[Congressional Record Volume 151, Number 167 (Wednesday, December 21, 2005)]
[Senate]
[Pages S14322-S14326]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE:
  S. 2162. A bill to foster local development by facilitating the 
delivery of financial assistance to small businesses, and for other 
purposes; to the Committee on Small Business and Entrepreneurship.

[[Page S14323]]

  Ms. SNOWE. Mr. President, I rise today to introduce the ``Local 
Development Business Loan Program Act of 2005.'' This bill will improve 
the Small Business Administration's (SBA) Certified Development Company 
Loan Program, also known as the ``504 Loan Program,'' by streamlining 
the lending process and providing small businesses with greater 
opportunities to obtain affordable financing. The 504 Loan Program 
provides small businesses with long-term, fixed-rate financing for real 
estate and machinery.
  As Chair of the Senate Committee on Small Business and 
Entrepreneurship, one of my primary responsibilities is to ensure small 
businesses are afforded the best possible environment to grow and 
flourish. The fundamental purpose of the SBA is to maintain and 
strengthen the nation's economy by aiding, counseling, assisting, and 
protecting the interests of small business concerns. This bill would 
strengthen the SBA's ability to pursue those goals.
  The legislation responds to one of the primary needs of small 
businesses: access to affordable capital. For many small businesses, 
expansion plans face constraints imposed by facilities that are too 
small, or equipment that has insufficient capacity or outdated 
features. These small businesses often lack capital to remedy these 
needs, and without the SBA they would be limited to obtaining short-
term financing with higher, often variable, rates. As a result, the 504 
loan program is a key element of these small businesses' eventual 
success, because the program provides long-term capital, at fixed 
rates, that allows businesses to obtain new facilities, expand existing 
facilities, and update their machinery.
  In Fiscal Year 2004, the SBA's financing programs, combined, 
supported over $20 billion in loans and venture capital for small 
businesses. In the 504 program alone, small businesses obtained 8,357 
loans in 2004. Through those loans the SBA guaranteed over $4 billion 
in financing. The SBA portion of each 504 program loan is only 40 
percent of the total loan size. This program thus produced 
approximately $10 billion in financing for small businesses in 2004! 
That financing allowed small businesses to create or retain 140,000 
jobs in 2004.
  Although the 504 program is already assisting entrepreneurial small 
businesses throughout the nation, it can be improved. The program works 
by combining in each financing package provided to a small business a 
loan from a Certified Development Company (CDC) that is guaranteed by 
the SBA, this is 40 percent of the total package; a non-guaranteed loan 
provided by a private ``first-mortgage'' lender, 50 percent of the 
total package; and a 10 percent down-payment provided by the small 
business. This bill offers improvements to all three aspects of the 
program, to increase the program's efficiency and impact. If approved 
by the Congress and signed into law, this bill will increase the number 
of small businesses that can utilize the program to grow and succeed.
  Job creation and retention is a bedrock element of local development 
efforts throughout the country. One of the statutory purposes of the 
504 loan program is to create new jobs and to help small businesses 
retain existing jobs. This bill's purpose is to further strengthen the 
local development impact of the 504 loan program. To reflect that, the 
bill re-names the 504 loan program as the ``Local Development Business 
Loan Program'' (Local Development Program). This new name will also 
help borrowers to understand the intent of the program; many small 
business owners had commented to the Committee that the name ``504 
program'' was neither clear nor indicative of the program's purposes. 
The bill will not require the SBA to waste money by discarding existing 
program materials that refer to the previous name; the SBA may continue 
to use those materials, but it will use the new name on any new 
materials produced after the bill's enactment.
  If the Local Development Program continues to grow at its recent 
pace, it may exceed $6 billion in guaranteed loans during 2006. The 
bill would authorize a maximum program level of $8 billion in 
guaranteed loans in fiscal year 2007, and $8.5 billion for fiscal year 
2008.
  This legislation will also reduce regulatory barriers that have 
constrained CDCs from expanding their operations into new areas. By 
increasing competitive opportunities for CDCs, the bill seeks to 
increase the number and qualify of financing options available to small 
businesses. For instance, existing SBA regulations require CDCs to have 
a separate loan committee for each State and to account for all revenue 
and expenses separately for each state. Regulations of this type have 
made compliance both costly and difficult and have deterred many CDCs 
from expanding into new areas. Simplifying these regulations will 
result in increased access to capital for small business.
  The bill allows borrowers to provide more than the required minimum 
amount of equity when initiating their loan, and to use the excess 
equity to reduce the amount of the first-lien mortgage made by a 
private lender in the program. By contributing a larger down-payment at 
the onset of the loan, this provision will provide an opportunity for 
these borrowers to reduce their periodic payment obligations.
  This legislation would also designate Local Development Program loans 
that qualify under the New Markets Tax Credit Program as a public 
policy goal under the Local Development Program, and thus make them 
eligible for larger financing packages. The New Market Tax Credit 
Program permits taxpayers to receive a credit against Federal income 
taxes for making qualified equity investments in designated Community 
Development Entities.
  The Act will also permit the ownership interest of two or more small 
business owners to be combined to determine whether the small business 
is 51 percent owned by minorities, women, or veterans in order to 
qualify as a business eligible for a public policy loan. The Act's goal 
of improving access to capital for small businesses is also furthered 
by another provision that permits Local Development Program borrowers 
to obtain financing in the maximum amount permitted under this program 
and also under the SBA's ``7(a) loan program.''
  This legislation would also allow a borrower to refinance a limited 
amount of existing debt. The amount that could be refinanced could not 
exceed 50 percent of the expansion project funded by the loan, and 
would be limited to certain situations. By giving these small 
businesses the opportunity to refinance and obtain lower-cost capital, 
the bill would provide them a greater chance to succeed.
  The bill would also eliminate a fee now imposed on the first mortgage 
lenders, private banks, in a Local Development Program financing 
package. The lender's fee is a one-time fee equal to 0.5 percent of the 
first mortgage loan. Currently, the first mortgage lenders pass this 
fee on to CDCs and to borrowers. The bill will not increase the total 
fees paid by the CDCs or the borrowers, but clarifies that the CDC's 
stipulated annual fee would be increased by 0.06 percent, 6/100ths of 
one percent, and the borrower's stipulated fee would increase by 
approximately 0.06 percent, to replace the fees currently imposed on 
CDCs and borrowers by private lenders. In other words, instead of a fee 
imposed on CDCs and borrowers by the private lenders, which is not 
always clearly identifiable to those outside the program, this 
provision will specify the fee be paid directly by the CDCs and 
borrowers. It is hoped that this provision will clarify the fee 
obligations owed within the program, and will clearly identify to banks 
the total costs of participating in the program.
  The SBA's current 504 Program provides our Nation's small businesses 
with low-cost, long-term financing that is absolutely critical to 
starting and developing a successful business. In turn, small 
businesses create the majority of new jobs created in the United 
States. This program, re-named as the Local Development Business Loan 
Program, will continue to help small businesses create jobs and support 
their local communities. In fact, the provisions in this bill will 
improve those efforts significantly.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

[[Page S14324]]

                                S. 2162

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

     SECTION 1. SHORT TITLE; DEFINITION.

       (a) Short Title.--This Act may be cited as the ``Local 
     Development Business Loan Program Act of 2005''.
       (b) Definition.--In this Act, the term ``Administrator'' 
     means the Administrator of the Small Business Administration.

     SEC. 2. DEVELOPMENT COMPANY LOAN PROGRAMS.

       (a) Title of Program.--Title V of the Small Business 
     Investment Act of 1958 (15 U.S.C. 695 et seq.) is amended by 
     adding at the end the following:

     ``SEC. 511. PROGRAM TITLE.

       ``The programs authorized by this title shall be known as 
     the `Local Development Business Loan Program'.''.
       (b) Existing Materials.--The Administrator may use 
     informational materials created, or that were in the process 
     of being created, before the date of enactment of this Act 
     that do not refer to a program under title V of the Small 
     Business Investment Act of 1958 (15 U.S.C. 695 et seq.) as 
     the ``Local Development Business Loan Program''.
       (c) New Materials.--Any informational materials created by 
     the Administrator on or after the date of enactment of this 
     Act shall refer to any program under title V of the Small 
     Business Investment Act of 1958 (15 U.S.C. 695 et seq.) as 
     the ``Local Development Business Loan Program''.

     SEC. 3. PROGRAM AUTHORIZATIONS.

       Section 20 of the Small Business Act (15 U.S.C. 631 note) 
     is amended by adding at the end the following:
       ``(f) Fiscal Year 2007.--For the program authorized under 
     section 7(a)(13) of this Act and the Local Development 
     Business Loan Program under the Small Business Investment Act 
     of 1958, the Administrator is authorized to make 
     $8,000,000,000 in financings, and there are authorized to be 
     appropriated to the Administrator such sums as may be 
     necessary to carry out such programs.
       ``(g) Fiscal Year 2008.--For the program authorized under 
     section 7(a)(13) of this Act and the Local Development 
     Business Loan Program under the Small Business Investment Act 
     of 1958, the Administrator is authorized to make 
     $8,500,000,000 in financings, and there are authorized to be 
     appropriated to the Administrator such sums as may be 
     necessary to carry out such programs.''.

     SEC. 4. LOAN LIQUIDATIONS.

       Section 510 of the Small Business Investment Act of 1958 
     (15 U.S.C. 697g) is amended--
       (1) by redesignating subsection (e) as subsection (g); and
       (2) by inserting after subsection (d) the following:
       ``(e) Participation.--
       ``(1) In general.--Any qualified State or local development 
     company which elects not to apply for authority to foreclose 
     and liquidate defaulted loans under this section, or which 
     the Administrator determines to be ineligible for such 
     authority, shall contract with a qualified third-party to 
     perform foreclosure and liquidation of defaulted loans in its 
     portfolio. The contract shall be contingent upon approval by 
     the Administrator with respect to the qualifications of the 
     contractor and the terms and conditions of liquidation 
     activities.
       ``(2) Commencement.--The provisions of this subsection 
     shall not require any development company to liquidate 
     defaulted loans until the Administrator has adopted and 
     implemented a program to compensate and reimburse development 
     companies, as provided under subsection (f).
       ``(f) Compensation and Reimbursement.--
       ``(1) Reimbursement of expenses.--The Administrator shall 
     reimburse each qualified State or local development company 
     for all expenses paid by such company as part of the 
     foreclosure and liquidation activities, if the expenses--
       ``(A) were approved in advance by the Administrator, either 
     specifically or generally; or
       ``(B) were incurred by the development company on an 
     emergency basis without prior approval from the 
     Administrator, if the Administrator determines that the 
     expenses were reasonable and appropriate.
       ``(2) Compensation for results.--The Administrator shall 
     develop a schedule to compensate and provide an incentive to 
     qualified State or local development companies that foreclose 
     and liquidate defaulted loans. The schedule shall be based on 
     a percentage of the net amount recovered, but shall not 
     exceed a maximum amount. The schedule shall not apply to any 
     foreclosure which is conducted pursuant to a contract between 
     a development company and a qualified third party to perform 
     the foreclosure and liquidation.''.

     SEC. 5. ADDITIONAL EQUITY INJECTIONS.

       Section 502(3)(B)(ii) of the Small Business Investment Act 
     of 1958 (15 U.S.C. 696(3)(B)(ii)) is amended to read as 
     follows:
       ``(ii) Funding from institutions.--If a small business 
     concern--

       ``(I) provides the minimum contribution required under 
     subparagraph (C), not less than 50 percent of the total cost 
     of any project financed under clause (i), (ii), or (iii) of 
     subparagraph (C) shall come from the institutions described 
     in subclauses (I), (II), and (III) of clause (i); and
       ``(II) provides more than the minimum contribution required 
     under subparagraph (C), any excess contribution may be used 
     to reduce the amount required from the institutions described 
     in subclauses (I), (II), and (III) of clause (i), except that 
     the amount from such institutions may not be reduced to an 
     amount that is less than the amount of the loan made by the 
     Administrator.''.

     SEC. 6. BUSINESSES IN LOW-INCOME AREAS.

       Section 501(d)(3)(A) of the Small Business Investment Act 
     of 1958 (15 U.S.C. 695(d)(3)(A)) is amended by inserting 
     after ``business district revitalization,'' the following: 
     ``or expansion of businesses in low-income communities which 
     would be eligible for a new markets tax credit pursuant to 
     section 45D(a) of the Internal Revenue Code of 1986, or 
     implementing regulations issued thereunder,''.

     SEC. 7. COMBINATIONS OF CERTAIN GOALS.

       Section 501(e) of the Small Business Investment Act of 1958 
     (15 U.S.C. 695(e)) is amended by adding at the end the 
     following:
       ``(7) A small business concern that is unconditionally 
     owned by more than 1 individual, or a corporation, the stock 
     of which is owned by more than 1 individual, shall be deemed 
     to have achieved a public policy goal required under 
     subsection (d)(3) if a combined ownership share of not less 
     than 51 percent is held by individuals who are in 1 of the 
     groups described in subparagraph (C) or (E) of subsection 
     (d)(3).''.

     SEC. 8. MAXIMUM 504 AND 7(A) LOAN ELIGIBILITY.

       Section 502(2) of the Small Business Investment Act of 1958 
     (15 U.S.C. 696(2)) is amended by adding at the end the 
     following:
       ``(C) Combination financing.--Notwithstanding any other 
     provision of law, financing under this title may be provided 
     to a borrower in the maximum amount provided in this 
     subsection, and a loan guarantee under section 7(a) of the 
     Small Business Act may be provided to the same borrower in 
     the maximum amount provided in section 7(a)(3)(A) of such 
     Act, to the extent that the borrower otherwise qualifies for 
     such assistance.''.

     SEC. 9. REFINANCING.

       Section 502 of the Small Business Investment Act of 1958 
     (15 U.S.C. 696) is amended by adding at the end the 
     following:
       ``(7) Permissible debt refinancing.--
       ``(A) In general.--Any financing approved under this title 
     may include a limited amount of debt refinancing.
       ``(B) Expansions.--If the project involves expansion of a 
     small business concern which has existing indebtedness 
     collateralized by fixed assets, any amount of existing 
     indebtedness that does not exceed \1/2\ of the project cost 
     of the expansion may be refinanced and added to the expansion 
     cost, providing that--
       ``(i) the proceeds of the indebtedness were used to acquire 
     land, including a building situated thereon, to construct a 
     building thereon, or to purchase equipment;
       ``(ii) the borrower has been current on all payments due on 
     the existing debt for at least the preceding year; and
       ``(iii) the financing under section 504 will provide better 
     terms or rate of interest than exists on the debt at the time 
     of refinancing.''.

     SEC. 10. FEES.

       (a) In General.--Section 503(d) of the Small Business 
     Investment Act of l958 (15 U.S.C. 697(d)) is amended--
       (1) by striking paragraph (2);
       (2) by redesignating paragraph (3) as paragraph (2); and
       (3) in paragraph (2), as so redesignated, by striking 
     ``0.125 percent'' and inserting ``0.185 percent''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect and apply to loans under section 503(d) of 
     the Small Business Investment Act of l958 (15 U.S.C. 697(d)) 
     approved on or after 30 days after the date of enactment of 
     this Act.

     SEC. 11. TECHNICAL CORRECTION.

       Section 501(e)(2) of the Small Business Investment Act of 
     1958 (15 U.S.C. 695(e)(2)) is amended by striking 
     ``outstanding''.

     SEC. 12. SBIA DEFINITIONS.

       Section 103 of the Small Business Investment Act of 1958 
     (15 U.S.C. 662) is amended--
       (1) by striking paragraph (6) and inserting the following:
       ``(6) the term `development company' means an entity 
     incorporated under State law with the authority to promote 
     and assist the growth and development of small business 
     concerns in the areas in which it is authorized to operate by 
     the Administrator;'';
       (2) in paragraph (16), by striking ``and'' at the end;
       (3) in paragraph (17), by striking the period at the end 
     and inserting ``; and''; and
       (4) by adding at the end the following:
       ``(18) the term `certified development company' means a 
     development company that the Administrator has certified 
     meets the criteria of section 506.''.

     SEC. 13. REPEAL OF SUNSET ON RESERVE REQUIREMENTS FOR PREMIER 
                   CERTIFIED LENDERS.

       Section 508(c)(6)(B) of the Small Business Investment Act 
     of 1958 (15 U.S.C. 697e(c)(6)(B)) is amended--
       (1) in the heading, by striking ``Temporary reduction'' and 
     inserting ``Reduction''; and
       (2) by striking ``Notwithstanding subparagraph (A), during 
     the 2-year period beginning on the date that is 90 days after 
     the date of enactment of this subparagraph, the'' and 
     inserting ``The''.

[[Page S14325]]

     SEC. 14. ELIGIBILITY OF DEVELOPMENT COMPANIES TO BE 
                   DESIGNATED AS CERTIFIED DEVELOPMENT COMPANIES 
                   AND AUTHORITY TO ISSUE DEBENTURES; AND 
                   PROVIDING AN AREA OF OPERATIONAL AUTHORITY, 
                   FUNDING RESTRICTIONS, AND ETHICAL REQUIREMENTS.

       Section 506 of the Small Business Investment Act of 1958 
     (15 U.S.C. 697c) is amended--
       (1) in the heading, by striking ``RESTRICTIONS ON 
     DEVELOPMENT COMPANY ASSISTANCE'' and inserting ``CERTIFIED 
     DEVELOPMENT COMPANIES''; and
       (2) by inserting before ``Notwithstanding any other 
     provision of law'' the following:
       ``(a) Authority to Issue Debentures.--A development company 
     may issue debentures under this title if the Administrator 
     certifies that the company meets the following criteria:
       ``(1) Size.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the development company shall be a small business concern 
     with fewer than 500 employees, and shall not be under the 
     control of any entity that does not meet the size standards 
     established by the Administrator for a small business 
     concern.
       ``(B) Exception.--Any development company that was 
     certified by the Administrator before December 31, 2005, may 
     continue to issue debentures under this title.
       ``(2) Purpose.--A primary purpose of the development 
     company shall be to benefit the community by fostering 
     economic development to create and preserve jobs and 
     stimulate private investment.
       ``(3) Primary function.--A primary function of the 
     development company shall be to accomplish its purpose by 
     providing long term financing to small business concerns 
     under the Local Development Business Loan Program. The 
     development company may also provide or support other local 
     economic development activities to assist the community.
       ``(4) Nonprofit status.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the development company shall be a nonprofit corporation.
       ``(B) Exception.--A development company certified by the 
     Administrator before January 1, 1987, may continue to issue 
     debentures under this title and retain its status as a for-
     profit enterprise.
       ``(5) Good standing.--The development company--
       ``(A) shall be in good standing in the State in which such 
     company is incorporated and in any other State in which it 
     conducts business; and
       ``(B) shall be in compliance with all laws, including 
     taxation requirements, in the State in which such company is 
     incorporated and in any other State in which it conducts 
     business.
       ``(6) Membership of development company.--There shall be--
       ``(A) not fewer than 25 members of the development company 
     (or owners or stockholders, if the corporation is a for-
     profit entity) none of whom may own or control more than 10 
     percent of the voting membership of the company; and
       ``(B) at least 1 member of the development company (none of 
     whom is in a position to control the development company) 
     from each of the following:
       ``(i) Government organizations that are responsible for 
     economic development.
       ``(ii) Financial institutions that provide commercial long 
     term fixed asset financing.
       ``(iii) Community organizations that are dedicated to 
     economic development.
       ``(iv) Businesses.
       ``(7) Board of directors.--
       ``(A) In general.--The development company shall have a 
     board of directors.
       ``(B) Members of board.--Each member of the board of 
     directors shall be--
       ``(i) a member of the development company; and
       ``(ii) elected by a majority of the members of the 
     development company.
       ``(C) Representation of organizations and institutions.--
       ``(i) In general.--There shall be at least 1 member of the 
     board of directors from not fewer than 3 of the 4 
     organizations and institutions described in paragraph (6)(B), 
     none of whom is in a position to control the development 
     company.
       ``(ii) Maximum percentage.--Not more than 50 percent of the 
     members of the board of directors shall be from any 1 of the 
     organizations and institutions described in paragraph (6)(B).
       ``(D) Meetings.--The board of directors of the development 
     company shall meet on a regular basis to make policy 
     decisions for such company.
       ``(8) Professional management and staff.--
       ``(A) In general.--The development company shall have full-
     time professional management, including a chief executive 
     officer to manage daily operations and a full-time 
     professional staff qualified to market the Local Development 
     Business Loan Program and handle all aspects of loan approval 
     and servicing, including liquidation, if appropriate.
       ``(B) Independent management and operation.--Except as 
     provided in paragraph (9), the development company shall be 
     independently managed and operated to pursue the economic 
     development purpose of the company and shall employ directly 
     the chief executive officer.
       ``(9) Management and operation exceptions.--
       ``(A) Affiliation.--A development company may be an 
     affiliate of another local nonprofit service corporation 
     (other than a development company), a purpose of which is to 
     support economic development in the area in which the 
     development company operates.
       ``(B) Staffing.--A development company may satisfy the 
     requirement for full-time professional staff under paragraph 
     (8)(A) by contracting for the required staffing with--
       ``(i) a local nonprofit service corporation;
       ``(ii) a nonprofit affiliate of a local nonprofit service 
     corporation;
       ``(iii) an entity wholly or partially operated by a 
     governmental agency; or
       ``(iv) another entity approved by the Administration.
       ``(C) Directors.--A development company and a local 
     nonprofit service corporation with which it is affiliated may 
     have in common some, but not all, members of their respective 
     board of directors.
       ``(D) Rural areas.--A development company in a rural area 
     may satisfy the requirements of a full-time professional 
     staff and professional management ability under paragraph 
     (8)(A) by contracting for such services with another 
     certified development company that--
       ``(i) has such staff and management ability; and
       ``(ii) is located in the same State as the development 
     company or in a State that is contiguous to the State in 
     which the development company is located.
       ``(E) Previously certified.--A development company that, on 
     or before December 31, 2005, was certified by the 
     Administrator and had contracted with a for-profit company to 
     provide staffing and management services, may continue to do 
     so.
       ``(b) Use of Excess Funds.--Any funds generated by a 
     certified development company from making loans under section 
     503 or 504 that remain unexpended after payment of staff, 
     operating, and overhead expenses shall be retained by the 
     certified development company as a reserve for--
       ``(1) future operations;
       ``(2) expanding the area in which the certified development 
     company operates through the methods authorized by this Act; 
     or
       ``(3) investment in other local economic development 
     activity in the State from which such funds were generated.
       ``(c) Ethical Requirements.--
       ``(1) In general.--A certified development company and the 
     officers, employees, and other staff of the company shall at 
     all times act ethically and avoid activities which constitute 
     a conflict of interest or appear to constitute a conflict of 
     interest.
       ``(2) Prohibited conflict in project loans.--
       ``(A) In general.--No certified development company may--
       ``(i) recommend or approve a guarantee of a debenture by 
     the Administrator under the Local Business Development Loan 
     Program that is collateralized by a second lien position on 
     the property being constructed or acquired; and
       ``(ii) provide, or be affiliated with a corporation or 
     other entity which provides, financing collateralized by a 
     first lien on the same property.
       ``(B) Exception.--During the 2-year period beginning on the 
     date of enactment of this subsection, a certified development 
     company that was participating as a first mortgage lender for 
     the Local Business Development Loan Program in either of 
     fiscal years 2004 or 2005 may continue to do so.
       ``(3) Other economic development activities.--It shall not 
     be a conflict of interest for a certified development company 
     to operate multiple programs to assist small business 
     concerns as part of carrying out its economic development 
     purpose.
       ``(d) Multistate Operations.--
       ``(1) Authorization.--Notwithstanding any other provision 
     of law, the Administrator shall permit a certified 
     development company to make loans in any State that is 
     contiguous to the State of incorporation of that certified 
     development company, only if such company--
       ``(A) is--
       ``(i) an accredited lender under section 507; or
       ``(ii) a premier certified lender under section 508;
       ``(B) has a membership that contains not fewer than 25 
     members from each State in which the company makes loans;
       ``(C) has a board of directors that contains not fewer than 
     1 member from each State in which the company makes loans; 
     and
       ``(D) maintains not fewer than 1 loan committee, which 
     shall have not fewer than 1 member from each State in which 
     the company makes loans; and
       ``(E) submits to the Administrator, in writing--
       ``(i) a notice of the intention of the company to make 
     loans in multiple States;
       ``(ii) the names of the States in which the company intends 
     to make loans;
       ``(iii) a detailed statement of how the company will comply 
     with this paragraph, including a list of the members 
     described in subparagraph (B).
       ``(2) Review.--The Administrator shall verify whether a 
     certified development company satisfies the requirements of 
     paragraph (1) on an expedited basis and, not later than 30 
     days after the date on which the Administrator receives the 
     statement described in paragraph (1)(E)(iii), the 
     Administrator shall determine whether such company satisfies 
     such criteria and provide notice to such company.

[[Page S14326]]

       ``(3) Loan committee participation.--For any loan made by a 
     company described in paragraph (1), not fewer than 1 member 
     of the loan committee from the State in which the loan is to 
     be made shall participate in the review of such loan.
       ``(4) Aggregate accounting.--A company described in 
     paragraph (1) may maintain an aggregate accounting of all 
     revenue and expenses of the company for purposes of this 
     title.
       ``(5) Directors.--Notwithstanding any other provision of 
     law, a person may serve on the board of directors, but not as 
     an officer, of more than 1 certified development company if 
     none of the certified development companies on which the 
     person serves as a member of the board of directors are 
     located or operate in the same area.
       ``(6) Local job creation requirements.--Any certified 
     development company making loans in multiple States shall 
     satisfy any applicable job creation or retention requirements 
     separately for each such State. Such a company shall not 
     count jobs created or retained in 1 State towards any 
     applicable job creation or retention requirement in another 
     State.
       ``(7) Contiguous states.--For purposes of this subsection, 
     the States of Alaska and Hawaii shall be deemed to be 
     contiguous to any State abutting the Pacific ocean.
       ``(e) Restrictions on Development Company Assistance.--''.

     SEC. 15. CONFORMING AMENDMENTS.

       Section 503 of the Small Business Investment Act of 1958 
     (15 U.S.C. 697) is amended--
       (1) in subsection (a)(1), by striking ``qualified State or 
     local development company'' and inserting ``certified 
     development company''; and
       (2) by striking subsection (e) and inserting the following:
       ``(e) Section 7(a) Loans.--Notwithstanding any other 
     provision of law, a certified development company is 
     authorized to prepare applications for deferred participation 
     loans under section 7(a) of the Small Business Act, to 
     service such loans, and to charge a reasonable fee for 
     servicing such loans.''.

     SEC. 16. CLOSING COSTS.

       Section 503(b) of the Small Business Investment Act of 1958 
     (15 U.S.C. 697(b)) is amended by striking paragraph (4) and 
     inserting the following:
       ``(4) the aggregate amount of such debenture does not 
     exceed the amount of the loans to be made from the proceeds 
     of such debenture plus, at the election of the borrower, 
     other amounts attributable to the administrative and closing 
     costs of such loans, except for the attorney fees of the 
     borrower;''.

     SEC. 17. DEFINITION OF RURAL.

       Section 501 of the Small Business Investment Act of 1958 
     (15 U.S.C. 695) is amended by adding at the end the 
     following:
       ``(f) As used in this title, the term `rural' shall include 
     any area that is not--
       ``(1) a city or town that has a population greater than 
     50,000 inhabitants; or
       ``(2) the urbanized area contiguous and adjacent to a city 
     or town described in paragraph (1).''.

     SEC. 18. REGULATIONS AND EFFECTIVE DATE.

       (a) In General.--Except as provided in subsection (b), the 
     Administrator shall--
       (1) publish proposed rules to implement this Act and the 
     amendments made by this Act not later than 120 days after the 
     date of enactment of this Act; and
       (2) publish such rules in final form not later than 120 
     days after the date of publication under paragraph (1).
       (b) Multistate Operations.--As soon as is practicable after 
     the date of enactment of this Act, the Administrator shall 
     promulgate regulations to implement section 506(d) of the 
     Small Business Investment Act of 1958, as added by section 14 
     of this Act. Such regulations shall become effective not 
     later than 120 days after the date of enactment of this Act.
       (c) Effective Date.--
       (1) In general.--Except as provided in paragraph (2) and 
     section 10(b), this Act and the amendments made by this Act 
     shall become effective 240 days after the date of enactment 
     of this Act, regardless of whether the Administrator has 
     promulgated the regulations required under subsection (a).
       (2) Multistate operations.--Section 506(d) of the Small 
     Business Investment Act of 1958, as added by section 14 of 
     this Act, shall become effective 120 days after the date of 
     enactment of this Act, regardless of whether the 
     Administrator has promulgated the regulations required under 
     subsection (b).
                                 ______