S. 3596 (110th): Small Business Lending Market Stabilization Act of 2008

The text of the bill below is as of Sep 25, 2008 (Introduced).

II

110th CONGRESS

2d Session

S. 3596

IN THE SENATE OF THE UNITED STATES

September 25 (legislative day, September 17), 2008

introduced the following bill; which was read twice and referred to the Committee on Small Business and Entrepreneurship

A BILL

To stabilize the small business lending market, and for other purposes.

1.

Short title

This Act may be cited as the Small Business Lending Market Stabilization Act of 2008.

2.

Small business lending market stabilization

(a)

Fees

To the extent the cost of such reduction in fees is offset by appropriations—

(1)

with respect to each loan guaranteed under section 7(a) of the Small Business Act (15 U.S.C. 636(a)) for which the application is approved on or after the date of enactment of this Act, the Administrator shall, in lieu of the fees otherwise applicable under paragraphs (23)(A) and (18)(A) of section 7(a) of the Small Business Act (15 U.S.C. 636(a)), collect no fee;

(2)

the Administrator shall, in lieu of the fees otherwise applicable under section 5(b)(14) of the Small Business Act (15 U.S.C. 634(b)(14)), collect no fee;

(3)

the Administrator shall, in lieu of the fee otherwise applicable under section 503(d)(2) of the Small Business Investment Act of 1958 (15 U.S.C. 697(d)(2)) for an institution described in subclause (I), (II), or (III) of section 502(3)(B)(i) of that Act (15 U.S.C. 696(3)(B)(i)), for any loan guarantee or project subject to such subsection for which the application is pending approval on or after the date of enactment of this Act, collect no fee;

(4)

a development company shall, in lieu of the mandatory 0.625 servicing fee under section 120.971(a)(3) of title 13, Code of Federal Regulations, (relating to fees paid by borrowers), collect no fee; and

(5)

the Administrator shall, in lieu of the fee otherwise applicable under section 503(d)(3) of the Small Business Investment Act (15 U.S.C. 697(d)(3)), collect no fee.

(b)

Reimbursement for waived fees

(1)

In general

To the extent the cost of such payments is offset by appropriations, the Administrator shall reimburse each development company that does not collect a servicing fee pursuant to subsection (a)(4).

(2)

Amount

The payment to a development company under paragraph (1) shall be in an amount equal to 0.5 percent of the outstanding principal balance of any guaranteed debenture for which the development company does not collect a servicing fee pursuant to subsection (a)(4).

(c)

Authorization of appropriations

There are authorized to be appropriated to the Administrator for fiscal year 2009—

(1)

$600,000,000 for loan subsidies and for loan modifications for loans to small business concerns authorized under subsection (a)(1);

(2)

$15,000,000 for lender oversight under section 5(b)(14) of the Small Business Act (15 U.S.C. 634(b)(14));

(3)

$50,000,000 for the elimination of fees under subsection (a)(3);

(4)

$40,000,000 for payments under subsection (b) to offset the elimination of fees under subsection (a)(4); and

(5)

$10,000,000 for the elimination of fees under subsection (a)(5).

(d)

Application of fee changes

If funds are made available to carry out subsections (a) and (b), the Administrator shall eliminate the fees under subsection (a) for any loan guarantee or project subject to such subsection for which the application is approved on or after the date of enactment of this Act and make payments under subsection (b) until the amount provided for such purpose is expended.

(e)

Maximum loan amount

Section 7(a)(3)(A) of the Small Business Act (15 U.S.C. 636(a)(3)(A)) is amended by striking $1,500,000 (or if the gross loan amount would exceed $2,000,000) and inserting $2,250,000 (or if the gross loan amount would exceed $3,000,000).

(f)

Main street incentives

(1)

In general

Section 502 of the Small Business Investment Act of 1958 (15 U.S.C. 696) is amended—

(A)

by striking paragraphs (4) and (5) and inserting the following:

(4)

Limitation on leasing

If the use of a loan under this section includes the acquisition of a facility or the construction of a new facility, the small business concern assisted—

(A)

shall permanently occupy and use not less than a total of 50 percent of the space in the facility; and

(B)

may, on a temporary or permanent basis, lease to others not more than 50 percent of the space in the facility.

; and

(B)

by redesignating paragraph (6) as paragraph (5).

(2)

Policy for 7(a) loans

Section 7(a)(28) of the Small Business Act (15 U.S.C. 636(a)(28)) is amended to read as follows:

(28)

Limitation on leasing

If the use of a loan under this subsection includes the acquisition of a facility or the construction of a new facility, the small business concern assisted—

(A)

shall permanently occupy and use not less than a total of 50 percent of the space in the facility; and

(B)

may, on a temporary or permanent basis, lease to others not more than 50 percent of the space in the facility.

.

(g)

Low-interest refinancing

Section 502 of the Small Business Investment Act of 1958 (15 U.S.C. 696), as amended by subsection (e)(1) of this section, is amended by adding at the end the following:

(6)

Permissible debt refinancing

A financing under this title may include refinancing of existing indebtedness, in an amount not to exceed 50 percent of the projected cost of the project financed under this title, if—

(A)

the project financed under this title involves the expansion of a small business concern;

(B)

the existing indebtedness is collateralized by fixed assets;

(C)

the existing indebtedness was incurred for the benefit of the small business concern;

(D)

the proceeds of the existing indebtedness were used to acquire land (including a building situated thereon), to construct or expand a building thereon, or to purchase equipment;

(E)

the borrower has been current on all payments due on the existing indebtedness for not less than 1 year preceding the proposed date of refinancing;

(F)

the financing under this title will provide better terms or a better rate of interest than exists on the existing indebtedness on the proposed date of refinancing;

(G)

the financing under this title is not being used to refinance any debt guaranteed by the Government; and

(H)

the financing under this title will be used only for—

(i)

refinancing existing indebtedness; or

(ii)

costs relating to the project financed under this title.

.

(h)

Updated job creation requirements

Section 501(e) of the Small Business Investment Act of 1958 (15 U.S.C. 695(e)) is amended—

(1)

in paragraph (1), by striking $50,000 and inserting $65,000; and

(2)

in paragraph (2), by striking $50,000 and inserting $65,000.

(i)

Size standard simplification

Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) is amended by adding at the end the following:

(5)

Optional size standard

(A)

In general

The Administrator shall establish an optional size standard for business loan applicants under section 7(a) and development company loan applicants under title V of the Small Business Investment Act of 1958, which uses maximum tangible net worth and average net income as an alternative to the use of industry standards.

(B)

Interim rule

Until the date on which the optional size standard established under subparagraph (A) is in effect, the alternative size standard in section 121.301(b) of title 13, Code of Federal Regulations (or any successor thereto) may be used by business loan applicants under section 7(a) and development company loan applicants under title V of the Small Business Investment Act of 1958.

.

(j)

Maximum loan size

Section 502(2)(A) of the Small Business Investment Act of 1958 (15 U.S.C. 696(2)(A)) is amended—

(1)

in clause (i), by striking $1,500,000 and inserting $3,000,000; and

(2)

in clause (ii), by striking $2,000,000 and inserting $3,500,000.

(k)

Loan pooling

Section 5(g)(1) of the Small Business Act (15 U.S.C. 634(g)(1)) is amended—

(1)

by inserting (A) before The Administration;

(2)

by striking the colon and all that follows and inserting a period; and

(3)

by adding at the end the following:

(B)

A trust certificate issued under subparagraph (A) shall be based on, and backed by, a trust or pool approved by the Administrator and composed solely of the guaranteed portion of such loans.

(C)

The interest rate on a trust certificate issued under subparagraph (A) shall be either—

(i)

the lowest interest rate on any individual loan in the pool; or

(ii)

the weighted average interest rate of all loans in the pool, subject to such limited variations in loan characteristics as the Administrator determines appropriate to enhance marketability of the pool certificates.

.

(l)

Alternative variable interest rate

(1)

In general

Section 7(a)(4)(A) of the Small Business Act (15 U.S.C. 636(a)(4)(A)) is amended by striking prescribed by the Administration, and inserting: prescribed by the Administration, including, on variable rate loans, a nationally recognized prime rate of interest and at least 1 other index as an alternative thereto at the option of the participating lender,.

(2)

Applicability

Not later than 180 days after the date of enactment of this Act, the Administrator shall select not less than 1 alternative index under section 7(a)(4)(A) of the Small Business Act, as amended by paragraph (1) of this subsection, and make such index available for use by participating lenders.

(m)

Definitions

In this section—

(1)

the terms Administration and Administrator mean the Small Business Administration and the Administrator thereof, respectively;

(2)

the term development company has the meaning given the term development companies in section 103 of the Small Business Investment Act of 1958 (15 U.S.C. 662); and

(3)

the term small business concern has the same meaning as in section 3 of the Small Business Act (15 U.S.C. 632).