[House Report 111-315]
[From the U.S. Government Publishing Office]


111th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    111-315

======================================================================



 
          SMALL BUSINESS FINANCING AND INVESTMENT ACT OF 2009

                                _______
                                

October 26, 2009.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Ms. Velazquez, from the Committee on Small Business, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3854]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Small Business, to whom was referred the 
bill (H.R. 3854) to amend the Small Business Act and the Small 
Business Investment Act of 1958 to improve programs providing 
access to capital under such Acts, and for other purposes, 
having considered the same, report favorably thereon without 
amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
  I. Purpose of the Bill and Summary..................................1
 II. Background and Need for Legislation..............................5
III. Hearings........................................................20
 IV. Committee Consideration.........................................22
  V. Committee Votes.................................................22
 VI. Section-by-Section Analysis of H.R. 3854........................22
VII. Congressional Budget Office Cost Estimate.......................51
VIII.Committee Estimate of Costs.....................................51

 IX. Oversight Findings..............................................52
  X. Statement of Constitutional Authority...........................52
 XI. Compliance With Public Law 104-4................................52
XII. Congressional Accountability Act................................52
XIII.Federal Advisory Committee Statement............................52

XIV. Statement of No Earmarks........................................53
 XV. Performance Goals and Objectives................................53
XVI. Changes in Existing Law Made by the Bill, as Reported...........53

                   I. Purpose of the Bill and Summary

    The Small Business Financing and Investment of 2009 extends 
through fiscal year 2011 the federal government's primary small 
business lending and investment programs. In doing so, the 
legislation makes key reforms to these programs that are 
intended to improve the flow of capital to small firms amidst 
one of the worst economic downturns in decades. The legislation 
also establishes two new programs that are intended to fill the 
gaps in the SBA's existing array of capital access programs, 
particularly in the provision of capital to early-stage small 
businesses in capital-intensive industries and for small firms 
whose access to capital is limited by the cost of financing.
    A result of the collapse in housing prices and resulting 
recession in 2008 has been a broad-based tightening of credit 
for small businesses of all types and sizes. This has severely 
curtailed the ability of small businesses to access credit and 
investment capital. Additionally, these conditions have 
continued unabated despite numerous efforts to stabilize the 
housing sector and restart lending through federal spending. 
This legislation has as its primary objective the improvement 
of the flow of capital to small firms in an economic climate 
that has made capital and credit more constrained than at any 
time in the history of the SBA's capital access mission.
    The legislation will increase the maximum gross size of 
7(a) loans by 50 percent--from the current level of $2 million 
to $3 million. This increase in the maximum loan size will help 
provide small firms with larger amounts of capital under the 
program without increasing the SBA's level of risk exposure 
with larger guarantee amounts on larger loans. This change will 
also ensure that the program remains focused on startup and 
early-stage small firms, businesses that have historically 
encountered the greatest difficulties in accessing credit. It 
also avoids making small borrowers carry a disproportionate 
share of the risk associated with larger loans. The maximum 
size of CDC financings will also be significantly increased--
from the current limit of $10 million to $25 million--and 
existing statutory limits that prohibit borrowers from securing 
CDC loans and 7(a) loans for the maximum combined amounts will 
be eliminated.
    The bill also extends authority for supplemental lending 
initiatives originally passed under P.L. 111-5, the American 
Recovery and Reinvestment Act of 2009 (ARRA), which 
significantly freed the flow of capital to small businesses. 
This includes an increase in the guaranty on SBA 7(a) loans to 
90 percent and waives fees on 7(a) and CDC loans. The Business 
Stabilization Loans (i.e. the ARC loan program) established 
under ARRA will also see improvements in the way of reduced 
documentation requirements, expanded eligibility for the use of 
ARC loan proceeds, and an increase in maximum ARC loan amounts 
from $35,000 to $50,000. Perhaps most importantly, however, the 
bill establishes a Capital Backstop Program under which the SBA 
will provide assistance to lenders in the application, 
processing, and underwriting functions for 7(a) loans, thus 
acting as a conduit to match lenders who are willing to make 
loans with borrowers in need of capital. Under this program, 
the SBA would also act as a lender of last resort for 
creditworthy borrowers in times of credit shortage or when 
private lenders withdraw from lending in an effort to hoard 
capital--as was widely seen in the recent credit crunch.
    The bill will establish permanent authority within the SBA 
to administer programs aimed at providing stability to the 
secondary markets for 7(a) and the CDC loan programs. These 
programs were originally enacted under for limited timeframes, 
but the significant time lag in the SBA's implementation of 
these programs combined with the ongoing weakness in SBA 
lending necessitates their continued operation, particularly in 
light of the possibility for future downturns. Together with 
the increase in 7(a) and CDC loan size and the enhanced loan 
incentives from ARRA, the extension of these initiatives in 
H.R. 3854 will significantly improve the credit conditions for 
small businesses, add stability to the small business lending 
markets, and improve the availability of capital for small 
firms.
    As a secondary objective, the bill seeks to fill gaps in 
the SBA's array of capital access programs. With the 
elimination of the SBIC Participating Securities program, the 
SBA no longer provides any form of patient equity investment to 
small businesses in need of capital. As a result, the agency 
has become completely reliant on debt-based programs, which are 
more suited to providing later-stage, expansion capital to 
cash-flow-positive businesses. This has particularly hampered 
investment in early-stage and capital-intensive small 
businesses, which lack the resources to service debt capital. 
These inherent limitations have only been aggravated by the 
economic downturn and the near-collapse in the U.S. capital 
markets. Venture capital financing and investments in early-
stage businesses has stagnated since the last quarter of 2008. 
As a result, the gap for investment in early-stage and capital-
intensive small businesses has grown wider, and this critical 
component of the small business community has continued to be 
underserved by existing government programs.
    At the same time, creditworthy small businesses have 
continued to struggle with issues stemming from the high cost 
of capital. Nowhere is this more pronounced than in the 
healthcare field, where the adoption of health information 
technology (HIT) has been slowed by the high cost of the 
technology and an inability of small health providers to 
finance this asset in a cost-effective manner. Despite the fact 
that small health providers are small businesses, most do not 
qualify for participation in existing Small Business 
Administration (SBA) capital access programs (such as the 7(a) 
or 504 loan programs) because they typically have access to 
conventional sources of credit. Additionally, these programs 
are ill-suited to overcoming the financial barrier that exists 
in the context of HIT. This is because the SBA's existing 
lending programs were originally designed to overcome a gap in 
the availability of capital. By contrast, the barrier to HIT 
for small medical practices is fundamentally a gap in the 
affordability of capital. For this reason, the SBA's existing 
lending programs are inadequate to drive wider adoption of HIT 
for small practices.
    The Small Business Financing and Investment of 2009 would 
fill these gaps in the SBA's capital access mission by 
establishing two new programs--the Small Business Early Stage 
Investment (SBESI) program and a Small Business Health 
Information Technology (HIT) Financing program--that will 
provide small businesses with access to equity investing and 
affordable credit. Under the SBESI program, the SBA will 
provide matching grant funding to act as co-investment in 
highly qualified investment companies that will focus on 
investing in small businesses, with particular emphasis on 
investing in early-stage small businesses in targeted capital-
intensive industries. Similarly, the HIT Financing program will 
complement the agency's existing array of business loan 
programs by making reduced cost capital available to small 
health practices for the purpose of purchasing HIT.
    Finally, the Small Business Financing and Investment of 
2009 will update and streamline the SBA's existing lending and 
investment programs. The bill incorporates several initiatives 
aimed at encouraging more lenders to participate in the capital 
access programs and make more loans available to small firms. 
First, the 7(a) lending process is simplified and streamlined, 
particularly among community banks and lenders who do not 
currently participate in the program. A Small Bank Outreach 
program will be established with the specific mission of 
identifying and supporting small banks, credit unions, and 
community lenders to participate in the program. The 
legislation also establishes a Rural Lender Outreach program to 
reduce the paperwork burden associated with 7(a) loans.
    This legislation also addresses several deficiencies that 
discourage existing lenders from fully utilizing the programs. 
The legislation will put an end to improper denials and long 
waiting periods when lenders apply for the SBA to honor its 
guarantees by requiring the SBA to make prompt and proper 
payment on guaranty repurchase applications. A National Lender 
Training Program will be established to train new and 
participating lenders on SBA's lending systems, policies, and 
procedures, and to help reduce incidents of improper loan 
underwriting and documentation in the program.
    Perhaps equally important, the bill will seek to halt the 
continued flight of SBICs that participate in the program by 
establishing an expedited licensing process to keep successful 
SBICs that are in good standing involved in the program. The 
bill will also revise the SBIC leverage limitations to create 
an incentive for successful, well-run SBICs to remain in the 
program by permitting SBICs that are managed by the same team 
to access the increased leverage limits available for a family 
of SBIC funds. Additionally, the bill inserts mandatory 
language in the Small Business Investment Act of 1958, 
directing the SBA Administrator to actively engage in 
affirmative actions to expand the number of investment 
companies in the New Markets Venture Capital (NMVC) and 
Renewable Energy Capital Investment (RECI) programs and ensure 
that both programs have a broad nationwide distribution.
    To ensure that the SBA's private sector lenders receive 
fair and expeditious resolution of their complaints, an 
independent and objective Ombudsman's office will be created to 
resolve lenders' appeals separately from the SBA's program 
administration offices. This measure will enhance participation 
in the lending programs by ensuring that program participants 
can make informal inquiries or file formal appeals to an 
independent, disinterested party in the strictest confidence 
and without fear or retaliation. The Ombudsman and independent 
review process, however, would not be a binding determination 
and would not affect other existing administrative procedures 
or judicial remedies.
    The existing capital access programs will also see an 
increased emphasis on specific public policy objectives. A 
Rural Lender Outreach program is established in the 7(a) 
program to focus on making loans with increased guarantees and 
reduced paperwork burdens for entrepreneurs in rural 
communities. The SBIC program will provide businesses with 
greater investment under the provisions of the bill that expand 
the Energy Saving Debenture program and increase the amounts of 
leverage available to invest in veteran-owned businesses. 
Socially and economically disadvantaged businesses will also 
benefit from permanent authority for the Community Express Loan 
program and the Increased Veteran Participation Loan programs. 
Both the NMVC and RECI programs will have an increased emphasis 
on increasing capital investments for small businesses engaged 
in manufacturing. The legislation will also expand access to 
7(a) loans for businesses that are organized as cooperative 
enterprises and will prohibit the SBA from applying disparate 
treatment to loans that are used to finance goodwill when a 
business is bought or sold.
    Ongoing deficiencies in the Small Business Administration's 
(SBA) disaster assistance program will also be addressed. The 
SBA will have additional financial assistance tools in the way 
of grant assistance programs that are intended to better fit 
the various needs of small businesses following severe 
disasters. The SBA will also be able to be more responsive to 
the needs of individual disaster victims with improvements to 
the way in which disaster assistance is approved, disbursed, 
and repaid. The SBA's disaster planning and preparedness will 
also be enhanced through the creation of Regional Disaster 
Working Groups.
    The Small Business Financing and Investment Act of 2009 is 
comprehensive legislation that will significantly improve 
access to credit and capital for businesses at each stage of 
growth and in any economic climate. By filling the gaps in the 
SBA's capital access mission and addressing deficiencies in the 
SBA's lending and investment programs, the agency will be 
significantly more adept at meeting the needs of small firms. 
Taken together, the provisions contained in the Small Business 
Financing and Investment Act will address the widespread 
difficulties that small firms have encountered in accessing 
credit and capital during the recent recession and will ensure 
that the small business community has ample credit and 
investment capital to create jobs and expand operations as the 
economy recovers.

                II. Background and Need for Legislation

    The SBA operates an array of financing programs that are 
intended to bridge the gap in the conventional markets that 
small businesses encounter in trying to secure access to 
affordable capital. In the 7(a) and 504 programs, entrepreneurs 
are provided with greater access to capital through the 
extension of federal guarantees on long-term loans. In the 
Microloan program, entrepreneurs receive SBA-subsidized small 
dollar loans in conjunction with basic managerial and technical 
assistance in operating their business.
    The SBA also administers programs aimed at providing 
investment in small businesses similar to what would be 
provided through the private equity markets. In the SBIC 
program, the SBA provides funding to specially licensed Small 
Business Investment Companies, which then use their own funds, 
plus resources borrowed with an SBA guaranty or ``leverage,'' 
to invest in small businesses. In the NMVC program, the SBA 
also provides specialized investment companies with leverage to 
invest in small businesses, but focuses this investment 
exclusively on small businesses located in low income (``LI'') 
areas and couples this investment with matching grant 
assistance to provide marketing, management and other 
operational assistance to the businesses in which it invests. 
In these investment programs, the SBA shares the risk of loss 
with private-sector investors, thereby enabling these lenders 
to provide small businesses with greater access to capital than 
they could otherwise obtain in the conventional market.

7(a) Loan Program

    The 7(a) loan program is the SBA's primary business loan 
program. It is the agency's largest and most important in terms 
of number of loans and program level supported. The program 
relies on private-sector lenders to provide loans that are, in 
turn, guaranteed by the SBA. The SBA has authority to guaranty 
up to 85 percent of loans of $150,000 and less, and up to 75 
percent of loans above $150,000. Under provisions passed in the 
American Recovery and Reinvestment Act (ARRA), however, the SBA 
will provide up to a 90 percent guaranty on most loans made 
under the 7(a) program through the end of fiscal year 2010.
    The proceeds from a 7(a) loan may be used for virtually any 
business purpose including: working capital, acquisition of 
furniture, fixtures, machinery and equipment, purchase of 
inventory, construction, renovation, and purchase of real 
estate. Because SBA loans are generally intended to encourage 
longer-term small business financing, actual loan maturities 
are based on the borrower's ability to repay, the purpose of 
the loan proceeds, and the useful life of the assets financed. 
However, maximum loan maturities have been established at 
twenty-five (25) years for real estate and equipment and seven 
(7) years for working capital.
    Interest rates on 7(a) loans may be fixed or variable, and 
are negotiated between the borrower and the lender, subject to 
SBA maximums. Interest rate caps vary depending on loan size 
and maturity, but for most fixed rate 7(a) loans (i.e. loans of 
$50,000 or more), the interest rate must not exceed Prime plus 
2.25 percent if the maturity is less than seven years, and 
Prime plus 2.75 percent if the maturity is seven years or more. 
Variable rate loans may be pegged to either the lowest prime 
rate or an SBA-determined optional peg rate. The lender and the 
borrower negotiate the amount of the spread which will be added 
to the base peg rate. The borrower and lender also negotiate 
the adjustment period for variable rate loans, which cannot 
adjust more often than once per month and must be consistent 
(e.g., monthly, quarterly, semiannually, annually or any other 
defined, consistent period).
    To offset the costs of 7(a) loans to the taxpayer, the 
Agency charges borrowers and lenders a guaranty fee and 
servicing fee for each loan approved and disbursed. The amount 
of these fees is determined by the size of the guaranteed 
portion of the loan. The lender will usually charge the full 
amount of upfront guaranty fee to the borrower. The lender's 
annual service fee, however, cannot be charged to the borrower. 
Under provisions passed in the American Recovery and 
Reinvestment Act (ARRA), however, the upfront guaranty fee paid 
by borrowers will be waived for loans made under the 7(a) 
program through the end of fiscal year 2010.
    The SBA also administers several subprograms and pilot 
programs under the 7(a) marquee--these are the SBA Express, 
Community Express, Patriot Express, and Rural Lender Advantage 
programs. While the programs have their own distinguishing 
eligibility terms and distinct benefits, they are all operated 
under the framework of the 7(a) program.

SBA Express Program

    As a subset of the 7(a) program, SBA Express provides a 50 
percent loan guaranty on loan amounts up to $350,000. To 
account for this lower guaranty, however, lenders are allowed 
to perform their own loan analysis and procedures and receive 
SBA approval with a 36-hour maximum turnaround time.

Community Express Program

    Community Express is a pilot SBA loan program that operates 
under the framework of the 7(a) loan program. Community Express 
was developed in May of 1999 in collaboration with the National 
Community Reinvestment Coalition (NCRC) and its member 
organizations and was designed to increase lending to 
designated geographic areas comprising low- and moderate-income 
areas and to women, minorities, and veterans.
    The Community Express Program generally conforms to the SBA 
Express Loan Program policies and procedures. Community Express 
participants are allowed to use, to the maximum extent 
possible, their own loan analyses, loan procedures and loan 
documentation. This includes their own application forms, 
internal credit memoranda, notes, collateral documents, 
servicing documentation and liquidation documentation. However, 
in using their documents and procedures, participants must 
continue to follow their established and proven internal credit 
review and analysis procedures for loans of similar size and 
type.
    Under the Community Express program, borrowers must receive 
technical and management assistance (``T.A.'') prior to and 
following loan closing from a local non-profit provider or from 
the participating lender. The technical assistance must be 
coordinated, arranged, and when necessary, paid for by the 
lender. To encourage participating lenders to aggressively 
address the targeted markets, and to offset some of the 
additional costs associated with the technical assistance 
component, SBA's loan guaranty under the pilot program is the 
same as under the regular 7(a) program--a maximum of 85 percent 
on loans up to $150,000 and a maximum of 75 percent on loans 
over $150,000.

Patriot Express Initiative

    In the spring of 2007, the SBA announced the establishment 
of a new 7(a) lending initiative for veterans known as the 
``Patriot Express Pilot Loan Initiative.'' Under this program, 
the SBA provides 7(a) loans for veterans and members of the 
military community wanting to establish or expand small 
businesses.
    It is important to note, however, that the Patriot Express 
initiative does not provide small businesses with any material 
benefits beyond existing standard 7(a) loans. As with any other 
7(a) loan, Patriot Express loans can be used for virtually any 
business purpose and are offered through the SBA's network of 
participating private-sector lenders. Guaranty approval for 
these loans are among the SBA's fastest, and carry the same 
guaranty levels as other 7(a) loans, which is up to 85 percent 
of loan amounts of $150,000 or less and up to 75 percent for 
loans over $150,000 up to $500,000. For loans above $350,000, 
however, lenders are required to take all available collateral. 
Interest on Patriot Express loans are also identical to that of 
other 7(a) loans, which is generally 2.25 percent to 4.75 
percent over prime depending upon the size and maturity of the 
loan.

Rural Lender Advantage Initiative

    In January of 2008, the SBA introduced a new initiative 
under the framework of the 7(a) loan program known as ``Rural 
Lender Advantage'' (RLA). This initiative is part of a broader 
SBA effort to promote the economic development of local 
communities, particularly in those facing the challenges of 
population loss, economic dislocation, and high unemployment. 
The Rural Lender Advantage program was intended to accommodate 
the loan processing needs of small community/rural-based 
lenders that make few or no 7(a) loans by simplifying and 
streamlining the Agency's application process and procedures, 
particularly for smaller SBA loans.
    Lenders participating in the Rural Lender Advantage program 
receive support from a 7(a) facility designed exclusively for 
new or small SBA loan volume lenders submitting loan requests 
through a non-delegated lender process. Lenders also receive 
training and counseling assistance on the Agency's 7(a) loan 
policies and procedures from personnel in SBA field offices.
    Loans made under the RLA program have a simplified 7(a) 
loan application and loan processing procedure for loans of 
$50,000 or less. Loans are capped, however, at a maximum loan 
limit of $350,000. The SBA applies standard guaranty rate, at 
85 percent for loans of $150,000 or less, and 75 percent for 
loans above $150,000, and works to expedite processing of RLA 
loans in a target timeframe of five days or less.
    The program underwent a phased rollout to each of the 
agency's ten regions through FY 2008. Since inception, the RLA 
program has made 650 loans in a total amount of $99.7 million. 
This represents far less than one percent of all 7(a) loans 
made under the program. Somewhat more notably, however, the RLA 
program has had the participation of over 567 lenders. Like 
Patriot Express loans, however, RLA loans do not carry any 
material benefits for small businesses over standard 7(a) 
loans. In this sense, both Patriot Express and RLA are 
primarily enhanced delivery mechanisms with aggressive 
marketing campaigns.

Business Stabilization Loans

    Under Section 506 of P.L. 111-5, the American Recovery and 
Reinvestment Act (signed Feb. 17, 2009), Congress provided $255 
million in funds for the SBA to carry out a Business 
Stabilization Loan program, also known as America's Recovery 
Capital (ARC) loans. ARC loans were established to provide 
viable small businesses with subsidized, small-dollar loans to 
make payments of principal and interest, in full or in part, on 
one or more existing, qualifying small business loans for up to 
six months. In this manner, ARC loans provide an immediate 
infusion of capital to small businesses to assist with making 
payments of principal and interest on existing debt. These 
loans allow borrowers to redirect cash flow from making loan 
payments to investing in their businesses, to help sustain the 
business and retain jobs.
    ARC loans are interest-free to the borrower, carry a 100-
percent guaranty from the SBA to the lender, and require no 
fees paid to SBA. Loan proceeds are provided over a six-month 
period and repayment of the ARC loan principal is deferred for 
12 months after the last disbursement of the proceeds. The 
repayment period, however, can extend up to five years.
    In order to receive an ARC loan, a business must be viable, 
but experiencing immediate financial hardship. The best 
candidates for ARC loans are small businesses that in the past 
were profitable but that are currently struggling. In most 
cases, these businesses have been making loan payments or are 
just beginning to miss loan payments due to financial hardship.
    ARC loans are made by commercial lenders who are SBA 
participants. The SBA pays these banks a monthly interest rate 
throughout the term of the loan. ARC loans will be offered by 
participating SBA lenders for as long as funding is available 
or until September 30, 2010, whichever comes first.

7(a) Secondary Market and Secondary Market Guaranty Programs

    The SBA was also provided with authority under ARRA to 
address the severe dislocations in the SBA loan secondary 
markets with the establishment of two programs to provide loans 
and guarantees to broker and dealers that purchase small 
business loans. Under Section 503 of ARRA, the SBA was directed 
to establish a SBA Secondary Market Guaranty Authority to 
provide a federal guaranty for pools of first lien loans made 
in CDC program financings that are sold to third-party 
investors. Section 509 of ARRA established a Secondary Market 
Lending Authority to make loans to systemically important SBA 
secondary market broker-dealers in 7(a) loans. These loans 
would be fully secured by the borrowers' existing portfolio of 
SBA-backed loans and the proceeds from these loans could only 
be used to purchase small business loans from banks. These 
loans would then be held or pooled and sold to investors to 
fund additional purchases of SBA loans. In this manner, the SBA 
Secondary Market Lending and Secondary Market Guaranty programs 
would provide funding and guarantees to the broker and dealer 
community to ensure the uninterrupted working of the secondary 
market for small business loans.
    ARRA contained emergency rulemaking authority for the SBA 
to waive the notice and comment requirements of the 
Administrative Procedures Act and implement the program in 15 
days. To date, however, the SBA has not implemented the 7(a) 
Secondary Market Lending or Secondary Market Guaranty 
initiatives contained in Act. Furthermore, the agency has 
expressed its intention of implementing this program with 
interest rates dating back to the last quarter of FY 2008. 
These rates are significantly higher than what could be 
available today in the open market and will likely make the 
program cost-prohibitive and unworkable for the vast majority 
of broker-dealers who the program was originally intended to 
help.

504 Certified Development Company Program

    The CDC Program provides permanent, fixed rate financing 
for businesses to acquire industrial or commercial buildings or 
heavy equipment and machinery. The program is delivered by 
local Certified Development Companies (CDCs) working in 
partnership with private lenders and the SBA. Typically, a CDC 
project includes a loan secured with a senior lien from a 
private-sector lender covering up to 50 percent of the project 
cost, a loan secured with a junior lien from the CDC (backed by 
a 100 percent SBA-guaranteed debenture) covering up to 40 
percent of the cost, and a contribution of at least ten percent 
equity from the small business being helped.
    The CDC program differs from the 7(a) loan program, which 
provides variable rate, shorter term financing for general 
business needs. Additionally, unlike 7(a) loans, which are 
delivered by financial institutions, 504 loans are delivered 
through CDCs and must satisfy certain economic development 
criteria.

7(m) Microloan Program

    The Microloan Program provides very small loans to start-
up, newly established, or growing small business concerns. 
Under this program, the SBA makes funds available to nonprofit 
community based lenders (also known as ``micro-
intermediaries'') at a discount of up to two percent from the 
cost of a five-year Treasury bond rate. These intermediaries, 
in turn, make loans to eligible borrowers in amounts up to a 
maximum of $35,000. The average loan size is about $13,000.
    Applications are submitted to the local intermediary and 
all credit decisions are made on the local level. Loan 
repayment periods are up to individual intermediary lenders, 
but cannot exceed six years. Other loan terms vary depending 
upon the size of the loan, the planned use of funds, the 
requirements of the intermediary lender, and the needs of the 
small business borrower. Interest rates vary, depending upon 
the intermediary lender and costs to the intermediary from the 
U.S. Treasury. Generally these rates will be between eight and 
13 percent.
    What distinguishes Microloans from other forms of SBA loan 
assistance is the addition of technical assistance for 
borrowers. Each intermediary is required to provide business-
based training and technical assistance to its borrowers. This 
assistance is often critical to the success of borrowers in 
early-stage or startup businesses.

Small Business Investment Company Program

    The Small Business Investment Company (SBIC) program was 
established in 1958 as part of the Small Business Investment 
Act. The program was originally created to stimulate and 
supplement the flow of private equity capital and long-term 
loans to small business concerns, thereby bridging the gap 
between traditional debt-based financing sources and 
entrepreneurs' needs for long-term equitable financing.
    Like many of the SBA's financing programs, the SBIC program 
operates as a public-private partnership. SBICs are state-
chartered entities organized solely for the purpose of 
providing a source of equity capital for small business 
concerns. After organizing their funds and receiving SBA 
approval, SBICs use their own funds, plus resources borrowed 
with an SBA guaranty or ``leverage,'' to invest in small 
businesses. Although subject to SBA regulation, SBICs remain 
privately owned and managed and make their own decisions about 
which small businesses investments to make.
    The SBA provides leverage to SBICs in two forms--
``debentures'' and ``participating securities.'' To obtain 
leverage, SBICs issue debentures or participating securities, 
which are guaranteed by the SBA. Separate pools of either SBA-
guaranteed debentures or participating securities are formed 
and sold to investors through periodic securities offerings. An 
SBIC's business plan and investment strategy are the primary 
factors in determining the type of leverage used by the SBIC.
    Debenture leverage has a term of ten years, with semi-
annual interest payments and a lump sum payment of principal at 
maturity. The ten-year debenture carries prepayment penalties 
during the first five years, but no prepayment penalty 
thereafter. The interest rate on the debenture is determined by 
market conditions at the time of the pooling. Debenture 
leverage operates on a zero-subsidy basis, being funded by fees 
charged to the SBIC as well as by annual fees based on a 
subsidy rate determined at the time of commitment.
    Participating securities function similar to debentures, 
but the SBA advances interest (known as ``prioritized 
payments'') to the participating security pool investors and is 
repaid these prioritized payments only out of profits of the 
fund. This makes participating securities unique among the 
SBA's programs. The SBA shares in the profits of the SBIC. 
Regardless of whether the SBIC earns profits, however, the full 
principal amount is due at ten-year maturity. Like SBIC 
debentures, participating securities leverage operates on a 
zero-subsidy basis, being funded by fixed commitment and 
drawdown fees as well as by annual fees paid out of profit 
distributions.
    By their nature, debenture SBICs focus on companies that 
are mature enough to make current interest payments on the 
investment so that the SBIC can meet its interest obligations 
to SBA. Thus, debenture financing will generally be best suited 
if the SBIC plans to invest in portfolio companies with the 
ability to service debt. By contrast, participating securities 
SBICs are able to invest equity capital in earlier stage 
businesses because interest is accrued on their obligation to 
the SBA. Thus, participating securities are generally best 
suited for SBICs investing in either seed and early-stage 
businesses or businesses that do not have established cash 
flows.
    Like the 504 and 7(a) programs, the SBIC program operates 
entirely from fees--meaning that no appropriation is required 
for the program. In 2004, however, the participating securities 
program ceased issuing new leverage commitments. This was 
largely the result of the Administration's decision to move the 
program to zero-subsidy in 2001, which was fundamentally 
unsuited to a program that functioned on patient equity 
investment in long-term assets. As a result, the program was 
essentially rendered insolvent by 2005 when the administration 
requested no program funding for the participating securities 
portion of the SBIC program in its annual budget request. The 
participating securities program has not been authorized for 
additional leverage since.

New Markets Venture Capital Program

    Congress created the New Markets Venture Capital (NMVC) 
program in December of 2000 to address the unmet equity needs 
of low-income communities. The NMVC program was administered 
under the purview of the SBA and was modeled after the SBA's 
Small Business Investment Company (SBIC) program. A crucial 
difference between NMVC and SBIC, however, was that the NMVC 
program was established with the specific purpose of providing 
economic development in low-income (LI) areas. NMVCCs are also 
required to make all of their investments in ``smaller 
enterprises,'' which are small business concerns with less than 
$6 million in net financial worth and that have not received 
more than $2 million in average net income the prior two years.
    Like the SBIC debenture program, the NMVC program operates 
as a public-private partnership between the SBA and licensed 
New Markets Venture Capital Companies (NMVCCs). The SBA does 
not make direct investments in small business concerns through 
the NMVC program. Instead, the SBA provides funding to NMVCCs, 
which then use their own funds, plus leverage borrowed with an 
SBA guaranty, to make investments in smaller enterprises 
defined by SBA regulations that are located in LI geographic 
areas.
    Although subject to SBA regulation, NMVCCs remain privately 
owned and managed and make their own decisions about which 
small businesses investments to make, within the constraints of 
NMVC statute, SBA regulations, and the terms of the NMVCC's 
participation agreement and Operational Assistance Grant award. 
In this sense, the SBA's role is essentially the same as with 
the SBIC program. The Agency selects participants for the NMVC 
program, provides funding for their investments and operational 
assistance activities, and regulates their operations to ensure 
that public policy objectives are being met. The SBA requires 
NMVCCs to provide regular performance reports and have annual 
financial examinations by SBA.
    The SBA arranges funding for the debentures under 
procedures similar to those utilized in the SBIC program. The 
SBA supplements NMVCC's available capital through guarantees of 
debentures issued by the company in a face amount of up to 1.5 
times its capital. The debentures have a term of up to ten 
years from the date of draw-down and are issued at a discount. 
Interest in the first five years is paid up front in the form 
of the discount, and is only payable for years six through ten. 
Principal is due at the end of year 10. The debentures are 
priced at a current market rate for comparable U.S. Government 
Treasury securities plus a small premium. The debentures are 
pre-payable without penalty after one year, and there are no 
SBA fees associated with the debenture.
    One crucial advantage that the NMVCCs enjoy over SBICs is 
the addition of SBA administered operational assistance grants 
(OA). The SBA also will match the resources that the NMVCC has 
raised for operational assistance (whether in cash or in-kind) 
with an equivalent grant. The NMVCC must use the grant funds 
and matching resources to provide marketing, management and 
other operational assistance to the businesses in which it 
invests or intends to invest. In principle, the program was 
intended to permit NMVC companies to use capital raised with 
New Markets Tax Credit allocations to meet the NMVC private 
capital match. In practice, however, this was not possible 
because the first NMTC allocations were made after NMVC private 
capital matches were due (e.g. after September 14, 2001).

Renewable Fuels Capital Investment Company Program

    A Renewable Fuel Capital Investment (RFCI) program was 
created in December of 2007 under PL 110-140. This program 
authorized the creation of specialized Renewable Fuel Capital 
Investment Companies (RFCIC) to issue SBA-guaranteed debentures 
to invest in small businesses engaged in researching, 
manufacturing, developing, and bringing to market renewable 
energy sources. This includes the development of biodiesel, 
ethanol, and related research concerning other biomass fuels 
such as cellulosic ethanol. It also includes investment in 
wind-, solar-, hydro-, and geothermal-related energy projects. 
The RFCI program also provides grants to RFCICs to be used to 
provide operational assistance to entrepreneurs in management, 
marketing, and other technical assistance to increase the 
success of the small businesses.
    RFCI program debentures are available in amounts up to 1.5 
times the private investment capital of the RFCIC. The 
debentures will have a term of up to ten years from the date of 
draw-down and will be issued at a discount. Interest in the 
first five years will be paid up front in the form of the 
discount, and is only payable for years six through ten. 
Principal is due at the end of year 10. The administration may 
charge fees on RFCIC debentures sufficient to reduce the 
program's cost to zero, but also has the authority to make 
contributions to reduce the burden associated with those fees 
if and when an appropriation is made available for that 
purpose.
    To date, the SBA has taken no action to implement the RFCI 
program. Under the existing statutory framework of the program, 
no appropriation is necessary to implement the RFCIC program, 
but the legislation does contain authority for the SBA to make 
contributions for the purpose of reducing or eliminating fees 
associated with debentures issued under the program.

 THE NEED TO REAUTHORIZE AND MODERNIZE THE SBA CAPITAL ACCESS PROGRAMS

Recession and Credit Contractions

    The U.S. economy has been in a state of recession since 
December 2007. These economic conditions grew from the rapid 
and widespread boom in credit fueled primarily by a bubble in 
real estate prices, followed by their subsequent collapse. A 
corollary to the boom and bust cycle, however, was a broad-
based tightening of credit for small businesses of all types 
and sizes. This has severely curtailed the ability of small 
businesses to fuel economic growth and remain solvent through 
the ensuing recession.
    In large part, these declines in small business lending 
were the result of the near-standstill in domestic lending that 
occurred after the collapse of Lehman Brothers in September of 
2008. According to the January 2009 Federal Reserve Senior Loan 
Officer Opinion Survey on Bank Lending Practices, approximately 
70 percent of banks surveyed reported tighter lending standards 
on small business loans. Additionally, in the last year, the 
delinquency rates of commercial and industrial loans, as 
reported by the Federal Reserve, reached their highest levels 
since the fourth quarter of 2004.
    The SBA's lending and investment programs are intended to 
bridge the gap in financing that occurs when the private 
markets contract. Conventional wisdom would suggest that these 
programs would expand when the gap in private credit grows 
during times of economic stress. Unfortunately, that has not 
been the case in this economic downturn. A growing number of 
businesses have struggled to secure loans and other forms of 
capital through the SBA's lending and investment programs. 
Despite moderate improvements that can be attributed to the 
small business lending initiatives contained in ARRA, the 
conditions for small business credit have been slow to improve.
    While conditions are better today, the July 2009 Senior 
Loan Officer Opinion Survey showed that 36 percent of banks 
reported tightening credit standards for small firms in the 
last three months, while only two percent reported standards 
easing somewhat. Furthermore, many lenders who historically 
have been leaders in SBA lending remain hesitant to make small 
business loans. CIT, the top lender in 2008, has curtailed its 
small business lending activity significantly in the last year 
and is at high risk of exiting this sector entirely.
    If the declines in small business lending is to be halted, 
inherent deficiencies in the SBA's capital access programs must 
be addressed. The agency must have additional lending programs 
that are better suited to operate under conditions where 
lenders are under increased capital constraints and extremely 
sensitive to risk. Additionally, these programs must provide 
significant tangible benefits to small business borrowers that 
are struggling with lower revenues and greater uncertainty in 
the near-term. While the SBA's existing programs cannot meet 
these criteria, the changes implemented under H.R. 3854 will 
address these needs.

Dislocations in Secondary Market Activity

    The secondary market provides lenders with liquidity for 
loan-making by enabling them to sell the guaranteed portion of 
SBA loans to private brokers and investors. In recent years, 
lenders to the small business community have become 
increasingly dependent upon the secondary market as a source of 
liquidity to make new loans. In the wake of the collapse of 
lending markets that occurred in the last quarter of 2008, 
however, the secondary market for small business loans was 
brought to a standstill as investors pulled back and stopped 
buying these loans. Monthly settlements of SBA loans fell 
precipitously and premiums on guaranteed SBA paper fell to 
unprecedented lows. As a result, banks had less capital to lend 
to small firms. This was a significant contributing factor to 
the precipitous decline in lending that occurred through FY 
2009.
    Stable and properly function secondary markets are 
essential to small business lending. As the small business loan 
secondary markets seized-up in September 2008, however, the SBA 
left entirely impotent. This was because the agency was 
unprepared to respond to a serious decline in secondary market 
activity and lacked tools to restore confidence to investors in 
SBA loans. Without functioning secondary markets, however, 
other efforts to stimulate small business lending were 
significantly hampered.
    The Administration has undertaken two efforts to stabilize 
and improve the deficiencies in SBA loan secondary markets. 
Neither effort has proven very successful. The Term Asset 
Backed Securities Loan Facility (TALF) administered by the 
Federal Reserve began in March of 2008 and allowed secondary-
market investors to take out loans from the Federal Reserve on 
a non-recourse basis backed by high-quality debt instruments, 
such as the guaranteed portion of SBA loans. In this fashion, 
TALF is intended to provide additional liquidity for investors 
in debt that can be backed by the TALF. This program has proven 
of limited utility for stimulating the small business loan 
secondary market, however, as only 1.7 percent of all deals 
settled by the TALF since March have been for SBA-backed loans.
    In March of 2009, the Treasury announced an additional 
proposal that was intended to restart stagnant secondary 
markets for SBA loans. Under this program, Treasury would use 
as much as $15 billion in funds appropriated by Congress under 
the Emergency Economic Stabilization Act of 2008 (EESA) and the 
Troubled Asset Relief Program (TARP) to make direct purchases 
of SBA loans from lenders. Since the announcement, however, not 
a single purchase has been made. Loan purchasers have been 
reluctant to take part because of concerns associated with 
TARP-related oversight and executive-compensation limits.
    Congress took action in the American Recovery and 
Reinvestment Act to address this issue by providing the SBA 
with authority to provide loans to broker/dealers that purchase 
7(a) small business loans. These loans would be fully secured 
by the borrowers' existing portfolio of SBA-backed loans and 
the proceeds from these loans could only be used to purchase 
small business loans from banks. Brokers/dealers in SBA loans 
would either hold the loans or pool them and sell them to 
investors. Congress also authorized the SBA to guaranty pools 
of first-lien loans made in conjunction with CDC financings.
    ARRA provided the agency with emergency rulemaking 
authority to waive notice and comment requirements of the 
Administrative Procedures Act and implement the secondary 
market programs within 15 days of enactment. In the nine months 
since the enactment of ARRA, however, the SBA has not 
implemented the 7(a) Secondary Market Lending initiative or CDC 
Secondary Market Guaranty programs contained in the ARRA. 
Furthermore, the agency has expressed its intent to implement 
this program with interest rates dating back to the last 
quarter of FY 2008. These rates are significantly higher than 
what could be available today in the open market and will 
likely make the program cost-prohibitive and unworkable for the 
vast majority of broker-dealers the program was originally 
intended to help. These actions by the Agency are entirely 
counterproductive to the original intent of the secondary 
market initiatives and serve only to further frustrate efforts 
to improve small business lending.

Declines in SBA Lending

    A growing number of businesses have struggled to secure 
loans through the SBA's flagship lending programs--the 7(a) 
program and the CDC program. Although both programs experienced 
modest declines beginning in 2002, when the program was first 
moved to zero-subsidy, the program's decline accelerated 
significantly in response to the collapse in the U.S. financial 
markets.\1\ In FY 2008, volume in the 7(a) program declined by 
over 38 percent compared to the previous year. The total number 
of 7(a) loans made in FY 2008 fell by over 30,000 loans 
compared to the previous year, while over 2,000 fewer projects 
received CDC financing. These trends continued unabated in FY 
2009, as the number of loans in both programs declined by over 
35 percent compared to FY 2008, and total funds loaned fell by 
over $4.8 billion. This represented the largest two-year 
decline in the history of the program, with over 50,000 fewer 
loans being made and nearly $7.5 billion less in lending--a 
level not seen in nearly a decade.
---------------------------------------------------------------------------
    \1\In FY 2006, lending volume declined by three percent from volume 
from FY 2005. This was the first time in over a decade that loan volume 
decreased from one fiscal year to the next. This trend continued 
unabated in FY 2007, with loan volume falling 2.4 percent below its FY 
2005 level.
---------------------------------------------------------------------------
    The decline in SBA lending has been led in large part by an 
over-reliance and subsequent collapse in the SBA Express Loan 
subprogram. Since FY 2005, SBA lending has grown increasingly 
reliant upon activity in the SBA Express program for overall 
lending in the program. In FY 2008, 39,877 loans were processed 
through SBA Express in a total amount of $2.23 billion. This 
represented 57 percent of the total number of loans made under 
the 7(a) program, but only 18 percent of the total amount of 
money made available under the 7(a) program. Over the past 
year, however, there has been a significant increase in 
defaults on SBA Express loans. Increasing costs stemming from 
the rising defaults have been the single largest driver of 
costs for the 7(a) program, and are expected to push the 
program to a positive subsidy rate in FY 2010.
    These trends are unsurprising given the structure of the 
SBA Express program. Because SBA Express loans provide a lower 
guaranty amount, these loans will entail more credit risk to 
lenders compared to conventional 7(a) loans. As a result, 
lenders making SBA Express loans may forego lending to less 
creditworthy borrowers and instead lend only to borrowers with 
the best credit. This is particularly true as economic 
conditions have worsened and lenders have had to contract 
credit standards significantly. As a result, the SBA Express 
program may be leading the 7(a) program short of its goal to 
make capital available to borrowers who may not otherwise 
qualify for funding in the conventional market.
    Additionally, because SBA Express loans are capped at 
$350,000, an increase in the number of these loans may result 
in less capital actually being made available to businesses. 
This is problematic because small businesses must achieve a 
critical mass of capital in order to capitalize effectively. By 
falling short of necessary capital levels (i.e. at levels under 
$350,000) a business may actually be hampered.
    The problems inherent to the SBA Express program, combined 
with the program's increasing defaults and projected positive 
subsidy rate, were the decisive factors why stimulus funds 
appropriated under ARRA were not used to support increased 
guarantees or fee reduction subsidies in this program.

Rising Costs Are Unsustainable

    With the enactment of H.R. 4818 in FY 2005, the 
Consolidated Appropriations Act, the cost of 7(a) loans 
increased significantly for both small business borrowers and 
lenders. The stringent zero-subsidy framework of this 
legislation caused borrower fees to double, with some 
businesses having to pay as much as $50,000 in upfront fees for 
a loan. Despite these fee hikes, program costs have continued 
to escalate. For fiscal year 2010, the 7(a) loan program will 
be unable to operate without a subsidy, with a projected 
subsidy rate of 0.46. This will require an appropriation of 
approximately $80 million to meet the requirements of the 
Federal Credit Reform Act of 1990. This flies in the face of 
what was originally promised with the program's shift to zero-
subsidy in FY 2002, which was supposed to eliminate the need 
for further appropriations and provide authority for indefinite 
lending.
    The CDC program is also facing significant rising costs in 
the near-term. Some of these costs stem from the current 
economic climate and the program's heavy concentration on 
lending for real estate projects, which are likely to see 
continued losses before the economy recovers. In order to keep 
CDC program fees acceptably low, substantial efforts must be 
made by SBA to minimize the actual loss, or charge-off, 
attributed to each defaulted loan. The SBA has a CDC loan 
portfolio of approximately $30 billion, but maintains a loan 
liquidation staff in its two servicing centers of fewer than 15 
individuals. Additionally, this staff has no ability to travel 
to the locations where loan collateral is located in order to 
track borrowers, guarantors, or collateral. The SBA has not 
taken steps in the past year to delegate additional authority 
to the individual CDCs that make these loans (and which are 
located in the towns and cities in which the collateral is 
located) to perform workouts, liquidations, and recoveries on 
defaulted loans. Under such an arrangement, however, it would 
be imperative that the costs for liquidations be paid promptly 
by the SBA, a task that the Agency has had difficulty 
performing recently.
    The rising costs of both the 7(a) and CDC programs have 
become particularly problematic in the current economic climate 
where credit availability has been pushed past historic lows. 
Congress made considerable efforts to restart lending through 
both programs by appropriating $375 million in P.L. 111-5--the 
American Recovery and Reinvestment Act of 2009--for the purpose 
of reducing fees on and increasing guarantees on 7(a) loans 
through FY 2010. Nonetheless, activity in both programs remains 
anemic, as reflected by the significant declines in lending 
activity in both 7(a) and CDC for FY 2009. If these programs 
remain correlated to wider conditions in the lending markets, 
the SBA will be unable to achieve its mission of making credit 
available to small businesses that are finding themselves shut 
out from traditional sources of capital.

Fewer Participants for SBA Programs

    The SBA also continues to lose ground in attracting new 
lenders to participate in its lending and investment programs. 
In FY 2007, only 2,374 lenders participated in the 7(a) 
program. This represented a 16 percent decline in the number of 
lenders from FY 2003, when 2,840 lenders participated in the 
program. While a good deal of this decline may be attributable 
to the discontinuation of streamlined lending initiatives in FY 
2005, much of the cause may stem from the challenges that small 
lenders have in entering the program. Much of this is due to 
compliance costs associated with SBA's loan regulations and the 
technical expertise needed to make an SBA loan.
    The SBA's investing programs have also suffered from 
declines in participants over the past decade. In FY 2002 the 
SBA licensed 41 new SBIC funds, more than half of which were 
for early-stage investment. By contrast, in FY 2008 the SBA 
issued licenses for only six SBIC funds, only one of which was 
for a new fund (the other five being license renewals), and 
none of which were for investment in early-stage businesses. As 
a result, the SBA has been unable to expand the breadth and 
reach of the program, limiting the availability of equity 
financing to entrepreneurs that the program has traditionally 
served.
    SBA has also been unable to bring new investment companies 
into NMVC and RFCI programs, limiting the availability of 
equity financing to entrepreneurs located in low-income areas 
or those that could contribute to the nation's renewable energy 
effort. To date, only six companies are participating in the 
NMVC program and the FY 2010 budget allocates no resources to 
bring more companies into the program. Additionally, the SBA 
has taken no action to date to implement the RFCI program. 
Agency support is crucial to ensuring that the NMVC and RFCI 
programs meet their full potential. These programs have 
significant potential to improve economic development in low-
income communities and fuel small business innovation in the 
area of renewable energy, particularly since businesses in 
these sectors have experienced a loss of their small 
manufacturing and industrial economic base. Administrative 
mismanagement and protracted delays in their implementation, 
however, have squandered much of this potential.

Difficulty Reaching Underserved Businesses

    In the spring of 2007, the SBA announced the establishment 
of a new 7(a) lending initiative for veterans known as the 
``Patriot Express (PE) Pilot Loan Initiative.'' Under this 
program, the SBA provides 7(a) loans for veterans and members 
of the military community wanting to establish or expand small 
businesses. In FY 2008, SBA made only 912 PE loans, accounting 
for less than two percent of all 7(a), and less than one 
percent of all dollars loaned. In addition to its lackluster 
performance, the continued reliance on Patriot Express has come 
at the expense of other programs that are aimed at increased 
access to capital for veteran-owned small businesses. The 
Increased Veteran Participation program was established by 
Congress in 2008 by P.L. 110-186, the Veteran Small Business 
Reauthorization and Opportunity Act of 2008. The Increased 
Veteran Participation program can function within the existing 
zero-subsidy policy of the 7(a) program, but carries 
significantly greater guarantees, loan sizes, and reduced fees 
for veteran borrowers. While no appropriation is necessary to 
implement this program, the SBA has yet to take action to 
implement the Increased Veteran Participation program.
    Small businesses in rural areas have also continued to 
struggle with access to the SBA's lending programs. In January 
of 2008, the SBA introduced a new initiative under the 
framework of the 7(a) loan program known as ``Rural Lender 
Advantage.'' This initiative was intended to accommodate the 
loan processing needs of small community/rural-based lenders 
that make few or no 7(a) loans by simplifying and streamlining 
the Agency's application process and procedures, particularly 
for smaller SBA loans. Like Patriot Express loans, however, RLA 
loans do not carry any material benefits for small businesses 
over standard 7(a) loans. In this sense, both Patriot Express 
and RLA are primarily enhanced delivery mechanisms with 
aggressive marketing campaigns which are unlikely to 
significantly improve lending businesses in these target 
groups.
    SBA's ability to provide capital for socially and 
economically disadvantaged small business owners will likely be 
affected by recent changes to the Community Express program--a 
pilot program of the 7(a) loan loans. Because Community Express 
is a pilot program, it is subject to statutory limitations that 
prohibit the SBA from making more than ten percent of 7(a) 
loans through a pilot program. In FY 2009, however, the SBA 
altered the Community Express program by targeting the program 
to underserved geographies (e.g., low-income or underserved 
locations), as opposed to its prior focus on demographic groups 
(e.g., minorities, women, and veterans). This policy, however, 
is inconsistent with the program's original intent of serving 
individuals who have faced more difficulty in securing credit 
through the conventional markets. By focusing on geographic 
areas, the SBA has expanded the pool of eligible borrowers 
beyond the intended target groups of women, minorities, and 
veterans while leaving statutory ten percent limit on the 
program's volume undisturbed. This will likely result in fewer 
7(a) loans going to the program's initial target groups and 
will likely affect the 7(a) program's overall success in 
lending to these individuals.
    In addition to reaching target demographics through its 
lending programs, the SBA has also struggled to provide capital 
investment for minority entrepreneurs. In FY 2008 only 3.4 
percent of all financings in the SBIC program went to small 
businesses that were majority black-owned. Only 1.22 percent of 
all SBIC investments went to small businesses that were 
Hispanic-owned and only 2.49 percent of SBIC investments went 
to women-owned businesses. Veteran-owned small businesses fared 
the worst, receiving only 0.12 percent of all SBIC financings. 
These figures represent a troubling performance for a program 
that was intended to focus on providing these groups with 
investment capital.
    Legislation is also necessary to address the 
Administration's failure to leverage the program's inherent 
ability to provide investment capital to industries that have 
particular difficulty in acquiring equity capital. The 
additional investment capital provided by the SBA in the SBIC 
and NMVC programs facilitates smaller transactions that are 
more suitable to investments in smaller businesses and has the 
added benefit of making SBIC and NMVCCs less reliant on public 
market sentiment compared to the investments made by 
traditional venture capital firms. This is particularly 
important to facilitating investment in small businesses in 
struggling industries and low income areas that have difficulty 
attracting private capital.

Inability To Support Early-Stage Businesses

    In 2004, the participating securities program ceased 
issuing new leverage commitments. This was largely the result 
of a decision to move the program to zero-subsidy in 2001, 
which was fundamentally unsuited to a program that functioned 
on patient equity investment in long-term assets. As a result, 
the program was essentially rendered insolvent by 2005 when the 
administration requested no program funding for the 
participating securities portion of the SBIC program in its 
annual budget. This policy was continued through the FY 2010 
budget.
    By eliminating the participating securities program, 
however, the SBA has become completely reliant on debt-based 
programs, which are more suited to providing later stage, 
expansion capital to cash-flow-positive businesses. This has 
particularly hampered investment in early-stage and capital-
intensive small businesses, which lack the resources to service 
heavy debt investment. According to SBA studies, the total 
unmet need for early-stage equity financing for small 
businesses is about $60 billion annually.
    Beginning in the last quarter of 2008, investments in early 
stage businesses plunged to $5.4 billion, a drop of 26.4 
percent from the prior quarter and 33.2 percent from the fourth 
quarter a year earlier. Several factors have contributed to 
this downturn, particularly the frozen markets for initial 
public offerings--there were only six nationally in the last 
year. The end result of these trends has been a significant 
decline in funding for small businesses and early stage 
companies. This is particularly troubling since these are 
precisely the types of businesses that have historically driven 
innovation and growth in the U.S. They are a keystone of U.S. 
competitiveness and will be integral to creating new jobs and 
driving growth as the economy exits this recession.
    In the current economic environment, however, many 
entrepreneurs have been unwilling to take on new business 
enterprises, reasoning that opportunities for capital are 
scarce. Today, the SBA is entirely reliant on debt-based 
programs to overcome the difficulties that small firms 
encounter when seeking capital. These debt-based programs, 
however, are more suited to providing later stage, expansion 
capital to businesses with positive cash-flow that can be used 
to make regular payments on debt. As a result, the gap for 
investment in early-stage and capital-intensive small 
businesses, which lack the resources to service heavy debt 
investment, has grown wider, and this critical component of the 
small business community has continued to be underserved by 
existing government programs.

                             III. Hearings

    In the 111th Congress, the Committee on Small Business held 
six hearings to examine the issue of small business access to 
capital, the SBA's capital access programs, and related 
legislation.
    On March 26, 2009, the Small Business Committee, 
Subcommittee on Oversight and Investigations held a hearing to 
examine issues related to investment in small businesses, with 
particular emphasis on how prevailing economic conditions have 
affected investment in small firms. Witnesses in this hearing 
explained how the current recession has aggravated the need for 
investment funds, particularly for equity investing in small 
firms, and how new federal initiatives could allay those needs. 
Additionally, this hearing explored numerous setbacks to the 
SBA's investment programs that have dramatically reduced the 
amount of investment in early stage and startup businesses and 
have inhibited the flow of venture capital to small businesses 
in general.
    The full Committee subsequently held a hearing on June 
10th, 2009, to examine the challenges facing the full array of 
the SBA's capital access programs. The Committee received 
testimony on issues facing the 7(a), Certified Development 
Company (CDC), Small Business Investment Company (SBIC), New 
Markets Venture Capital (NMVC), 7(m)/Microloan, and Renewable 
Fuels Capital Investment (RFCI) Company programs. Witnesses at 
this hearing discussed various deficiencies affecting the 
efficacy of these programs and proposed steps that could be 
taken to better meet the SBA's capital access mission.
    The Small Business Committee, Subcommittee on Regulations 
and Healthcare held a hearing on June 22, 2009 to discuss the 
financial challenges that solo and small group health practices 
face in adopting health information technology (HIT). In 
particular, witnesses provided testimony on the dislocations 
between capital costs and returns on investment that discourage 
greater uptake of HIT assets by small health providers.
    On Thursday, July 23, 2009 the Small Business Committee, 
Subcommittee on Finance and Tax held a hearing to examine 
proposed legislative initiatives to address deficiencies in the 
SBA's lending and investment programs that had been identified 
by previous hearings before the Committee. Witnesses at this 
hearing discussed several legislative proposals that would make 
a number of important reforms to the SBA's existing programs 
and establish new programs that will help close the gap for 
equity investment that was left when the SBA's investing 
programs were curtailed.
    On Thursday, October 8, 2009, the Small Business Committee, 
Subcommittee on Finance and Tax held a markup of legislation 
affecting the SBA's capital access programs, including the 
7(a), CDC, Microloan, SBIC, NMVC, and Disaster loan 
programs.\2\ These bills would also establish a new lending 
program to provide reduced cost capital to small medical 
practices that purchase health information technology and new 
equity investing program under the SBA. These bills were 
reported to the full Committee by voice vote with no 
amendments.
---------------------------------------------------------------------------
    \2\This included H.R. 3723, The Small Business Credit Expansion and 
Loan Markets Stabilization Act of 2009, which was introduced by Rep. 
Halvorson (IL) to make improvements to the 7(a) loan program; H.R. 
3739: The Job Creation and Economic Development Through CDC 
Modernization Act of 2009, which was introduced by Rep. Buchanan (FL) 
to update the CDC program; H.R. 3737: The Small Business Microlending 
Expansion Act of 2009, which was introduced by Rep. Ellsworth (IN) to 
improve the Microloan program; H.R. 3740: The Small Business Investment 
Company Modernization and Improvement Act of 2009, introduced by Rep. 
Leutkemeyer (MO) to streamline and expand the SBIC program; H.R. 3722: 
The Enhanced New Markets and Expanded Investment in Renewable Energy 
for Small Manufacturers Act of 2009, introduced by Rep. Kirkpatrick 
(AZ) to expand the NMVC and RECI programs; H.R. 3014: The Small 
Business Health Information Technology Financing Act of 2009, 
introduced by Rep. Dahlkemper (PA) to create a new lending program to 
make capital available for small health practices to purchase health 
information technology; H.R. 3738: The Small Business Early Stage 
Investment Act of 2009, introduced by Rep. Nye (VA) to create a new 
equity investment program at the SBA; and H.R. 3743: The Small Business 
Disaster Readiness and Reform Act of 2009, introduced by Rep. Griffith 
(AL) to make necessary improvements to the SBA's Disaster assistance 
program.
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    The full Committee subsequently held a hearing on October 
14th, 2009, to review proposed legislation to address 
deficiencies in the SBA's lending and investment programs that 
had been identified by previous hearings before the Committee. 
Witnesses at this hearing expressed their support for several 
legislative proposals to reform the SBA's existing programs and 
establish new programs that will help close the gap for equity 
investment. These proposals ultimately became the basis for 
H.R. 3854.

                      IV. Committee Consideration

    The Committee on Small Business met in open session on 
October 21, 2009 and ordered H.R. 3854 reported to the House by 
voice vote. No amendments were offered during the markup.

                           V. Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. As 
noted in the comprehensive description of the markup above, no 
recorded votes were conducted. A motion by Ms. Velazquez to 
report the bill to the House with a favorable recommendation 
was AGREED to by a voice vote at 10:41 a.m.

              VI. Section-by-Section Analysis of H.R. 3854

            Section 1. Short title; table of contents
    This provision sets a short title for the Act as ``Small 
Business Financing and Investment Act of 2009''

              TITLE I--SMALL BUSINESS LENDING ENHANCEMENTS

            Section 101. The small lender outreach division
    This provision will direct the Administrator to establish a 
program within an existing office to support regional SBA 
offices in assisting small lenders who do not participate in 
the preferred lenders program (PLP) to make 7(a) loans. The 
Committee intends for this program to be established in an 
existing element of SBA and does not intend for a new division 
to be created for this purpose.
    The Committee believes that this program will encourage 
more non-PLP lenders to participate in the 7(a) program, 
particularly community banks and lenders located in rural 
areas.
            Section 102. The rural lender outreach program
    This provision would establish an SBA lending program 
focused on lending to small businesses located in rural areas. 
The program would be administered by the Small Bank Outreach 
Division established under this bill. The RLO program would 
improve upon conventional 7(a) loans to encourage increased 
lender participation in the 7(a) program, reducing application 
burdens for borrowers and lenders in rural areas, by expediting 
the lending process, and enhancing loans made under this 
program by increasing the guarantee to 90 percent on amounts up 
to $250,000. Loans made under this program would use 
abbreviated application and documentation requirements and 
require the SBA to approve or decline the loan within 36 hours.
    The Committee believes that this program will help 
alleviate the trend of declining lender participation in the 
7(a) program, particularly among lenders in rural areas. The 
Committee anticipates that this program can increase lender 
efficiency and reduce the cost of processing 7(a) loans for the 
SBA, lenders, and borrowers, thereby encouraging greater 
participation. The Committee does not, however, believe that 
abbreviated application and documentation requirements should 
result in lower underwriting standards. The Committee intends 
for loans made under this program to remain consistent with 
prudent banking practices and that lenders should continue to 
follow established and proven internal credit review and 
analysis procedures for loans of similar size and type. To 
ensure that this occurs, the Committee intends for the SBA to 
establish minimum credit standards as it feels necessary to 
limit the rate of default on loans made under this program.
            Section 103. Community Express program made permanent
    This provision would make the Community Express pilot 
program permanent. The program will provide loans to businesses 
majority owned by women, socially or economically disadvantaged 
individuals, or U.S. military veterans without regard to their 
geographic location.
    The Committee believes that lenders participating in the 
program should be allowed to use, to the maximum extent 
possible, their own loan analyses, loan procedures and loan 
documentation. This includes their own application forms, 
internal credit memoranda, notes, collateral documents, 
servicing documentation and liquidation documentation. However, 
in using their documents and procedures, the Committee intends 
for lenders to continue to follow established and proven 
internal credit review and analysis procedures for loans of 
similar size and type.
    Over the past five years, the SBA has relied on the 
Community Express pilot program as a key mechanism for making 
loans to these businesses. The Committee believes that this 
program must be maintained given the decline in both the number 
and dollar amount of loans that the SBA has made to these 
groups. From FY 2007 to FY 2008, the number of 7(a) loans made 
to minority-owned businesses declined by over 33 percent, while 
the number of loans made to women-owned businesses declined by 
29 percent. During the same time period, the number of 7(a) 
loans to veteran-owned businesses declined by more than 22 
percent.
    Under the Community Express program, borrowers must receive 
technical and management assistance (``T.A.'') prior to and 
following loan closing from a local non-profit provider or from 
the participating lender. The technical assistance must be 
coordinated, arranged and, when necessary, paid for by the 
lender. To encourage participating lenders to aggressively 
address the targeted businesses, and to offset some of the 
additional costs associated with the technical assistance 
component, SBA's loan guaranty under the pilot program is the 
same as under the regular 7(a) program--a maximum of 85% on 
loans up to $250,000.
    The Committee intends for the Community Express program to 
follow collateral standards that the SBA promulgated under the 
existing pilot program. For this reason, the SBA shall not 
require lenders to take collateral for loans less than $25,000. 
This provision does not, however, require that loans under 
$25,000 be uncollateralized. To the contrary, a lender may 
require collateral on loans of $25,000 or less if they feel a 
particular loan so warrants. This provision will simply 
preclude the SBA from setting collateral requirements on loans 
of $25,000 or less. This provision is intended to streamline 
the lending process, particularly in situations when collateral 
may be unnecessary.
            Section 104. Increased Veteran Participation Loan Program 
                    made permanent
    This provision would amend the Increased Veteran 
Participation Program (IVPP) under section 7(a)(32) of the 
Small Business Act to permanently establish this initiative as 
a sub-program of the 7(a) Loan Program. This section will also 
provide permanent authority to reduce fees on IVPP loans by 
half and increase the guarantee to 90 percent for loans made to 
veteran-owned small businesses. The Committee believes that 
this program will significantly ameliorate the declining 
numbers of military veterans participating in the 7(a) program, 
particularly at a time when more veterans are returning from 
active deployments in Iraq and Afghanistan and are seeking 
capital for their small businesses.
    Because this program does not displace the zero subsidy 
policy governing the 7(a) program, the Committee intends for it 
to be fully implemented irrespective of whether an 
appropriation is made available to the program. In the event 
that the 7(a) program reaches positive subsidy, however, the 
Committee expects the SBA to identify and eliminate non-
permanent loan programs before exercising discretion of not 
operating the IVPP. Additionally, it is the Committee's 
expectation that the permanent establishment of the IVPP 
program would eliminate the need for the superfluous Patriot 
Express pilot program and that this program would be 
discontinued.
            Section 105. Leasing policy
    This section will clarify permissible uses of 7(a) 
financings for facilities that will subsequently be leased by 
the small business concern. Under this provision, a 7(a) 
program loan may be used to acquire or construct a facility, so 
long as the small business concern receiving the loan 
permanently occupies no less than 50 percent of the project 
property and may temporarily lease no more than 50 percent of 
the project property
            Section 106. National lender training program
    This section would require the SBA's ten regional offices 
to carry out a lender training program to train new and 
participating lenders on SBA's lending systems, policies, and 
procedures. Costs for this program can be covered by fees, and 
the program cannot be contracted out to non-governmental 
entities.
    The Committee believes that the role of program training 
and lender education is properly the purview of the SBA and 
that lenders should not seek private training courses or 
seminars to train employees on SBA program policies and 
procedures. At a minimum, the Committee would expect every 
lender participating in an SBA lending program to have at least 
one employee complete SBA training and that continuing 
education for SBA participants be available on an annual basis.
    This section also reiterates existing laws which limit 
participation in the SBA's capital access programs to entities 
that engage solely in lending, investment, or entrepreneurial 
development or in activities incidental to the business of 
lending, investing, or small business entrepreneurial 
development. The Committee does not intend for this language to 
make any material change to the entities that currently 
participate in these programs.
            Section 107. Applications for repurchase of loans
    This section shall require the SBA to make prompt payment 
on repurchase applications, and to make a final determination 
to approve or deny a complete repurchase application within 45 
days of receipt. Applications not receiving a final 
determination within 45 days shall be deemed approved.
    The Committee does not intend for this provision to require 
the SBA to pay fraudulent or improperly issued guarantees. The 
Committee intends for this provision to eliminate the practice 
of partial guaranty payments or complete guaranty denials that 
are based upon immaterial or technical deficiencies in the loan 
application, approval, or servicing process. Additionally, the 
Committee believes that partial or complete denials should be 
exceedingly rare in instances where the SBA has had an 
opportunity to review and approve a guaranty prior to its 
issuance. This provision is intended to ensure that the SBA 
provides greater certainty for the guarantees that lenders rely 
upon when making 7(a) loans. In recent years, untimely payments 
and denials on guaranty purchases have all but eliminated the 
meager margins that lenders relied upon to economically justify 
participation in the 7(a) program.
            Section 108. Alternative size standards
    This provision will provide a simplified and 
straightforward standard for determining small business loan 
eligibility. The Committee believes that this provision will 
encourage greater lender participation in the 7(a) program. At 
a minimum, the standard must include businesses' maximum 
tangible net worth and average net income as factors upon which 
the size determination is based.
    The Committee intends for the simplified size standard to 
be set by the SBA, thereby giving the SBA the opportunity to 
ensure that this standard addresses any of the concerns it 
feels necessary. Until that standard is adopted, however, the 
Committee intends for the SBA to use the size standard that 
currently exists for the 504 program.
            Section 109. Pilot program authority
    This section would limit the maximum number, term, and 
dollar amount of SBA pilot programs, and would require that any 
new pilot programs, or any changes to an existing pilot 
program, be made pursuant to the notice and comment rulemaking 
provisions of Section 553(b) of Title V of the United States 
Code.
    The Committee believes that no material changes to the 
SBA's lending and investment programs should be made without 
the notice and comment rulemaking procedures established under 
the Administrative Procedures Act. This includes changes to 
informal program guidance or SBA standard operating procedures 
that would affect the way in which SBA loans are applied for, 
approved, or processed. Additionally, the Committee intends for 
this provision to curtail the SBA's ability to establish new 
programs or delivery mechanisms for SBA loan programs without 
explicit statutory authority, particularly when Congressionally 
mandated programs remain unimplemented.
            Section 110. Loans to cooperatives
    This section will simplify the eligibility requirements for 
cooperatives to receive 7(a) loans by permitting any 
cooperative that is not organized as a tax exempt entity, which 
is engaged in a business activity, that offers its goods or 
services to the public, and that obtains financial benefits for 
itself as an entity as well as for its members.
    The Committee intends for this language to eliminate the 
SBA's current distinctions between ``consumer,'' ``marketing,'' 
and ``producer'' cooperatives. The Committee also believes that 
the SBA's practice of looking primarily at an entity's tax 
filing status to determine eligibility for SBA loans should be 
discontinued, as this factor is not dispositive in determining 
whether an entity is a business or not. The language in this 
provision is intended to expand eligibility for SBA loans to 
small businesses that are organized as cooperatives. The 
Committee believes that the SBA's treatment of cooperative 
businesses should be no different than the treatment given 
other businesses. The cooperative must still be deemed eligible 
under the SBA's size standards, and if any of its members are 
business entities, they must also meet the SBA's size 
standards.
            Section 111. Capital Backstop program
    Under this section, the SBA would be required to establish 
a process by which potential borrowers submit loan applications 
directly to the agency. The SBA would then be authorized to 
engage in application processing and preliminary underwriting 
of these applications before forwarding the applications to 
private sector SBA lenders within 100 miles of the principal 
office of the potential borrower. If no such lenders approve 
these loan applications and undertake the loans, the SBA is 
required to provide such applications to preferred SBA lenders 
nationwide. If after 60 days no private sector lender approves 
these loans, the SBA is authorized underwrite, close, and fund 
the loan.
    The SBA would then be required to offer closed and funded 
loans to the private sector through asset sales convened semi-
annually. The SBA is authorized to contract with private sector 
vendors for due diligence, asset valuation, and other services 
related to the asset sales. The SBA would be prohibited from 
selling loans for less than 90 percent of the net present 
value, as determined and certified by a qualified third-party 
entity, of such assets through the asset sales. For loans that 
were unable to be sold through the asset sales, the SBA would 
be required to maintain and service such loans.
    This program will be subject to the Federal Credit Reform 
Act of 1990, meaning that it will carry sufficient fees to 
reduce the cost to zero and that the program level for lending 
would be indefinite. The program would also only take effect in 
the event that the Bureau of Economic Analysis has determined 
the U.S. gross domestic product has declined for three 
consecutive quarters and that the annual program level volume 
in the SBA's 7(a) loan program has declined by 30 percent or 
more compared to the same time in the previous fiscal year.
    It should also be noted, however, that the SBA would be 
required to apply the existing eligibility and credit 
underwriting criteria that are used for 7(a) loans, thus 
avoiding any adverse selection for SBA loan-making. In fact, 
the SBA backstop portfolio should carry no more risk than that 
of a 7(a) private sector lender. Additionally, total program 
level in the Capital Backstop program would be identical to the 
annual program level of the 7(a) program, meaning that the 
program would not entail any increased exposure beyond levels 
already contemplated in the annual 7(a) program level 
authorization. Finally, to avoid any undue burden on the SBA's 
other programs, the Capital Backstop program would be carried 
out using a reserve cadre that is skilled and trained to make 
loans.
            Section 112. Loans to finance goodwill
    Under this provision, the SBA would be prohibited from 
applying disparate application, processing, or approval 
standards on loans used to finance goodwill.
            Section 113. Appellate process and ombudsman
    This section would establish an Office of the Agency 
Ombudsman within the SBA. The Agency Ombudsman would be 
organized around the principle of dispute resolution within the 
SBA's various lending and investment programs. This office 
would be established to ensure that the private sector partners 
that administer the SBA's programs receive fair and expeditious 
resolution of their complaints. The Ombudsman would report 
directly to the Administrator and would serve as an objective 
arbiter to resolve appeals independently of the SBA's program 
administration offices through a separate appeals process. This 
process is designed to provide participants with an 
independent, fair, and confidential means of settling 
disagreements that can arise from the SBA's oversight or 
decision making functions. This would enable program 
participants to make informal inquiries or file formal appeals 
in the strictest confidence without fear of retaliation.
            Section 114. Extension of recovery and relief loan benefits
    This section would extend the increased guarantees and 
eliminated borrower fee provisions that were established under 
Sections 501 and 502 of the American Recovery and Reinvestment 
Act of 2009 through the end of fiscal year 2011, providing 
small businesses and lenders with continued support to make 
capital available as the economy recovers. The Committee 
intends for this to serve solely as a prospective extension of 
authority to continue these benefits through September 30, 2011 
and should not be considered as having any effect on the 
existing operation of the program.
    It is the Committee's intent that borrowers remain the 
primary beneficiaries of the fee reduction and that funds 
appropriated for fee reduction first be used to the maximum 
extent practicable to reduce fees for borrowers before being 
used to reduce fees paid by lenders. If there are insufficient 
funds to eliminate borrower fees entirely throughout the 
authorization period, the agency should adjust the borrower 
fees upward to conserve funds and effect a fee reduction 
through the end of the stimulus period for borrowers only. This 
is the only approach intended by the Committee to give full 
effect to the language which provides small business borrowers 
with priority over lenders in receiving this vital relief. 
Additionally, the Committee intends for the increased guaranty 
to be applied uniformly for all loans made under Section 7(a) 
regardless of the size of the loan, purpose of the loan 
proceeds, or size of the institution making the loan. The sole 
exception for these benefits should be for loans made under SBA 
Express, which should not carry either the increased guaranty 
or the reduced fees.
            Section 115. Reduced documentation for Business 
                    Stabilization loans
    This provision will streamline and improve the application 
process for Business Stabilization loans established under the 
American Recovery and Reinvestment Act (ARRA) by requiring the 
SBA to develop a single page application for these loans and 
reduced documentation requirements by permitting lenders to 
apply documentation and processing procedures that the 
institution uses for loans of similar size and purpose. The 
Committee intends for this provision to significantly reduce 
the burden on borrowers seeking ARC loans following the 
enactment of this provision. The new application process and 
revised documentation standards should not affect existing or 
pending loan applications, but should only be prospectively 
applied for new loans. Additionally, the Committee does not 
intend for the reduced documentation requirements to result in 
significantly lower underwriting standards. The Committee 
intends for loans made under this program to remain consistent 
with prudent banking practices and that lenders should continue 
to follow established and proven internal credit review and 
analysis procedures for loans of similar size and type.
            Section 116. Expanded eligibility for Business 
                    Stabilization loans
    This provision will expand the Business Stabilization loans 
established under the American Recovery and Reinvestment Act 
(ARRA) to permit loan funds to be used for the purpose of 
making payments of principal and interest on loans that are 
guaranteed by the Federal government. This would include the 
payment of principal and interest on any preexisting SBA 
guaranteed loan. The Committee does not intend for the expanded 
uses of loan proceeds to affect existing or pending loan 
applications, but should only be prospectively applied for new 
loans approved or made after the date of enactment.
            Section 117. Increased amount for Business Stabilization 
                    loans
    This provision will increase the maximum loan size for the 
Business Stabilization loans established under the American 
Recovery and Reinvestment Act (ARRA) from the current level of 
$35,000 to $50,000. The Committee does not intend for these 
larger loan amounts to affect existing or pending loan 
applications, but should only be prospectively applied for new 
loans approved or made after the date of enactment.
            Section 118. Extension of Business Stabilization loans
    This provision will extend the Business Stabilization loans 
established under the American Recovery and Reinvestment Act 
(ARRA) through the end of fiscal year 2011. The Committee 
intends for this extension to serve solely as a prospective 
extension of authority to continue this program through 
September 30, 2011 and should not be considered as having any 
effect on the existing operation of the program.
            Section 119. Secondary Market Lending Authority made 
                    permanent
    This section would make the Secondary Market Lending 
Authority established under Section 509 of the American 
Recovery and Reinvestment Act of 2009 permanent, providing the 
SBA with permanent authority to make liquidity available to 
brokers and dealers who purchase and sell SBA 7(a) loans, thus 
stabilizing this vital component of the small business lending 
market.
            Section 120. SBA Secondary Market Lending Authority 
                    expanded
    This section would amend the Secondary Market Lending 
Authority established under Section 509 of the American 
Recovery and Reinvestment Act of 2009 to permit any 7(a) lender 
to apply for and receive loans authorized by this section. 
Additionally, the Secondary Market Lending Authority is amended 
to provide the SBA with authority to use appropriated funds for 
the purpose of reducing the cost of loans made under this 
program.
            Section 121. Increased loan limits
    This provision will increase the maximum gross loan amount 
for 7(a) loans from the current level of $2 million to $3 
million. The Committee does not intend for there to be any 
increase in the total amount of these loans that the SBA 
guarantees.
            Section 122. Real estate appraisals
    This section would require an appraisal by a licensed or 
certified appraiser for any 7(a) financing secured by 
commercial real estate with an estimated value in excess of 
$400,000. The Committee does not, however, intend for these 
increased limitations on real estate appraisals to result in 
lower underwriting standards. The Committee intends for loans 
to remain consistent with prudent banking practices and for 
lenders to continue to follow established and proven internal 
credit review and analysis procedures for loans of similar size 
and type.
            Section 123. Additional support for express loan program
    This provision will permit the SBA to retain a 25 basis 
point fee that is currently charged and retained by lenders on 
all 7(a) loans. The Committee intends that lenders making SBA 
Express loans should remit this portion of the fee to the SBA 
and that the SBA use this additional fee to bring the 7(a) 
program within zero subsidy. The Committee does not intend for 
the SBA to retain this fee in any other type of loan made under 
Section 7(a).

Section 124. Authorization of appropriations

    This section would authorize a program level of $17.5 
billion in the 7(a) loan program through fiscal year 2011.

            TITLE II--CDC ECONOMIC DEVELOPMENT LOAN PROGRAM

Subtitle A--General provisions

            Section 201. Program levels
    This section will authorize the 504/Certified Development 
Company Program levels at $9 billion in financings in fiscal 
year 2010 and $10 billion in financings in fiscal year 2011. 
These levels should be adequate given current and projected 
levels of program activity.
            Section 202. Definitions
    This provision codifies the definition of a Certified 
Development Company (CDC) as a company which the SBA has 
determined meets the criteria of the new section 506 of the 
Small Business Investment Act of 1958 (SBIA). The Committee 
believes that this change is necessary because the SBIA does 
not define CDCs in general terms.

Subtitle B--Certified Development companies

            Section 211. Certified Development companies
    This provision specifies criteria that a development 
company must meet in order to issue debentures. A CDC must have 
fewer than 200 employees and must serve its local community by 
fostering economic development, creating and preserving jobs, 
and stimulating private community investment. Except for CDCs 
certified prior to January 1, 1987, CDCs must operate as not-
for-profit entities and must maintain good standing with all 
laws, including taxation requirements, in their state of 
incorporation. This provision will also establish requirements 
for CDC membership and will require that CDCs be professionally 
managed and maintain a board of directors that represents its 
membership.
    This provision will require CDCs to maintain a directorate 
with ties to the states in which it operates. It also imposes 
ethical requirements on CDCs and their employees, including a 
prohibition on persons serving as an officer, director or chief 
executive officer of more than one certified development 
company.
            Section 213. Accredited lenders program
    This provision codifies the existing accredited lenders 
program, which CDCs that meet the accreditation criteria must 
follow in order to participate in the ACL program, which 
permits skilled, experienced, and well staffed CDCs in good-
standing to make loans with accelerated approval and closing 
times.
            Section 214. Premier Certified Development Program
    This provision codifies the existing Premier Certified 
Development Program (PCL) by which accredited lenders can make 
completely delegated loan decisions.
            Section 215. Multi state operations
    This provision establishes criteria for subsequent 
development company expansion which requires that each 
additional State be contiguous to the State of incorporation, 
and requires the CDC to add to its membership in the State of 
incorporation at least 25 members from each additional State, 
and must add to its board in the State of incorporation at 
least one member from each additional State.
            Section 216. Guaranty of debentures
    This provision codifies the existing authority for the SBA 
to issue guarantees for the full amount of CDC debentures 
issued under the program as well as the fee structure which 
sets the program subsidy at zero. It would also change the 
existing law to provide borrowers in the 504 program with the 
option to include loan and debenture closing costs, other than 
borrower's attorney fees, in the debenture. The Committee 
believes that this provision will improve efficiency and 
convenience in the 504 program and result in increased 
participation in the program.
            Section 217. Economic development through debentures
    This section codifies the economic development mission that 
is central to the CDC program. Among these objectives, this 
provision will allow the ownership interest of two or more 
owners to be combined to determine whether the small business 
is at least 51 percent owned by minorities, women or veterans 
in order to qualify for assistance as a public policy goal. The 
Committee believes that this change is consistent with the 504 
program's existing provision which permits small businesses to 
qualify as a public policy goal for 504 program financing by 
majority ownership of a single woman, minority, or veteran.
    This provision also designates financings in areas eligible 
for investment under the New Markets Tax Credit Program as a 
public policy goal under the 504 program, thus making these 
financings eligible for a larger maximum debenture limit. The 
Committee believes that this change is consistent with the 504 
program's existing purpose of fostering community development 
and economic investment.
    This effort would also permit 504/CDC project financings to 
be used to acquire the stock of a corporation, so long as the 
amount of the financing used to acquire stock does not exceed 
the fixed asset value attributable to such assets.
            Section 218. Project funding requirements
    This section would increase the maximum loan sizes for 504/
CDC financings from $3.75 million for conventional projects and 
$5 million for projects that meet the public policy goals in 
the Small Business Investment Act to $7 and $10 million 
respectively. These increases are commensurate with the rate of 
inflation since the maximum loan sizes were last established.
    This provision would also increase the maximum loan sizes 
for financings for projects that improve energy efficiency, 
produce renewable energy, or fund small manufacturing to $20 
million. Businesses located in New Markets (i.e. low income) 
areas could receive a maximum financing of $12.5 million, and 
the provision would also create new financing of up to $25 
million for small businesses that constitute a major source of 
employment.
    This provision will also enable borrowers to provide more 
than the required minimum amount of equity and to use the 
excess equity to reduce the amount of the first mortgage loan, 
as long as the amount of the first mortgage loan would not be 
reduced to less than the amount of the SBA guaranteed portion 
of the loan. The Committee intends for this change to enable 
high-risk borrowers or start-up businesses to lower the costs 
associated with 504 financings. Additionally, the Committee 
believes that this provision will permit more borrowers to 
qualify for financing in the 504 program.
    This section will clarify permissible uses of 504 
financings for facilities that will subsequently be leased by 
the small business concern. Under this provision, a 504/CDC 
program loan may be used to acquire or construct a facility so 
long as the small business concern receiving the loan 
permanently occupies no less than 50 percent of the project 
property and may temporarily lease no more than 50 percent of 
the project property.
    A CDC borrower will also be able to obtain financing in the 
maximum amount permitted under the 504 program and also to 
obtain a 7(a) loan in the maximum amount permitted under that 
program. This provision will provide entrepreneurs with 
increased access to affordable capital in amounts necessary to 
support capital intensive small businesses. This is consistent 
with the express purpose of the 7(a) and 504 programs, 
particularly since no existing SBA program can adequately 
fulfill this role by itself.
    This section makes a conforming amendment to make the 
uniform leasing policy contained within the Small Business 
Investment Act consistent with the policy established by this 
act within the Small Business Act. This would require an 
appraisal by a licensed or certified appraiser for any 504/CDC 
financing secured by commercial real estate with an estimated 
value in excess of $400,000.
            Section 219. Private debenture sales and pooling of 
                    debentures
    This provision codifies the existing authority by which the 
SBA pools and sells debentures issued under the program with 
full guarantees on trust certificates issued from the pools.
            Section 220. Foreclosure and liquidation of loans
    Because the CDC program operates as a zero subsidy program, 
it is essential that defaulted loans be liquidated and 
recovered in an effective and timely manner. This provision 
will require a CDC to either foreclose and liquidate defaulted 
loans which it made or to contract with a qualified third-party 
to do so. This provision also imposes a requirement that SBA 
reimburse a CDC for all expenses incurred by the CDC if the 
expenses were approved by SBA in advance or were reasonable. 
The requirement will not be effective, however, until the SBA 
adopts and implements a program to compensate and reimburse the 
CDC for expenses associated with foreclosure and liquidation. 
This section will strengthen the CDC program by permitting CDCs 
to play an active role in ensuring that defaulted CDC loans are 
liquidated in an efficient manner.
    This provision would also provide continuing delegated 
authority for the central servicing agent to continue to 
collect and disburse funds or payments received on defaulted 
loans.
            Section 221. Reports and regulations
    This provision will require the SBA to complete annual 
reports on the PCL program, the liquidation efforts of the 
agency, and the number of CDC project financings made in 
combination with 7(a) loans.
    This provision would also require the SBA to comply with 
the notice and comment rulemaking provisions of the 
Administrative Procedures Act before amending any regulation 
affecting the CDC program.
            Section 222. Program name
    This provision would establish the official title of the 
program as the CDC Economic Development Loan Program and 
require the SBA to modify all references to the program to 
conform to this change. The Committee believes that this change 
will clarify that loans made under section 504 of the Small 
Business Investment Act of 1958 may be used for the purpose of 
stimulating community economic development.

Subtitle C--Miscellaneous

            Section 231. Report on standard operating procedures
    This provision would require the SBA to prepare a report 
with 180 days of enactment of the Act that identifies the 
regulatory authority for which each standard operating 
procedure affecting the CDC program has been issued.
            Section 232. Alternative size standard
    This provision would require the SBA to conduct a report 
and study on the efficacy of the current alternative size 
standards of the CDC program.

                      TITLE III--MICROLOAN PROGRAM

            Section 301. Microloan credit building initiative
    Under this section, the SBA will require Intermediaries to 
transmit credit reporting information on Microloan program 
borrowers to one of the major credit reporting agencies. These 
credit bureaus are Experian, Equifax, and Transunion. The 
Committee intends that the SBA help Intermediaries in the 
program to devise a method of providing and recording such 
records with the credit agencies. The SBA will have discretion 
to determine whether to aggregate and report the data itself, 
or to negotiate agreements for the intermediaries to collect 
the necessary information and report directly.
    The Committee believes that the inability of micro-
intermediaries to provide borrower information to credit 
reporting agencies limits the potential of many low-income 
borrowers to improve and strengthen their credit history, which 
further limits their access to affordable capital and their 
future success. Because most micro-intermediaries have small 
portfolios of loans and only brief repayment records, the cost 
of reporting microloan histories to major credit bureaus is 
often impractical. The Committee intends for the SBA to 
undertake to overcome this barrier and help borrowers in the 
Microloan program establish credit with the loans they receive 
under the program.
            Section 302. Flexible credit terms
    This provision would remove existing requirements that all 
microloans be ``short-term.'' The Committee intends for this 
provision to provide lenders with authority to offer more 
flexible loan instruments to entrepreneurs, particularly with 
longer-term loans or revolving lines of credit. These 
potentially longer term loans would allow lenders to adjust the 
term to the specific needs and sophistication of the borrower 
enhancing participation in the program, particularly among 
seasonal businesses or borrowers that rely upon revolving 
credit. With greater flexibility in repayment terms, borrowers 
have greater control to manage their debt obligations, which 
can potentially enhance their profitability and success.
            Section 303. Increased program participation
    This provision would broaden the eligibility requirements 
for micro-intermediaries to help expand access to the Microloan 
program. This section would permit participation from micro-
intermediaries that have at least 1 year of experience making 
microloans to startup, newly established, or growing small 
business concerns, or that have a full-time employee who has 
not less than 3 years experience in managing a portfolio of 
loans to startup, newly established, or growing small business 
concerns and who also has at least 1 year experience providing, 
as an integral part of its microloan program, intensive 
marketing, management, and technical assistance to its 
borrowers. Microlending experience should include, but is not 
limited to, management or oversight of a loan fund. 
Microlending experience may also include requirements as per 
the discretion of SBA.
    The Committee intends for this provision to increase the 
number of intermediaries that can qualify for the program with 
no reduction in the quality and experience of participating 
Intermediaries. If an aspiring intermediary (generally a non-
profit organization) has no direct experience in microlending 
and technical assistance, then it can hire trained employees 
with considerable, equivalent experience and still qualify to 
participate in the program.
            Section 304. Increased limit on intermediary borrowing
    Under this section, the maximum obligation for 
participating intermediaries to the SBA may not exceed a total 
of $7 million, an increase from the current statutory limit of 
$3.5 million. In appropriate cases, the Administrator will have 
discretion to increase the limit to $10 million for qualified 
and experienced intermediaries (i.e. those that have been in 
existence for more than a year), and first-year Intermediaries, 
will have their maximum cap increased from $750,000 to $1 
million.
    The Committee is aware that the tightening credit market 
has significantly multiplied the need for access to capital--
particularly among entrepreneurs whose credit scores may have 
been hurt by job loss or foreclosure. Currently, however, large 
Intermediaries have increased demand for Microloans, but have 
had their lending capacity constrained by existing program 
limits. The Committee intends for this provision to provide 
these intermediaries with additional borrowing power under the 
program to increase the number and size of microloans that they 
make available to small businesses.
            Section 305. Expanded borrower education assistance
    This provision would increase the percentage of the 
technical assistance grant that a micro-intermediary can spend 
on providing information and technical assistance to small 
business concerns that are prospective borrowers. The 
limitation is currently 25 percent. This provision would 
increase that amount to 35 percent. This section also increases 
the percentage of the technical assistance grant that a micro-
intermediary can use for the provision of technical assistance 
through third-party providers--from 25 percent to 35 percent.
    The Committee intends that these provisions, taken 
together, will greatly increase the amount that micro-
intermediaries use to provide borrowers with training, 
financial education, and guidance. This ultimately reduces the 
risk of loss in the program and helps micro-intermediaries 
serve more borrowers while tailoring their service to the 
borrower's specific needs.
            Section 306. Interest rates and loan size
    This section would increase the required average loan size 
that Intermediaries must meet to qualify for subsidized 
interest rates under the program from the current level of 
$7,500 to $10,000. The Committee intends for this provision to 
result in larger loan amounts flowing to small businesses that 
borrow under the program.
            Section 307. Reporting requirement
    This section will require the SBA to make an annual report 
to the House Committee on Small Business and the Senate 
Committee on Small Business and Entrepreneurship that contains 
information on the Microloan program. At a minimum, this report 
should contain information regarding the number and dollar 
amount of loans made under the program, the number of jobs 
created or retained under the program and a break-down program 
performance by number and dollar amount of loans made to women, 
veterans of the U.S. military, and minority-owned businesses. 
These statistics should be further broken down state-by-state 
as well as by each intermediary that participates in the 
program. This report should also contain information on the 
number of business enterprises that received a microloan and 
that subsequently achieved success.
    Currently, very little information is available on the 
Microloan Program. This dearth of data makes it difficult for 
the microenterprise field to focus on areas of improvement and 
efficiency.
            Section 308. Surplus interest rate subsidy for businesses
    Under this section, the Administrator will be authorized to 
use surplus funds for the purpose of reducing the interest 
rates paid by entrepreneurs who borrow from Intermediaries if, 
at the beginning of the third quarter of a fiscal year, the 
Administrator determines that any portion of any amount made 
available to carry out the 7(m) program, whether for loan 
making or technical assistance, is unlikely to be used during 
that fiscal year. While the SBA has discretion to determine the 
timing and structure of this supplemental subsidy for 
borrowers, the Committee believes that this can either be done 
by using the funds in a single interest rate buy down, or by 
applying the funds to subsidize the interest payments of 
borrowers. The SBA will also have discretion to determine 
whether this benefit will be available for all borrows, or only 
some.
    The Committee intends that this provision enable the SBA to 
fully utilize all funds that are appropriated for the Microloan 
program. Through this authority, the Committee does not expect 
Microloan funds to go unspent in any fiscal year.
            Section 309. Authorization of appropriations
    This section would authorize the SBA to make $110 million 
in loans under the Microloan program and provide $80 million in 
technical assistance grants for each of fiscal years 2010 and 
2011.

          TITLE IV--SMALL BUSINESS INVESTMENT COMPANY PROGRAM

            Section 401. Increased investments from states
    This section would raise the current cap on the amount that 
state funds can invest in SBICs from 33 percent to 40 percent. 
This is particularly important given the current economic 
climate and the demand from state entities for safe and sound 
investment vehicles. This would also have the added benefit of 
increasing the amount of capital available for SBIC investment 
in small businesses.
            Section 402. Expedited licensing for experienced applicants
    The existing licensing process is perhaps the single-
greatest impairment to the SBIC program. The licensing and 
relicensing process has become so cumbersome that many 
successful SBICs leave the program rather than deal with the 
arduous and lengthy task of SBA licensing. In FY 2008, only 6 
SBICs were licensed, marking a more than 90 percent decrease in 
the number of licensees from the peak of the 1990's. Only one 
of these was for a new SBIC fund. The remaining five were 
license renewals for successful funds already participating in 
the program, and several of these renewals took over a year to 
complete.
    This section will create an expedited licensing process as 
an incentive to keep successful SBICs investing in domestic 
small businesses. Under this framework, an existing licensed 
SBIC in good-standing with the SBA would be granted a new 
license by the Administrator if two-thirds of the management 
team will remain in place, no additional licenses have been 
granted to the fund in the last 3 years and the full management 
team clears a criminal background check. The new fund would 
still need to raise the requisite capital from the private 
sector and follow an SBA-approved investment plan.
            Section 403. Revised leverage limitations for successful 
                    SBICs
    This section will revise the SBIC leverage limitations to 
create an incentive for successful, well-managed SBICs to 
remain in the program. Under this section, SBA approved SBICs 
will be authorized to access the maximum leverage limits for 
any ``family'' of SBIC funds--those that are controlled by the 
same management team. The limits would also be increased for 
existing SBICs and for SBICs under control of a Business 
Development Company, with an additional provision for regular 
inflationary adjustments.
    In order to access these increased limits, all SBIC funds 
under management must be in good standing with the SBA and any 
increased leverage would be subject to SBA approval.
            Section 404. Consistency for cost control
    This section would correct inconsistencies between the 
SBA's regulations and the Small Business Investment Act to 
clarify the terms of a ``default'' on an SBIC loan. Although 
the SBA's current regulations permit SBICs to charge a default 
interest rate (13 C.F.R. 107.885), the terms of a default are 
not consistent with market terms. This places SBIC funds at a 
competitive disadvantage with non-SBA regulated investment 
funds and makes it more difficult for SBICs to recover on 
defaulted loans, which, in turn, increases costs to the 
program.
            Section 405. Investments in veteran-owned small businesses
    This section would provide SBICs that invest in veteran-
owned small businesses to receive the same increased leverage 
limitations that are currently available to SBICs that invest 
in businesses located in Low and Moderate Income areas (LMI). 
This is intended to promote investment in veteran-owned 
businesses, a demographic that the program has had significant 
difficulty in reaching.
            Section 406. Limitations on prepayment
    Voluntary prepayments are often common and necessary for 
proper loan administration and servicing. Currently, SBIC 
investments are authorized to be prepaid by the businesses that 
receive these loans. Under the SBA's regulations, however, all 
prepayments have been conditioned upon SBA pre-approval of 
minimum prepayment amounts and minimum notice periods.
    This section would clarify that no prior approval is 
necessary for customary minimum prepayment amounts and would 
establish a de minimis amount (the lesser of $50,000 or 5 
percent of the principal amount) for other prepayment amounts 
that would not require written pre-approval or advance notice.
            Section 407. Investment with certain passive entities
    This provision would permit SBICs to make investments using 
wholly-owned passive entities whose sole purpose is to make 
investments in small businesses.
            Section 408. Investment in smaller enterprises
    This provision would obviate any requirement that SBICs 
make more than 25 percent of the aggregate dollar amount of its 
investments in a smaller enterprise if such investments would 
result in a net cost to the SBIC.
            Section 409. Capital impairment
    This provision will provide SBICs that have received 
earmarked assets with 6 years following licensing to remedy any 
condition of capital impairment that does not exceed 85 percent 
of the total leverage commitment received from the SBA.
            Section 410. Tangible net worth
    This provision will establish a consistent manner of 
determining the tangible net worth for both small business 
concerns and smaller enterprises under the Small Business 
Investment Act that uses Generally Accepted Accounting 
Principles and a measurement of total new worth and 
intangibles.
            Section 411. Development of agency record
    This provision would require the Associate Administrator 
for Capital Access to develop and keep a written evidentiary 
record pertaining to each application for a license by an SBIC. 
This record would serve as the basis for appeals in the 
application process.
            Section 412. Program levels
    This provision would authorize the SBA to make $5 billion 
each, in purchases of SBIC Participating Securities and 
debenture leverage for fiscal years 2010 and 2011.

   TITLE V--NEW MARKETS VENTURE CAPITAL AND RENEWABLE ENERGY CAPITAL 
                          INVESTMENT PROGRAMS

Subtitle A--Enhanced New Markets Venture Capital program

            Section 501. Expansion of New Markets Venture Capital 
                    program
    To date, only six NMVC companies are participating in the 
New Markets program and the SBA's current budget allocates no 
resources to bring more companies into the program. The 
Committee intends for this provision to mandate that the SBA 
Administrator to actively engage in affirmative actions to 
expand the number of NMVC companies and increase the number of 
investments made by current and new NMVC companies. At a 
minimum, the Committee intends that the SBA's budget reflect 
efforts to operate the program.
    This section would also require the Administrator to 
perform a study on their success in expanding the NMVC program 
and report his progress in expanding the program no later than 
one year after the enactment of this provision.
            Section 502. Improved nationwide distribution
    This section would direct the SBA Administrator to ensure 
that there is a uniform geographic distribution of NMVC 
companies in connection with the agency's efforts to expand the 
program. In licensing new NMVC companies, this provision would 
require the Administrator to avoid allocating limited program 
resources to license new NMVC companies where existing NMVC 
companies already exist and can meet the demand for small 
business investment in low income areas. Currently, small 
business investment is concentrated in only a handful of 
geographic areas, which are primarily located along the East 
and West coasts of the U.S.
            Section 503. Increased investment in small business 
                    concerns engaged primarily in manufacturing
    This section will amend the NMVC program to place an 
increased focus on small businesses engaged in manufacturing. 
The program's current limitation to ``smaller enterprises'' 
will be expanded to permit investment in small business 
concerns engaged primarily in manufacturing that are located in 
low income areas. Additionally, the private capital 
requirements for NMVC companies that investment in small 
manufacturers are lowered, thus making it easier for these 
companies to secure final approval from the SBA. The Committee 
intends for the SBA to facilitate the licensing of these NMVC 
companies, particularly in communities that have lost a 
significant portion of their manufacturing industry.
    Many low income communities throughout the nation have 
suffered as a result of a loss of their small manufacturing and 
industrial economic base. The Committee believes that the NMVC 
program has an inherent strength at providing investment 
capital to these communities because the additional investment 
capital provided by the SBA facilitates smaller transactions 
that are more suitable to investments in low income communities 
and makes NMVC companies less reliant on public market 
sentiment compared to the investments made by traditional 
venture capital firms. Consequently, NMVC investments can flow 
to industries like small manufacturing, which have recently 
suffered particular difficulty in attracting private venture 
capital.
            Section 504. Expanded uses for operational assistance in 
                    manufacturing
    This section will amend the NMVC program to expand the 
permissible uses of operational assistance grants to include 
assistance for small manufacturing businesses in LI areas to 
retool, update, or replace machinery or equipment.
    The Committee believes that the addition of OA grants 
provides the NMVC program with a significant crucial advantage 
over the SBIC program. By enabling NMVC companies to use these 
funds to retool, update, or replace machinery or equipment in 
small manufacturing businesses they invest in, the Committee 
believes that NMVC companies will be more likely to make these 
investments, thus enabling the program to better reach this 
crucial sector of the small business community.
            Section 505. Updating definition of low-income geographic 
                    area
    This section would amend the current definition of ``low-
income geographic area'' by simply referring the definition 
directly to the definition of a ``low-income community'' in the 
Internal Revenue Code.
    The Committee believes that the NMVC program's current 
definition of ``low-income geographic area'' creates a 
significant barrier to the program's success. As long as the 
definitions between the NMVC program and the NMTC program are 
different, NMVC companies will have difficulty in operating in 
low-income communities. This result is inconsistent with the 
program's original intent.
    This section is intended to establish parity between the 
definitions of the eligible NMVC investments and NMTC 
allocations, thereby bringing these two programs into 
alignment. This change will help the program operate as it was 
originally intended and will permit investment firms to use 
capital raised with New Markets Tax Credit allocations to meet 
the program's requirements for matching private capital. 
Additionally, this approach ensures that the two definitions 
will remain aligned even in the event that eligibility 
conditions for tax credit allocations are changed at a future 
date.
            Section 506. Expanding operational assistance to 
                    conditionally approved companies
    This section will permit New Markets Venture Capital 
Companies that have received conditional approval from the SBA 
under Section 354 to receive early grant assistance up to 
$50,000 at the point of initial designation. In the event that 
a conditionally approved NMVC company fails to win final 
approval, however, the grant must be repaid to the SBA. If the 
company wins final approval, however, the amount of early grant 
assistance will be deducted from the total amount of 
operational grant assistance the company receives. 
Additionally, this section provides NMVC companies with two 
full years to raise private capital and matching funds for 
operational assistance. Currently, these companies have up to 
two years under current law.
    These changes are intended to remedy two longstanding 
problems in the NMVC program. Under existing statutes, NMVC 
companies could not receive operational assistance grants until 
after they received final approval. This restriction severely 
limited the ability of NMVC companies to provide this 
assistance to their investment concerns, which is often vital 
to ensuring the success of these businesses and the security of 
their investment. This change is intended to provide very 
limited OA grants prior to final approval.
    The Committee intends for these changes to remedy the 
problem that many NMVC companies experienced in reaching final 
approval. For many NMVC companies, raising the private capital 
and matching OA funds was the greatest barrier to winning final 
approval. By extending the timeframe for matching funds to two 
full years, these companies should have adequate time to raise 
private capital that is integral to the NMVC program.
            Section 507. Limitation on time for final approval
    This section provides NMVC companies with two full years to 
raise private capital and matching funds for operational 
assistance. Currently, these companies have ``up to'' two years 
under current law. The Committee intends for this change to 
remedy the problem that many NMVC companies experienced in 
reaching final approval. For many NMVC companies, raising the 
private capital and matching OA funds was the greatest barrier 
to winning final approval. Many NMVCCs were not given a 
definite timeframe of two full years to raise their matching OA 
funds. By extending the timeframe for matching funds to two 
full years, these companies should have greater certainty in 
the licensing process and adequate time to raise private 
capital that is integral to the NMVC program.
            Section 508. Streamlined application for New Markets 
                    Venture Capital program
    This section will require the SBA to develop a set of 
documents that reduce the cost and burden for New Markets 
Venture Capital companies applying for final approval under the 
program. These documents must be created within 60 days after 
the enactment of the bill.
    This section is intended to simplify the application 
process for new NMVC companies, enabling the SBA to license 
more companies and expand the program. This section is also 
intended to operate in conjunction with the expansion and 
nationwide distribution initiatives established by this 
legislation.
            Section 509. Elimination of matching requirement
    This section will eliminate the minimum amount of matching 
commitments for operational assistance that an NMVC company 
must raise before receiving final approval. Currently, this 
minimum is set at not less than 30 percent of the total amount 
of private capital or binding capital commitments the NMVC 
company has raised.
    The requirement for matching OA commitments has proven to 
be the greatest barrier to licensing new NMVC companies. The 
required matching commitments were simply too high for many 
NMVC companies to meet, particularly given the economic 
conditions in the communities in which they operate. By 
eliminating this requirement, this section is intended to 
enable many more NMVC companies to participate in the program 
and should streamline the process to winning final approval 
from the SBA.
            Section 510. Simplified formula for operational assistance 
                    grants
    This section will revise the amount of operational 
assistance grants a NMVC company may receive. The new amounts 
will be equal to either 10 percent of the private resources the 
company has raised for operational assistance, or $1 million, 
whichever is less.
    This section is intended to significantly simplify the 
formula for determining the amount of OA grants a NMVC company 
may receive, enabling companies to receive their OA allocations 
more quickly than they currently do and providing these 
companies with greater certainty as to the amount of OA 
resources that they will have. OA grants have been an integral 
part of the NMVC program since its inception, providing 
critical support for businesses that receive NMVC investment. 
The combination of OA funds in conjunction with NMVC investment 
greatly increases the potential for successful business 
operations and ultimately serves to protect the underlying 
investment while simultaneously helping achieve the public 
policy goals of the program.
            Section 511. Authorization of appropriations and enhanced 
                    allocation for small manufacturing
    This section reauthorizes appropriations in a total amount 
of $100 million to fund debenture guarantees and $20 million 
for operational assistance grants for fiscal years 2010 and 
2011. Additionally, this section requires that at least half of 
these authorized funds be used for the purpose of entering into 
participation agreements and providing operational assistance 
to NMVC companies that invest primarily in small business 
concerns that are engaged in manufacturing.
    This section is intended to reestablish funding for the 
NMVC companies and, in conjunction with the program expansion 
and licensing initiatives of this legislation would require the 
SBA to resume licensing new NMVC companies and providing 
additional leverage commitments to existing NMVC companies. The 
initiative for small manufacturing is specifically intended to 
increase the number of NMVC companies that primarily invest in 
small manufacturers. This section should not, however, present 
an additional barrier for NMVC companies that wish to invest in 
low income areas or that do not wish to invest in small 
manufacturers.

Subtitle B--Expanded investment in small business renewable energy

            Section 521. Expanded investment in renewable energy
    This section reconfigures the Renewable Fuels Capital 
Investment (RFCI) Program in the Small Business Investment Act 
of 1958 to highlight the program's existing focus on investment 
in all types of renewable energy, not just renewable fuels.
            Section 522. Renewable Energy Capital Investment (RECI) 
                    program made permanent
    This section will provide standing authority for the SBA to 
carry out the RECI program as a permanent part of the agency's 
investment mission.
            Section 523. Expanded eligibility for small businesses
    This section would eliminate the program's current 
limitation to ``smaller enterprises,'' and will instead permit 
investment in all businesses that qualify as small business 
concerns under the Small Business Act.
            Section 524. Expanded uses for operational assistance in 
                    manufacturing and small businesses
    Like the NMVC program, the RECI program is bolstered by the 
addition of SBA administered operational assistance grants (OA) 
that provide matching grant assistance for resources that are 
provided to assist small businesses that receive investment 
capital with marketing, management, and other operational 
assistance. This section will amend the RECI program to expand 
the permissible uses of operational assistance to include 
assistance for all small businesses to take steps to reduce 
their energy consumption and for small manufacturing businesses 
to retool, update, or replace machinery or equipment.
            Section 525. Expansion of Renewable Energy Capital 
                    Investment program
    This section would establish mandatory language in the 
Small Business Investment Act of 1958 directing the SBA 
Administrator to actively engage in affirmative actions to 
expand the number of RECI companies. Despite the program's 
enactment in December of 2007, the Administrator has yet to 
implement the program and the SBA's most recent budget 
allocates no resources to facilitate implementation.
    This section would also require the Administrator to 
perform a study on their success in expanding the RECI program 
and report this progress in expanding the program no later than 
one year after the enactment of this provision.
            Section 526. Simplified fee structure to expedite 
                    implementation
    This section will simplify the existing fee structure of 
the RECI program to authorize the Administrator to charge fees 
only for the purpose of offsetting the cost of RECI guarantees. 
Operational assistance grants would continue to be subsidized 
by appropriated funds. This will effectively expedite the 
implementation of the RECI program by enabling the SBA to 
implement the investment and leverage portion of the program 
independent of the operational grants.
            Section 527. Increased operational assistance grants
    This provision would double the existing authorization for 
operational assistance grants in the RECI program from its 
current level of $15 million a year to $30 million for each 
fiscal year through 2011. OA grants have been an integral part 
of the RECI program since its inception, providing critical 
support for businesses that receive RECI investment. The 
combination of OA funds in conjunction with investment capital 
greatly increases the potential for successful business 
operations and ultimately serves to protect the underlying 
investment, while simultaneously helping achieve the public 
policy goals of the program.
            Section 528. Authorizations of appropriations
    This section authorizes a program level of $1 billion in 
debenture guarantees.

TITLE VI--SMALL BUSINESS HEALTH INFORMATION TECHNOLOGY (HIT) FINANCING 
                                PROGRAM

            Section 601. Amendment of Small Business Act
    This section amends the Small Business Act to create a new 
loan guarantee program separate from other SBA programs that is 
solely available to certain healthcare providers to purchase 
health information technology. The HIT Loan Program will rely 
on private-sector lenders to provide loans that are, in turn, 
guaranteed by the SBA. The proceeds from a HIT loan may be used 
for qualifying HIT purpose including the acquisition, 
maintenance, or training for HIT systems and equipment.
    The Committee intends for the SBA to establish a separate 
subsidy model for this program taking into account the limited 
eligibility and general creditworthy attributes of borrowers in 
the program.
            Subsection (a) Definitions
    This section provides that the definition for health 
information technology (for purposes of the guarantee loan 
program) will be consistent with the ``meaningful EHR use'' 
requirements set forth in the Social Security Act. Loan 
proceeds shall be used exclusively for Health IT purposes.
    Participation in the program is limited to physicians as 
defined in section 1861(r) of the Social Security Act, 
practitioner as described in section 1842(b)(18)(C) of that Act 
(such as MDs, Osteopaths, Dentists, Podiatrists, Optometrists, 
Chiropractors, Physician Assistants, Nurse Practitioners, 
Clinical Nurse Specialists, Certified Registered Nurse 
Anesthetist, Certified Nurse-midwifes, Clinical Social Workers, 
Clinical Psychologists, Registered Dietitian or Nutrition 
Professionals), and Physical or Occupational Therapists, Speech 
Language Pathologists, Audiologists, pharmacists, medical 
transcriptionists, and providers of durable medical equipment, 
prosthetics, orthotics, or supplies. The practices that are 
eligible must also be a ``small business concern'' as defined 
using the small business size standards.
            Subsection (b) Loan guarantees for qualified eligible 
                    professionals
    This provision establishes a loan guarantee program for 
eligible professionals, which provides a 90 percent guarantee 
and loan amounts up to $350,000 for any single individual/
professional and $2,000,000 for any group.
            Subsection (c) Fees
    The fees imposed by the SBA on borrowers shall be no more 
than 2 percent of the guaranteed portion of the loan. The 
annual lender servicing fees imposed by SBA are limited to no 
more than 50 basis points. Additional fees may not be assessed 
against the borrower by a lender. The committee intends for 
these provisions to encourage borrowers and lenders to 
participate in the program.
            Subsection (d) Deferral period
    This provision permits a professional who has borrowed 
through the program to defer payment on his or her loan for at 
least one year and up to three years and provides authority for 
the SBA to subsidize the interest costs associated with the 
deferral. The Committee intends for these deferral periods to 
be an integral part of any HIT loan that should conform to the 
general timeframe in which HIT will begin to generate tangible 
financial benefits for the business.
            Subsection (e) Effective date
    This section provides that the SBA loan guarantee program 
may not take effect until the Secretary of HHS has established 
``meaningful EHR use requirements'' as set forth in the Social 
Security Act.
            Subsection (f) Sunset
    SBA may not extend loan guarantees 5 years after the 
Secretary of HHS has established ``meaningful EHR use 
requirements'' as set forth in the Social Security Act.
            Subsection (g) Authorization of appropriation
    Authorizes $10 billion in loan authority.

        TITLE VII--SMALL BUSINESS EARLY-STAGE INVESTMENT PROGRAM

            Section 701. Small Business Early Stage Investment program
    This provision directs the SBA to establish and carry out a 
new program focused on making patient equity investment in 
small businesses with specific emphasis on early-stage small 
businesses in targeted industries.
            Section 399A. Establishment of program
    The program is established as a stand alone program in the 
Small Business Investment Act of 1958.
            Section 399B. Administration of program
    The program should be administered by the Investment 
Division established under Title II of the Small Business 
Investment Act of 1958.
            Section 399C. Applications
    The Committee intends for the program to be open to all 
manner of private investment companies, both those organized 
under relevant State or Federal laws, as well as small business 
investment companies (SBICs) licensed under Title III of the 
Small Business Investment Act. Irrespective of the entity's 
organization, however, all applicants must make a new 
application to the SBA to participate in the program.
    The Administrator must establish a new application process 
to select investment companies to participate in the program. 
The Committee intends for this process to be similar to the 
process that the agency currently uses to select participants 
for its other investment programs, and should include 
requirements for (1) a business plan describing how the company 
intends to make successful venture capital investments in early 
stage small businesses in targeted industries; (2) information 
regarding the relevant venture capital qualifications and 
personal background of the managers of the company applying to 
participate in the program; and (3) a description of the extent 
to which the applicant meets other selection criteria that are 
also established under this part.
    Because SBICs have already submitted an application along 
these lines, the Committee intends for the Administrator to 
establish an abbreviated application process for SBICs that 
have already received an SBIC license who wish to participate 
in the SBESI program. To the maximum extent practicable, the 
abbreviated application process must avoid duplication of 
information or materials previously submitted in the SBIC 
licensing process. Additionally, in taking applications from 
SBICs, the Administrator shall incorporate a presumption that 
SBICs satisfy selection criteria related to character and 
fitness under Section 399D(b)(3). SBICs shall also be presumed 
to satisfy the criteria requiring the fund to focus on 
investment in early stage small businesses in targeted 
industries under Section 399D(b)(5). Beyond these presumptions, 
however, SBICs should be judged by the merits of their 
application and should compete on equal footing with other 
applicants for selection to participate in the program
            Section 399D. Selection of participating investment 
                    companies
    Within 90 days after receiving an application, the 
Administrator must make a determination to approve an 
application for issuance of a grant commitment to the applicant 
or disapprove the application and should transmit this decision 
to the applicant.
    In deciding to approve or disapprove an application, the 
Administrator should consider selection criteria similar to 
those specified in the agency's other investing programs. These 
criteria are: (1) the likelihood that the company will meet the 
goals specified in its business plan; (2) the likelihood that 
the investments of the company will create or preserve jobs, 
both through direct hiring in the company and the small 
businesses in which it invests and through indirect effects in 
businesses outside the company and its investment businesses; 
(3) the character and fitness of the company's management team; 
(4) the previous experience of the company's management team 
making investments similar to those described in the 
application; (5) the extent to which the company will 
concentrate its investment activities on early stage small 
businesses in targeted industries; (6) the likelihood that the 
company will achieve profitability; (7) the management team's 
track record at managing profitable investment vehicles.
    The Committee intends for the SBA to select participants 
solely by these criteria and should place its highest emphasis 
on the likelihood that the company will achieve profitability 
and protect the SBA grant interest.
            Section 399E. Grants
    For those companies selected to participate in the program, 
the Administrator shall provide grants in amounts of up to $100 
million. In order to receive these grants, however, the company 
must have raised an amount of private capital equal to or 
greater than the amount of the SBA grant, thus establishing a 
minimum 1:1 ratio of SBA grant capital to private capital. The 
total aggregate amount of all grants the SBA makes to any one 
participating company cannot exceed $100 million. The Committee 
contemplates the potential for multiple grants to be awarded to 
investment companies that participate in the program, but the 
SBA may also choose to make a single grant commitment that is 
adequate to meet the investment strategy of the company. At a 
minimum, however, grant commitments by the SBA should be 
adequate to fund initial and follow-on investments and should 
protect the SBA's pro rata interests in the investment company. 
Grant funds can only be drawn-down by the investment company at 
the same time and in the same proportions as the private 
capital is paid into the investment fund and should be paid 
promptly by the SBA when called by the investment company 
manager.
    Grant commitments from the SBA should be available to 
selected investment companies for the purpose of making first-
round investments in new small businesses for a five-year 
period after the grant commitment is first drawn upon. After 
the initial five-year period, the investment company will not 
be able to make new-named investments, however, and will be 
limited to drawing upon the SBA grant commitment for the 
purpose of making follow-on investments in small businesses 
that have already received an initial investment. This period 
for follow-on investments should remain open for ten years 
after the grant commitment is first drawn upon, with an 
additional two one-year periods available at the discretion of 
the Administrator. SBA will audit participating investment 
companies when half of the grant commitment funds have been 
drawn-down to ensure that the grant is being invested in a 
fashion consistent with the law.
            Section 399F. Investments in early stage small businesses
    As a condition of receiving an SBA grant, a participating 
investment company must make all of its investments in small 
businesses, as determined on the date when the first investment 
is made in the business. Additionally, at least 50 percent of 
an investment company's investments must be made in early-stage 
small businesses in targeted industries, as those terms are 
defined in the act. It is possible that some investment 
companies would voluntarily choose to make more of its 
investments in early-stage businesses in targeted industries, 
and the Committee believes that these investment companies 
should be favorably considered by the Administrator.
            Section 399G. Pro rata investment shares
    All investments made by a participating investment company 
must include a grant funds in an amount that is equal to the 
overall proportions of grant funds and private capital in the 
investment fund.
            Section 399H. Grant interest
    In exchange for receiving SBESI funds, participating 
investment funds must convey a ``grant interest'' to the SBA. 
The grant interest shall carry all the rights and attributes of 
other investors, but shall not denote control or voting rights 
to the SBA. The grant interest shall entitle the SBA to a pro 
rata portion of any distributions made by the fund, equal to 
the overall percentage of capital in the investment company 
that the grant comprises. In this sense, the Committee intends 
that the SBA's grant interest be akin to that of a limited 
partner interest in a limited partnership or limited liability 
company. The Administrator shall receive distributions from the 
licensed company at the same times and in the same amounts as 
other investors in the company, without regard to a specific 
repayment date or deadline. The investment company shall make 
allocations of income, gain, loss, deduction and credit to the 
Administrator with respect to the grant interest as if the 
Administrator were an investor.
    The manager's profits interest shall not exceed twenty 
percent of the firm's profits, exclusive of any profits that 
may accrue as a result of the manager's individual capital 
contributions to the investment company. Any excess of this 
amount, less deemed taxes thereon, shall be returned by the 
manager and paid to the investors and the SBA in proportion to 
their capital contributions and grants paid in. No manager's 
profits interest shall be paid prior to the payment to the 
investors and the Administration of all contributed capital and 
grants made, other than a tax distribution.
    Additionally, as a condition of receiving a grant, a 
participating investment company must make all distributions to 
all investors in cash and must make distributions within a 
reasonable time after exiting investments.
            Section 399I. Fund
    Ongoing funding for the program will be provided through a 
separate fund created with the program which shall be available 
to the Administrator, subject to annual appropriations, as a 
revolving fund for the purposes of the program. All amounts 
received by the Administrator, including any moneys, property, 
or assets derived by him from his operations in connection with 
this part, shall be deposited in the fund. All expenses and 
payments, excluding administrative expenses, pursuant to the 
operations of the Administrator under this part shall be paid 
from the fund.
    The Committee intends for this revolving fund to enable the 
program to become self-sustaining.
            Section 399J. Application of other sections
    This provision incorporates SBA oversight and enforcement 
authority, including authorities to take action in cases of 
fraud, waste, and abuse by investment companies, its officers 
and agents, from its existing investment programs into the 
SBESI program. Additionally, the Committee intends for these 
provisions to provide the SBA with authority to take any 
actions that are already taken under the SBA's SBIC program to 
enforce agency regulations and polices against program 
participants and protect taxpayer funds. This includes the 
conduct of regular examinations and investigations of 
participating investment companies and the issuance of removal, 
prohibition, suspension, and cease and desist actions orders 
for malfeasance in the program It also contemplates the pursuit 
of more rigorous remedies at law for fraud or breaches of 
fiduciary duties with civil and criminal penalties
            Section 399K. Definitions
    ``Targeted Industries'' are predominately involved in 
researching, developing, manufacturing, producing, or bringing 
to market goods, products, or services for the agricultural 
technology, energy technology, environmental technology, life 
science, information technology, digital media or clean 
technology sectors.
    An ``Early Stage Small Business'' is a small business 
concern as defined in section 3 of the Small Business Act that 
is located in the United States (or its territories), and that 
has not generated gross annual sales revenues exceeding $15 
million in any of the previous three years.
    The Committee intends for these businesses to all share 
attributes of being highly capital-intensive enterprises whose 
business models are generally not amenable to financing through 
lending programs.
            Section 399L. Authorization
    This section will authorize the SBESI program to make a 
total of $200 million in grants.

                  TITLE VIII--DISASTER RELIEF PROGRAMS

            Section 801. Revised collateral requirements
    This provision will revise the collateral requirements so 
that business owners are not required to pledge their homes for 
business loans less than $250,000. The Committee believes that 
this provision will encourage more small businesses to seek 
disaster loans without apprehension that their home will be 
placed at risk as they attempt to rebuild their businesses 
following a disaster. Additionally, the Committee believes that 
this provision is consistent with the SBA's current practice of 
making loans based upon an individual's ability to repay and 
income.
            Section 802. Increased limits
    This provision will increase the legislative limit on 
disaster loans from $1.5 million to $3 million for homeowner 
loans and from $2 to $3 million for business loans.
            Section 803. Revised repayment terms
    This provision requires the SBA to impose a minimum 
deferment period of twelve months and mandates that the 
repayment period begin from the date that the final loan 
disbursement is made. Additionally, this provision requires 
that repayment amounts be based solely on funds that have 
actually been disbursed.
    The Committee intends for this provision to provide 
disaster victims with more equitable repayment terms that are 
more responsive to their needs immediately following a 
disaster. Additionally, because the interest continues to 
accrue during the mandatory twelve month deferment period, the 
Committee believes that this provision will have little or no 
cost. The Committee does not intend for the increased deferment 
period or revised repayment policy to affect existing or 
pending disaster loan applications, but should only be 
prospectively applied for new loans approved or made after the 
date of enactment.
            Section 804. Revised disbursement process
    This provision will require that approved funds for SBA 
disaster loans be disbursed upon a schedule with increased 
minimum disbursement levels to better meet the needs of 
disaster victims. The Committee believes that this provision 
will enable the SBA to remedy problems in disbursing approved 
loan amounts in adequate amounts to meet disaster victim's 
needs in a timely manner. The Committee does not intend for 
this provision to preclude the SBA from making full 
disbursements in situations where it feels full disbursements 
are appropriate. The Committee only intends that this provision 
set minimum amounts that must be disbursed at each stage. The 
Committee also does not intend that the minimum disbursement 
amounts should be absolute in situations where the borrower 
actually desires that a lesser amount be disbursed in each 
stage.
    The Committee believes that by maintaining a disbursement 
schedule with stages and by leaving the disbursement schedule 
for loans in excess of $500,000 at the discretion of the SBA, 
the risk of increased losses will be limited
            Section 805. Grant program
    This provision will provide the SBA with authority to offer 
grants of up to $100,000 for the businesses most severely 
affected by a catastrophic disaster for which the Administrator 
has declared eligibility for additional disaster assistance 
(pursuant to 7(b)(9) of the Small Business Act). The Committee 
believes that this program will fill the need for financial 
assistance for small businesses that is currently not being met 
by any federally administered assistance program, particularly 
under circumstances where a disaster is of such scale or 
severity that disaster victims are unlikely to seek out loan 
assistance.
    To limit the costs associated with this program, the 
Committee has limited the scope of the program by imposing very 
strict eligibility requirements. Only small businesses actually 
located in an area affected by the applicable disaster will be 
eligible for grant assistance. The Committee intends for this 
limitation to restrict the availability of grant assistance to 
only those communities that were severely impacted by the 
physical damage of a catastrophic disaster. Additionally, a 
small business must also certify that it will reestablish its 
business in the same county in which it was originally located. 
A small business must also have been in existence for at least 
two years prior to the disaster and must have applied for and 
been rejected for a conventional SBA disaster loan. The 
Committee also intends for grant assistance to go to small 
businesses that are economically viable, as determined by the 
Administrator. The Committee believes that these criteria will 
be sufficiently stringent to ensure that only a small number of 
businesses will meet all of these requirements to qualify for a 
grant. Additionally, the Committee only intends for grant 
assistance to be provided in situations where the Administrator 
feels it is appropriate, and has thus provided the 
Administrator with discretion over whether the grant program 
will be implemented.
    The grant funding provided under this provision is intended 
to complement the existing purpose of the SBA disaster 
assistance lending program by serving as a tool to deliver 
capital to small businesses in a form that the existing loan 
program cannot (i.e. under circumstances where a disaster is of 
such scale or severity that disaster victims are unlikely to 
seek out loan assistance). In this manner, the program will 
serve the same public policy goals of the SBA disaster 
assistance mission.
            Section 806. Regional disaster working groups
    This provision shall require the Administrator to establish 
and carry out a new program whereby the Regional Administrator 
in each of the SBA's regional offices must develop region-
specific disaster preparedness and response plans that are 
based upon the comprehensive disaster response plan required by 
Sec. 40 of the Small Business Act and that is developed in 
cooperation with city, state, and federal emergency response 
authorities as well as with representatives from businesses 
located within the region. At a minimum, the disaster 
preparedness and recovery subplan must identify and plan for 
three disaster scenarios, either natural or manmade, that are 
likely to occur in the region.
    The regional disaster working groups are intended to 
enhance the SBA's ability to respond on a local level and 
fulfill the disaster assistance mission of providing small 
firms with vital access to capital to rebuild following a 
disaster. In this manner, the program will serve the same 
public policy goals of the SBA disaster assistance mission.
            Section 807. Outreach grants for loan applicant assistance
    This section will direct the Administrator to use funds 
authorized for administrative expenses in the Disaster Loan 
program to make grants to Women's Business Centers, Veterans' 
Business Outreach Centers, Small Business Development Centers, 
and local chambers of commerce located in an area of a declared 
disaster for the purpose of providing disaster loan applicants 
with assistance in preparing applications for disaster 
assistance. The Committee intends for this grant program to be 
carried out using funds authorized for administrative expenses 
in the disaster loan program.
    The grant funding provided under this provision is intended 
to complement the existing purpose of the SBA disaster 
assistance lending program by serving as a tool to deliver 
capital to small businesses in circumstances where a disaster 
is of such scale or severity that the SBA's existing loan 
program outreach and loan application efforts are likely to be 
overwhelmed. In this manner the program will serve the same 
public policy goals of the SBA disaster assistance mission.

                         TITLE IX--REGULATIONS

            Section 901. Regulations
    Pursuant to this section, the SBA must promulgate 
regulations to carry out the provisions contained in the Act 
within 180 days following enactment.

             VII. Congressional Budget Office Cost Estimate

    The legislation is currently under review by CBO and when 
it is final will be made part of the Congressional Record.

                   VIII. Committee Estimate of Costs

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 3854. Based on estimates provided by CBO for H.R. 1332, 
H.R. 1361, H.R. 3020, H.R. 3567, and H.R. 3866, as reported by 
the Committee on Small Business or by the House during the 
110th Congress and further analysis by Committee staff, the 
Committee estimates that the bill will cost $1,459,985,000 
($1.46 billion) over the two-year authorization period. The 
Committee notes several changes regarding previous CBO cost 
estimates. First, H.R. 3854 does not contain an authorization 
for the Small Business Investment Company (SBIC) participating 
securities program, which would have been scored on a dollar-
for-dollar basis. Second, H.R. 3854 does not authorize an angel 
investment or surety bond program, as were contained in H.R. 
3567.
    In determining the costs of H.R. 3854, the Committee also 
notes that the extension of the ARC loan program in section 118 
and the ARRA-related fee reductions in section 114 are for one 
year only and do not carry over through the duration of the 
authorization. The Capital Backstop program authorized in 
section 111 is subject to the same underwriting and loan 
origination regulations as the 7(a) loan program; as a result, 
this program in not expected to incur subsidy costs in excess 
of those for the 7(a) loan program prior to the ARRA-related 
changes to fees and guarantees. The national lender training 
program established in section 106 will be fully paid for 
through fees levied on program participants and has no cost. 
The Microloan interest rate reduction contained in section 308 
has no line item cost, as funds are taken from monies provided 
through program authorizations that have been accounted for in 
the Committee's estimate. Committee staff used subsidy rates 
and loan portfolio assumptions in the calculation of subsidy 
costs for the loan guarantee and direct loan programs contained 
in this cost estimate. These subsidy rate and loan portfolio 
assumptions are from the FY 2010 Federal Credit Supplement, as 
prepared by the Office of Management and Budget that was 
submitted with the President's FY 2010 budget proposal. 
Committee staff used internal forecasts for loan volume and 
program demand, which reflect both historical usage and 
forecasts regarding of economic conditions.
    Finally, the committee estimates the cost of H.R. 3854 
would be $2,719,462,500 ($2.72 billion) over the 2010-2014 
periods, subject to appropriation of the specified and 
necessary amounts.

                         IX. Oversight Findings

    In accordance with clause 2(b)(1) of rule X of the Rules of 
the House of Representatives, the oversight findings and 
recommendations of the Committee on Small Business with respect 
to the subject matter contained in H.R. 3854 are incorporated 
into the descriptive portions of this report.

                X. Statement of Constitutional Authority

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, Section 8, clause 18, of the 
Constitution of the United States.

                  XI. Compliance With Public Law 104-4

    H.R. 3854 contains no unfunded mandates.

                 XII. Congressional Accountability Act

    H.R. 3854 does not relate to the terms and conditions of 
employment or access to public services or accommodations with 
the meaning of section 102(b)(3) of P.L. 104-1.

               XIII. Federal Advisory Committee Statement

    This legislation does not establish or authorize the 
establishment of any new advisory committees.

                     XIV. Statement of No Earmarks

    Pursuant to clause 9 of rule XXI, H.R. 3854 does not 
contain any congressional earmarks, limited tax benefits, or 
limited tariff benefits as defined in clause 9(d), 9(e), or 
9(f) of rule XXI.

                  XV. Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 3854 includes a number of provisions designed to 
modernize and make more effective the SBA 7(a), CDC, SBIC, 
NMVC, RECI, and Disaster Assistance programs.

       XVI. Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

SMALL BUSINESS ACT

           *       *       *       *       *       *       *


  Sec. 3. (a)(1) * * *

           *       *       *       *       *       *       *

  (5) In addition to any other size standard under this 
subsection, the Administrator shall establish and permit a 
lender making a loan under section 7(a) to use an alternative 
size standard. The alternative size standard shall be based on 
factors including the maximum tangible net worth and average 
net income of a business concern.

           *       *       *       *       *       *       *

  Sec. 7. (a) Loans to Small Business Concerns; Allowable 
Purposes; Qualified Business; Restrictions and Limitations.--
The Administration is empowered to the extent and in such 
amounts as provided in advance in appropriation Acts to make 
loans for plant acquisition, construction, conversion, or 
expansion, including the acquisition of land, material, 
supplies, equipment, and working capital, and to make loans to 
any qualified small business concern, including those owned by 
qualified Indian tribes, for purposes of this Act. Such 
financings may be made either directly or in cooperation with 
banks or other financial institutions through agreements to 
participate on an immediate or deferred (guaranteed) basis. 
These powers shall be subject, however, to the following 
restrictions, limitations, and provisions:
          (1) * * *
          (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 $150,000 and is less 
                        than or equal to $2,000,000; [or]
                          (ii) 85 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 
                        $150,000[.]; or
                          (iii) 50 percent of the balance of 
                        the financing outstanding at the time 
                        of disbursement of the loan, if such 
                        balance exceeds $2,000,000.

           *       *       *       *       *       *       *

          (3) No loan shall be made under this subsection--
                  (A) if the total amount outstanding and 
                committed (by participation or otherwise) to 
                the borrower from the business loan and 
                investment fund established by this Act would 
                exceed $1,500,000 (or if the gross loan amount 
                would exceed [$2,000,000] $3,000,000), except 
                as provided in subparagraph (B);

           *       *       *       *       *       *       *

          (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, as 
                follows:
                          (i) * * *

           *       *       *       *       *       *       *

                  (B) Retention of certain fees.--Lenders 
                participating in the programs established under 
                this subsection may retain not more than 25 
                percent of a fee collected under subparagraph 
                (A)(i), except that a lender making a loan 
                under paragraph (31) may not retain any 
                percentage of a fee collected under such 
                subparagraph.

           *       *       *       *       *       *       *

          [(25) Limitation on conducting pilot projects.--
                  [(A) In general.--Not more than 10 percent of 
                the total number of loans guaranteed in any 
                fiscal year under this subsection may be 
                awarded as part of a pilot program which is 
                commenced by the Administrator on or after 
                October 1, 1996.
                  [(B) Pilot program defined.--In this 
                paragraph, the term ``pilot program'' means any 
                lending program initiative, project, 
                innovation, or other activity not specifically 
                authorized by law.
                  [(C) Low documentation loan program.--The 
                Administrator may carry out the low 
                documentation loan program for loans of 
                $100,000 or less only through lenders with 
                significant experience in making small business 
                loans. Not later than 90 days after the date of 
                enactment of this subsection, the Administrator 
                shall promulgate regulations defining the 
                experience necessary for participation as a 
                lender in the low documentation loan program.]
          (25) Limitation on conducting pilot projects.--
                  (A) Limitation on number.--Not more than 10 
                percent of the total number of loans guaranteed 
                in any fiscal year under this subsection may be 
                awarded as part of a pilot program.
                  (B) Dollar limitations.--
                          (i) In general.--With respect to any 
                        pilot program under this subsection 
                        established on or after the date of the 
                        enactment of the Small Business 
                        Financing and Investment Act of 2009, 
                        no loan shall be made under such 
                        program if such loan would result in 
                        the total amount of loans made during a 
                        fiscal year under all such programs to 
                        be in excess of 5 percent of the total 
                        amount of loans guaranteed in such 
                        fiscal year under this subsection.
                          (ii) Certain pre-existing programs.--
                        With respect to any pilot program under 
                        this subsection established before the 
                        date of the enactment of the Small 
                        Business Financing and Investment Act 
                        of 2009, no loan shall be made under 
                        such program if such loan would result 
                        in the total amount of loans made 
                        during a fiscal year under all such 
                        programs to be in excess of 10 percent 
                        of the total amount of loans guaranteed 
                        in such fiscal year under this 
                        subsection.
                  (C) Expiration.--
                          (i) In general.--Except as provided 
                        in clause (iii), the duration of any 
                        pilot program under this subsection may 
                        not exceed 3 years.
                          (ii) Designation as new program.--For 
                        purposes of this subparagraph, a pilot 
                        program shall not be treated as a new 
                        pilot program solely on the basis of a 
                        modification or change in the pilot 
                        program, including the change of its 
                        name.
                          (iii) Existing programs.--With 
                        respect to any pilot program in 
                        existence on the date of the enactment 
                        of the Small Business Financing and 
                        Investment Act of 2009, such program 
                        may continue in effect for a period not 
                        exceeding 3 years after such date 
                        without regard to the duration of such 
                        program before such date.
                  (D) Regulations.--
                          (i) In general.--With respect to each 
                        pilot program under this subsection, 
                        including each pilot program in 
                        existence on the date of the enactment 
                        of the Small Business Financing and 
                        Investment Act of 2009, the 
                        Administrator shall--
                                  (I) issue regulations for 
                                such program after providing 
                                notice in the Federal Register 
                                and an opportunity for comment; 
                                and
                                  (II) ensure that such 
                                regulations are published in 
                                the Code of Federal 
                                Regulations.
                          (ii) Pilot programs established after 
                        date of enactment.--With respect to any 
                        pilot program established after the 
                        date of the enactment of the Small 
                        Business Financing and Investment Act 
                        of 2009, such program shall not take 
                        effect until the requirements under 
                        this subparagraph are satisfied.
                  (E) Repeal of authority to waive certain 
                rules.--
                          (i) In general.--Notwithstanding 
                        section 120.3 of title 13, Code of 
                        Federal Regulations, the Administrator 
                        may not from time to time suspend, 
                        modify, or waive rules for a limited 
                        period of time to test new programs or 
                        ideas with respect to this subsection, 
                        unless such suspension, modification, 
                        or waiver is explicitly authorized by 
                        Act of Congress.
                          (ii) Existing pilot programs.--
                        Nothing under clause (i) may be 
                        construed to affect a pilot program in 
                        existence on the date of the enactment 
                        of the Small Business Financing and 
                        Investment Act of 2009.
                  (F) Pilot program.--For purposes of this 
                paragraph, the term ``pilot program'' means any 
                lending program initiative, project, 
                innovation, or other activity not specifically 
                authorized by Act of Congress.

           *       *       *       *       *       *       *

          [(28) Leasing.--In addition to such other lease 
        arrangements as may be authorized by the 
        Administration, a borrower may permanently lease to one 
        or more tenants not more than 20 percent of any 
        property constructed with the proceeds of a loan 
        guaranteed under this subsection, if the borrower 
        permanently occupies and uses not less than 60 percent 
        of the total business space in the property.]
          (28) Leasing.--If a loan under this subsection is 
        used to acquire or construct a facility, the assisted 
        small business concern--
                  (A) shall permanently occupy and use not less 
                than 50 percent of the space in such facility; 
                and
                  (B) may, on a temporary or permanent basis, 
                lease to others not more than 50 percent of the 
                space in such facility.
          (29) Real estate appraisals.--With respect to a loan 
        under this subsection that is secured by commercial 
        real property, an appraisal of such property by [a 
        State licensed or certified appraiser] an appraiser 
        licensed or certified by the State in which such 
        property is located--
                  (A) shall be required by the Administration 
                in connection with any such loan for more than 
                [$250,000] $400,000; or
                  (B) may be required by the Administration or 
                the lender in connection with any such loan for 
                [$250,000] $400,000 or less, if such appraisal 
                is necessary for appropriate evaluation of 
                creditworthiness.

           *       *       *       *       *       *       *

          [(32)] (33) Increased veteran participation 
        program.--
                  (A) Definitions.--In this paragraph--
                          (i) * * *
                          (ii) the term ``[pilot] program'' 
                        means the [pilot] program established 
                        under subparagraph (B); and

           *       *       *       *       *       *       *

                  (B) Establishment.--The Administrator shall 
                establish and carry out a [pilot] program under 
                which the Administrator shall reduce the fees 
                for veteran participation loans.
                  [(C) Duration.--The pilot program shall 
                terminate at the end of the second full fiscal 
                year after the date that the Administrator 
                establishes the pilot program.]
                  [(D)] (C) Maximum participation.--A veteran 
                participation loan shall include the maximum 
                participation levels by the Administrator 
                permitted for loans made under this subsection.
                  [(E)] (D) Fees.--
                          (i) In general.-- * * *

           *       *       *       *       *       *       *

                          (iv) No increase of fees.--The 
                        Administrator shall not increase the 
                        fees under paragraph (18) on loans made 
                        under this subsection that are not 
                        veteran participation loans as a direct 
                        result of the [pilot] program.
                  [(F) GAO report.--
                          [(i) In general.--Not later than 1 
                        year after the date that the pilot 
                        program terminates, the Comptroller 
                        General of the United States shall 
                        submit to the Committee on Small 
                        Business of the House of 
                        Representatives and the Committee on 
                        Small Business and Entrepreneurship of 
                        the Senate a report on the pilot 
                        program.
                          [(ii) Contents.--The report submitted 
                        under clause (i) shall include--
                                  [(I) the number of veteran 
                                participation loans for which 
                                fees were reduced under the 
                                pilot program;
                                  [(II) a description of the 
                                impact of the pilot program on 
                                the program under this 
                                subsection;
                                  [(III) an evaluation of the 
                                efficacy and potential fraud 
                                and abuse of the pilot program; 
                                and
                                  [(IV) recommendations for 
                                improving the pilot program.]
          (34) Small lender outreach program.--The 
        Administrator shall establish and carry out a program 
        to provide support to regional, district, and branch 
        offices of the Administration to assist small lenders, 
        who do not participate in the Preferred Lenders 
        Program, to participate in the programs under this 
        subsection.
          (35) Rural lending outreach program.--
                  (A) In general.--The Administrator shall 
                establish and carry out a rural lending 
                outreach program (hereinafter referred to in 
                this paragraph as the ``program'') to provide 
                loans under this subsection in accordance with 
                this paragraph.
                  (B) Maximum participation.--A loan under the 
                program shall include the maximum participation 
                levels by the Administrator permitted for loans 
                made under this subsection.
                  (C) Maximum loan amount.--The maximum amount 
                of a loan under the program shall be $250,000.
                  (D) Use of rural lenders.--The program shall 
                be carried out through lenders located in a 
                rural area (as such term is defined under 
                subsection (m)(11)(C)) or, if a small business 
                concern located in a rural area does not have a 
                lender located within 30 miles of the principal 
                place of business of such concern, through any 
                lender chosen by such concern that provides 
                loans under this subsection.
                  (E) Time for approval.--The Administrator 
                shall approve or disapprove a loan under the 
                program within 36 hours.
                  (F) Documentation.--The program shall use 
                abbreviated application and documentation 
                requirements.
                  (G) Credit standards.--Minimum credit 
                standards, as the Administrator considers 
                necessary to limit the rate of default on loans 
                made under the program, shall apply.
          (36) Community express program.--
                  (A) In general.--The Administrator shall 
                carry out a Community Express Program to 
                provide loans under this subsection in 
                accordance with this paragraph.
                  (B) Requirements.--For a loan made under the 
                Community Express Program, the following shall 
                apply:
                          (i) The loan shall be in an amount 
                        not exceeding $250,000.
                          (ii) The loan shall be made to a 
                        small business concern the majority 
                        ownership interest of which is directly 
                        held by individuals the Administrator 
                        determines are, without regard to the 
                        geographic location of such 
                        individuals, women, members of 
                        qualified Indian tribes, socially or 
                        economically disadvantaged individuals, 
                        veterans, or members of the reserve 
                        components of the Armed Forces.
                          (iii) The loan shall comply with the 
                        collateral policy of the 
                        Administration.
                          (iv) The loan shall include terms 
                        requiring the lender to provide, at the 
                        expense of the lender, technical 
                        assistance to the borrower through the 
                        lender or a third-party provider.
                          (v) The Administrator shall approve 
                        or disapprove the loan within 36 hours.
          (37) National lender training program.--
                  (A) In general.--The Administrator shall 
                establish and carry out, through the regional 
                offices of the Administration, a lender 
                training program for new and existing lenders 
                under this subsection with respect to the 
                lending systems, policies, and procedures of 
                the Administration.
                  (B) Fees.--The Administrator shall charge a 
                fee for the program established under 
                subparagraph (A) to reduce the cost of such 
                program to zero.
                  (C) Limitation.--The program established 
                under subparagraph (A) may not be carried out 
                by contract with a nongovernmental entity.
          (38) Applications for repurchase of loans.--
                  (A) In general.--Not later than 45 days after 
                the date of the receipt of a claim from a 
                lender for proper payment of the guaranteed 
                portion of a loan under this subsection due to 
                default, the Administrator shall make a final 
                determination with respect to the approval or 
                denial of such claim.
                  (B) Late determinations.--If the 
                Administrator does not make a final 
                determination under subparagraph (A) in the 
                time period specified in such subparagraph, the 
                claim shall be approved and paid promptly.
          (39) Cooperatives.--The Administration may provide 
        loans under this subsection to any cooperative that--
                  (A) is not organized as a tax-exempt entity;
                  (B) is engaged in a legal business activity;
                  (C) obtains financial benefits for the 
                cooperative and for the members of such 
                cooperative; and
                  (D) is eligible under applicable size 
                standards of the Administration, including that 
                any business entity that is a member of such 
                cooperative is eligible under applicable size 
                standards of the Administration.
          (40) Capital backstop program.--
                  (A) In general.--The Administrator shall 
                establish a process under which a small 
                business concern may submit an application to 
                the Administrator for the purpose of securing a 
                loan under this subsection. With respect to 
                such application, the Administrator shall 
                collect all information necessary to determine 
                the creditworthiness and repayment ability of 
                an applicant and shall determine if such 
                application meets basic eligibility and credit 
                standards for a loan under this subsection.
                  (B) Participation of lenders.--
                          (i) In general.--The Administrator 
                        shall establish a process under which 
                        the Administrator makes available to 
                        lenders each loan application submitted 
                        and determined to meet basic 
                        eligibility and credit standards under 
                        subparagraph (A) for the purpose of 
                        such lenders originating, underwriting, 
                        closing, and servicing the loan for 
                        which the applicant applied.
                          (ii) Eligibility.--Lenders are 
                        eligible to receive a loan application 
                        described in clause (i) if they 
                        participate in the programs established 
                        under this subsection.
                          (iii) Local lenders.--The 
                        Administrator shall first make 
                        available a loan application described 
                        in clause (i) to lenders within 100 
                        miles of the principal office of the 
                        loan applicant.
                          (iv) Preferred lenders.--If a lender 
                        described in clause (iii) does not 
                        agree to originate, underwrite, close, 
                        and service the loan applied for within 
                        5 business days of receiving a loan 
                        application described in clause (i), 
                        the Administrator shall subsequently 
                        make available such loan application to 
                        lenders in the Preferred Lenders 
                        Program under paragraph (2)(C)(ii) of 
                        this subsection.
                          (v) Authority of administration to 
                        lend.--If a lender described in clauses 
                        (iii) or (iv) does not agree to 
                        originate, underwrite, close, and 
                        service the loan applied for within 10 
                        business days of receiving a loan 
                        application described in clause (i), 
                        the Administrator shall originate, 
                        underwrite, close, and service such 
                        loan.
                  (C) Asset sales.--The Administrator shall 
                offer to sell loans made by the Administrator 
                under this paragraph. Such sales shall be made 
                through the semi-annual public solicitation (in 
                the Federal Register and in other media) of 
                offers to purchase. The Administrator may 
                contract with vendors for due diligence, asset 
                valuation, and other services related to such 
                sales. The Administrator may not sell any loan 
                under this subparagraph for less than 90 
                percent of the net present value of the loan, 
                as determined and certified by a qualified 
                third party.
                  (D) Loans not sold.--The Administrator shall 
                maintain and service loans made by the 
                Administrator under this paragraph that are not 
                sold through the asset sales under this 
                paragraph.
                  (E) Effective dates.--This paragraph shall 
                have effect on a date if--
                          (i) such date occurs during a period 
                        that--
                                  (I) begins on the date the 
                                Bureau of Economic Analysis, or 
                                any successor organization, 
                                makes a determination that the 
                                gross domestic product of the 
                                United States has decreased for 
                                three consecutive quarters; and
                                  (II) ends on the date the 
                                Bureau of Economic Analysis, or 
                                any successor organization, 
                                makes a determination that the 
                                gross domestic product of the 
                                United States has increased for 
                                two consecutive quarters; and
                          (ii) the number of loans provided 
                        under this subsection prior to such 
                        date in the fiscal year including such 
                        date is at least 30 percent less than 
                        the number of such loans provided prior 
                        to the same point in the previous 
                        fiscal year.
                  (F) Implementation.--The Administrator shall 
                establish a group of at least 250 individuals 
                available to carry out activities under this 
                paragraph on any date on which this paragraph 
                has effect under subparagraph (E). The 
                Administrator shall provide to such group the 
                training necessary to carry out activities 
                under this paragraph.
                  (G) Application of other law.--Nothing in 
                this paragraph shall be construed to exempt any 
                activity of the Administrator under this 
                paragraph from the Federal Credit Reform Act of 
                1990 (2 U.S.C. 661 et seq.).
                  (H) Authorization of appropriations.--
                          (i) Program levels.--The 
                        Administrator is authorized to make 
                        loans under this paragraph in an amount 
                        that is equal to half the amount 
                        authorized for loans under this 
                        subsection other than loans under this 
                        paragraph.
                          (ii) Authorization of 
                        appropriations.--In addition to amounts 
                        made available to carry out this 
                        subsection, there are authorized to be 
                        appropriated such sums as may be 
                        necessary to carry out this paragraph.
          (41) Goodwill.--The Administrator may not apply an 
        application, processing, or approval standard to a loan 
        for the purpose of financing goodwill under this 
        subsection, unless such standard applies to all loans 
        under this subsection.

           *       *       *       *       *       *       *

  (b) Except as to agricultural enterprises as defined in 
section 18(b)(1) of this Act, the Administration also is 
empowered to the extent and in such amounts as provided in 
advance in appropriation Acts--
          (1) * * *

           *       *       *       *       *       *       *

          (3)(A) * * *

           *       *       *       *       *       *       *

          (E) No loan may be made under this paragraph, either 
        directly or in cooperation with banks or other lending 
        institutions through agreements to participate on an 
        immediate or deferred basis, if the total amount 
        outstanding and committed to the borrower under this 
        subsection would exceed [$1,500,000] $3,000,000, unless 
        such applicant constitutes, or have become due to 
        changed economic circumstances, a major source of 
        employment in its surrounding area, as determined by 
        the Administration, in which case the Administration, 
        in its discretion, may waive the [$1,500,000] 
        $3,000,000 limitation.

           *       *       *       *       *       *       *

          (8) Increased loan caps.--
                  (A) Aggregate loan amounts.--Except as 
                provided in subparagraph (B), and 
                notwithstanding any other provision of law, the 
                aggregate loan amount outstanding and committed 
                to a borrower under this subsection may not 
                exceed [$2,000,000] $3,000,000.

           *       *       *       *       *       *       *

          (10) Grants to disaster-affected small businesses.--
                  (A) In general.--If the Administrator 
                declares eligibility for additional disaster 
                assistance under paragraph (9), the 
                Administrator may make a grant, in an amount 
                not exceeding $100,000, to a small business 
                concern that--
                          (i) is located in an area affected by 
                        the applicable major disaster;
                          (ii) submits to the Administrator a 
                        certification by the owner of the 
                        concern that such owner intends to 
                        reestablish the concern in the same 
                        county in which the concern was 
                        originally located;
                          (iii) has applied for, and was 
                        rejected for, a conventional disaster 
                        assistance loan under this subsection; 
                        and
                          (iv) was in existence for at least 2 
                        years before the date on which the 
                        applicable disaster declaration was 
                        made.
                  (B) Priority.--In making grants under this 
                paragraph, the Administrator shall give 
                priority to a small business concern that the 
                Administrator determines is economically viable 
                but unable to meet short-term financial 
                obligations.
                  (C) Program level and authorization of 
                appropriations.--
                          (i) Program level.--The Administrator 
                        is authorized to make $100,000,000 in 
                        grants under this paragraph for each of 
                        fiscal years 2010 and 2011.
                          (ii) Authorization of 
                        appropriations.--There are authorized 
                        to be appropriated to the Administrator 
                        such sums as may be necessary to carry 
                        out this paragraph.
          (11) Outreach grants for loan applicant assistance.--
                  (A) In general.--From amounts made available 
                for administrative expenses relating to 
                activities under this subsection, the 
                Administrator is authorized to make grants to 
                the following:
                          (i) A women's business center in an 
                        area affected by a disaster.
                          (ii) A small business development 
                        center in an area affected by a 
                        disaster.
                          (iii) A Veteran Business Outreach 
                        Center in an area affected by a 
                        disaster.
                          (iv) A chamber of commerce in an area 
                        affected by a disaster.
                  (B) Use of grant.--An entity specified under 
                subparagraph (A) shall use a grant received 
                under this paragraph to provide application 
                preparation assistance to applicants for a loan 
                under this subsection.
                  (C) Program level.--The Administrator is 
                authorized to make $50,000,000 in grants under 
                this paragraph for each of fiscal years 2010 
                and 2011.

           *       *       *       *       *       *       *

  (f) Additional Requirements for 7(b) Loans.--
          (1) * * *
          (2) Revised collateral requirements.--In making a 
        loan with respect to a business under subsection (b), 
        if the total approved amount of such loan is less than 
        or equal to $250,000, the Administrator may not require 
        the borrower to use the borrower's home as collateral.
          (3) Revised repayment terms.--In making loans under 
        subsection (b), the Administrator--
                  (A) may not require repayment to begin until 
                the date that is 12 months after the date on 
                which the final disbursement of approved 
                amounts is made; and
                  (B) shall calculate the amount of repayment 
                based solely on the amounts disbursed.
          (4) Revised disbursement process.--In making a loan 
        under subsection (b), the Administrator shall disburse 
        loan amounts in accordance with the following:
                  (A) If the total amount approved with respect 
                to such loan is less than or equal to 
                $150,000--
                          (i) the first disbursement with 
                        respect to such loan shall consist of 
                        40 percent of the total loan amount, or 
                        a lesser percentage of the total loan 
                        amount if the Administrator and the 
                        borrower agree on such a lesser 
                        percentage;
                          (ii) the second disbursement shall 
                        consist of 50 percent of the loan 
                        amounts that remain after the first 
                        disbursement, and shall be made when 
                        the borrower has produced satisfactory 
                        receipts to demonstrate the proper use 
                        of 50 percent of the first 
                        disbursement; and
                          (iii) the third disbursement shall 
                        consist of the loan amounts that remain 
                        after the preceding disbursements, and 
                        shall be made when the borrower has 
                        produced satisfactory receipts to 
                        demonstrate the proper use of the first 
                        disbursement and 50 percent of the 
                        second disbursement.
                  (B) If the total amount approved with respect 
                to such loan is more than $150,000 but less 
                than or equal to $500,000--
                          (i) the first disbursement with 
                        respect to such loan shall consist of 
                        20 percent of the total loan amount, or 
                        a lesser percentage of the total loan 
                        amount if the Administrator and the 
                        borrower agree on such a lesser 
                        percentage;
                          (ii) the second disbursement shall 
                        consist of 30 percent of the loan 
                        amounts that remain after the first 
                        disbursement, and shall be made when 
                        the borrower has produced satisfactory 
                        receipts to demonstrate the proper use 
                        of 50 percent of the first 
                        disbursement;
                          (iii) the third disbursement shall 
                        consist of 25 percent of the loan 
                        amounts that remain after the first and 
                        second disbursements, and shall be made 
                        when the borrower has produced 
                        satisfactory receipts to demonstrate 
                        the proper use of the first 
                        disbursement and 50 percent of the 
                        second disbursement; and
                          (iv) the fourth disbursement shall 
                        consist of the loan amounts that remain 
                        after the preceding disbursements, and 
                        shall be made when the borrower has 
                        produced satisfactory receipts to 
                        demonstrate the proper use of the first 
                        and second disbursements and 50 percent 
                        of the third disbursement.
                  (C) If the total amount approved with respect 
                to such loan is more than $500,000--
                          (i) the first disbursement with 
                        respect to such loan shall consist of 
                        at least $100,000, or a lesser amount 
                        if the Administrator and the borrower 
                        agree on such a lesser amount; and
                          (ii) the number of disbursements 
                        after the first, and the amount of each 
                        such disbursement, shall be in the 
                        discretion of the Administrator, but 
                        the amount of each such disbursement 
                        shall be at least $100,000.

           *       *       *       *       *       *       *

  [(e) [RESERVED].
  [(f) [RESERVED].]

           *       *       *       *       *       *       *

  (m) Microloan Program.--
          (1)(A) * * *
          (B) Establishment.--There is established a microloan 
        program, under which the Administration may--
                  (i) make direct loans to eligible 
                intermediaries, as provided under paragraph 
                (3), for the purpose of making [short-term,] 
                fixed interest rate microloans to startup, 
                newly established, and growing small business 
                concerns under paragraph (6);

           *       *       *       *       *       *       *

          (2) Eligibility for participation.--An intermediary 
        shall be eligible to receive loans and grants under 
        subparagraphs (B)(i) and (B)(ii) of paragraph (1) if 
        it--
                  (A) meets the definition in [paragraph (10)] 
                paragraph (11); and
                  [(B) has at least 1 year of experience making 
                microloans to startup, newly established, or 
                growing small business concerns and providing, 
                as an integral part of its microloan program, 
                intensive marketing, management, and technical 
                assistance to its borrowers.]
                  (B) has--
                          (i) at least--
                                  (I) 1 year of experience 
                                making microloans to startup, 
                                newly established, or growing 
                                small business concerns; or
                                  (II) 1 full-time employee who 
                                has not less than 3 years of 
                                experience making microloans to 
                                startup, newly established, or 
                                growing small business 
                                concerns; and
                          (ii) at least--
                                  (I) 1 year of experience 
                                providing, as an integral part 
                                of its microloan program, 
                                intensive marketing, 
                                management, and technical 
                                assistance to its borrowers; or
                                  (II) 1 full-time employee who 
                                has not less than 1 year of 
                                experience providing intensive 
                                marketing, management, and 
                                technical assistance to 
                                borrowers.
          (3) Loans to intermediaries.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Loan limits.--Notwithstanding subsection 
                (a)(3), no loan shall be made under this 
                subsection if the total amount outstanding and 
                committed to one intermediary (excluding 
                outstanding grants) from the business loan and 
                investment fund established by this Act would, 
                as a result of such loan, exceed [$750,000] 
                $1,000,000 in the first year of such 
                intermediary's participation in the program, 
                and [$3,500,000] $7,000,000 in the remaining 
                years of the intermediary's participation in 
                the program. The Administrator may treat the 
                amount of $7,000,000 in this subparagraph as if 
                such amount is $10,000,000 if the Administrator 
                determines, with respect to an intermediary, 
                that such treatment is appropriate.

           *       *       *       *       *       *       *

                  (F) Loan duration; interest rates.--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) Rates applicable to certain 
                        small loans.--Loans made by the 
                        Administration to an intermediary that 
                        makes loans to small business concerns 
                        and entrepreneurs averaging not more 
                        than [$7,500] $10,000, shall bear an 
                        interest rate that is 2 percentage 
                        points below the rate determined by the 
                        Secretary of the Treasury for 
                        obligations of the United States with a 
                        period of maturity of 5 years, adjusted 
                        to the nearest one-eighth of 1 percent.

           *       *       *       *       *       *       *

          (4) Marketing, management and technical assistance 
        grants to intermediaries.--Grants made in accordance 
        with subparagraph (B)(ii) of paragraph (1) shall be 
        subject to the following requirements:
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Assistance to certain small business 
                concerns.--
                          (i) In general.--Each intermediary 
                        may expend an amount not to exceed [25 
                        percent] 35 percent of the grant funds 
                        received under paragraph (1)(B)(ii) to 
                        provide information and technical 
                        assistance to small business concerns 
                        that are prospective borrowers under 
                        this subsection.
                          (ii) Technical assistance.--An 
                        intermediary may expend not more than 
                        [25 percent] 35 percent of the funds 
                        received under paragraph (1)(B)(ii) to 
                        enter into third party contracts for 
                        the provision of technical assistance.

           *       *       *       *       *       *       *

          (6) Loans to small business concerns from eligible 
        intermediaries.--
                  (A) In general.--An eligible intermediary 
                shall make [short-term,] fixed rate loans to 
                startup, newly established, and growing small 
                business concerns from the funds made available 
                to it under subparagraph (B)(i) of paragraph 
                (1) for working capital and the acquisition of 
                materials, supplies, furniture, fixtures, and 
                equipment.

           *       *       *       *       *       *       *

                  (C) Interest limit.--Notwithstanding any 
                provision of the laws of any State or the 
                constitution of any State pertaining to the 
                rate or amount of interest that may be charged, 
                taken, received, or reserved on a loan, the 
                maximum rate of interest to be charged on a 
                microloan funded under this subsection shall 
                not exceed the rate of interest applicable to a 
                loan made to an intermediary by the 
                Administration--
                          (i) in the case of a loan of more 
                        than [$7,500] $10,000 made by the 
                        intermediary to a small business 
                        concern or entrepreneur by more than 
                        7.75 percentage points; and
                          (ii) in the case of a loan of not 
                        more than [$7,500] $10,000 made by the 
                        intermediary to a small business 
                        concern or entrepreneur by more than 
                        8.5 percentage points.

           *       *       *       *       *       *       *

          (11) Definitions.--For purposes of this subsection--
                  (A) * * *
                  (B) the term ``microloan'' means a [short-
                term,] fixed rate loan of not more than 
                $35,000, made by an intermediary to a startup, 
                newly established, or growing small business 
                concern;

           *       *       *       *       *       *       *

          (14) Credit reporting information.--The Administrator 
        shall establish a process, for use by an intermediary 
        making a loan to a borrower under this subsection, 
        under which the intermediary shall provide to the major 
        credit reporting agencies the information about the 
        borrower, both positive and negative, that is relevant 
        to credit reporting, such as the payment activity of 
        the borrower on the loan. Such process shall allow an 
        intermediary the option of providing information to the 
        major credit reporting agencies through the 
        Administration or independently.
          (15) Reporting requirement.--Not later than 90 days 
        after the end of each fiscal year, the Administrator 
        shall submit to the Committee on Small Business of the 
        House of Representatives and the Committee on Small 
        Business and Entrepreneurship of the Senate a report 
        that includes, with respect to such fiscal year of the 
        microloan program, the following:
                  (A) The names and locations of each 
                intermediary that received funds to make 
                microloans or provide marketing, management, 
                and technical assistance.
                  (B) The amounts of each loan and each grant 
                provided to each such intermediary in such 
                fiscal year and in prior fiscal years.
                  (C) A description of the contributions from 
                non-Federal sources of each such intermediary.
                  (D) The number and amounts of microloans made 
                by each such intermediary to all borrowers and 
                to each of the following:
                          (i) Women entrepreneurs and business 
                        owners.
                          (ii) Low-income entrepreneurs and 
                        business owners.
                          (iii) Veteran entrepreneurs and 
                        business owners.
                          (iv) Disabled entrepreneurs and 
                        business owners.
                          (v) Minority entrepreneurs and 
                        business owners.
                  (E) A description of the marketing, 
                management, and technical assistance provided 
                by each such intermediary to all borrowers and 
                to each of the following:
                          (i) Women entrepreneurs and business 
                        owners.
                          (ii) Low-income entrepreneurs and 
                        business owners.
                          (iii) Veteran entrepreneurs and 
                        business owners.
                          (iv) Disabled entrepreneurs and 
                        business owners.
                          (v) Minority entrepreneurs and 
                        business owners.
                  (F) The number of jobs created and retained 
                as a result of microloans and marketing, 
                management, and technical assistance provided 
                by each such intermediary.
                  (G) The repayment history of each such 
                intermediary.
                  (H) The number of businesses that achieved 
                success after receipt of a microloan.
          (16) Interest assistance.--
                  (A) In general.--The Administrator is 
                authorized to use amounts determined unlikely 
                to be expended under subparagraph (B) to assist 
                borrowers that receive a microloan under this 
                subsection to reduce the interest paid with 
                respect to such microloan.
                  (B) Amounts unlikely to be expended.--Not 
                later than April 1 of each fiscal year, the 
                Administrator shall determine if any amounts 
                made available to carry out this subsection for 
                such fiscal year are unlikely to be expended 
                for activities under this subsection other than 
                activities under this paragraph.

           *       *       *       *       *       *       *

  Sec. 20. (a) * * *

           *       *       *       *       *       *       *

  (f) Fiscal Years 2010 and 2011 With Respect to Section 
7(a).--
          (1) Program levels.--For the programs authorized by 
        this Act, in each of fiscal years 2010 and 2011 
        commitments for general business loans authorized under 
        section 7(a) may not exceed $20,000,000,000.
          (2) Authorization of appropriations.--There are 
        authorized to be appropriated such sums as may be 
        necessary to carry out paragraph (1).
  (g) Program Levels With Respect to CDC Economic Development 
Loan Program.--
          (1) Fiscal year 2010.--For financings authorized by 
        section 7(a)(13) of this Act and title V of the Small 
        Business Investment Act of 1958, the Administrator is 
        authorized to make $9,000,000,000 in guarantees of 
        debentures for fiscal year 2010.
          (2) Fiscal year 2011.--For financings authorized by 
        section 7(a)(13) of this Act and title V of the Small 
        Business Investment Act of 1958, the Administrator is 
        authorized to make $10,000,000,000 in guarantees of 
        debentures for fiscal year 2011.
  (h) Fiscal Years 2010 and 2011 With Respect to Section 
7(m).--
          (1) Program levels.--For the programs authorized by 
        this Act, the Administration is authorized to make 
        during each of fiscal years 2010 and 2011--
                  (A) $80,000,000 in technical assistance 
                grants, as provided in section 7(m); and
                  (B) $110,000,000 in direct loans, as provided 
                in section 7(m).
          (2) Authorization of appropriations.--There is 
        authorized to be appropriated such sums as may be 
        necessary to carry out paragraph (1).
  (i) Part A of Title III of the Small Business Investment Act 
of 1958.--
          (1) Program levels 2010.--For fiscal year 2010, in 
        carrying out the program authorized by part A of title 
        III of the Small Business Investment Act of 1958, the 
        Administrator is authorized to make $5,000,000,000 in 
        guarantees of debentures.
          (2) Program levels 2011.--For fiscal year 2011, in 
        carrying out the program authorized by part A of title 
        III of the Small Business Investment Act of 1958, the 
        Administrator is authorized to make $5,5000,000,000 in 
        guarantees of debentures.
  (j) Fiscal Years 2010 and 2011 With Respect to Section 
7(b).--There is authorized to be appropriated such sums as may 
be necessary for administrative expenses and loans under 
section 7(b).
  [(j)] (k) Fiscal Year 2004 Purchase and Guarantee Authority 
Under Title III of Small Business Investment Act of 1958.--For 
fiscal year 2004, for the programs authorized by title III of 
the Small Business Investment Act of 1958 (15 U.S.C. 681 et 
seq.), the Administration is authorized to make--
          (1) * * *

           *       *       *       *       *       *       *


SEC. 40. COMPREHENSIVE DISASTER RESPONSE PLAN.

  (a) Plan Required.--The Administrator shall develop, 
implement, [or] and maintain a comprehensive written disaster 
response plan. The plan shall include the following:
          (1) * * *

           *       *       *       *       *       *       *

  (d) Regional Disaster Working Groups.--In carrying out 
subsection (a), the Administrator, acting through the regional 
administrators of the regional offices of the Administration, 
shall develop a disaster preparedness and response plan for 
each region of the Administration. Each such plan shall be 
developed in cooperation with Federal, State, and local 
emergency response authorities and representatives of 
businesses located in the region to which such plan applies. 
Each such plan shall identify and include a plan relating to 
the 3 disasters, natural or manmade, most likely to occur in 
the region to which such plan applies.
  [(d)] (e) Report.--The Administrator shall include a report 
on the plan whenever the Administration submits the report 
required by section 43.

           *       *       *       *       *       *       *


SEC. 44. APPELLATE PROCESS AND OMBUDSMAN.

  (a) Appellate Process.--
          (1) In general.--Not later than 270 days after the 
        date of the enactment of the Small Business Financing 
        and Investment Act of 2009, the Administrator shall 
        establish an independent appellate process within the 
        Administration. The process shall be available to 
        review material determinations made by the 
        Administration that affect a lender or investment 
        company that participates or is applying to participate 
        in a program administered by the Administration.
          (2) Review process.--In establishing the independent 
        appellate process under paragraph (1), the 
        Administrator shall ensure that--
                  (A) any appeal of a material determination by 
                the Administration is heard and resulting 
                recommendations are provided expeditiously; and
                  (B) appropriate safeguards exist for 
                protecting the appellant from retaliation by 
                Administration employees.
          (3) Comment period.--Not later than 180 days after 
        the date of the enactment of the Small Business 
        Financing and Investment Act of 2009, the Administrator 
        shall provide an opportunity for notice and comment on 
        proposed guidelines for the establishment of an 
        independent appellate process under this section.
  (b) Agency Ombudsman.--
          (1) Establishment.--Not later than 180 days after the 
        date of the enactment of the Small Business Financing 
        and Investment Act of 2009, the Administrator shall 
        appoint an ombudsman.
          (2) Duties.--The ombudsman appointed in accordance 
        with paragraph (1) shall--
                  (A) act as a liaison between the 
                Administration and any lender or investment 
                company that participates or is applying to 
                participate in a program administered by the 
                Administration with respect to a problem such 
                entity may have in dealing with the 
                Administration resulting from a material 
                determination made by the Administration; and
                  (B) ensure that safeguards exist to encourage 
                complainants to come forward and preserve 
                confidentiality.
  (c) Other Authority.--An individual carrying out the 
independent appellate process established under subsection (a) 
or the position of ombudsman established under subsection (b) 
is authorized to--
          (1) examine records and documents relating to a 
        matter under review pursuant to such subsections; and
          (2) initiate the review of a matter under such 
        subsections if such individual believes that 
        Administration procedures have not been followed as 
        intended with respect to such matter, without regard to 
        whether an appeal or complaint has been made.
  (d) Limitations.--
          (1) In general.--An individual carrying out the 
        independent appellate process established under 
        subsection (a) or the position of ombudsman established 
        under subsection (b) may not, as a result of the 
        authority provided under this section--
                  (A) make, change, or set aside a law, policy, 
                or administrative decision;
                  (B) make binding decisions or determine 
                rights;
                  (C) directly compel an entity to implement 
                the recommendations of such individual; or
                  (D) accept jurisdiction over an issue that is 
                pending in a legal forum.
          (2) Rule of construction.--Activities carried out 
        under this section may not be construed--
                  (A) as a formal investigation, formal 
                hearing, or binding decision;
                  (B) as limiting any remedy or right of 
                appeal;
                  (C) as affecting any procedure concerning 
                grievances, appeals, or administrative matters 
                under law; or
                  (D) as a substitute for an administrative or 
                judicial proceeding.
  (e) Report.--Not later than one year after the date of the 
enactment of the Small Business Financing and Investment Act of 
2009 and annually thereafter, the Administrator shall submit to 
the Committee on Small Business of the House of Representatives 
and the Committee on Small Business and Entrepreneurship of the 
Senate a report describing and providing the status of appeals 
made under subsection (a) and complaints made under subsection 
(b).
  (f) Definitions.--In this section, the following apply:
          (1) Material determination.--The term ``material 
        determination'' includes determinations relating to--
                  (A) applications for payment relating to a 
                loan guarantee; and
                  (B) the ability of an entity to participate 
                in an Administration loan or investing program.
          (2) Independent appellate process.--The term 
        ``independent appellate process'' means a review by an 
        Administration official who does not directly or 
        indirectly report to the Administration official who 
        made the material determination under review.

SEC. 45. LOAN GUARANTEES FOR HEALTH INFORMATION TECHNOLOGY.

  (a) Definitions.--As used in this section:
          (1) The term ``health information technology'' means 
        computer hardware, software, and related technology 
        that supports the meaningful EHR use requirements set 
        forth in section 1848(o)(2)(A) of the Social Security 
        Act (42 U.S.C. 1395w-4(o)(2)(A)) and is purchased by an 
        eligible professional to aid in the provision of health 
        care in a health care setting, including, but not 
        limited to, electronic medical records, and that 
        provides for--
                  (A) enhancement of continuity of care for 
                patients through electronic storage, 
                transmission, and exchange of relevant personal 
                health data and information, such that this 
                information is accessible at the times and 
                places where clinical decisions will be or are 
                likely to be made;
                  (B) enhancement of communication between 
                patients and health care providers;
                  (C) improvement of quality measurement by 
                eligible professionals enabling them to 
                collect, store, measure, and report on the 
                processes and outcomes of individual and 
                population performance and quality of care;
                  (D) improvement of evidence-based decision 
                support; or
                  (E) enhancement of consumer and patient 
                empowerment.
        Such term shall not include information technology 
        whose sole use is financial management, maintenance of 
        inventory of basic supplies, or appointment scheduling.
          (2) The term ``eligible professional'' means any of 
        the following:
                  (A) A physician (as defined in section 
                1861(r) of the Social Security Act (42 U.S.C. 
                1395x(r)).
                  (B) A practitioner described in section 
                1842(b)(18)(C) of that Act.
                  (C) A physical or occupational therapist or a 
                qualified speech-language pathologist.
                  (D) A qualified audiologist (as defined in 
                section 1861(ll)(3)(B)) of that Act.
                  (E) A qualified medical transcriptionist who 
                is either certified by or registered with the 
                Association for Healthcare Documentation 
                Integrity, or a successor association thereto.
                  (F) A State-licensed pharmacist.
                  (G) A State-licensed supplier of durable 
                medical equipment, prosthetics, orthotics, or 
                supplies.
          (3) The term ``qualified eligible professional'' 
        means an eligible professional whose office can be 
        classified as a small business concern by the 
        Administrator for purposes of this Act under size 
        standards established under section 3 of this Act.
          (4) The term ``qualified medical transcriptionist'' 
        means a specialist in medical language and the 
        healthcare documentation process who interprets and 
        transcribes dictation by physicians and other 
        healthcare professionals to ensure accurate, complete, 
        and consistent documentation of healthcare encounters.
  (b) Loan Guarantees for Qualified Eligible Professionals.--
          (1) In general.--Subject to paragraph (2), the 
        Administrator may guarantee up to 90 percent of the 
        amount of a loan made to a qualified eligible 
        professional to be used for the acquisition of health 
        information technology for use in such eligible 
        professional's medical practice and for the costs 
        associated with the installation of such technology. 
        Except as otherwise provided in this section, the terms 
        and conditions that apply to loans made under section 
        7(a) of this Act shall apply to loan guarantees made 
        under this section.
          (2) Limitations on guarantee amounts.--The maximum 
        amount of loan principal guaranteed under this 
        subsection may not exceed--
                  (A) $350,000 with respect to any single 
                qualified eligible professional; and
                  (B) $2,000,000 with respect to a single group 
                of affiliated qualified eligible professionals.
  (c) Fees.--(1) The Administrator may impose a guarantee fee 
on the borrower for the purpose of reducing the cost (as 
defined in section 502(5) of the Federal Credit Reform Act of 
1990) of the guarantee to zero in an amount not to exceed 2 
percent of the total guaranteed portion of any loan guaranteed 
under this section. The Administrator may also impose annual 
servicing fees on lenders not to exceed 0.5 percent of the 
outstanding balance of the guarantees on lenders' books.
  (2) No service fees, processing fees, origination fees, 
application fees, points, brokerage fees, bonus points, or 
other fees may be charged to a loan applicant or recipient by a 
lender in the case of a loan guaranteed under this section.
  (d) Deferral Period.--Loans guaranteed under this section 
shall carry a deferral period of not less than 1 year and not 
more than 3 years. The Administrator shall have the authority 
to subsidize interest during the deferral period.
  (e) Effective Date.--No loan may be guaranteed under this 
section until the meaningful EHR use requirements have been 
determined by the Secretary of Health and Human Services.
  (f) Sunset.--No loan may be guaranteed under this section 
after the date that is 5 years after meaningful EHR use 
requirements have been determined by the Secretary of Health 
and Human Services.
  (g) Authorization of Appropriations.--There are authorized to 
be appropriated such sums as are necessary for the cost (as 
defined in section 502(5) of the Federal Credit Reform Act of 
1990) of guaranteeing $10,000,000,000 in loans under this 
section. The Administrator shall determine such program cost 
separately and distinctly from other programs operated by the 
Administrator.
  Sec. [44.] 46. All laws and parts of laws inconsistent with 
this Act are hereby repealed to the extent of such 
inconsistency.
                              ----------                              


AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

           *       *       *       *       *       *       *


DIVISION A--APPROPRIATIONS PROVISIONS

           *       *       *       *       *       *       *


TITLE V--FINANCIAL SERVICES AND GENERAL GOVERNMENT

           *       *       *       *       *       *       *


Small Business Administration

           *       *       *       *       *       *       *


        Administrative Provisions--Small Business Administration

  Sec. 501. Fee Reductions. (a) Administrative Provisions Small 
Business Administration.--Until [September 30, 2010] September 
30, 2011, and to the extent that the cost of such elimination 
or reduction of fees is offset by appropriations, with respect 
to each loan guaranteed under section 7(a) of the Small 
Business Act (15 U.S.C. 636(a)) and section 502 of this title, 
for which the application is approved on or after the date of 
enactment of this Act, the Administrator shall--
          (1) * * *

           *       *       *       *       *       *       *

  (c) Application of Fee Eliminations.--
          (1) * * *
          [(2) The Administrator shall eliminate fees under 
        subsections (a) and (b) until the amount provided for 
        such purposes, as applicable, under the heading 
        ``Business Loans Program Account'' under the heading 
        ``Small Business Administration'' under this Act are 
        expended.]
  Sec. 502. Economic Stimulus Lending Program for Small 
Businesses. (a) * * *

           *       *       *       *       *       *       *

  (f) Sunset.--Loan guarantees may not be issued under this 
section after [the date 12 months after the date of enactment 
of this Act] September 30, 2011.

           *       *       *       *       *       *       *

  Sec. 506. Business Stabilization Program. (a) In General.--
Subject to the availability of appropriations, the 
Administrator of the Small Business Administration shall carry 
out a program to provide loans on a deferred basis to viable 
(as such term is determined pursuant to regulation by the 
Administrator of the Small Business Administration) small 
business concerns that have a qualifying small business loan 
and are experiencing immediate financial hardship. In carrying 
out such program, the Administrator shall establish and utilize 
a one-page application for loans under this section and shall 
authorize lenders to utilize the same documentation and 
procedural requirements for loans under this section as such 
lenders utilize for other loans of a similar size and type.

           *       *       *       *       *       *       *

  (c) Qualifying Small Business Loan.--A loan made to a small 
business concern that meets the eligibility standards in 
section 7(a) of the Small Business Act (15 U.S.C. 636(a)) [but 
shall not include loans guarantees (or loan guarantee 
commitments made) by the Administrator prior to the date of 
enactment of this Act].
  (d) Loan Size.--Loans guaranteed under this section may not 
exceed [$35,000] $50,000.

           *       *       *       *       *       *       *

  (j) Sunset.--The Administrator of the Small Business 
Administration shall not issue loan guarantees under this 
section after [September 30, 2010] September 30, 2011.

           *       *       *       *       *       *       *

  Sec. 509. Establishment of SBA Secondary Market Lending 
Authority.
  (a) * * *

           *       *       *       *       *       *       *

  (c) Responsibilities, Authorities, Organization, and 
Limitations.--
          (1) Designation of systemically important sba 
        secondary market broker-dealers.--The Administrator 
        shall establish a process to designate, in consultation 
        with the Board of Governors of the Federal Reserve and 
        the Secretary of the Treasury, Systemically Important 
        Secondary Market Broker-Dealers. Such process shall 
        include the designation of each lender participating in 
        a program under section 7(a) of the Small Business Act 
        as a Systematically Important Secondary Market Broker-
        Dealer for purposes of this section.

           *       *       *       *       *       *       *

  [(e) Duration.--The authority of this section shall remain in 
effect for a period of 2 years after the date of enactment of 
this section.]
  [(f)] (e) Fees.--The Administrator shall charge fees, up 
front, annual, or both at a specified percentage of the loan 
amount that is at such a rate that the cost of the program 
under the Federal Credit Reform Act of 1990 ((title V of the 
Congressional Budget and Impoundment Control Act of 1974; 2 
U.S.C. 661) shall be equal to zero. To the extent that the cost 
of an elimination or reduction of fees is offset by 
appropriations, the Administrator shall in lieu of the fee 
otherwise applicable under this subsection collect no fee or 
reduce fees to the maximum extent possible.
  [(h)] (f) Budget Treatment.--Nothing in this section shall be 
construed to exempt any activity of the Administrator under 
this section from the Federal Credit Reform Act of 1990 (title 
V of the Congressional Budget and Im poundment Control Act of 
1974; 2 U.S.C. 661 and following).
  [(i)] (g) Emergency Rulemaking Authority.--The Administrator 
shall promulgate regulations under this section within 30 days 
after the date of enactment of enactment of this section. In 
promulgating these regulations,the Administrator the notice 
requirements of section 553(b) of title 5 of the United States 
Code shall not apply.

           *       *       *       *       *       *       *

                              ----------                              


                 SMALL BUSINESS INVESTMENT ACT OF 1958

TITLE I--SHORT TITLE, STATEMENT OF POLICY, AND DEFINITIONS

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 103. As used in this Act--
          (1) * * *

           *       *       *       *       *       *       *

          [(6) the term ``development companies'' means 
        enterprises incorporated under State law with the 
        authority to promote and assist the growth and 
        development of small-business concerns in the areas 
        covered by their operations;]
          (6) the term ``development company'' means any 
        corporation organized in order to promote economic 
        development and the growth of small business concerns 
        and includes companies chartered under a special State 
        law authorizing them to operate on a statewide basis;

           *       *       *       *       *       *       *

          (13) the term ``qualified nonprivate funds'' means 
        any--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) funds invested in any applicant or 
                licensee by one or more State or local 
                government entities (including any guarantee 
                extended by those entities) in an aggregate 
                amount that does not exceed [33 percent] 45 
                percent of the private capital of the applicant 
                or licensee;

           *       *       *       *       *       *       *

          (18) the term ``Energy Saving debenture'' means a 
        deferred interest debenture that--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) is issued at no cost (as defined in 
                section 502 of the Credit Reform Act of 1990) 
                with respect to purchasing and guaranteeing the 
                debenture; [and]
          (19) the term ``Energy Saving qualified investment'' 
        means investment in a small business concern that is 
        primarily engaged in researching, manufacturing, 
        developing, or providing products, goods, or services 
        that reduce the use or consumption of non-renewable 
        energy resources [.];
          (20) the term ``certified development company'' means 
        a development company that the Administrator has 
        determined meets the criteria set forth in section 501;
          (21) the term ``local governmental entity'' means--
                  (A) a State or a political subdivision of a 
                State; or
                  (B) a combination of political subdivisions 
                which--
                          (i) has been formed to promote 
                        economic or community development;
                          (ii) is composed of representatives 
                        of the State or a political subdivision 
                        acting in their official capacity; and
                          (iii) includes an area in an adjacent 
                        State if it is part of a local economic 
                        area, a rural area, or has a population 
                        determined by the Administrator to be 
                        insufficient to support the formation 
                        of a separate development company;
                such term includes entities meeting the 
                requirements of clauses (i) through (iii), such 
                as, but not limited to, a council of 
                governments, regional development corporation, 
                regional planning commission, or economic 
                development district;
          (22) the term ``member'' means any person authorized 
        to vote for a director of a corporation or the 
        dissolution or merger of a company (for purposes of 
        this definition, a shareholder of a for-profit 
        corporation shall be considered a member);
          (23) the terms ``rural'' and ``rural area'' shall 
        have the same meaning as those terms are given in 
        section 1991(a)(13)(A) of title 7, United States Code;
          (24) the term ``small manufacturer'' means a small 
        business concern--
                  (A) the primary business of which is 
                classified in sector 31, 32, or 33 of the North 
                American Industrial Classification System; and
                  (B) all of the production facilities of which 
                are located in the United States; and
          (25) for purposes of the terms ``small-business 
        concern'' in paragraph (5) and ``smaller enterprise'' 
        in paragraph (12), tangible net worth shall, to the 
        extent used, mean the total net worth of the small 
        business, in accordance with General Accepted 
        Accounting Principles, minus all intangibles in 
        accordance with General Accepted Accounting Principles.

           *       *       *       *       *       *       *


                TITLE III--INVESTMENT DIVISION PROGRAMS

              Part A--Small Business Investment Companies

          ORGANIZATION OF SMALL BUSINESS INVESTMENT COMPANIES

  Sec. 301. (a) * * *

           *       *       *       *       *       *       *

  (d) Licenses for Experienced Applicants.--
          (1) In general.--Notwithstanding any other provision 
        of this section, not later than 60 days after the 
        initial receipt by the Administrator of any request 
        (which shall be deemed to be the application) for a 
        license to operate as a small business investment 
        company under this Act, the Administrator shall approve 
        the request and issue such license if each of the 
        following requirements is satisfied:
                  (A) At least 50 percent of the principal 
                managers of the applicant consist of at least 
                two-thirds of the principal managers of a small 
                business investment company that has been 
                licensed under this Act.
                  (B) The licensed small business investment 
                company specified under subparagraph (A) has 
                operated under such license for at least 3 
                years prior to the receipt of the request 
                specified in this paragraph.
                  (C) The licensed small business investment 
                company specified under subparagraph (A)--
                          (i) either has invested at least 70 
                        percent of its private capital and 
                        drawn at least 50 percent of its 
                        projected leverage at the time of the 
                        receipt of the request specified in 
                        this paragraph or reserved for 
                        investment and expenses or some 
                        combination of both at least 70 percent 
                        of its private capital in the one-year 
                        period prior to the date on which the 
                        application referred to in this 
                        paragraph was received by the 
                        Administrator;
                          (ii) has maintained 6 consecutive 
                        quarters of profitable net investment 
                        income; and
                          (iii) has made at least 3 exits from 
                        investments in small businesses that 
                        have realized profits from those 
                        respective investments.
                  (D) The applicant submits to the 
                Administrator, in writing, an application 
                consisting of all of the following:
                          (i) A certification, in the form 
                        prescribed by the Administrator, that 
                        such applicant satisfies the 
                        requirements of this subsection and 
                        that all information contained in the 
                        application is true and complete.
                          (ii) A copy of the organizational 
                        documents of the applicant.
                          (iii) A copy of the operating plan of 
                        the applicant demonstrating that at 
                        least 50 percent of the amount of the 
                        planned investments of the applicant 
                        will be in the same or substantially 
                        similar investment stage and use the 
                        same or substantially similar type of 
                        investment instruments as the 
                        investments of the licensed small 
                        business investment company specified 
                        under subparagraph (A).
                          (iv) A certification, in a form 
                        prescribed by the Administrator, that 
                        the applicant satisfies the 
                        requirements of subsections (a) and (c) 
                        of section 302 of this Act.
                  (E) The applicant is in good standing as set 
                forth in paragraph (2).
                  (F) The applicant pays all fees prescribed by 
                the Administrator under subsection (e).
          (2) Good standing.--For purposes of this subsection, 
        an applicant is in good standing if--
                  (A) a licensed leveraged debentured or non-
                leveraged small business investment company 
                specified under paragraph (1)(A) is actively 
                operating under this Act on the date of the 
                initial receipt of the application by the 
                Administrator to which this subsection applies;
                  (B) no principal manager of the applicant has 
                been found liable in a civil action for fraud 
                if the Administrator makes a reasonable 
                determination based on evidence in the agency 
                record that such liability has a material 
                adverse effect on the ability of the applicant 
                to perform obligations required by a license 
                issued pursuant to this Act; and
                  (C) no principal manager is under 
                investigation by a governmental agency or 
                authority for, is under indictment for, or has 
                been convicted of a felony for a violation of 
                Federal or State securities laws, fraud, or 
                another criminal violation if such 
                investigation, indictment, or conviction has a 
                material adverse effect on the ability of the 
                applicant to perform obligations under a 
                license issued under this Act.
          (3) Limitation.--
                  (A) In general.--The Administrator may remove 
                an application from the approval process under 
                this subsection if the Administrator determines 
                based on evidence in the agency record that the 
                approval of the license would present an 
                unacceptable risk to the Federal Government.
                  (B) In writing.--Such determination shall be 
                made in writing and provided to the applicant 
                no later than 10 calendar days after such 
                determination is made. Failure to provide this 
                determination to the applicant shall be deemed 
                to be a permanent waiver of the Administrator's 
                authority to remove an application pursuant to 
                this subsection.
                  (C) Non-delegability.--The Administrator may 
                rely on agency personnel to collect data or 
                other material relevant to establishing a 
                record, but the decision to remove the 
                application may not be delegated by the 
                Administrator to any subordinate personnel in 
                the agency.
          (4) Notice and opportunity to cure non-conformance.--
                  (A) Notice of non-conformance.--Except for a 
                determination made pursuant to paragraph (3), 
                the Administrator shall provide an applicant 
                described in paragraph (1) within 60 days after 
                receipt of the application a written notice and 
                description of any nonconformance with any 
                requirement of this subsection based on 
                evidence in the agency record.
                  (B) Opportunity to cure.--The applicant shall 
                have 30 days following the receipt of notice of 
                nonconformance or the receipt of removal as set 
                forth in paragraph (3) to cure such 
                nonconformance.
                  (C) Failure to provide notice.--Failure to 
                provide the notice within the time limit set 
                forth in subparagraph (A) shall be deemed to be 
                acceptance by the Administrator of the 
                applicant's conformance with the requirements 
                of this subsection.
          (5) Background reviews.--The Administrator shall 
        ensure that a timely background check of the principal 
        managers of each applicant is completed with respect to 
        paragraphs (2)(B) and (2)(C).
          (6) Fees.--The Administrator may charge an applicant 
        additional fees for carrying out the background reviews 
        mandated by paragraph (5). Such fees shall not exceed 
        $10,000.
          (7) Effect of non-qualification.--The failure of an 
        applicant to qualify for expedited licensure under this 
        subsection shall have no effect on an existing license 
        or the ability for the applicant or any of its 
        individual managers to apply for or receive a license 
        to operate a small business investment company under 
        the procedures established elsewhere in this Act or its 
        implementing regulations.
          (8) Regulations.--The Administrator shall develop 
        forms and promulgate regulations to implement this 
        subsection after providing an opportunity for notice 
        and comment. Regulations promulgated pursuant to this 
        paragraph shall be published in the Code of Federal 
        Regulations.

           *       *       *       *       *       *       *


                            BORROWING POWER

  Sec. 303. (a) * * *
  (b) To encourage the formation and growth of small business 
investment companies the Administration is authorized when 
authorized in appropriation Acts, to purchase, or to guarantee 
the timely payment of all principal and interest as scheduled 
on, debentures or participating securities issued by such 
companies. Such purchases or guarantees may be made by the 
Administration on such terms and conditions as it deems 
appropriate, pursuant to regulations issued by the 
Administration. The full faith and credit of the United States 
is pledged to the payment of all amounts which may be required 
to be paid under any guarantee under this subsection. 
Debentures purchased or guaranteed by the Administration under 
this subsection shall be subordinate to any other debenture 
bonds, promissory notes, or other debts and obligations of such 
companies, unless the Administration in its exercise of 
reasonable investment prudence and in considering the financial 
soundness of such company determines otherwise. Such debentures 
may be issued for a term of not to exceed fifteen years and 
shall bear interest at a rate not less than a rate determined 
by the Secretary of the Treasury taking into consideration the 
current average market yield on outstanding marketable 
obligations of the United States with remaining periods to 
maturity comparable to the average maturities on such 
debentures, adjusted to the nearest one-eighth of 1 per centum, 
plus, for debentures obligated after September 30, 2001, an 
additional charge, in an amount established annually by the 
Administration, as necessary to reduce to zero the cost (as 
defined in section 502 of the Federal Credit Reform Act of 1990 
(2 U.S.C. 661a)) to the Administration of purchasing and 
guaranteeing debentures under this Act, which amount may not 
exceed 1.38 percent per year, and which shall be paid to and 
retained by the Administration. The debentures or participating 
securities shall also contain such other terms as the 
Administration may fix, and shall be subject to the following 
restrictions and limitations:
          (1) * * *
          [(2) Maximum leverage.--
                  [(A) In general.--The maximum amount of 
                outstanding leverage made available to any one 
                company licensed under section 301(c) of this 
                Act may not exceed the lesser of--
                          [(i) 300 percent of such company's 
                        private capital; or
                          [(ii) $150,000,000.
                  [(B) Multiple licenses under common 
                control.--The maximum amount of outstanding 
                leverage made available to two or more 
                companies licensed under section 301(c) of this 
                Act that are commonly controlled (as determined 
                by the Administrator) and not under capital 
                impairment may not exceed $225,000,000.]
          (2) Maximum leverage.--
                  (A) In general.--(i) The maximum amount of 
                outstanding leverage made available to any one 
                company licensed under section 301(c) of this 
                Act may not exceed the lesser of--
                          (I) 300 percent of such company's 
                        private capital; or
                          (II) $150,000,000.
                  (ii) In applying clause (i)(I) in the case of 
                a debenture licensee which is in good standing 
                without the imposition of additional regulatory 
                standards and whose financings at cost are 
                comprised of at least 50 percent of loans and 
                debt securities, such licensee may be leveraged 
                as follows:
                          (I) The first one-third of private 
                        capital to 300 percent.
                          (II) The second one-third of private 
                        capital to 200 percent.
                          (III) The last third of private 
                        capital to 100 percent.
                  (iii) Notwithstanding clause (i), in the case 
                of any company operating as a business 
                development company (as such term is defined 
                under section 2(a)(48) of the Investment 
                Company Act of 1940) or a majority-owned 
                subsidiary of such a company that is in good 
                standing without the imposition of additional 
                regulatory requirements, the maximum amount of 
                outstanding leverage made available to such 
                company shall be $250,000,000.
                  (B) Multiple licensees under common 
                control.--The maximum amount of outstanding 
                leverage made available to two or more 
                debenture companies licensed under section 
                301(c) of this Act that are commonly controlled 
                (as determined by the Administrator) and not 
                under capital impairment may not exceed 
                $350,000,000.
                  (C) Investments in low-income geographic 
                areas and veterans.--(i) In calculating the 
                outstanding leverage of a company for the 
                purposes of subparagraph (A), the Administrator 
                shall not include the amount of the cost basis 
                of any equity investment made by the company in 
                a smaller enterprise located in a low-income 
                geographic area (as defined in section 351) or 
                in a small business concern owned and 
                controlled by veterans (as such term is defined 
                in section 3(q)(3) of the Small Business Act), 
                to the extent that the total of such amounts 
                does not exceed 50 percent of the company's 
                private capital.
                  (ii) The maximum amount of outstanding 
                leverage made available to--
                          (I) * * *
                          (II) 2 or more companies described in 
                        clause (iii) that are under common 
                        control (as determined by the 
                        Administrator) may not exceed 
                        [$250,000,000] $400,000,000.
                  (iii) A company described in this clause is a 
                company licensed under section 301(c) in the 
                first fiscal year after the date of enactment 
                of this clause or any fiscal year thereafter 
                that certifies in writing that not less than 50 
                percent of the dollar amount of investments of 
                that company shall be made in companies that 
                are located in a low-income geographic area (as 
                that term is defined in section 351) or in 
                small business concerns owned and controlled by 
                veterans (as such term is defined in section 
                3(q)(3) of the Small Business Act).

           *       *       *       *       *       *       *

                  (E) Regulations.--The Administrator shall 
                promulgate regulations, after notice and 
                opportunity for comment, establishing 
                quantifiable objective criteria under which a 
                licensee's private capital in its entirety may 
                be leveraged up to 300 percent. Such 
                regulations shall be published in the Code of 
                Federal Regulations.

           *       *       *       *       *       *       *

  (d) Investments in Smaller Enterprises.--The Administrator 
shall require each licensee, as a condition of approval of an 
application for leverage, to certify in writing that not less 
than 25 percent of the aggregate dollar amount of financings of 
that licensee shall be provided to smaller enterprises. A 
licensee shall not be required to achieve any percentage of 
such financings (at cost) which is higher than 25 percent which 
may result from the application of prior statutory or 
regulatory requirements to all or any portion of the licensee's 
portfolio.
  (e) Capital Impairment.--Before approving any application for 
leverage submitted by a licensee under this Act, the 
Administrator--
          (1) * * *

           *       *       *       *       *       *       *

A licensee with Earmarked Assets (as that term is defined by 
the Administrator) will not be in capital impairment during the 
first 72 months after its date of licensure, if its impairment 
does not exceed 85 percent.

           *       *       *       *       *       *       *


               LONG-TERM LOANS TO SMALL-BUSINESS CONCERNS

  Sec. 305. (a) * * *

           *       *       *       *       *       *       *

  (c) The maximum rate of interest for the company's share of 
any loan made under this section shall be determined by the 
Administration: Provided, That the Administration also shall 
permit those companies which have issued debentures pursuant to 
this Act to charge a maximum rate of interest based upon the 
coupon rate of interest on the outstanding debentures, 
determined on an annual basis, plus such other expenses of the 
company as may be approved by the Administration. In addition 
to the foregoing, with respect to a loan made, or debt with 
equity features acquired, under this section, the minimum 
coupon rate of interest (cost of money ceiling) imposed by the 
Administrator shall not be less than 19 percent per annum for a 
loan or a debt security, except that nothing herein shall alter 
or affect provisions permitting higher coupon rates of interest 
(cost of money ceilings) and a company may charge up to an 
additional 7 percent more than the interest rate set forth in 
the loan or debt security in the event of a default. For 
purposes of this subsection a default means the occurrence of 
any of the following:
          (1) Failure to pay an amount when due.
          (2) Failure to provide in a timely manner material 
        information required under the applicable financing 
        documents.
          (3) Failure to observe any material term, covenant, 
        or other agreement contained in the applicable 
        financing documents.
          (4) A representation, warranty, certification, or 
        statement of fact made by or on behalf of a borrower in 
        any applicable financing document or in any document 
        delivered in connection therewith, that was materially 
        incorrect or misleading when made.
          (5) Any material event of default specified in the 
        applicable financing documents.

           *       *       *       *       *       *       *

  (g) A company may require a small business concern to accept 
reasonable and customary minimum prepayment amounts, terms, and 
notice requirements.
  (h) The private capital of a licensee may include funds 
transferred to an account of the Telecommunications Development 
Fund created pursuant to section 714 of the Communications Act 
of 1934 (47 U.S.C. 614) and which are described in section 
309(j)(8)(C)(iii) of the Communications Act of 1934 (47 U.S.C. 
309(j)(8)(C)(iii)).
  (i) The authorization to make loans under subsection (a) 
includes the authority to engage in venture leasing, equipment 
leasing, real estate sale leasebacks, and similar arrangements 
with small business concerns, so long as such arrangements have 
an economic purpose similar to traditional loans. Any 
transaction covered by this subsection involving real property 
shall require the occupancy of at least 50 percent of the real 
property by the small business concern.

           *       *       *       *       *       *       *


SEC. 321. INVESTMENT WITH CERTAIN PASSIVE ENTITIES.

  A licensee may provide financing to a passive business as 
defined under section 107.720(b)(1) of title 13, Code of 
Federal Regulations, as in effect on January 1, 2009, which is 
a corporation or limited liability company wholly-owned by the 
licensee and the sole purpose of which is to provide financing 
by the licensee to such concerns would cause investors in the 
licensee to incur with respect to regulated investment 
companies, income not qualifying under section 851(b)(2)(A) of 
the Internal Revenue Code of 1986. Nothing in this section 
shall affect the validity of regulations permitting financings 
of passive businesses previously duly promulgated by the 
Administrator.

SEC. 322. AGENCY RECORD FOR LICENSING OF SMALL BUSINESS INVESTMENT 
                    COMPANIES.

  (a) Record.--The Associate Administrator for Investment shall 
establish an agency record of evidence referring or relating to 
each application for a license to become a small business 
investment company.
  (b) Written Notification.--The Administrator shall provide a 
written explanation of any denial of a license application 
based upon evidence in the agency record. Absent an order by a 
Federal or State court of general jurisdiction, access to 
applications and the agency record shall be limited to the 
applicant and to the Administrator and subordinate personnel of 
the Administrator.

              Part B--New Markets Venture Capital Program

SEC. 351. DEFINITIONS.

  In this part, the following definitions apply:
          (1) Developmental venture capital.--The term 
        ``developmental venture capital'' means capital in the 
        form of equity capital investments in businesses made 
        with a primary objective of fostering economic 
        development in low-income geographic areas or 
        encouraging the growth or continuation of small 
        business concerns located in low-income geographic 
        areas and engaged primarily in manufacturing. For the 
        purposes of this paragraph, the term ``equity capital'' 
        has the same meaning given such term in section 
        303(g)(4).
          [(2) Low-income individual.--The term ``low-income 
        individual'' means an individual whose income (adjusted 
        for family size) does not exceed--
                  [(A) for metropolitan areas, 80 percent of 
                the area median income; and
                  [(B) for nonmetropolitan areas, the greater 
                of--
                          [(i) 80 percent of the area median 
                        income; or
                          [(ii) 80 percent of the statewide 
                        nonmetropolitan area median income.
          [(3) Low-income geographic area.--the term ``low-
        income geographic area'' means--
                  [(A) any population census tract (or in the 
                case of an area that is not tracted for 
                population census tracts, the equivalent county 
                division, as defined by the Bureau of the 
                Census of the Department of Commerce for 
                purposes of defining poverty areas), if--
                          [(i) the poverty rate for that census 
                        tract is not less than 20 percent;
                          [(ii) in the case of a tract--
                                  [(I) that is located within a 
                                metropolitan area, 50 percent 
                                or more of the households in 
                                that census tract have an 
                                income equal to less than 60 
                                percent of the area median 
                                gross income; or
                                  [(II) that is not located 
                                within a metropolitan area, the 
                                median household income for 
                                such tract does not exceed 80 
                                percent of the statewide median 
                                household income; or
                          [(iii) as determined by the 
                        Administrator based on objective 
                        criteria, a substantial population of 
                        low-income individuals reside, an 
                        inadequate access to investment capital 
                        exists, or other indications of 
                        economic distress exist in that census 
                        tract; or
                  [(B) any area located within--
                          [(i) a HUBZone (as defined in section 
                        3(p) of the Small Business Act and the 
                        implementing regulations issued under 
                        that section);
                          [(ii) an urban empowerment zone or 
                        urban enterprise community (as 
                        designated by the Secretary of Housing 
                        and Urban Development); or
                          [(iii) a rural empowerment zone or 
                        rural enterprise community (as 
                        designated by the Secretary of 
                        Agriculture).]
          (2) Low-income geographic area.--The term ``low-
        income geographic area'' has the meaning given the term 
        ``low-income community'' in section 45D(e) of the 
        Internal Revenue Code of 1986.

           *       *       *       *       *       *       *

          [(4)] (3) New markets venture capital company.--The 
        term ``New Markets Venture Capital company'' means a 
        company that--
                  (A) * * *

           *       *       *       *       *       *       *

          [(5)] (4) Operational assistance.--The term 
        ``operational assistance'' means management, marketing, 
        and other technical assistance that assists a small 
        business concern with business development or 
        assistance that assists a small business concern 
        located in a low-income geographic area and engaged 
        primarily in manufacturing with retooling, updating, or 
        replacing machinery or equipment.
          [(6)] (5) Participation agreement.--The term 
        ``participation agreement'' means an agreement, between 
        the Administrator and a company granted final approval 
        under section 354(e), that--
                  (A) * * *
                  (B) requires the company to make investments 
                in smaller enterprises at least 80 percent of 
                which are located in low-income geographic 
                areas or in small business concerns located in 
                low-income geographic areas at least 80 percent 
                of which are engaged primarily in 
                manufacturing.
          [(7)] (6) Specialized small business investment 
        company.--The term ``specialized small business 
        investment company'' means any small business 
        investment company that--
                  (A) * * *

           *       *       *       *       *       *       *

          [(8)] (7) State.--The term ``State'' means such of 
        the several States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the Virgin Islands, Guam, 
        American Samoa, the Commonwealth of the Northern 
        Mariana Islands, and any other commonwealth, territory, 
        or possession of the United States.

SEC. 352. PURPOSES.

  The purposes of the New Markets Venture Capital Program 
established under this part are--
          (1) * * *
          (2) to establish a developmental venture capital 
        program, with the mission of addressing the unmet 
        equity investment needs of small enterprises located in 
        low-income geographic areas and small business concerns 
        located in low-income geographic areas and engaged 
        primarily in manufacturing, to be administered by the 
        Administrator--
                  (A) * * *
                  (B) to guarantee debentures of New Markets 
                Venture Capital companies to enable each such 
                company to make developmental venture capital 
                investments in smaller enterprises in low-
                income geographic areas or in small business 
                concerns located in low-income geographic areas 
                and engaged primarily in manufacturing; and
                  (C) to make grants to New Markets Venture 
                Capital companies, and to other entities, for 
                the purpose of providing operational assistance 
                to smaller enterprises and small business 
                concerns financed, or expected to be financed, 
                by such companies.

SEC. 353. ESTABLISHMENT.

  In accordance with this part, the Administrator shall 
establish a New Markets Venture Capital Program, [under which 
the Administrator may] under which the Administrator shall--
          (1) * * *

           *       *       *       *       *       *       *


SEC. 354. SELECTION OF NEW MARKETS VENTURE CAPITAL COMPANIES.

  (a) Eligibility.--A company shall be eligible to apply to 
participate, as a New Markets Venture Capital company, in the 
program established under this part if--
          (1) * * *

           *       *       *       *       *       *       *

          (3) the company has a primary objective of economic 
        development of low-income geographic areas or investing 
        in small business concerns located in low-income 
        geographic areas and engaged primarily in 
        manufacturing.
  (b) Application.--To participate, as a New Markets Venture 
Capital company, in the program established under this part a 
company meeting the eligibility requirements set forth in 
subsection (a) shall submit an application to the Administrator 
that includes--
          (1) a business plan describing how the company 
        intends to make successful developmental venture 
        capital investments in identified low-income geographic 
        areas or in small business concerns located in low-
        income geographic areas and engaged primarily in 
        manufacturing;

           *       *       *       *       *       *       *

          (4) a proposal describing how the company intends to 
        use the grant funds provided under this part to provide 
        operational assistance to smaller enterprises or small 
        business concerns financed by the company, including 
        information regarding whether the company intends to 
        use licensed professionals, when necessary, on the 
        company's staff or from an outside entity;

           *       *       *       *       *       *       *

  (d) Requirements To Be Met for Final Approval.--The 
Administrator shall grant each conditionally approved company 
[a period of time, not to exceed 2 years,] 2 years to satisfy 
the following requirements:
          (1) Capital requirement.--[Each]
                  (A) In general.--Except as provided in 
                subparagraph (B), each conditionally approved 
                company shall raise not less than $5,000,000 of 
                private capital or binding capital commitments 
                from one or more investors (other than agencies 
                or departments of the Federal Government) who 
                met criteria established by the Administrator.
                  (B) Small business concerns engaged primarily 
                in manufacturing.--Each conditionally approved 
                company engaged primarily in development of and 
                investment in small business concerns located 
                in low-income geographic areas and engaged 
                primarily in manufacturing shall raise not less 
                than $3,000,000 of private capital or binding 
                capital commitments from one or more investors 
                (other than agencies or departments of the 
                Federal Government) who met criteria 
                established by the Administrator.
          (2) Nonadministration resources for operational 
        assistance.--
                  (A) In general.--In order to provide 
                operational assistance to smaller enterprises 
                or small business concerns expected to be 
                financed by the company, each conditionally 
                approved company--
                          (i) shall have binding commitments 
                        (for contribution in cash or in kind)--
                                  (I) from any sources other 
                                than the Small Business 
                                Administration that meet 
                                criteria established by the 
                                Administrator; and
                                  (II) payable or available 
                                over a multiyear period 
                                acceptable to the Administrator 
                                (not to exceed 10 years); [and]
                                  [(III) in an amount not less 
                                than 30 percent of the total 
                                amount of capital and 
                                commitments raised under 
                                paragraph (1);]

           *       *       *       *       *       *       *

  (f) Geographic Expansion.--From among companies submitting 
applications under subsection (b), the Administrator shall 
consider the selection criteria and promotion of nationwide 
distribution under subsection (c) and shall, to the extent 
practicable, approve at least one company from each geographic 
region of the Small Business Administration.

           *       *       *       *       *       *       *


SEC. 358. OPERATIONAL ASSISTANCE GRANTS.

  (a) In General.--
          (1) Authority.--In accordance with this section, the 
        Administrator may make grants to New Markets Venture 
        Capital companies and to other entities, as authorized 
        by this part, to provide operational assistance to 
        smaller enterprises and small business concerns 
        financed, or expected to be financed, by such companies 
        or other entities.

           *       *       *       *       *       *       *

          (4) Grant amount.--
                  (A) New markets venture capital companies.--
                The amount of a grant made under this 
                subsection to a New Markets Venture Capital 
                company [shall be equal to the resources (in 
                cash or in kind) raised by the company under 
                section 354(d)(2).] shall be equal to the 
                lesser of--
                          (i) 10 percent of the resources (in 
                        cash or in-kind) raised by the company 
                        under section 354(d)(2); or
                          (ii) $1,000,000.

           *       *       *       *       *       *       *

          (6) Grants to conditionally approved companies.--
                  (A) In general.--Subject to the provisions of 
                this paragraph, upon the request of a company 
                conditionally approved under section 354(c), 
                the Administrator shall make a grant to the 
                company under this subsection.
                  (B) Repayment by companies not approved.--If 
                a company receives a grant under this paragraph 
                and does not receive final approval under 
                section 354(e), the company shall repay the 
                amount of the grant to the Administrator.
                  (C) Deduction from grant to approved 
                company.--If a company receives a grant under 
                this paragraph and receives final approval 
                under section 354(e), the Administrator shall 
                deduct the amount of such grant from the amount 
                of any immediately succeeding grant the company 
                receives for operational assistance.
                  (D) Amount of grant.--No company may receive 
                a grant of more than $50,000 under this 
                paragraph.
  (b) Supplemental Grants.--
          (1) In general.--The Administrator may make 
        supplemental grants to New Markets Venture Capital 
        companies and to other entities, as authorized by this 
        part under such terms as the Administrator may require, 
        to provide additional operational assistance to smaller 
        enterprises and small business concerns financed, or 
        expected to be financed, by the companies.

           *       *       *       *       *       *       *


SEC. 368. AUTHORIZATIONS OF APPROPRIATIONS.

  (a) In General.--There are authorized to be appropriated for 
[fiscal years 2001 through 2006] fiscal years 2010 and 2011, to 
remain available until expended, the following sums:
          (1) Such subsidy budget authority as may be necessary 
        to guarantee [$150,000,000] $100,000,000 of debentures 
        under this part, of which not less than 50 percent 
        shall be used to guarantee debentures of companies 
        engaged primarily in development of and investment in 
        small business concerns located in low-income 
        geographic areas and engaged primarily in 
        manufacturing.
          (2) [$30,000,000] $20,000,000 to make grants under 
        this part, of which not less than 50 percent shall be 
        used to make grants to companies engaged primarily in 
        development of and investment in small business 
        concerns located in low-income geographic areas and 
        engaged primarily in manufacturing.

           *       *       *       *       *       *       *


  PART C--[RENEWABLE FUEL CAPITAL INVESTMENT PILOT] RENEWABLE ENERGY 
                      CAPITAL INVESTMENT  PROGRAM

SEC. 381. DEFINITIONS.

  In this part:
          (1) Operational assistance.--The term ``operational 
        assistance'' means management, marketing, and other 
        technical assistance that assists a small business 
        concern with business development, assistance that 
        assists a small business concern to reduce energy 
        consumption, or assistance that assists a small 
        business concern engaged primarily in manufacturing 
        with retooling, updating, or replacing machinery or 
        equipment.
          (2) Participation agreement.--The term 
        ``participation agreement'' means an agreement, between 
        the Administrator and a company granted final approval 
        under section 384(e), that--
                  (A) * * *
                  (B) requires the company to make investments 
                in [smaller enterprises] small business 
                concerns primarily engaged in researching, 
                manufacturing, developing, producing, or 
                bringing to market goods, products, or services 
                that generate or support the production of 
                renewable energy.

           *       *       *       *       *       *       *

          (4) [Renewable fuel capital investment] Renewable 
        energy capital investment company.--The term 
        ``[Renewable Fuel Capital Investment] Renewable Energy 
        Capital Investment company'' means a company--
                  (A) * * *

           *       *       *       *       *       *       *


SEC. 382. PURPOSES.

  The purposes of the [Renewable Fuel Capital Investment] 
Renewable Energy Capital Investment Program established under 
this part are--
          (1) to promote the research, development, 
        manufacture, production, and bringing to market of 
        goods, products, or services that generate or support 
        the production of renewable energy by encouraging 
        venture capital investments in [smaller enterprises] 
        small business concerns primarily engaged such 
        activities; and
          (2) to establish a venture capital program, with the 
        mission of addressing the unmet equity investment needs 
        of [smaller enterprises] small business concerns 
        engaged in researching, developing, manufacturing, 
        producing, and bringing to market goods, products, or 
        services that generate or support the production of 
        renewable energy, to be administered by the 
        Administrator--
                  (A) to enter into participation agreements 
                with [Renewable Fuel Capital Investment] 
                Renewable Energy Capital Investment companies;
                  (B) to guarantee debentures of [Renewable 
                Fuel Capital Investment] Renewable Energy 
                Capital Investment companies to enable each 
                such company to make venture capital 
                investments in [smaller enterprises] small 
                business concerns engaged in the research, 
                development, manufacture, production, and 
                bringing to market of goods, products, or 
                services that generate or support the 
                production of renewable energy; and
                  (C) to make grants to Renewable Fuel 
                Investment Capital companies, and to other 
                entities, for the purpose of providing 
                operational assistance to [smaller enterprises] 
                small business concerns financed, or expected 
                to be financed, by such companies.

SEC. 383. ESTABLISHMENT.

  The Administrator shall establish a [Renewable Fuel Capital 
Investment] Renewable Energy Capital Investment Program, [under 
which the Administrator may] under which the Administrator 
shall--
          (1) * * *
          (2) guarantee the debentures issued by [Renewable 
        Fuel Capital Investment] Renewable Energy Capital 
        Investment companies as provided in section 385.

SEC. 384. SELECTION OF [RENEWABLE FUEL CAPITAL INVESTMENT] RENEWABLE 
                    ENERGY CAPITAL INVESTMENT COMPANIES.

  (a) Eligibility.--A company is eligible to apply to be 
designated as a [Renewable Fuel Capital Investment] Renewable 
Energy Capital Investment company if the company--
          (1) * * *

           *       *       *       *       *       *       *

          (3) has a primary objective of investment in [smaller 
        enterprises] small business concerns that research, 
        manufacture, develop, produce, or bring to market 
        goods, products, or services that generate or support 
        the production of renewable energy.
  (b) Application.--A company desiring to be designated as a 
[Renewable Fuel Capital Investment] Renewable Energy Capital 
Investment company shall submit an application to the 
Administrator that includes--
          (1) a business plan describing how the company 
        intends to make successful venture capital investments 
        in [smaller enterprises] small business concerns 
        primarily engaged in the research, manufacture, 
        development, production, or bringing to market of 
        goods, products, or services that generate or support 
        the production of renewable energy;

           *       *       *       *       *       *       *

          (3) a description of how the company intends to seek 
        to address the unmet capital needs of the [smaller 
        enterprises] small business concerns served;
          (4) a proposal describing how the company intends to 
        use the grant funds provided under this part to provide 
        operational assistance to [smaller enterprises] small 
        business concerns financed by the company, including 
        information regarding whether the company has employees 
        with appropriate professional licenses or will contract 
        with another entity when the services of such an 
        individual are necessary;

           *       *       *       *       *       *       *

  (c) Conditional Approval.--
          (1) In general.--From among companies submitting 
        applications under subsection (b), the Administrator 
        shall conditionally approve companies to operate as 
        [Renewable Fuel Capital Investment] Renewable Energy 
        Capital Investment companies.

           *       *       *       *       *       *       *

  (d) Requirements To Be Met for Final Approval.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Nonadministration resources for operational 
        assistance.--
                  (A) In general.--In order to provide 
                operational assistance to [smaller enterprises] 
                small business concerns expected to be financed 
                by the company, each conditionally approved 
                company shall have binding commitments (for 
                contribution in cash or in-kind)--
                          (i) * * *

           *       *       *       *       *       *       *

  (e) Final Approval; Designation.--The Administrator shall, 
with respect to each applicant conditionally approved under 
subsection (c)--
          (1) grant final approval to the applicant to operate 
        as a [Renewable Fuel Capital Investment] Renewable 
        Energy Capital Investment company under this part and 
        designate the applicant as such a company, if the 
        applicant--
                  (A) * * *

           *       *       *       *       *       *       *


SEC. 385. DEBENTURES.

  (a) In General.--The Administrator may guarantee the timely 
payment of principal and interest, as scheduled, on debentures 
issued by any [Renewable Fuel Capital Investment] Renewable 
Energy Capital Investment company.

           *       *       *       *       *       *       *

  (d) Maximum Guarantee.--
          (1) In general.--Under this section, the 
        Administrator may guarantee the debentures issued by a 
        [Renewable Fuel Capital Investment] Renewable Energy 
        Capital Investment company only to the extent that the 
        total face amount of outstanding guaranteed debentures 
        of such company does not exceed 150 percent of the 
        private capital of the company, as determined by the 
        Administrator.

           *       *       *       *       *       *       *


SEC. 386. ISSUANCE AND GUARANTEE OF TRUST CERTIFICATES.

  (a) Issuance.--The Administrator may issue trust certificates 
representing ownership of all or a fractional part of 
debentures issued by a [Renewable Fuel Capital Investment] 
Renewable Energy Capital Investment company and guaranteed by 
the Administrator under this part, if such certificates are 
based on and backed by a trust or pool approved by the 
Administrator and composed solely of guaranteed debentures.

           *       *       *       *       *       *       *


SEC. 387. FEES.

  (a) In General.--Except as provided in section 386(d), the 
Administrator may charge such fees as it determines appropriate 
with respect to any guarantee [or grant] issued under this 
part, in an amount established annually by the Administrator, 
as necessary to reduce to zero the cost (as defined in section 
502 of the Federal Credit Reform Act of 1990) to the 
Administration of purchasing and guaranteeing debentures under 
this part, which amounts shall be paid to and retained by the 
Administration.

           *       *       *       *       *       *       *


SEC. 388. FEE CONTRIBUTION.

  (a) In General.--To the extent that amounts are made 
available to the Administrator for the purpose of fee 
contributions, the Administrator shall contribute to fees paid 
by the [Renewable Fuel Capital Investment] Renewable Energy 
Capital Investment companies under section 387.

           *       *       *       *       *       *       *


SEC. 389. OPERATIONAL ASSISTANCE GRANTS.

  (a) In General.--
          (1) Authority.--The Administrator may make grants to 
        [Renewable Fuel Capital Investment] Renewable Energy 
        Capital Investment companies to provide operational 
        assistance to [smaller enterprises] small business 
        concerns financed, or expected to be financed, by such 
        companies or other entities.

           *       *       *       *       *       *       *

          (3) Grant amount.--The amount of a grant made under 
        this subsection to a [Renewable Fuel Capital 
        Investment] Renewable Energy Capital Investment company 
        shall be equal to the lesser of--
                  (A) * * *

           *       *       *       *       *       *       *

  (b) Supplemental Grants.--
          (1) In general.--The Administrator may make 
        supplemental grants to [Renewable Fuel Capital 
        Investment] Renewable Energy Capital Investment 
        companies and to other entities, as authorized by this 
        part, under such terms as the Administrator may 
        require, to provide additional operational assistance 
        to [smaller enterprises] small business concerns 
        financed, or expected to be financed, by the companies.

           *       *       *       *       *       *       *

  (c) Limitation.--None of the assistance made available under 
this section may be used for any overhead or general and 
administrative expense of a [Renewable Fuel Capital Investment] 
Renewable Energy Capital Investment company.

SEC. 390. BANK PARTICIPATION.

  (a) In General.--Except as provided in subsection (b), any 
national bank, any member bank of the Federal Reserve System, 
and (to the extent permitted under applicable State law) any 
insured bank that is not a member of such system, may invest in 
any [Renewable Fuel Capital Investment] Renewable Energy 
Capital Investment company, or in any entity established to 
invest solely in [Renewable Fuel Capital Investment] Renewable 
Energy Capital Investment companies.

           *       *       *       *       *       *       *


SEC. 391. FEDERAL FINANCING BANK.

  Notwithstanding section 318, the Federal Financing Bank may 
acquire a debenture issued by a [Renewable Fuel Capital 
Investment] Renewable Energy Capital Investment company under 
this part.

SEC. 392. REPORTING REQUIREMENT.

  Each [Renewable Fuel Capital Investment] Renewable Energy 
Capital Investment company that participates in the program 
established under this part shall provide to the Administrator 
such information as the Administrator may require, including--
          (1) * * *

           *       *       *       *       *       *       *


SEC. 393. EXAMINATIONS.

  (a) In General.--Each [Renewable Fuel Capital Investment] 
Renewable Energy Capital Investment company that participates 
in the program established under this part shall be subject to 
examinations made at the direction of the Investment Division 
of the Administration in accordance with this section.

           *       *       *       *       *       *       *


SEC. 394. MISCELLANEOUS.

  To the extent such procedures are not inconsistent with the 
requirements of this part, the Administrator may take such 
action as set forth in sections 309, 311, 312, and 314 and an 
officer, director, employee, agent, or other participant in the 
management or conduct of the affairs of a [Renewable Fuel 
Capital Investment] Renewable Energy Capital Investment company 
shall be subject to the requirements of such sections.

SEC. 395. REMOVAL OR SUSPENSION OF DIRECTORS OR OFFICERS.

  Using the procedures for removing or suspending a director or 
an officer of a licensee set forth in section 313 (to the 
extent such procedures are not inconsistent with the 
requirements of this part), the Administrator may remove or 
suspend any director or officer of any [Renewable Fuel Capital 
Investment] Renewable Energy Capital Investment company.

           *       *       *       *       *       *       *


SEC. 397. AUTHORIZATIONS OF APPROPRIATIONS AND PROGRAM LEVELS.

  (a) In General.--Subject to the availability of 
appropriations, the Administrator is authorized to make 
$15,000,000 in operational assistance grants under section 389 
for each of fiscal years 2008 and 2009 and $30,000,000 in such 
grants for each of fiscal years 2010 and 2011.

           *       *       *       *       *       *       *

  (c) Program Levels.--For the programs authorized by this 
part, the Administration is authorized to make $1,000,000,000 
in guarantees of debentures for each of fiscal years 2010 and 
2011.

[SEC. 398. TERMINATION.

  [The program under this part shall terminate at the end of 
the second full fiscal year after the date that the 
Administrator establishes the program under this part.]

         PART D--SMALL BUSINESS EARLY-STAGE INVESTMENT PROGRAM

SEC. 399A. ESTABLISHMENT OF PROGRAM.

  The Administrator shall establish and carry out an early-
stage investment program (hereinafter referred to in this part 
as the ``program'') to provide equity investment financing to 
support early-stage small businesses in targeted industries in 
accordance with this part.

SEC. 399B. ADMINISTRATION OF PROGRAM.

  The program shall be administered by the Administrator acting 
through the Associate Administrator described under section 
201.

SEC. 399C. APPLICATIONS.

  (a) In General.--Any incorporated body, limited liability 
company, or limited partnership organized and chartered or 
otherwise existing under Federal or State law for the purpose 
of performing the functions and conducting the activities 
contemplated under the program and any small business 
investment company may submit to the Administrator an 
application to participate in the program.
  (b) Requirements for Application.--An application to 
participate in the program shall include the following:
          (1) A business plan describing how the applicant 
        intends to make successful venture capital investments 
        in early-stage small businesses in targeted industries.
          (2) Information regarding the relevant venture 
        capital investment qualifications and backgrounds of 
        the individuals responsible for the management of the 
        applicant.
          (3) A description of the extent to which the 
        applicant meets the selection criteria under section 
        399D.
  (c) Applications From Small Business Investment Companies.--
The Administrator shall establish an abbreviated application 
process for small business investment companies that have 
received a license under section 301 and that are applying to 
participate in the program. Such abbreviated process shall 
incorporate a presumption that such small business investment 
companies satisfactorily meet the selection criteria under 
paragraphs (3) and (5) of section 399D(b).

SEC. 399D. SELECTION OF PARTICIPATING INVESTMENT COMPANIES.

  (a) In General.--Not later than 90 days after the date on 
which the Administrator receives an application from an 
applicant under section 399C, the Administrator shall make a 
final determination to approve or disapprove such applicant to 
participate in the program and shall transmit such 
determination to the applicant in writing.
  (b) Selection Criteria.--In making a determination under 
subsection (a), the Administrator shall consider each of the 
following:
          (1) The likelihood that the applicant will meet the 
        goals specified in the business plan of the applicant.
          (2) The likelihood that the investments of the 
        applicant will create or preserve jobs, both directly 
        and indirectly.
          (3) The character and fitness of the management of 
        the applicant.
          (4) The experience and background of the management 
        of the applicant.
          (5) The extent to which the applicant will 
        concentrate investment activities on early-stage small 
        businesses in targeted industries.
          (6) The likelihood that the applicant will achieve 
        profitability.
          (7) The experience of the management of the applicant 
        with respect to establishing a profitable investment 
        track record.

SEC. 399E. GRANTS.

  (a) In General.--The Administrator may make one or more 
grants to a participating investment company.
  (b) Grant Amounts.--
          (1) Non-federal capital.--A grant made to a 
        participating investment company under the program may 
        not be in an amount that exceeds the amount of the 
        capital of such company that is not from a Federal 
        source and that is available for investment on or 
        before the date on which a grant is drawn upon. Such 
        capital may include legally binding commitments with 
        respect to capital for investment.
          (2) Limitation on aggregate amount.--The aggregate 
        amount of all grants made to a participating investment 
        company under the program may not exceed $100,000,000.
  (c) Grant Process.--In making a grant under the program, the 
Administrator shall commit a grant amount to a participating 
investment company and the amount of each such commitment shall 
remain available to be drawn upon by such company--
          (1) for new-named investments during the 5-year 
        period beginning on the date on which each such 
        commitment is first drawn upon; and
          (2) for follow-on investments and management fees 
        during the 10-year period beginning on the date on 
        which each such commitment is first drawn upon, with 
        not more than 2 additional 1-year periods available at 
        the discretion of the Administrator.

SEC. 399F. INVESTMENTS IN EARLY-STAGE SMALL BUSINESSES IN TARGETED 
                    INDUSTRIES.

  (a) In General.--As a condition of receiving a grant under 
the program, a participating investment company shall make all 
of the investments of such company in small business concerns, 
of which at least 50 percent shall be early-stage small 
businesses in targeted industries.
  (b) Evaluation of Compliance.--With respect to a grant amount 
committed to a participating investment company under section 
399E, the Administrator shall evaluate the compliance of such 
company with the requirements under this section if such 
company has drawn upon 50 percent of such commitment.

SEC. 399G. PRO RATA INVESTMENT SHARES.

  Each investment made by a participating investment company 
under the program shall be treated as comprised of capital from 
grants under the program according to the ratio that capital 
from grants under the program bears to all capital available to 
such company for investment.

SEC. 399H. GRANT INTEREST.

  (a) Grant Interest.--
          (1) In general.--As a condition of receiving a grant 
        under the program, a participating investment company 
        shall convey a grant interest to the Administrator in 
        accordance with paragraph (2).
          (2) Effect of conveyance.--The grant interest 
        conveyed under paragraph (1) shall have all the rights 
        and attributes of other investors attributable to their 
        interests in the participating investment company, but 
        shall not denote control or voting rights to the 
        Administrator. The grant interest shall entitle the 
        Administrator to a pro rata portion of any 
        distributions made by the participating investment 
        company equal to the percentage of capital in the 
        participating investment company that the grant 
        comprises. The Administrator shall receive 
        distributions from the participating investment company 
        at the same times and in the same amounts as any other 
        investor in the company with a similar interest. The 
        investment company shall make allocations of income, 
        gain, loss, deduction, and credit to the Administrator 
        with respect to the grant interest as if the 
        Administrator were an investor.
  (b) Manager Profits.--As a condition of receiving a grant 
under the program, the manager profits interest payable to the 
managers of a participating investment company under the 
program shall not exceed 20 percent of profits, exclusive of 
any profits that may accrue as a result of the capital 
contributions of any such managers with respect to such 
company. Any excess of this amount, less taxes payable thereon, 
shall be returned by the managers and paid to the investors and 
the Administrator in proportion to the capital contributions 
and grants paid in. No manager profits interest (other than a 
tax distribution) shall be paid prior to the repayment to the 
investors and the Administrator of all contributed capital and 
grants made.
  (c) Distribution Requirements.--As a condition of receiving a 
grant under the program, a participating investment company 
shall make all distributions to all investors in cash and shall 
make distributions within a reasonable time after exiting 
investments, including following a public offering or market 
sale of underlying investments.

SEC. 399I. FUND.

  There is hereby created within the Treasury a separate fund 
for grants which shall be available to the Administrator 
subject to annual appropriations as a revolving fund to be used 
for the purposes of the program. All amounts received by the 
Administrator, including any moneys, property, or assets 
derived by the Administrator from operations in connection with 
the program, shall be deposited in the fund. All expenses and 
payments, excluding administrative expenses, pursuant to the 
operations of the Administrator under the program shall be paid 
from the fund.

SEC. 399J. APPLICATION OF OTHER SECTIONS.

  To the extent not inconsistent with requirements under this 
part, the Administrator may apply sections 309, 311, 312, 313, 
and 314 to activities under this part and an officer, director, 
employee, agent, or other participant in a participating 
investment company shall be subject to the requirements under 
such sections.

SEC. 399K. DEFINITIONS.

  In this part, the following definitions apply:
          (1) Early-stage small business in a targeted 
        industry.--The term ``early-stage small business in a 
        targeted industry'' means a small business concern 
        that--
                  (A) is domiciled in a State;
                  (B) has not generated gross annual sales 
                revenues exceeding $15,000,000 in any of the 
                previous 3 years; and
                  (C) is engaged primarily in researching, 
                developing, manufacturing, producing, or 
                bringing to market goods, products, or services 
                with respect to any of the following business 
                sectors:
                          (i) Agricultural technology.
                          (ii) Energy technology.
                          (iii) Environmental technology.
                          (iv) Life science.
                          (v) Information technology.
                          (vi) Digital media.
                          (vii) Clean technology.
                          (viii) Defense technology.
          (2) Participating investment company.--The term 
        ``participating investment company'' means an applicant 
        approved under section 399D to participate in the 
        program.
          (3) Small business concern.--The term ``small 
        business concern'' has the same meaning given such term 
        under section 3(a) of the Small Business Act (15 U.S.C. 
        632(a)).

SEC. 399L. AUTHORIZATION OF APPROPRIATIONS.

  There is authorized to be appropriated to carry out the 
program $200,000,000 for the first full fiscal year beginning 
after the date of the enactment of this part.

           *       *       *       *       *       *       *


        TITLE V--LOANS TO STATE AND LOCAL DEVELOPMENT COMPANIES

                      [STATE DEVELOPMENT COMPANIES

  [Sec. 501. (a) The Congress hereby finds and declares that 
the purpose of this title is to foster economic development and 
to create or preserve job opportunities in both urban and rural 
areas by providing long-term financing for small business 
concerns through the development company program authorized by 
this title.
  [(b) The Administration is authorized to make loans to State 
development companies to assist in carrying out the purposes of 
this Act. Any funds advanced under this subsection shall be in 
exchange for obligations of the development company which bear 
interest at such rate, and contain such other terms, as the 
Administration may fix, and funds may be so advanced without 
regard to the use and investment by the development company of 
funds secured by it from other sources.
  [(c) The total amount of obligations purchased and 
outstanding at any one time by the Administration under this 
section from any one State development company shall not exceed 
the total amount borrowed by it from all other sources. Funds 
advanced to a State development company under this section 
shall be treated on an equal basis with those funds borrowed by 
such company after the date of the enactment of this Act, 
regardless of source, which have the highest priority, except 
when this requirement is waived by the Administrator.
  [(d) In order to qualify for assistance under this title, the 
development company must demonstrate that the project to be 
funded is directed toward at least one of the following 
economic development objectives--
          [(1) the creation of job opportunities within two 
        years of the completion of the project or the 
        preservation or retention of jobs attributable to the 
        project;
          [(2) improving the economy of the locality, such as 
        stimulating other business development in the 
        community, bringing new income into the area, or 
        assisting the community in diversifying and stabilizing 
        its economy; or
          [(3) the achievement of one or more of the following 
        public policy goals:
                  [(A) business district revitalization,
                  [(B) expansion of exports,
                  [(C) expansion of minority business 
                development or women-owned business 
                development,
                  [(D) rural development,
                  [(E) expansion of small business concerns 
                owned and controlled by veterans, as defined in 
                section 3(q) of the Small Business Act (15 
                U.S.C. 632(q)), especially service-disabled 
                veterans, as defined in such section 3(q),
                  [(F) enhanced economic competition, including 
                the advancement of technology, plan retooling, 
                conversion to robotics, or competition with 
                imports,
                  [(G) changes necessitated by Federal budget 
                cutbacks, including defense related industries,
                  [(H) business restructuring arising from 
                Federally mandated standards or policies 
                affecting the environment or the safety and 
                health of employees,
                  [(I) reduction of energy consumption by at 
                least 10 percent,
                  [(J) increased use of sustainable design, 
                including designs that reduce the use of 
                greenhouse gas emitting fossil fuels, or low-
                impact design to produce buildings that reduce 
                the use of non-renewable resources and minimize 
                environmental impact, or
                  [(K) plant, equipment and process upgrades of 
                renewable energy sources such as the small-
                scale production of energy for individual 
                buildings or communities consumption, commonly 
                known as micropower, or renewable fuels 
                producers including biodiesel and ethanol 
                producers.
If eligibility is based upon the criteria set forth in 
paragraph (2) or (3), the project need not meet the job 
creation or job preservation criteria developed by the 
Administration if the overall portfolio of the development 
company meets or exceeds such job creation or retention 
criteria. In subparagraphs (J) and (K), terms have the meanings 
given those terms under the Leadership in Energy and 
Environmental Design (LEED) standard for green building 
certification, as determined by the Administrator.
  [(e)(1) A project meets the objective set forth in subsection 
(d)(1) if the project creates or retains one job for every 
$65,000 guaranteed by the Administration, except that the 
amount is $100,000 in the case of a project of a small 
manufacturer.
  [(2) Paragraph (1) does not apply to a project for which 
eligibility is based on the objectives set forth in paragraph 
(2) or (3) of subsection (d), if the development company's 
portfolio of outstanding debentures creates or retains one job 
for every $65,000 guaranteed by the Administration.
  [(3) For projects in Alaska, Hawaii, State-designated 
enterprise zones, empowerment zones and enterprise communities, 
labor surplus areas, as determined by the Secretary of Labor, 
and for other areas designated by the Administrator, the 
development company's portfolio may average not more than 
$75,000 per job created or retained.
  [(4) Loans for projects of small manufacturers shall be 
excluded from calculations under paragraph (2) or (3).
  [(5) Under regulations prescribed by the Administrator, the 
Administrator may waive, on a case-by-case basis or by 
regulation, any requirement of this subsection (other than 
paragraph (4)). With respect to any waiver the Administrator is 
prohibited from adopting a dollar amount that is lower than the 
amounts set forth in paragraphs (1), (2), and (3).
  [(6) As used in this subsection, the term ``small 
manufacturer'' means a small business concern--
          [(A) the primary business of which is classified in 
        sector 31, 32, or 33 of the North American Industrial 
        Classification System; and
          [(B) all of the production facilities of which are 
        located in the United States.

 [LOANS FOR PLANT ACQUISITION, CONSTRUCTION, CONVERSION, AND EXPANSION

  [Sec. 502. The Administration may, in addition to its 
authority under section 501, make loans for plant acquisition, 
construction, conversion or expansion, including the 
acquisition of land, to State and local development companies, 
and such loans may be made or effected either directly or in 
cooperation with banks or other lending institutions through 
agreements to participate on an immediate or deferred basis: 
Provided, however, That the foregoing powers shall be subject 
to the following restrictions and limitations:
          [(1) Use of proceeds.--The proceeds of any such loan 
        shall be used solely by the borrower to assist 1 or 
        more identifiable small business concerns and for a 
        sound business purpose approved by the Administration.
          [(2) Maximum amount.--
                  [(A) In general.--Loans made by the 
                Administration under this section shall be 
                limited to--
                          [(i) $1,500,000 for each small 
                        business concern if the loan proceeds 
                        will not be directed toward a goal or 
                        project described in subparagraph (B) 
                        or (C);
                          [(ii) $2,000,000 for each small 
                        business concern if the loan proceeds 
                        will be directed toward 1 or more of 
                        the public policy goals described under 
                        section 501(d)(3);
                          [(iii) $4,000,000 for each project of 
                        a small manufacturer;
                          [(iv) $4,000,000 for each project 
                        that reduces the borrower's energy 
                        consumption by at least 10 percent; and
                          [(v) $4,000,000 for each project that 
                        generates renewable energy or renewable 
                        fuels, such as biodiesel or ethanol 
                        production.
                  [(B) Definition.--As used in this paragraph, 
                the term ``small manufacturer'' means a small 
                business concern--
                          [(i) the primary business of which is 
                        classified in sector 31, 32, or 33 of 
                        the North American Industrial 
                        Classification System; and
                          [(ii) all of the production 
                        facilities of which are located in the 
                        United States.
          [(3) Criteria for assistance.--
                  [(A) In general.--Any development company 
                assisted under this section or section 503 of 
                this title must meet the criteria established 
                by the Administration, including the extent of 
                participation to be required or amount of paid-
                in capital to be used in each instance as is 
                determined to be reasonable by the 
                Administration.
                  [(B) Community injection funds.--
                          [(i) Sources of funds.--Community 
                        injection funds may be derived, in 
                        whole or in part, from--
                                  [(I) State or local 
                                governments;
                                  [(II) banks or other 
                                financial institutions;
                                  [(III) foundations or other 
                                not-for-profit institutions; or
                                  [(IV) the small business 
                                concern (or its owners, 
                                stockholders, or affiliates) 
                                receiving assistance through a 
                                body authorized by this title.
                          [(ii) Funding from institutions.--Not 
                        less than 50 percent of the total cost 
                        of any project financed pursuant to 
                        clauses (i), (ii), or (iii) of 
                        subparagraph (C) shall come from the 
                        institutions described in subclauses 
                        (I), (II), and (III) of clause (i).
                  [(C) Funding from a small business concern.--
                The small business concern (or its owners, 
                stockholders, or affiliates) receiving 
                assistance through a body authorized by this 
                title shall provide--
                          [(i) at least 15 percent of the total 
                        cost of the project financed, if the 
                        small business concern has been in 
                        operation for a period of 2 years or 
                        less;
                          [(ii) at least 15 percent of the 
                        total cost of the project financed if 
                        the project involves the construction 
                        of a limited or single purpose building 
                        or structure;
                          [(iii) at least 20 percent of the 
                        total cost of the project financed if 
                        the project involves both of the 
                        conditions set forth in clauses (i) and 
                        (ii); or
                          [(iv) at least 10 percent of the 
                        total cost of the project financed, in 
                        all other circumstances, at the 
                        discretion of the development company.
                  [(D) Seller financing.--Seller-provided 
                financing may be used to meet the requirements 
                of subparagraph (B), if the seller subordinates 
                the interest of the seller in the property to 
                the debenture guaranteed by the Administration.
                  [(E) Collateralization.--
                          [(i) In general.--The collateral 
                        provided by the small business concern 
                        shall generally include a subordinate 
                        lien position on the property being 
                        financed under this title, and is only 
                        1 of the factors to be evaluated in the 
                        credit determination. Additional 
                        collateral shall be required only if 
                        the Administration determines, on a 
                        case-by-case basis, that additional 
                        security is necessary to protect the 
                        interest of the Government.
                          [(ii) Appraisals.--With respect to 
                        commercial real property provided by 
                        the small business concern as 
                        collateral, an appraisal of the 
                        property by a State licensed or 
                        certified appraiser--
                                  [(I) shall be required by the 
                                Administration before 
                                disbursement of the loan if the 
                                estimated value of that 
                                property is more than $250,000; 
                                or
                                  [(II) may be required by the 
                                Administration or the lender 
                                before disbursement of the loan 
                                if the estimated value of that 
                                property is $250,000 or less, 
                                and such appraisal is necessary 
                                for appropriate evaluation of 
                                creditworthiness.
          [(4) If the project is to construct a new facility, 
        up to 33 per centum of the total project may be leased, 
        if reasonable projections of growth demonstrate that 
        the assisted small business concern will need 
        additional space within three years and will fully 
        utilize such additional space within ten years.
          [(5) Limitation on leasing.--In addition to any 
        portion of the project permitted to be leased under 
        paragraph (4), not to exceed 20 percent of the project 
        may be leased by the assisted small business to 1 or 
        more other tenants, if the assisted small business 
        occupies permanently and uses not less than a total of 
        60 percent of the space in the project after the 
        execution of any leases authorized under this section.
          [(6) Ownership requirements.--Ownership requirements 
        to determine the eligibility of a small business 
        concern that applies for assistance under any credit 
        program under this title shall be determined without 
        regard to any ownership interest of a spouse arising 
        solely from the application of the community property 
        laws of a State for purposes of determining marital 
        interests.
          [(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, any 
                amount of existing indebtedness that does not 
                exceed 50 percent of the project cost of the 
                expansion may be refinanced and added to the 
                expansion cost, if--
                          [(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 existing indebtedness is 
                        collateralized by fixed assets;
                          [(iii) the existing indebtedness was 
                        incurred for the benefit of the small 
                        business concern;
                          [(iv) the financing under this title 
                        will be used only for refinancing 
                        existing indebtedness or costs relating 
                        to the project financed under this 
                        title;
                          [(v) the financing under this title 
                        will provide a substantial benefit to 
                        the borrower when prepayment penalties, 
                        financing fees, and other financing 
                        costs are accounted for;
                          [(vi) the borrower has been current 
                        on all payments due on the existing 
                        debt for not less than 1 year preceding 
                        the date of refinancing; and
                          [(vii) the financing under section 
                        504 will provide better terms or rate 
                        of interest than the existing 
                        indebtedness at the time of 
                        refinancing.

                    [DEVELOPMENT COMPANY DEBENTURES

  [Sec. 503. (a)(1) Except as provided in subsection (b), the 
Administration may guarantee the timely payment of all 
principal and interest as scheduled on any debenture issued by 
any qualified State or local development company.
  [(2) Such guarantees may be made on such terms and conditions 
as the Administration may by regulation determine to be 
appropriate: Provided, That the Administration shall not 
decline to issue such guarantee when the ownership interests of 
the small business concern and the ownership interests of the 
property to be financed with the proceeds of a loan made 
pursuant to subsection (b)(1) are not identical because one or 
more of the following classes of relatives have an ownership 
interest in either the small business concern or the property: 
father, mother, son, daughter, wife, husband, brother, or 
sister: Provided further, That the Administrator or his 
designee has determined on a case-by-case basis that such 
ownership interest, such guarantee, and the proceeds of such 
loan, will substantially benefit the small business concern.
  [(3) The full faith and credit of the United States is 
pledged to the payment of all amounts guaranteed under this 
subsection.
  [(4) Any debenture issued by any State or local development 
company with respect to which a guarantee is made under this 
subsection, may be subordinated by the Administration to any 
other debenture, promissory note, or other debt or obligation 
of such company.
  [(b) No guarantee may be made with respect to any debenture 
under subsection (a) unless--
          [(1) such debenture is issued for the purpose of 
        making one or more loans to small business concerns, 
        the proceeds of which shall be used by such concern for 
        the purposes set forth in section 502;
          [(2) necessary funds for making such loans are not 
        available to such company from private sources on 
        reasonable terms;
          [(3) the interest rate on such debentures is not less 
        than the rate of interest determined by the Secretary 
        of the Treasury for purposes of section 303(b);
          [(4) the aggregate amount of such debenture does not 
        exceed the amount of loans to be made from the proceeds 
        of such debenture (other than any excess attributable 
        to the administrative costs of such loans);
          [(5) the amount of any loan to be made from such 
        proceeds does not exceed an amount equal to 50 percent 
        of the cost of the project with respect to which such 
        loan is made;
          [(6) the Administration approves each loan to be made 
        from such proceeds; and
          [(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 
                established annually by the Administration, 
                which amount shall not exceed--
                          [(i) the lesser of --
                                  [(I) 0.9375 percent per year 
                                of the outstanding balance of 
                                the loan; and
                                  [(II) the minimum amount 
                                necessary to reduce the cost 
                                (as defined in section 502 of 
                                the Federal Credit Reform Act 
                                of 1990) to the Administration 
                                of purchasing and guaranteeing 
                                debentures under this Act to 
                                zero; and
                          [(ii) 50 percent of the amount 
                        established under clause (i) in the 
                        case of a loan made during the 2-year 
                        period beginning on October 1, 2002, 
                        for the life 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).
  [(c)(1) The purpose of this subsection is to facilitate the 
orderly and necessary flow of long-term loans from certified 
development companies to small business concerns.
  [(2) Notwithstanding the provisions of the constitution or 
laws of any State limiting the rate or amount of interest which 
may be charged, taken, received, or reserved, the maximum legal 
rate of interest on any commercial loan which funds any portion 
of the cost of the project financed pursuant to this section or 
section 504 which is not funded by a debenture guaranteed under 
this section shall be a rate which is established by the 
Administrator of the Small Business Administration under the 
authority of this section.
  [(3) The Administrator is authorized and directed to 
establish and publish quarterly a maximum legal interest rate 
for any commercial loan which funds any portion of the cost of 
the project financed pursuant to this section or section 504 
which is not funded by a debenture guaranteed under this 
section.
  [(d) Charges for Administration Expenses.--
          [(1) Level of charges.--The Administration may impose 
        an additional charge for administrative expenses with 
        respect to each debenture for which payment of 
        principal and interest is guaranteed under subsection 
        (a).
          [(2) Participation fee.--The Administration shall 
        collect a one-time fee in an amount equal to 50 basis 
        points on the total participation in any project of any 
        institution described in subclause (I), (II), or (III) 
        of section 502(3)(B)(i). Such fee shall be imposed only 
        when the participation of the institution will occupy a 
        senior credit position to that of the development 
        company. All proceeds of the fee shall be used to 
        offset the cost (as that term is defined in section 502 
        of the Credit Reform Act of 1990) to the Administration 
        of making guarantees under subsection (a).
          [(3) Development company fee.--The Administration 
        shall collect annually from each development company a 
        fee of 0.125 percent of the outstanding principal 
        balance of any guaranteed debenture authorized by the 
        Administration after September 30, 1996. Such fee shall 
        be derived from the servicing fees collected by the 
        development company pursuant to regulation, and shall 
        not be derived from any additional fees imposed on 
        small business concerns. All proceeds of the fee shall 
        be used to offset the cost (as that term is defined in 
        section 502 of the Credit Reform Act of 1990) to the 
        Administration of making guarantees under subsection 
        (a).
  [(e)(1) For purposes of this section, the term ``qualified 
State or local development company'' means any State or local 
development company which, as determined by the Administration, 
has--
          [(A) a full-time professional staff;
          [(B) professional management ability (including 
        adequate accounting, legal, and business-servicing 
        abilities); and
          [(C) a board of directors, or membership, which meets 
        on a regular basis to make management decisions for 
        such company, including decisions relating to the 
        making and servicing of loans by such company.
  [(2) A company in a rural area shall be deemed to have 
satisfied the requirements of a full-time professional staff 
and professional management ability if it contracts with 
another certified development company which has such staff and 
management ability and which is located in the same general 
area to provide such services.
                  [Sec. 503 (e)(3). Notwithstanding any other 
                provision of law, qualified State or local 
                development companies shall be 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.
  [(f) Effective Date.--The fees authorized by subsections (b) 
and (d) shall apply to financings approved by the 
Administration on or after October 1, 1996.
  [(g) Calculation of Subsidy Rate.--All fees, interest, and 
profits received and retained by the Administration under this 
section shall be included in the calculations made by the 
Director of the Office of Management and Budget to offset the 
cost (as that term is defined in section 502 of the Federal 
Credit Reform Act of 1990) to the Administration of purchasing 
and guaranteeing debentures under this Act.
  [(h) Required Actions Upon Default.--
          [(1) Initial actions.--Not later than the 45th day 
        after the date on which a payment on a loan funded 
        through a debenture guaranteed under this section is 
        due and not received, the Administration shall--
                  [(A) take all necessary steps to bring such a 
                loan current; or
                  [(B) implement a formal written deferral 
                agreement.
          [(2) Purchase or acceleration of debenture.--Not 
        later than the 65th day after the date on which a 
        payment on a loan described in paragraph (1) is due and 
        not received, and absent a formal written deferral 
        agreement, the administration shall take all necessary 
        steps to purchase or accelerate the debenture.
          [(3) Prepayment penalties.--With respect to the 
        portion of any project derived from funds set forth in 
        section 502(3), the Administration--
                  [(A) shall negotiate the elimination of any 
                prepayment penalties or late fees on defaulted 
                loans made prior to September 30, 1996;
                  [(B) shall not pay any prepayment penalty or 
                late fee on the default based purchase of loans 
                issued after September 30, 1996; and
                  [(C) for any project financed after September 
                30, 1996, shall not pay any default interest 
                rate higher than the interest rate on the note 
                prior to the date of default.
  [(i) Two-Year Waiver of Fees.--The Administration may not 
assess or collect any up front guarantee fee with respect to 
loans made under this title during the 2-year period beginning 
on October 1, 2002.

                        [PRIVATE DEBENTURE SALES

  [Sec. 504. (a) Notwithstanding any other law, rule, or 
regulation, the Administration shall sell to investors, either 
publicly or by private placement, debentures pursuant to 
section 503 of this title as follows:
          [(1) Of the program levels otherwise authorized by 
        law for fiscal year 1986, an amount not to exceed 
        $200,000,000.
          [(2) Of the program levels otherwise authorized by 
        law for fiscal years 1987 and 1988, an amount not to 
        exceed $425,000,000.
          [(3) All of the program levels authorized for fiscal 
        year 1989 and subsequent fiscal years.
  [(b) Nothing in any provision of law shall be construed to 
authorize the Federal Financing Bank to acquire--
          [(1) any obligation the payment of principal or 
        interest on which at any time has been guaranteed in 
        whole or in part under section 503 of this title and 
        which is being sold pursuant to the provisions of the 
        program authorized in this section;
          [(2) any obligation which is an interest in any 
        obligation described in paragraph (1); or
          [(3) any obligation which is secured by, or 
        substantially all of the value of which is attributable 
        to, any obligation described in paragraph (1) or (2).

                         [POOLING OF DEBENTURES

  [Sec. 505. (a) The Administration is authorized to issue 
trust certificates representing ownership of all or a 
fractional part of debentures issued by State or local 
development companies and guaranteed by the Administration 
under this Act: Provided, That such trust certificates shall be 
based on and backed by a trust or pool approved by the 
Administration and composed solely of guaranteed debentures.
  [(b) The Administration is authorized, upon such terms and 
conditions as are deemed appropriate, to guarantee the timely 
payment of the principal of and interest on trust certificates 
issued by the Administration or its agent for purposes of this 
section. Such guarantee shall be limited to the extent of 
principal and interest on the guaranteed debentures which 
compose the trust or pool. In the event that a debenture in 
such trust or pool is prepaid, either voluntarily or in the 
event of default, the guarantee of timely payment of principal 
and interest on the trust certificates shall be reduced in 
proportion to the amount of principal and interest such prepaid 
debenture represents in the trust or pool. Interest on prepaid 
or defaulted debentures shall accrue and be guaranteed by the 
Administration only through the date of payment on the 
guarantee. During the term of the trust certificate, it may be 
called for redemption due to prepayment or default of all 
debentures constituting the pool.
  [(c) The full faith and credit of the United States is 
pledged to the payment of all amounts which may be required to 
be paid under any guarantee of such trust certificates issued 
by the Administration or its agent pursuant to this section.
  [(d) The Administration shall not collect any fee for any 
guarantee under this section: Provided, That nothing herein 
shall preclude any agent of the Administration from collecting 
a fee approved by the Administration for the functions 
described in subsection (f)(2) of this section.
  [(e)(1) In the event the Administration pays a claim under a 
guarantee issued under this section, it shall be subrogated 
fully to the rights satisfied by such payment.
  [(2) No State or local law, and no Federal law, shall 
preclude or limit the exercise by the Administration of its 
ownership rights in the debentures constituting the trust or 
pool against which the trust certificates are issued.
  [(f)(1) The Administration shall--
          [(A) provide for a central registration of all trust 
        certificates sold pursuant to this section;
          [(B) contract with an agent to carry out on behalf of 
        the Administration the central registration functions 
        of this section and the issuance of trust certificates 
        to facilitate poolings; such agent shall provide a 
        fidelity bond or insurance in such amounts as the 
        Administration determines to be necessary to fully 
        protect the interests of the Government;
          [(C) prior to any sale, require the seller to 
        disclose to a purchaser of a trust certificate issued 
        pursuant to this section, information on the terms, 
        conditions, and yield of such instrument; and
          [(D) have the authority to regulate brokers and 
        dealers in trust certificates sold pursuant to this 
        section.
  [(2) Nothing in this subsection shall prohibit the 
utilization of a book-entry or other electronic form of 
registration for trust certificates.

            [RESTRICTIONS ON DEVELOPMENT COMPANY ASSISTANCE

  [Sec. 506. Notwithstanding any other provisions of law: (1) 
on or after May 1, 1991, no development company may accept 
funding from any source, including but not limited to any 
department or agency of the United States Government, if such 
funding includes any conditions, priorities or restrictions 
upon the types of small businesses to which they may provide 
financial assistance under this title or if it includes any 
conditions or imposes any requirements, directly or indirectly, 
upon any recipient of assistance under this title; and (2) 
before such date, no department or agency of the United States 
Government which provides funding to any development company 
shall impose any condition, priority or restriction upon the 
type of small business which receives financing under this 
title nor shall it include any condition or impose any 
requirement, directly or indirectly upon any recipient of 
assistance under this title: Provided, That the foregoing shall 
not affect any such conditions, priorities or restrictions if 
the department or agency also provides all of the financial 
assistance to be delivered by the development company to the 
small business and such conditions, priorities or restrictions 
are limited solely to the financial assistance so provided.

[SEC. 507. ACCREDITED LENDERS PROGRAM.

  [(a) Establishment.--The Administration is authorized to 
establish an Accredited Lenders Program for qualified State and 
local development companies that meet the requirements of 
subsection (b).
  [(b) Requirements.--The Administration may designate a 
qualified State or local development company as an accredited 
lender if such company--
          [(1) has been an active participant in the 
        Development Company Program authorized by sections 502, 
        503, and 504 for not less than the preceding 12 months;
          [(2) has well-trained, qualified personnel who are 
        knowledgeable in the Administration's lending policies 
        and procedures for such Development Company Program;
          [(3) has the ability to process, close, and service 
        financing for plant and equipment under such 
        Development Company Program;
          [(4) has a loss rate on the company's debentures that 
        is reasonable and acceptable to the Administration;
          [(5) has a history of submitting to the 
        Administration complete and accurate debenture guaranty 
        application packages; and
          [(6) has demonstrated the ability to serve small 
        business credit needs for financing plant and equipment 
        through the Development Company Program.
  [(c) Expedited Processing of Loan Applications.--The 
Administration shall develop an expedited procedure for 
processing a loan application or servicing action submitted by 
a qualified State or local development company that has been 
designated as an accredited lender in accordance with 
subsection (b).
  [(d) Suspension or Revocation of Designation.--
          [(1) In general.--The designation of a qualified 
        State or local development company as an accredited 
        lender may be suspended or revoked if the 
        Administration determines that--
                  [(A) the development company has not 
                continued to meet the criteria for eligibility 
                under subsection (b); or
                  [(B) the development company has failed to 
                adhere to the Administration's rules and 
                regulations or is violating any other 
                applicable provision of law.
          [(2) Effect.--A suspension or revocation under 
        paragraph (1) shall not affect any outstanding 
        debenture guarantee.
  [(e) Definition.--For purposes of this section, the term 
``qualified State or local development company'' has the same 
meaning as in section 503(e).

[SEC. 508. PREMIER CERTIFIED LENDERS PROGRAM.

  [(a) Establishment.--The Administration may establish a 
Premier Certified Lenders Program for certified development 
companies that meet the requirements of subsection (b).
  [(b) Requirements.--
          [(1) Application.--To be eligible to participate in 
        the Premier Certified Lenders Program established under 
        subsection (a), a certified development company shall 
        prepare and submit to the Administration an application 
        at such time, in such manner, and containing such 
        information as the Administration may require.
          [(2) Designation.--The Administration may designate a 
        certified development company as a premier certified 
        lender--
                  [(A) if the company is an active certified 
                development company in good standing and has 
                been an active participant in the accredited 
                lenders program during the entire 12-month 
                period preceding the date on which the company 
                submits an application under paragraph (1), 
                except that the Administration may waive this 
                requirement if the company is qualified to 
                participate in the accredited lenders program;
                  [(B) if the company has a history of--
                          [(i) submitting to the Administration 
                        adequately analyzed debenture guarantee 
                        application packages; and
                          [(ii) of properly closing section 504 
                        loans and servicing its loan portfolio;
                  [(C) if the company agrees to assume and to 
                reimburse the Administration for 10 percent of 
                any loss sustained by the Administration as a 
                result of default by the company in the payment 
                of principal or interest on a debenture issued 
                by such company and guaranteed by the 
                Administration under this section (15 percent 
                in the case of any such loss attributable to a 
                debenture issued by the company during any 
                period for which an election is in effect under 
                subsection (c)(7) for such company); and
                  [(D) the Administrator determines, with 
                respect to the company, that the loss reserve 
                established in accordance with subsection (c) 
                is sufficient for the company to meet its 
                obligations to protect the Federal Government 
                from risk of loss.
          [(3) Applicability of criteria after designation.--
        The Administrator may revoke the designation of a 
        certified development company as a premier certified 
        lender under this section at any time, if the 
        Administrator determines that the certified development 
        company does not meet any requirement described in 
        subparagraphs (A) through (D) of paragraph (2).
  [(c) Loss Reserve.--
          [(1) Establishment.--A company designated as a 
        premier certified lender shall establish a loss reserve 
        for financing approved pursuant to this section.
          [(2) Amount.--The amount of each loss reserve 
        established under paragraph (1) shall be 10 percent of 
        the amount of the company's exposure, as determined 
        under subsection (b)(2)(C).
          [(3) Assets.--Each loss reserve established under 
        paragraph (1) shall be comprised of--
                  [(A) segregated funds on deposit in an 
                account or accounts with a federally insured 
                depository institution or institutions selected 
                by the company, subject to a collateral 
                assignment in favor of, and in a format 
                acceptable to, the Administration;
                  [(B) irrevocable letter or letters of credit, 
                with a collateral assignment in favor of, and a 
                commercially reasonable format acceptable to, 
                the Administration; or
                  [(C) any combination of the assets described 
                in subparagraphs (A) and (B).
          [(4) Contributions.--The company shall make 
        contributions to the loss reserve, either cash or 
        letters of credit as provided above, in the following 
        amounts and at the following intervals:
                  [(A) 50 percent when a debenture is closed.
                  [(B) 25 percent additional not later than 1 
                year after a debenture is closed.
                  [(C) 25 percent additional not later than 2 
                years after a debenture is closed.
          [(5) Replenishment.--If a loss has been sustained by 
        the Administration, any portion of the loss reserve, 
        and other funds provided by the premier company as 
        necessary, may be used to reimburse the Administration 
        for the premier company's share of the loss as provided 
        in subsection (b)(2)(C). If the company utilizes the 
        reserve, within 30 days it shall replace an equivalent 
        amount of funds.
          [(6) Disbursements.--
                  [(A) In general.--The Administration shall 
                allow the certified development company to 
                withdraw from the loss reserve amounts 
                attributable to any debenture that has been 
                repaid.
                  [(B) Temporary reduction based on outstanding 
                balance.--Notwithstanding subparagraph (A), 
                during the 2-year period beginning on the date 
                that is 90 days after the date of the enactment 
                of this subparagraph, the Administration shall 
                allow the certified development company to 
                withdraw from the loss reserve such amounts as 
                are in excess of 1 percent of the aggregate 
                outstanding balances of debentures to which 
                such loss reserve relates. The preceding 
                sentence shall not apply with respect to any 
                debenture before 100 percent of the 
                contribution described in paragraph (4) with 
                respect to such debenture has been made.
          [(7) Alternative loss reserve.--
                  [(A) Election.--With respect to any eligible 
                calendar quarter, any qualified high loss 
                reserve PCL may elect to have the requirements 
                of this paragraph apply in lieu of the 
                requirements of paragraphs (2) and (4) for such 
                quarter.
                  [(B) Contributions.--
                          [(i) Ordinary rules inapplicable.--
                        Except as provided under clause (ii) 
                        and paragraph (5), a qualified high 
                        loss reserve PCL that makes the 
                        election described in subparagraph (A) 
                        with respect to a calendar quarter 
                        shall not be required to make 
                        contributions to its loss reserve 
                        during such quarter.
                          [(ii) Based on loss.--A qualified 
                        high loss reserve PCL that makes the 
                        election described in subparagraph (A) 
                        with respect to any calendar quarter 
                        shall, before the last day of such 
                        quarter, make such contributions to its 
                        loss reserve as are necessary to ensure 
                        that the amount of the loss reserve of 
                        the PCL is--
                                  [(I) not less than $100,000; 
                                and
                                  [(II) sufficient, as 
                                determined by a qualified 
                                independent auditor, for the 
                                PCL to meet its obligations to 
                                protect the Federal Government 
                                from risk of loss.
                          [(iii) Certification.--Before the end 
                        of any calendar quarter for which an 
                        election is in effect under 
                        subparagraph (A), the head of the PCL 
                        shall submit to the Administrator a 
                        certification that the loss reserve of 
                        the PCL is sufficient to meet such 
                        PCL's obligation to protect the Federal 
                        Government from risk of loss. Such 
                        certification shall be in such form and 
                        submitted in such manner as the 
                        Administrator may require and shall be 
                        signed by the head of such PCL and the 
                        auditor making the determination under 
                        clause (ii)(II).
                  [(C) Disbursements.--
                          [(i) Ordinary rule inapplicable.--
                        Paragraph (6) shall not apply with 
                        respect to any qualified high loss 
                        reserve PCL for any calendar quarter 
                        for which an election is in effect 
                        under subparagraph (A).
                          [(ii) Excess funds.--At the end of 
                        each calendar quarter for which an 
                        election is in effect under 
                        subparagraph (A), the Administration 
                        shall allow the qualified high loss 
                        reserve PCL to withdraw from its loss 
                        reserve the excess of--
                                  [(I) the amount of the loss 
                                reserve, over
                                  [(II) the greater of $100,000 
                                or the amount which is 
                                determined under subparagraph 
                                (B)(ii) to be sufficient to 
                                meet the PCL's obligation to 
                                protect the Federal Government 
                                from risk of loss.
                  [(D) Recontribution.--If the requirements of 
                this paragraph apply to a qualified high loss 
                reserve PCL for any calendar quarter and cease 
                to apply to such PCL for any subsequent 
                calendar quarter, such PCL shall make a 
                contribution to its loss reserve in such amount 
                as the Administrator may determine provided 
                that such amount does not exceed the amount 
                which would result in the total amount in the 
                loss reserve being equal to the amount which 
                would have been in such loss reserve had this 
                paragraph never applied to such PCL. The 
                Administrator may require that such payment be 
                made as a single payment or as a series of 
                payments.
                  [(E) Risk management.--If a qualified high 
                loss reserve PCL fails to meet the requirement 
                of subparagraph (F)(iii) during any period for 
                which an election is in effect under 
                subparagraph (A) and such failure continues for 
                180 days, the requirements of paragraphs (2), 
                (4), and (6) shall apply to such PCL as of the 
                end of such 180-day period and such PCL shall 
                make the contribution to its loss reserve 
                described in subparagraph (D). The 
                Administrator may waive the requirements of 
                this subparagraph.
                  [(F) Qualified high loss reserve pcl.--The 
                term ``qualified high loss reserve PCL'' means, 
                with respect to any calendar year, any premier 
                certified lender designated by the 
                Administrator as a qualified high loss reserve 
                PCL for such year. The Administrator shall not 
                designate a company under the preceding 
                sentence unless the Administrator determines 
                that--
                          [(i) the amount of the loss reserve 
                        of the company is not less than 
                        $100,000;
                          [(ii) the company has established and 
                        is utilizing an appropriate and 
                        effective process for analyzing the 
                        risk of loss associated with its 
                        portfolio of PCLP loans and for grading 
                        each PCLP loan made by the company on 
                        the basis of the risk of loss 
                        associated with such loan; and
                          [(iii) the company meets or exceeds 4 
                        or more of the specified risk 
                        management benchmarks as of the most 
                        recent assessment by the Administration 
                        or the Administration has issued a 
                        waiver with respect to the requirement 
                        of this clause.
                  [(G) Specified risk management benchmarks.--
                For purposes of this paragraph, the term 
                ``specified risk management benchmarks'' means 
                the following rates, as determined by the 
                Administrator:
                          [(i) Currency rate.
                          [(ii) Delinquency rate.
                          [(iii) Default rate.
                          [(iv) Liquidation rate.
                          [(v) Loss rate.
                  [(H) Qualified independent auditor.--For 
                purposes of this paragraph, the term 
                ``qualified independent auditor'' means any 
                auditor who--
                          [(i) is compensated by the qualified 
                        high loss reserve PCL;
                          [(ii) is independent of such PCL; and
                          [(iii) has been approved by the 
                        Administrator during the preceding 
                        year.
                  [(I) PCLP loan.--For purposes of this 
                paragraph, the term ``PCLP loan'' means any 
                loan guaranteed under this section.
                  [(J) Eligible calendar quarter.--For purposes 
                of this paragraph, the term ``eligible calendar 
                quarter'' means--
                          [(i) the first calendar quarter that 
                        begins after the end of the 90-day 
                        period beginning with the date of the 
                        enactment of this paragraph; and
                          [(ii) the 7 succeeding calendar 
                        quarters.
                  [(K) Calendar quarter.--For purposes of this 
                paragraph, the term ``calendar quarter'' 
                means--
                          [(i) the period which begins on 
                        January 1 and ends on March 31 of each 
                        year;
                          [(ii) the period which begins on 
                        April 1 and ends on June 30 of each 
                        year;
                          [(iii) the period which begins on 
                        July 1 and ends on September 30 of each 
                        year; and
                          [(iv) the period which begins on 
                        October 1 and ends on December 31 of 
                        each year.
                  [(L) Regulations.--Not later than 45 days 
                after the date of the enactment of this 
                paragraph, the Administrator shall publish in 
                the Federal Register and transmit to the 
                Congress regulations to carry out this 
                paragraph. Such regulations shall include 
                provisions relating to--
                          [(i) the approval of auditors under 
                        subparagraph (H); and
                          [(ii) the designation of qualified 
                        high loss reserve PCLs under 
                        subparagraph (F), including the 
                        determination of whether a process for 
                        analyzing risk of loss is appropriate 
                        and effective for purposes of 
                        subparagraph (F)(ii).
          [(8) Bureau of pclp oversight.--
                  [(A) Establishment.--There is hereby 
                established in the Small Business 
                Administration a bureau to be known as the 
                Bureau of PCLP Oversight.
                  [(B) Purpose.--The Bureau of PCLP Oversight 
                shall carry out such functions of the 
                Administration under this subsection as the 
                Administrator may designate.
                  [(C) Deadline.--Not later than 90 days after 
                the date of the enactment of this Act--
                          [(i) the Administrator shall ensure 
                        that the Bureau of PCLP Oversight is 
                        prepared to carry out any functions 
                        designated under subparagraph (B), and
                          [(ii) the Office of the Inspector 
                        General of the Administration shall 
                        report to the Congress on the 
                        preparedness of the Bureau of PCLP 
                        Oversight to carry out such functions.
  [(d) Sale of Certain Defaulted Loans.--
          [(1) Notice.--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, it shall give prior notice thereof to 
        any certified development company which has a 
        contingent liability under this section. The notice 
        shall be given to the company as soon as possible after 
        the financing is identified, but not less than 90 days 
        before the date the Administration first makes any 
        records 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 shall not offer 
        any loan described in paragraph (1) as part of a bulk 
        sale unless it--
                  [(A) provides prospective purchasers with the 
                opportunity to examine the Administration's 
                records with respect to such loan; and
                  [(B) provides the notice required by 
                paragraph (1).
  [(e) Loan Approval Authority.--
          [(1) In general.--Notwithstanding section 503(b)(6), 
        and subject to such terms and conditions as the 
        Administration may establish, the Administration may 
        permit a company designated as a premier certified 
        lender under this section to approve, authorize, close, 
        service, foreclose, litigate (except that the 
        Administration may monitor the conduct of any such 
        litigation to which a premier certified lender is a 
        party), and liquidate loans that are funded with the 
        proceeds of a debenture issued by such company and may 
        authorize the guarantee of such debenture.
          [(2) Scope of review.--The approval of a loan by a 
        premier certified lender shall be subject to final 
        approval as to eligibility of any guarantee by the 
        Administration pursuant to section 503(a), but such 
        final approval shall not include review of decisions by 
        the lender involving creditworthiness, loan closing, or 
        compliance with legal requirements imposed by law or 
        regulation.
  [(f) Review.--After the issuance and sale of debentures under 
this section, the Administration, at intervals not greater than 
12 months, shall review the financings made by each premier 
certified lender. The review shall include the lender's credit 
decisions and general compliance with the eligibility 
requirements for each financing approved under the program 
authorized under this section. The Administration shall 
consider the findings of the review in carrying out its 
responsibilities under subsection (g), but such review shall 
not affect any outstanding debenture guarantee.
  [(g) Suspension or Revocation.--The designation of a 
certified development company as a premier certified lender may 
be suspended or revoked if the Administration determines that 
the company--
          [(1) has not continued to meet the criteria for 
        eligibility under subsection (b);
          [(2) has not established or maintained the loss 
        reserve required under subsection (c);
          [(3) is failing to adhere to the Administration's 
        rules and regulations; or
          [(4) is violating any other applicable provision of 
        law.
  [(h) Effect of Suspension or Revocation.--A suspension or 
revocation under subsection (g) shall not affect any 
outstanding debenture guarantee.
  [(i) Program Goals.--Each certified development company 
participating in the program under this section shall establish 
a goal of processing a minimum of not less than 50 percent of 
the loan applications for assistance under section 504 pursuant 
to the program authorized under this section.
  [(j) Report.--Not later than 1 year after the date of 
enactment of this Act, and annually thereafter, the 
Administration shall report to the Committees on Small Business 
of the Senate and the House of Representatives on the 
implementation of this section. Each report shall include--
          [(1) the number of certified development companies 
        designated as premier certified lenders;
          [(2) the debenture guarantee volume of such 
        companies;
          [(3) a comparison of the loss rate for premier 
        certified lenders to the loss rate for accredited and 
        other lenders, specifically comparing default rates and 
        recovery rates on liquidations; and
          [(4) such other information as the Administration 
        deems appropriate.

[SEC. 509. PREPAYMENT OF DEVELOPMENT COMPANY DEBENTURES.

  [(a) In General.--
          [(1) Prepayment authorized.--Subject to the 
        requirements set forth in subsection (b), an issuer of 
        a debenture purchased by the Federal Financing Bank and 
        guaranteed by the Administration under this Act may, at 
        the election of the borrower (in the case of a loan 
        under section 503) or the issuer (in the case of a 
        small business investment company) and with the 
        approval of the Administration, prepay such debenture 
        in accordance with the provisions of this section.
          [(2) Procedure.--
                  [(A) In general.--In making a prepayment 
                under paragraph (1)--
                          [(i) the borrower (in the case of a 
                        loan under section 503) or the issuer 
                        (in the case of a small business 
                        investment company) shall pay to the 
                        Federal Financing Bank an amount that 
                        is equal to the sum of the unpaid 
                        principal balance due on the debenture 
                        as of the date of the prepayment (plus 
                        accrued interest at the coupon rate on 
                        the debenture) and the amount of the 
                        repurchase premium described in 
                        subparagraph (B); and
                          [(ii) the Administration shall pay to 
                        the Federal Financing Bank the 
                        difference between the repurchase 
                        premium paid by the borrower under this 
                        subsection and the repurchase premium 
                        that the Federal Financing Bank would 
                        otherwise have received.
                  [(B) Repurchase premium.--
                          [(i) In general.--For purposes of 
                        subparagraph (A)(i), the repurchase 
                        premium is the amount equal to the 
                        product of--
                                  [(I) the unpaid principal 
                                balance due on the debenture on 
                                the date of prepayment; and
                                  [(II) the applicable 
                                percentage rate, as determined 
                                in accordance with clauses (ii) 
                                and (iii).
                          [(ii) Applicable percentage rate.--
                        For purposes of clause (i)(II), the 
                        applicable percentage rate means--
                                  [(I) with respect to a 10-
                                year term loan, 8.5 percent;
                                  [(II) with respect to a 15-
                                year term loan, 9.5 percent;
                                  [(III) with respect to a 20-
                                year term loan, 10.5 percent; 
                                and
                                  [(IV) with respect to a 25-
                                year term loan, 11.5 percent.
                          [(iii) Adjustments to applicable 
                        percentage rate.--The percentage rates 
                        described in clause (ii) shall be 
                        increased or decreased by the 
                        Administration by a factor not to 
                        exceed one-third, if the same factor is 
                        applied in each case and if the 
                        Administration determines that an 
                        adjustment is necessary, based on the 
                        number of borrowers having given notice 
                        of their intent to participate, in 
                        order to make the program (including 
                        the amounts appropriated for this 
                        purpose under Public Law 103-317) 
                        result in no substantial net gain or 
                        loss of revenue to the Federal 
                        Financing Bank or to the 
                        Administration. Amounts collected in 
                        excess of the amount necessary to 
                        ensure revenue neutrality shall be 
                        refunded to the borrowers.
  [(b) Requirements.--For purposes of subsection (a), the 
requirements of this subsection are that--
          [(1) the debenture is outstanding and neither the 
        loan that secures the debenture, if any, nor the 
        debenture is in default on the date on which the 
        prepayment is made;
          [(2) State, local, or personal funds, or the proceeds 
        of a refinancing in accordance with subsection (d) of 
        this section under the programs authorized by this 
        title, are used to prepay or roll over the debenture; 
        and
          [(3) with respect to a debenture issued under section 
        503, the issuer certifies that the benefits, net of 
        fees and expenses authorized herein, associated with 
        prepayment of the debenture are entirely passed through 
        to the borrower.
  [(c) No Prepayment Fees or Penalties.--No fees or penalties 
other than those specified in this section may be imposed on 
the issuer, the borrower, the Administration, or any fund or 
account administered by the Administration as the result of a 
prepayment under this section.
  [(d) Refinancing Limitations.--
          [(1) In general.--The refinancing of a debenture 
        under sections 504 and 505, in accordance with 
        subsection (b)(2)--
                  [(A) shall not exceed the amount necessary to 
                prepay existing debentures, including all costs 
                associated with the refinancing and any 
                applicable prepayment penalty or repurchase 
                premium; and
                  [(B) except as provided in paragraphs (2) and 
                (3), shall be subject to the provisions of 
                sections 504 and 505 and the rules and 
                regulations promulgated thereunder, including 
                rules and regulations governing payment of 
                authorized expenses, commissions, fees, and 
                discounts to brokers and dealers in trust 
                certificates issued pursuant to section 505.
          [(2) Job creation.--An applicant for refinancing 
        under section 504 of a loan made pursuant to section 
        503 shall not be required to demonstrate that a 
        requisite number of jobs will be created with the 
        proceeds of a refinancing.
          [(3) Loan processing fee.--To cover the cost of loan 
        packaging, processing, and other administrative 
        functions, a development company that provides 
        refinancing under subsection (b)(2) may impose a one-
        time loan processing fee, not to exceed 0.5 percent of 
        the principal amount of the loan.
          [(4) New debentures.--Issuers of debentures under 
        title III may issue new debentures in accordance with 
        such title in order to prepay existing debentures as 
        authorized in this section.
          [(5) Preliminary notice.--
                  [(A) In general.--The Administration shall 
                use certified mail and other reasonable means 
                to notify each eligible borrower of the 
                prepayment program provided in this title. Each 
                preliminary notice shall specify the range and 
                dollar amount of repurchase premiums which 
                could be required of that borrower in order to 
                participate in the program. In carrying out 
                this program, the Administration shall provide 
                a period of not less than 45 days following the 
                receipt of such notice by the borrower during 
                which the borrower must notify the 
                Administration of the borrower's intent to 
                participate in the program. The Administration 
                shall require that a borrower who gives notice 
                of its intent to participate to make an earnest 
                money deposit of $1,000 which shall not be 
                refundable but which shall be credited toward 
                the final repurchase premium.
                  [(B) Definition.--For purposes of this 
                paragraph, the term ``borrower'', in the case 
                of a small business investment company or a 
                specialized small business investment company, 
                means ''issuer''.
          [(6) Final notice.--Based upon the response to the 
        preliminary notice under paragraph (5), the 
        Administration shall make a final computation of the 
        necessary prepayment premiums and shall notify each 
        qualified respondent of the results of such 
        computation. Each qualified respondent shall be 
        afforded not less than 4 months to complete the 
        prepayment.
  [(e) Definitions.--For purposes of this section--
          [(1) the term ``issuer'' means--
                  [(A) the qualified State or local development 
                company that issued a debenture pursuant to 
                section 503, which has been purchased by the 
                Federal Financing Bank; and
                  [(B) a small business investment company 
                licensed pursuant to section 301; or
          [(2) the term ``borrower'' means a small business 
        concern whose loan secures a debenture issued pursuant 
        to section 503.
  [(f) Regulations.--Not later than 30 days after the date of 
enactment of this section, the Administration shall promulgate 
such regulations as may be necessary to carry out this section.
  [(g) Authorization.--There are authorized to be appropriated 
$30,000,000 to carry out the provisions of The Small Business 
Prepayment Penalty Relief Act of 1994.

[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) 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 
                        promulgation 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 
                        less than 10 loans per year that are 
                        funded with the proceeds of debentures 
                        guaranteed under section 503; and
                  [(B) the company--
                          [(i) has one 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 section (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 
                                the Administration's management 
                                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 foreclosures, 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 
                                plan that cannot be approved or 
                                denied within the 15-day period 
                                required by subclause (I), the 
                                Administration shall within 
                                such period provide in 
                                accordance with subparagraph 
                                (E) notice 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 
                        routine actions 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 
                                within such period provide in 
                                accordance with subparagraph 
                                (E) notice 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 within 
                                such period provide in 
                                accordance with subparagraph 
                                (E) notice 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 Administration's inability to 
                        act on a 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, 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 law; or
          [(3) fails to comply with any reporting requirement 
        that may be established by the Administration relating 
        to carrying out of functions described in paragraph 
        (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 of the Senate a report on the 
        results of delegation of authority under this section.
          [(2) Contents.--Each report submitted under paragraph 
        (1) shall include the following information:
                  [(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.
                  [(E) The number of times that the 
                Administration has failed to approve or reject 
                a liquidation plan in accordance with 
                subparagraph (A)(i), a workout plan in 
                accordance with subparagraph (C)(i), or to 
                approve or deny a request for purchase of 
                indebtedness under subparagraph (B)(i), 
                including specific information regarding the 
                reasons for the Administration's failure and 
                any delays that resulted.]

SEC. 501. CERTIFIED DEVELOPMENT COMPANIES.

  (a) Certified Development Company Debenture Authority.--Only 
development companies certified by the Administrator shall have 
the authority to issue debentures under this Act.
  (b) Certification Standards.--A development company shall be 
certified for the purposes of issuing debentures if the 
Administrator determines that it meets each of the following 
criteria:
          (1) Small concern.--
                  (A) In general.--Except as provided in 
                subparagraph (C) of paragraph (2), the company, 
                including its affiliates, shall have no more 
                than 200 employees.
                  (B) Control.--Except as provided in paragraph 
                (2) (B) or (C) the company shall not be under 
                the control of any other concern.
                  (C) Not for profit.--The development company 
                is organized as a not-for-profit corporation.
          (2) Exceptions.--
                  (A) For profit status.--If a development 
                company was chartered as a for-profit 
                corporation and issued debentures prior to 
                January 1, 1987, the company shall not be 
                required to change its status to not-for-profit 
                in order to be certified.
                  (B) Affiliation grandfather.--Any company 
                that was authorized by the Administrator to 
                issue debentures before December 31, 2005, 
                shall be eligible for certification without 
                regard to its status as part of, or its 
                affiliation with, any other not-for-profit 
                corporation or local governmental entity unless 
                that not-for-profit corporation or local 
                governmental entity is another entity that 
                issues debentures under this title.
                  (C) Affiliation with local governmental 
                entities.--Any company that was organized after 
                the date of enactment of the Small Business 
                Financing and Investment Act of 2009 shall be 
                eligible for certification without regard to 
                its status as part of or affiliation with any 
                local governmental entity.
          (3) Good standing.--A development company shall be in 
        good standing and comply with all laws, in every State 
        in which it is incorporated or authorized to conduct 
        business.
          (4) Membership.--
                  (A) In general.--The development company 
                shall have at least 25 members.
                  (B) Voting rights.--No member shall control 
                more than 10 percent of the total voting power 
                in the development company.
                  (C) Residence.--Members must be residents of 
                the State in which the development company is 
                chartered or authorized to do business.
                  (D) Diversity.--The development company must 
                have at least one member from each of the 
                following:
                          (i) A local governmental entity.
                          (ii) A financial institution subject 
                        to regulation by a Federal organization 
                        belonging to the Federal Financial 
                        Institutions Examination Council and 
                        that provides long-term fixed asset 
                        financing in the commercial market.
                          (iii) A not-for-profit organization, 
                        other than a development company, that 
                        is dedicated to promoting economic 
                        growth.
                          (iv) A for-profit business, other 
                        than a financial institution described 
                        in clause (ii).
                  (E) Employment status.--Membership in a 
                development company shall not be predicated on 
                employment status and an individual who retired 
                from or was terminated (for reasons other than 
                fraud or the commission of a crime) from an 
                entity described in subparagraph (D) shall be 
                deemed to be from the organization described in 
                that subparagraph.
          (5) Board of directors.--
                  (A) In general.--The development company's 
                board consists of members and each director 
                receives a majority vote of the members unless 
                the development company is a for-profit 
                corporation in which case the board need not 
                consist entirely of members.
                  (B) Board representation.--There shall be at 
                least one director from not fewer than 3 of the 
                4 types of organizations specified in paragraph 
                (4)(D) but no single type of organization shall 
                have more than 50 percent representation on the 
                board of the development company. If the 
                development company is a for-profit 
                corporation, financial institution 
                representatives may make up more than 50 
                percent of the board.
                  (C) Affiliated entity representation 
                restrictions.--A development company that is 
                described in paragraph (1)(C) may have any or 
                all of its board members appointed by entities 
                affiliated with the company and may include 
                common members who also serve on the 
                affiliate's board of directors if the 
                appointment of board members was exercised by 
                an affiliate prior to December 31, 2005.
                  (D) Special rule for certain development 
                companies.--The board of directors for any 
                development company issuing debentures before 
                December 31, 2005, and incorporated under a 
                State law requiring, or which is interpreted by 
                the State's legal department as imposing 
                specific requirements on, the number and 
                selection of members, board members, or both, 
                and the rights and privileges conferred by such 
                State law, may adhere to such provisions.
          (6) Professional management and staff.--
                  (A) In general.--The development company 
                shall have full-time independent professional 
                management, including a chief executive officer 
                to manage the daily operations and a full-time 
                professional staff qualified to carry out the 
                functions authorized under this title.
                  (B) Utilization of staff from affiliated 
                entities.--A development company shall not be 
                denied certification under this section if its 
                chief executive or full-time professional staff 
                is from an affiliated entity as described in 
                paragraph (1)(C).
                  (C) Staff under contract.--The Administrator 
                shall not deny certification to a development 
                company that contracts for its full time staff 
                if one of the following conditions is met:
                          (i) The development company is 
                        located in a rural area, obtains its 
                        staff through contract from another 
                        development company that is certified 
                        by the Administrator and that 
                        development company operates in the 
                        same or a contiguous State.
                          (ii) The development company had 
                        issued debentures under this title 
                        prior to December 31, 2005, and had 
                        contracted with a for-profit business 
                        concern to provide staffing and 
                        management services.
  (c) Applications.--
          (1) Development companies issuing debentures before 
        september 30, 2009.--
                  (A) Short form application.--(i) For any 
                development company that issued debentures 
                pursuant to this title before September 30, 
                2009, the Administrator shall develop, after an 
                opportunity for notice and comment, no later 
                than 90 days after the date of enactment of the 
                Small Business Financing and Investment Act of 
                2009, a short-form application that contains 
                sufficient information for the Administrator to 
                determine that the development company 
                currently meets the standards set forth in 
                subsection (b). In developing such application, 
                the Administrator shall be required to limit 
                the amount of paperwork necessary to determine 
                whether the development company meets the 
                standards for certification and may limit the 
                application to the filing of reports previously 
                submitted to the Administrator.
                  (ii) For those companies that obtain staff 
                through contracts, the application shall 
                include a copy of the contract.
                  (B) Certification decision.--(i) The 
                Administrator shall certify the development 
                company if the application demonstrates that 
                the applicant meets the standards in subsection 
                (b). The decision to certify or not approve the 
                request for certification shall be made within 
                7 business days from the date the initial 
                submission of the application is received by 
                the Administrator. If the Administrator takes 
                no action to approve or disapprove within 7 
                business days, the application for 
                certification is deemed approved and no further 
                action is required by the Administrator or the 
                development company to obtain certification. If 
                the Administrator disapproves the application, 
                the Administrator shall provide in writing 
                within 3 business days the reasons for the 
                disapproval. If such document is not provided 
                within the time specified, the application is 
                deemed approved and no further action is 
                required by the Administrator or the 
                development company to obtain certification.
                  (ii) For those development companies that 
                submit contracts under subparagraph (A)(ii), 
                the Administrator is limited in rejecting the 
                application only if the Administrator finds 
                that the entity servicing the applicant is no 
                longer able to provide the employees or 
                services needed by the applicant to perform the 
                functions that would be authorized under this 
                title.
                  (C) Application resubmittal.--If the 
                Administrator disapproves the application for 
                certification and provides a written statement 
                as set forth in subparagraph (B), the 
                development company may file a new application 
                limited solely to addressing the concerns of 
                the Administrator and the certification 
                procedures set forth in subparagraph (B) shall 
                recommence.
                  (D) Appeals.--If the Administrator 
                disapproves an application in accordance with 
                the procedures of subparagraphs (B) or (C), the 
                applicant may, within 10 calendar days after 
                receipt of the disapproval, appeal such 
                disapproval. The Administrator shall conduct a 
                hearing to determine such appeal pursuant to 
                sections 554, 556, and 557 of title 5, United 
                States Code, and shall issue a decision not 
                later than 45 days after the appeal is filed. 
                The decision on appeal shall constitute final 
                agency action for purposes of chapter 7 of 
                title 5, United States Code.
                  (E) Grandfathering.--
                          (i) In general.--For the period 2 
                        years after date of enactment of the 
                        Small Business Financing and Investment 
                        Act of 2009, any development company 
                        that was issuing debentures on or 
                        before the date set forth in this 
                        clause (i) shall be deemed to be a 
                        certified development company.
                          (ii) Completion of application 
                        process.--The procedures set forth in 
                        this paragraph for determining 
                        certification shall apply to any 
                        development company meeting the 
                        qualifications of clause (i).
                          (iii) Effect of denial.--The denial 
                        or rejection of an application for 
                        certification as set forth in this 
                        subsection shall have no effect on the 
                        ability of a development company 
                        meeting the qualifications in clause 
                        (i) from continuing to issue debentures 
                        during the entire two-year period 
                        established in that clause.
                          (iv) Failure to obtain 
                        certification.--Any development company 
                        that fails to obtain certification in 
                        accordance with the procedures set 
                        forth in this paragraph during the 
                        period set forth in clause (i) shall be 
                        considered to be a new development 
                        company and the procedures of paragraph 
                        (2) shall apply. The authority to issue 
                        debentures shall cease for any 
                        development company covered by this 
                        subparagraph that has failed to obtain 
                        certification from the Administrator 
                        during the time period set forth in 
                        clause (i).
                  (F) Automatic qualification provision.--If 
                the Administrator fails to implement the 
                certification process set forth in this 
                paragraph, any development company that was 
                issuing debentures before September 30, 2009, 
                pursuant to this title shall be considered 
                certified until such time as the Administrator 
                develops the certification procedures set forth 
                in this paragraph.
                  (G) Savings clause.--Any action taken by a 
                development company or the Administrator 
                pursuant to this paragraph shall have no impact 
                on any guarantee of a debenture issued prior to 
                the date of enactment of the Small Business 
                Financing and Investment Act of 2009.
          (2) Application process for new development 
        companies.--
                  (A) In general.--For any development company 
                that has not issued debentures prior to 
                September 30, 2009, the Administrator shall 
                develop no later than 180 days after the date 
                of enactment of the Small Business Financing 
                and Investment Act of 2009, after an 
                opportunity for notice and comment, an 
                application form for certification that 
                provides the Administrator with sufficient 
                information to insure that the applicant meets 
                the standards set forth in subsection (b). The 
                Administrator shall certify such development 
                company or reject the application within 60 
                calendar days from the date the initial 
                submission was received by the Administrator. 
                If the Administrator rejects the application, 
                the Administrator shall provide in writing 
                within 7 business days after the decision, the 
                reason for rejecting the application.
                  (B) Appeals.--A development company shall be 
                able to appeal the disapproval of an 
                application under the procedures set forth in 
                paragraph (1)(D).

SEC. 502. OPERATIONAL REQUIREMENTS FOR CERTIFIED DEVELOPMENT COMPANIES.

  (a) Maintenance of Standards for Certification.--Any company 
certified pursuant to section 501 shall continue to comply with 
the requirements of that section to remain certified. The 
Administrator shall develop a reporting form, which to the 
extent possible, incorporates other documents and reports 
already kept by certified development companies, demonstrating 
their continued compliance. The form shall be developed in a 
manner that the estimated time for completion shall take no 
more than 2 hours.
  (b) Ethics and Conflict of Interests.--
          (1) In general.--A certified development company, its 
        officers, employees, and contractors shall act 
        ethically and avoid activities which constitute a 
        conflict of interest or appear to constitute a conflict 
        of interest. For purposes of this subsection, conduct 
        that is unethical includes, but is not limited to, the 
        actions specified in section 120.140 of title 13, Code 
        of Federal Regulations, as in effect on January 1, 
        2009.
          (2) By associates.--An associate may not be an 
        officer, director, or manager of more than 1 certified 
        development company. The term ``associate'' shall have 
        the same meaning given the term ``Associate of a CDC'' 
        in section 120.10 of title 13, Code of Federal 
        Regulations, as in effect on January 1, 2009. For the 
        purposes of this subsection, 10 percent shall be 
        substituted wherever section 120.10 of title 13, Code 
        of Federal Regulation uses 20 percent.
          (3) By entities.--Except as provided in sections 
        501(b)(5) and 501(b)(6), no person, sole 
        proprietorship, partnership, or corporation shall 
        control or have managerial control of more than one 
        certified development company. Control means any of the 
        following:
                  (A) The ability to appoint or remove a member 
                of the company or member of its board of 
                directors.
                  (B) The ability to modify or approve rate or 
                fee changes affecting revenues of the certified 
                development company.
                  (C) The ability to veto, overrule, or modify 
                decisions of the certified development 
                company's body.
                  (D) The ability, either directly or 
                contractually, to appoint, hire, reassign, or 
                dismiss those managers and employees 
                responsible for the daily operations of the 
                certified development company.
                  (E) The ability to access the certified 
                development company's resources or amend its 
                budget.
                  (F) The ability to control another certified 
                development company pursuant to provisions in a 
                contract.
  (c) Meetings.--The board of directors of the certified 
development company shall meet on a regular basis to make 
policy decisions for the company.
  (d) Loan Committees.--The board of directors of a certified 
development company may use a loan committee to process loans 
in the State in which it operates as well as adjacent local 
economic areas. Members of the loan committee shall be 
residents of the certified development company's State of 
operation or the adjacent local economic area. Such loan 
committees shall meet on a periodic basis as set forth by the 
board of directors.
  (e) Prohibited Conflict in Project Loans.--
          (1) In general.--Certified development companies 
        shall not recommend or approve a guarantee of a 
        debenture that will be collateralized by property being 
        constructed or acquired on which an institution, as 
        provided in section 508(c)(1)(A), will have a first 
        lien position.
          (2) Exception.--The prohibition in paragraph (1) 
        shall not apply to any certified development company 
        that was affiliated with or part of any entity that 
        took a first lien position between October 1, 2003, and 
        September 30, 2005.
  (f) Affiliation With Lenders Operating Under Section 7 of the 
Small Business Act.--
          (1) Prohibition.--No certified development company 
        may invest in, or be an affiliate of, a lender who 
        participates in the loan programs authorized in 
        sections 7(a) and 7(c) of the Small Business Act (15 
        U.S.C. 636(a) and (c)).
          (2) Exception.--The prohibition in paragraph (1) 
        shall not apply to any certified development company 
        that is affiliated with an entity authorized by the 
        Administrator to operate under section 7(a) of the 
        Small Business Act if such affiliation occurred on or 
        before November 6, 2003.
          (3) Credit union affiliation.--A certified 
        development company shall not lose its status due to an 
        affiliation with an institution regulated by the 
        National Credit Union Administration if the development 
        company was affiliated with such an institution prior 
        to January 1, 2007.
  (g) Servicing and Packaging Guaranteed Loans.--A certified 
development company is authorized to prepare applications for 
loans under sections 7(a) or 7(c) of the Small Business Act (15 
U.S.C. 636(a) or (c)), to service such loans, and to charge a 
reasonable fee for servicing such loans.
  (h) Use of Excess Funds.--Any funds generated by a certified 
development company from the issuance of debentures under this 
title, the sale of debentures in the private secondary market, 
or fees described in subsection (g) that remain unexpended 
after payment of staff, operating, and overhead expenses shall 
be used by the certified development company for--
          (1) operating reserves;
          (2) expanding the area in which the certified 
        development company operates through the methods 
        authorized in section 505 (relating to multi-State 
        operation);
          (3) investment in other community and local economic 
        development activity or community development primarily 
        in the State from which such funds were generated; or
          (4) investment in small business investment companies 
        subject to the limitations in subsection (i).
  (i) Limitations With Respect to Small Business Investment 
Companies.--A certified development company shall not--
          (1) invest excess funds in a small business 
        investment company that the Administrator determines to 
        be capitally impaired as set forth in section 107.1830 
        of title 13, Code of Federal Regulations, as in effect 
        on January 1, 2009, or any successor regulation to that 
        regulation, but may maintain its investment in such 
        company if such investment was made prior to the 
        determination of capital impairment; and
          (2) provide a debenture under this title to a small 
        business concern that has financing with a small 
        business investment company in which the certified 
        development company has invested excess funds.
  (j) Economic Development Activities.--A company certified 
pursuant to this section shall carry out each of the following 
economic development activities that create or preserve jobs in 
urban and rural areas:
          (1) The company shall provide long-term financing to 
        small business concerns through debentures described in 
        section 506.
          (2) The company shall operate any other program to 
        assist small business concerns or communities that 
        promote local economic development and job creation or 
        preservation.
  (k) Restrictions on Assistance.--
          (1) In general.--After the date of enactment of the 
        Small Business Financing and Investment Act of 2009, no 
        certified development company may accept funding from 
        any source, including any Federal agency (as that term 
        is defined in section 551 of title 5, United States 
        Code) if the source imposes--
                  (A) conditions on the types of small business 
                concerns that a certified development company 
                may provide assistance to under this title; or
                  (B) conditions or requirements, directly or 
                indirectly, upon any small business concern 
                receiving assistance under this title.
          (2) Exception.--The conditions of subparagraphs (A) 
        and (B) of paragraph (1) shall not apply if the source 
        provides all of the financing that will be provided by 
        the certified development company to the small business 
        concern, provided further that any conditions or 
        restrictions are limited solely to the financing 
        provided by the source of funding.
  (l) Revocation and Suspension.--The Administrator may suspend 
or revoke a certified development company's status if the 
Administrator determines, after a hearing on the record as set 
forth in sections 554, 556, and 557 of title 5, United States 
Code, that the certified development company no longer--
          (1) meets the eligibility criteria established under 
        section 501 of this title;
          (2) satisfies the operational standards in this 
        section; or
          (3) complies with the Administrator's rules, 
        regulations, or provisions of law.
  (m) Effect of Suspension or Revocation.--A suspension or 
revocation under subsection (l) shall not affect any 
outstanding debenture guarantee.

SEC. 503. ACCREDITED LENDERS PROGRAM.

  (a) Establishment.--
          (1) In general.--A certified development company may 
        apply for status to become an accredited certified 
        development company if it meets the operational 
        standards of section 502 and the criteria in subsection 
        (b).
          (2) Application.--The Administrator shall, after 
        opportunity for notice and comment, develop an 
        application for certified development companies seeking 
        to become accredited certified development companies.
          (3) Processing of application.--The Administrator 
        shall make a determination within 30 days after a 
        complete application has been filed by the certified 
        development company.
          (4) Reapplication.--If the Administrator rejects the 
        application, the Administrator shall provide in writing 
        the reasons for the rejection. Any certified 
        development company may reapply which will recommence 
        the processing time limits set forth in paragraph (3), 
        and such reapplication shall be limited to addressing 
        the reasons for rejection. If the Administrator rejects 
        a second application, that shall be considered final 
        agency action for purposes of chapter 7 of title 5, 
        United States Code.
  (b) Standards for Accredited Certified Development Company 
Program.--The Administrator shall designate a certified 
development company as accredited if it meets the following 
standards:
          (1) Has been a certified development company for not 
        less than the preceding 12 months and has issued 
        debentures as authorized under this title during that 
        time period.
          (2) Has well-trained, qualified personnel who are 
        knowledgeable in the lending policies and procedures 
        for certified development companies.
          (3) Has the ability to process, close, and service 
        the loan issued under this title.
          (4) Has a loss rate on the company's debentures that 
        is reasonable and acceptable to the Administrator.
          (5) Has a history of submitting to the Administrator 
        complete and accurate debenture guaranty application 
        packages.
          (6) Has the ability to serve small business credit 
        needs for financing plant and equipment as a certified 
        development company.
  (c) Expedited Processing of Guarantee Applications.--The 
Administrator shall develop an expedited procedure for 
processing a guarantee application or servicing action 
submitted by an accredited certified development company. For 
purposes of this subsection, an expedited procedure is one that 
takes at least two business days less than the processing 
performed for certified development companies that have not 
been accredited.
  (d) Suspension or Revocation of Accredited Status.--The 
Administrator may suspend or revoke a certified development 
company's accredited status if the Administrator determines, 
after a hearing on the record as set forth in sections 554, 
556, and 557 of title 5, United States Code, that the certified 
development company no longer meets the eligibility criteria 
established under this section (which shall not include a time 
limit on the term of the certified development company's 
accredited status) or failed to adhere to the Administrator's 
rules, regulations, or is violating some other provision of 
law. Such suspension or revocation shall have no effect on the 
development company's status as certified.
  (e) Effect of Suspension or Revocation on Existing 
Guarantees.--A suspension or revocation of accredited status 
shall not affect any outstanding debenture guarantee.
  (f) Grandfather Provision.--Any certified development company 
that was accredited by the date of enactment of the Small 
Business Financing and Investment Act of 2009 shall remain 
accredited for 24 months after that date. If the certified 
development company does not have an application for 
accreditation approved by the Administrator within the 24 
months, its accreditation standard shall lapse.
  (g) Automatic Qualification.--
          (1) In general.--Until the Administrator develops 
        procedures for granting accredited status, any 
        certified development company that was accredited as of 
        the date of enactment of the Small Business Financing 
        and Investment Act of 2009 shall be deemed to be 
        accredited.
          (2) Applications.--Any certified development company 
        that satisfies the provision of paragraph (1) shall 
        have 24 months in which to submit the application 
        established by this section for accredited status.
          (3) Effect while application pending.--The denial or 
        rejection of an application for accredited status as 
        set forth in this section shall have no effect on the 
        ability of a development company that meets the 
        standard set forth in paragraph (1) from maintaining 
        its status during the 24 months specified in this 
        subsection.
  (h) Promulgation of Accrediting Standards.--The Administrator 
shall develop standards for accrediting, suspension, and 
revocation under the program established by this section only 
after notice and an opportunity for comment as set forth in 
section 553(b) of title 5, United States Code. After the 
development of such standards, the Administrator shall publish 
such standards in the Code of Federal Regulations.
  (i) Rule of Construction.--Any reference to the term 
``accredited lender'' in any provision of law enacted, or any 
regulation adopted, prior to the enactment of the Small 
Business Financing and Investment Act of 2009 shall be deemed 
to be a reference to the term ``accredited certified 
development company''.

SEC. 504. PREMIER CERTIFIED LENDER PROGRAM.

  (a) Establishment.--
          (1) In general.--A certified development company 
        accredited under section 503 may apply for status to 
        become a premier certified development company.
          (2) Application.--The Administrator shall, after 
        opportunity for notice and comment, develop an 
        application for accredited certified development 
        companies seeking to become premier certified 
        development companies.
          (3) Processing of application.--The Administrator 
        shall make a determination within 60 days after a 
        complete application has been filed by an accredited 
        certified development company.
          (4) Reapplication.--If the Administrator rejects the 
        application, the Administrator shall provide in writing 
        the reasons for the rejection. Any accredited certified 
        development company may reapply which will recommence 
        the processing time limits set forth in paragraph (3), 
        and such reapplication shall be limited to addressing 
        the reasons for rejection. If the Administrator rejects 
        a second application, that shall be considered final 
        agency action for purposes of chapter 7 of title 5, 
        United States Code.
  (b) Standards for Obtaining Premier Certified Development 
Company Status.--The Administrator shall designate an 
accredited certified development company as a premier certified 
development company if the application submitted pursuant to 
subsection (a) demonstrates that the accredited certified 
development company meets the following standards:
          (1) Has been an accredited certified development 
        company for at least 12 months.
          (2) Has submitted to the Administrator adequately 
        analyzed debenture guarantee applications.
          (3) Has closed, in a proper manner following the 
        Administrator regulations, loans under this title.
          (4) Has serviced its loan portfolio in accordance 
        with the standards set by the Administrator.
          (5) Has established a loan loss reserve established 
        in accordance with this section that the Administrator 
        determines is sufficient to meet its obligations to 
        protect the Federal Government from the risk of loss on 
        each debenture guaranteed under this section.
          (6) Has agreed, as part of the application and in 
        order to protect the Federal Government against the 
        risk of loss, to the following--
                  (A) on account of a debenture, the proceeds 
                of which were used to fund a loan approved 
                prior to the date of enactment of the Small 
                Business Financing and Investment Act of 2009, 
                agrees to reimburse the Administrator for 10 
                percent of any loss sustained by the 
                Administrator as a result of a default by the 
                company in the payment of principal or interest 
                on a debenture issued by such company and 
                guaranteed by the Administrator;
                  (B) on account of a debenture, the proceeds 
                of which were used to fund a loan approved 
                prior to the date of enactment of the Small 
                Business Financing and Investment Act of 2009 
                and which were issued during the period in 
                which the company had made a selection pursuant 
                to section 508(c)(7) of the Small Business 
                Investment Act of 1958, as in effect on the day 
                before such date of enactment, agrees to 
                reimburse the Administrator for 15 percent of 
                any loss sustained by the Administrator as a 
                result of a default by the company in the 
                payment of principal or interest on a debenture 
                issued by such company and guaranteed by the 
                Administrator; or
                  (C) on account of a debenture, the proceeds 
                of which are used to fund a loan approved on or 
                after the date of enactment of the Small 
                Business Financing and Investment Act of 2009, 
                upon closing, pay to the Administrator a one-
                time participation fee in the amount equal to 
                the higher of the following:
                          (i) 0.25 percent of the amount of the 
                        debenture.
                          (ii) A percent of the amount of the 
                        debenture equal to 10 percent of the 
                        amount of the company's historic loss 
                        rate on debentures guaranteed under 
                        this section as determined by the 
                        Administrator. The rate specified by 
                        this clause shall be determined 
                        annually based upon the company's loan 
                        losses as of close of business on June 
                        30 and notice of the determination 
                        shall be provided to each company not 
                        later than August 31. Such rate shall 
                        be applicable to loans approved during 
                        the fiscal year commencing after the 
                        determination is made and shall expire 
                        and have no further application after 
                        the end of such fiscal year. If no 
                        timely determination has been made 
                        prior to the commencement of a fiscal 
                        year, including the year of enactment 
                        of the Small Business Financing and 
                        Investment Act of 2009, one may be made 
                        after the commencement and it shall be 
                        applicable to loans approved during the 
                        balance of such fiscal year commencing 
                        30 days after notification to the 
                        development company involved.
  (c) Suspension or Revocation of Premier Status.--The 
Administrator may suspend or revoke an accredited certified 
development company's premier status if the Administrator 
determines, after a hearing on the record as set forth in 
sections 554, 556, and 557 of title 5, United States Code, that 
the accredited certified development company no longer meets 
the eligibility criteria for premier status as established 
under this section or failed to adhere to the Administrator's 
rules, regulations, or is violating some other provision of 
law. Such revocation or suspension shall have no effect on its 
status as an accredited certified development company.
  (d) Loan Loss Reserve.--
          (1) Assets.--Each loan loss reserve maintained by the 
        premier certified development company for loans made 
        pursuant to the authority in subsection (g)(1) shall be 
        comprised of--
                  (A) segregated funds on deposit in an account 
                or accounts with a federally insured depository 
                institution or institutions selected by the 
                company, subject to a collateral assignment in 
                favor of, and in a format acceptable to, the 
                Administrator that shall amount to 10 percent 
                of the company's exposure as determined 
                pursuant to subsection (b)(6);
                  (B) irrevocable letter or letters of credit, 
                with a collateral assignment in favor of, and a 
                commercially reasonable format acceptable to, 
                the Administrator; or
                  (C) any combination of the assets described 
                in subparagraphs (A) and (B).
          (2) Contributions.--The company shall make 
        contributions to the loss reserve, either cash or 
        letters of credit as provided above, in the following 
        amounts and at the following intervals:
                  (A) 50 percent when a debenture is closed.
                  (B) 25 percent additional not later than 1 
                year after a debenture is closed.
                  (C) 25 percent additional not later than 2 
                years after a debenture is closed.
          (3) Replenishment.--If a loss has been sustained by 
        the Administrator, any portion of the loss reserve, and 
        other funds provided by the premier certified 
        development company as necessary, may be used to 
        reimburse the Administrator for the premier certified 
        development company's share of the loss as provided for 
        in subsection (b)(6). If the premier certified 
        development company utilizes the reserve, it shall, 
        within 30 calendar days, replace an equivalent amount 
        of funds.
          (4) Disbursements.--
                  (A) In general.--The Administrator shall 
                allow the premier certified development company 
                to withdraw from the loss reserve amounts 
                attributable to any debenture that has been 
                repaid.
                  (B) Reduction.--The Administrator shall allow 
                the premier certified development company to 
                withdraw from the loss reserve such amounts as 
                are in excess of 1 percent of the aggregate 
                outstanding balances of debentures to which 
                such loss reserve relates. The reduction 
                authorized by this subparagraph shall not apply 
                with respect to any debenture before 100 
                percent of the contribution described in 
                paragraph (2) with respect to such debenture 
                has been made.
                  (C) Rule of construction.--The provision 
                contained in subparagraph (B) shall be read as 
                if enacted prior to a date 2 years and 90 days 
                after the date of enactment of the Small 
                Business Financing and Investment Act of 2009.
  (e) Bureau of Premier Certified Development Company Lender 
Oversight.--
          (1) In general.--There is hereby established a Bureau 
        of Premier Certified Development Company Lender 
        Oversight in the Office of Lender Oversight at the 
        Administration which shall have responsibility and 
        capability for carrying out oversight of premier 
        certified development companies and such other 
        responsibilities as the Administrator designates.
          (2) Annual review.--The Bureau established in 
        paragraph (1) annually shall review the financing made 
        by each premier certified development company. Such 
        review shall include the premier certified development 
        company's credit decisions and general compliance with 
        the eligibility requirements for each financing 
        approved as a result of its status as a premier 
        certified development company.
          (3) Random audits.--The Bureau shall develop and 
        implement a method for sampling the debentures issued 
        by premier certified development companies. Such 
        sampling shall be similar to the random file audits of 
        development companies that utilize the Abridged 
        Submission Method described in chapter 4 of subpart C 
        of Standard Operating Procedure 50 10 (5)(A) as was in 
        effect on March 2, 2009.
          (4) Review of lenders providing senior financing.--
                  (A) Calculation of loan loss rate.--The 
                Bureau shall periodically calculate the loss 
                rate of all debentures approved under this 
                section and shall calculate a loss rate on the 
                basis of the total debentures attributable to 
                projects approved by premier certified 
                development companies in which each lender is a 
                participating lender.
                  (B) Notification.--If the Bureau determines 
                that the loss rate on debentures involving an 
                individual lender exceeds the average for all 
                debentures approved under this section, it 
                shall advise the Administrator.
          (5) Use of reviews and audits.--The Administrator 
        shall consider the findings under paragraphs (2), (3), 
        and (4) in carrying out the responsibilities under 
        subsection (h).
  (f) Sale of Certain Defaulted Loans.--
          (1) Notice.--If, upon default in repayment, the 
        Administrator acquires a debenture issued by a premier 
        certified development company and identifies such loan 
        for inclusion in a bulk asset sale of defaulted or 
        repurchased loans or other financing, the Administrator 
        shall give prior notice thereof to any premier 
        certified development company which has a contingent 
        liability under this section. The notice shall be given 
        to the premier certified development company as soon as 
        possible after the financing is identified, but not 
        less than 90 days before the date the Administrator 
        first makes any records on such financing available for 
        examination by prospective purchasers prior to its 
        offering in a package of loans for bulk sale.
          (2) Limitations.--The Administrator shall not offer 
        any loan described in paragraph (1) as part of a bulk 
        sale unless the Administrator--
                  (A) provides prospective purchasers with the 
                opportunity to examine the Administration's 
                records with respect to such loan; and
                  (B) provides the notice required by paragraph 
                (1).
  (g) Loan Approval Authority.--
          (1) In general.--A premier certified development 
        company may, under conditions determined by the 
        Administrator in regulations published in the Code of 
        Federal Regulations, issue guarantees on debentures, 
        approve, authorize, close, service, foreclose, litigate 
        (except that the Administrator may monitor conduct of 
        any such litigation), and liquidate loans that are 
        funded with proceeds of a debenture issued by a premier 
        certified development company unless the Administrator 
        advises the company that loans involving a specific 
        institutional lender are to be submitted to the 
        Administrator for further consideration, and approval 
        by the Administrator.
          (2) Program goals.--Each premier certified 
        development company shall establish a goal of 
        processing no less than 50 percent of the applications 
        for assistance under this title that the premier 
        certified development company receives. Failure to meet 
        this goal shall have no affect on the company's status 
        as a premier certified development company under this 
        section.
          (3) Scope of review.--The approval of a loan and 
        guarantee of a debenture by a premier certified 
        development company shall be subject to final approval 
        as to the eligibility of any guarantee by the 
        Administrator as set forth in section 506, but such 
        final approval shall not include review of decisions by 
        the premier certified development company involving 
        creditworthiness, loan closing, or compliance with 
        legal requirements imposed by law or regulation.
  (h) Suspension or Revocation.--The Administrator may suspend 
or revoke an accredited certified development company's premier 
status if the Administrator determines, after a hearing on the 
record as set forth in sections 554, 556, and 557 of title 5, 
United States Code, that the accredited certified development 
company no longer meets the eligibility criteria established 
under this section, fails to maintain adequate loan loss 
reserves mandated in this section even if it meets the other 
eligibility requirements for premier status, or violates the 
Administrator's rules, regulations, or some other provision of 
law. The Administrator shall consider the review of the premier 
certified development company conducted pursuant to subsection 
(e) in determining whether to suspend or revoke an accredited 
development company's premier status. Such suspension or 
revocation shall have no effect on the development company's 
status as an accredited certified development company.
  (i) Effect of Suspension or Revocation.--A suspension or 
revocation of premier status shall not affect any outstanding 
debenture guarantee.
  (j) Rule of Construction.--Any reference to the term 
``premier certified lender'' or ``PCL'' in legislation enacted, 
or regulations adopted, prior to the enactment of the Small 
Business Financing and Investment Act of 2009 shall be deemed 
to be a reference to the term ``premier certified development 
company''.

SEC. 505. MULTI-STATE OPERATIONS.

  (a) Authorization.--The Administrator shall permit an 
accredited or premier certified development company to make 
loans or issue debentures in any State that is contiguous to 
the State of incorporation of that company only if the 
company--
          (1) has members, from each of the States in which it 
        operates with not fewer than 25 members who reside in 
        such States;
          (2) has a board of directors that contains not fewer 
        than 2 members from each State in which the company 
        makes loans and issues debentures and are residents of 
        that State;
          (3) maintains a separate loan committee to process 
        loans in each expansion State and the members of the 
        loan committee are solely residents of the expansion 
        State; and
          (4) files an application developed by the 
        Administrator which provides--
                  (A) notice of the intention to make loans in 
                multiple States;
                  (B) a specification of the States in which 
                the company intends to make loans;
                  (C) a list of members in each expansion 
                State; and
                  (D) a detailed statement on how the company 
                will comply with the requirements of this 
                subsection.
  (b) Loan Committees.--The requirements of paragraph (3) of 
subsection (a) shall not require a development company to 
establish a loan committee in its State of incorporation or in 
a local economic area outside the State of incorporation unless 
such area is part of an expansion State.
  (c) Review.--
          (1) In general.--The Administrator shall review each 
        application for expansion under subsection (a), but 
        such review shall be limited to that information needed 
        to determine whether the company will comply with the 
        requirements of subsection (a).
          (2) Deadline for decision.--The Administrator shall 
        make a decision on each application under subsection 
        (a) within 15 calendar days after the receipt of the 
        application. If no such decision is granted, the 
        application is deemed to be approved and no further 
        action is required by the applicant or the 
        Administrator for the company to expand into the States 
        specified in the application.
          (3) Application resubmittal.--If the Administrator 
        rejects the application for expansion, the 
        Administrator shall provide in writing the reasons for 
        denial within 10 calendar days of the decision. The 
        applicant then may resubmit the application but the 
        review of such resubmitted applications will be limited 
        only to the areas in which the Administrator found the 
        original application deficient. The deadlines in 
        paragraph (2) shall apply to resubmitted applications.
          (4) Appeal.--If a resubmitted application is denied, 
        the applicant may, within 10 calendar days after 
        receipt of the disapproval, appeal such disapproval. 
        The Administrator shall conduct a hearing to determine 
        such appeal pursuant to sections 554, 556, and 557 of 
        title 5, United States Code, and shall issue a decision 
        not later than 45 days after the appeal is filed. The 
        decision on appeal shall constitute final agency action 
        for purposes of chapter 7 of title 5, United States 
        Code.
  (d) Failure To Develop Application.--If the Administrator 
fails to develop an application as required in subsection 
(a)(4) within 60 days of the enactment of the Small Business 
Financing and Investment Act of 2009, an accredited or premier 
certified development company only need submit the information 
required in subsection (a) to the Administrator to be deemed 
eligible to commence operations authorized by this section. 
Such eligibility shall not be terminated if the Administrator 
develops an application after the 60-day period set forth in 
this subsection.
  (e) Aggregate Accounting.--An accredited or premier certified 
development company authorized to operate in multiple States 
pursuant to this section may maintain an aggregate accounting 
of all revenue and expenses of the company for purposes of this 
title.
  (f) Local Job Creation Requirements.--
          (1) In general.--Any company making loans in multiple 
        States as authorized in this section shall not count 
        jobs created or retained in one State towards any 
        applicable job creation or retention requirements 
        mandated by this title in another State.
          (2) Applicability.--Any company operating under the 
        authority of this section shall be required to meet any 
        job creation or retention requirement of this title on 
        the date that is 2 years after the certified 
        development company closed its first loan in its new 
        State of operation.
  (g) Contiguous States.--For the purposes of this section, the 
States of Alaska and Hawaii shall be deemed to be contiguous to 
any State abutting the Pacific Ocean. Territories of the United 
States located in the Pacific Ocean shall be deemed to be 
contiguous to any State abutting the Pacific Ocean, including 
Alaska and Hawaii, and territories of the United States located 
in the Caribbean Sea shall be deemed contiguous to any State 
abutting the Gulf of Mexico.
  (h) Exemption for Local Economic Areas.--Except as provided 
in subsection (a)(3) with respect to loan committees, any 
certified, accredited, or premier development company or 
applicant operating in a local economic development area that 
crosses the border of another State shall not be considered to 
be operating under the provisions of this section and shall not 
be required to comply with the requirements of this section for 
multi-State operation.

SEC. 506. GUARANTY OF DEBENTURES.

  (a) Authority To Guarantee.--Except as provided in subsection 
(c), the Administrator may guarantee the timely payment of all 
principal and interest as scheduled on any debenture issued by 
a certified development company.
  (b) Terms and Conditions of the Guarantee.--Such guarantees 
may be made on such terms and conditions as the Administrator 
may by regulation, published in the Code of Federal 
Regulations, determine to be appropriate, except that the 
Administrator shall not decline to issue such guarantee when 
the ownership interests of the small business concern and the 
ownership interests of the property to be financed with the 
proceeds of the loan made pursuant to subsection (e)(1) are not 
identical because one or more of the following classes of 
relatives have an ownership interest in either the small 
business concern or the property: father, mother, son, 
daughter, wife, husband, brother, or sister, if the 
Administrator or his designee has determined on a case-by-case 
basis that such ownership interest, such guarantee, and the 
proceeds of such loan, will substantially benefit the small 
business concern.
  (c) Full Faith and Credit.--The full faith and credit of the 
United States is pledged to the payment of all amounts 
guaranteed under this section.
  (d) Subordination.--Any debenture issued by a certified 
development company with respect to which a guarantee is made 
under this section may be subordinated by the Administrator to 
any other debenture, promissory note, or other debt or 
obligation of such company.
  (e) Standards for Administrator Guarantees.--No guarantee may 
be made with respect to any debenture under this section 
unless--
          (1) the debenture is issued for the purpose of making 
        one or more loans to small business concerns the 
        proceeds of which shall be used for the purposes set 
        forth in section 507;
          (2) the interest rate on such debentures is not less 
        than the rate of interest determined by the Secretary 
        of the Treasury for purposes of section 303(b);
          (3) 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;
          (4) the amount of any loan to be made from such 
        proceeds does not exceed an amount equal to 50 percent 
        of the cost of the project with respect to which such 
        loan is made;
          (5) the Administrator, except to the extent provided 
        in section 504 with respect to premier certified 
        development companies, approves each loan to be made 
        from such proceeds; and
          (6) with respect to each loan made from the proceeds 
        of such debenture, the Administrator--
                  (A) assesses and collects a fee, which shall 
                be payable by the borrower, in an amount 
                established annually by the Administration, 
                which amount shall not exceed--
                          (i) the lesser of--
                                  (I) 0.9375 percent per year 
                                of the outstanding balance of 
                                the loan; or
                                  (II) the minimum amount 
                                necessary to reduce the cost 
                                (as defined in section 502 of 
                                the Federal Credit Reform Act 
                                of 1990) to the Administrator 
                                of purchasing and guaranteeing 
                                debentures under this title to 
                                zero; and
                          (ii) 50 percent of the amount 
                        established under clause (i) in the 
                        case of a loan made during the 2-year 
                        period beginning on October 1, 2002, 
                        for the life 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 Administrator of making guarantees under 
                this section.
  (f) Interest Rates on Commercial Loans.--Notwithstanding the 
provisions of the constitution or laws of any State limiting 
the rate or amount of interest which may be charged, taken, 
received, or reserved, the maximum legal rate of interest on 
any commercial loan which funds any portion of the cost of the 
project financed pursuant to this title which is not funded by 
a debenture guaranteed under this section shall be a rate which 
is established by the Administrator who shall publish such rate 
quarterly in, at a minimum, the Federal Register and on the 
Administration's website.
  (g) Debenture Repayment.--Any debenture that is issued under 
this section shall provide for the payment of principal and 
interest on a semiannual basis.
  (h) Charges for Administrator's Expenses.--The Administrator 
may impose an additional charge for administrative expenses 
with respect to each debenture for which payment of principal 
and interest is guaranteed under this section. Such 
administrative expenses may include--
          (1) development company fees for processing, closing, 
        servicing, late payment, or loan assumption;
          (2) agent or trustee fees for central servicing, 
        underwriters, or debenture funding; and
          (3) fees charged by the Administrator for the 
        debenture guaranty and from the certified development 
        company to reduce the subsidy cost.
  (i) Participation Fee.--The Administrator shall collect a 
one-time fee in an amount equal to 50 basis points on the total 
participation in any project of any State or local government, 
bank, other financial institution, or foundation or not-for-
profit institution. Such fee shall be imposed only when the 
participation of the entity described in the previous sentence 
will occupy a senior credit position to that of the development 
company. All proceeds of the fee shall be used to offset the 
cost (as that term is defined in section 502 of the Credit 
Reform Act of 1990) to the Administrator of making guarantees 
under this section.
  (j) Certified Development Company Fee.--The Administrator 
shall collect annually from each development company a fee of 
0.125 percent of the outstanding principal balance of any 
guaranteed debenture authorized by the Administrator after 
September 30, 1996. Such fee shall be derived from the 
servicing fees collected by the certified development company 
pursuant to regulation, and shall not be derived from any 
additional fees imposed on small business concerns. All 
proceeds of the fee shall be used to offset the cost (as that 
term is defined in section 502 of the Credit Reform Act of 
1990) to the Administrator of making guarantees under this 
section.
  (k) Effective Date.--The fees authorized by this section 
shall apply to any financing approved under this title on or 
after October 1, 1996.
  (l) Calculation of Subsidy Rate.--All fees, interest, and 
profits received and retained by the Administrator under this 
section shall be included in the calculations made by the 
Director of the Office of Management and Budget to offset the 
cost (as that term is defined in section 502 of the Federal 
Credit Reform Act of 1990) to the Administrator of purchasing 
and guaranteeing debentures under this title.
  (m) Actions Upon Default.--
          (1) Initial actions.--Not later than the 45th day 
        after the date on which a payment on a loan funded 
        through a debenture guaranteed under this section is 
        due and not received, the Administrator shall--
                  (A) take all necessary steps to bring such 
                loan current; or
                  (B) implement a formal written deferral 
                agreement.
          (2) Purchase or acceleration of debenture.--Not later 
        than the 65th day after the date on which a payment on 
        a loan described in paragraph (1) is due and not 
        received, and absent a formal written deferral 
        agreement, the Administrator shall take all necessary 
        steps to purchase or accelerate the debenture.
          (3) Prepayment penalties.--With respect to the 
        portion of any project derived from funds not provided 
        by a debenture issued by a certified development 
        company or borrower, the Administrator--
                  (A) shall negotiate the elimination of any 
                prepayment penalties or late fees on defaulted 
                loans made prior to September 30, 1996;
                  (B) shall not pay any prepayment penalty or 
                late fee on the default based purchase of loans 
                issued after September 30, 1996; and
                  (C) shall not pay a default interest rate 
                higher than the interest rate on the note prior 
                to the date of default for any project financed 
                after September 30, 1996.
          (4) Collection and servicing.--
                  (A) In general.--In the event of the default 
                of any loan and the repurchase of a debenture 
                guaranteed by the Administrator under this 
                title, the Administrator shall continue to 
                delegate to the central servicing agent that 
                was contracted for that service as of January 
                1, 2009, or successor contractor the authority 
                to collect and disburse all funds or payments 
                received on such defaulted loans, including 
                payments from guarantors or on notes in 
                compromise of the original note. The central 
                servicing agent shall continue to provide an 
                accounting of income and expenses for any such 
                loan on the same basis it does for any other 
                loan issued under this title. The central 
                servicing agent shall make the accounting of 
                income and expenses and reports thereon 
                available as requested by the certified 
                development company that issued the debenture 
                or the Administrator.
                  (B) Effective date.--The requirements of 
                subparagraph (A) shall become effective 180 
                days after the date of enactment of the Small 
                Business Financing and Investment Act of 2009.

SEC. 507. ECONOMIC DEVELOPMENT AND DEBENTURES.

  (a) In General.--A certified development company shall be 
prohibited from issuing a debenture under this title unless the 
project funded with the debenture meets one of the following 
economic development objectives:
          (1) The creation of job opportunities within two 
        years of the completion of the project or the 
        preservation or retention of jobs attributable to the 
        project.
          (2) Improving the economy of the locality, such as 
        stimulating other business development in the 
        community, bringing new income into the area, or 
        assisting the community in diversifying and stabilizing 
        its economy.
          (3) The achievement of one or more of the following 
        public policy goals:
                  (A) Business district revitalization or 
                expansion of businesses in low-income 
                communities which would be eligible for a new 
                markets tax credit under section 45D(a) of the 
                Internal Revenue Code of 1986, or implementing 
                regulations issued under that section.
                  (B) Expansion of exports.
                  (C) Expansion of minority business 
                development or women-owned business 
                development.
                  (D) Rural development.
                  (E) Expansion of small business concerns 
                owned and controlled by veterans, as defined in 
                section 3(q) of the Small Business Act (15 
                U.S.C. 632(q)), especially service-disabled 
                veterans, as defined in such section.
                  (F) Enhanced economic competition, including 
                the advancement of technology, plan retooling, 
                conversion to robotics, or competition with 
                imports.
                  (G) Changes necessitated by Federal budget 
                cutbacks, including defense related industries.
                  (H) Business restructuring arising from 
                federally mandated standards or policies 
                affecting the environment or the safety and 
                health of employees.
                  (I) Reduction of energy consumption by at 
                least 10 percent.
                  (J) Increased use of sustainable design, 
                including designs that reduce the use of 
                greenhouse gas emitting fossil fuels, or low-
                impact design to produce buildings that reduce 
                the use of nonrenewable resources and minimize 
                environmental impact.
                  (K) Plant, equipment, and process upgrades of 
                renewable energy sources such as the small-
                scale production of energy for individual 
                buildings or communities consumption, commonly 
                known as micropower, or renewable fuels 
                producers including biodiesel and ethanol 
                producers.
          (4) Debt refinancing to the extent permitted by 
        subsection (d).
  (b) Job Creation and Retention Requirements.--
          (1) In general.--A project meets the job creation or 
        retention objective set forth in subsection (a)(1) if 
        the project creates or retains one job for every 
        $65,000 guaranteed by the Administrator, except that 
        the amount shall be $100,000 in the case of a project 
        of a small manufacturer.
          (2) Exceptions.--
                  (A) Paragraph (1) shall not apply to a 
                project for which eligibility is based on the 
                objectives set forth in subsection (a)(2) or 
                (a)(3) if the certified development company's 
                portfolio of outstanding debentures creates or 
                retains one job for every $65,000 guaranteed by 
                the Administrator.
                  (B) For projects in Alaska, Hawaii, State-
                designated enterprise zones, empowerment zones, 
                enterprise communities, or labor surplus areas 
                designated by the Administrator, the certified 
                development company's portfolio may average not 
                more than $75,000 per job created or retained.
                  (C) Loans for projects of small manufacturers 
                shall be excluded from the calculations in 
                subparagraphs (A) and (B).
  (c) Combination of Certain Goals.--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 goal under 
subsection (a)(3) if a combined ownership share of not less 
than 51 percent is held by individuals who are in 1 of, or a 
combination of, the groups described in subparagraphs (C) or 
(E) of subsection (a)(1).
  (d) Composition of the Project.--
          (1) In general.--The projects described in this 
        section shall include, but not be limited to, plant 
        acquisition, construction, conversion, expansion 
        (including the acquisition of land), equipment and 
        related project costs, or to acquire the stock of a 
        corporation (as long as the value of the loan for the 
        acquisition of the stock does not exceed the fixed 
        asset value attributable to such assets as would be 
        eligible for financing under subsection (a)).
          (2) Debt refinancing.--Any financing approved under 
        this title may include a limited amount of debt 
        refinancing if the project involves the expansion of a 
        small business concern.
          (3) Limitation.--The amount of the existing 
        indebtedness may be refinanced and added to the 
        expansion cost if--
                  (A) the existing indebtedness does not exceed 
                50 percent of the project cost of the 
                expansion;
                  (B) the proceeds of the indebtedness were 
                used to acquire land, including a building 
                situated thereon, to construct a building 
                thereon, or to purchase equipment;
                  (C) the existing indebtedness is 
                collateralized by fixed assets;
                  (D) the existing indebtedness was incurred 
                for the benefit of the small business concern;
                  (E) the financing under this title will be 
                used only for refinancing existing indebtedness 
                or costs relating to the project financed under 
                this title;
                  (F) the financing under this title will 
                provide a substantial benefit to the borrower 
                when prepayment penalties, financing fees, and 
                other financing costs are accounted for;
                  (G) the borrower has been current on all 
                payments due on the existing debt for not less 
                than 1 year preceding the date of refinancing; 
                and
                  (H) the financing under this title will 
                provide better terms or rate of interest than 
                the existing indebtedness at the time of 
                refinancing.
  (e) Definition.--For purposes of subparagraphs (J) and (K) of 
subsection (a)(3), the terms included have the meanings given 
those terms under the Leadership in Energy and Environmental 
Design (more generally referred to as LEED) standard for green 
building certification, as determined by the Administrator 
through regulation to be published in the Code of Federal 
Regulations.

SEC. 508. PROJECT FUNDING REQUIREMENTS.

  (a) In General.--Any project described in section 507 must 
meet the funding standards set forth in this section.
  (b) Size of Debenture.--The Administrator shall only be 
permitted to guarantee debenture issued by a certified 
development company up to the following amounts:
          (1) $3,000,000 for any project of a small business 
        concern.
          (2) $4,000,000 for any project that meets the public 
        policy goals set forth in section 507(a)(3).
          (3) $4,000,000 for any project to be located in a 
        low-income community as that term is described in 
        section 507(a)(3)(A).
          (4) $8,000,000 for each project of a small 
        manufacturer.
          (5) $8,000,000 for each project that reduces the 
        borrower's energy consumption by at least 10 percent.
          (6) $8,000,000 for each project that generates 
        renewable energy or renewable fuels, such as, but not 
        limited to, biodiesel or ethanol production.
          (7) $10,000,000 for each project for a small business 
        concern that constitutes a major source of employment 
        as that term is used in section 7(b)(3)(E) of the Small 
        Business Act (15 U.S.C. 636(b)(3)(E)).
  (c) Funding From Sources Other Than Debentures Issued by 
Certified Development Companies.--
          (1) In general.--Any project financed pursuant to 
        this title must have the following contributions from 
        parties other than the debenture issued by the 
        certified development company:
                  (A) Funding from institutions.--
                          (i) If a small business concern 
                        provides--
                                  (I) the minimum contribution 
                                required by subparagraph (B), 
                                not less than 50 percent of the 
                                total cost of any project 
                                financed shall come from State 
                                or local governments, banks or 
                                other financial institutions, 
                                or foundations or other not-
                                for-profit institutions; and
                                  (II) more than the minimum 
                                contribution required under 
                                subparagraph (B), any excess 
                                contribution may be used to 
                                reduce the amount required from 
                                institutions described in 
                                subclause (I), except that the 
                                amount provided by such 
                                institution may not be reduced 
                                to an amount that is less than 
                                the amount of the loan made by 
                                the Administrator.
                  (B) Funding from small business concerns.--
                The small business concern (or its owners, 
                stockholders, or affiliates) that will have a 
                project financed pursuant to this title shall 
                provide--
                          (i) at least 15 percent of the total 
                        cost of the project financed if the 
                        small business concern has been in 
                        operation for a period of 2 years or 
                        less;
                          (ii) at least 15 percent of the total 
                        cost of the project financed if the 
                        project involves construction of a 
                        limited or single purposed building or 
                        structure;
                          (iii) at least 20 percent of the 
                        total cost of the project financed if 
                        the project involves both of the 
                        conditions in clauses (i) and (ii); or
                          (iv) at least 10 percent of the total 
                        cost of the project financed and not 
                        covered by clauses (i), (ii), or (iii), 
                        at the discretion of the certified 
                        development company.
          (2) Seller financing.--Seller-provided financing may 
        be used to meet the requirements of paragraph (1)(B), 
        if the seller subordinates the interest of the seller 
        in the property to the debenture guaranteed by the 
        Administrator.
          (3) Collateralization.--
                  (A) In general.--The collateral provided by 
                the small business concern shall generally 
                include a subordinate lien position on the 
                property being financed under this title, and 
                is only one of the factors to be evaluated in 
                the credit determination. Additional collateral 
                shall be required only if the Administrator 
                determines, on a case-by-case basis, that 
                additional security is necessary to protect the 
                interest of the Government.
                  (B) Appraisals.--With respect to commercial 
                real property provided by the small business 
                concern as collateral, an appraisal of the 
                property by a State licensed or certified 
                appraiser--
                          (i) shall be required by the 
                        Administrator before disbursement of 
                        the loan if the estimated value of that 
                        property is more than $400,000; or
                          (ii) may be required by the 
                        Administrator or the lender before 
                        disbursement of the loan if the 
                        estimated value of that property is 
                        $400,000 or less, and such appraisal is 
                        necessary for appropriate evaluation of 
                        creditworthiness.
                  (C) Adjustment.--The Administrator shall 
                periodically adjust the amount under 
                subparagraph (B) to account for the effects of 
                inflation, provided that no such adjustment 
                shall be less than $50,000.
          (4) Limitation on leasing.--
                  (A) If the project funded under this section 
                includes the acquisition of a facility or the 
                construction of a new facility, the small 
                business concern--
                          (i) shall permanently occupy and use 
                        not less than 50 percent of the project 
                        property; and
                          (ii) may, on a temporary or permanent 
                        basis, lease to others not more than 50 
                        percent of the project property.
                  (B) For purposes of this paragraph, the term 
                ``project property'' means--
                          (i) the building and any exterior 
                        areas used in connection with the 
                        building or a part thereof and includes 
                        all of the parcels of real property 
                        included in the project in the 
                        aggregate; and
                          (ii) occupancy and use of the project 
                        property by the operating company shall 
                        be deemed to be occupancy and use by 
                        the small business concern that 
                        received funding under this section.
  (d) Regulations.--(1) The Administrator shall promulgate 
regulations, after notice and comment, to implement the 
provisions of this section within 60 days after enactment of 
the Small Business Financing and Investment Act of 2009. The 
Administrator may limit the comment period to 15 days to meet 
this deadline.
  (2) If the Administrator fails to promulgate the regulations 
as provided in paragraph (1), all leases entered into, absent 
clear and convincing evidence of fraud, shall be deemed to be 
in compliance with the limitations on leasing in this 
subparagraph for purposes of honoring the guarantee on the 
debenture issued by the certified development company.
  (3) Any regulation of the Administrator or interpretation of 
any regulation by the Administrator or the Office of Hearings 
and Appeals that restricts the use of proceeds for leased 
projects that was in effect on the date of enactment of the 
Small Business Financing and Investment Act of 2009 shall 
hereby cease to apply.
  (4) Any interpretation of the leasing provisions issued by 
the Administrator prior to the issuance of regulations required 
by paragraph (1) shall be considered null and void and may be 
not be used in any court of competent jurisdiction, be it 
Federal or State court, to dishonor any guarantee of a 
debenture issued by a certified development company for a 
project funded pursuant to this section.
  (e) Ownership Calculation.--Ownership requirements to 
determine the eligibility of a small business concern that 
applies for funding under this title shall be determined 
without regard to any ownership interest of a spouse arising 
solely from the application of the community property laws of a 
State for purposes of determining marital interests.
  (f) Combination Financing.--Financing under this title may be 
provided to a borrower in the maximum amount provided in this 
section, and a loan guarantee under section 7(a) of the Small 
Business Act (15 U.S.C. 636(a)) 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.
  (g) Rules for Debentures Funding Projects in Low-Income 
Areas.--
          (1) Size standards.--For purposes of determining the 
        size of a small business concern seeking funds for a 
        project described in subsection (b)(3), the size 
        standard promulgated by the Administrator in section 
        121.201 of title 13, Code of Federal Regulations, as in 
        effect on January, 1, 2009, or any successor 
        regulation, shall be increased by 25 percent.
          (2) Personal liquidity.--
                  (A) In general.--The amount of personal 
                resources of an owner for a project described 
                in subsection (b)(3) that are excluded from the 
                amount required to reduce the portion of the 
                project funded by the Administrator shall be 
                not less than 25 percent more than that 
                required for funding of any other project 
                described in subsection (b).
                  (B) Definition.--For purposes of subparagraph 
                (A), the term ``owner'' means any person that 
                owns not less than 20 percent of the equity or 
                has not less than 20 percent of the voting 
                rights (in the case of a small business 
                organized as a partnership) of a small business 
                concern seeking funds under this section.
  (h) Applicability of Credit Elsewhere and Personal Resources 
Regulations.--Except as provided in subsection (c)(1)(B) with 
respect to project funding, the Administrator shall be 
prohibited from applying the regulations set forth in sections 
120.101 and 120.102 of title 13, Code of Federal Regulations, 
as in effect on January 1, 2009, or any successor regulation 
that applies a credit elsewhere or personal resources test to 
any application for a loan under this title pending or filed 
after the date of enactment of the Small Business Financing and 
Investment Act of 2009.

SEC. 509. PRIVATE DEBENTURE SALES AND POOLING OF DEBENTURES.

  (a) Private Debenture Sales.--Notwithstanding any other law, 
rule, or regulation, the Administrator shall sell to investors, 
either publicly or by private placement, debentures issued by 
certified development companies pursuant to this title for the 
full amount of the program levels authorized in each fiscal 
year and if there is not authorization of a level, the amount 
of debentures actually issued.
  (b) Federal Financing Bank.--Nothing in any provision of law 
shall be construed to authorize the Federal Financing Bank to 
acquire--
          (1) any obligation the payment of principal or 
        interest on which at any time has been guaranteed in 
        whole or in part under this title and which is being 
        sold pursuant to the provisions of this section;
          (2) any obligation which is an interest in any 
        obligation which is an interest in any obligation 
        described in paragraph (1); or
          (3) any obligation which is secured by, or 
        substantially all of the value of which is attributable 
        to, any obligation described in paragraph (1) or (2).
  (c) Pooling of Debentures.--
          (1) In general.--The Administrator is authorized to 
        issue trust certificates representing ownership of all 
        or a fractional part of debentures issued by certified 
        development companies and guaranteed under this title 
        if such trust certificates are based on and backed by a 
        trust or pool approved by the Administrator and 
        composed solely of guaranteed debentures.
          (2) Guarantee of trust certificates.--The 
        Administrator is authorized, upon such terms and 
        conditions as are deemed appropriate, to guarantee the 
        timely payment of the principal of and interest on 
        trust certificates issued by the Administrator or its 
        agent for purposes of this section. Such guarantee 
        shall be limited to the extent of principal and 
        interest on the guaranteed debentures which compose the 
        trust or pool. In the event that a debenture in such 
        trust or pool is prepaid, either voluntarily or in the 
        event of default, the guarantee of timely payment of 
        principal and interest on the trust certificates shall 
        be reduced in proportion to the amount of principal and 
        interest such prepaid debenture represents in the trust 
        or pool. Interest on prepaid or defaulted debentures 
        shall accrue and be guaranteed by the Administrator 
        only through the date of payment on the guarantee. 
        During the term of the trust certificate, it may be 
        called for redemption due to prepayment or default of 
        all debentures constituting the pool.
          (3) Full faith and credit.--The full faith and credit 
        of the United States is pledged to the payment of all 
        amounts which may be required to be paid under any 
        guarantee of such trust certificates issued by the 
        Administrator or its agent pursuant to this section.
          (4) Prohibition on guarantee fee for pools.--The 
        Administrator shall not collect any fee for any 
        guarantee under this section, provided that nothing 
        herein shall preclude any agent of the Administrator 
        from collecting a fee approved by the Administrator for 
        the functions performed in paragraph (6)(F).
          (5) Subrogation.--
                  (A) In general.--In the event the 
                Administrator pays a claim under a guarantee 
                issued under this section, it shall be 
                subrogated fully to the rights satisfied by 
                such payment.
                  (B) Administrator exercise of rights.--No 
                Federal, State, or local law shall preclude or 
                limit the exercise by the Administrator of its 
                ownership rights in the debentures constituting 
                the trust or pool against which the trust 
                certificates are issued.
          (6) Central registration.--
                  (A) In general.--The Administrator shall 
                provide for a central registration of all trust 
                certificates sold pursuant to this section.
                  (B) Contract.--The Administrator shall 
                contract with an agent to carry out on behalf 
                of the Administrator the central registration 
                functions of this section and the issuance of 
                trust certificates to facilitate pooling.
                  (C) Bond.--The Administrator shall require 
                the contractor to provide a fidelity bond or 
                insurance in such amounts as is deemed 
                necessary to fully protect the interests of the 
                Government.
                  (D) Disclosure requirements.--The 
                Administrator shall, prior to any sale, require 
                the seller to disclose to a purchaser of a 
                trust certificate issued pursuant to this 
                section, information on terms, conditions, and 
                yield of such instruments.
                  (E) Authority to regulate.--The Administrator 
                shall have the authority to regulate brokers 
                and dealers in trust certificates sold pursuant 
                to this section.
                  (F) Book entry permitted.--Nothing in this 
                paragraph shall prohibit the utilization of a 
                book-entry or other electronic form of 
                registration for trust certificates.

SEC. 510. FORECLOSURE AND LIQUIDATION OF LOANS.

  (a) Delegation of Authority.--In accordance with this 
section, the Administrator shall delegate to any certified 
development company that meets the eligibility requirements of 
subsection (b)(1), 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 Administrator pursuant to this 
title.
  (b) Eligibility for Delegation.--
          (1) Requirements.--A certified development company 
        shall be eligible for a delegation of authority under 
        subsection (a) if--
                  (A) the certified development 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), before the enactment of the 
                        Small Business Financing and Investment 
                        Act of 2009;
                          (ii) is an accredited or premier 
                        certified development company; or
                          (iii) during the 3 fiscal years 
                        immediately prior to seeking such a 
                        delegation, has made an average of not 
                        less than 10 loans per year that are 
                        funded with the proceeds of debentures 
                        guaranteed under this title; and
                  (B) the certified development company--
                          (i) has one or more employees--
                                  (I) with not less than 2 
                                years of substantive, 
                                decisionmaking 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 
                                this title; and
                                  (II) who have completed a 
                                training program on loan 
                                liquidation developed by the 
                                Administrator in conjunction 
                                with a certified development 
                                company that meet the 
                                requirements of this paragraph; 
                                or
                          (ii) submits to the Administrator 
                        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 Administrator with 
                        respect to the qualifications of the 
                        contractor and the terms and conditions 
                        of liquidation activities.
          (2) Confirmation.--On the request, the Administrator 
        shall examine the qualifications of any certified 
        development company described in subsection (a) to 
        determine if such company is eligible for the 
        delegation of authority under this section. If the 
        Administrator determines that a company is not 
        eligible, the Administrator shall provide the company, 
        in writing, with the reasons for such ineligibility. 
        The certified development company shall be entitled to 
        request delegated authority and the Administrator shall 
        review the request only to address whether the 
        certified development company has rectified the reasons 
        for the Administrator's original determination of 
        ineligibility.
  (c) Scope of Delegated Authority.--
          (1) In general.--Each certified development company 
        to which the Administrator 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 
                Administrator under paragraph (2)(A);
                  (B) litigate any matter relating to the 
                performance of the functions described in 
                subparagraph (A), except that the Administrator 
                may--
                          (i) defend or bring any claim if--
                                  (I) the outcome of the 
                                litigation may adversely affect 
                                the Administrator's management 
                                of the program established 
                                under this title; or
                                  (II) the Administrator is 
                                entitled to legal remedies not 
                                available to a certified 
                                development company and such 
                                remedies will benefit either 
                                the Administrator or the 
                                certified development company; 
                                and
                          (ii) oversee the conduct of any such 
                        litigation; and
                  (C) take other appropriate actions to 
                mitigate loan losses in lieu of total 
                liquidation or foreclosures, including the 
                restructuring of a loan in accordance with 
                prudent loan servicing practices and pursuant 
                to a workout plan approved in advance by the 
                Administrator under paragraph (2).
          (2) Administrator approval of plans.--
                  (A) Certified development company submission 
                of plans.--Before carrying out functions 
                described in paragraph (1)(A) or (1)(C), the 
                certified development company shall submit to 
                the Administrator a proposed liquidation plan, 
                any proposal for the Administrator to the 
                purchase of any other indebtedness secured by 
                the property securing a defaulted loan, or a 
                workout plan or any combination thereof.
                  (B) Administrator approval procedures.--
                          (i) Timing.--Not later than 15 
                        business days after the plans described 
                        in subparagraph (A) are received by the 
                        Administrator, the Administrator shall 
                        approve or reject the plan.
                          (ii) Notice of no decision.--With 
                        respect to any plan that cannot be 
                        approved or denied within the 15-day 
                        period required by clause (i), the 
                        Administrator shall within such period 
                        provide in accordance with subparagraph 
                        (E) notice to the company that 
                        submitted the plan.
                  (C) Routine actions.--In carrying out the 
                functions described in paragraph (1)(A), a 
                certified development company may undertake 
                routine actions not addressed in a liquidation 
                or workout plan without obtaining additional 
                approval from the Administrator.
                  (D) Compromise of indebtedness.--In carrying 
                out functions described in paragraph (1)(A), a 
                certified 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 offer, release 
                        any obligor or other party contingently 
                        liable, if the company secures the 
                        written approval of the Administrator.
                  (E) Contents of notice of no decision.--Any 
                notice provided by the Administrator pursuant 
                to subparagraph (B)(ii) shall--
                          (i) be in writing stating the 
                        specific reasons for which the 
                        Administrator was unable to act on the 
                        request submitted pursuant to 
                        subparagraph (A);
                          (ii) provide an estimate of the 
                        additional time needed for the 
                        Administrator to reach a decision on 
                        the request; and
                          (iii) specify any additional 
                        information or documentation that the 
                        Administrator needs to make a decision 
                        but was not provided in the plan 
                        submitted by the certified development 
                        company.
          (3) Conflict of interest.--In carrying out functions 
        described in paragraph (1), a certified 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, 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.--
          (1) In general.--The Administrator may revoke or 
        suspend a delegation of authority under this section to 
        a certified development company if the Administrator 
        determines that the company--
                  (A) does not meet the requirements of 
                subsection (b)(1);
                  (B) violated any applicable law or rule or 
                regulation of the Administrator that in the 
                estimation of the Administrator requires 
                revocation; or
                  (C) fails to comply with any reporting that 
                may be established by the Administrator 
                relating to the establishment of eligibility in 
                subsection (b)(1) or carrying out the functions 
                described in subsection (c)(1).
          (2) Written notice.--The Administrator shall provide 
        in writing detailed reason why the delegation of 
        authority was suspended or revoked.
  (e) Participation in Liquidation.--
          (1) In general.--
                  (A) Contract with qualified third party.--A 
                certified 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.
                  (B) Contract approval.--The contract entered 
                into by the certified development company 
                specified in subparagraph (A) shall be 
                contingent upon approval by the Administrator 
                with respect to the qualifications of the 
                contractor and the terms and conditions of 
                liquidation activities. The Administrator shall 
                not unreasonably withhold such approval.
                  (C) Notification of rejection.--If the 
                Administrator rejects the contract, the 
                Administrator shall provide a notice to the 
                certified development company, in writing, 
                explaining the reasons for such rejection 
                within ten business days after submission of 
                the contract.
                  (D) Resubmittal.--The certified development 
                company shall be permitted to resubmit the 
                contract and the Administrator's review of any 
                such resubmittal shall be limited to 
                insufficiencies described in the notification 
                of rejection.
                  (E) Regulations.--The Administrator shall 
                promulgate regulations, after notice and 
                opportunity for comment, adopting standards for 
                the approval of qualified third-party 
                contractors within 90 days after the date of 
                enactment of the Small Business Financing and 
                Investment Act of 2009.
                  (F) Failure to promulgate regulations.--If 
                the Administrator fails to promulgate such 
                regulations, any contract for liquidation 
                entered into by a certified development company 
                under this subsection shall be considered valid 
                for the purposes of this subsection and 
                subsection (f).
                  (G) Effect of administrator's promulgation of 
                regulations.--If the Administrator promulgates 
                regulations after the deadline specified in 
                subparagraph (E), those regulations shall not 
                have any retroactive application with respect 
                to contracts that are described in subparagraph 
                (F).
          (2) Commencement.--This subsection shall not require 
        any certified development company to liquidate 
        defaulted loans until the Administrator implements a 
        system to compensate and reimburse certified 
        development companies for liquidation of any defaulted 
        loans.
  (f) Compensation and Reimbursement.--
          (1) Reimbursement of expenses.--The Administrator 
        shall reimburse each certified development company for 
        all expenses paid by such company as part of the 
        foreclosure and liquidation activities taken to carry 
        out this section, if the expenses--
                  (A) were--
                          (i) approved in advance by the 
                        Administrator, either specifically in a 
                        plan submitted pursuant to subsection 
                        (c) or generally, such as, but not 
                        limited to, actions approved by the 
                        Administrator in regulations or other 
                        interpretative issuances; or
                          (ii) 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; and
                  (B) are submitted by the certified 
                development company to the Administrator not 
                later than 3 years after the date the expense 
                was incurred or the bill therefore is submitted 
                to the certified development company, whichever 
                is later.
          (2) Alternative reimbursement.--As an alternative to 
        the procedure in paragraph (1), a certified development 
        company may elect to obtain reimbursement for all such 
        expenses from the proceeds of any collateral provided 
        by the borrower that was liquidated by the certified 
        development company if the expenses comply with the 
        requirements of paragraph (1). Within 6 months of the 
        reimbursement, the certified development company shall 
        provide the Administrator with the same information and 
        documentation it would be required to submit to obtain 
        payment from the Administrator.
          (3) Regulations.--The Administrator shall promulgate 
        regulations, after notice and comment to carry out the 
        provisions of paragraphs (1) and (2). If the 
        Administrator does not promulgate such regulations 
        within one year, certified development companies shall 
        be authorized, notwithstanding the requirements of 
        subsection (e)(2), to liquidate defaulted loans and 
        such costs and expenses incurred, absent clear and 
        convincing evidence of fraud, shall be deemed to be 
        approved.
          (4) Compensation for results.--
                  (A) Development.--In regulations promulgated 
                pursuant to paragraph (3), the Administrator 
                also shall develop a schedule of compensation 
                that provides monetary incentives for certified 
                development companies in order to increase 
                recoveries on defaulted loans.
                  (B) Criteria.--The schedule shall--
                          (i) be based on a percentage of the 
                        net amount recovered, but shall not 
                        exceed a maximum amount; and
                          (ii) not apply to any foreclosure 
                        which is conducted under a contract 
                        between a certified development company 
                        and a qualified third party to perform 
                        the foreclosure and liquidation.
                  (C) Payment.--The Administrator shall 
                transmit the compensation provided herein to 
                the development company from the proceeds of 
                liquidated collateral, unless the Administrator 
                utilizes another source for funds, within 30 
                days from the date when the liquidation case 
                has been closed and documentation received.

SEC. 511. REPORTS.

  (a) Premier Certified Development Companies.--The 
Administrator shall report annually to the Committee on Small 
Business of the House of Representatives and the Committee on 
Small Business and Entrepreneurship of the Senate on the 
implementation of section 504. Each report shall include--
          (1) the number of premier certified development 
        companies;
          (2) the debenture volume of each premier certified 
        development company;
          (3) a comparison of the loss rate for premier 
        certified development companies to the loss rate for 
        accredited or certified development companies; and
          (4) such other information as the Administrator deems 
        appropriate.
  (b) Reports on Liquidation and Foreclosures.--
          (1) In general.--Based on information provided by 
        certified development companies and the Administrator, 
        the Administrator shall submit annually to the 
        Committee on Small Business and Entrepreneurship of the 
        Senate and the Committee on Small Business of the House 
        of Representatives a report on the results of 
        delegation of authority under section 510.
          (2) Contents.--Each report submitted under paragraph 
        (1) shall include the following information:
                  (A) With respect to each loan foreclosed or 
                liquidated by a certified development company, 
                or for which losses were otherwise mitigated by 
                pursuant to a workout plan--
                          (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 certified 
                development company to which authority is 
                delegated under section 510, the totals of each 
                of the amounts described in clauses (i) through 
                (v) of subparagraph (A).
                  (C) With respect to each certified 
                development company that contracts with a 
                qualified third-party contractor pursuant to 
                section 510(e), the total of each of the 
                amounts described in clauses (i) through (v) of 
                subparagraph (A).
                  (D) With respect to all loans subject to 
                foreclosure, liquidation, or mitigation under 
                section 510, the totals of each of the amounts 
                described in clauses (i) through (v) of 
                subparagraph (A).
                  (E) A comparison between--
                          (i) the information provided under 
                        subparagraph (D) 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 Administrator during the same 
                        period.
                  (F) The number of times that the 
                Administrator has failed to approve or reject a 
                liquidation plan, workout plan, request to 
                purchase indebtedness, or failed to approve a 
                third-party contractor under section 510, 
                including specific information regarding the 
                reasons for the Administrator's failure and any 
                delays that resulted.
  (c) Reports on Combination Financing.--
          (1) Reporting requirement.--Not later than 90 days 
        after the date of enactment of the Small Business 
        Financing and Investment Act of 2009, and annually 
        thereafter, the Administrator shall submit a report to 
        the Committee on Small Business and Entrepreneurship of 
        the Senate and the Committee on Small Business of the 
        House of Representatives that--
                  (A) includes the number of small business 
                concerns that have financing under both section 
                7(a) of the Small Business Act (15 U.S.C. 
                636(a)) and title V of the Small Business 
                Investment Act of 1958 (15 U.S.C. 695 et seq.) 
                during the year before the year of that report; 
                and
                  (B) describes the total amount and general 
                performance of the financing described in 
                subparagraph (A).
  (d) Report on Other Economic Development Activity.--The 
Administrator shall compile and submit to the Committee on 
Small Business of the House of Representatives and the 
Committee on Small Business and Entrepreneurship of the Senate 
on an annual basis, commencing in the year that the Small 
Business Financing and Investment Act of 2009 is enacted, a 
report that describes the economic and community development 
activities, other than loan making under this title, of each 
certified development company during the prior fiscal year. The 
Administrator may contract with another party, including non-
governmental entities, to collect information or otherwise 
assist in the preparation of the report required by this 
subsection.

SEC. 512. PROMULGATION OF REGULATIONS UNDER THIS TITLE.

  (a) Deadlines for Implementing Regulations.--Except as 
expressly provided elsewhere in the Small Business Financing 
and Investment Act of 2009, the Administrator shall promulgate 
regulations under this title, after providing notice and the 
opportunity for comment, within 180 days after the date of 
enactment of that Act.
  (b) Notice and Comment Requirements in General.--Except as 
otherwise provided elsewhere in this title, the Administrator 
shall provide, after the date of enactment of the Small 
Business Financing and Investment Act of 2009, notice of any 
proposed change to a regulation implementing this title 
(whether in existence on the date of enactment of the Small 
Business Financing and Investment Act of 2009 or subsequently 
adopted), publish such notification in the Federal Register, 
and provide a comment period of not less than 60 days.

SEC. 513. PROGRAM NAME.

  (a) In General.--The program created by this title shall be 
referred to as the CDC Economic Development Loan Program.
  (b) Modification of Materials Used.--Not later than 60 days 
after the date of enactment of the Small Business Financing and 
Investment Act of 2009, the Administrator shall modify all 
documents and websites to conform to the name change made by 
this section.

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