[Congressional Record (Bound Edition), Volume 146 (2000), Part 8]
[Senate]
[Pages 10725-10730]
[From the U.S. Government Publishing Office, www.gpo.gov]



     CERTIFIED DEVELOPMENT COMPANY PROGRAM IMPROVEMENTS ACT OF 1999

  Mr. ALLARD. Mr. President, I ask unanimous consent that the Senate 
now proceed to the consideration of Calendar No. 531, H.R. 2614.
  The PRESIDING OFFICER. The clerk will report the bill by title.
  The legislative clerk read as follows:

       A bill (H.R. 2614) to amend the small business investment 
     act to make improvements to the Certified Development Company 
     Program, and for other purposes.

  There being no objection, the Senate proceeded to consider the bill 
which had been considered from the Committee on Small Business, with an 
amendment to strike all after the enacting clause and insert in lieu 
thereof the following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Certified Development 
     Company Program Improvements Act of 2000''.

     SEC. 2. WOMEN-OWNED BUSINESSES.

       Section 501(d)(3)(C) of the Small Business Investment Act 
     of 1958 (15 U.S.C. 695(d)(3)(C)) is amended by inserting 
     before the comma ``or women-owned business development''.

     SEC. 3. MAXIMUM DEBENTURE SIZE.

       Section 502(2) of the Small Business Investment Act of 1958 
     (15 U.S.C. 696(2)) is amended to read as follows:
       ``(2) Loan limits.--Loans made by the Administration under 
     this section shall be limited to $1,000,000 for each such 
     identifiable small business concern, other than loans meeting 
     the criteria specified in section 501(d)(3), which shall be 
     limited to $1,300,000 for each such identifiable small 
     business concern.''.

     SEC. 4. FEES.

       Section 503(f) of the Small Business Investment Act of 1958 
     (15 U.S.C. 697(f)) is amended to read as follows:
       ``(f) Effective Date.--The fees authorized by subsections 
     (b) and (d) shall apply to any financing approved by the 
     Administration during the period beginning on October 1, 1996 
     and ending on September 30, 2003.''.

     SEC. 5. PREMIER CERTIFIED LENDERS PROGRAM.

       Section 217(b) of the Small Business Administration 
     Reauthorization and Amendments Act of 1994 (15 U.S.C. 697e 
     note) is repealed.

     SEC. 6. SALE OF CERTAIN DEFAULTED LOANS.

       Section 508 of the Small Business Investment Act of 1958 
     (15 U.S.C. 697e) is amended--
       (1) in subsection (a), by striking ``On a pilot program 
     basis, the'' and inserting ``The'';
       (2) by redesignating subsections (d) though (i) as 
     subsections (e) though (j), respectively;
       (3) in subsection (f) (as redesignated by paragraph (2)), 
     by striking ``subsection (f)'' and inserting ``subsection 
     (g)'';
       (4) in subsection (h) (as redesignated by paragraph (2)), 
     by striking ``subsection (f)'' and inserting ``subsection 
     (g)''; and
       (5) by inserting after subsection (c) the following:
       ``(d) Sale of Certain Defaulted Loans.--
       ``(1) Notice.--
       ``(A) In general.--If, upon default in repayment, the 
     Administration acquires a loan guaranteed under this section 
     and identifies such loan for inclusion in a bulk asset sale 
     of defaulted or repurchased loans or other financings, the 
     Administration shall give prior notice thereof to any 
     certified development company that has a contingent liability 
     under this section.
       ``(B) Timing.--The notice required by subparagraph (A) 
     shall be given to the certified development company as soon 
     as possible after the financing is identified, but not later 
     than 90 days before the date on which the Administration 
     first makes any record on such financing available for 
     examination by prospective purchasers prior to its offering 
     in a package of loans for bulk sale.
       ``(2) Limitations.--The Administration may not offer any 
     loan described in paragraph (1)(A) as part of a bulk sale, 
     unless the Administration--
       ``(A) provides prospective purchasers with the opportunity 
     to examine the records of the Administration with respect to 
     such loan; and
       ``(B) provides the notice required by paragraph (1).''.

     SEC. 7. LOAN LIQUIDATION.

       (a) Liquidation and Foreclosure.--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. 510. FORECLOSURE AND LIQUIDATION OF LOANS.

       ``(a) Delegation of Authority.--In accordance with this 
     section, the Administration shall delegate to any qualified 
     State or local development company (as defined in section 
     503(e)) that meets the eligibility requirements of subsection 
     (b)(1) of this section the authority to foreclose and 
     liquidate, or to otherwise treat in accordance with this 
     section, defaulted loans in its portfolio that are funded 
     with the proceeds of debentures guaranteed by the 
     Administration under section 503.
       ``(b) Eligibility for Delegation.--
       ``(1) Requirements.--A qualified State or local development 
     company shall be eligible for a delegation of authority under 
     subsection (a) if--
       ``(A) the company--
       ``(i) has participated in the loan liquidation pilot 
     program established by the Small Business Programs 
     Improvement Act of 1996 (15 U.S.C. 695 note), as in effect on 
     the day before the date of issuance of final regulations by 
     the Administration implementing this section;
       ``(ii) is participating in the Premier Certified Lenders 
     Program under section 508; or
       ``(iii) during the 3 fiscal years immediately prior to 
     seeking such a delegation, has made an average of not fewer 
     than 10 loans per year that are funded with the proceeds of 
     debentures guaranteed under section 503; and
       ``(B) the company--
       ``(i) has 1 or more employees--

       ``(I) with not less than 2 years of substantive, decision-
     making experience in administering the liquidation and 
     workout of problem loans secured in a manner substantially 
     similar to loans funded with the proceeds of debentures 
     guaranteed under section 503; and
       ``(II) who have completed a training program on loan 
     liquidation developed by the Administration in conjunction 
     with qualified State and local development companies that 
     meet the requirements of this paragraph; or

       ``(ii) submits to the Administration documentation 
     demonstrating that the company has contracted with a 
     qualified third-party to perform any liquidation activities 
     and secures the approval of the contract by the 
     Administration with respect to the qualifications of the 
     contractor and the terms and conditions of liquidation 
     activities.
       ``(2) Confirmation.--On request, the Administration shall 
     examine the qualifications of any company described in 
     subsection (a) to determine if such company is eligible for 
     the delegation of authority under this section. If the 
     Administration determines that a company is not eligible, the 
     Administration shall provide the company with the reasons for 
     such ineligibility.
       ``(c) Scope of Delegated Authority.--
       ``(1) In general.--Each qualified State or local 
     development company to which the Administration delegates 
     authority under subsection (a) may, with respect to any loan 
     described in subsection (a)--
       ``(A) perform all liquidation and foreclosure functions, 
     including the purchase in accordance with this subsection of 
     any other indebtedness secured by the property securing the 
     loan, in a reasonable and sound manner, according to 
     commercially accepted practices, pursuant to a liquidation 
     plan approved in advance by the Administration under 
     paragraph (2)(A);
       ``(B) litigate any matter relating to the performance of 
     the functions described in subparagraph (A), except that the 
     Administration may--
       ``(i) defend or bring any claim if--

       ``(I) the outcome of the litigation may adversely affect 
     management by the Administration of the loan program 
     established under section 502; or
       ``(II) the Administration is entitled to legal remedies not 
     available to a qualified State or local development company, 
     and such remedies will benefit either the Administration or 
     the qualified State or local development company; or

       ``(ii) oversee the conduct of any such litigation; and
       ``(C) take other appropriate actions to mitigate loan 
     losses in lieu of total liquidation or foreclosure, including 
     the restructuring of a loan in accordance with prudent loan 
     servicing practices and pursuant to a workout plan approved 
     in advance by the Administration under paragraph (2)(C).
       ``(2) Administration approval.--
       ``(A) Liquidation plan.--
       ``(i) In general.--Before carrying out functions described 
     in paragraph (1)(A), a qualified State or local development 
     company shall submit to the Administration a proposed 
     liquidation plan.
       ``(ii) Administration action on plan.--

       ``(I) Timing.--Not later than 15 business days after a 
     liquidation plan is received by the Administration under 
     clause (i), the Administration shall approve or reject the 
     plan.
       ``(II) Notice of no decision.--With respect to any 
     liquidation plan that cannot be approved or

[[Page 10726]]

     denied within the 15-day period required by subclause (I), 
     the Administration shall, during such period, provide notice 
     in accordance with subparagraph (E) to the company that 
     submitted the plan.

       ``(iii) Routine actions.--In carrying out functions 
     described in paragraph (1)(A), a qualified State or local 
     development company may undertake any routine action not 
     addressed in a liquidation plan without obtaining additional 
     approval from the Administration.
       ``(B) Purchase of indebtedness.--
       ``(i) In general.--In carrying out functions described in 
     paragraph (1)(A), a qualified State or local development 
     company shall submit to the Administration a request for 
     written approval before committing the Administration to the 
     purchase of any other indebtedness secured by the property 
     securing a defaulted loan.
       ``(ii) Administration action on request.--

       ``(I) Timing.--Not later than 15 business days after 
     receiving a request under clause (i), the Administration 
     shall approve or deny the request.
       ``(II) Notice of no decision.--With respect to any request 
     that cannot be approved or denied within the 15-day period 
     required by subclause (I), the Administration shall, during 
     such period, provide notice in accordance with subparagraph 
     (E) to the company that submitted the request.

       ``(C) Workout plan.--
       ``(i) In general.--In carrying out functions described in 
     paragraph (1)(C), a qualified State or local development 
     company shall submit to the Administration a proposed workout 
     plan.
       ``(ii) Administration action on plan.--

       ``(I) Timing.--Not later than 15 business days after a 
     workout plan is received by the Administration under clause 
     (i), the Administration shall approve or reject the plan.
       ``(II) Notice of no decision.--With respect to any workout 
     plan that cannot be approved or denied within the 15-day 
     period required by subclause (I), the Administration shall, 
     during such period, provide notice in accordance with 
     subparagraph (E) to the company that submitted the plan.

       ``(D) Compromise of indebtedness.--In carrying out 
     functions described in paragraph (1)(A), a qualified State or 
     local development company may--
       ``(i) consider an offer made by an obligor to compromise 
     the debt for less than the full amount owing; and
       ``(ii) pursuant to such an offer, release any obligor or 
     other party contingently liable, if the company secures the 
     written approval of the Administration.
       ``(E) Contents of notice of no decision.--Any notice 
     provided by the Administration under subparagraph 
     (A)(ii)(II), (B)(ii)(II), or (C)(ii)(II)--
       ``(i) shall be in writing;
       ``(ii) shall state the specific reason for the inability of 
     the Administration to act on the subject plan or request;
       ``(iii) shall include an estimate of the additional time 
     required by the Administration to act on the plan or request; 
     and
       ``(iv) if the Administration cannot act because 
     insufficient information or documentation was provided by the 
     company submitting the plan or request, shall specify the 
     nature of such additional information or documentation.
       ``(3) Conflict of interest.--In carrying out functions 
     described in paragraph (1), a qualified State or local 
     development company shall take no action that would result in 
     an actual or apparent conflict of interest between the 
     company (or any employee of the company) and any third party 
     lender (or any associate of a third party lender) or any 
     other person participating in a liquidation, foreclosure, or 
     loss mitigation action.
       ``(d) Suspension or Revocation of Authority.--The 
     Administration may revoke or suspend a delegation of 
     authority under this section to any qualified State or local 
     development company, if the Administration determines that 
     the company--
       ``(1) does not meet the requirements of subsection (b)(1);
       ``(2) has violated any applicable rule or regulation of the 
     Administration or any other applicable provision of law; or
       ``(3) has failed to comply with any reporting requirement 
     that may be established by the Administration relating to 
     carrying out functions described in subsection (c)(1).
       ``(e) Report.--
       ``(1) In general.--Based on information provided by 
     qualified State and local development companies and the 
     Administration, the Administration shall annually submit to 
     the Committees on Small Business of the House of 
     Representatives and the Senate a report on the results of 
     delegation of authority under this section.
       ``(2) Contents.--Each report submitted under paragraph (1) 
     shall include--
       ``(A) with respect to each loan foreclosed or liquidated by 
     a qualified State or local development company under this 
     section, or for which losses were otherwise mitigated by the 
     company pursuant to a workout plan under this section--
       ``(i) the total cost of the project financed with the loan;
       ``(ii) the total original dollar amount guaranteed by the 
     Administration;
       ``(iii) the total dollar amount of the loan at the time of 
     liquidation, foreclosure, or mitigation of loss;
       ``(iv) the total dollar losses resulting from the 
     liquidation, foreclosure, or mitigation of loss; and
       ``(v) the total recoveries resulting from the liquidation, 
     foreclosure, or mitigation of loss, both as a percentage of 
     the amount guaranteed and the total cost of the project 
     financed;
       ``(B) with respect to each qualified State or local 
     development company to which authority is delegated under 
     this section, the totals of each of the amounts described in 
     clauses (i) through (v) of subparagraph (A);
       ``(C) with respect to all loans subject to foreclosure, 
     liquidation, or mitigation under this section, the totals of 
     each of the amounts described in clauses (i) through (v) of 
     subparagraph (A);
       ``(D) a comparison between--
       ``(i) the information provided under subparagraph (C) with 
     respect to the 12-month period preceding the date on which 
     the report is submitted; and
       ``(ii) the same information with respect to loans 
     foreclosed and liquidated, or otherwise treated, by the 
     Administration during the same period; and
       ``(E) the number of times that the Administration has 
     failed to approve or reject a liquidation plan in accordance 
     with subsection (c)(2)(A) or a workout plan in accordance 
     with subsection (c)(2)(C), or to approve or deny a request 
     for purchase of indebtedness under subsection (c)(2)(B), 
     including specific information regarding the reasons for the 
     failure of the Administration and any delay that resulted.''.
       (b) Regulations.--
       (1) In general.--Not later than 150 days after the date of 
     enactment of this Act, the Administrator shall issue such 
     regulations as may be necessary to carry out section 510 of 
     the Small Business Investment Act of 1958, as added by 
     subsection (a) of this section.
       (2) Termination of pilot program.--Effective on the date on 
     which final regulations are issued under paragraph (1), 
     section 204 of the Small Business Programs Improvement Act of 
     1996 (15 U.S.C. 695 note) is repealed.

     SEC. 8. FUNDING LEVELS FOR CERTAIN FINANCINGS UNDER THE SMALL 
                   BUSINESS INVESTMENT ACT OF 1958.

       Section 20 of the Small Business Act (15 U.S.C. 631 note) 
     is amended by adding at the end the following:
       ``(g) Program Levels for Certain Small Business Investment 
     Act of 1958 Financings.--The following program levels are 
     authorized for financings under section 504 of the Small 
     Business Investment Act of 1958:
       ``(1) $4,000,000,000 for fiscal year 2001.
       ``(2) $5,000,000,000 for fiscal year 2002.
       ``(3) $6,000,000,000 for fiscal year 2003.''.


                           Amendment No. 3431

 (Purpose: To make an amendment with respect to timely Administration 
action on geographic expansion applications, use of unobligated funds, 
            and the HUBZone program, and for other purposes)

  Mr. ALLARD. Mr. President, Senator Bond has an amendment at the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Colorado [Mr. Allard] for Mr. Bond, 
     proposes an amendment numbered 3431.

  The amendment is as follows:
       At the end of the bill, add the following:

     SEC. 9. TIMELY ACTION ON APPLICATIONS.

       (a) Automatic Approval of Pending Applications.--An 
     application by a State or local development company to expand 
     its operations under title V of the Small Business Investment 
     Act of 1958 into another territory, county, or State that is 
     pending on the date of enactment of this Act and that was 
     submitted to the Administration 12 months or more before that 
     date of enactment shall be deemed to be approved beginning 21 
     days after that date of enactment, unless the Administration 
     has taken final action to approve or deny the application 
     before the end of that 21-day period.
       (b) Definitions.--In this section--
       (1) the term ``Administration'' means the headquarters of 
     the Small Business Administration; and
       (2) the term ``development company'' has the same meaning 
     as in section 103 of the Small Business Investment Act of 
     1958 (15 U.S.C. 662).

     SEC. 10. USE OF CERTAIN UNOBLIGATED AND UNEXPENDED FUNDS.

       (a) Transfer of Funds.--Notwithstanding any other provision 
     of law, unobligated and unexpended balances of the funds 
     described in subsection (b) are transferred to and made 
     available to the Small Business Administration to fund the 
     costs of guaranteed loans under section 7(a) of the Small 
     Business Act.
       (b) Sources.--Funds described in this subsection are--
       (1) funds transferred to the Business Loan Program Account 
     of the Small Business Administration from the Department of 
     Defense under the Department of Defense Appropriations Act, 
     1995 (Public Law 103-335) and section 507(g) of the Small 
     Business Reauthorization Act of 1997 (15 U.S.C. 636 note) for 
     the DELTA Program under that section 507; and
       (2) funds previously made available under the Omnibus 
     Consolidated Rescissions and Appropriations Act of 1996 (110 
     Stat. 1321 et seq.) and the Omnibus Consolidated 
     Appropriations Act, 1997 (110 Stat. 3009 et seq.) for the 
     microloan guarantee program under section 7(m) of the Small 
     Business Act.

     SEC. 11. HUBZONE REDESIGNATED AREAS.

       Section 3(p) of the Small Business Act (15 U.S.C. 632(p)) 
     is amended--

[[Page 10727]]

       (1) in paragraph (1)--
       (A) in subparagraph (B), by striking ``or'' at the end;
       (B) in subparagraph (C), by striking the period at the end 
     and inserting ``; or''; and
       (C) by adding at the end the following:
       ``(D) redesignated areas.''; and
       (2) in paragraph (4), by adding at the end the following:
       ``(C) Redesignated area.--The term `redesignated area' 
     means any census tract that ceases to be qualified under 
     subparagraph (A) and any nonmetropolitan county that ceases 
     to be qualified under subparagraph (B), except that a census 
     tract or a nonmetropolitan county may be a `redesignated 
     area' only for the 3-year period following the date on which 
     the census tract or nonmetropolitan county ceased to be so 
     qualified.''.

  Mr. ALLARD. Mr. President, I ask unanimous consent the amendment be 
agreed to.
  The PRESIDING OFFICER. Without objection, the amendment is agreed to.
  The amendment (No. 3431) was agreed to.
  Mr. BOND. Mr. President, I rise today to speak in support of H.R. 
2614, the Certified Development Company Program Improvements Act of 
2000. This important legislation was recently considered by the 
Committee on Small Business and approved by an 18-0 vote. I am also 
offering a ``Managers' Amendment,'' which has been approved on both 
sides of the aisle.
  The purpose of H.R. 2614 is to make the 504 Certified Development 
Company program a more effective and more efficient program. The 504 
Program is a key credit program run by the Small Business 
Administration to provide access to capital to small business owners. 
It was enacted to leverage private sector resources to fund larger 
projects for small businesses to acquire, construct or expand their 
facilities. Specifically, it was designed to create job opportunities 
and improve the economic health of both rural and inner city 
communities.
  Unlike most government-guaranteed loan programs, the 504 loan is 
subordinate to a loan made by a private lender. SBA guarantees 10- or 
20-year debentures issued by Certified Development Companies (CDC), and 
the proceeds from the sales of these debentures to investors are used 
to fund the 504 loans. Usually, the conventional loan will finance 50 
percent of the project's cost, and the SBA-guaranteed 504 loan cannot 
exceed 40 percent of the project cost. In the event of a default of the 
504 small business borrower, the bank's loan is senior to the SBA-
guaranteed 504 loan.


                    504 Loan Defaults and Recoveries

  Over the past 5 years, the Committee on Small Business has devoted 
considerable attention to the 504 program. The committee has been 
particularly concerned about reports and testimony from the SBA and the 
Office of Management and Budget (OMB) about loan recoveries following a 
default by a borrowers on a loan made under the program. Historically, 
in nearly all cases when a 504 program borrower defaults, it is the 
SBA, not the CDC, that take the required liquidation and foreclosure 
actions. The failure of the SBA to take aggressive actions to recover 
the value of collateral held following a default significantly 
increases the costs to borrowers to obtain a loan under the 504 
program.
  In response to the continuing problem of low recoveries under the 504 
program, the committee, in 1996, approved legislation establishing a 
pilot program that allowed approximately 20 CDCs to liquidate loan that 
they originate. Results from the pilot have been encouraging, and the 
committee concluded that it is in the best interest of the 504 program 
to allow additional CDC's to conduct their own liquidation and 
foreclosure activities. Section 7 of H.R. 2614, as reported by the 
Committee on Small Business, makes the pilot liquidation program 
permanent and requires SBA to permit certain CDC's to foreclose and 
liquidate defaulted loans that they have originated under the 504 loan 
program.


                   Premier Certified Lenders Program

  In October 1994, the Congress first enacted the Premier Certified 
Lenders Program (PCLP) on a pilot basis. The program was expanded by 
Congress in 1997, and the limitation on the number CDC's that could 
participate in the program was removed. The Committee has noted the 
success of the PCLP and has agreed with the House of Representatives to 
make it a permanent part of the 504 program. In doing so, the committee 
expects the SBA to continue its efforts to work with the CDC's to take 
advantage of the strengths of the most successful and well-run CDC's.


                           504 Program Costs

  In 1995, the SBA and the National Association of Development 
Companies (NADCO) strongly urged the Congress to adopt legislation 
mandating that the 504 program be supported entirely by fees paid by 
the private sector. Since the new fees took effect at the beginning of 
1996, the fees increased from 0.125 percent to 0.875 percent in FY 
1997. The fees rise or fall based primarily on two key factors: the 
rate of defaults and the recovery rates. Since FY 1997, the committee 
is pleased to note that estimates for defaults and recoveries has 
improved dramatically, and the borrower fee for FY 2001 will be 0.472 
percent, a significant drop in four years from its peak in FY 1997. 
H.R. 2614 authorizes SBA to collect these fees to offset the credit 
subsidy rate through FY 2003.
  The bill adds 504 loans to women-owned small businesses to the 
current list of public policy goals specified under the Small Business 
Investment Act of 1958. Currently, loans for public policy goals can be 
guaranteed up to $1,000,000. Other 504 loans can be guaranteed up to 
$750,000. As approved by the committee, H.R. 2614 will increase the 
guarantee ceiling for regular 504 loans to $1,000,000, and the ceiling 
for public policy loans will become $1,300,000.
  During the committee's consideration of H.R. 2614, the committee 
members voted unanimously to establish the authorization levels for the 
504 program. The levels approved are $4 billion in FY 2001, $5 billion 
in FY 2002, and $6 billion in FY 2003. These are the same levels that 
the committee also approved in the Small Business Reauthorization Act 
of 2000.


                              Asset Sales

  During the past four years, the committee has urged SBA to undertake 
the sale of assets held by the Agency; however, the committee does not 
believe this step forward should necessarily harm its lending partners, 
such as the CDC's. SBA has announced it will undertake two sales during 
calendar year 2000; consequently, the committee approved a provision 
that requires the SBA to notify CDC's prior to including a 504 loan in 
an asset sale. The committee adopted this section in order to insure 
there is an open dialogue and full cooperation between the SBA and the 
relevant CDCs.


                               Amendments

  Mr. President, the Manager's Amendment includes three provisions. The 
first provision, which has the strong support of the majority leader, 
Senator Lott, and Senator Cochran, is designed to expedite SBA 
consideration of several applications for multi-state operating 
authority for CDC's that have been pending at the 504 program office at 
the SBA headquarters for at least one year.
  The second provision addresses the pending shortfall in the 7(a) 
guaranteed business loan program. SBA is now projecting that the 7(a) 
program will run out of money on or about September 1, 2000. In order 
to ensure that sufficient funds are available to fund this important 
small business credit program until September 30, 2000, when FY 2000 
concludes, the Amendment authorizes SBA to reprogram funds appropriated 
but not spent in prior years for the DELTA loan program and the 
Microloan guarantee loan program. The total amount that SBA would need 
to reprogram would not exceed $6.5 million.
  The third provision addresses an unforeseen event under the HUBZone 
program, which was authorized by Congress in 1997. The HUBZone program 
provides a valuable Federal contracting incentive for small businesses 
that are located in economically distressed inner cities and poor rural 
counties and that employ residents from these distressed areas. It is 
my understanding that new unemployment data will be released soon by 
the Bureau of Labor Statistics, which could

[[Page 10728]]

result in the sudden disqualification on many recently certified 
HUBZone small businesses. The amendment will ensure that HUBZone areas 
remain qualified for a fixed period of at least 3 years by giving them 
a 3-year period to wrap up their HUBZone activities once an area has 
ceased to qualify on the basis of income or unemployment data. This 
change in the law will counter an unintended consequence and bring some 
needed stability to program.
  Mr. President, the Certified Development Company Program Improvements 
Act of 2000 is an important credit program providing small businesses 
with credit opportunities that would not otherwise be available. I urge 
my colleagues to support that bill and the manager's amendment.
  Mr. LEVIN. Mr. President, I am pleased the Senate will shortly pass 
H.R. 2614, the Certified Development Company Program Improvements Act 
of 1999. This bill was passed by the House on August 2, 1999.
  The Small Business Administration's 504 loan program provides 20- and 
10-year fixed-rate loans to small businesses through Certified 
Development Companies to be used for the acquisition or renovation of 
plant and equipment. SBA's 504 program loans are funded through the 
sale of pooled debentures on the bond market which gives small 
businesses access to interest rates that are close to those offered to 
large corporations.
  SBA's 504 loan program is a net plus to our economy because it 
requires that small businesses receiving loans must create jobs or 
retain jobs that otherwise would be lost and/or meet certain national 
public policy goals. The 504 loan program's job creation track record 
has been excellent, with at least 3 jobs being created for every 
$35,000 in 504 lending provided.
  This legislation is most urgently needed because the 504 program 
needs to be reauthorized. Even though the program costs the Government 
nothing and no appropriations are made to fund it because the program 
pays for itself through fees collected from borrowers, it cannot 
continue to operate without an authorization. We cannot allow this to 
happen. The 504 loan program is too important to small businesses who 
wish to expand because it provides affordable financing for growth with 
low down payments which is often difficult or impossible for small 
businesses to obtain from traditional lenders.
  This bill improves on the 504 loan program and increases the maximum 
amount of a regular SBA guaranteed debenture, long term bond, from 
$750,000 to $1 million. The maximum amount for loans with specific 
public policy purposes, low-income, rural and minority-owned 
businesses, is increased to $1,300,000. There has not been an 
adjustment to the maximum loan level in 10 years and this change allows 
the program to keep up with inflation that has occurred over that time 
period. It also adds women-owned businesses to the category of public 
policy goals that the program aims to achieve, making women-owned 
businesses eligible for the higher levels of financing. This is an 
important addition due to the significant role women-owned businesses 
play in contributing to job growth in our economy. The bill also 
reauthorizes the program for 3 more years and makes two pilot programs 
permanent.
  The State of Michigan has many active CDCs which keep in close touch 
with my office to report on their activities and the small businesses 
they have helped. On their behalf and on behalf of all the small 
businesses assisted by the 504 loan program and those that will be 
assisted in the future, I commend my colleagues for passing this 
legislation which improves on an already outstanding program.
  Mr. KERRY. Mr. President, the availability of capital and credit 
still remains one of the most significant impediments to small business 
creation and growth, and it is the Small Business Administration (SBA) 
that continues to effectively serve as the principal ``gap'' lender to 
our nation's 24 million small businesses.
  SBA's loan and investment programs are a bargain. For very little, 
taxpayers leverage their money to fuel the economy and help thousands 
of small businesses every year. In the 7(a) program, taxpayers spend 
$1.24 for every $100 loaned to small business owners. Well-known 
successes like Winnebago and Ben & Jerry's are examples of the 
program's effectiveness. In the 504 program, taxpayers don't spend a 
penny to lend or leverage investments because they are self-funded.
  Today we will vote on H.R. 2614, the Certified Development Company 
Program Improvements Act of 2000. This bill makes changes to the 504 
Certified Development Company (CDC or 504 program) loan program that 
will greatly increase the opportunity for small businesses to build a 
facility, buy more equipment, or acquire a new building. These loans 
create a ripple effect that enables small business owners to expand 
their companies, hire more workers and ultimately improve the local 
economy.
  This bill also includes a manager's amendment with three provisions. 
One, it addresses prompt approval of applications from certified 
development companies (CDCs) to operate in multiple states. Two, it 
restores much of the shortfall in 7(a) funding for FY2000 by giving SBA 
the authority to reprogram unused funds. Three, it maintains continuity 
in the HUBZone program by grandfathering in existing HUBZone companies 
as zones are redefined when the Bureau of Labor Statistics releases its 
new data.
  Before I get into the details of this bill, I would like to spend a 
minute describing the 504 Certified Development Company (CDC) loan 
program. This program is mission-driven, designed to provide capital to 
growing small businesses and create jobs. The professionals who work at 
CDCs do much more than make loans--they better communities. They 
usually have a mixture of expertise, part economic development 
specialist and part lender. They know their communities, and they know 
how to package loans and help prospective borrowers get financing. In 
fact, if you were to talk to them, you would learn that many are former 
lenders from commercial banks who wanted to get out from behind a desk 
and get involved in their communities. Instead of turning away 
meritorious projects because they didn't fit the profile of a 
traditional borrower, using the 504 program they could put together a 
loan that spreads the risk among commercial lenders, CDCs, the state or 
local governments, and the small business owners. These loans jumpstart 
or complement the economic development in CDCs' communities.
  Specifically, the 504 program provides businesses with long-term, 
fixed-rated financing for major fixed assets, such as buildings and 
equipment. CDCs work with the SBA and private-sector lenders to provide 
financing to small businesses and ultimately contribute to the economic 
development of their communities or the regions they serve. There are 
about 290 CDCs nationwide, and each CDC covers a specific area. Each 
CDC's portfolio must create or retain one job for every $35,000 
provided by the SBA.
  As I mentioned earlier, but will expand on here, proceeds from 504 
loans must be used for fixed-asset projects. Projects range from land 
purchases and improvements--including existing buildings, grading, 
street improvements, utilities, parking lots and landscaping--to the 
construction of new facilities, or modernization, renovation or 
conversion of existing facilities, to the purchase of long-term 
machinery and equipment. The 504 Program cannot be used for working 
capital or inventory, consolidating or repaying debt, or refinancing.
  I strongly support SBA's 504 loan program. Since 1980, more than 
25,000 businesses have received more than $20 billion in fixed-asset 
financing through the 504 program. In Massachusetts, over the last 
decade, small businesses got $318 million in 504 loans that created 
more than 10,000 jobs. The stories behind those numbers say a lot about 
how SBA's 504 loans help business owners and communities. In Fall 
River, owners Patricia Ladino and Russell Young developed a custom 
packing plant for scallops and shrimp that has grown from ten to 30 
employees in just two short years and is in the process of

[[Page 10729]]

another expansion that will add as many as 25 new jobs. In Danvers, 
there's the car dealership that used a 504 loan to grow a company over 
15 years from 25 to 395 employees. In Berkshire County, the 504 program 
has helped support the growth of the plastics mold and tool industry. 
One good example of success in this area is the development of Starbase 
Technologies in Pittsfield which now employs 65 people.
  H.R. 2614 would build on that success by implementing the following. 
First, it will increase the maximum debenture size for Section 504 
loans from $750,000 to $1 million, and the size of debentures for loans 
that meet special public policy goals from $1 million to $1,300,000. It 
has been 10 years since the Committee acted to increase the maximum 
guarantee amount in the 504 program. To keep pace with inflation, the 
maximum guarantee amount should be increased to approximately $1.25 
million. However, consistent with my colleagues on the House Small 
Business Committee, I believe that a simple increase to $1 million is 
probably sufficient.
  H.R. 2614 also adds women-owned businesses to the current list of 
businesses eligible for the larger public policy loans with guarantees 
of up to $1.3 million. Currently, the higher guaranty is available for 
business district revitalization; expansion of exports; expansion of 
minority business development; rural development; enhanced economic 
competition; and, added just last year, veteran-owned businesses, with 
an emphasis on service-disabled veterans.
  This small legislative change was significant and long overdue. 
Throughout America's history, countless men and women have served our 
country and fought for its ideals as members of our armed services. 
However, when they return to civilian life, veterans have often 
encountered barriers to starting or expanding a business. Although 
there are a number of programs at the SBA to provide assistance, many 
of these are not specifically targeted at veterans. Making them 
eligible for the higher debenture should help to remedy some of the 
inequalities that our service men and women face upon their return to 
civilian life and provide greater opportunity for the 5.5 million 
businesses owned or operated by veterans. That change also should help 
the 104,000 service-disabled veterans within the business community.
  I originally introduced the provision to add women-owned businesses 
to the list of public policy goals in the 105th Congress as part of S. 
2448, the Small Business Loan Enhancement Act. Though it eventually was 
included in and passed by the Senate as part of H.R. 3412, a 
comprehensive small business bill, it was never enacted. Unfortunately, 
the House received the bill too late to act before the 105th Congress 
adjourned. I am very pleased that the Committee continues to recognize 
the important role women-owned businesses play in the economy and is 
making this change to facilitate the expansion of this sector of our 
economy.
  Women-owned businesses are increasing in number, range, diversity and 
earning power. They constitute one-third of the 24 million small 
businesses in the United States, generate $3.6 trillion annually in 
revenues to the economy and range in industry from advertising agencies 
to manufacturing. Addressing the special needs of women-owned 
businesses serves not only these entrepreneurs, but also the economic 
strength of this nation as a whole. Since 1992, SBA has managed to 
increase access to capital for women and has worked in earnest to move 
women entrepreneurs away from expensive credit card financing to more 
affordable loans for financing their business ventures. While the 
percentage of 504 loans to women-owned businesses has increased 
nationwide from 4.2 percent in 1987 to 13 percent in 1999, and I 
applaud that, we need to increase lending opportunities to better 
reflect that 38 percent of all businesses are owned by women.
  By expanding the public policy goals of the 504 loan program to 
include women-owned businesses, we are ensuring that loans to eligible 
women business owners aren't capped at $1 million but are now available 
for as much as $1.3 million. According to Certified Development Company 
professionals, loan underwriters are conservative when it comes to 
approving loans for more than $750,000 and this directive would 
undoubtedly help eligible women business owners get the financing they 
need to expand their facilities and buy equipment as their businesses 
grow.
  H.R. 2614 also reauthorizes the fees currently levied on the 
borrower, the Certified Development Company, and the participating 
bank. The fees in the 504 program cover all its costs, resulting in a 
program that operates at no cost to the taxpayer. Without this 
legislation, the fees sunset on October 1, 2000. H.R. 2614 will 
continue them through October 1, 2003.
  Additionally, H.R. 2614 will grant permanent status to the Preferred 
Certified Lender Program before it sunsets at the end of fiscal year 
2000. This program enables experienced CDCs to use streamlined 
procedures for loan making and liquidation, resulting in improved 
service to the small business borrower and reduced losses and 
liquidation costs.
  H.R. 2614 also makes the Loan Liquidation Pilot Program a permanent 
program. This gives qualified and experienced CDCs the ability to 
handle the liquidation of loans with only minimal involvement of the 
SBA. It is the goal of this liquidation program to increase the 
recovery rates of the 504 loan program, and to bring about a 
corresponding reduction in the fees charged to the borrowers and the 
lenders.
  Importantly, this bill includes Senator Wellstone's provision to 
authorize the program for three more years, making it a complete 
package. I believe it is better to act now on a bill that already has 
the House's blessing than to wait for the comprehensive reauthorization 
bill, H.R. 3843, to make its way to the President's desk. Taking this 
action now will enable the CDCs to plan for the year ahead, because 
they know that the program levels for fiscal years 2001 through 2003 
are $4 billion, $5 billion and $6 billion.
  In addition to these changes, and as I mentioned earlier, this bill 
includes a manager's amendment. The first provision deals with long-
pending applications from CDCs that are seeking to expand into multiple 
states. To address the problem, this provision establishes a one-time 
automatic approval of applications for multi-state operation that have 
been pending at SBA headquarters for 12 months or more. Unless SBA acts 
to approve or disapprove the applications, automatic approval would go 
into effect 21 days after the bill is signed by the President.
  While I urge the SBA to process applications in a timely manner, and 
while I understand the frustration of the applicants who have been 
waiting, I believe, in general, that it is in the best interest of the 
taxpayers for applicants and their proposals to be thoroughly screened, 
rather than blindly approved. This program, above all else, was 
designed to help small businesses, and I believe we should carefully 
review policy changes that are intended to expand a CDC's territory to 
make sure that the real goal--increasing access to the program for 
small businesses--is achieved.
  The second provision gives the SBA the authority to reprogram unused 
funds to make up for the significant shortfall of appropriations for 
the 7(a) loan program. In its budget request for FY 2000, and again 
recently, the SBA estimated that the demand in this popular lending 
program would grow to a program level of $10.5 billion. Unfortunately, 
it was only appropriated enough to support a level of close to $9.8 
billion. The Administration's estimate has proven to be more accurate 
than Congress anticipated, and the SBA needs additional funds to keep 
the program running throughout this fiscal year. This bill restores 
$500 million of the $700 million shortfall. I strongly support this 
provision and worked with Senator Bond to draft this legislation. I 
appreciate his cooperation and respectfully urge the appropriators in 
both the Senate and House to work with us.

[[Page 10730]]

  Lastly, Mr. President, this bill also includes a technical change to 
the Historically Underutilized Business Zone small business contracting 
program (HUBZone program) administered by the SBA. The HUBZone program 
is designed to provide contracting opportunities in economically 
distressed areas of this country. One of the criteria for this program 
is that a small business must be located in a qualified census tract or 
nonmetropolitan county based on unemployment statistics from the 
Department of Labor and the Department of the Census.
  As new data becomes available, there is a possibility that HUBZone 
firms would lose their eligibility, because the data could reflect that 
the census tract the firm is located in is technically no longer 
considered an economically depressed area. As ranking member of the 
Committee on Small Business and as a cosponsor of the original HUBZone 
law passed in 1997, I am concerned that when a particular area is no 
longer deemed HUBZone-eligible, small business owners in that area will 
lose the ability to bid on contracting opportunities under the program 
with little or no warning. This will be disruptive to the program and 
could discourage participation by qualified small businesses.
  Because it is better policy to provide both small firms and the SBA 
with some sort of warning before a firm is deemed ineligible, this 
amendment is intended to allow a HUBZone firm located in an 
economically depressed area that has been redesignated by either Bureau 
of Labor Statistics (BLS) or Census data, to remain eligible under the 
program for three additional years. Thus the firm is put on notice that 
contracting opportunities under the program may not be available in the 
future, and the business is given time to plan for this change.
  While I understand only a handful of firms were affected by a change 
in designated areas when new BLS data was released last year, I support 
the chairman's effort to ensure that no firm is taken by surprise this 
year. I am pleased that Senator Bond and his staff worked together with 
my staff to come up with appropriate language for this amendment.
  In closing, I want to thank my colleagues for supporting this bill. 
If, as expected, it is enacted, they will have improved the business 
climate and taken a few more steps to ensure that small businesses have 
access to capital and expanded procurement opportunities.
  Mr. ALLARD. I ask unanimous consent the committee amendment be agreed 
to, the bill be read a third time and passed, the motion to reconsider 
be laid upon the table, and any statement relating to the bill be 
printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The committee amendment, as amended, was agreed to.
  The bill (H.R. 2614), as amended, was read the third time and passed.

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