years in a row.
                            ``(ii) Reporting requirement.--If the 
                        Director revokes the authority of a small 
                        business lending company to make, service, or 
                        liquidate business loans under section 7(a), 
                        the Director shall report the revocation, along 
                        with details and information describing why 
                        that decision was made, to the Office of the 
                        Inspector General of the Administration.
                    ``(B) Annual stress tests.--
                            ``(i) In general.--Each small business 
                        lending company shall--
                                    ``(I) conduct an annual stress test 
                                of the portfolio of the small business 
                                lending company under section 7(a) in 
                                accordance with the requirements under 
                                clause (ii); and
                                    ``(II) report to the Director the 
                                findings of each annual stress test 
                                conducted under subclause (I).
                            ``(ii) Requirements.--Each stress test 
                        conducted under clause (i) shall comply with 
                        the following requirements:
                                    ``(I) The small business lending 
                                company shall use financial data as of 
                                December 31 of the calendar year prior 
                                to the reporting year.
                                    ``(II) The small business lending 
                                company shall use the scenarios 
                                provided by the Director, which shall 
                                reflect a minimum of 2 sets of economic 
                                and financial conditions, including 
                                baseline and severely adverse scenarios 
                                that incorporate consideration of 
                                interest rate risk. The Director shall 
                                provide a description of the scenarios 
                                required to be used by each small 
                                business lending company not later than 
                                February 15 of the reporting year.
                                    ``(III) The board of directors and 
                                senior management of each small 
                                business lending company shall consider 
                                the results of the stress tests 
                                conducted under this subsection in the 
                                normal course of business, including 
                                capital planning, assessment of capital 
                                adequacy, and risk management practices 
                                of the small business lending company.
                    ``(C) Compliance with bank secrecy act and anti-
                money laundering requirements.--
                            ``(i) Definition.--In this subparagraph, 
                        the term `Bank Secrecy Act' means--
                                    ``(I) section 21 of the Federal 
                                Deposit Insurance Act (12 U.S.C. 
                                1829b);
                                    ``(II) chapter 2 of title I of 
                                Public Law 91-508 (12 U.S.C. 1951 et 
                                seq.); and
                                    ``(III) subchapter II of chapter 53 
                                of title 31, United States Code.
                            ``(ii) Annual reviews.--The Director--
                                    ``(I) shall conduct annual reviews 
                                to ensure that small business lending 
                                companies are in compliance with the 
                                requirements contained in the 
                                regulations issued under clause (iii); 
                                and
                                    ``(II) in conducting a review under 
                                subclause (I), may not rely on self-
                                certification by a small business 
                                lending company that the small business 
                                lending company is in compliance with 
                                those requirements.
                            ``(iii) Regulations.--Not later than 1 year 
                        after the date of enactment of the Modernizing 
                        SBA's Business Loan Programs Act of 2023, the 
                        Administrator shall, in consultation with other 
                        appropriate Federal agencies, issue regulations 
                        to provide a framework to ensure that small 
                        business lending companies are in compliance 
                        with the requirements under the Bank Secrecy 
                        Act, including Know Your Customer and anti-
                        money laundering requirements, and any 
                        applicable consumer protection laws, including 
                        the Truth in Lending Act (15 U.S.C. 1601 et 
                        seq.), the Equal Credit Opportunity Act (15 
                        U.S.C. 1691 et seq.), and the Gramm-Leach-
                        Bliley Act (Public Law 106-102; 113 Stat. 
                        1338).'';
            (5) in paragraph (4), as so redesignated, by inserting 
        ``Notification.--'' after ``(4)''; and
            (6) in paragraph (5), as so redesignated, by inserting 
        ``Delegation.--'' after ``(5)''.

SEC. 207. OFFICE OF CREDIT RISK MANAGEMENT.

    Section 47 of the Small Business Act (15 U.S.C. 657t) is amended--
            (1) in subsection (c)--
                    (A) in paragraph (1), by inserting before the 
                period at the end the following: ``with a demonstrated 
                career in or outstanding qualifications or expertise 
                related to finance and financial risk management. The 
                Director shall report directly to the Administrator''; 
                and
                    (B) by adding at the end the following:
            ``(3) Compensation.--The Administrator shall fix the 
        compensation of the Director--
                    ``(A) as necessary to carry out the duties of the 
                Office; and
                    ``(B) in an amount that is not less than the 
                highest rate of basic pay for the Senior Executive 
                Service under section 5382(b) of title 5, United States 
                Code.''; and
            (2) in subsection (h)(2)--
                    (A) in subparagraph (I), by striking ``and'' at the 
                end;
                    (B) in subparagraph (J), by striking the period at 
                the end and inserting a semicolon; and
                    (C) by adding at the end the following:
                    ``(K) the number of 7(a) lenders that had an early 
                default rate of more than 3 percent; and
                    ``(L) an analysis of the median and average credit 
                scores of borrowers relating to early default rates, 
                purchase rates, and charge offs.''.

SEC. 208. DENIED LOAN OR LOAN MODIFICATION REQUEST.

    (a) 7(a) Loans.--Section 7(a)(1) of the Small Business Act (15 
U.S.C. 636(a)(1)), as amended by section 206(b) of this Act, is amended 
by adding at the end the following:
                    ``(H) Denied loan or loan modification request.--
                            ``(i) Role of administrator.--The 
                        Administrator may not intervene or make a final 
                        decision with respect to a request for 
                        reconsideration of a denied loan or loan 
                        modification request made by an applicant or 
                        recipient of a loan under this subsection.
                            ``(ii) Final decision.--Only the Director 
                        of the Office of Financial Assistance may make 
                        a final decision with respect to a request for 
                        reconsideration of a denied loan or loan 
                        modification request made by an applicant or 
                        recipient of a loan under this subsection.''.
    (b) 504/CDC Loans.--Section 502 of the Small Business Investment 
Act of 1958 (15 U.S.C. 696), as amended by section 205(b) of this Act, 
is amended by adding at the end the following:
            ``(11) Denied loan or loan modification request.--
                    ``(A) Role of administrator.--The Administrator may 
                not intervene or make a final decision with respect to 
                a request for reconsideration of a denied loan or loan 
                modification request made by an applicant or recipient 
                of a loan under this section.
                    ``(B) Final decision.--Only the Director of the 
                Office of Financial Assistance may make a final 
                decision with respect to a request for reconsideration 
                of a denied loan or loan modification request made by 
                an applicant or recipient of a loan under this 
                section.''.

SEC. 209. DIRECT LENDING.

    Section 7(a)(1) of the Small Business Act (15 U.S.C. 636(a)(1)), as 
amended by section 208(a) of this Act, is amended by adding at the end 
the following:
                    ``(I) Notification required before direct 
                lending.--Not later than 60 days before the 
                Administration implements any policy or pilot program 
                that would allow the Administration to directly make a 
                loan under this subsection, the Administrator shall 
                submit a notification to Congress for review.''.

SEC. 210. RESTRICTION ON REFINANCING DEBT.

    Section 7(a)(1) of the Small Business Act (15 U.S.C. 636(a)(1)), as 
amended by section 209 of this Act, is amended by adding at the end the 
following:
                    ``(J) Restriction on refinancing debt.--
                            ``(i) Definition.--In this subparagraph, 
                        the term `delegated authority' means status 
                        granted by the Administration to a lender to 
                        allow the lender to process, close, service, 
                        and liquidate certain loans made under this 
                        subsection without prior review by the 
                        Administration.
                            ``(ii) Restriction.--A lender shall be 
                        prohibited from using any delegated authority 
                        under this subsection to refinance any debt 
                        held by the lender, including any loan made 
                        under this subsection.''.

SEC. 211. GAO STUDY.

    Not later than 2 years after the date of enactment of this Act, the 
Comptroller General of the United States shall conduct a study and 
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 that includes--
            (1) an analysis of the use of alternative credit models for 
        loans made under section 7(a) of the Small Business Act (15 
        U.S.C. 636(a)) in an amount of less than $350,000, including--
                    (A) an analysis of whether appropriate guardrails 
                are in place to prevent fraud, waste, and abuse and 
                provide protections for the borrower;
                    (B) an evaluation of the effectiveness of those 
                credit models in reducing barriers to access to capital 
                to underserved and rural communities; and
                    (C) recommendations as to whether improvements can 
                be made by Administration in its use of alternative 
                credit models to prevent waste, fraud, and abuse and to 
                improve access to capital to underserved and rural 
                communities;
            (2) an audit of the operations, staffing, and resources of 
        the Office of Credit Risk Management of the Administration, 
        including the efforts of the Office to implement the new 
        oversight provisions under the amendments made by this title; 
        and
            (3) a survey of the practices of lenders under section 7(a) 
        of the Small Business Act (15 U.S.C. 636(a)) relating to the 
        use of criminal history when determining whether to approve a 
        loan under that section or a similarly sized commercial loan 
        that is not guaranteed by the Administration.
                                                       Calendar No. 158

118th CONGRESS

  1st Session

                                S. 2482

_______________________________________________________________________

                                 A BILL

 To amend the Small Business Act to authorize the Community Advantage 
   Loan Program of the Small Business Administration, and for other 
                               purposes.

_______________________________________________________________________

                             July 25, 2023

                 Read twice and placed on the calendar