[House Report 115-941]
[From the U.S. Government Publishing Office]


115th Congress   }                                      {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                      {      115-941

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



 
          SMALL BUSINESS ACCESS TO CAPITAL AND EFFICIENCY ACT

                                _______
                                

 September 12, 2018.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

    Mr. Chabot, from the Committee on Small Business, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 6348]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business, to whom was referred the 
bill (H.R. 6348) to adjust the real estate appraisal thresholds 
under the section 504 program to bring them into line with the 
thresholds used by the Federal banking regulators, and for 
other purposes, having considered the same, report favorably 
thereon without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
   I. Purpose and Bill Summary........................................2
  II. Background and the Need for Legislation.........................2
 III. Hearings........................................................3
  IV. Committee Consideration.........................................3
   V. Committee Votes.................................................4
  VI. Section-by-Section Analysis of H.R. 6348........................6
 VII. Congressional Budget Office Cost Estimate.......................6
VIII. Unfunded Mandates...............................................7
  IX. New Budget Authority, Entitlement Authority and Tax Expenditures7
   X. Oversight Findings..............................................7
  XI. Statement of Constitutional Authority...........................8
 XII. Congressional Accountability Act................................8
XIII. Federal Advisory Committee Statement............................8
 XIV. Statement of No Earmarks........................................8
  XV. Statement of Duplication of Federal Programs....................8
 XVI. Disclosure of Directed Rule Makings.............................8
XVII. Performance Goals and Objectives................................8
XVIII.Changes in Existing Law Made by the Bill, as Reported...........8


                      I. Purpose and Bill Summary

    Although the economy continues to improve, small 
businesses, entrepreneurs, and startups regularly face 
challenges accessing capital. To assist creditworthy small 
businesses, the Small Business Administration (SBA) offers 
numerous lending programs, including the 504/Certified 
Development Company (504/CDC) Loan Program. With a focus on 
long-term and fixed-rate terms, the 504/CDC Loan Program 
supports small businesses with numerous lending needs, 
including financing related to real estate.
    While not all property transactions are the same, most 
commercial real estate transactions require a formal appraisal 
above a certain dollar value. Set in 1994 by financial 
regulators, all commercial real estate transactions above 
$250,000 require a formal appraisal. Likewise, SBA's 504/CDC 
appraisal threshold level is also $250,000.
    After 24 years, the Federal Reserve, the Office of the 
Comptroller of the Currency, and the Federal Deposit Insurance 
Corporation updated their threshold level in the spring of 2018 
from $250,000 to $500,000.
    With an ever-growing list of burdens impacting small 
businesses, an outdated SBA appraisal threshold level will 
produce confusion and uncertainty for small businesses, and the 
very institutions that strive to serve them.
    To similarly modernize the SBA 504/CDC Loan Program 
threshold, H.R. 6348, the Small Business Access to Capital 
Efficiency (ACE) Act, was introduced to benchmark the SBA 
threshold with the value set by financial regulators.

                II. Background and Need for Legislation

    To assist creditworthy small businesses that cannot access 
traditional lending sources, the SBA offers the 504/CDC Loan 
Program. The 504/CDC Loan Program provides long-term and fixed-
rate financing to small businesses. Originally created in the 
Small Business Investment Act of 1958\1\, the 504/CDC Loan 
Program assists small businesses with the acquisition of major 
fixed assets, such as real estate or machinery or for equipment 
purchases that expand or update their small businesses.
---------------------------------------------------------------------------
    \1\15 U.S.C. Sec. 695.
---------------------------------------------------------------------------
    In order to operate the program and cover any losses, the 
SBA charges fees to protect the American taxpayer in accordance 
to the 1990 Federal Credit Reform Act (FCRA).\2\ Because fees 
have been sufficient, the 504/CDC Loan Program has not needed 
an appropriation of funds from Congress for the last three 
fiscal years, and SBA has requested a zero subsidy for FY 
2019.\3\
---------------------------------------------------------------------------
    \2\For any government loan program, FCRA requires an agency to 
collect an appropriation or fee to cover the cost of the program. 2 
U.S.C. Sec. 661.
    \3\For FY 2016, SBA requested zero subsidy. SBA, FY 2016 
Congressional Budget Justification And FY 2014 Annual Performance 
Report at 41. For FY 2017, SBA requested zero subsidy. SBA, FY 2017 
Congressional Budget Justification And FY 2015 Annual Performance 
Report at 39. For FY 2018, SBA requested zero subsidy. FY 2018 
Congressional Budget Justification And FY 2016 Annual Performance 
Report at 31. For FY 2019, SBA requested zero subsidy. FY 2019 
Congressional Budget Justification And FY 2017 Annual Performance 
Report at 34.
---------------------------------------------------------------------------
    Unique to the 504/CDC Loan Program is the role of the 
certified development company, or CDC, which must be a non-
profit corporation that is certified and regulated by SBA to 
participate in the program.\4\ Along with the small businesses 
and the financial institutions that are involved in the credit 
transaction, CDCs also play a major role in the cost structure 
of the loan program. A standard loan is organized where the 
small business or borrower is responsible for 10 percent of the 
project. The financial institution is in the senior lien 
position and is responsible for 50 percent of the value of the 
project, and the remaining balance of 40 percent belongs to the 
CDC, which is in the second lien position, through a federal 
government guaranteed debenture. Importantly, funds are not 
lent by SBA; rather SBA guarantees the loans made by the CDC.
---------------------------------------------------------------------------
    \4\SOP 50 10 5(I). Subpart A., Ch. 3(I)(B).
---------------------------------------------------------------------------
    A hallmark of the 504/CDC Loan Program, and a 
differentiating characteristic among SBA's many loan products, 
is the focus on economic development. Eligibility in the loan 
program and the size of the loan is determined based on the 
borrower either meeting a job creation or job retention 
requirement. Job creation is defined as creating or retaining 
at least one job for every $65,000 spent on the project. If 
meeting the job creation or retention requirement cannot be 
achieved, a borrower can still qualify if they meet either one 
community development goal or a number of public policy 
goals.\5\
---------------------------------------------------------------------------
    \5\The community development goals are: improving, diversifying, or 
stabilizing the local economy; stimulating business development; 
generating new income; helping manufacturing firms; or assisting the 
labor supply. The public policy goals are: revitalizing a business 
district with a redevelopment plan; increase of exports; increase of 
women owned small businesses, veteran owned small businesses, or 
minority owned businesses; assisting with rural development; increasing 
productivity or competitiveness; modernizing facilities to meet health, 
safety and environmental requirements; helping businesses in areas 
impacted by Federal budget reductions or base closings; or reducing the 
unemployment rate. 13 Sec. CFR 120.862.
---------------------------------------------------------------------------
    With a concentration on long-term and fixed-rate loans, the 
504/CDC Loan Program is an important small business lending 
tool for real estate transactions. When the transaction is 
above a certain dollar value, a formal real estate appraisal is 
required before the transaction can be completed. In 1994, 
federal banking regulators, including the Federal Reserve, the 
Office of the Comptroller of the Currency, and the Federal 
Deposit Insurance Corporation, set the appraisal threshold at 
$250,000.\6\ Although the limit for the 504/CDC Loan Program is 
set at the same value, the SBA's appraisal threshold is set in 
statute within the Small Business Investment Act.\7\
---------------------------------------------------------------------------
    \6\59 Fed. Reg. 29,482 (June 7, 1994).
    \7\15 U.S.C. 696(3)(E)(ii).
---------------------------------------------------------------------------
    After more than two decades, federal banking regulators 
decided to update and modernize the real estate appraisal 
threshold from $250,000 to $500,000.\8\ Due to the 504/CDC Loan 
Program threshold value being codified in statute, H.R.6348 was 
introduced to modernize SBA's real estate appraisal threshold.
---------------------------------------------------------------------------
    \8\83 Fed. Reg. 15,019 (Apr. 9, 2018)
---------------------------------------------------------------------------

                             III. Hearings

    While one hearing has been held by the Committee in the 
115th Congress exploring SBA's 504/CDC loan program, the 
hearing did not specifically examine reforming the program's 
real estate threshold.

                      IV. Committee Consideration

    The Committee on Small Business met in open session, with a 
quorum being present, on July 18, 2018, and ordered H.R. 6348 
be favorably reported, as amended, to the House via voice vote 
at 11:18 A.M. During the markup, no amendments were offered.

                           V. Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the recorded 
votes on the motion to report the legislation and amendments 
thereto. The Committee voted via voice vote to report H.R. 6348 
to the House at 11:18 A.M.


              VI. Section-by-Section Analysis of H.R. 6348


Section 1. Short title

    This section designates the bill as the ``Small Business 
Access to Capital and Efficiency Act'' or the ``Small Business 
ACE Act.''

Section 2. Appraisal thresholds

    This section amends sections 502(3)(E)(ii) of the Small 
Business Investment Act of 1958 (15 U.S.C. 696(3)(E)(ii)) by 
updating the SBA's 504/CDC Loan Program commercial real estate 
appraisal threshold to correspond with the level set by federal 
banking regulators.
    H.R. 6348 does not set a specific dollar value; rather, it 
matches the level set by the federal banking regulators. 
Additionally, if one federal banking regulator has a different 
value compared to the others, the SBA 504/CDC Loan Program 
appraisal value will match the regulator with the lowest 
threshold. Federal banking regulator exemptions do not apply, 
as the 504/CDC Loan Program's appraisal threshold follows the 
Small Business Investment Act.
    Mirroring the value set by federal banking regulators, 
instead of codifying a value in statute, will remove 
uncertainty for SBA 504/CDC loans when federal banking 
regulators set their own value. As federal banking regulators 
update their value, the SBA value will move as well. This is 
important because many SBA lending partners, which include 
community banks and credit unions, are also regulated by 
federal banking regulators because of their conventional 
lending products. H.R. 6348 will remove the uncertainty lenders 
now have juggling two different real estate appraisal 
thresholds.

             VII. Congressional Budget Office Cost Estimate

    The Congressional Budget Office, pursuant to Sec. 402 of 
the Congressional Budget Act of 1974, submitted a cost estimate 
for H.R. 6348 that stated enacting the legislation would not 
increase net direct spending or on budget deficits in any of 
the four 10-year periods beginning in 2029.

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 13, 2018.
Hon. Steve Chabot,
Chairman, Committee on Small Business,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 6348, the Small 
Business ACE Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                             Mark P. Hadley
                                        (For Keith Hall, Director).
    Enclosure.

H.R. 6348--Small Business ACE Act

    Under current law, small businesses that receive loans 
under the Small Business Administration's (SBA's) 504/Certified 
Development Company Loan program are required to receive an 
appraisal on commercial real property used as collateral in 
securing those loans if the estimated value of the property is 
$250,000 or greater. H.R. 6348 would raise that threshold to 
the lowest of the thresholds used by the Board of Governors of 
the Federal Reserve System, the Comptroller of the Currency, 
and the Federal Deposit Insurance Corporation to determine when 
a commercial real estate transaction requires an appraisal. The 
threshold for all three agencies is currently $500,000.
    Using information from the SBA on the costs of similar 
activities, CBO estimates that implementing the bill would cost 
less than $500,000 for the agency to update its program rules; 
such spending would be subject to the availability of 
appropriated funds. CBO also estimates that any change in the 
subsidy cost of SBA loans, which is subject to appropriation, 
would also be insignificant.
    Enacting H.R. 6348 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 6348 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    H.R. 6348 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Stephen Rabent. 
The estimate was reviewed by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                        VIII. Unfunded Mandates

    H.R. 6348 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act, Pub. 
L. No. 104-4, and would impose no costs on state, local or 
tribal governments.

  IX. New Budget Authority, Entitlement Authority and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House, the Committee provides the following opinion and 
estimate with respect to new budget authority, entitlement 
authority, and tax expenditures. The Committee adopts the cost 
estimate prepared by the Director of the Congressional Budget 
Office pursuant to Sec. 402 of the Congressional Budget Act of 
1974.

                         X. Oversight Findings

    In accordance with clause 2(b)(1) of rule X of the Rules of 
the House, the oversight findings and recommendations of the 
Committee on Small Business with respect to the subject matter 
contained in H.R. 6348 are incorporated into the descriptive 
portions of this report.

               XI. Statement of Constitutional Authority

    Pursuant to clause 7 of rule XIII of the Rules of the House 
of Representatives, the Committee finds that the authority for 
this legislation in Art. I, Sec. 8, cl. 3 of the Constitution 
of the United States.

                 XII. Congressional Accountability Act

    H.R. 6348 does not relate to the terms and conditions of 
employment or access to public services or accommodations 
within the meaning of Sec. 102(b)(3) of Pub. L. No. 104-1.

             XIII. Federal Advisory Committee Act Statement

    H.R. 6348 does not establish or authorize the establishment 
of any new advisory committees as that term is defined in the 
Federal Advisory Committee Act, 5 U.S.C. App. 2.

                     XIV. Statement of No Earmarks

    Pursuant to clause 9 of rule XXI, H.R. 6348 does not 
contain any congressional earmarks, limited tax benefits or 
limited tariff benefits as defined in subsections (d), (e) or 
(f) of clause 9 of rule XXI of the Rules of the House.

            XV. Statement of Duplication of Federal Programs

    Pursuant to clause 3(c) of the rule XIII of the Rules of 
the House, no provision of H.R. 6348 establishes or 
reauthorizes a program of the federal government known to be 
duplicative of another federal program, a program that was 
included in any report from the United States Government 
Accountability Office pursuant to Sec. 21 of Pub. L. No. 111-
139, or a program related to a program identified in the most 
recent catalog of federal domestic assistance.

                XVI. Disclosure of Directed Rule Makings

    Pursuant to clause 3(c) of rule XIII of the Rules of the 
House, H.R. 6348 does not direct any rule making.

                 XVII. Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House, the Committee establishes the following performance-
related goals and objectives in this legislation:
    H.R. 6348 would update SBA's 504/CDC Loan Program's 
commercial real estate appraisal threshold to match the level 
set by federal financial regulators.

      XVIII. 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, and existing law in which no 
change is proposed is shown in roman):

                 SMALL BUSINESS INVESTMENT ACT OF 1958



           *       *       *       *       *       *       *
TITLE V--LOANS TO STATE AND LOCAL DEVELOPMENT COMPANIES

           *       *       *       *       *       *       *


  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) $5,000,000 for each small 
                        business concern if the loan proceeds 
                        will not be directed toward a goal or 
                        project described in clause (ii), 
                        (iii), (iv), or (v);
                          (ii) $5,000,000 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) $5,500,000 for each project of 
                        a small manufacturer;
                          (iv) $5,500,000 for each project that 
                        reduces the borrower's energy 
                        consumption by at least 10 percent; and
                          (v) $5,500,000 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]
                                  (I) In general._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)] (aa) shall be 
                                        required by the 
                                        Administration before 
                                        disbursement of the 
                                        loan if the estimated 
                                        value of that property 
                                        [is more than $250,000] 
                                        is more than the 
                                        Federal banking 
                                        regulator appraisal 
                                        threshold; or
                                          [(II)] (bb) 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] 
                                        is equal to or less 
                                        than the Federal 
                                        banking regulator 
                                        appraisal threshold, 
                                        and such appraisal is 
                                        necessary for 
                                        appropriate evaluation 
                                        of creditworthiness.
                                  (II) Federal banking 
                                regulator appraisal threshold 
                                defined.--For purposes of this 
                                clause, the term ``Federal 
                                banking regulator appraisal 
                                threshold'' means the lesser of 
                                the threshold amounts set by 
                                the Board of Governors of the 
                                Federal Reserve System, the 
                                Comptroller of the Currency, 
                                and the Federal Deposit 
                                Insurance Corporation for when 
                                a federally related transaction 
                                that is a commercial real 
                                estate transaction requires an 
                                appraisal prepared by a State 
                                licensed or certified 
                                appraiser.
          (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.
=======================================================================


[Note: Section 521(a) of division E of Public Law 114-113 
provides: Subparagraph (C) of section 502(7) of the Small 
Business Investment Act of 1958 (15 U.S.C. 696(7)), as in 
effect on September 25, 2012, shall be in effect in any fiscal 
year during which the cost to the Federal Government of making 
guarantees under such subparagraph (C) and section 503 of the 
Small Business Investment Act of 1958 (15 U.S.C. 697) is zero, 
except that subclause (I)(bb) and subclause (II) of clause (iv) 
of such subparagraph (C) shall not be in effect; unless, upon 
application by a development company and after determining that 
the refinance loan is needed for good cause, the Administrator 
of the Small Business Administration waives this paragraph, a 
development company shall limit its financings under section 
502 of the Small Business Investment Act of 1958 (15 U.S.C. 
696) so that, during any fiscal year, new financings under such 
subparagraph (C) shall not exceed 50 percent of the dollars 
loaned under title V of the Small Business Investment Act of 
1958 (15 U.S.C. 695 et seq.) during the previous fiscal year; 
and clause (iv)(I)(aa) of such subparagraph (C) shall be 
applied by substituting ``job creation and retention'' for 
``job creation''. Effective on September 27, 2012, subparagraph 
(C) of section 502(7) of the Small Business Investment Act of 
1958 (15 U.S.C. 696(7)) was repealed by section 1122(b) of 
Public Law 111-240. Prior to such amendment having taken 
effect, subparagraph (C) read as follows:]

                  (C) Refinancing not involving expansions.--
                          (i) Definitions.--In this 
                        subparagraph--
                                  (I) the term ``borrower'' 
                                means a small business concern 
                                that submits an application to 
                                a development company for 
                                financing under this 
                                subparagraph;
                                  (II) the term ``eligible 
                                fixed asset'' means tangible 
                                property relating to which the 
                                Administrator may provide 
                                financing under this section; 
                                and
                                  (III) the term ``qualified 
                                debt'' means indebtedness--
                                          (aa) that--
                                                  (AA) was 
                                                incurred not 
                                                less than 2 
                                                years before 
                                                the date of the 
                                                application for 
                                                assistance 
                                                under this 
                                                subparagraph;
                                                  (BB) is a 
                                                commercial 
                                                loan;
                                                  (CC) is not 
                                                subject to a 
                                                guarantee by a 
                                                Federal agency;
                                                  (DD) the 
                                                proceeds of 
                                                which were used 
                                                to acquire an 
                                                eligible fixed 
                                                asset;
                                                  (EE) was 
                                                incurred for 
                                                the benefit of 
                                                the small 
                                                business 
                                                concern; and
                                                  (FF) is 
                                                collateralized 
                                                by eligible 
                                                fixed assets; 
                                                and
                                          (bb) for which the 
                                        borrower has been 
                                        current on all payments 
                                        for not less than 1 
                                        year before the date of 
                                        the application.
                          (ii) Authority.--A project that does 
                        not involve the expansion of a small 
                        business concern may include the 
                        refinancing of qualified debt if--
                                  (I) the amount of the 
                                financing is not more than 90 
                                percent of the value of the 
                                collateral for the financing, 
                                except that, if the appraised 
                                value of the eligible fixed 
                                assets serving as collateral 
                                for the financing is less than 
                                the amount equal to 125 percent 
                                of the amount of the financing, 
                                the borrower may provide 
                                additional cash or other 
                                collateral to eliminate any 
                                deficiency;
                                  (II) the borrower has been in 
                                operation for all of the 2-year 
                                period ending on the date of 
                                the loan; and
                                  (III) for a financing for 
                                which the Administrator 
                                determines there will be an 
                                additional cost attributable to 
                                the refinancing of the 
                                qualified debt, the borrower 
                                agrees to pay a fee in an 
                                amount equal to the anticipated 
                                additional cost.
                          (iii) Financing for business 
                        expenses.--
                                  (I) Financing for business 
                                expenses.--The Administrator 
                                may provide financing to a 
                                borrower that receives 
                                financing that includes a 
                                refinancing of qualified debt 
                                under clause (ii), in addition 
                                to the refinancing under clause 
                                (ii), to be used solely for the 
                                payment of business expenses.
                                  (II) Application for 
                                financing.--An application for 
                                financing under subclause (I) 
                                shall include--
                                          (aa) a specific 
                                        description of the 
                                        expenses for which the 
                                        additional financing is 
                                        requested; and
                                          (bb) an itemization 
                                        of the amount of each 
                                        expense.
                                  (III) Condition on additional 
                                financing.--A borrower may not 
                                use any part of the financing 
                                under this clause for non-
                                business purposes.
                          (iv) Loans based on jobs.--
                                  (I) Job creation and 
                                retention goals.--
                                          (aa) In general.--The 
                                        Administrator may 
                                        provide financing under 
                                        this subparagraph for a 
                                        borrower that meets the 
                                        job creation goals 
                                        under subsection (d) or 
                                        (e) of section 501.
                                          (bb) Alternate job 
                                        retention goal.--The 
                                        Administrator may 
                                        provide financing under 
                                        this subparagraph to a 
                                        borrower that does not 
                                        meet the goals 
                                        described in item (aa) 
                                        in an amount that is 
                                        not more than the 
                                        product obtained by 
                                        multiplying the number 
                                        of employees of the 
                                        borrower by $65,000.
                                  (II) Number of employees.--
                                For purposes of subclause (I), 
                                the number of employees of a 
                                borrower is equal to the sum 
                                of--
                                          (aa) the number of 
                                        full-time employees of 
                                        the borrower on the 
                                        date on which the 
                                        borrower applies for a 
                                        loan under this 
                                        subparagraph; and
                                          (bb) the product 
                                        obtained by 
                                        multiplying--
                                                  (AA) the 
                                                number of part-
                                                time employees 
                                                of the borrower 
                                                on the date on 
                                                which the 
                                                borrower 
                                                applies for a 
                                                loan under this 
                                                subparagraph; 
                                                by
                                                  (BB) the 
                                                quotient 
                                                obtained by 
                                                dividing the 
                                                average number 
                                                of hours each 
                                                part time 
                                                employee of the 
                                                borrower works 
                                                each week by 
                                                40.
                          (v) Nondelegation.--Notwithstanding 
                        section 508(e), the Administrator may 
                        not permit a premier certified lender 
                        to approve or disapprove an application 
                        for assistance under this subparagraph.
                          (vi) Total amount of loans.--The 
                        Administrator may provide not more than 
                        a total of $7,500,000,000 of financing 
                        under this subparagraph for each fiscal 
                        year.
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