[Congressional Record Volume 143, Number 61 (Monday, May 12, 1997)]
[Senate]
[Pages S4321-S4322]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. D'AMATO:
  S. 735. A bill to amend title 10, United States Code, to restore the 
Department of Defense loan guarantee program for small and medium-sized 
business concerns that are economically dependent on defense 
expenditures; to the Committee on Armed Services.


the small business administration defense loan and technical assistance 
                       loan extension act of 1997

 Mr. D'AMATO. Mr. President, I introduce legislation that will 
extend the Small Business Administration Defense Loan and Technical 
Assistance [DELTA] Loan Program. There are many areas in the country 
still in the process of trying to transition from defense into 
commercial product lines. The proposed legislation would extend the 
program to September 30, 1999, and broadens the eligibility to include 
companies that derived at least 25 percent of its sales from defense-
related contracts in any 1 of 7 prior years and increases the loan 
guarantee to 90 percent. Since the funds have already been appropriated 
no additional funds are required.
  Presently under the current DELTA Program, a company must have 25 
percent of its sales coming from defense contracts in the prior year 
and guarantees 75 percent of the loan. The current DELTA Program has a 
sunset clause which goes into effect at the end of fiscal year 1998.
  Without this legislation, the DELTA Program expires before companies 
have been given ample opportunity to make this very difficult 
transition. We have an obligation to provide extended support for small 
businesses in areas that have been hard hit by defense downsizing.
  If the DELTA Program is allowed to expire, all the undedicated monies 
would revert back to the General Treasury. Of the $30 million 
appropriated, only slightly more than $3 million has been utilized.
  Mr. President, I urge my colleagues on both sides of the aisle to 
join me in cosponsoring this important legislation.
  Mr. President, I ask unanimous consent that the complete text of the 
bill be placed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 735

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. RESTORATION OF LOAN GUARANTEE PROGRAM FOR DEFENSE 
                   DEPENDENT SMALL AND MEDIUM-SIZED BUSINESS 
                   CONCERNS.

       (a) DELTA Loan Guarantee Program.--(1) Chapter 148 of title 
     10, United States Code, is amended by inserting before 
     section 2525 the following new section:

     ``Sec. 2524. Loan guarantees for defense dependent small and 
       medium-sized business concerns

       ``(a) Loan Guarantees Authorized.--The Secretary of Defense 
     may provide support under this section for programs sponsored 
     by the Federal Government, regional entities, States, local 
     governments, and private entities and nonprofit organizations 
     that assist small business concerns and medium-sized business 
     concerns that are economically dependent on defense 
     expenditures to acquire dual-use capabilities through the 
     provision of loan guarantees to such business concerns under 
     the terms and conditions specified under this section and 
     other applicable law.
       ``(b) Transfer of Administration.--(1) The Secretary of 
     Defense may enter into a memorandum of understanding with the 
     Administrator of the Small Business Administration, the 
     Administrator of the Economic Development Administration of 
     the Department of Commerce, or the head of any other Federal 
     agency having expertise regarding the provision of loan 
     guarantees, under which the agency may--
       ``(A) process applications for loan guarantees under this 
     section;
       ``(B) guarantee repayment of the resulting loans; and
       ``(C) provide any other services to the Secretary to 
     administer the loan guarantee program under this section.
       ``(2) From funds made available for the loan guarantee 
     program under this section, the Secretary of Defense may 
     transfer to the agency or agencies that are parties to the 
     memorandum of understanding such sums as may be necessary for 
     the agency or agencies to carry out activities under the loan 
     guarantee program.
       ``(3) The Secretary of Defense shall enter into the 
     memorandum of understanding authorized by paragraph (1) 
     within 60 days after the date of the enactment of this 
     section.
       ``(c) Condition on Operation.--The Secretary shall carry 
     out the loan guarantee program authorized under this section 
     during any fiscal year for which funds are specifically made 
     available to cover the costs of loan guarantees to be issued 
     pursuant to such section.
       ``(d) Special Requirements Regarding Loan Guarantees.--(1) 
     Competitive procedures shall be used in the selection of 
     small business concerns and medium-sized business concerns to 
     receive loan guarantees under this section.
       ``(2) The criteria used for the selection of a small 
     business concern or medium-sized business concern to receive 
     a loan guarantee under this section shall include the 
     following:
       ``(A) The extent to which the loans to be guaranteed would 
     support the retention of defense workers whose employment 
     would otherwise be permanently or temporarily terminated as a 
     result of reductions in expenditures by the United States for 
     defense, the termination or cancellation of a defense 
     contract, the failure to proceed with an approved major 
     weapon system, the merger or consolidation of the operations 
     of a defense contractor, or the closure or realignment of a 
     military installation.
       ``(B) The extent to which the loans to be guaranteed would 
     stimulate job creation and new economic activities in 
     communities most adversely affected by reductions in 
     expenditures by the United States for defense, the 
     termination or cancellation of a defense contract, the 
     failure to proceed with an approved major weapon system, the 
     merger or consolidation of the operations of a defense 
     contractor, or the closure or realignment of a military 
     installation.
       ``(C) The extent to which the loans to be guaranteed would 
     be used to acquire (or permit the use of other funds to 
     acquire) capital equipment to modernize or expand the 
     facilities of the borrower to enable the borrower to remain 
     in the national technology and industrial base available 
     to the Department of Defense.

[[Page S4322]]

       ``(3) Except as provided in paragraph (4), to be eligible 
     for a loan guarantee under this section, a borrower must 
     demonstrate to the satisfaction of the Secretary that, during 
     any one of the seven preceding operating years of the 
     borrower, at least 25 percent of the value of the borrower's 
     sales were derived from--
       ``(A) contracts with the Department of Defense or the 
     defense-related activities of the Department of Energy; or
       ``(B) subcontracts in support of defense-related prime 
     contracts.
       ``(4)(A) An individual described in subparagraph (B) shall 
     be eligible for a loan guarantee under this section to 
     establish, or acquire and operate, a small business concern 
     in an area that the Secretary determines is (or reasonably 
     can be expected to be) detrimentally affected by reductions 
     in defense spending, the termination or cancellation of a 
     defense contract, the failure to proceed with an approved 
     major weapon system, the merger or consolidation of the 
     operations of a defense contractor, or the closure or 
     realignment of a military installation.
       ``(B) An individual referred to in subparagraph (A) is an 
     individual--
       ``(i) who is a former employee of the Department of Defense 
     or a defense contractor; and
       ``(ii) whose employment was terminated as a result of 
     reductions in defense spending, the termination or 
     cancellation of a defense contract, the failure to proceed 
     with an approved major weapon system, the merger or 
     consolidation of the operations of a defense contractor, or 
     the closure or realignment of a military installation.
       ``(e) Maximum Amount of Loan Principal.--The maximum amount 
     of loan principal for which the Secretary may provide a 
     guarantee under this section during a fiscal year may not 
     exceed--
       ``(1) $1,250,000, with respect to a small business concern; 
     and
       ``(2) $10,000,000 with respect to a medium-sized business 
     concern.
       ``(f) Loan Guaranty Rate.--The maximum allowable guarantee 
     percentage for loans guaranteed under this section may not 
     exceed 90 percent.
       ``(g) Allocation of Funds Between Small and Medium 
     Businesses.--The total amount available for a fiscal year to 
     cover the costs of loan guarantees under this section shall 
     be divided between small business concerns and medium-sized 
     business concerns as follows:
       ``(A) 60 percent for small business concerns.
       ``(B) 40 percent for medium-sized business concerns.
       ``(h) Medium-Sized Business Concern Defined.--In this 
     section, the term `medium-sized business concern' means a 
     business concern that is not more than two times the maximum 
     size specified by the Administrator of the Small Business 
     Administration for purposes of determining whether a business 
     concern furnishing a product or service is a small business 
     concern.''.
       (2) The table of sections at the beginning of subchapter IV 
     of such chapter is amended by inserting before the item 
     relating to section 2525 the following new item:

``2524. Loan guarantees for defense dependent small- and medium-sized 
              business concerns.''.

       (b) Continued Availability of Existing Funds.--The funds 
     made available under the second proviso under the heading 
     ``Research, Development, Test and Evaluation, Defense-Wide'' 
     in Public Law 103-335 (108 Stat. 2613) shall be available 
     until September 30, 1999--
       (1) to cover the costs (as defined in section 502(5) of the 
     Federal Credit Reform Act of 1990 (2 U.S.C. 661a(5))) of loan 
     guarantees issued under section 2524 of title 10, United 
     States Code, as added by subsection (a); and
       (2) to cover the reasonable costs of the administration of 
     loan guarantees referred to in such section.

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