[House Report 104-269]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    104-269
_______________________________________________________________________


 
             SMALL BUSINESS LENDING ENHANCEMENT ACT OF 1995

                                _______


               September 28, 1995.--Ordered to be printed

_______________________________________________________________________


Mrs. Meyers of Kansas, from the committee of conference, submitted the 
                               following

                           CONFERENCE REPORT

                         [To accompany S. 895]

      The committee of conference on the disagreeing votes of 
the two Houses on the amendments of the House to the bill (S. 
895), to amend the Small Business Act to reduce the level of 
participation by the Small Business Administration in certain 
loans guaranteed by the Administration, and for other purposes, 
having met, after full and free conference, have agreed to 
recommend and do recommend to their respective Houses as 
follows:
      That the Senate recede from its disagreement to the 
amendment of the House to the text of the bill and agree to the 
same with an amendment as follows:
      In lieu of the matter proposed to be inserted by the 
House amendment, insert the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Lending 
Enhancement Act of 1995''.

SEC. 2. REDUCED LEVEL OF PARTICIPATION IN GUARANTEED LOANS.

    Section 7(a)(2) of the Small Business Act (15 U.S.C. 
636(a)(2)) is amended to read as follows:
            ``(2) Level of participation in guaranteed loans.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), in an agreement to 
                participate in a loan on a deferred basis under 
                this subsection (including a loan made under 
                the Preferred Lenders Program), such 
                participation by the Administration shall be 
                equal to--
                            ``(i) 75 percent of the balance of 
                        the financing outstanding at the time 
                        of disbursement of the loan, if such 
                        balance exceeds $100,000; or
                            ``(ii) 80 percent of the balance of 
                        the financing outstanding at the time 
                        of disbursement of the loan, if such 
                        balance is less than or equal to 
                        $100,000.
                    ``(B) Reduced participation upon request.--
                            ``(i) In general.--The guarantee 
                        percentage specified by subparagraph 
                        (A) for any loan under this subsection 
                        may be reduced upon the request of the 
                        participating lender.
                            ``(ii) Prohibition.--The 
                        Administration shall not use the 
                        guarantee percentage requested by a 
                        participating lender under clause (i) 
                        as a criterion for establishing 
                        priorities in approving loan guarantee 
                        requests under this subsection.
                    ``(C) Interest rate under preferred lenders 
                program.--
                            ``(i) In general.--The maximum 
                        interest rate for a loan guaranteed 
                        under the Preferred Lenders Program 
                        shall not exceed the maximum interest 
                        rate, as determined by the 
                        Administration, applicable to other 
                        loans guaranteed under this subsection.
                            ``(ii) Preferred lenders program 
                        defined.--For purposes of this 
                        subparagraph, the term `Preferred 
                        Lenders Program' means any program 
                        established by the Administrator, as 
                        authorized under the proviso in section 
                        5(b)(7), under which a written 
                        agreement between the lender and the 
                        Administration delegates to the 
                        lender--
                                    ``(I) complete authority to 
                                make and close loans with a 
                                guarantee from the 
                                Administration without 
                                obtaining the prior specific 
                                approval of the Administration; 
                                and
                                    ``(II) authority to service 
                                and liquidate such loans.''.

SEC. 3. GUARANTEE FEES.

    (a) Amount of Fees.--Section 7(a)(18) of the Small Business 
Act (15 U.S.C. 636(a)(18)) is amended to read as follows:
            ``(18) Guarantee fees.--
                    ``(A) In general.--With respect to each 
                loan guaranteed under this subsection (other 
                than a loan that is repayable in 1 year or 
                less), the Administration shall collect a 
                guarantee fee, which shall be payable by the 
                participating lender and may be charged to the 
                borrower, in an amount equal to the sum of--
                            ``(i) 3 percent of the amount of 
                        the deferred participation share of the 
                        loan that is less than or equal to 
                        $250,000;
                            ``(ii) if the deferred 
                        participation share of the loan exceeds 
                        $250,000, 3.5 percent of the difference 
                        between--
                                    ``(I) $500,000 or the total 
                                deferred participation share of 
                                the loan, whichever is less; 
                                and
                                    ``(II) $250,000; and
                            ``(iii) if the deferred 
                        participation share of the loan exceeds 
                        $500,000, 3.875 percent of the 
                        difference between--
                                    ``(I) the total deferred 
                                participation share of the 
                                loan; and
                                    ``(II) $500,000.
                    ``(B) Exception for certain loans.--
                Notwithstanding subparagraph (A), if the total 
                deferred participation share of a loan 
                guaranteed under this subsection is less than 
                or equal to $80,000, the guarantee fee 
                collected under subparagraph (A) shall be in an 
                amount equal to 2 percent of the total deferred 
                participation share of the loan.''.
    (b) Repeal of Provisions Allowing Retention of Fees by 
Lenders.--Section 7(a)(19) of the Small Business Act (15 U.S.C. 
636(a)(19)) is amended--
            (1) in subparagraph (B)--
                    (A) by striking ``shall (i) develop'' and 
                inserting ``shall develop''; and
                    (B) by striking ``, and (ii)'' and all that 
                follows through the end of the subparagraph and 
                inserting a period; and
            (2) by striking subparagraph (C).

SEC. 4. ESTABLISHMENT OF ANNUAL FEE.

    (a) In General.--Section 7(a) of the Small Business Act (15 
U.S.C. 636(a)) is amended by adding at the end the following 
new paragraph:
            ``(23) Annual fee.--
                    ``(A) In general.--With respect to each 
                loan guaranteed under this subsection, the 
                Administration shall, in accordance with such 
                terms and procedures as the Administration 
                shall establish by regulation, assess and 
                collect an annual fee in an amount equal to 0.5 
                percent of the outstanding balance of the 
                deferred participation share of the loan.
                    ``(B) Payer.--The annual fee assessed under 
                subparagraph (A) shall be payable by the 
                participating lender and shall not be charged 
                to the borrower.''.
    (b) Conforming Amendment.--Section 5(g)(4)(A) of the Small 
Business Act (15 U.S.C. 634(g)(4)(A)) is amended--
            (1) by striking the first sentence and inserting 
        the following: ``The Administration may collect a fee 
        for any loan guarantee sold into the secondary market 
        under subsection (f) in an amount equal to not more 
        than 50 percent of the portion of the sale price that 
        exceeds 110 percent of the outstanding principal amount 
        of the portion of the loan guaranteed by the 
        Administration.''; and
            (2) by striking ``fees'' each place such term 
        appears and inserting ``fee''.

SEC. 5. NOTIFICATION REQUIREMENT.

    Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) 
is amended by adding at the end the following new paragraph:
            ``(24) Notification requirement.--The 
        Administration shall notify the Committees on Small 
        Business of the Senate and the House of Representatives 
        not later than 15 days before making any significant 
        policy or administrative change affecting the operation 
        of the loan program under this subsection.''.

SEC. 6. DEVELOPMENT COMPANY DEBENTURES.

    Section 503(b) of the Small Business Investment Act of 1958 
(15 U.S.C. 697(b)) is amended--
            (1) in paragraph (5), by striking ``and'' at the 
        end;
            (2) in paragraph (6), by striking the period at the 
        end and inserting ``; and''; and
            (3) by adding at the end the following new 
        paragraph:
            ``(7) with respect to each loan made from the 
        proceeds of such debenture, the Administration--
                    ``(A) assesses and collects a fee, which 
                shall be payable by the borrower, in an amount 
                equal to 0.125 percent per year of the 
                outstanding balance of the loan; and
                    ``(B) uses the proceeds of such fee to 
                offset the cost (as such term is defined in 
                section 502 of the Federal Credit Reform Act of 
                1990) to the Administration of making 
                guarantees under subsection (a).''.

SEC. 7. PILOT PREFERRED SURETY BOND GUARANTEE PROGRAM EXTENSION.

    Section 207 of the Small Business Administration 
Reauthorization and Amendment Act of 1988 (15 U.S.C. 694b note) 
is amended by striking ``September 30, 1995'' and inserting 
``September 30, 1997''.

SEC. 8. APPLICABILITY.

    (a) In General.--Except as provided in subsection (b), the 
amendments made by this Act do not apply with respect to any 
loan made or guaranteed under the Small Business Act or the 
Small Business Investment Act of 1958 before the date of 
enactment of this Act.
    (b) Exceptions.--The amendments made by this Act apply to a 
loan made or guaranteed under the Small Business Act or the 
Small Business Investment Act of 1958 before the date of 
enactment of this Act, if the loan is refinanced, extended, 
restructured, or renewed on or after the date of enactment of 
this Act.
      And the House agree to the same.
      That the Senate recede from its disagreement to the 
amendment of the House to the title of the bill, and agree to 
the same.

                                   Jan Meyers,
                                   Peter G. Torkildsen,
                                   Jim Longley,
                                   John J. LaFalce,
                                   Glenn Poshard,
                                 Managers on the Part of the House.

                                   Christopher S. Bond,
                                   Conrad Burns,
                                   Paul Coverdell,
                                   Dale Bumpers,
                                   Sam Nunn,
                                Managers on the Part of the Senate.
       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

      The managers on the part of the House and the Senate at 
the conference on the disagreeing votes of the two Houses on 
the amendments of the House to the bill (S. 895) to amend the 
Small Business Act to reduce the level of participation by the 
Small Business Administration in certain loans guaranteed by 
the Administration, and for other purposes, submit the 
following joint statement to the House and the Senate in 
explanation of the effect of the action agreed upon by the 
managers and recommended in the accompanying conference report:
      The conference agreement establishes new guarantee 
levels, program fees, and administrative provisions governing 
the Small Business Administration's 7(a) Guaranteed Business 
Loan Program and the 504 Certified Development Company Program.
      The conference agreement lowers the guarantee rate for 
all 7(a) loans to 75%, except for loans of $100,000 or less, 
which will have a guarantee rate of 80%. As part of this 
overall change, the guarantee rate for Export Working Capital 
Program loans will be decreased to be consistent with other 
7(a) loans. The conferees are aware of efforts by the Small 
Business Administration to coordinate the features and 
operations of the Export Working Capital Program with a similar 
export loan program operated by the Export-Import Bank. The 
conferees are supportive of the continuing joint efforts of the 
SBA and Export-Import Bank to encourage and facilitate small 
business participation in the export marketplace. In 
establishing the new guarantee rate under the Export Working 
Capital Program, this legislation should not be interpreted as 
expressing any intention or expectation that the guarantee rate 
for the Eximbank program be reduced to the same level. The 
conferees direct the SBA, in consultation with the Export-
Import Bank, to issue a report no later than 120 days after the 
enactment of this act assessing the impact, if any, of the 
reduced guarantee rate on the Export Working Capital Program. 
The report should include a comparison of the SBA program with 
the working capital guarantee program operated by the Export-
Import Bank, and shall include an analysis of the number and 
size of transactions concluded under the program, both prior to 
and after enactment of the new guarantee provisions.
      Under the conference agreement, guarantee fees under the 
7(a) program increase as the size of the loan increases. The 
conferees are aware of the concern expressed by the Small 
Business Administration that lenders and borrowers may seek to 
arrange a number of smaller, related loans in order to avoid 
the higher guarantee fee applicable to a single, larger loan. 
The conferees direct the Small Business Administration to 
implement the guarantee fee structure set forth in the 
conference agreement with any instructions, definitions, rules, 
regulations, or guidelines as the SBA may deem necessary in 
order to prevent avoidance or evasion of these fees, including 
establishing a reasonable period of time during which related 
loans will be treated as constituting a single loan for 
purposes of calculating the guarantee fee.
      The effect of the provisions included in the conference 
agreement will be to reduce the subsidy rate for the 7(a) loan 
program and increase the availability of guarantee authority 
under the program. The conferees direct the SBA, promptly upon 
enactment of the legislation included in the conference report, 
to remove the temporary administrative limitations previously 
implemented by the SBA to limit demand for 7(a) loan 
guarantees. Any such administrative program changes in the 
future will be subject to the provisions of Section 5 of the 
new legislation.

                                   Jan Meyers,
                                   Peter G. Torkildsen,
                                   Jim Longley,
                                   John J. LaFalce,
                                   Glenn Poshard,
                                 Managers on the Part of the House.

                                   Christopher S. Bond,
                                   Conrad Burns,
                                   Paul Coverdell,
                                   Dale Bumpers,
                                   Sam Nunn,
                                Managers on the Part of the Senate.