15 U.S.C. § 636 : US Code - Section 636: Additional powers

Search 15 U.S.C. § 636 : US Code - Section 636: Additional powers

(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 chapter. 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) In general. -
(A) Credit elsewhere. - No financial assistance shall be
extended pursuant to this subsection if the applicant can
obtain credit elsewhere. No immediate participation may be
purchased unless it is shown that a deferred participation is
not available; and no direct financing may be made unless it is
shown that a participation is not available.
(B) Background checks. - Prior to the approval of any loan
made pursuant to this subsection, or section 503 of the Small
Business Investment Act of 1958 [15 U.S.C. 697], the
Administrator may verify the applicant's criminal background,
or lack thereof, through the best available means, including,
if possible, use of the National Crime Information Center
computer system at the Federal Bureau of Investigation.
(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; 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.
(B) Reduced participation upon request. -
(i) In general. - The guarantee percentage specified by
subparagraph (A) for any loan under this subsection may be
reduced upon the request of the participating lender.
(ii) Prohibition. - The Administration shall not use the
guarantee percentage requested by a participating lender
under clause (i) as a criterion for establishing priorities
in approving loan guarantee requests under this subsection.
(C) Interest rate under preferred lenders program. -
(i) In general. - The maximum interest rate for a loan
guaranteed under the Preferred Lenders Program shall not
exceed the maximum interest rate, as determined by the
Administration, applicable to other loans guaranteed under
this subsection.
(ii) Preferred lenders program defined. - For purposes of
this subparagraph, the term "Preferred Lenders Program" means
any program established by the Administrator, as authorized
under the proviso in section 634(b)(7) of this title, under
which a written agreement between the lender and the
Administration delegates to the lender -
(I) complete authority to make and close loans with a
guarantee from the Administration without obtaining the
prior specific approval of the Administration; and
(II) complete authority to service and liquidate such
loans without obtaining the prior specific approval of the
Administration for routine servicing and liquidation
activities, but shall not take any actions creating an
actual or apparent conflict of interest.
(D) Participation under export working capital program. -
Notwithstanding subparagraph (A), in an agreement to
participate in a loan on a deferred basis under the Export
Working Capital Program established pursuant to paragraph
(14)(A), such participation by the Administration shall not
exceed 90 percent.
(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 chapter would
exceed $1,500,000 (or if the gross loan amount would exceed
$2,000,000), except as provided in subparagraph (B);
(B) if the total amount outstanding and committed (on a
deferred basis) solely for the purposes provided in paragraph
(16) to the borrower from the business loan and investment fund
established by this chapter would exceed $1,750,000, of which
not more than $1,250,000 may be used for working capital,
supplies, or financings under paragraph (14) for export
purposes; and
(C) if effected either directly or in cooperation with banks
or other lending institutions through agreements to participate
on an immediate basis if the amount would exceed $350,000.
(4) Interest rates and prepayment charges. -
(A) Interest rates. - Notwithstanding the provisions of the
constitution of any State or the 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 financing made on a deferred basis pursuant to this
subsection shall not exceed a rate prescribed by the
Administration, and the rate of interest for the
Administration's share of any direct or immediate participation
loan shall not exceed the current average market yield on
outstanding marketable obligations of the United States with
remaining periods to maturity comparable to the average
maturities of such loans and adjusted to the nearest one-eighth
of 1 per centum, and an additional amount as determined by the
Administration, but not to exceed 1 per centum per annum:
Provided, That for those loans to assist any public or private
organization for the handicapped or to assist any handicapped
individual as provided in paragraph (10) of this subsection,
the interest rate shall be 3 per centum per annum.
(B) Payment of accrued interest. -
(i) In general. - Any bank or other lending institution
making a claim for payment on the guaranteed portion of a
loan made under this subsection shall be paid the accrued
interest due on the loan from the earliest date of default to
the date of payment of the claim at a rate not to exceed the
rate of interest on the loan on the date of default, minus
one percent.
(ii) Loans sold on secondary market. - If a loan described
in clause (i) is sold on the secondary market, the amount of
interest paid to a bank or other lending institution
described in that clause from the earliest date of default to
the date of payment of the claim shall be no more than the
agreed upon rate, minus one percent.
(iii) Applicability. - Clauses (i) and (ii) shall not apply
to loans made on or after October 1, 2000.
(C) Prepayment charges
(i) In general. - A borrower who prepays any loan
guaranteed under this subsection shall remit to the
Administration a subsidy recoupment fee calculated in
accordance with clause (ii) if -
(I) the loan is for a term of not less than 15 years;
(II) the prepayment is voluntary;
(III) the amount of prepayment in any calendar year is
more than 25 percent of the outstanding balance of the
loan; and
(IV) the prepayment is made within the first 3 years
after disbursement of the loan proceeds.
(ii) Subsidy recoupment fee. - The subsidy recoupment fee
charged under clause (i) shall be -
(I) 5 percent of the amount of prepayment, if the
borrower prepays during the first year after disbursement;
(II) 3 percent of the amount of prepayment, if the
borrower prepays during the second year after disbursement;
and
(III) 1 percent of the amount of prepayment, if the
borrower prepays during the third year after disbursement.
(5) No such loans including renewals and extensions thereof may
be made for a period or periods exceeding twenty-five years,
except that such portion of a loan made for the purpose of
acquiring real property or constructing, converting, or expanding
facilities may have a maturity of twenty-five years plus such
additional period as is estimated may be required to complete
such construction, conversion, or expansion.
(6) All loans made under this subsection shall be of such sound
value or so secured as reasonably to assure repayment: Provided,
however, That -
(A) for loans to assist any public or private organization or
to assist any handicapped individual as provided in paragraph
(10) of this subsection any reasonable doubt shall be resolved
in favor of the applicant;
(B) recognizing that greater risk may be associated with
loans for energy measures as provided in paragraph (12) of this
subsection, factors in determining "sound value" shall include,
but not be limited to, quality of the product or service;
technical qualifications of the applicant or his employees;
sales projections; and the financial status of the business
concern: Provided further, That such status need not be as
sound as that required for general loans under this subsection;
and (!1)
(C) Repealed. Pub. L. 97-35, title XIX, Sec. 1910, Aug. 13,
1981, 95 Stat. 778.
On that portion of the loan used to refinance existing
indebtedness held by a bank or other lending institution, the
Administration shall limit the amount of deferred participation
to 80 per centum of the amount of the loan at the time of
disbursement: Provided further, That any authority conferred by
this subparagraph on the Administration shall be exercised solely
by the Administration and shall not be delegated to other than
Administration personnel.
(7) The Administration may defer payments on the principal of
such loans for a grace period and use such other methods as it
deems necessary and appropriate to assure the successful
establishment and operation of such concern.
(8) The Administration may make loans under this subsection to
small business concerns owned and controlled by disabled veterans
(as defined in section 4211(3) of title 38).
(9) The Administration may provide loans under this subsection
to finance residential or commercial construction or
rehabilitation for sale: Provided, however, That such loans shall
not be used primarily for the acquisition of land.
(10) The Administration may provide guaranteed loans under this
subsection to assist any public or private organization for the
handicapped or to assist any handicapped individual, including
service-disabled veterans, in establishing, acquiring, or
operating a small business concern.
(11) The Administration may provide loans under this subsection
to any small business concern, or to any qualified person seeking
to establish such a concern when it determines that such loan
will further the policies established in section 631(c) (!2) of
this title, with particular emphasis on the preservation or
establishment of small business concerns located in urban or
rural areas with high proportions of unemployed or low-income
individuals or owned by low-income individuals.
(12)(A) The Administration may provide loans under this
subsection to assist any small business concern, including start
up, to enable such concern to design architecturally or engineer,
manufacture, distribute, market, install, or service energy
measures: Provided, however, That such loan proceeds shall not be
used primarily for research and development.
(b) (!3) The Administration may provide deferred participation
loans under this subsection to finance the planning, design, or
installation of pollution control facilities for the purposes set
forth in section 404 of the Small Business Investment Act of 1958
[15 U.S.C. 694-1]. Notwithstanding the limitation expressed in
paragraph (3) of this subsection, a loan made under this
paragraph may not result in a total amount outstanding and
committed to a borrower from the business loan and investment
fund of more than $1,000,000.
(13) The Administration may provide financings under this
subsection to State and local development companies for the
purposes of, and subject to the restrictions in, title V of the
Small Business Investment Act of 1958 [15 U.S.C. 695 et seq.].
(14)(A) The Administration may provide extensions of credit,
standby letters of credit, revolving lines of credit for export
purposes, and other financing to enable small business concerns,
including small business export trading companies and small
business export management companies, to develop foreign markets.
A bank or participating lending institution may establish the
rate of interest on such financings as may be legal and
reasonable.
(B) When considering loan or guarantee applications, the
Administration shall give weight to export-related benefits,
including opening new markets for United States goods and
services abroad and encouraging the involvement of small
businesses, including agricultural concerns, in the export
market.
(C) The Administration shall aggressively market its export
financing program to small businesses.
(15)(A) The Administration may guarantee loans under this
subsection to qualified employee trusts with respect to a small
business concern for the purpose of purchasing stock of the
concern under a plan approved by the Administrator which, when
carried out, results in the qualified employee trust owning at
least 51 per centum of the stock of the concern.
(B) The plan requiring the Administrator's approval under
subparagraph (A) shall be submitted to the Administration by the
trustee of such trust with its application for the guarantee.
Such plan shall include an agreement with the Administrator which
is binding on such trust and on the small business concern and
which provides that -
(i) not later than the date the loan guaranteed under
subparagraph (A) is repaid (or as soon thereafter as is
consistent with the requirements of section 401(a) of title
26), at least 51 per centum of the total stock of such concern
shall be allocated to the accounts of at least 51 per centum of
the employees of such concern who are entitled to share in such
allocation,
(ii) there will be periodic reviews of the role in the
management of such concern of employees to whose accounts stock
is allocated, and
(iii) there will be adequate management to assure management
expertise and continuity.
(C) In determining whether to guarantee any loan under this
paragraph, the individual business experience or personal assets
of employee-owners shall not be used as criteria, except inasmuch
as certain employee-owners may assume managerial
responsibilities, in which case business experience may be
considered.
(D) For purposes of this paragraph, a corporation which is
controlled by any other person shall be treated as a small
business concern if such corporation would, after the plan
described in subparagraph (B) is carried out, be treated as a
small business concern.
(E) The Administration shall compile a separate list of
applications for assistance under this paragraph, indicating
which applications were accepted and which were denied, and shall
report periodically to the Congress on the status of employee-
owned firms assisted by the Administration.
(16) International trade. -
(A) In general. - If the Administrator determines that a loan
guaranteed under this subsection will allow an eligible small
business concern that is engaged in or adversely affected by
international trade to improve its competitive position, the
Administrator may make such loan to assist such concern in -
(i) the financing of the acquisition, construction,
renovation, modernization, improvement, or expansion of
productive facilities or equipment to be used in the United
States in the production of goods and services involved in
international trade; or
(ii) the refinancing of existing indebtedness that is not
structured with reasonable terms and conditions.
(B) Security. - Each loan made under this paragraph shall be
secured by a first lien position or first mortgage on the
property or equipment financed by the loan or on other assets
of the small business concern.
(C) Engaged in international trade. - For purposes of this
paragraph, a small business concern is engaged in international
trade if, as determined by the Administrator, the small
business concern is in a position to expand existing export
markets or develop new export markets.
(D) Adversely affected by international trade. - For purposes
of this paragraph, a small business concern is adversely
affected by international trade if, as determined by the
Administrator, the small business concern -
(i) is confronting increased competition with foreign firms
in the relevant market; and
(ii) is injured by such competition.
(E) Findings by certain federal agencies. - For purposes of
subparagraph (D)(ii) the Administrator shall accept any finding
of injury by the International Trade Commission or any finding
of injury by the Secretary of Commerce pursuant to chapter 3 of
title II of the Trade Act of 1974 [19 U.S.C. 2341 et seq.].
(17) The Administration shall authorize lending institutions
and other entities in addition to banks to make loans authorized
under this subsection.
(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) A guarantee fee not to exceed 2 percent of the deferred
participation share of a total loan amount that is not more
than $150,000.
(ii) A guarantee fee not to exceed 3 percent of the
deferred participation share of a total loan amount that is
more than $150,000, but not more than $700,000.
(iii) A guarantee fee not to exceed 3.5 percent of the
deferred participation share of a total loan amount that is
more than $700,000.
(iv) In addition to the fee under clause (iii), a guarantee
fee equal to 0.25 percent of any portion of the deferred
participation share that is more than $1,000,000.
(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).
(19)(A) In addition to the Preferred Lenders Program authorized
by the proviso in section 634(b)(7) of this title, the
Administration is authorized to establish a Certified Lenders
Program for lenders who establish their knowledge of
Administration laws and regulations concerning the guaranteed
loan program and their proficiency in program requirements. The
designation of a lender as a certified lender shall be suspended
or revoked at any time that the Administration determines that
the lender is not adhering to its rules and regulations or that
the loss experience of the lender is excessive as compared to
other lenders, but such suspension or revocation shall not affect
any outstanding guarantee.
(B) In order to encourage all lending institutions and other
entities making loans authorized under this subsection to provide
loans of $50,000 or less in guarantees to eligible small business
loan applicants, the Administration shall develop and allow
participating lenders to solely utilize a uniform and simplified
loan form for such loans.
(C) Authority to liquidate loans. -
(i) In general. - The Administrator may permit lenders
participating in the Certified Lenders Program to liquidate
loans made with a guarantee from the Administration pursuant to
a liquidation plan approved by the Administrator.
(ii) Automatic approval. - If the Administrator does not
approve or deny a request for approval of a liquidation plan
within 10 business days of the date on which the request is
made (or with respect to any routine liquidation activity under
such a plan, within 5 business days) such request shall be
deemed to be approved.
(20)(A) The Administration is empowered to make loans either
directly or in cooperation with banks or other financial
institutions through agreements to participate on an immediate or
deferred (guaranteed) basis to small business concerns eligible
for assistance under subsection (j)(10) of this section and
section 637(a) of this title. Such assistance may be provided
only if the Administration determines that -
(i) the type and amount of such assistance requested by such
concern is not otherwise available on reasonable terms from
other sources;
(ii) with such assistance such concern has a reasonable
prospect for operating soundly and profitably within a
reasonable period of time;
(iii) the proceeds of such assistance will be used within a
reasonable time for plant construction, conversion, or
expansion, including the acquisition of equipment, facilities,
machinery, supplies, or material or to supply such concern with
working capital to be used in the manufacture of articles,
equipment, supplies, or material for defense or civilian
production or as may be necessary to insure a well-balanced
national economy; and
(iv) such assistance is of such sound value as reasonably to
assure that the terms under which it is provided will not be
breached by the small business concern.
(B)(i) No loan shall be made under this paragraph if the total
amount outstanding and committed (by participation or otherwise)
to the borrower would exceed $750,000.
(ii) Subject to the provisions of clause (i), in agreements to
participate in loans on a deferred (guaranteed) basis,
participation by the Administration shall be not less than 85 per
centum of the balance of the financing outstanding at the time of
disbursement.
(iii) The rate of interest on financings made on a deferred
(guaranteed) basis shall be legal and reasonable.
(iv) Financings made pursuant to this paragraph shall be
subject to the following limitations:
(I) No immediate participation may be purchased unless it is
shown that a deferred participation is not available.
(II) No direct financing may be made unless it is shown that
a participation is unavailable.
(C) A direct loan or the Administration's share of an immediate
participation loan made pursuant to this paragraph shall be any
secured debt instrument -
(i) that is subordinated by its terms to all other borrowings
of the issuer;
(ii) the rate of interest on which shall not exceed the
current average market yield on outstanding marketable
obligations of the United States with remaining periods to
maturity comparable to the average maturities of such loan and
adjusted to the nearest one-eighth of 1 per centum;
(iii) the term of which is not more than twenty-five years;
and
(iv) the principal on which is amortized at such rate as may
be deemed appropriate by the Administration, and the interest
on which is payable not less often than annually.
(21)(A) The Administration may make loans on a guaranteed basis
under the authority of this subsection -
(i) to a small business concern that has been (or can
reasonably be expected to be) detrimentally affected by -
(I) the closure (or substantial reduction) of a Department
of Defense installation; or
(II) the termination (or substantial reduction) of a
Department of Defense program on which such small business
was a prime contractor or subcontractor (or supplier) at any
tier; or
(ii) to a qualified individual or a veteran seeking to
establish (or acquire) and operate a small business concern.
(B) Recognizing that greater risk may be associated with a loan
to a small business concern described in subparagraph (A)(i), any
reasonable doubts concerning the firm's proposed business plan
for transition to nondefense-related markets shall be resolved in
favor of the loan applicant when making any determination
regarding the sound value of the proposed loan in accordance with
paragraph (6).
(C) Loans pursuant to this paragraph shall be authorized in
such amounts as provided in advance in appropriation Acts for the
purposes of loans under this paragraph.
(D) For purposes of this paragraph a qualified individual is -
(i) a member of the Armed Forces of the United States,
honorably discharged from active duty involuntarily or pursuant
to a program providing bonuses or other inducements to
encourage voluntary separation or early retirement;
(ii) a civilian employee of the Department of Defense
involuntarily separated from Federal service or retired
pursuant to a program offering inducements to encourage early
retirement; or
(iii) an employee of a prime contractor, subcontractor, or
supplier at any tier of a Department of Defense program whose
employment is involuntarily terminated (or voluntarily
terminated pursuant to a program offering inducements to
encourage voluntary separation or early retirement) due to the
termination (or substantial reduction) of a Department of
Defense program.
(E) Job creation and community benefit. - In providing
assistance under this paragraph, the Administration shall develop
procedures to ensure, to the maximum extent practicable, that
such assistance is used for projects that -
(i) have the greatest potential for -
(I) creating new jobs for individuals whose employment is
involuntarily terminated due to reductions in Federal defense
expenditures; or
(II) preventing the loss of jobs by employees of small
business concerns described in subparagraph (A)(i); and
(ii) have substantial potential for stimulating new economic
activity in communities most affected by reductions in Federal
defense expenditures.
(22) The Administration is authorized to permit participating
lenders to impose and collect a reasonable penalty fee on late
payments of loans guaranteed under this subsection in an amount
not to exceed 5 percent of the monthly loan payment per month
plus interest.
(23) Yearly fee. -
(A) In general. - With respect to each loan approved under
this subsection, the Administration shall assess, collect, and
retain a fee, not to exceed 0.55 percent per year of the
outstanding balance of the deferred participation share of the
loan, in an amount established once annually by the
Administration in the Administration's annual budget request to
Congress, as necessary to reduce to zero the cost to the
Administration of making guarantees under this subsection. As
used in this paragraph, the term "cost" has the meaning given
that term in section 661a of title 2.
(B) Payer. - The yearly fee assessed under subparagraph (A)
shall be payable by the participating lender and shall not be
charged to the borrower.
(C) Lowering of borrower fees. - If the Administration
determines that fees paid by lenders and by small business
borrowers for guarantees under this subsection may be reduced,
consistent with reducing to zero the cost to the Administration
of making such guarantees -
(i) the Administration shall first consider reducing fees
paid by small business borrowers under clauses (i) through
(iii) of paragraph (18)(A), to the maximum extent possible;
and
(ii) fees paid by small business borrowers shall not be
increased above the levels in effect on December 8, 2004.
(24) Notification requirement. - The Administration shall
notify the Committees on Small Business of the Senate and the
House of Representatives not later than 15 days before making any
significant policy or administrative change affecting the
operation of the loan program under this subsection.
(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 September 30, 1996, the Administrator shall
promulgate regulations defining the experience necessary for
participation as a lender in the low documentation loan
program.
(26) Calculation of subsidy rate. - All fees, interest, and
profits received and retained by the Administration under this
subsection 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 661a of title 2) to the
Administration of purchasing and guaranteeing loans under this
chapter.
(27) Repealed. Pub. L. 106-8, Sec. 3(c), Apr. 2, 1999, 113
Stat. 16.
(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.
(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 -
(A) shall be required by the Administration in connection
with any such loan for more than $250,000; or
(B) may be required by the Administration or the lender in
connection with any such loan for $250,000 or less, if such
appraisal is necessary for appropriate evaluation of
creditworthiness.
(30) Ownership requirements. - Ownership requirements to
determine the eligibility of a small business concern that
applies for assistance under any credit program under this
chapter 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.
(31) Express loans. -
(A) Definitions. - As used in this paragraph:
(i) The term "express lender" means any lender authorized
by the Administration to participate in the Express Loan
Program.
(ii) The term "express loan" means any loan made pursuant
to this paragraph in which a lender utilizes to the maximum
extent practicable its own loan analyses, procedures, and
documentation.
(iii) The term "Express Loan Program" means the program for
express loans established by the Administration under
paragraph (25)(B), as in existence on April 5, 2004, with a
guaranty rate of not more than 50 percent.
(B) Restriction to express lender. - The authority to make an
express loan shall be limited to those lenders deemed qualified
to make such loans by the Administration. Designation as an
express lender for purposes of making an express loan shall not
prohibit such lender from taking any other action authorized by
the Administration for that lender pursuant to this subsection.
(C) Grandfathering of existing lenders. - Any express lender
shall retain such designation unless the Administration
determines that the express lender has violated the law or
regulations promulgated by the Administration or modifies the
requirements to be an express lender and the lender no longer
satisfies those requirements.
(D) Maximum loan amount. - The maximum loan amount under the
Express Loan Program is $350,000.
(E) Option to participate. - Except as otherwise provided in
this paragraph, the Administration shall take no regulatory,
policy, or administrative action, without regard to whether
such action requires notification pursuant to paragraph (24),
that has the effect of requiring a lender to make an express
loan pursuant to subparagraph (D).
(b) Disaster loans; authorization, scope, terms and conditions,
etc.
Except as to agricultural enterprises as defined in section
647(b)(1) of this title, the,(!4) Administration also is empowered
to the extent and in such amounts as provided in advance in
appropriation Acts -
(1)(A) to make such loans (either directly or in cooperation
with banks or other lending institutions through agreements to
participate on an immediate or deferred (guaranteed) basis) as
the Administration may determine to be necessary or appropriate
to repair, rehabilitate or replace property, real or personal,
damaged or destroyed by or as a result of natural or other
disasters: Provided, That such damage or destruction is not
compensated for by insurance or otherwise: And provided further,
That the Administration may increase the amount of the loan by up
to an additional 20 per centum if it determines such increase to
be necessary or appropriate in order to protect the damaged or
destroyed property from possible future disasters by taking
mitigating measures, including, but not limited to, construction
of retaining walls and sea walls, grading and contouring land,
relocating utilities and modifying structures;
(B) to refinance any mortgage or other lien against a totally
destroyed or substantially damaged home or business concern:
Provided, That no loan or guarantee shall be extended unless the
Administration finds that (i) the applicant is not able to obtain
credit elsewhere; (ii) such property is to be repaired,
rehabilitated, or replaced; (iii) the amount refinanced shall not
exceed the amount of physical loss sustained; and (iv) such
amounts shall be reduced to the extent such mortgage or lien is
satisfied by insurance or otherwise; and
(C) during fiscal years 2000 through 2004, to establish a
predisaster mitigation program to make such loans (either
directly or in cooperation with banks or other lending
institutions through agreements to participate on an immediate or
deferred (guaranteed) basis), as the Administrator may determine
to be necessary or appropriate, to enable small businesses to use
mitigation techniques in support of a formal mitigation program
established by the Federal Emergency Management Agency, except
that no loan or guarantee may be extended to a small business
under this subparagraph unless the Administration finds that the
small business is otherwise unable to obtain credit for the
purposes described in this subparagraph;
(2) to make such loans (either directly or in cooperation with
banks or other lending institutions through agreements to
participate on an immediate or deferred (guaranteed) basis) as
the Administration may determine to be necessary or appropriate
to any small business concern or small agricultural cooperative
located in an area affected by a disaster,(!4) (including
drought), with respect to both farm-related and nonfarm-related
small business concerns, if the Administration determines that
the concern or the cooperative has suffered a substantial
economic injury as a result of such disaster and if such disaster
constitutes -
(A) a major disaster, as determined by the President under
the Disaster Relief and Emergency Assistance Act [42 U.S.C.
5121 et seq.]; or
(B) a natural disaster, as determined by the Secretary of
Agriculture pursuant to section 1961 of title 7, in which case,
assistance under this paragraph may be provided to farm-related
and nonfarm-related small business concerns, subject to the
other applicable requirements of this paragraph; or
(C) a disaster, as determined by the Administrator of the
Small Business Administration; or
(D) if no disaster declaration has been issued pursuant to
subparagraph (A), (B), or (C), the Governor of a State in which
a disaster has occurred may certify to the Small Business
Administration that small business concerns or small
agricultural cooperatives (1) have suffered economic injury as
a result of such disaster, and (2) are in need of financial
assistance which is not available on reasonable terms in the
disaster stricken area. Not later than 30 days after the date
of receipt of such certification by a Governor of a State, the
Administration shall respond in writing to that Governor on its
determination and the reasons therefore,(!5) and may then make
such loans as would have been available under this paragraph if
a disaster declaration had been issued.
Provided, That no loan or guarantee shall be extended pursuant to
this paragraph (2) unless the Administration finds that the
applicant is not able to obtain credit elsewhere.
(3)(A) In this paragraph -
(i) the term "essential employee" means an individual who is
employed by a small business concern and whose managerial or
technical expertise is critical to the successful day-to-day
operations of that small business concern;
(ii) the term "period of military conflict" has the meaning
given the term in subsection (n)(1) of this section; and
(iii) the term "substantial economic injury" means an
economic harm to a business concern that results in the
inability of the business concern -
(I) to meet its obligations as they mature;
(II) to pay its ordinary and necessary operating expenses;
or
(III) to market, produce, or provide a product or service
ordinarily marketed, produced, or provided by the business
concern.
(B) The Administration may make such disaster loans (either
directly or in cooperation with banks or other lending
institutions through agreements to participate on an immediate or
deferred basis) to assist a small business concern that has
suffered or that is likely to suffer substantial economic injury
as the result of an essential employee of such small business
concern being ordered to active military duty during a period of
military conflict.
(C) A small business concern described in subparagraph (B)
shall be eligible to apply for assistance under this paragraph
during the period beginning on the date on which the essential
employee is ordered to active duty and ending on the date that is
90 days after the date on which such essential employee is
discharged or released from active duty.
(D) Any loan or guarantee extended pursuant to this paragraph
shall be made at the same interest rate as economic injury loans
under paragraph (2).
(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, unless
such applicant constitutes 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 limitation.
(F) For purposes of assistance under this paragraph, no
declaration of a disaster area shall be required.
No loan under this subsection, including renewals and extensions
thereof, may be made for a period or periods exceeding thirty
years: Provided, That the Administrator may consent to a suspension
in the payment of principal and interest charges on, and to an
extension in the maturity of, the Federal share of any loan under
this subsection for a period not to exceed five years, if (A) the
borrower under such loan is a homeowner or a small business
concern, (B) the loan was made to enable (i) such homeowner to
repair or replace his home, or (ii) such concern to repair or
replace plant or equipment which was damaged or destroyed as the
result of a disaster meeting the requirements of clause (A) or (B)
of paragraph (2) of this subsection, and (C) the Administrator
determines such action is necessary to avoid severe financial
hardship: Provided further, That the provisions of paragraph (1) of
subsection (c) of this section shall not be applicable to any such
loan having a maturity in excess of twenty years. Notwithstanding
the provisions of any other law, the interest rate on the
Administration's share of any loan made under this subsection,
except as provided in subsection (c) of this section, shall not
exceed the average annual interest rate on all interest-bearing
obligations of the United States then forming a part of the public
debt as computed at the end of the fiscal year next preceding the
date of the loan and adjusted to the nearest one-eighth of 1 per
centum plus one-quarter of 1 per centum: Provided, however, That
the interest rate for loans made under paragraphs (1) and (2)
hereof shall not exceed the rate of interest which is in effect at
the time of the occurrence of the disaster. In agreements to
participate in loans on a deferred basis under this subsection,
such participation by the Administration shall not be in excess of
90 per centum of the balance of the loan outstanding at the time of
disbursement. Notwithstanding any other provision of law, the
interest rate on the Administration's share of any loan made
pursuant to paragraph (1) of this subsection to repair or replace a
primary residence and/or replace or repair damaged or destroyed
personal property, less the amount of compensation by insurance or
otherwise, with respect to a disaster occurring on or after July 1,
1976, and prior to October 1, 1978, shall be: 1 per centum on the
amount of such loan not exceeding $10,000, and 3 per centum on the
amount of such loan over $10,000 but not exceeding $40,000. The
interest rate on the Administration's share of the first $250,000
of all other loans made pursuant to paragraph (1) of this
subsection, with respect to a disaster occurring on or after July
1, 1976, and prior to October 1, 1978, shall be 3 per centum. All
repayments of principal on the Administration's share of any loan
made under the above provisions shall first be applied to reduce
the principal sum of such loan which bears interest at the lower
rates provided in this paragraph. The principal amount of any loan
made pursuant to paragraph (1) in connection with a disaster which
occurs on or after April 1, 1977, but prior to January 1, 1978, may
be increased by such amount, but not more than $2,000, as the
Administration determines to be reasonable in light of the amount
and nature of loss, damage, or injury sustained in order to finance
the installation of insulation in the property which was lost,
damaged, or injured, if the uninsured, damaged portion of the
property is 10 per centum or more of the market value of the
property at the time of the disaster. Not later than June 1, 1978,
the Administration shall prepare and transmit to the Select
Committee on Small Business of the Senate, the Committee on Small
Business of the House of Representatives, and the Committees of the
Senate and House of Representatives having jurisdiction over
measures relating to energy conservation, a report on its
activities under this paragraph, including therein an evaluation of
the effect of such activities on encouraging the installation of
insulation in property which is repaired or replaced after a
disaster which is subject to this paragraph, and its
recommendations with respect to the continuation, modification, or
termination of such activities.
In the administration of the disaster loan program under
paragraphs (1), (2), and (4) of this subsection, in the case of
property loss or damage or injury resulting from a major disaster
as determined by the President or a disaster as determined by the
Administrator which occurs on or after January 1, 1971, and prior
to July 1, 1973, the Small Business Administration, to the extent
such loss or damage or injury is not compensated for by insurance
or otherwise -
(A) may make any loan for repair, rehabilitation, or
replacement of property damaged or destroyed without regard to
whether the required financial assistance is otherwise available
from private sources;
(B) may, in the case of the total destruction or substantial
property damage of a home or business concern, refinance any
mortgage or other liens outstanding against the destroyed or
damaged property if such property is to be repaired,
rehabilitated, or replaced, except that (1) in the case of a
business concern, the amount refinanced shall not exceed the
amount of the physical loss sustained, and (2) in the case of a
home, the amount of each monthly payment of principal and
interest on the loan after refinancing under this clause shall
not be less than the amount of each such payment made prior to
such refinancing;
(C) may, in the case of a loan made under clause (A) or a
mortgage or other lien refinanced under clause (B) in connection
with the destruction of, or substantial damage to, property owned
and used as a residence by an individual who by reason of
retirement, disability, or other similar circumstances relies for
support on survivor, disability, or retirement benefits under a
pension, insurance, or other programs, consent to the suspension
of the payments of the principal of that loan, mortgage, or lien
during the lifetime of that individual and his spouse for so long
as the Administration determines that making such payments would
constitute a substantial hardship;
(D) shall notwithstanding the provisions of any other law and
upon presentation by the applicant of proof of loss or damage or
injury and a bona fide estimate of cost of repair,
rehabilitation, or replacement, cancel the principal of any loan
made to cover a loss or damage or injury resulting from such
disaster, except that -
(i) with respect to a loan made in connection with a disaster
occurring on or after January 1, 1971 but prior to January 1,
1972, the total amount so canceled shall not exceed $2,500, and
the interest on the balance of the loan shall be at a rate of 3
per centum per annum; and
(ii) with respect to a loan made in connection with a
disaster occurring on or after January 1, 1972 but prior to
July 1, 1973, the total amount so canceled shall not exceed
$5,000 and the interest on the balance of the loan shall be at
a rate of 1 percentum per annum.
(E) (!6) A State grant made on or prior to July 1, 1979, shall
not be considered compensation for the purpose of applying the
provisions of section 312(a) of the Disaster Relief and Emergency
Assistance Act [42 U.S.C. 5155(a)] to a disaster loan under
paragraph (1), (2), or (4) of this subsection.
With respect to any loan referred to in clause (D) which is
outstanding on August 16, 1972, the Administrator shall -
(i) make such change in the interest rate on the balance of
such loan as is required under that clause effective as of August
16, 1972; and
(ii) in applying the limitation set forth in that clause with
respect to the total amount of such loan which may be canceled,
consider as part of the amount so canceled any part of such loan
which was previously canceled pursuant to section 231 of the
Disaster Relief Act of 1970 [15 U.S.C. 636a].
Whoever wrongfully misapplies the proceeds of a loan obtained
under this subsection shall be civilly liable to the Administrator
in an amount equal to one-and-one half times the original principal
amount of the loan.
(c) Extension or renewal of loans; purchase of participations;
assumption of obligations; disaster loans; interest rates; loan
amounts
(1) The Administration may further extend the maturity of or
renew any loan made pursuant to this section, or any loan
transferred to the Administration pursuant to Reorganization Plan
Numbered 2 of 1954, or Reorganization Plan Numbered 1 of 1957,
for additional periods not to exceed ten years beyond the period
stated therein, if such extension or renewal will aid in the
orderly liquidation of such loan.
(2) During any period in which principal and interest charges
are suspended on the Federal share of any loan, as provided in
subsection (b) of this section, the Administrator shall, upon the
request of any person, firm, or corporation having a
participation in such loan, purchase such participation, or
assume the obligation of the borrower, for the balance of such
period, to make principal and interest payments on the non-
Federal share of such loan: Provided, That no such payments
shall be made by the Administrator in behalf of any borrower
unless (i) the Administrator determines that such action is
necessary in order to avoid a default, and (ii) the borrower
agrees to make payments to the Administration in an aggregate
amount equal to the amount paid in its behalf by the
Administrator, in such manner and at such times (during or after
the term of the loan) as the Administrator shall determine having
due regard to the purposes sought to be achieved by this
paragraph.
(3) With respect to a disaster occurring on or after October 1,
1978, and prior (!7) August 13, 1981, on the Administration's
share of loans made pursuant to paragraph (1) of subsection (b)
of this section -
(A) if the loan proceeds are to repair or replace a primary
residence and/or repair or replace damaged or destroyed
personal property, the interest rate shall be 3 percent on the
first $55,000 of such loan;
(B) if the loan proceeds are to repair or replace property
damaged or destroyed and if the applicant is a business concern
which is unable to obtain sufficient credit elsewhere, the
interest rate shall be as determined by the Administration, but
not in excess of 5 percent per annum; and
(C) if the loan proceeds are to repair or replace property
damaged or destroyed and if the applicant is a business concern
which is able to obtain sufficient credit elsewhere, the
interest rate shall not exceed the current average market yield
on outstanding marketable obligations of the United States with
remaining periods to maturity comparable to the average
maturities of such loans and adjusted to the nearest one-eighth
of 1 percent, and an additional amount as determined by the
Administration, but not to exceed 1 percent: Provided, That
three years after such loan is fully disbursed and every two
years thereafter for the term of the loan, if the
Administration determines that the borrower is able to obtain a
loan from non-Federal sources at reasonable rates and terms for
loans of similar purposes and periods of time, the borrower
shall, upon request by the Administration, apply for and accept
such a loan in sufficient amount to repay the Administration:
Provided further, That no loan under subsection (b)(1) of this
section shall be made, 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 such
subsection would exceed $500,000 for each disaster, unless an
applicant constitutes a major source of employment in an area
suffering a disaster, in which case the Administration, in its
discretion, may waive the $500,000 limitation.
(4) Notwithstanding the provisions of any other law, the
interest rate on the Federal share of any loan made under
subsection (b) of this section shall be -
(A) in the case of a homeowner unable to secure credit
elsewhere, the rate prescribed by the Administration but not
more than one-half the 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 of such loans plus an additional charge of
not to exceed 1 per centum per annum as determined by the
Administrator, and adjusted to the nearest one-eighth of 1 per
centum but not to exceed 8 per centum per annum;
(B) in the case of a homeowner able to secure credit
elsewhere, the rate prescribed by the Administration but not
more than the 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 of such loans plus an additional charge of not to
exceed 1 per centum per annum as determined by the
Administrator, and adjusted to the nearest one-eighth of 1 per
centum;
(C) in the case of a business concern unable to obtain credit
elsewhere, not to exceed 8 per centum per annum;
(D) in the case of a business concern able to obtain credit
elsewhere, the rate prescribed by the Administration but not in
excess of the rate prevailing in private market for similar
loans and not more than the rate prescribed by the
Administration as the maximum interest rate for deferred
participation (guaranteed) loans under subsection (a) of this
section. Loans under this subparagraph shall be limited to a
maximum term of three years.
(5) Notwithstanding the provisions of any other law, the
interest rate on the Federal share of any loan made under
subsection (b)(1) and (b)(2) of this section on account of a
disaster commencing on or after October 1, 1982, shall be -
(A) in the case of a homeowner unable to secure credit
elsewhere, the rate prescribed by the Administration but not
more than one-half the 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 of such loan plus an additional charge of
not to exceed 1 per centum per annum as determined by the
Administrator, and adjusted to the nearest one-eighth of 1 per
centum, but not to exceed 4 per centum per annum;
(B) in the case of a homeowner able to secure credit
elsewhere, the rate prescribed by the Administration but not
more than the 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 of such loans plus an additional charge of not to
exceed 1 per centum per annum as determined by the
Administrator, and adjusted to the nearest one-eighth of 1 per
centum, but not to exceed 8 per centum per annum;
(C) in the case of a business or other concern, including
agricultural cooperatives, unable to obtain credit elsewhere,
not to exceed 4 per centum per annum;
(D) in the case of a business concern able to obtain credit
elsewhere, the rate prescribed by the Administration but not in
excess of the lowest of (i) the rate prevailing in the private
market for similar loans, (ii) the rate prescribed by the
Administration as the maximum interest rate for deferred
participation (guaranteed) loans under subsection (a) of this
section, or (iii) 8 per centum per annum. Loans under this
subparagraph shall be limited to a maximum term of three years.
(6) Notwithstanding the provisions of any other law, such
loans, subject to the reductions required by subparagraphs (A)
and (B) of subsection (b)(1) of this section, shall be in amounts
equal to 100 per centum of loss. The interest rates for loans
made under subsection (b)(1) and (2) of this section, as
determined pursuant to paragraph (5), shall be the rate of
interest which is in effect on the date of the disaster
commenced: Provided, That no loan under subsection (b)(1) and (2)
of this section shall be made, either directly or in cooperation
with banks or other lending institutions through agreements to
participate on an immediate or deferred (guaranteed) basis, if
the total amount outstanding and committed to the borrower under
subsection (b) of this section would exceed $500,000 for each
disaster unless an applicant constitutes a major source of
employment in an area suffering a disaster, in which case the
Administration, in its discretion, may waive the $500,000
limitation: Provided further, That the Administration, subject to
the reductions required by subparagraphs (A) and (B) of
subsection (b)(1) of this section, shall not reduce the amount of
eligibility for any homeowner on account of loss of real estate
to less than $100,000 for each disaster nor for any homeowner or
lessee on account of loss of personal property to less than
$20,000 for each disaster, such sums being in addition to any
eligible refinancing: Provided further, That the Administration
shall not require collateral for loans of $10,000 or less which
are made under paragraph (1) of subsection (b) of this section.
Employees of concerns sharing a common business premises shall be
aggregated in determining "major source of employment" status for
nonprofit applicants owning such premises.
With respect to any loan which is outstanding on April 18, 1984,
and which was made on account of a disaster commencing on or after
October 1, 1982, the Administrator shall make such change in the
interest rate on the balance of such loan as is required herein
effective as of April 18, 1984.
(7) The Administration shall not withhold disaster assistance
pursuant to this paragraph to nurseries who are victims of
drought disasters. As used in subsection (b)(2) of this section
the term "an area affected by a disaster" includes any county, or
county contiguous thereto, determined to be a disaster by the
President, the Secretary of Agriculture or the Administrator of
the Small Business Administration.
(d) Funds for small business development centers under section 648
of this title
The Administration shall not fund any Small Business Development
Center or any variation thereof, except as authorized in section
648 of this title.
(e) [RESERVED]
(f) [RESERVED]
(g) Repealed. Pub. L. 97-35, title XIX, Sec. 1913(c), Aug. 13,
1981, 95 Stat. 780
(h) Loans to handicapped persons and organizations for handicapped
(1) The Administration also is empowered, where other financial
assistance is not available on reasonable terms, to make such loans
(either directly or in cooperation with Banks or other lending
institutions through agreements to participate on an immediate or
deferred basis) as the Administration may determine to be necessary
or appropriate -
(A) to assist any public or private organization -
(i) which is organized under the laws of the United States or
of any State, operated in the interest of handicapped
individuals, the net income of which does not inure in whole or
in part to the benefit of any shareholder or other individual;
(ii) which complies with any applicable occupational health
and safety standard prescribed by the Secretary of Labor; and
(iii) which, in the production of commodities and in the
provision of services during any fiscal year in which it
receives financial assistance under this subsection, employs
handicapped individuals for not less than 75 per centum of the
man-hours required for the production or provision of the
commodities or services; or
(B) to assist any handicapped individual in establishing,
acquiring, or operating a small business concern.
(2) The Administration's share of any loan made under this
subsection shall not exceed $350,000, nor may any such loan be made
if the total amount outstanding and committed (by participation or
otherwise) to the borrower from the business loan and investment
fund established by section 633(c)(1)(B) of this title would exceed
$350,000. In agreements to participate in loans on a deferred basis
under this subsection, the Administration's participation may total
100 per centum of the balance of the loan at the time of
disbursement. The Administration's share of any loan made under
this subsection shall bear interest at the rate of 3 per centum per
annum. The maximum term of any such loan, including extensions and
renewals thereof, may not exceed fifteen years. All loans made
under this subsection shall be of such sound value or so secured as
reasonably to assure repayment: Provided, however, That any
reasonable doubt shall be resolved in favor of the applicant.
(3) For purposes of this subsection, the term "handicapped
individual" means a person who has a physical, mental, or emotional
impairment, defect, ailment, disease, or disability of a permanent
nature which in any way limits the selection of any type of
employment for which the person would otherwise be qualified or
qualifiable.
(i) Loans to small business concerns located in urban or rural
areas with high proportions of unemployed or low-income
individuals, or owned by low-income individuals
(1) The Administration also is empowered to make, participate (on
an immediate basis) in, or guarantee loans, repayable in not more
than fifteen years, to any small business concern, or to any
qualified person seeking to establish such a concern, when it
determines that such loans will further the policies established in
section 631(b) (!8) of this title, with particular emphasis on the
preservation or establishment of small business concerns located in
urban or rural areas with high proportions of unemployed or low-
income individuals, or owned by low-income individuals: Provided,
however, That no such loans shall be made, participated in, or
guaranteed if the total of such Federal assistance to a single
borrower outstanding at any one time would exceed $100,000. The
Administration may defer payments on the principal of such loans
for a grace period and use such other methods as it deems necessary
and appropriate to assure the successful establishment and
operation of such concern. The Administration may, in its
discretion, as a condition of such financial assistance, require
that the borrower take steps to improve his management skills by
participating in a management training program approved by the
Administration: Provided, however, That any management training
program so approved must be of sufficient scope and duration to
provide reasonable opportunity for the individuals served to
develop entrepreneurial and managerial self-sufficiency.
(2) The Administration shall encourage, as far as possible, the
participation of the private business community in the program of
assistance to such concerns, and shall seek to stimulate new
private lending activities to such concerns through the use of the
loan guarantees, participations in loans, and pooling arrangements
authorized by this subsection.
(3) To insure an equitable distribution between urban and rural
areas for loans between $3,500 and $100,000 made under this
subsection, the Administration is authorized to use the agencies
and agreements and delegations developed under title III of the
Economic Opportunity Act of 1964, as amended [42 U.S.C. 2841 et
seq.], as it shall determine necessary.
(4) The Administration shall provide for the continuing
evaluation of programs under this subsection, including full
information on the location, income characteristics, and types of
businesses and individuals assisted, and on new private lending
activity stimulated, and the results of such evaluation together
with recommendations shall be included in the report required by
section 639(a) of this title.
(5) Loans made pursuant to this subsection (including immediate
participation in and guarantees of such loans) shall have such
terms and conditions as the Administration shall determine, subject
to the following limitations -
(A) there is reasonable assurance of repayment of the loan;
(B) the financial assistance is not otherwise available on
reasonable terms from private sources or other Federal, State, or
local programs;
(C) the amount of the loan, together with other funds
available, is adequate to assure completion of the project or
achievement of the purposes for which the loan is made;
(D) the loan bears interest at a rate not less than (i) a rate
determined by the Secretary of the Treasury, taking into
consideration the average market yield on outstanding Treasury
obligations of comparable maturity, plus (ii) such additional
charge, if any, toward covering other costs of the program as the
Administration may determine to be consistent with its purposes:
Provided, however, That the rate of interest charged on loans
made in redevelopment areas designated under the Public Works and
Economic Development Act of 1965 [42 U.S.C. 3121 et seq.] shall
not exceed the rate currently applicable to new loans made under
section 201 of that Act [42 U.S.C. 3141]; and
(E) fees not in excess of amounts necessary to cover
administrative expenses and probable losses may be required on
loan guarantees.
(6) The Administration shall take such steps as may be necessary
to insure that, in any fiscal year, at least 50 per centum of the
amounts loaned or guaranteed pursuant to this subsection are
allotted to small business concerns located in urban areas
identified by the Administration as having high concentrations of
unemployed or low-income individuals or to small business concerns
owned by low-income individuals. The Administration shall define
the meaning of low income as it applies to owners of small business
concerns eligible to be assisted under this subsection.
(7) No financial assistance shall be extended pursuant to this
subsection where the Administration determines that the assistance
will be used in relocating establishments from one area to another
if such relocation would result in an increase in unemployment in
the area of original location.
(j) Financial assistance for projects providing technical or
management assistance; areas of high concentration of
unemployment or low-income; preferences; manner and method of
payment; accessible services; program evaluations; establishment
of development program; coordination of policies
(1) The Administration shall provide financial assistance to
public or private organizations to pay all or part of the cost of
projects designed to provide technical or management assistance to
individuals or enterprises eligible for assistance under subsection
(i) of this section, paragraph (10) of this subsection; and section
637(a) of this title, with special attention to small businesses
located in areas of high concentration of unemployed or low-income
individuals, to small businesses eligible to receive contracts
pursuant to section 637(a) of this title.
(2) Financial assistance under this subsection may be provided
for projects, including, but not limited to -
(A) planning and research, including feasibility studies and
market research;
(B) the identification and development of new business
opportunities;
(C) the furnishing of centralized services with regard to
public services and Federal Government programs including
programs authorized under subsection (i) of this section;
paragraph (10) of this subsection, and section 637(a) of this
title;
(D) the establishment and strengthening of business service
agencies, including trade associations and cooperatives; and
(E) the furnishing of business counseling, management training,
and legal and other related services, with special emphasis on
the development of management training programs using the
resources of the business community, including the development of
management training opportunities in existing business, and with
emphasis in all cases upon providing management training of
sufficient scope and duration to develop entrepreneurial and
managerial self-sufficiency on the part of the individuals
served.
(3) The Administration shall encourage the placement of
subcontracts by businesses with small business concerns located in
areas of high concentration of unemployed or low-income
individuals, with small businesses owned by low-income individuals,
and with small businesses eligible to receive contracts pursuant to
section 637(a) of this title. The Administration may provide
incentives and assistance to such businesses that will aid in the
training and upgrading of potential subcontractors or other small
business concerns eligible for assistance under subsections (i) and
(j) of this section, and section 637(a) of this title.
(4) The Administration shall give preference to projects which
promote the ownership, participation in ownership, or management of
small businesses owned by low-income individuals and small
businesses eligible to receive contracts pursuant to section 637(a)
of this title.
(5) The financial assistance authorized for projects under this
subsection includes assistance advanced by grant, agreement, or
contract.
(6) The Administration is authorized to make payments under
grants and contracts entered into under this subsection in lump sum
or installments, and in advance or by way of reimbursement, and in
the case of grants, with necessary adjustments on account of
overpayments or underpayments.
(7) To the extent feasible, services under this subsection shall
be provided in a location which is easily accessible to the
individuals and small business concerns served.
(8) Repealed. Pub. L. 101-574, title II, Sec. 242(2), Nov. 15,
1990, 104 Stat. 2827.
(9) The Administration shall take such steps as may be necessary
and appropriate, in coordination and cooperation with the heads of
other Federal departments and agencies, to insure that contracts,
subcontracts, and deposits made by the Federal Government or with
programs aided with Federal funds are placed in such way as to
further the purposes of subsections (i) and (j) of this section and
section 637(a) of this title.
(10) There is established within the Administration a small
business and capital ownership development program (hereinafter
referred to as the "Program") which shall provide assistance
exclusively for small business concerns eligible to receive
contracts pursuant to section 637(a) of this title. The program,
and all other services and activities authorized under this
subsection and section 637(a) of this title, shall be managed by
the Associate Administrator for Minority Small Business and Capital
Ownership Development under the supervision of, and responsible to,
the Administrator.
(A) The Program shall -
(i) assist small business concerns participating in the
Program (either through public or private organizations) to
develop and maintain comprehensive business plans which set
forth the Program Participant's specific business targets,
objectives, and goals developed and maintained in conformity
with subparagraph (D).(!9)
(ii) provide for such other nonfinancial services as deemed
necessary for the establishment, preservation, and growth of
small business concerns participating in the Program, including
but not limited to (I) loan packaging, (II) financial
counseling, (III) accounting and bookkeeping assistance, (IV)
marketing assistance, and (V) management assistance;
(iii) assist small business concerns participating in the
Program to obtain equity and debt financing;
(iv) establish regular performance monitoring and reporting
systems for small business concerns participating in the
Program to assure compliance with their business plans;
(v) analyze and report the causes of success and failure of
small business concerns participating in the Program; and
(vi) provide assistance necessary to help small business
concerns participating in the Program to procure surety bonds,
with such assistance including, but not limited to, (I) the
preparation of application forms required to receive a surety
bond, (II) special management and technical assistance designed
to meet the specific needs of small business concerns
participating in the Program and which have received or are
applying to receive a surety bond, and (III) preparation of all
forms necessary to receive a surety bond guarantee from the
Administration pursuant to title IV, part B of the Small
Business Investment Act of 1958 [15 U.S.C. 694a et seq.].
(B) Small business concerns eligible to receive contracts
pursuant to section 637(a) of this title shall participate in the
Program.
(C)(i) A small business concern participating in any program or
activity conducted under the authority of this paragraph or
eligible for the award of contracts pursuant to section 637(a) of
this title on September 1, 1988, shall be permitted continued
participation and eligibility in such program or activity for a
period of time which is the greater of -
(I) 9 years less the number of years since the award of its
first contract pursuant to section 637(a) of this title; or
(II) its original fixed program participation term (plus any
extension thereof) assigned prior to November 15, 1988, plus
eighteen months.
(ii) Nothing contained in this subparagraph shall be deemed to
prevent the Administration from instituting a termination or
graduation pursuant to subparagraph (F) or (H) for issues
unrelated to the expiration of any time period limitation.
(D)(i) Promptly after certification under paragraph (11) a
Program Participant shall submit a business plan (hereinafter
referred to as the "plan") as described in clause (ii) of this
subparagraph for review by the Business Opportunity Specialist
assigned to assist such Program Participant. The plan may be a
revision of a preliminary business plan submitted by the Program
Participant or required by the Administration as a part of the
application for certification under this section and shall be
designed to result in the Program Participant eliminating the
conditions or circumstances upon which the Administration
determined eligibility pursuant to section 637(a)(6) of this
title. Such plan, and subsequent modifications submitted under
clause (iii) of this subparagraph, shall be approved by the
business opportunity specialist prior to the Program Participant
being eligible for award of a contract pursuant to section 637(a)
of this title.
(ii) The plans submitted under this subparagraph shall include
the following:
(I) An analysis of market potential, competitive environment,
and other business analyses estimating the Program
Participant's prospects for profitable operations during the
term of program participation and after graduation.
(II) An analysis of the Program Participant's strengths and
weaknesses with particular attention to correcting any
financial, managerial, technical, or personnel conditions which
are likely to impede the small business concern from receiving
contracts other than those awarded under section 637(a) of this
title.
(III) Specific targets, objectives, and goals, for the
business development of the Program Participant during the next
and succeeding years utilizing the results of the analyses
conducted pursuant to subclauses (I) and (II).
(IV) A transition management plan outlining specific steps to
assure profitable business operations after graduation (to be
incorporated into the Program Participant's plan during the
first year of the transitional stage of Program participation).
(V) Estimates of contract awards pursuant to section 637(a)
of this title and from other sources, which the Program
Participant will require to meet the specific targets,
objectives, and goals for the years covered by its plan. The
estimates established shall be consistent with the provisions
of subparagraph (I) and section 637(a) of this title.
(iii) Each Program Participant shall annually review its
currently approved plan with its Business Opportunity Specialist
and modify such plan as may be appropriate. Any modified plan
shall be submitted to the Administration for approval. The
currently approved plan shall be considered valid until such time
as a modified plan is approved by the Business Opportunity
Specialist. Annual reviews pertaining to years in the
transitional stage of program participation shall require, as
appropriate, a written verification that such Program Participant
has complied with the requirements of subparagraph (I) relating
to attaining business activity from sources other than contracts
awarded pursuant to section 637(a) of this title.
(iv) Each Program Participant shall annually forecast its needs
for contract awards under section 637(a) of this title for the
next program year and the succeeding program year during the
review of its business plan, conducted pursuant to clause (iii).
Such forecast shall be known as the section 8(a) [15 U.S.C.
637(a)] contract support level and shall be included in the
Program Participant's business plan. Such forecast shall include -

(I) the aggregate dollar value of contract support to be
sought on a noncompetitive basis under section 637(a) of this
title, reflecting compliance with the requirements of
subparagraph (I) relating to attaining business activity from
sources other than contracts awarded pursuant to section 637(a)
of this title,
(II) the types of contract opportunities being sought,
identified by Standard Industrial Classification (SIC) Code or
otherwise,
(III) an estimate of the dollar value of contract support to
be sought on a competitive basis, and
(IV) such other information as may be requested by the
Business Opportunity Specialist to provide effective business
development assistance to the Program Participant.
(E) A small business concern participating in the program
conducted under the authority of this paragraph and eligible for
the award of contracts pursuant to section 637(a) of this title
shall be denied all such assistance if such concern -
(i) voluntarily elects not to continue participation;
(ii) completes the period of Program participation as
prescribed by paragraph (15);
(iii) is terminated pursuant to a termination proceeding
conducted in accordance with section 637(a)(9) of this title;
or
(iv) is graduated pursuant to a graduation proceeding
conducted in accordance with section 637(a)(9) of this title.
(F) For purposes of this section and section 637(a) of this
title, the term "terminated" and the term "termination" means the
total denial or suspension of assistance under this paragraph or
under section 637(a) of this title prior to the graduation of the
participating small business concern or prior to the expiration
of the maximum program participation term. An action for
termination shall be based upon good cause, including -
(i) the failure by such concern to maintain its eligibility
for Program participation;
(ii) the failure of the concern to engage in business
practices that will promote its competitiveness within a
reasonable period of time as evidenced by, among other
indicators, a pattern of unjustified delinquent performance or
terminations for default with respect to contracts awarded
under the authority of section 637(a) of this title;
(iii) a demonstrated pattern of failing to make required
submissions or responses to the Administration in a timely
manner;
(iv) the willful violation of any rule or regulation of the
Administration pertaining to material issues;
(v) the debarment of the concern or its disadvantaged owners
by any agency pursuant to subpart 9.4 of title 48, Code of
Federal Regulations (or any successor regulation); or
(vi) the conviction of the disadvantaged owner or an officer
of the concern for any offense indicating a lack of business
integrity including any conviction for embezzlement, theft,
forgery, bribery, falsification or violation of section 645 of
this title. For purposes of this clause, no termination action
shall be taken with respect to a disadvantaged owner solely
because of the conviction of an officer of the concern (who is
other than a disadvantaged owner) unless such owner conspired
with, abetted, or otherwise knowingly acquiesced in the
activity or omission that was the basis of such officer's
conviction.
(G) The Director of the Division may initiate a termination
proceeding by recommending such action to the Associate
Administrator for Minority Small Business and Capital Ownership
Development. Whenever the Associate Administrator, or a designee
of such officer, determines such termination is appropriate,
within 15 days after making such a determination the Program
Participant shall be provided a written notice of intent to
terminate, specifying the reasons for such action. No Program
Participant shall be terminated from the Program pursuant to
subparagraph (F) without first being afforded an opportunity for
a hearing in accordance with section 637(a)(9) of this title.
(H) For the purposes of this subsection and section 637(a) of
this title the term "graduated" or "graduation" means that the
Program Participant is recognized as successfully completing the
program by substantially achieving the targets, objectives, and
goals contained in the concern's business plan thereby
demonstrating its ability to compete in the marketplace without
assistance under this section or section 637(a) of this title.
(I)(i) During the developmental stage of its participation in
the Program, a Program Participant shall take all reasonable
efforts within its control to attain the targets contained in its
business plan for contracts awarded other than pursuant to
section 637(a) of this title (hereinafter referred to as
"business activity targets."). Such efforts shall be made a part
of the business plan and shall be sufficient in scope and
duration to satisfy the Administration that the Program
Participant will engage a reasonable marketing strategy that will
maximize its potential to achieve its business activity targets.
(ii) During the transitional stage of the Program a Program
Participant shall be subject to regulations regarding business
activity targets that are promulgated by the Administration
pursuant to clause (iii);
(iii) The regulations referred to in clause (ii) shall:
(I) establish business activity targets applicable to Program
Participants during the fifth year and each succeeding year of
Program Participation; such targets, for such period of time,
shall reflect a reasonably consistent increase in contracts
awarded other than pursuant to section 637(a) of this title,
expressed as a percentage of total sales; when promulgating
business activity targets the Administration may establish
modified targets for Program Participants that have
participated in the Program for a period of longer than four
years on June 1, 1989;
(II) require a Program Participant to attain its business
activity targets;
(III) provide that, before the receipt of any contract to be
awarded pursuant to section 637(a) of this title, the Program
Participant (if it is in the transitional stage) must certify
that it has complied with the regulations promulgated pursuant
to subclause (II), or that it is in compliance with such
remedial measures as may have been ordered pursuant to
regulations issued under subclause (V);
(IV) require the Administration to review each Program
Participant's performance regarding attainment of business
activity targets during periodic reviews of such Participant's
business plan; and
(V) authorize the Administration to take appropriate remedial
measures with respect to a Program Participant that has failed
to attain a required business activity target for the purpose
of reducing such Participant's dependence on contracts awarded
pursuant to section 637(a) of this title; such remedial actions
may include, but are not limited to assisting the Program
Participant to expand the dollar volume of its competitive
business activity or limiting the dollar volume of contracts
awarded to the Program Participant pursuant to section 637(a)
of this title; except for actions that would constitute a
termination, remedial measures taken pursuant to this subclause
shall not be reviewable pursuant to section 637(a)(9) of this
title.
(J)(i) The Administration shall conduct an evaluation of a
Program Participant's eligibility for continued participation in
the Program whenever it receives specific and credible
information alleging that such Program Participant no longer
meets the requirements for Program eligibility. Upon making a
finding that a Program Participant is no longer eligible, the
Administration shall initiate a termination proceeding in
accordance with subparagraph (F). A Program Participant's
eligibility for award of any contract under the authority of
section 637(a) of this title may be suspended pursuant to subpart
9.4 of title 48, Code of Federal Regulations (or any successor
regulation).
(ii)(I) Except as authorized by subclauses (II) or (III), no
award shall be made pursuant to section 637(a) of this title to a
concern other than a small business concern.
(II) In determining the size of a small business concern owned
by a socially and economically disadvantaged Indian tribe (or a
wholly owned business entity of such tribe), each firm's size
shall be independently determined without regard to its
affiliation with the tribe, any entity of the tribal government,
or any other business enterprise owned by the tribe, unless the
Administrator determines that one or more such tribally owned
business concerns have obtained, or are likely to obtain, a
substantial unfair competitive advantage within an industry
category.
(III) Any joint venture established under the authority of
section 602(b) of Public Law 100-656, the "Business Opportunity
Development Reform Act of 1988", shall be eligible for award of a
contract pursuant to section 637(a) of this title.
(11)(A) The Associate Administrator for Minority Small Business
and Capital Ownership Development shall be responsible for
coordinating and formulating policies relating to Federal
assistance to small business concerns eligible for assistance under
subsection (i) of this section and small business concerns eligible
to receive contracts pursuant to section 637(a) of this title.
(B)(i) Except as provided in clause (iii), no individual who was
determined pursuant to section 637(a) of this title to be socially
and economically disadvantaged before August 15, 1989, shall be
permitted to assert such disadvantage with respect to any other
concern making application for certification after August 15, 1989.
(ii) Except as provided in clause (iii), any individual upon whom
eligibility is based pursuant to section 637(a)(4) of this title
shall be permitted to assert such eligibility for only one small
business concern.
(iii) A socially and economically disadvantaged Indian tribe may
own more than one small business concern eligible for assistance
pursuant to paragraph (10) and section 637(a) of this title if -
(I) the Indian tribe does not own another firm in the same
industry which has been determined to be eligible to receive
contracts under this program, and
(II) the individuals responsible for the management and daily
operations of the concern do not manage more than two Program
Participants.
(C) No concern, previously eligible for the award of contracts
pursuant to section 637(a) of this title, shall be subsequently
recertified for program participation if its prior participation in
the program was concluded for any of the reasons described in
paragraph (10)(E).
(D) A concern eligible for the award of contracts pursuant to
this subsection shall remain eligible for such contracts if there
is a transfer of ownership and control (as defined pursuant to
section 637(a)(4) of this title) to individuals who are determined
to be socially and economically disadvantaged pursuant to section
637(a) of this title. In the event of such a transfer, the concern,
if not terminated or graduated, shall be eligible for a period of
continued participation in the program not to exceed the time
limitations prescribed in paragraph (15).
(E) There is established a Division of Program Certification and
Eligibility (hereinafter referred to in this paragraph as the
"Division") that shall be made part of the Office of Minority Small
Business and Capital Ownership Development. The Division shall be
headed by a Director who shall report directly to the Associate
Administrator for Minority Small Business and Capital Ownership
Development. The Division shall establish field offices within such
regional offices of the Administration as may be necessary to
perform efficiently its functions and responsibilities.
(F) Subject to the provisions of section 637(a)(9) of this title,
the functions and responsibility of the Division are to -
(i) receive, review and evaluate applications for certification
pursuant to paragraphs (4), (5), (6) and (7) of section 637(a) of
this title;
(ii) advise each program applicant within 15 days after the
receipt of an application as to whether such application is
complete and suitable for evaluation and, if not, what matters
must be rectified;
(iii) render recommendations on such applications to the
Associate Administrator for Minority Small Business and Capital
Ownership Development;
(iv) review and evaluate financial statements and other
submissions from concerns participating in the program
established by paragraph (10) to ascertain continued eligibility
to receive subcontracts pursuant to section 637(a) of this title;
(v) make a request for the initiation of termination or
graduation proceedings, as appropriate, to the Associate
Administrator for Minority Small Business and Capital Ownership
Development;
(vi) make recommendations to the Associate Administrator for
Minority Small Business and Capital Ownership Development
concerning protests from applicants that have been denied program
admission;
(vii) decide protests regarding the status of a concern as a
disadvantaged concern for purposes of any program or activity
conducted under the authority of subsection (d) of section 637 of
this title, or any other provision of Federal law that references
such subsection for a definition of program eligibility; and
(viii) implement such policy directives as may be issued by the
Associate Administrator for Minority Small Business and Capital
Ownership Development pursuant to subparagraph (I) regarding,
among other things, the geographic distribution of concerns to be
admitted to the program and the industrial make-up of such
concerns.
(G) An applicant shall not be denied admission into the program
established by paragraph (10) due solely to a determination by the
Division that specific contract opportunities are unavailable to
assist in the development of such concern unless -
(i) the Government has not previously procured and is unlikely
to procure the types of products or services offered by the
concern; or
(ii) the purchases of such products or services by the Federal
Government will not be in quantities sufficient to support the
developmental needs of the applicant and other Program
Participants providing the same or similar items or services.
(H) Not later than 90 days after receipt of a completed
application for Program certification, the Associate Administrator
for Minority Small Business and Capital Ownership Development shall
certify a small business concern as a Program Participant or shall
deny such application.
(I) Thirty days before the conclusion of each fiscal year, the
Director of the Division shall review all concerns that have been
admitted into the Program during the preceding 12-month period. The
review shall ascertain the number of entrants, their geographic
distribution and industrial classification. The Director shall also
estimate the expected growth of the Program during the next fiscal
year and the number of additional Business Opportunity Specialists,
if any, that will be needed to meet the anticipated demand for the
Program. The findings and conclusions of the Director shall be
reported to the Associate Administrator for Minority Small Business
and Capital Ownership Development by September 30 of each year.
Based on such report and such additional data as may be relevant,
the Associate Administrator shall, by October 31 of each year,
issue policy and program directives applicable to such fiscal year
that -
(i) establish priorities for the solicitation of program
applications from underrepresented regions and industry
categories;
(ii) assign staffing levels and allocate other program
resources as necessary to meet program needs; and
(iii) establish priorities in the processing and admission of
new Program Participants as may be necessary to achieve an
equitable geographic distribution of concerns and a distribution
of concerns across all industry categories in proportions needed
to increase significantly contract awards to small business
concerns owned and controlled by socially and economically
disadvantaged individuals. When considering such increase the
Administration shall give due consideration to those industrial
categories where Federal purchases have been substantial but
where the participation rate of such concerns has been limited.
(12)(A) The Administration shall segment the Capital Ownership
Development Program into two stages: a developmental stage; and a
transitional stage.
(B) The developmental stage of program participation shall be
designed to assist the concern in its effort to overcome its
economic disadvantage by providing such assistance as may be
necessary and appropriate to access its markets and to strengthen
its financial and managerial skills.
(C) The transitional stage of program participation shall be
designed to overcome, insofar as practicable, the remaining
elements of economic disadvantage and to prepare such concern for
graduation from the program.
(13) A Program Participant, if otherwise eligible, shall be
qualified to receive the following assistance during the stages of
program participation specified in paragraph 12: (!10)
(A) Contract support pursuant to section 637(a) of this title.
(B) Financial assistance pursuant to subsection (a)(20) of this
section.
(C) A maximum of two exemptions from the requirements of
section 35(a) (!11) of title 41, which exemptions shall apply
only to contracts awarded pursuant to section 637(a) of this
title and shall only be used to allow for contingent agreements
by a small business concern to acquire the machinery, equipment,
facilities, or labor needed to perform such contracts. No
exemption shall be made pursuant to this subparagraph if the
contract to which it pertains has an anticipated value in excess
of $10,000,000. This subparagraph shall cease to be effective on
October 1, 1992.
(D) A maximum of five exemptions from the requirements of
sections 3131 and 3133 of title 40, which exemptions shall apply
only to contracts awarded pursuant to section 637(a) of this
title, except that, such exemptions may be granted under this
subparagraph only if -
(i) the Administration finds that such concern is unable to
obtain the requisite bond or bonds from a surety and that no
surety is willing to issue a bond subject to the guarantee
provision of title IV of the Small Business Investment Act of
1958 (15 U.S.C. 692 et seq.);
(ii) the Administration and the agency providing the
contracting opportunity have provided for the protection of
persons furnishing materials or labor to the Program
Participant by arranging for the direct disbursement of funds
due to such persons by the procuring agency or through any bank
the deposits of which are insured by the Federal Deposit
Insurance Corporation; and
(iii) the contract to which it pertains does not exceed
$3,000,000 in amount. This subparagraph shall cease to be
effective on October 1, 1994.
(E) Financial assistance whereby the Administration may
purchase in whole or in part, and on behalf of such concerns,
skills training or upgrading for employees or potential employees
of such concerns. Such assistance may be made without regard to
section 647(a) of this title. Assistance may be made by direct
payment to the training provider or by reimbursing the Program
Participant or the Participant's employee, if such reimbursement
is found to be reasonable and appropriate. For purposes of this
subparagraph the term "training provider" shall mean an
institution of higher education, a community or vocational
college, or an institution eligible to provide skills training or
upgrading under title I of the Workforce Investment Act of 1998
[29 U.S.C. 2801 et seq.]. The Administration shall, in
consultation with the Secretary of Labor, promulgate rules and
regulations to implement this subparagraph that establish
acceptable training and upgrading performance standards and
provide for such monitoring or audit requirements as may be
necessary to ensure the integrity of the training effort. No
financial assistance shall be granted under the subparagraph
unless the Administrator determines that -
(i) such concern has documented that it has first explored
the use of existing cost-free or cost-subsidized training
programs offered by public and private sector agencies working
with programs of employment and training and economic
development;
(ii) no more than five employees or potential employees of
such concern are recipients of any benefits under this
subparagraph at any one time;
(iii) no more than $2,500 shall be made available for any one
employee or potential employee;
(iv) the length of training or upgrading financed by this
subparagraph shall be no less than one month nor more than six
months;
(v) such concern has given adequate assurance it will employ
the trainee or upgraded employee for at least six months after
the training or upgrading financed by this subparagraph has
been completed and each trainee or upgraded employee has
provided a similar assurance to remain within the employ of
such concern for such period; if such concern, trainee, or
upgraded employee breaches this agreement, the Administration
shall be entitled to and shall make diligent efforts to obtain
from the violating party the repayment of all funds expended on
behalf of the violating party, such repayment shall be made to
the Administration together with such interest and costs of
collection as may be reasonable; the violating party shall be
barred from receiving any further assistance under this
subparagraph;
(vi) the training to be financed may take place either at
such concern's facilities or at those of the training provider;
and
(vii) such concern will maintain such records as the
Administration deems appropriate to ensure that the provisions
of this paragraph and any other applicable law have not been
violated.
(F) The transfer of technology or surplus property owned by the
United States to such a concern. Activities designed to effect
such transfer shall be developed in cooperation with the heads of
Federal agencies and shall include the transfer by grant,
license, or sale of such technology or property to such a
concern. Such property may be transferred to Program Participants
on a priority basis. Technology or property transferred under
this subparagraph shall be used by the concern during the normal
conduct of its business operation and shall not be sold or
transferred to any other party (other than the Government) during
such concern's term of participation in the Program and for one
year thereafter.
(G) Training assistance whereby the Administration shall
conduct training sessions to assist individuals and enterprises
eligible to receive contracts under section 637(a) of this title
in the development of business principles and strategies to
enhance their ability to successfully compete for contracts in
the marketplace.
(H) Joint ventures, leader-follower arrangements, and teaming
agreements between the Program Participant and other Program
Participants and other business concerns with respect to
contracting opportunities for the research, development, full-
scale engineering or production of major systems. Such
activities shall be undertaken on the basis of programs developed
by the agency responsible for the procurement of the major
system, with the assistance of the Administration.
(I) Transitional management business planning training and
technical assistance.
(J) Program Participants in the developmental stage of Program
participation shall be eligible for the assistance provided by
subparagraphs (A), (B), (C), (D), (E), (F), and (G).
(14) Program Participants in the transitional stage of Program
participation shall be eligible for the assistance provided by
subparagraphs (A), (B), (F), (G), (H), and (I) of paragraph (13).
(15) Subject to the provisions of paragraph (10)(C), a small
business concern may receive developmental assistance under the
Program and contracts under section 637(a) of this title for a
total period of not longer than nine years, measured from the date
of its certification under the authority of such section, of which -

(A) no more than four years may be spent in the developmental
stage of Program Participation; and
(B) no more than five years may be spent in the transitional
stage of Program Participation.
(16)(A) The Administrator shall develop and implement a process
for the systematic collection of data on the operations of the
Program established pursuant to paragraph (10).
(B) Not later than April 30 of each year, the Administrator shall
submit a report to the Congress on the Program that shall include
the following:
(i) The average personal net worth of individuals who own and
control concerns that were initially certified for participation
in the Program during the immediately preceding fiscal year. The
Administrator shall also indicate the dollar distribution of net
worths, at $50,000 increments, of all such individuals found to
be socially and economically disadvantaged. For the first report
required pursuant to this paragraph the Administrator shall also
provide the data specified in the preceding sentence for all
eligible individuals in the Program as of November 15, 1988.
(ii) A description and estimate of the benefits and costs that
have accrued to the economy and the Government in the immediately
preceding fiscal year due to the operations of those business
concerns that were performing contracts awarded pursuant to
section 637(a) of this title.
(iii) A compilation and evaluation of those business concerns
that have exited the Program during the immediately preceding
three fiscal years. Such compilation and evaluation shall detail
the number of concerns actively engaged in business operations,
those that have ceased or substantially curtailed such
operations, including the reasons for such actions, and those
concerns that have been acquired by other firms or organizations
owned and controlled by other than socially and economically
disadvantaged individuals. For those businesses that have
continued operations after they exited from the Program, the
Administrator shall also separately detail the benefits and costs
that have accrued to the economy during the immediately preceding
fiscal year due to the operations of such concerns.
(iv) A listing of all participants in the Program during the
preceding fiscal year identifying, by State and by Region, for
each firm: the name of the concern, the race or ethnicity, and
gender of the disadvantaged owners, the dollar value of all
contracts received in the preceding year, the dollar amount of
advance payments received by each concern pursuant to contracts
awarded under section 637(a) of this title, and a description
including (if appropriate) an estimate of the dollar value of all
benefits received pursuant to paragraphs (13) and (14) and
subsection (a)(20) of this section during such year.
(v) The total dollar value of contracts and options awarded
during the preceding fiscal year pursuant to section 637(a) of
this title and such amount expressed as a percentage of total
sales of (I) all firms participating in the Program during such
year; and (II) of firms in each of the nine years of program
participation.
(vi) A description of such additional resources or program
authorities as may be required to provide the types of services
needed over the next two-year period to service the expected
portfolio of firms certified pursuant to section 637(a) of this
title.
(vii) The total dollar value of contracts and options awarded
pursuant to section 637(a) of this title, at such dollar
increments as the Administrator deems appropriate, for each four
digit standard industrial classification code under which such
contracts and options were classified.
(C) The first report required by subparagraph (B) shall pertain
to fiscal year 1990.
(k) Functions relating to loans and financial assistance for
projects providing technical or management assistance to
individuals or enterprises eligible for assistance as small
business concerns located in urban or rural areas with high
proportions of unemployed or low-income individuals, or owned by
low-income individuals
In carrying out its functions under subsections (i) and (j) of
this section and section 637(a) of this title, the Administration
is authorized -
(1) to utilize, with their consent, the services and facilities
of Federal agencies without reimbursement, and, with the consent
of any State or political subdivision of a State, accept and
utilize the services and facilities of such State or subdivision
without reimbursement;
(2) to accept, in the name of the Administration, and employ or
dispose of in furtherance of the purposes of this chapter, any
money or property, real, personal, or mixed, tangible, or
intangible, received by gift, devise, bequest, or otherwise;
(3) to accept voluntary and uncompensated services,
notwithstanding the provisions of section 1342 of title 31; and
(4) to employ experts and consultants or organizations thereof
as authorized by section 3109 of title 5, except that no
individual may be employed under the authority of this subsection
for more than one hundred days in any fiscal year; to compensate
individuals so employed at rates not in excess of the daily
equivalent of the highest rate payable under section 5332 of
title 5, including traveltime; and to allow them, while away from
their homes or regular places of business, travel expenses
(including per diem in lieu of subsistence) as authorized by
section 5703 of title 5 for persons in the Government service
employed intermittently, while so employed: Provided, however,
That contracts for such employment may be renewed annually.
(l) [RESERVED]
(m) Microloan Program
(1)(A) Purposes
The purposes of the Microloan Program are -
(i) to assist women, low-income, veteran (within the meaning
of such term under section 632(q) of this title), and minority
entrepreneurs and business owners and other such individuals
possessing the capability to operate successful business
concerns;
(ii) to assist small business concerns in those areas
suffering from a lack of credit due to economic downturns;
(iii) to establish a microloan program to be administered by
the Small Business Administration -
(I) to make loans to eligible intermediaries to enable such
intermediaries to provide small-scale loans, particularly
loans in amounts averaging not more than $10,000, to startup,
newly established, or growing small business concerns for
working capital or the acquisition of materials, supplies, or
equipment;
(II) to make grants to eligible intermediaries that,
together with non-Federal matching funds, will enable such
intermediaries to provide intensive marketing, management,
and technical assistance to microloan borrowers;
(III) to make grants to eligible nonprofit entities that,
together with non-Federal matching funds, will enable such
entities to provide intensive marketing, management, and
technical assistance to assist low-income entrepreneurs and
other low-income individuals obtain private sector financing
for their businesses, with or without loan guarantees; and
(IV) to report to the Committees on Small Business of the
Senate and the House of Representatives on the effectiveness
of the microloan program and the advisability and feasibility
of implementing such a program nationwide; and
(iv) to establish a welfare-to-work microloan initiative,
which shall be administered by the Administration, in order to
test the feasibility of supplementing the technical assistance
grants provided under clauses (ii) and (iii) of subparagraph
(B) to individuals who are receiving assistance under the State
program funded under part A of title IV of the Social Security
Act (42 U.S.C. 601 et seq.), or under any comparable State
funded means tested program of assistance for low-income
individuals, in order to adequately assist those individuals in
-
(I) establishing small businesses; and
(II) eliminating their dependence on that assistance.
(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);
(ii) in conjunction with such loans and subject to the
requirements of paragraph (4), make grants to such
intermediaries for the purpose of providing intensive
marketing, management, and technical assistance to small
business concerns that are borrowers under this subsection; and
(iii) subject to the requirements of paragraph (5), make
grants to nonprofit entities for the purpose of providing
marketing, management, and technical assistance to low-income
individuals seeking to start or enlarge their own businesses,
if such assistance includes working with the grant recipient to
secure loans in amounts not to exceed $35,000 from private
sector lending institutions, with or without a loan guarantee
from the nonprofit entity.
(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); (!12) 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.
(3) Loans to intermediaries
(A) Intermediary applications
(i) In general
As part of its application for a loan, each intermediary
shall submit a description to the Administration of -
(I) the type of businesses to be assisted;
(II) the size and range of loans to be made;
(III) the geographic area to be served and its economic,
poverty, and unemployment characteristics;
(IV) the status of small business concerns in the area to
be served and an analysis of their credit and technical
assistance needs;
(V) any marketing, management, and technical assistance
to be provided in connection with a loan made under this
subsection;
(VI) the local economic credit markets, including the
costs associated with obtaining credit locally;
(VII) the qualifications of the applicant to carry out
the purpose of this subsection; and
(VIII) any plan to involve other technical assistance
providers (such as counselors from the Service Corps of
Retired Executives or small business development centers)
or private sector lenders in assisting selected business
concerns.
(ii) Selection of intermediaries
In selecting intermediaries to participate in the program
established under this subsection, the Administration shall
give priority to those applicants that provide loans in
amounts averaging not more than $10,000.
(B) Intermediary contribution
As a condition of any loan made to an intermediary under
subparagraph (B)(i) of paragraph (1), the Administration shall
require the intermediary to contribute not less than 15 percent
of the loan amount in cash from non-Federal sources.
(C) Loan limits
Notwithstanding subsection (a)(3) of this section, 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 chapter would, as a result of such loan,
exceed $750,000 in the first year of such intermediary's
participation in the program, and $3,500,000 in the remaining
years of the intermediary's participation in the program.
(D)(i) In general
The Administrator shall, by regulation, require each
intermediary to establish a loan loss reserve fund, and to
maintain such reserve fund until all obligations owed to the
Administration under this subsection are repaid.
(ii) Level of loan loss reserve fund
(I) In general
Subject to subclause (III), the Administrator shall require
the loan loss reserve fund of an intermediary to be
maintained at a level equal to 15 percent of the outstanding
balance of the notes receivable owed to the intermediary.
(II) Review of loan loss reserve
After the initial 5 years of an intermediary's
participation in the program authorized by this subsection,
the Administrator shall, at the request of the intermediary,
conduct a review of the annual loss rate of the intermediary.
Any intermediary in operation under this subsection prior to
October 1, 1994, that requests a reduction in its loan loss
reserve shall be reviewed based on the most recent 5-year
period preceding the request.
(III) Reduction of loan loss reserve
Subject to the requirements of clause IV,(!13) the
Administrator may reduce the annual loan loss reserve
requirement of an intermediary to reflect the actual average
loan loss rate for the intermediary during the preceding 5-
year period, except that in no case shall the loan loss
reserve be reduced to less than 10 percent of the outstanding
balance of the notes receivable owed to the intermediary.
(IV) Requirements
The Administrator may reduce the annual loan loss reserve
requirement of an intermediary only if the intermediary
demonstrates to the satisfaction of the Administrator that -
(aa) the average annual loss rate for the intermediary
during the preceding 5-year period is less than 15 percent;
and
(bb) that (!14) no other factors exist that may impair
the ability of the intermediary to repay all obligations
owed to the Administration under this subsection.
(E) Unavailability of comparable credit
An intermediary may make a loan under this subsection of more
than $20,000 to a small business concern only if such small
business concern demonstrates that it is unable to obtain
credit elsewhere at comparable interest rates and that it has
good prospects for success. In no case shall an intermediary
make a loan under this subsection of more than $35,000, or have
outstanding or committed to any 1 borrower more than $35,000.
(F) Loan duration; interest rates
(i) Loan duration
Loans made by the Administration under this subsection
shall be for a term of 10 years.
(ii) Applicable interest rates
Except as provided in clause (iii), loans made by the
Administration under this subsection to an intermediary shall
bear an interest rate equal to 1.25 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.
(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, 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.
(iv) Rates applicable to multiple sites or offices
The interest rate prescribed in clause (ii) or (iii) shall
apply to each separate loan-making site or office of 1
intermediary only if such site or office meets the
requirements of that clause.
(v) Rate basis
The applicable rate of interest under this paragraph shall -

(I) be applied retroactively for the first year of an
intermediary's participation in the program, based upon the
actual lending practices of the intermediary as determined
by the Administration prior to the end of such year; and
(II) be based in the second and subsequent years of an
intermediary's participation in the program, upon the
actual lending practices of the intermediary during the
term of the intermediary's participation in the program.
(vii) (!15) Covered intermediaries
The interest rates prescribed in this subparagraph shall
apply to all loans made to intermediaries under this
subsection on or after October 28, 1991.
(G) Delayed payments
The Administration shall not require repayment of interest or
principal of a loan made to an intermediary under this
subsection during the first year of the loan.
(H) Fees; collateral
Except as provided in subparagraphs (B) and (D), the
Administration shall not charge any fees or require collateral
other than an assignment of the notes receivable of the
microloans with respect to any loan made to an intermediary
under this subsection.
(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) Grant amounts
Except as otherwise provided in subparagraph (C) and subject
to subparagraph (B), each intermediary that receives a loan
under subparagraph (B)(i) of paragraph (1) shall be eligible to
receive a grant to provide marketing, management, and technical
assistance to small business concerns that are borrowers under
this subsection. Except as provided in subparagraph (C), each
intermediary meeting the requirements of subparagraph (B) may
receive a grant of not more than 25 percent of the total
outstanding balance of loans made to it under this subsection.
(B) Contribution
As a condition of any grant made under subparagraph (A), the
Administration shall require the intermediary to contribute an
amount equal to 25 percent of the amount of the grant, obtained
solely from non-Federal sources. In addition to cash or other
direct funding, the contribution may include indirect costs or
in-kind contributions paid for under non-Federal programs.
(C) Additional technical assistance grants for making certain
loans
(i) In general
Each intermediary that has a portfolio of loans made under
this subsection that averages not more than $10,000 during
the period of the intermediary's participation in the program
shall be eligible to receive a grant equal to 5 percent of
the total outstanding balance of loans made to the
intermediary under this subsection, in addition to grants
made under subparagraph (A).
(ii) Purposes
A grant awarded under clause (i) may be used to provide
marketing, management, and technical assistance to small
business concerns that are borrowers under this subsection.
(iii) Contribution exception
The contribution requirements in subparagraph (B) do not
apply to grants made under this subparagraph.
(D) Eligibility for multiple sites or offices
The eligibility for a grant described in subparagraph
(A),(!16) or (C) shall be determined separately for each loan-
making site or office of 1 intermediary.
(E) Assistance to certain small business concerns
(i) In general
Each intermediary may expend an amount not to exceed 25
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 of the
funds received under paragraph (1)(B)(ii) to enter into third
party contracts for the provision of technical assistance.
(F) Supplemental grant
(i) In general
The Administration may accept any funds transferred to the
Administration from other departments or agencies of the
Federal Government to make grants in accordance with this
subparagraph and section 202(b) of the Small Business
Reauthorization Act of 1997 to participating intermediaries
and technical assistance providers under paragraph (5), for
use in accordance with clause (iii) to provide additional
technical assistance and related services to recipients of
assistance under a State program described in paragraph
(1)(A)(iv) at the time they initially apply for assistance
under this subparagraph.
(ii) Eligible recipients; grant amounts
In making grants under this subparagraph, the
Administration may select, from among participating
intermediaries and technical assistance providers described
in clause (i), not more than 20 grantees in fiscal year 1998,
not more than 25 grantees in fiscal year 1999, and not more
than 30 grantees in fiscal year 2000, each of whom may
receive a grant under this subparagraph in an amount not to
exceed $200,000 per year.
(iii) Use of grant amounts
Grants under this subparagraph -
(I) are in addition to other grants provided under this
subsection and shall not require the contribution of
matching amounts as a condition of eligibility; and
(II) may be used by a grantee -
(aa) to pay or reimburse a portion of child care and
transportation costs of recipients of assistance
described in clause (i), to the extent such costs are not
otherwise paid by State block grants under the Child Care
Development Block Grant Act of 1990 (42 U.S.C. 9858 et
seq.) or under part A of title IV of the Social Security
Act (42 U.S.C. 601 et seq.); and
(bb) for marketing, management, and technical
assistance to recipients of assistance described in
clause (i).
(iv) Memorandum of Understanding
Prior to accepting any transfer of funds under clause (i)
from a department or agency of the Federal Government, the
Administration shall enter into a Memorandum of Understanding
with the department or agency, which shall -
(I) specify the terms and conditions of the grants under
this subparagraph; and
(II) provide for appropriate monitoring of expenditures
by each grantee under this subparagraph and each recipient
of assistance described in clause (i) who receives
assistance from a grantee under this subparagraph, in order
to ensure compliance with this subparagraph by those
grantees and recipients of assistance.
(5) Private sector borrowing technical assistance grants
Grants made in accordance with subparagraph (B)(iii) of
paragraph (1) shall be subject to the following requirements:
(A) Grant amounts
Subject to the requirements of subparagraph (B), the
Administration may make not more than 55 grants annually, each
in amounts not to exceed $200,000 for the purposes specified in
subparagraph (B)(iii) of paragraph (1).
(B) Contribution
As a condition of any grant made under subparagraph (A), the
Administration shall require the grant recipient to contribute
an amount equal to 20 percent of the amount of the grant,
obtained solely from non-Federal sources. In addition to cash
or other direct funding, the contribution may include indirect
costs or in-kind contributions paid for under non-Federal
programs.
(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.
(B) Portfolio requirement
To the extent practicable, each intermediary that operates a
microloan program under this subsection shall maintain a
microloan portfolio with an average loan size of not more than
$15,000.
(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 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 made by
the intermediary to a small business concern or entrepreneur
by more than 8.5 percentage points.
(D) Review restriction
The Administration shall not review individual microloans
made by intermediaries prior to approval.
(E) Establishment of child care or transportation businesses
In addition to other eligible small businesses concerns,
borrowers under any program under this subsection may include
individuals who will use the loan proceeds to establish for-
profit or nonprofit child care establishments or businesses
providing for-profit transportation services.
(7) Program funding for microloans
(A) Number of participants
Under the program authorized by this subsection, the
Administration may fund, on a competitive basis, not more than
300 intermediaries.
(B) Allocation
(i) Minimum allocation
Subject to the availability of appropriations, of the total
amount of new loan funds made available for award under this
subsection in each fiscal year, the Administration shall make
available for award in each State (including the District of
Columbia, the Commonwealth of Puerto Rico, the United States
Virgin Islands, Guam, and American Samoa) an amount equal to
the sum of -
(I) the lesser of -
(aa) $800,000; or
(bb) 1/55 of the total amount of new loan funds made
available for award under this subsection for that fiscal
year; and
(II) any additional amount, as determined by the
Administration.
(ii) Redistribution
If, at the beginning of the third quarter of a fiscal year,
the Administration determines that any portion of the amount
made available to carry out this subsection is unlikely to be
made available under clause (i) during that fiscal year, the
Administration may make that portion available for award in
any one or more States (including the District of Columbia,
the Commonwealth of Puerto Rico, the United States Virgin
Islands, Guam, and American Samoa) without regard to clause
(i).
(8) Equitable distribution of intermediaries
In approving microloan program applicants and providing funding
to intermediaries under this subsection, the Administration shall
select and provide funding to such intermediaries as will ensure
appropriate availability of loans for small businesses in all
industries located throughout each State, particularly those
located in urban and in rural areas.
(9) Grants for management, marketing, technical assistance, and
related services
(A) In general
The Administration may procure technical assistance for
intermediaries participating in the Microloan Program to ensure
that such intermediaries have the knowledge, skills, and
understanding of microlending practices necessary to operate
successful microloan programs.
(B) Assistance amount
The Administration shall transfer 7 percent of its annual
appropriation for loans and loan guarantees under this
subsection to the Administration's Salaries and Expense Account
for the specific purpose of providing 1 or more technical
assistance grants to experienced microlending organizations and
national and regional nonprofit organizations that have
demonstrated experience in providing training support for
microenterprise development and financing.(!17) to achieve the
purpose set forth in subparagraph (A).
(C) Welfare-to-work microloan initiative
Of amounts made available to carry out the welfare-to-work
microloan initiative under paragraph (1)(A)(iv) in any fiscal
year, the Administration may use not more than 5 percent to
provide technical assistance, either directly or through
contractors, to welfare-to-work microloan initiative grantees,
to ensure that, as grantees, they have the knowledge, skills,
and understanding of microlending and welfare-to-work
transition, and other related issues, to operate a successful
welfare-to-work microloan initiative.
(10) Report to Congress
On November 1, 1995, the Administration shall submit to the
Committees on Small Business of the Senate and the House of
Representatives a report, including the Administration's
evaluation of the effectiveness of the first 3 1/2 years of the
microloan program and the following:
(A) the numbers and locations of the intermediaries funded to
conduct microloan programs;
(B) the amounts of each loan and each grant to
intermediaries;
(C) a description of the matching contributions of each
intermediary;
(D) the numbers and amounts of microloans made by the
intermediaries to small business concern borrowers;
(E) the repayment history of each intermediary;
(F) a description of the loan portfolio of each intermediary
including the extent to which it provides microloans to small
business concerns in rural areas; and
(G) any recommendations for legislative changes that would
improve program operations.
(11) Definitions
For purposes of this subsection -
(A) the term "intermediary" means -
(i) a private, nonprofit entity;
(ii) a private, nonprofit community development
corporation;
(iii) a consortium of private, nonprofit organizations or
nonprofit community development corporations;
(iv) a quasi-governmental economic development entity (such
as a planning and development district), other than a State,
county, municipal government, or any agency thereof, if -
(I) no application is received from an eligible nonprofit
organization; or
(II) the Administration determines that the needs of a
region or geographic area are not adequately served by an
existing, eligible nonprofit organization that has
submitted an application; or
(v) an agency of or nonprofit entity established by a
Native American Tribal Government,
that seeks to borrow or has borrowed funds from the
Administration to make microloans to small business concerns
under this subsection;
(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;
(C) the term "rural area" means any political subdivision or
unincorporated area -
(i) in a nonmetropolitan county (as defined by the
Secretary of Agriculture) or its equivalent thereof; or
(ii) in a metropolitan county or its equivalent that has a
resident population of less than 20,000 if the Small Business
Administration has determined such political subdivision or
area to be rural.
(12) Deferred participation loan pilot
In lieu of making direct loans to intermediaries as authorized
in paragraph (1)(B), during fiscal years 1998 through 2000, the
Administration may, on a pilot program basis, participate on a
deferred basis of not less than 90 percent and not more than 100
percent on loans made to intermediaries by a for-profit or
nonprofit entity or by alliances of such entities, subject to the
following conditions:
(A) Number of loans
In carrying out this paragraph, the Administration shall not
participate in providing financing on a deferred basis to more
than 10 intermediaries in urban areas or more than 10
intermediaries in rural areas.
(B) Term of loans
The term of each loan shall be 10 years. During the first
year of the loan, the intermediary shall not be required to
repay any interest or principal. During the second through
fifth years of the loan, the intermediary shall be required to
pay interest only. During the sixth through tenth years of the
loan, the intermediary shall be required to make interest
payments and fully amortize the principal.
(C) Interest rate
The interest rate on each loan shall be the rate specified by
paragraph (3)(F) for direct loans.
(13) Evaluation of welfare-to-work microloan initiative
On January 31, 1999, and annually thereafter, the
Administration shall submit to the Committees on Small Business
of the House of Representatives and the Senate a report on any
monies distributed pursuant to paragraph (4)(F).
(n) Repayment deferred for active duty reservists
(1) Definitions
In this subsection:
(A) Eligible reservist
The term "eligible reservist" means a member of a reserve
component of the Armed Forces ordered to active duty during a
period of military conflict.
(B) Essential employee
The term "essential employee" means an individual who is
employed by a small business concern and whose managerial or
technical expertise is critical to the successful day-to-day
operations of that small business concern.
(C) Period of military conflict
The term "period of military conflict" means -
(i) a period of war declared by the Congress;
(ii) a period of national emergency declared by the
Congress or by the President; or
(iii) a period of a contingency operation, as defined in
section 101(a) of title 10.
(D) Qualified borrower
The term "qualified borrower" means -
(i) an individual who is an eligible reservist and who
received a direct loan under subsection (a) or (b) of this
section before being ordered to active duty; or
(ii) a small business concern that received a direct loan
under subsection (a) or (b) of this section before an
eligible reservist, who is an essential employee, was ordered
to active duty.
(2) Deferral of direct loans
(A) In general
The Administration shall, upon written request, defer
repayment of principal and interest due on a direct loan made
under subsection (a) or (b) of this section, if such loan was
incurred by a qualified borrower.
(B) Period of deferral
The period of deferral for repayment under this paragraph
shall begin on the date on which the eligible reservist is
ordered to active duty and shall terminate on the date that is
180 days after the date such eligible reservist is discharged
or released from active duty.
(C) Interest rate reduction during deferral
Notwithstanding any other provision of law, during the period
of deferral described in subparagraph (B), the Administration
may, in its discretion, reduce the interest rate on any loan
qualifying for a deferral under this paragraph.
(3) Deferral of loan guarantees and other financings
The Administration shall -
(A) encourage intermediaries participating in the program
under subsection (m) of this section to defer repayment of a
loan made with proceeds made available under that subsection,
if such loan was incurred by a small business concern that is
eligible to apply for assistance under subsection (b)(3) of
this section; and
(B) not later than 30 days after August 17, 1999, establish
guidelines to -
(i) encourage lenders and other intermediaries to defer
repayment of, or provide other relief relating to, loan
guarantees under subsection (a) of this section and
financings under section 697a of this title that were
incurred by small business concerns that are eligible to
apply for assistance under subsection (b)(3) of this section,
and loan guarantees provided under subsection (m) of this
section if the intermediary provides relief to a small
business concern under this paragraph; and
(ii) implement a program to provide for the deferral of
repayment or other relief to any intermediary providing
relief to a small business borrower under this paragraph.