[Congressional Record Volume 145, Number 18 (Tuesday, February 2, 1999)]
[House]
[Pages H286-H288]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  SMALL BUSINESS INVESTMENT COMPANY TECHNICAL CORRECTIONS ACT OF 1999

  Mr. TALENT. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 68) to amend section 20 of the Small Business Act and make 
technical corrections in title III of the Small Business Investment 
Act, as amended.
  The Clerk read as follows:

                                H.R. 68

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Investment 
     Company Technical Corrections Act of 1999''.

     SEC. 2. SBIC PROGRAM.

       (a) In General.--Section 308(i)(2) of the Small Business 
     Investment Act of 1958 (15 U.S.C. 687(i)(2)) is amended by 
     adding at the end the following: ``In this paragraph, the 
     term `interest' includes only the maximum mandatory sum, 
     expressed in dollars or as a percentage rate, that is payable 
     with respect to the business loan amount received by the 
     small business concern, and does not include the value, if 
     any, of contingent obligations, including warrants, royalty, 
     or conversion rights, granting the small business investment 
     company an ownership interest in the equity or increased 
     future revenue of the small business concern receiving the 
     business loan.''.
       (b) Funding Levels.--Section 20 of the Small Business Act 
     (15 U.S.C. 631 note) is amended--
       (1) in subsection (d)(1)(C)(i), by striking 
     ``$800,000,000'' and inserting ``$1,200,000,000''; and
       (2) in subsection (e)(1)(C)(i), by striking 
     ``$900,000,000'' and inserting ``$1,500,000,000''.
       (c) Technical Corrections.--Title III of the Small Business 
     Investment Act of 1958 (15 U.S.C. 661 et seq.) is amended--
       (1) in section 303(g) (15 U.S.C. 683(g)), by striking 
     paragraph (13);

[[Page H287]]

       (2) in section 308 (15 U.S.C. 687) by adding at the end the 
     following:
       ``(j) For the purposes of sections 304 and 305, in any case 
     in which an incorporated or unincorporated business is not 
     required by law to pay Federal income taxes at the enterprise 
     level, but is required to pass income through to its 
     shareholders or partners, an eligible small business or 
     smaller enterprise may be determined by computing the after-
     tax income of such business by deducting from the net income 
     an amount equal to the net income multiplied by the combined 
     marginal Federal and State income tax rate for 
     corporations.''; and
       (3) in section 320 (15 U.S.C. 687m), by striking ``6'' and 
     inserting ``12''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Missouri (Mr. Talent) and the gentlewoman from New York (Ms. Velazquez) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Missouri (Mr. Talent).
  Mr. TALENT. Mr. Speaker, this is an important measure, but before we 
get to it, I yield such time as he may consume to the gentleman from 
Ohio (Mr. Traficant) who has another very important subject he wishes 
to discuss before the House.
  (Mr. TRAFICANT asked and was given permission to speak out of order.)


                     Tribute to Charles Billy Malry

  Mr. TRAFICANT. Mr. Speaker, I want to thank the distinguished 
gentleman for yielding me this time, and I rise to pay tribute to one 
of ours that has passed on, Charles Billy Malry, the gentleman, the 
tall black fellow that stood there working for the Clerk who for many 
years, 16 years, served this House. Five children he leaves, 
grandchildren, but more importantly he loved boxing, he loved 
photography, but he loved this House and he loved, admired and 
respected the Members of this House.
  On behalf of everyone who knows Bill and was a friend of Bill, who 
always had a smile and always engaged us, always willing to contact us 
for need and to all his family, our deepest sympathy. The House will 
certainly miss his tremendous service.
  Mr. TALENT. Mr. Speaker, I yield myself such time as I may consume.
  I thank the gentleman for remembering Mr. Malry. It is a good 
opportunity for us all to remember the staff who supports our work and 
supports the work we do on behalf of the country. They are, in a very 
enduring sense, the House, and the Congress, and I appreciate the 
gentleman and his comments and join them.
  Mr. Speaker, let me begin by thanking my colleague, the ranking 
member on the Committee on Small Business, the gentlewoman from New 
York (Ms. Velazquez), for her assistance in moving the bill and her 
help in fashioning it.
  Mr. Speaker, the purpose of H.R. 68 is to make technical corrections 
to Title III of the Small Business Investment Act. Title III authorizes 
the Small Business Investment Company program. Small business 
investment companies, or SBICs, are venture capital firms licensed by 
the Small Business Administration that use SBA guarantees to leverage 
private capital for investment in small businesses. The technical 
corrections proposed by H.R. 68 will improve the flexibility of the 
SBIC program and allow increased access to this program by small 
business.
  Congress revamped the SBIC program during the 103rd Congress to 
provide for a new form of leverage geared specifically toward equity 
investment in small businesses. Over the past few years as the new 
program has become established, certain deficiencies have come to 
light; and, in addition, certain statutory provisions have become 
obsolete.
  H.R. 68 seeks to correct these deficiencies and remove provisions 
that may produce confusion due to changes in law and the character of 
the SBIC program.
  First, H.R. 68 will modify the SBIC program to exclude contingent 
obligations from the calculation of interest and loans made by SBICs. 
These contingent obligations include financial tools like royalties, 
warrants, conversion rights and options.
  Second, under H.R. 68, a provision in the Small Business Investment 
Act that reserves leverage for smaller SBICs will also be repealed. 
Changes in SBA policy regarding applications for leverage, statutory 
changes in the availability of commitments for SBICs and the makeup of 
the industry present the possibility that that provision may in fact 
create conflicts and confusion.
  Third, H.R. 68 will increase the authorization levels for the 
participating securities segment of the SBIC program. The authorization 
levels will rise from $800 million to $1.2 billion in fiscal year 1999 
and from $900 million to $1.5 billion in fiscal year 2000. These 
increases are necessary to meet the rising demand for this section of 
the SBIC program. Mr. Speaker, they in no way reflect the general 
revenue subsidy, simply the amount in the authorization levels for the 
program itself.
  Fourth, H.R. 68 modifies the test for determining the eligibility of 
small businesses for SBIC financing. Current statutory language does 
not account for small businesses organized in pass-through tax 
structures such as S corporations, limited liability companies and 
partnerships.
  Finally, H.R. 68 will allow the SBA greater flexibility in issuing 
trust certificates to finance the SBIC program's investments in small 
businesses. Current law allows fundings to be issued every 6 months or 
more frequently. This inhibits the ability of the SBICs and the SBA to 
form pools of certificates that are large enough to generate serious 
investor interest. Allowing more time between fundings will permit SBA 
and the industry to form larger pools for sale in the market, thereby 
increasing investor interest and improving the interest rates for the 
small businesses financed.
  Mr. Speaker, this bill is important work. It will have a real impact 
on the businesses in this country seeking start-up financing and, at 
the end of the day, that is the most important part of our job.
  Let me again thank the gentlewoman from New York (Ms. Velazquez) and 
her staff for their assistance in moving the measure before us.
  Mr. Speaker, I urge my colleagues to support H.R. 68.
  Mr. Speaker, I reserve the balance of my time.
  Ms. VELAZQUEZ. Mr. Speaker, I yield myself such time as I may 
consume. I would like to thank the gentleman from Missouri for moving 
forward this bill in a bipartisan process and including me in this 
process.
  I rise in strong support of H.R. 68, the Small Business Investment 
Company Technical Corrections Act. As a cosponsor of last year's bill 
and an original cosponsor of this legislation, I strongly support the 
improvements we will consider to the Small Business Investment Act and 
the Small Business Investment Company program today. These changes will 
only serve to make the SBIC program more efficient and responsive to 
the needs of small entrepreneurs.
  There is no question that the value of SBICs has been felt across 
this Nation. SBICs have invested nearly $15 billion in long-term debt 
and equity capital to over 90,000 small businesses. Over the past 
years, SBICs have given companies like Intel Corporation, Federal 
Express and America Online the push they needed to succeed. And because 
of SBICs, millions of jobs have been created and billions of dollars 
have been added into our economy.
  Even as America experiences the longest period of economic growth in 
decades, there are still many disadvantaged urban and rural communities 
that are being left behind. One way of bringing economic development 
and prosperity to more Americans is through the SBIC program.
  In fact, SBICs are such a powerful tool that the President's new 
economic development initiative for these distressed communities, which 
he announced in the State of the Union address, is based on the solid 
framework of the SBIC program. By passing today's legislation, we are 
answering the President's challenge and making it easier for small 
businesses, especially in those targeted urban and rural areas, to 
access the capital that they need.
  Today's legislation ensures that the next Fed Ex's and AOLs of this 
country continue to have a fighting chance. The proposal is simple. It 
will make five technical corrections to the Small Business Investment 
Company Act that will help SBICs and small businesses alike. By 
streamlining the process and increasing flexibility, SBICs will be able 
to creatively finance more businesses.

[[Page H288]]

  The changes under discussion today will provide SBICs and small 
business with important tools like equity features. This proposal will 
not only improve a business' cash flow but will also create a sound 
investment for the SBIC.
  Recently we have also seen the SBIC program expand into new areas. 
Last year we witnessed the creation of two women-owned SBICs and the 
establishment of the first Hispanic-owned firm. By increasing funding 
levels, we can build on the growing popularity of the SBIC program and 
make it a vehicle for achieving greater investment returns from 
historically underserved markets, such as women, minorities and inner 
cities.
  Additionally, by giving the SBIC program greater flexibility and 
ensuring investment guarantees, small businesses will be assured lower 
interest rates. The bill also confirms that most small businesses, 
regardless of their chosen business form, are eligible for SBIC 
financing.
  Finally, we would clarify SBA's role in ensuring equitable 
distribution and management of its participating securities to SBICs of 
all sizes. These changes are part of an ongoing process that will 
enable us to provide creative financing to more small businesses more 
efficiently.
  I am pleased to join the distinguished chairman in support of the 
proposed correction, and I urge the adoption of this legislation.
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from Illinois (Mr. Davis).
  Mr. DAVIS of Illinois. Mr. Speaker, first of all let me commend the 
gentleman from Missouri (Mr. Talent) and the gentlewoman from New York 
(Ms. Velazquez) for bringing this important legislation to the floor.
  I rise today in support of H.R. 68, the Small Business Investment 
Company Technical Corrections Act. Congress created the Small Business 
Investment Company program to ensure that independent small businesses 
have access to long-term financial and venture capital resources. In my 
district as well as districts throughout America, there are many small 
businesses eager to take advantage of these resources, resources that 
have been made available to them by SBICs which offer a wealth of 
opportunity, such as long-term loans of up to 20 years, all funds for 
working capital and equipment, or help for companies to expand or 
renovate their facilities.
  Mr. Speaker, I believe that this bill will add another layer of 
financing for our Nation's budding small businesses. I urge all of my 
colleagues to vote in favor of it.
  We all know that small businesses are the foundation of our economy, 
and any effort to keep them alive, viable and thriving is worthy of our 
support and the support of all Members of this distinguished body. 
Therefore, again, I am pleased to join with my colleagues on the 
Committee on Small Business.
  Again, I commend and congratulate the chairman, the gentleman from 
Missouri (Mr. Talent) and the ranking member, the gentlewoman from New 
York (Ms. Velazquez), and urge passage of this important legislation.
  Ms. VELAZQUEZ. Mr. Speaker, I yield such time as he may consume to 
the gentleman from Kansas (Mr. Moore).
  (Mr. MOORE asked and was given permission to revise and extend his 
remarks)
  Mr. MOORE. Mr. Speaker, today I am speaking in support of H.R. 68, 
the Small Business Investment Company Technical Corrections Act, 
because the success of small businesses is ultimately linked to their 
ability to obtain investment capital.
  The Small Business Investment Act has largely met the growing demands 
to obtain credit and equity investment capital. This is evident in my 
own district where an SBIC, Kansas City equity partners, invested in 
Organized Living, a local storage organization business. Today, through 
the assistance of the SBIC, this business has grown to a 6-store, 20-
plus million dollar storage company.
  The changes offered in this bill will strengthen these public/private 
partnerships to provide small businesses like Organized Living greater 
access to investment capital. It will also lower interest rates on 
loans and better cash flow. These improvements will allow small 
businesses to continue to create jobs and add billions of dollars to 
our economy.
  Mr. Speaker, as a newly-appointed member of the Committee on Small 
Business and an original cosponsor of H.R. 68, I urge my colleagues to 
support this measure.
  Ms. VELAZQUEZ. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, the biggest challenge facing our Nation's business is 
access to capital. For small businesses, access to capital means access 
to opportunity, and by passing the Small Business Investment Company 
Technical Corrections Act today, we can take an important step toward 
giving small businesses a chance to take advantage of that opportunity.
  The SBIC program has an impressive history of helping small 
businesses grow and expand. The work done by SBIC is especially 
critical now as everyday more and more private venture dollars are sent 
overseas to help support companies that compete with U.S. businesses.
  The SBIC program helps level the playing field for American business 
by focusing solely on helping domestic small businesses. These are 
companies that create the bulk of American jobs.
  Furthermore, SBICs fill a unique gap by providing capital to 
companies that need smaller loans which are not generally made by large 
banks or lending institutions. The competitiveness that SBIC provides 
our small businesses helps strengthen our American economy.
  The changes that will result from H.R. 68 will provide SBICs with the 
flexibility to offer more loans, increase the amount of available 
funding and lower interest rates.
  Today's measure will help SBICs build on their already impressive 
work and pave the way for future small business success stories. I urge 
everyone to support the Small Business Investment Company Technical 
Corrections Act. Vote yes on H.R. 68.
  Mr. Speaker, I yield back the balance of my time.
  Mr. TALENT. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, we have had discussion here on the floor about the 
importance of this bill, and I appreciate the gentlewoman's comments 
about the importance of this program. It is the only equity investment 
program as opposed to loan program in which the Federal Government 
plays a part for small business and it is therefore particularly 
important.
  Those of us who are familiar with small business start-ups and 
expansion know that there are many small businesses that need 
investment, rather than additional loans. They are carrying enough debt 
but they needed some additional money put into the business. The SBIC 
program is the avenue for accomplishing that. We have nurtured it and 
shepherded it over the years and it is doing extremely well.
  This bill is necessary in order for the program to continue moving 
forward, and I would appreciate the House's support for H.R. 68.
  Once again, I want to express my appreciation to the distinguished 
gentlewoman from New York (Ms. Velazquez).
  Mr. Speaker, I have no more speakers and I yield back the balance of 
my time.
  The SPEAKER pro tempore (Mr. Burr of North Carolina). The question is 
on the motion offered by the gentleman from Missouri (Mr. Talent) that 
the House suspend the rules and pass the bill, H.R. 68, as amended.
  The question was taken.
  Mr. TALENT. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

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