[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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