§ 636. — Additional powers.
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From the U.S. Code Online via GPO Access
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[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC636]
TITLE 15--COMMERCE AND TRADE
CHAPTER 14A--AID TO SMALL BUSINESS
Sec. 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 $1,000,000 (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 $1,250,000, of which
not more than $750,000 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\
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\1\ So in original. The ``; and'' probably should be a period.
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(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.
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\2\ See References in Text note below.
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(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.
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\3\ So in original. Probably should be ``(B)''.
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(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)(A) The Administration may guarantee loans under this
paragraph to assist any eligible small business concern in an
industry engaged in or adversely affected by international trade in
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, if the Administration
determines that the appropriate upgrading of plant and equipment
will allow the concern to improve its competitive position. Each
such loan shall be secured by a first lien position or first
mortgage on the property or equipment financed by the loan.
(B) A small business concern shall be considered to be engaged
in or adversely affected by international trade for purposes of this
provision if such concern is, as determined by the Administration in
accordance with regulations that it shall develop--
(i) in a position to significantly expand existing export
markets or develop new export markets; or
(ii) adversely affected by import competition in that it
is--
(I) confronting increased direct competition with
foreign firms in the relevant market; and
(II) can demonstrate injury attributable to such
competition.
(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 equal to 2 percent of the deferred
participation share of a total loan amount that is not more
than $150,000.
(ii) A guarantee fee equal to 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 equal to 3.5 percent of the
deferred participation share of a total loan amount that is
more than $700,000.
(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).
(C) Two-year reduction in fees.--With respect to loans
approved during the 2-year period beginning on October 1, 2002,
the guarantee fee under subparagraph (A) shall be as follows:
(i) A guarantee fee equal to 1 percent of the deferred
participation share of a total loan amount that is not more
than $150,000.
(ii) A guarantee fee equal to 2.5 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 equal to 3.5 percent of the
deferred participation share of a total loan amount that is
more than $700,000.
(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) Annual fee.--
(A) In general.--With respect to each loan guaranteed under
this subsection, the Administration shall, in accordance with
such terms and procedures as the Administration shall establish
by regulation, assess and collect an annual fee in an amount
equal to 0.5 percent of the outstanding balance of the deferred
participation share of the loan. With respect to loans approved
during the 2-year period beginning on October 1, 2002, the
annual fee assessed and collected under the preceding sentence
shall be in an amount equal to 0.25 percent of the outstanding
balance of the deferred participation share of the loan.
(B) Payer.--The annual fee assessed under subparagraph (A)
shall be payable by the participating lender and shall not be
charged to the borrower.
(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.
(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--
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\4\ So in original. The comma probably should not appear.
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(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 determined to be necessary or appropriate to any
small business concern or small agricultural cooperative located in
an area affected by a disaster, 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 the Consolidated Farm and Rural
Development Act (7 U.S.C. 1961); 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. Upon receipt of such certification, the
Administration 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) \5\ 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.
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\5\ See 1980 Amendment note below.
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 \6\ August 13, 1981, on the Administration's share
of loans made pursuant to paragraph (1) of subsection (b) of this
section--
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\6\ So in original. Probably should be ``prior to''.
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(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) \7\ 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.
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\7\ See References in Text note below.
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(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).\8\
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\8\ So in original. The period probably should be a semicolon.
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(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: \9\
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\9\ So in original. Probably should be paragraph ``(12):''.
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(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) \10\ 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.
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\10\ See References in Text note below.
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(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); 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, the
Administrator may reduce the annual loan loss reserve
requirement of an intermediary to reflect the actual average
loan