SUBCHAPTER V—LOANS TO STATE AND LOCAL DEVELOPMENT COMPANIES
§695. State development companies
(a) Congressional finding and declaration of purpose
The Congress hereby finds and declares that the purpose of this subchapter is to foster economic development and to create or preserve job opportunities in both urban and rural areas by providing long-term financing for small business concerns through the development company program authorized by this subchapter.
(b) Loans; obligations of development companies
The Administration is authorized to make loans to State development companies to assist in carrying out the purposes of this chapter. Any funds advanced under this subsection shall be in exchange for obligations of the development company which bear interest at such rate, and contain such other terms, as the Administration may fix, and funds may be so advanced without regard to the use and investment by the development company of funds secured by it from other sources.
(c) Maximum loans to development companies
The total amount of obligations purchased and outstanding at any one time by the Administration under this section from any one State development company shall not exceed the total amount borrowed by it from all other sources. Funds advanced to a State development company under this section shall be treated on an equal basis with those funds borrowed by such company after August 21, 1958, regardless of source, which have the highest priority, except when this requirement is waived by the Administrator.
(d) Eligibility for assistance
In order to qualify for assistance under this subchapter, the development company must demonstrate that the project to be funded is directed toward at least one of the following economic development objectives—
(1) the creation of job opportunities within two years of the completion of the project or the preservation or retention of jobs attributable to the project;
(2) improving the economy of the locality, such as stimulating other business development in the community, bringing new income into the area, or assisting the community in diversifying and stabilizing its economy; or
(3) the achievement of one or more of the following public policy goals:
(A) business district revitalization,
(B) expansion of exports,
(C) expansion of minority business development or women-owned business development,
(D) rural development,
(E) expansion of small business concerns owned and controlled by veterans, as defined in
(F) enhanced economic competition, including the advancement of technology, plan retooling, conversion to robotics, or competition with imports,
(G) changes necessitated by Federal budget cutbacks, including defense related industries,
(H) business restructuring arising from Federally mandated standards or policies affecting the environment or the safety and health of employees,
(I) reduction of energy consumption by at least 10 percent,
(J) increased use of sustainable design, including designs that reduce the use of greenhouse gas emitting fossil fuels, or low-impact design to produce buildings that reduce the use of non-renewable resources and minimize environmental impact,
(K) plant, equipment and process upgrades of renewable energy sources such as the small-scale production of energy for individual buildings or communities consumption, commonly known as micropower, or renewable fuels producers including biodiesel and ethanol producers, or
(L) reduction of rates of unemployment in labor surplus areas, as such areas are determined by the Secretary of Labor.
In subparagraphs (J) and (K), terms have the meanings given those terms under the Leadership in Energy and Environmental Design (LEED) standard for green building certification, as determined by the Administrator.
If eligibility is based upon the criteria set forth in paragraph (2) or (3), the project need not meet the job creation or job preservation criteria developed by the Administration if the overall portfolio of the development company meets or exceeds such job creation or retention criteria.
(e) Creation or retention of jobs
(1) A project meets the objective set forth in subsection (d)(1) if the project creates or retains one job for every $65,000 guaranteed by the Administration, except that the amount is $100,000 in the case of a project of a small manufacturer.
(2) Paragraph (1) does not apply to a project for which eligibility is based on the objectives set forth in paragraph (2) or (3) of subsection (d), if the development company's portfolio of outstanding debentures creates or retains one job for every $65,000 guaranteed by the Administration.
(3) For projects in Alaska, Hawaii, State-designated enterprise zones, empowerment zones and enterprise communities, labor surplus areas, as determined by the Secretary of Labor, and for other areas designated by the Administrator, the development company's portfolio may average not more than $75,000 per job created or retained.
(4) Loans for projects of small manufacturers shall be excluded from calculations under paragraph (2) or (3).
(5) Under regulations prescribed by the Administrator, the Administrator may waive, on a case-by-case basis or by regulation, any requirement of this subsection (other than paragraph (4)). With respect to any waiver the Administrator is prohibited from adopting a dollar amount that is lower than the amounts set forth in paragraphs (1), (2), and (3).
(6) As used in this subsection, the term "small manufacturer" means a small business concern—
(A) the primary business of which is classified in sector 31, 32, or 33 of the North American Industrial Classification System; and
(B) all of the production facilities of which are located in the United States.
(
Editorial Notes
References in Text
For definition of "this chapter", referred to in subsec. (b), see References in Text note set out under
Amendments
2010—Subsec. (d)(3)(L).
2009—Subsec. (e)(1), (2).
2007—Subsec. (d)(3).
Subsec. (d)(3)(I) to (K).
2004—Subsec. (e).
2000—Subsec. (d)(3)(C).
1999—Subsec. (d)(3)(E)–(H).
1990—Subsec. (a).
Subsec. (d).
1988—
Statutory Notes and Related Subsidiaries
Effective Date of 2007 Amendment
Amendment by
Budgetary Treatment of Loans and Financings
Assistance made available under any financings made under this subchapter during 2-year period beginning Oct. 1, 2002, to be treated as a separate program of the Small Business Administration for purposes of the Federal Credit Reform Act of 1990 (
Loan Liquidation Pilot Program
"(a)
"(b)
"(1)
"(2)
"(3)
"(A) have not less than 6 years of experience in the program established by title V of the Small Business Investment Act of 1958;
"(B) have made, during the 6 most recent fiscal years, an average of not less than 10 loans per year through the program established by such title V of the Small Business Investment Act of 1958;
"(C) have not less than 2 years of experience in liquidating loans under the authority of a Federal, State, or other lending program; and
"(D) meet such other requirements as the Administration may establish.
"(c)
"(1) perform all liquidation and foreclosure functions, including the acceleration or purchase of community injection funds, subject to such company obtaining prior written approval from the Administrator before committing the agency to purchase any other indebtedness secured by the property: Provided, That the Administrator shall approve or deny a request for such purchase within a period of 10 business days; and
"(2) liquidate such loans in a reasonable and sound manner and according to commercially accepted practices pursuant to a liquidation plan approved by the administrator in advance of its implementation. 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.
"(d)
"(1) have full authority to rescind the authority granted any development company under this section upon a 10-day written notice stating the reasons for the rescission; and
"(2) not later than 90 days after the admission of the development companies specified in subsection (b), implement the pilot program.
"(e)
"(1)
"(A) the total dollar amount of each loan and project liquidated;
"(B) the total dollar amount guaranteed by the Administration;
"(C) total dollar losses;
"(D) total recoveries both as percentage of the amount guaranteed and the total cost of the project; and
"(E) a comparison of the pilot program information with the same information for liquidation conducted outside the pilot program over the period of time.
"(2)
[Section 204 of title II of div. D of
§696. Loans for plant acquisition, construction, conversion and expansion
The Administration may, in addition to its authority under
(1)
(2)
(A)
(i) $5,000,000 for each small business concern if the loan proceeds will not be directed toward a goal or project described in clause (ii), (iii), (iv), or (v);
(ii) $5,000,000 for each small business concern if the loan proceeds will be directed toward 1 or more of the public policy goals described under
(iii) $5,500,000 for each project of a small manufacturer;
(iv) $5,500,000 for each project that reduces the borrower's energy consumption by at least 10 percent; and
(v) $5,500,000 for each project that generates renewable energy or renewable fuels, such as biodiesel or ethanol production.
(B)
(i) the primary business of which is classified in sector 31, 32, or 33 of the North American Industrial Classification System; and
(ii) all of the production facilities of which are located in the United States.
(3)
(A)
(B)
(i)
(I) State or local governments;
(II) banks or other financial institutions;
(III) foundations or other not-for-profit institutions; or
(IV) the small business concern (or its owners, stockholders, or affiliates) receiving assistance through a body authorized by this subchapter.
(ii)
(C)
(i) at least 15 percent of the total cost of the project financed, if the small business concern has been in operation for a period of 2 years or less;
(ii) at least 15 percent of the total cost of the project financed if the project involves the construction of a limited or single purpose building or structure;
(iii) at least 20 percent of the total cost of the project financed if the project involves both of the conditions set forth in clauses (i) and (ii); or
(iv) at least 10 percent of the total cost of the project financed, in all other circumstances, at the discretion of the development company.
(D)
(E)
(i)
(ii)
(I) In general.—With respect to commercial real property provided by the small business concern as collateral, an appraisal of the property by a State licensed or certified appraiser—
(aa) shall be required by the Administration before disbursement of the loan if the estimated value of that property is more than the Federal banking regulator appraisal threshold; or
(bb) may be required by the Administration or the lender before disbursement of the loan if the estimated value of that property is equal to or less than the Federal banking regulator appraisal threshold, and such appraisal is necessary for appropriate evaluation of creditworthiness.
(II) Federal banking regulator appraisal threshold defined.—For purposes of this clause, the term "Federal banking regulator appraisal threshold" means the lesser of the threshold amounts set by the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation for when a federally related transaction that is a commercial real estate transaction requires an appraisal prepared by a State licensed or certified appraiser.
(4) If the project is to construct a new facility, up to 33 per centum of the total project may be leased, if reasonable projections of growth demonstrate that the assisted small business concern will need additional space within three years and will fully utilize such additional space within ten years.
(5)
(6)
(7)
(A)
(B)
(i) the proceeds of the indebtedness were used to acquire land, including a building situated thereon, to construct a building thereon, or to purchase equipment;
(ii) the existing indebtedness is collateralized by fixed assets;
(iii) the existing indebtedness was incurred for the benefit of the small business concern;
(iv) the financing under this subchapter will be used only for refinancing existing indebtedness or costs relating to the project financed under this subchapter;
(v) the financing under this subchapter will provide a substantial benefit to the borrower when prepayment penalties, financing fees, and other financing costs are accounted for;
(vi) the borrower has been current on all payments due on the existing debt for not less than 1 year preceding the date of refinancing; and
(vii) the financing under
(C)
(i)
(I) the term "borrower" means a small business concern that submits an application to a development company for financing under this subparagraph;
(II) the term "eligible fixed asset" means tangible property relating to which the Administrator may provide financing under this section; and
(III) the term "qualified debt" means indebtedness—
(aa) that was incurred not less than 6 months before the date of the application for assistance under this subparagraph;
(bb) that is a commercial loan;
(cc) the proceeds of which were used to acquire an eligible fixed asset;
(dd) that was incurred for the benefit of the small business concern; and
(ee) that is collateralized by eligible fixed assets.
(ii)
(I) the amount of the financing is not more than 90 percent of the value of the collateral for the financing, except that, if the appraised value of the eligible fixed assets serving as collateral for the financing is less than the amount equal to 125 percent of the amount of the financing, the borrower may provide additional cash or other collateral to eliminate any deficiency;
(II) the borrower has been in operation for all of the 2-year period ending on the date the loan application is submitted; and
(III) for a financing for which the Administrator determines there will be an additional cost attributable to the refinancing of the qualified debt, the borrower agrees to pay a fee in an amount equal to the anticipated additional cost.
(iii)
(I)
(II)
(aa) a specific description of the expenses for which the additional financing is requested; and
(bb) an itemization of the amount of each expense.
(III)
(iv)
(I)
(aa)
(bb)
(II)
(aa) the number of full-time employees of the borrower on the date on which the borrower applies for a loan under this subparagraph; and
(bb) the product obtained by multiplying—
(AA) the number of part-time employees of the borrower on the date on which the borrower applies for a loan under this subparagraph, by
(BB) the quotient obtained by dividing the average number of hours each part time employee of the borrower works each week by 40.
(v)
(
Editorial Notes
Amendments
2020—Par. (7)(B).
Par. (7)(C).
2018—Par. (3)(E)(ii).
2010—Par. (2)(A)(i).
Par. (2)(A)(ii).
Par. (2)(A)(iii) to (v).
Par. (7)(C).
2009—Par. (7).
2007—Par. (2)(A)(iv), (v).
2004—Par. (2).
2000—Par. (2).
Par. (3)(E).
Par. (6).
1997—Par. (1).
Par. (3)(D), (E).
Par. (5).
1996—Par. (3).
"(A) State or local governments;
"(B) banks or other financial institutions;
"(C) foundations or other not-for-profit institutions; or
"(D) a small business concern (or its owners, stockholders, or affiliates) receiving assistance through bodies authorized under this subchapter."
1990—Par. (2).
1988—
Par. (2).
Par. (4).
1981—Pars. (1) to (4).
Par. (5).
1978—Par. (4).
1976—
Par. (3).
1961—Par. (3).
Par. (5).
Par. (6).
Statutory Notes and Related Subsidiaries
Effective Date of 2010 Amendment
Effective Date of 2007 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1981 Amendment
Amendment by
Refinancing Senior Project Debt
Refinancing Not Involving Expansions Under Former Par. (7)(C)
1 So in original. Probably should be "clause".
§697. Development company debentures
(a) Guarantees; Administration authority; regulatory terms and conditions; full faith and credit; subordination of debentures
(1) Except as provided in subsection (b), the Administration may guarantee the timely payment of all principal and interest as scheduled on any debenture issued by any qualified State or local development company.
(2) Such guarantees may be made on such terms and conditions as the Administration may be regulation determine to be appropriate: Provided, That the Administration shall not decline to issue such guarantee when the ownership interests of the small business concern and the ownership interests of the property to be financed with the proceeds of a loan made pursuant to subsection (b)(1) are not identical because one or more of the following classes of relatives have an ownership interest in either the small business concern or the property: father, mother, son, daughter, wife, husband, brother, or sister: Provided further, That the Administrator or his designee has determined on a case-by-case basis that such ownership interest, such guarantee, and the proceeds of such loan, will substantially benefit the small business concern.
(3) The full faith and credit of the United States in pledged to the payment of all amounts guaranteed under this subsection.
(4) Any debenture issued by any State or local development company with respect to which a guarantee is made under this subsection, may be subordinated by the Administration to any other debenture, promissory note, or other debt or obligation of such company.
(b) Statutory terms and conditions
No guarantee may be made with respect to any debenture under subsection (a) unless—
(1) such debenture is issued for the purpose of making one or more loans to small business concerns, the proceeds of which shall be used by such concern for the purposes set forth in
(2) necessary funds for making such loans are not available to such company from private sources on reasonable terms;
(3) the interest rate on such debenture is not less than the rate of interest determined by the Secretary of the Treasury for purposes of
(4) the aggregate amount of such debenture does not exceed the amount of loans to be made from the proceeds of such debenture (other than any excess attributable to the administrative costs of such loans);
(5) the amount of any loan to be made from such proceeds does not exceed an amount equal to 50 percent of the cost of the project with respect to which such loan is made;
(6) the Administration approves each loan to be made from such proceeds; and
(7) with respect to each loan made from the proceeds of such debenture, the Administration—
(A) assesses and collects a fee, which shall be payable by the borrower, in an amount established annually by the Administration, which amount shall not exceed—
(i) the lesser of—
(I) 0.9375 percent per year of the outstanding balance of the loan; and
(II) the minimum amount necessary to reduce the cost (as defined in
(ii) 50 percent of the amount established under clause (i) in the case of a loan made during the 2-year period beginning on October 1, 2002, for the life of the loan; and
(B) uses the proceeds of such fee to offset the cost (as such term is defined in
(c) Commercial loan interest rate
(1) The purpose of this subsection is to facilitate the orderly and necessary flow of long-term loans from certified development companies to small business concerns.
(2) Notwithstanding the provisions of the constitution or laws of any State limiting the rate or amount of interest which may be charged, taken, received, or reserved, the maximum legal rate of interest on any commercial loan which funds any portion of the cost of the project financed pursuant to this section or
(3) The Administrator is authorized and directed to establish and publish quarterly a maximum legal interest rate for any commercial loan which funds any portion of the cost of the project financed pursuant to this section or
(d) Charges for Administration expenses
(1) Level of charges
The Administration may impose an additional charge for administrative expenses with respect to each debenture for which payment of principal and interest is guaranteed under subsection (a).
(2) Participation fee
The Administration shall collect a one-time fee in an amount equal to 50 basis points on the total participation in any project of any institution described in subclause (I), (II), or (III) of
(3) Development company fee
The Administration shall collect annually from each development company a fee of 0.125 percent of the outstanding principal balance of any guaranteed debenture authorized by the Administration after September 30, 1996. Such fee shall be derived from the servicing fees collected by the development company pursuant to regulation, and shall not be derived from any additional fees imposed on small business concerns. All proceeds of the fee shall be used to offset the cost (as that term is defined in
(e) "Qualified State or local development company" defined; exception for rural company; authority
(1) For purposes of this section, the term "qualified State or local development company" means any State or local development company which, as determined by the Administration, has—
(A) a full-time professional staff;
(B) professional management ability (including adequate accounting, legal, and business-servicing abilities); and
(C) a board of directors, or membership, which meets on a regular basis to make management decisions for such company, including decisions relating to the making and servicing of loans by such company.
(2) A company in a rural area shall be deemed to have satisfied the requirements of a full-time professional staff and professional management ability if it contracts with another certified development company which has such staff and management ability and which is located in the same general area to provide such services.
(3) Notwithstanding any other provision of law, qualified State or local development companies shall be authorized to prepare applications for deferred participation loans under
(f) Effective date
The fees authorized by subsections (b) and (d) shall apply to financings approved by the Administration on or after October 1, 1996.
(g) Calculation of subsidy rate
All fees, interest, and profits received and retained by the Administration under this section shall be included in the calculations made by the Director of the Office of Management and Budget to offset the cost (as that term is defined in
(h) Required actions upon default
(1) Initial actions
Not later than the 45th day after the date on which a payment on a loan funded through a debenture guaranteed under this section is due and not received, the Administration shall—
(A) take all necessary steps to bring such a loan current; or
(B) implement a formal written deferral agreement.
(2) Purchase or acceleration of debenture
Not later than the 65th day after the date on which a payment on a loan described in paragraph (1) is due and not received, and absent a formal written deferral agreement, the administration 1 shall take all necessary steps to purchase or accelerate the debenture.
(3) Prepayment penalties
With respect to the portion of any project derived from funds set forth in
(A) shall negotiate the elimination of any prepayment penalties or late fees on defaulted loans made prior to September 30, 1996;
(B) shall not pay any prepayment penalty or late fee on the default based purchase of loans issued after September 30, 1996; and
(C) for any project financed after September 30, 1996, shall not pay any default interest rate higher than the interest rate on the note prior to the date of default.
(i) Two-year waiver of fees
The Administration may not assess or collect any up front guarantee fee with respect to loans made under this subchapter during the 2-year period beginning on October 1, 2002.
(
Editorial Notes
References in Text
For definition of "this chapter", referred to in subsecs. (b)(7)(A)(ii) and (g), see References in Text note set out under
Amendments
2004—Subsec. (f).
2001—Subsec. (b)(7)(A).
Subsec. (i).
2000—Subsec. (f).
1997—Subsec. (b)(7)(A).
"(i) 0.9375 percent per year of the outstanding balance of the loan; or
"(ii) such percentage per year of the outstanding balance of the loan as the Administrator may determine to be necessary to reduce the cost (as that term is defined in
Subsec. (f).
1996—Subsec. (b)(7)(A).
Subsec. (d).
Subsec. (f).
Subsec. (g).
Subsec. (h).
1995—Subsec. (b)(7).
1994—Subsec. (c) to (e).
1990—Subsec. (e)(3).
1988—Subsec. (a)(2).
Subsec. (c).
Subsec. (d).
Subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Effective Date of 2001 Amendment; Use of Funds
"(d)
"(e)
Effective Date of 1997 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1995 Amendment
Amendment by
Termination Date of 1988 Amendment
Effective Date
Section effective Oct. 1, 1980, see section 507 of
Temporary Fee Elimination for the 504 Loan Program
"(1)
"(A) the Administrator shall, in lieu of the fee otherwise applicable under section 503(d)(2) of the Small Business Investment Act of 1958 (
"(B) a development company shall, in lieu of the processing fee under section 120.971(a)(1) of title 13, Code of Federal Regulations (relating to fees paid by borrowers), or any successor regulation, collect no fee.
"(2)
"(A)
"(B)
1 So in original. Probably should be capitalized.
§697a. Private debenture sales
(a) Notwithstanding any other law, rule, or regulation, the Administration shall sell to investors, either publicly or by private placement, debentures pursuant to
(1) Of the program levels otherwise authorized by law for fiscal year 1986, an amount not to exceed $200,000,000.
(2) Of the program levels otherwise authorized by law for each of fiscal years 1987 and 1988, an amount not to exceed $425,000,000.
(3) All of the program levels authorized for fiscal year 1989 and subsequent fiscal years.
(b) Nothing in any provision of law shall be construed to authorize the Federal Financing Bank to acquire—
(1) any obligation the payment of principal or interest on which at any time has been guaranteed in whole or in part under
(2) any obligation which is an interest in any obligation described in paragraph (1); or
(3) any obligation which is secured by, or substantially all of the value of which is attributable to, any obligation described in paragraph (1) or (2).
(
Editorial Notes
Amendments
1988—
"(a) Notwithstanding any other law, rule, or regulation, the Administration shall conduct a pilot program involving the sale to investors, either publicly or by private placement, of debentures guaranteed pursuant to
"(1) of the program levels otherwise authorized by law for fiscal year 1986, an amount not to exceed $200,000,000;
"(2) of the program levels otherwise authorized by law for fiscal year 1987, an amount not to exceed $425,000,000; and
"(3) of the program levels otherwise authorized by law for fiscal year 1988, an amount not to exceed $425,000,000.
"(b) Nothing in any provision of law shall be construed to authorize the Federal Financing Bank to acquire—
"(1) any obligation the payment of principal or interest on which at any time has been guaranteed in whole or in part under
"(2) any obligation which is an interest in any obligation described in paragraph (1), or
"(3) any obligation which is secured by, or substantially all of the value of which is attributable to, any obligation described in paragraph (1) or (2)."
1987—Subsec. (a).
Statutory Notes and Related Subsidiaries
Regulations
Small Business Administration to promulgate final rules and regulations to implement this section within 60 days of Apr. 7, 1986, see section 18008(d)(2) of
Pilot Program Report
§697b. Pooling of debentures
(a) Issuance; debentures composing trust or pool
The Administration is authorized to issue trust certificates representing ownership of all or a fractional part of debentures issued by State or local development companies and guaranteed by the Administration under this chapter: Provided, That such trust certificates shall be based on and backed by a trust or pool approved by the Administration and composed solely of guaranteed debentures.
(b) Terms and conditions of guarantee; payment of principal and interest
The Administration is authorized, upon such terms and conditions as are deemed appropriate, to guarantee the timely payment of the principal of and interest on trust certificates issued by the Administration or its agent for purposes of this section. Such guarantee shall be limited to the extent of principal and interest on the guaranteed debentures which compose the trust or pool. In the event that a debenture in such trust or pool is prepaid, either voluntarily or in the event of default, the guarantee of timely payment of principal and interest on the trust certificates shall be reduced in proportion to the amount of principal and interest such prepaid debenture represents in the trust or pool. Interest on prepaid or defaulted debentures shall accrue and be guaranteed by the Administration only through the date of payment on the guarantee. During the term of the trust certificate, it may be called for redemption due to prepayment or default of all debentures constituting the pool.
(c) Full faith and credit of United States
The full faith and credit of the United States is pledged to the payment of all amounts which may be required to be paid under any guarantee of such trust certificates issued by the Administration or its agent pursuant to this section.
(d) Collection of fees
The Administration shall not collect any fee for any guarantee under this section: Provided, That nothing herein shall preclude any agent of the Administration from collecting a fee approved by the Administration for the functions described in subsection (f)(2) of this section.
(e) Subrogation rights; ownership rights in debentures
(1) In the event the Administration pays a claim under a guarantee issued under this section, it shall be subrogated fully to the rights satisfied by such payment.
(2) No State or local law, and no Federal law, shall preclude or limit the exercise by the Administration of its ownership rights in the debentures constituting the trust or pool against which the trust certificates are issued.
(f) Central registration requirements; regulation of brokers and dealers; electronic registration
(1) The Administration shall—
(A) provide for a central registration of all trust certificates sold pursuant to this section;
(B) contract with an agent to carry out on behalf of the Administration the central registration functions of this section and the issuance of trust certificates to facilitate poolings; such agent shall provide a fidelity bond or insurance in such amounts as the Administration determines to be necessary to fully protect the interests of the Government;
(C) prior to any sale, require the seller to disclose to a purchaser of a trust certificate issued pursuant to this section, information on the terms, conditions, and yield of such instrument; and
(D) have the authority to regulate brokers and dealers in trust certificates sold pursuant to this section.
(2) Nothing in this subsection shall prohibit the utilization of a book-entry or other electronic form of registration for trust certificates.
(
Editorial Notes
References in Text
For definition of "this chapter", referred to in subsec. (a), see References in Text note set out under
Amendments
1996—Subsec. (f).
1988—
Subsec. (a).
Statutory Notes and Related Subsidiaries
Effective Date of 1996 Amendment
Amendment by
Rules and Regulations for Implementation of Central Registration, Pilot Program and Trust Certificate Provisions; Consultation
"(1) Notwithstanding any law, rule, or regulation, within 60 days after the date of enactment of this Act [Apr. 7, 1986], the Small Business Administration shall develop and promulgate final rules and regulations to implement the central registration provisions provided for in section 505(f)(1) of the Small Business Investment Act [
"(2) Notwithstanding any law, rule or regulation, within 60 days after the date of enactment of this Act [Apr. 7, 1986], the Small Business Administration also shall consult with representatives of appropriate Federal and State agencies and officials, the securities industry, financial institutions and lenders, and small business persons, and shall develop and promulgate final rules and regulations to implement sections 504 and 505 of the Small Business Investment Act [
§697c. Restrictions on development company assistance
(
§697d. Accredited Lenders Program
(a) Establishment
The Administration is authorized to establish an Accredited Lenders Program for qualified State and local development companies that meet the requirements of subsection (b).
(b) Requirements
The Administration may designate a qualified State or local development company as an accredited lender if such company—
(1) has been an active participant in the Development Company Program authorized by
(2) has well-trained, qualified personnel who are knowledgeable in the Administration's lending policies and procedures for such Development Company Program;
(3) has the ability to process, close, and service financing for plant and equipment under such Development Company Program;
(4) has a loss rate on the company's debentures that is reasonable and acceptable to the Administration;
(5) has a history of submitting to the Administration complete and accurate debenture guaranty application packages; and
(6) has demonstrated the ability to serve small business credit needs for financing plant and equipment through the Development Company Program.
(c) Expedited processing of loan applications
The Administration shall develop an expedited procedure for processing a loan application or servicing action submitted by a qualified State or local development company that has been designated as an accredited lender in accordance with subsection (b).
(d) Suspension or revocation of designation
(1) In general
The designation of a qualified State or local development company as an accredited lender may be suspended or revoked if the Administration determines that—
(A) the development company has not continued to meet the criteria for eligibility under subsection (b); or
(B) the development company has failed to adhere to the Administration's rules and regulations or is violating any other applicable provision of law.
(2) Effect
A suspension or revocation under paragraph (1) shall not affect any outstanding debenture guarantee.
(e) Definition
In this section, the term "qualified State or local development company" has the meaning given the term in
(
Editorial Notes
Amendments
2020—Subsecs. (e), (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2020 Amendment
Except as otherwise provided, amendment by
Regulations
Report on Implementation of Program
§697e. Premier Certified Lenders Program
(a) Establishment
The Administration may establish a Premier Certified Lenders Program for certified development companies that meet the requirements of subsection (b).
(b) Requirements
(1) Application
To be eligible to participate in the Premier Certified Lenders Program established under subsection (a), a certified development company shall prepare and submit to the Administration an application at such time, in such manner, and containing such information as the Administration may require.
(2) Designation
The Administration may designate a certified development company as a premier certified lender—
(A) if the company is an active certified development company in good standing and has been an active participant in the accredited lenders program during the entire 12-month period preceding the date on which the company submits an application under paragraph (1), except that the Administration may waive this requirement if the company is qualified to participate in the accredited lenders program;
(B) if the company has a history of—
(i) submitting to the Administration adequately analyzed debenture guarantee application packages; and
(ii) of properly closing section 504 [
(C) if the company agrees to assume and to reimburse the Administration for 10 percent of any loss sustained by the Administration as a result of default by the company in the payment of principal or interest on a debenture issued by such company and guaranteed by the Administration under this section (15 percent in the case of any such loss attributable to a debenture issued by the company during any period for which an election is in effect under subsection (c)(7) for such company); and
(D) the 1 Administrator determines, with respect to the company, that the loss reserve established in accordance with subsection (c) is sufficient for the company to meet its obligations to protect the Federal Government from risk of loss.
(3) Applicability of criteria after designation
The Administrator may revoke the designation of a certified development company as a premier certified lender under this section at any time, if the Administrator determines that the certified development company does not meet any requirement described in subparagraphs (A) through (D) of paragraph (2).
(c) Loss reserve
(1) Establishment
A company designated as a premier certified lender shall establish a loss reserve for financing approved pursuant to this section.
(2) Amount
The amount of each loss reserve established under paragraph (1) shall be 10 percent of the amount of the company's exposure, as determined under subsection (b)(2)(C).
(3) Assets
Each loss reserve established under paragraph (1) shall be comprised of—
(A) segregated funds on deposit in an account or accounts with a federally insured depository institution or institutions selected by the company, subject to a collateral assignment in favor of, and in a format acceptable to, the Administration;
(B) irrevocable letter or letters of credit, with a collateral assignment in favor of, and a commercially reasonable format acceptable to, the Administration; or
(C) any combination of the assets described in subparagraphs (A) and (B).
(4) Contributions
The company shall make contributions to the loss reserve, either cash or letters of credit as provided above, in the following amounts and at the following intervals:
(A) 50 percent when a debenture is closed.
(B) 25 percent additional not later than 1 year after a debenture is closed.
(C) 25 percent additional not later than 2 years after a debenture is closed.
(5) Replenishment
If a loss has been sustained by the Administration, any portion of the loss reserve, and other funds provided by the premier company as necessary, may be used to reimburse the Administration for the premier company's share of the loss as provided in subsection (b)(2)(C). If the company utilizes the reserve, within 30 days it shall replace an equivalent amount of funds.
(6) Disbursements
(A) In general
The Administration shall allow the certified development company to withdraw from the loss reserve amounts attributable to any debenture that has been repaid.
(B) Temporary reduction based on outstanding balance
Notwithstanding subparagraph (A), during the 2-year period beginning on the date that is 90 days after May 28, 2004, the Administration shall allow the certified development company to withdraw from the loss reserve such amounts as are in excess of 1 percent of the aggregate outstanding balances of debentures to which such loss reserve relates. The preceding sentence shall not apply with respect to any debenture before 100 percent of the contribution described in paragraph (4) with respect to such debenture has been made.
(7) Alternative loss reserve
(A) Election
With respect to any eligible calendar quarter, any qualified high loss reserve PCL may elect to have the requirements of this paragraph apply in lieu of the requirements of paragraphs (2) and (4) for such quarter.
(B) Contributions
(i) Ordinary rules inapplicable
Except as provided under clause (ii) and paragraph (5), a qualified high loss reserve PCL that makes the election described in subparagraph (A) with respect to a calendar quarter shall not be required to make contributions to its loss reserve during such quarter.
(ii) Based on loss
A qualified high loss reserve PCL that makes the election described in subparagraph (A) with respect to any calendar quarter shall, before the last day of such quarter, make such contributions to its loss reserve as are necessary to ensure that the amount of the loss reserve of the PCL is—
(I) not less than $100,000; and
(II) sufficient, as determined by a qualified independent auditor, for the PCL to meet its obligations to protect the Federal Government from risk of loss.
(iii) Certification
Before the end of any calendar quarter for which an election is in effect under subparagraph (A), the head of the PCL shall submit to the Administrator a certification that the loss reserve of the PCL is sufficient to meet such PCL's obligation to protect the Federal Government from risk of loss. Such certification shall be in such form and submitted in such manner as the Administrator may require and shall be signed by the head of such PCL and the auditor making the determination under clause (ii)(II).
(C) Disbursements
(i) Ordinary rule inapplicable
Paragraph (6) shall not apply with respect to any qualified high loss reserve PCL for any calendar quarter for which an election is in effect under subparagraph (A).
(ii) Excess funds
At the end of each calendar quarter for which an election is in effect under subparagraph (A), the Administration shall allow the qualified high loss reserve PCL to withdraw from its loss reserve the excess of—
(I) the amount of the loss reserve, over
(II) the greater of $100,000 or the amount which is determined under subparagraph (B)(ii) to be sufficient to meet the PCL's obligation to protect the Federal Government from risk of loss.
(D) Recontribution
If the requirements of this paragraph apply to a qualified high loss reserve PCL for any calendar quarter and cease to apply to such PCL for any subsequent calendar quarter, such PCL shall make a contribution to its loss reserve in such amount as the Administrator may determine provided that such amount does not exceed the amount which would result in the total amount in the loss reserve being equal to the amount which would have been in such loss reserve had this paragraph never applied to such PCL. The Administrator may require that such payment be made as a single payment or as a series of payments.
(E) Risk management
If a qualified high loss reserve PCL fails to meet the requirement of subparagraph (F)(iii) during any period for which an election is in effect under subparagraph (A) and such failure continues for 180 days, the requirements of paragraphs (2), (4), and (6) shall apply to such PCL as of the end of such 180-day period and such PCL shall make the contribution to its loss reserve described in subparagraph (D). The Administrator may waive the requirements of this subparagraph.
(F) Qualified high loss reserve PCL
The term "qualified high loss reserve PCL" means, with respect to any calendar year, any premier certified lender designated by the Administrator as a qualified high loss reserve PCL for such year. The Administrator shall not designate a company under the preceding sentence unless the Administrator determines that—
(i) the amount of the loss reserve of the company is not less than $100,000;
(ii) the company has established and is utilizing an appropriate and effective process for analyzing the risk of loss associated with its portfolio of PCLP loans and for grading each PCLP loan made by the company on the basis of the risk of loss associated with such loan; and
(iii) the company meets or exceeds 4 or more of the specified risk management benchmarks as of the most recent assessment by the Administration or the Administration has issued a waiver with respect to the requirement of this clause.
(G) Specified risk management benchmarks
For purposes of this paragraph, the term "specified risk management benchmarks" means the following rates, as determined by the Administrator:
(i) Currency rate.
(ii) Delinquency rate.
(iii) Default rate.
(iv) Liquidation rate.
(v) Loss rate.
(H) Qualified independent auditor
For purposes of this paragraph, the term "qualified independent auditor" means any auditor who—
(i) is compensated by the qualified high loss reserve PCL;
(ii) is independent of such PCL; and
(iii) has been approved by the Administrator during the preceding year.
(I) PCLP loan
For purposes of this paragraph, the term "PCLP loan" means any loan guaranteed under this section.
(J) Eligible calendar quarter
For purposes of this paragraph, the term "eligible calendar quarter" means—
(i) the first calendar quarter that begins after the end of the 90-day period beginning with May 28, 2004; and
(ii) the 7 succeeding calendar quarters.
(K) Calendar quarter
For purposes of this paragraph, the term "calendar quarter" means—
(i) the period which begins on January 1 and ends on March 31 of each year;
(ii) the period which begins on April 1 and ends on June 30 of each year;
(iii) the period which begins on July 1 and ends on September 30 of each year; and
(iv) the period which begins on October 1 and ends on December 31 of each year.
(L) Regulations
Not later than 45 days after May 28, 2004, the Administrator shall publish in the Federal Register and transmit to the Congress regulations to carry out this paragraph. Such regulations shall include provisions relating to—
(i) the approval of auditors under subparagraph (H); and
(ii) the designation of qualified high loss reserve PCLs under subparagraph (F), including the determination of whether a process for analyzing risk of loss is appropriate and effective for purposes of subparagraph (F)(ii).
(8) Bureau of PCLP Oversight
(A) Establishment
There is hereby established in the Small Business Administration a bureau to be known as the Bureau of PCLP Oversight.
(B) Purpose
The Bureau of PCLP Oversight shall carry out such functions of the Administration under this subsection as the Administrator may designate.
(C) Deadline
Not later than 90 days after May 28, 2004—
(i) the Administrator shall ensure that the Bureau of PCLP Oversight is prepared to carry out any functions designated under subparagraph (B), and
(ii) the Office of the Inspector General of the Administration shall report to the Congress on the preparedness of the Bureau of PCLP Oversight to carry out such functions.
(d) Sale of certain defaulted loans
(1) Notice
If, upon default in repayment, the Administration acquires a loan guaranteed under this section and identifies such loan for inclusion in a bulk asset sale of defaulted or repurchased loans or other financings, it shall give prior notice thereof to any certified development company which has a contingent liability under this section. The notice shall be given to the company as soon as possible after the financing is identified, but not less than 90 days before the date the Administration first makes any records on such financing available for examination by prospective purchasers prior to its offering in a package of loans for bulk sale.
(2) Limitations
The Administration shall not offer any loan described in paragraph (1) as part of a bulk sale unless it—
(A) provides prospective purchasers with the opportunity to examine the Administration's records with respect to such loan; and
(B) provides the notice required by paragraph (1).
(e) Loan approval authority
(1) In general
Notwithstanding
(2) Scope of review
The approval of a loan by a premier certified lender shall be subject to final approval as to eligibility of any guarantee by the Administration pursuant to
(f) Review
After the issuance and sale of debentures under this section, the Administration, at intervals not greater than 12 months, shall review the financings made by each premier certified lender. The review shall include the lender's credit decisions and general compliance with the eligibility requirements for each financing approved under the program authorized under this section. The Administration shall consider the findings of the review in carrying out its responsibilities under subsection (g), but such review shall not affect any outstanding debenture guarantee.
(g) Suspension or revocation
The designation of a certified development company as a premier certified lender may be suspended or revoked if the Administration determines that the company—
(1) has not continued to meet the criteria for eligibility under subsection (b);
(2) has not established or maintained the loss reserve required under subsection (c);
(3) is failing to adhere to the Administration's rules and regulations; or
(4) is violating any other applicable provision of law.
(h) Effect of suspension or revocation
A suspension or revocation under subsection (g) shall not affect any outstanding debenture guarantee.
(i) Program goals
Each certified development company participating in the program under this section shall establish a goal of processing a minimum of not less than 50 percent of the loan applications for assistance under
(j) Report
Not later than 1 year after October 22, 1994, and annually thereafter, the Administration shall report to the Committees on Small Business of the Senate and the House of Representatives on the implementation of this section. Each report shall include—
(1) the number of certified development companies designated as premier certified lenders;
(2) the debenture guarantee volume of such companies;
(3) a comparison of the loss rate for premier certified lenders to the loss rate for accredited and other lenders, specifically comparing default rates and recovery rates on liquidations; and
(4) such other information as the Administration deems appropriate.
(
Editorial Notes
Codification
May 28, 2004, referred to in subsec. (c)(8)(C), was in the original "the date of enactment of this Act", which was translated as meaning the date of enactment of
October 22, 1994, referred to in subsec. (j), was in the original "the date of enactment of this Act", which was translated as meaning the date of enactment of
Amendments
2004—Subsec. (b)(2)(C).
Subsec. (b)(2)(D).
Subsec. (c)(5).
Subsec. (c)(6).
Subsec. (c)(7), (8).
2000—
Subsec. (a).
Subsecs. (d), (e).
Subsec. (f).
Subsec. (g).
Subsec. (h).
Subsecs. (i), (j).
1997—Subsec. (a).
Subsec. (b)(2).
Subsec. (b)(2)(A), (B).
"(A) has been an active participant in the accredited lenders program during the 12-month period preceding the date on which the company submits an application under paragraph (1), except that, prior to January 1, 1996, the Administration may waive this requirement if the company is qualified to participate in the accredited lenders program;
"(B) has a history of submitting to the Administration adequately analyzed debenture guarantee application packages; and".
Subsec. (b)(2)(C).
Subsec. (b)(2)(D).
Subsec. (b)(3).
Subsec. (c).
"(1)
"(2)
"(A) the historic loss rate on debentures issued by such company; or
"(B) 10 percent of the amount of the company's exposure as determined under subsection (b)(2)(C) of this section.
"(3)
"(4)
"(A) 50 percent when a debenture is closed.
"(B) 25 percent not later than 1 year after a debenture is closed.
"(C) 25 percent not later than 2 years after a debenture is closed."
Subsec. (d)(1).
Subsec. (f).
Subsec. (g).
Subsec. (h).
Subsec. (i)(3).
1994—
Statutory Notes and Related Subsidiaries
Change of Name
Committee on Small Business of Senate changed to Committee on Small Business and Entrepreneurship of Senate. See Senate Resolution No. 123, One Hundred Seventh Congress, June 29, 2001.
Effective Date of 1997 Amendment
Amendment by
Termination Date
Section 217(b) of
Regulations
"(1) not later than 150 days after the date of enactment of this Act [Dec. 2, 1997], promulgate regulations to carry out the amendments made by subsection (a) [amending this section]; and
"(2) not later than 180 days after the date of enactment of this Act, issue program guidelines and fully implement the amendments made by subsection (a)."
1 So in original. Probably should be preceded by "if".
§697f. Prepayment of development company debentures
(a) In general
(1) Prepayment authorized
Subject to the requirements set forth in subsection (b), an issuer of a debenture purchased by the Federal Financing Bank and guaranteed by the Administration under this chapter may, at the election of the borrower (in the case of a loan under
(2) Procedure
(A) In general
In making a prepayment under paragraph (1)—
(i) the borrower (in the case of a loan under
(ii) the Administration shall pay to the Federal Financing Bank the difference between the repurchase premium paid by the borrower under this subsection and the repurchase premium that the Federal Financing Bank would otherwise have received.
(B) Repurchase premium
(i) In general
For purposes of subparagraph (A)(i), the repurchase premium is the amount equal to the product of—
(I) the unpaid principal balance due on the debenture on the date of prepayment; and
(II) the applicable percentage rate, as determined in accordance with clauses (ii) and (iii).
(ii) Applicable percentage rate
For purposes of clause (i)(II), the applicable percentage rate means—
(I) with respect to a 10-year term loan, 8.5 percent;
(II) with respect to a 15-year term loan, 9.5 percent;
(III) with respect to a 20-year term loan, 10.5 percent; and
(IV) with respect to a 25-year term loan, 11.5 percent.
(iii) Adjustments to applicable percentage rate
The percentage rates described in clause (ii) shall be increased or decreased by the Administration by a factor not to exceed one-third, if the same factor is applied in each case and if the Administration determines that an adjustment is necessary, based on the number of borrowers having given notice of their intent to participate, in order to make the program (including the amounts appropriated for this purpose under
(b) Requirements
For purposes of subsection (a), the requirements of this subsection are that—
(1) the debenture is outstanding and neither the loan that secures the debenture, if any, nor the debenture is in default on the date on which the prepayment is made;
(2) State, local, or personal funds, or the proceeds of a refinancing in accordance with subsection (d) under the programs authorized by this subchapter, are used to prepay or roll over the debenture; and
(3) with respect to a debenture issued under
(c) No prepayment fees or penalties
No fees or penalties other than those specified in this section may be imposed on the issuer, the borrower, the Administration, or any fund or account administered by the Administration as the result of a prepayment under this section.
(d) Refinancing limitations
(1) In general
The refinancing of a debenture under
(A) shall not exceed the amount necessary to prepay existing debentures, including all costs associated with the refinancing and any applicable prepayment penalty or repurchase premium; and
(B) except as provided in paragraphs (2) and (3), shall be subject to the provisions of
(2) Job creation
An applicant for refinancing under
(3) Loan processing fee
To cover the cost of loan packaging, processing, and other administrative functions, a development company that provides refinancing under subsection (b)(2) may impose a one-time loan processing fee, not to exceed 0.5 percent of the principal amount of the loan.
(4) New debentures
Issuers of debentures under subchapter III may issue new debentures in accordance with such subchapter in order to prepay existing debentures as authorized in this section.
(5) Preliminary notice
(A) In general
The Administration shall use certified mail and other reasonable means to notify each eligible borrower of the prepayment program provided in this subchapter. Each preliminary notice shall specify the range and dollar amount of repurchase premiums which could be required of that borrower in order to participate in the program. In carrying out this program, the Administration shall provide a period of not less than 45 days following the receipt of such notice by the borrower during which the borrower must notify the Administration of the borrower's intent to participate in the program. The Administration shall require that a borrower who gives notice of its intent to participate to make an earnest money deposit of $1,000 which shall not be refundable but which shall be credited toward the final repurchase premium.
(B) "Borrower" defined
For purposes of this paragraph, the term "borrower", in the case of a small business investment company or a specialized small business investment company, means "issuer".
(6) Final notice
Based upon the response to the preliminary notice under paragraph (5), the Administration shall make a final computation of the necessary prepayment premiums and shall notify each qualified respondent of the results of such computation. Each qualified respondent shall be afforded not less than 4 months to complete the prepayment.
(e) Definitions
For purposes of this section—
(1) the term "issuer" means—
(A) the qualified State or local development company that issued a debenture pursuant to
(B) a small business investment company licensed pursuant to
(2) the term "borrower" means a small business concern whose loan secures a debenture issued pursuant to
(f) Regulations
Not later than 30 days after October 22, 1994, the Administration shall promulgate such regulations as may be necessary to carry out this section.
(g) Authorization
There are authorized to be appropriated $30,000,000 to carry out the provisions of The Small Business Prepayment Penalty Relief Act of 1994.
(
Editorial Notes
References in Text
For definition of "this chapter", referred to in subsec. (a)(1), see References in Text note set out under
The Small Business Prepayment Penalty Relief Act of 1994, referred to in subsec. (g), is title V of
Amendments
1996—Subsec. (a)(1).
Subsec. (e)(1)(B).
Statutory Notes and Related Subsidiaries
Intention of Congress
"(a)
"(1) section 303 or 503 of the Small Business Investment Act of 1958 [
"(2) title III [probably means title III of
"(b)
"(c)
"(1) allow any borrower or issuer to participate in the program if the borrower or issuer fails to—
"(A) make a timely election and provide the deposit on a timely basis; or
"(B) complete the prepayment process within the required time; or
"(2) allow any borrower or issuer to participate in the program at a percentage rate other than the rate finally determined to be applicable to all other borrowers or issuers with similar terms of years."
§697g. Foreclosure and liquidation of loans
(a) Delegation of authority
In accordance with this section, the Administration shall delegate to any qualified State or local development company (as defined in
(b) Eligibility for delegation
(1) Requirements
A qualified State or local development company shall be eligible for a delegation of authority under subsection (a) if—
(A) the company—
(i) has participated in the loan liquidation pilot program established by the Small Business Programs Improvement Act of 1996 (
(ii) is participating in the Premier Certified Lenders Program under
(iii) during the 3 fiscal years immediately prior to seeking such a delegation, has made an average of not less than 10 loans per year that are funded with the proceeds of debentures guaranteed under
(B) the company—
(i) has one or more employees—
(I) with not less than 2 years of substantive, decision-making experience in administering the liquidation and workout of problem loans secured in a manner substantially similar to loans funded with the proceeds of debentures guaranteed under
(II) who have completed a training program on loan liquidation developed by the Administration in conjunction with qualified State and local development companies that meet the requirements of this paragraph; or
(ii) submits to the Administration documentation demonstrating that the company has contracted with a qualified third-party to perform any liquidation activities and secures the approval of the contract by the Administration with respect to the qualifications of the contractor and the terms and conditions of liquidation activities.
(2) Confirmation
On request the Administration shall examine the qualifications of any company described in subsection (a) to determine if such company is eligible for the delegation of authority under this section. If the Administration determines that a company is not eligible, the Administration shall provide the company with the reasons for such ineligibility.
(c) Scope of delegated authority
(1) In general
Each qualified State or local development company to which the Administration delegates authority under section 1 (a) may with respect to any loan described in subsection (a)—
(A) perform all liquidation and foreclosure functions, including the purchase in accordance with this subsection of any other indebtedness secured by the property securing the loan, in a reasonable and sound manner according to commercially accepted practices, pursuant to a liquidation plan approved in advance by the Administration under paragraph (2)(A);
(B) litigate any matter relating to the performance of the functions described in subparagraph (A), except that the Administration may—
(i) defend or bring any claim if—
(I) the outcome of the litigation may adversely affect the Administration's management of the loan program established under
(II) the Administration is entitled to legal remedies not available to a qualified State or local development company and such remedies will benefit either the Administration or the qualified State or local development company; or
(ii) oversee the conduct of any such litigation; and
(C) take other appropriate actions to mitigate loan losses in lieu of total liquidation or foreclosures, including the restructuring of a loan in accordance with prudent loan servicing practices and pursuant to a workout plan approved in advance by the Administration under paragraph (2)(C).
(2) Administration approval
(A) Liquidation plan
(i) In general
Before carrying out functions described in paragraph (1)(A), a qualified State or local development company shall submit to the Administration a proposed liquidation plan.
(ii) Administration action on plan
(I) Timing
Not later than 15 business days after a liquidation plan is received by the Administration under clause (i), the Administration shall approve or reject the plan.
(II) Notice of no decision
With respect to any plan that cannot be approved or denied within the 15-day period required by subclause (I), the Administration shall within such period provide in accordance with subparagraph (E) notice to the company that submitted the plan.
(iii) Routine actions
In carrying out functions described in paragraph (1)(A), a qualified State or local development company may undertake routine actions not addressed in a liquidation plan without obtaining additional approval from the Administration.
(B) Purchase of indebtedness
(i) In general
In carrying out functions described in paragraph (1)(A), a qualified State or local development company shall submit to the Administration a request for written approval before committing the Administration to the purchase of any other indebtedness secured by the property securing a defaulted loan.
(ii) Administration action on request
(I) Timing
Not later than 15 business days after receiving a request under clause (i), the Administration shall approve or deny the request.
(II) Notice of no decision
With respect to any request that cannot be approved or denied within the 15-day period required by subclause (I), the Administration shall within such period provide in accordance with subparagraph (E) notice to the company that submitted the request.
(C) Workout plan
(i) In general
In carrying out functions described in paragraph (1)(C), a qualified State or local development company shall submit to the Administration a proposed workout plan.
(ii) Administration action on plan
(I) Timing
Not later than 15 business days after a workout plan is received by the Administration under clause (i), the Administration shall approve or reject the plan.
(II) Notice of no decision
With respect to any workout plan that cannot be approved or denied within the 15-day period required by subclause (I), the Administration shall within such period provide in accordance with subparagraph (E) notice to the company that submitted the plan.
(D) Compromise of indebtedness
In carrying out functions described in paragraph (1)(A), a qualified State or local development company may—
(i) consider an offer made by an obligor to compromise the debt for less than the full amount owing; and
(ii) pursuant to such an offer, release any obligor or other party contingently liable, if the company secures the written approval of the Administration.
(E) Contents of notice of no decision
Any notice provided by the Administration under subparagraph (A)(ii)(II), (B)(ii)(II), or (C)(ii)(II)—
(i) shall be in writing;
(ii) shall state the specific reason for the Administration's inability to act on a plan or request;
(iii) shall include an estimate of the additional time required by the Administration to act on the plan or request; and
(iv) if the Administration cannot act because insufficient information or documentation was provided by the company submitting the plan or request, shall specify the nature of such additional information or documentation.
(3) Conflict of interest
In carrying out functions described in paragraph (1), a qualified State or local development company shall take no action that would result in an actual or apparent conflict of interest between the company (or any employee of the company) and any third party lender, associate of a third party lender, or any other person participating in a liquidation, foreclosure, or loss mitigation action.
(d) Suspension or revocation of authority
The Administration may revoke or suspend a delegation of authority under this section to any qualified State or local development company, if the Administration determines that the company—
(1) does not meet the requirements of subsection (b)(1);
(2) has violated any applicable rule or regulation of the Administration or any other applicable law; or
(3) fails to comply with any reporting requirement that may be established by the Administration relating to carrying out of functions described in paragraph (1).
(e) Report
(1) In general
Based on information provided by qualified State and local development companies and the Administration, the Administration shall annually submit to the Committees on Small Business of the House of Representatives and of the Senate a report on the results of delegation of authority under this section.
(2) Contents
Each report submitted under paragraph (1) shall include the following information:
(A) With respect to each loan foreclosed or liquidated by a qualified State or local development company under this section, or for which losses were otherwise mitigated by the company pursuant to a workout plan under this section—
(i) the total cost of the project financed with the loan;
(ii) the total original dollar amount guaranteed by the Administration;
(iii) the total dollar amount of the loan at the time of liquidation, foreclosure, or mitigation of loss;
(iv) the total dollar losses resulting from the liquidation, foreclosure, or mitigation of loss; and
(v) the total recoveries resulting from the liquidation, foreclosure, or mitigation of loss, both as a percentage of the amount guaranteed and the total cost of the project financed.
(B) With respect to each qualified State or local development company to which authority is delegated under this section, the totals of each of the amounts described in clauses (i) through (v) of subparagraph (A).
(C) With respect to all loans subject to foreclosure, liquidation, or mitigation under this section, the totals of each of the amounts described in clauses (i) through (v) of subparagraph (A).
(D) A comparison between—
(i) the information provided under subparagraph (C) with respect to the 12-month period preceding the date on which the report is submitted; and
(ii) the same information with respect to loans foreclosed and liquidated, or otherwise treated, by the Administration during the same period.
(E) The number of times that the Administration has failed to approve or reject a liquidation plan in accordance with subparagraph (A)(i), a workout plan in accordance with subparagraph (C)(i), or to approve or deny a request for purchase of indebtedness under subparagraph (B)(i), including specific information regarding the reasons for the Administration's failure and any delays that resulted.
(
Editorial Notes
References in Text
The Small Business Programs Improvement Act of 1996, referred to in subsec. (b)(1)(A)(i), is
Statutory Notes and Related Subsidiaries
Change of Name
Committee on Small Business of Senate changed to Committee on Small Business and Entrepreneurship of Senate. See Senate Resolution No. 123, One Hundred Seventh Congress, June 29, 2001.
Regulations
"(1)
"(2)