Regulation

15 USCS § 634
Current through Public Law 117-130, approved June 6, 2022.
United States Code Service > TITLE 15. COMMERCE AND TRADE (Chs. 1 — 120) > CHAPTER 14A. AID
TO SMALL BUSINESS (§§ 631 — 657u)

§ 634. General powers
(a) Seal; appointment and compensation of personnel; use of other services and facilities.
The Administration shall have power to adopt, alter, and use a seal, which shall be judicially
noticed. The Administrator is authorized, subject to the civil-service and classification laws, to
select, employ, appoint, and fix the compensation of such officers, employees, attorneys, and
agents as shall be necessary to carry out the provisions of this Act; to define their authority and
duties; and to pay the costs of qualification of certain of them as notaries public. The
Administration, with the consent of any board, commission, independent establishment, or
executive department of the Government, may avail itself on a reimbursable or nonreimbursable
basis of the use of information, services, facilities (including any field service thereof), officers,
and employees thereof, in carrying out the provisions of this Act.
(b) Powers of Administrator. In the performance of, and with respect to, the functions, powers,
and duties vested in him by this Act the Administrator may—
(1) sue and be sued in any court of record of a State having general jurisdiction, or in any
United States district court, and jurisdiction is conferred upon such district court to determine
such controversies without regard to the amount in controversy; but no attachment, injunction,
garnishment, or other similar process, mesne or final, shall be issued against the Administrator
or his property;
(2) under regulations prescribed by him, assign or sell at public or private sale, or otherwise
dispose of for cash or credit, in his discretion and upon such terms and conditions and for such
consideration as the Administrator shall determine to be reasonable, any evidence of debt,
contract, claim, personal property, or security assigned to or held by him in connection with
the payment of loans granted under this Act, and to collect or compromise all obligations
assigned to or held by him and all legal or equitable rights accruing to him in connection with
the payment of such loans until such time as such obligations may be referred to the Attorney
General for suit or collection;
(3) deal with, complete, renovate, improve, modernize, insure, or rent, or sell for cash or credit
upon such terms and conditions and for such consideration as the Administrator shall
determine to be reasonable, any real property conveyed to or otherwise acquired by him in
connection with the payment of loans granted under this Act;
(4) pursue to final collection, by way of compromise or otherwise, all claims against third
parties assigned to the Administrator in connection with loans made by him. This shall include
authority to obtain deficiency judgments or otherwise in the case of mortgages assigned to the
Administrator. Section 3709 of the Revised Statutes, as amended (41 U.S.C., sec. 5) [41 USCS

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§ 6101], shall not be construed to apply to any contract of hazard insurance or to any purchase
or contract for services or supplies on account of property obtained by the Administrator as a
result of loans made under this Act if the premium therefor or the amount thereof does not
exceed $1,000. The power to convey and to execute in the name of the Administrator deeds of
conveyance, deeds of release, assignments and satisfactions of mortgages, and any other
written instrument relating to real property or any interest therein acquired by the
Administrator pursuant to the provisions of this Act may be exercised by the Administrator or
by any officer or agent appointed by him without the execution of any express delegation of
power or power of attorney. Nothing in this section shall be construed to prevent the
Administrator from delegating such power by order or by power of attorney, in his discretion,
to any officer or agent he may appoint;
(5) acquire, in any lawful manner, any property (real, personal, or mixed, tangible or
intangible), whenever deemed necessary or appropriate to the conduct of the activities
authorized in sections 7(a) and 7(b) [15 USCS § 636(a), (b)];
(6) make such rules and regulations as he deems necessary to carry out the authority vested in
him by or pursuant to this Act;
(7) in addition to any powers, functions, privileges and immunities otherwise vested in him,
take any and all actions (including the procurement of the services of attorneys by contract in
any office where an attorney or attorneys are not or cannot be economically employed full time
to render such services) when he determines such actions are necessary or desirable in making,
servicing, compromising, modifying, liquidating, or otherwise dealing with or realizing on
loans made under the provisions of this Act: Provided, That with respect to deferred
participation loans, including loans guaranteed under paragraph (15) or (35) of section 7(a) [15
USCS § 636(a)], the Administrator may, in the discretion of and pursuant to regulations
promulgated by the Administrator, authorize participating lending institutions to take actions
relating to loan servicing on behalf of the Administrator, including determining eligibility and
creditworthiness and loan monitoring, collection, and liquidation;
(8) pay the transportation expenses and per diem in lieu of subsistence expenses, in
accordance with the Travel Expense Act of 1949 [5 USCS §§ 5701 et seq.], for travel of any
person employed by the Administration to render temporary services not in excess of six
months in connection with any disaster referred to in section 7(b) [15 USCS § 636(b)] from
place of appointment to, and while at, the disaster area and any other temporary posts of duty
and return upon completion of the assignment: Provided , That the Administrator may extend
the six-month limitation for an additional six months if the Administrator determines the
extension is necessary to continue efficient disaster loan making activities;
(9) accept the services and facilities of Federal, State, and local agencies and groups, both
public and private, and utilize such gratuitous services and facilities as may, from time to time,
be necessary, to further the objectives of section 7(b) [15 USCS § 636(b)];
(10) upon purchase by the Administration of any deferred participation entered into under
section 7 of this Act [15 USCS § 636], continue to charge a rate of interest not to exceed that
initially charged by the participating institution on the amount so purchased for the remaining
term of the indebtedness;

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(11) make such investigations as he deems necessary to determine whether a recipient of or
participant in any assistance under this Act or any other person has engaged or is about to
engage in any acts or practices which constitute or will constitute a violation of any provision
of this Act, or of any rule or regulation under this Act, or of any order issued under this Act.
The Administration shall permit any person to file with it a statement in writing, under oath or
otherwise as the Administration shall determine, as to all the facts and circumstances
concerning the matter to be investigated. For the purpose of any investigation, the
Administration is empowered to administer oaths and affirmations, subpena witnesses, compel
their attendance, take evidence, and require the production of any books, papers, and
documents which are relevant to the inquiry. Such attendance of witnesses and the production
of any such records may be required from any place in the United States. In case of contumacy
by, or refusal to obey a subpena issued to, any person, including a recipient or participant, the
Administration may invoke the aid of any court of the United States within the jurisdiction of
which such investigation or proceeding is carried on, or where such person resides or carries
on business, in requiring the attendance and testimony of witnesses and the production of
books, papers, and documents; and such court may issue an order requiring such person to
appear before the Administration, there to produce records, if so ordered, or to give testimony
touching the matter under investigation. Any failure to obey such order of the court may be
punished by such court as a contempt thereof. All process in any such case may be served in
the judicial district whereof such person is an inhabitant or wherever he may be found;
(12) impose, retain, and use only those fees which are specifically authorized by law or which
are in effect on September 30, 1994, and in the amounts and at the rates in effect on such date,
except that the Administrator may, subject to approval in appropriations Acts, impose, retain,
and utilize, additional fees—
(A) not to exceed $100 for each loan servicing action (other than a loan assumption)
requested after disbursement of the loan, including any substitution of collateral, release or
substitution of a guarantor, reamortization, or similar action;
(B) not to exceed $300 for loan assumptions;
(C) not to exceed 1 percent of the amount of requested financings under title III of the
Small Business Investment Act of 1958 for which the applicant requests a commitment
from the Administration for funding during the following year; and
(D) to recover the direct, incremental cost involved in the production and dissemination of
compilations of information produced by the Administration under the authority of this Act
and the Small Business Investment Act of 1958;
(13) collect, retain and utilize, subject to approval in appropriations Acts, any amounts
collected by fiscal transfer agents and not used by such agent as payment of the cost of loan
pooling or debenture servicing operations, except that amounts collected under this paragraph
and paragraph (12) shall be utilized solely to facilitate the administration of the program that
generated the excess amounts; and
(14) require any lender authorized to make loans under section 7 of this Act [15 USCS § 636]
to pay examination and review fees, which shall be deposited in the account for salaries and
expenses of the Administration, and shall be available for the costs of examinations, reviews,
and other lender oversight activities.

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(c) Procurement of experts and consultants; compensation and expenses. To such extent as
he finds necessary to carry out the provisions of this Act, the Administrator is authorized to
procure the temporary (not in excess of one year) or intermittent services of experts or consultants
or organizations thereof, including stenographic reporting services, by contract or appointment,
and in such cases such services shall be without regard to the civil-service and classification laws
and, except in the case of stenographic reporting services by organizations, without regard to
section 3709 of the Revised Statutes, as amended (41 U.S.C., sec. 5) [41 USCS § 6101]. Any
individual so employed may be compensated at a rate not in excess of the daily equivalent of the
highest rate payable under section 5332 of title 5, United States Code, including traveltime, and,
while such individual is away from his or her home or regular place of business, he or she may be
allowed travel expenses (including per diem in lieu of subsistence) as authorized by section 5703
of title 5, United States Code.
(d) Safety deposit box rentals. Section 3648 of the Revised Statutes (31 U.S.C. 529) [31 USCS
§ 3324(a) and (b)] shall not apply to prepayments of rentals made by the Administration on safety
deposit boxes used by the Administration for the safeguarding of instruments held as security for
loans or for the safeguarding of other documents.
(e) Undertaking or suspension of payment obligation; period; extension of maturity;
repayment agreement; “required payments” defined.
(1) Subject to the requirements and conditions contained in this subsection, upon application
by a small business concern which is the recipient of a loan made under this Act, the
Administration may undertake the small business concern’s obligation to make the required
payments under such loan or may suspend such obligation if the loan was a direct loan made
by the Administration. While such payments are being made by the Administration pursuant to
the undertaking of such obligation or while such obligation is suspended, no such payment
with respect to the loan may be required from the small business concern.
(2) The Administration may undertake or suspend for a period of not to exceed 5 years any
small business concern’s obligation under this subsection only if—
(A) without such undertaking or suspension of the obligation, the small business concern
would, in the sole discretion of the Administration, become insolvent or remain insolvent;
(B) with the undertaking or suspension of the obligation, the small business concern
would, in the sole discretion of the Administration, become or remain a viable small
business entity; and
(C) the small business concern executes an agreement in writing satisfactory to the
Administration as provided by paragraph (4).
(3) Notwithstanding the provisions of sections 7(a)(4)(C) and 7(i)(1) of this Act [15 USCS §
636(a)(4)(C), (i)(1)], the Administration may extend the maturity of any loan on which the
Administration undertakes or suspends the obligation pursuant to this subsection for a
corresponding period of time.
(4)
(A) Prior to the undertaking or suspension by the Administration of any small business
concern’s obligation under this subsection, the Administration, consistent with the
purposes sought to be achieved herein, shall require the small business concern to agree in

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writing to repay to it the aggregate amount of the payments which were required under the
loan during the period for which such obligation was undertaken or suspended, either—
(i) by periodic payments not less in amount or less frequently falling due than those
which were due under the loan during such period, or
(ii) pursuant to a repayment schedule agreed upon by the Administration and the small
business concern, or
(iii) by a combination of the payments described in clause (i) and clause (ii).
(B) In addition to requiring the small business concern to execute the agreement described
in subparagraph (A), the Administration shall, prior to the undertaking or suspension of the
obligation, take such action, and require the small business concern to take such action as
the Administration deems appropriate in the circumstances, including the provision of such
security as the Administration deems necessary or appropriate to insure that the rights and
interests of the lender (Small Business Administration or participant) will be safeguarded
adequately during and after the period in which such obligation is so undertaken or
suspended.
(5) The term “required payments” with respect to any loan means payments of principal and
interest under the loan.
(f) Sale of guaranteed portion of loans by lender or subsequent holder; limitations;
secondary market.
(1) The guaranteed portion of any loan made pursuant to this Act may be sold by the lender,
and by any subsequent holder, consistent with regulations on such sales as the Administration
shall establish, subject to the following limitations:
(A) prior to the Administration’s approval of the sale, or upon any subsequent resale, of
any loan guaranteed by the Administration, if the lender certifies that such loan has been
properly closed and that the lender has substantially complied with the provisions of the
guarantee agreement and the regulations of the Administration, the Administration shall
review and approve only materials not previously approved;
(B) all fees due the Administration on a guaranteed loan shall have been paid in full prior
to any sale; and
(C) each loan, except each loan made under section 7(a)(14) [15 USCS § 636(a)(14)],
shall have been fully disbursed to the borrower prior to any sale.
(2) After a loan is sold in the secondary market, the lender shall remain obligated under its
guarantee agreement with the Administration, and shall continue to service the loan in a
manner consistent with the terms and conditions of such agreement.
(3) The Administration shall develop such procedures as are necessary for the facilitation,
administration, and promotion of secondary market operations, and for assessing the increase
of small business access to capital at reasonable rates and terms as a result of secondary market
operations. Beginning on March 31, 1997, the sale of the unguaranteed portion of any loan
made under section 7(a) [15 USCS § 636(a)] shall not be permitted until a final regulation that
applies uniformly to both depository institutions and other lenders is promulgated by the
Administration setting forth the terms and conditions under which such sales can be permitted,

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including maintenance of appropriate reserve requirements and other safeguards to protect the
safety and soundness of the program.
(4) Nothing in this subsection or subsection (g) of this section shall be interpreted to impede
or extinguish the right of the borrower or the successor in interest to such borrower to prepay
(in whole or in part) any loan made pursuant to section 7(a) of this Act [15 USCS § 636(a)],
the guaranteed portion of which may be included in such trust or pool, or to impede or
extinguish the rights of any party pursuant to section 7(a)(6)(C) [15 USCS § 636(a)(6)(C)] or
subsection (e) of this section.
(g) Trust certificates; guarantee of timely payments of principal and interest; full faith and
credit of United States; collection of fees; subrogation; division of loan guarantees.
(1) The Administration is authorized to issue trust certificates representing ownership of all or
a fractional part of the guaranteed portion of one or more loans which have been guaranteed by
the Administration under this Act, or under section 502 of the Small Business Investment Act
of 1958 (15 U.S.C. 660): Provided , That such trust certificates shall be based on and backed
by a trust or pool approved by the Administration and composed solely of the entire
guaranteed portion of such loans.
(2) 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 subsection. Such
guarantee shall be limited to the extent of principal and interest on the guaranteed portions of
loans which compose the trust or pool. In the event that a loan 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 loan represents in the trust or pool. Interest on prepaid or defaulted loans
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 loans constituting the pool.
(3) 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 subsection.
(4)
(A) The Administration may collect a fee for any loan guarantee sold into the secondary
market under subsection (f) in an amount equal to not more than 50 percent of the portion
of the sale price that exceeds 110 percent of the outstanding principal amount of the
portion of the loan guaranteed by the Administration. Any such fee imposed by the
Administration shall be collected by the Administration or by the agent which carries out
on behalf of the Administration the central registration functions required by subsection (h)
of this section and shall be paid to the Administration and used solely to reduce the subsidy
on loans guaranteed under section 7(a) of this Act [15 USCS § 636(a)]: Provided, That
such fee shall not be charged to the borrower whose loan is guaranteed: and, Provided
further, That nothing herein shall preclude any agent of the Administration from collecting
a fee approved by the Administration for the functions described in subsection (h)(2)
[(h)(1)(B)].

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(B) The Administration is authorized to impose and collect, either directly or through a
fiscal and transfer agent, a reasonable penalty on late payments of the fee authorized under
subparagraph (A) in an amount not to exceed 5 percent of such fee per month plus interest.
(C) The Administration may contract with an agent to carry out, on behalf of the
Administration, the assessment and collection of the annual fee established under section
7(a)(23) [15 USCS § 636(a)(23)]. The agent may receive, as compensation for services,
any interest earned on the fee while in the control of the agent before the time at which the
agent is contractually required to remit the fee to the Administration.
(5)
(A) In the event the Administration pays a claim under a guarantee issued under this
subsection, it shall be subrogated fully to the rights satisfied by such payment.
(B) No State or local law, and no Federal law, shall preclude or limit the exercise by the
Administration of its ownership rights in the portions of loans constituting the trust or pool
against which the trust certificates are issued.
(6) If the amount of the guaranteed portion of any loan under section 7(a) [15 USCS § 636(a)]
is more than $500,000, the Administrator shall, upon request of a pool assembler, divide the
loan guarantee into increments of $500,000 and 1 increment of any remaining amount less than
$500,000, in order to permit the maximum amount of any loan in a pool to be not more than
$500,000. Only 1 increment of any loan guarantee divided under this paragraph may be
included in the same pool. Increments of loan guarantees to different borrowers that are
divided under this paragraph may be included in the same pool.
(h) Central registration of loans and trust certificates; contracts with agent; disclosures by
sellers of guaranteed portions of loans; regulation of brokers and dealers; electronic
registration.
(1) Upon the adoption of final rules and regulations, the Administration shall—
(A) provide for a central registration of all loans and trust certificates sold pursuant to
subsections (f) and (g) of 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
pooling. Such agent shall provide a fidelity bond or insurance in such amounts as the
Administration determines to be necessary to fully protect the interest of the Government;
(C) prior to any sale, require the seller to disclose to a purchaser of the guaranteed portion
of a loan guaranteed under this Act and to the purchaser of a trust certificate issued
pursuant to subsection (g), information on the terms, conditions, and yield of such
instrument. As used in this paragraph, if the instrument being sold is a loan, the term
“seller” does not include (A) an entity which made the loan or (B) any individual or entity
which sells three or fewer guaranteed loans per year; and
(D) have the authority to regulate brokers and dealers in guaranteed loans and trust
certificates sold pursuant to subsections (f) and (g) of this section.
(2) The agent described in paragraph (1)(B) may be compensated through any of the fees
assessed under this section and any interest earned on any funds collected by the agent while

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such funds are in the control of the agent and before the time at which the agent is
contractually required to transfer such funds to the Administration or to the holders of the trust
certificates, as appropriate.
(3) Nothing in this subsection shall prohibit the utilization of a book-entry or other electronic
form of registration for trust certificates. The Administration may, with the consent of the
Secretary of the Treasury, use the book-entry system of the Federal Reserve System.
(i) Office of Hearings and Appeals.
(1) Establishment.
(A) Office. There is established in the Administration an Office of Hearings and
Appeals—
(i) to impartially decide matters relating to program decisions of the Administrator—
(I) for which Congress requires a hearing on the record; or
(II) that the Administrator designates for hearing by regulation; and
(ii) which shall contain the office of the Administration that handles requests
submitted pursuant to sections 552 of title 5, United States Code (commonly referred to
as the “Freedom of Information Act”) and maintains records pursuant to section 552a
of title 5, United States Code (commonly referred to as the “Privacy Act of 1974”).
(B) Jurisdiction.
(i) In general. Except as provided in clause (ii), the Office of Hearings and Appeals
shall hear appeals of agency actions under or pursuant to this Act, the Small Business
Investment Act of 1958 (15 U.S.C. 661 et seq.), and title 13 of the Code of Federal
Regulations, and shall hear such other matters as the Administrator may determine
appropriate.
(ii) Exception. The Office of Hearings and Appeals shall not adjudicate disputes that
require a hearing on the record, except disputes pertaining to the small business
programs described in this Act.
(C) Associate Administrator. The head of the Office of Hearings and Appeals shall be the
Chief Hearing Officer appointed under section 4(b)(1) [15 USCS § 633(b)(1)], who shall be
responsible to the Administrator.
(2) Chief Hearing Officer duties.
(A) In general. The Chief Hearing Officer shall—
(i) be a career appointee in the Senior Executive Service and an attorney licensed by a
State, commonwealth, territory or possession of the United States, or the District of
Columbia; and
(ii) be responsible for the operation and management of the Office of Hearings and
Appeals.
(B) Alternative dispute resolution. The Chief Hearing Officer may assign a matter for
mediation or other means of alternative dispute resolution.
(3) Hearing Officers.

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(A) In general. The Office of Hearings and Appeals shall appoint Hearing Officers to carry
out the duties described in paragraph (1)(A)(i).
(B) Conditions of employment. A Hearing Officer appointed under this paragraph—
(i) shall serve in the excepted service as an employee of the Administration under
section 2103 of title 5, United States Code, and under the supervision of the Chief
Hearing Officer;
(ii) shall be classified at a position to which section 5376 of title 5, United States Code,
applies; and
(iii) shall be compensated at a rate not exceeding the maximum rate payable under
such section.
(C) Authority; powers. Notwithstanding section 556(b) of title 5, United States Code—
(i) a Hearing Officer may hear cases arising under section 554 of such title [5 USCS §
554];
(ii) a Hearing Officer shall have the powers described in section 556(c) of such title [5
USCS § 556(c)] ; and
(iii) the relevant provisions of subchapter II of chapter 5 of such title [5 USCS §§ 551
et seq.] (except for section 556(b) of such title) shall apply to such Hearing Officer.
(D) Treatment of current personnel. An individual serving as a Judge in the Office of
Hearings and Appeals (as that position and office are designated in section 134.101 of title
13, Code of Federal Regulations) on the effective date of this subsection [enacted Nov. 25,
2015] shall be considered as qualified to be, and redesignated as, a Hearing Officer.
(4) Determinations regarding status of concerns.
(A) In general. Not later than 2 days after the date on which a final determination that a
business concern does not meet the requirements of the status such concern claims to hold
is made, such concern or the Administrator, as applicable, shall update the status of such
concern in the System for Award Management (or any successor system).
(B) Administrator updates. If such concern fails to update the status of such concern as
described in subparagraph (A), not later than 2 days after such failure the Administrator
shall make such update.
(C) Notification. A concern required to make an update described under subparagraph (A)
shall notify a contracting officer for each contract with respect to which such concern has
an offer or bid pending of the determination made under subparagraph (A), if the concern
finds, in good faith, that such determination affects the eligibility of the concern to perform
such a contract.
(5) Hearing Officer defined. In this subsection, the term “Hearing Officer” means an
individual appointed or redesignated under this subsection who is an attorney licensed by a
State, commonwealth, territory or possession of the United States, or the District of Columbia.

History

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HISTORY:
July 18, 1958, P. L. 85-536, § 2 [5], 72 Stat. 385; Sept. 26, 1961, P. L. 87-305, § 4, 75 Stat. 666; Oct. 4,
1961, P. L. 87-367, Title I, § 103(3), 75 Stat. 787; June 6, 1972, P. L. 92-310, Title II, Part 2, § 224(a), 86
Stat. 206; Aug. 23, 1974, P. L. 93-386, §§ 3(1), 10, 88 Stat. 745, 749; June 4, 1976, P. L. 94-305, Title II,
§ 208, 90 Stat. 671; Aug. 4, 1977, P. L. 95-89, Title III, § 303, 91 Stat. 558; Oct. 24, 1978, P. L. 95-510, §
103, 92 Stat. 1781; July 2, 1980, P. L. 96-302, Title I, Part B, § 114, 94 Stat. 838; July 10, 1984, P. L. 98352, § 2, 98 Stat. 329; Nov. 3, 1988, P. L. 100-590, Title I, § 113, 102 Stat. 2997; Oct. 28, 1991, P. L.
102-140, Title VI, § 609(a), 105 Stat. 825; Oct. 28, 1992, P. L. 102-564, Title III, § 307(d), 106 Stat.
4264; Aug. 13, 1993, P. L. 103-81, § 3(a), 107 Stat. 781; July 22, 1994, P. L. 103-282, § 2, 108 Stat.
1422; Oct. 22, 1994, P. L. 103-403, Title VI, § 602, 108 Stat. 4202; Oct. 12, 1995, P. L. 104-36, § 4(b),
109 Stat. 297; Sept. 30, 1996, P. L. 104-208, Div D, Title I, § 103(e), Title II, §§ 205(a), 208(i), 110 Stat.
3009-727, 3009-738, 3009-747; Dec. 21, 2000, P. L. 106-554, § 1(a)(9), 114 Stat. 2763; Sept. 24, 2004, P.
L. 108-306, § 3, 118 Stat. 1131; Dec. 8, 2004, P. L. 108-447, Div K, Title I, Subtitle C, § 131, 118 Stat.
3452; Sept. 27, 2010, P. L. 111-240, Title I, Subtitle A, Part I, § 1117, 124 Stat. 2509; Nov. 25, 2015, P.
L. 114-92, Div A, Title VIII, Subtitle F, § 869(a)(1), 129 Stat. 936; Dec. 23, 2016, P. L. 114-328, Div A,
Title XVIII, Subtitle D, § 1833(a), 130 Stat. 2661; Aug. 13, 2018, P.L. 115-232, Div A, Title VIII,
Subtitle F, § 862(b)(2), 132 Stat. 1898; Dec. 27, 2021, P.L. 117-81, Div A, Title VIII, Subtitle G, § 863,
135 Stat. 1852.
United States Code Service
Copyright © 2022 Matthew Bender & Company, Inc.
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End of Document

15 USCS § 636
Current through Public Law 117-130, approved June 6, 2022.
United States Code Service > TITLE 15. COMMERCE AND TRADE (Chs. 1 — 120) > CHAPTER 14A. AID
TO SMALL BUSINESS (§§ 631 — 657u)

§ 636. Additional powers [Caution: See prospective amendment note below.]
(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 Act. 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.
(i) In general. The Administrator has the authority to direct, and conduct oversight for,
the methods by which lenders determine whether a borrower is able to obtain 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.
(ii) Liquidity. On and after October 1, 2015, the Administrator may not guarantee a
loan under this subsection if the lender determines that the borrower is unable to obtain
credit elsewhere solely because the liquidity of the lender depends upon the guaranteed
portion of the loan being sold on the secondary market.
(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 USCS § 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.
(C) Lending limits of lenders. On and after October 1, 2015, the Administrator may not
guarantee a loan under this subsection if the sole purpose for requesting the guarantee is to
allow the lender to exceed the legal lending limit of the lender.
(2) Level of participation in guaranteed loans.
(A) In general. Except as provided in subparagraphs (B), (D), (E), and (F), in an
agreement to participate in a loan on a deferred basis under this subsection (including a

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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) Export-Import Bank lenders. Any lender that is participating in the Delegated
Authority Lender Program of the Export-Import Bank of the United States (or any
successor to the Program) shall be eligible to participate in the Preferred Lenders
Program.
(iii) 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 5(b)(7) [15 USCS § 634(b)(7)], 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. 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 be 90 percent.
(E) Participation in international trade loan. In an agreement to participate in a loan on a
deferred basis under paragraph (16), the participation by the Administration may not
exceed 90 percent.
(F) Participation in the paycheck protection program. In an agreement to participate in a
loan on a deferred basis under paragraph (36), the participation by the Administration shall
be 100 percent.

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(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 Act would exceed
$3,750,000 (or if the gross loan amount would exceed $5,000,000), 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 Act would exceed $4,500,000 (or if the gross loan amount would
exceed $5,000,000), of which not more than $4,000,000 may be used for working capital,
supplies, or financings under section 7(a)(14) [subsec. (a)(14) of this section] 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.

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(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 [.]
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)

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(A) In general .The Administrator may defer payments on the principal and interest 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.
(B) Deferral requirements. With respect to a deferral provided under this paragraph, the
Administrator may allow lenders under this subsection—
(i) to provide full payment deferment relief (including payment of principal and
interest) for a period of not more than 1 year; and
(ii) to provide an additional deferment period if the borrower provides documentation
justifying such additional deferment.
(C) Secondary market.
(i) In general. Except as provided in clause (ii), if an investor declines to approve a
deferral or additional deferment requested by a lender under subparagraph (B), the
Administrator shall exercise the authority to purchase the loan so that the borrower may
receive full payment deferment relief (including payment of principal and interest) or
an additional deferment as described in subparagraph (B).
(ii) Exception. If, in a fiscal year, the Administrator determines that the cost of
implementing clause (i) is greater than zero, the Administrator shall not implement that
clause.
(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, United
States Code).
(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 2(c) of this Act, 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 lowincome individuals.
(12)
(A) The Administration may provide loans under this subsection to assist any small
business concern, including start up, to enable such concern to design architecturally or
engineer, manufacture, distribute, market, install, or service energy measures: Provided,
however, That such loan proceeds shall not be used primarily for research and
development.

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[(B)](b) 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
USCS § 694-1]. Notwithstanding the limitation expressed in paragraph (3) of this
subsection, a loan made under this paragraph may not result in a total amount outstanding
and committed to a borrower from the business loan and investment fund of more than
$1,000,000.
(13) The Administration may provide financings under this subsection to State and local
development companies for the purposes of, and subject to the restrictions in, title V of the
Small Business Investment Act of 1958 [15 USCS §§ 695 et seq.].
(14) Export Working Capital Program.
(A) In general. The Administrator 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) Terms.
(i) Loan amount. The Administrator may not guarantee a loan under this paragraph of
more than $5,000,000.
(ii) Fees.
(I) In general. For a loan under this paragraph, the Administrator shall collect the
fee assessed under paragraph (23) not more frequently than once each year.
(II) Untapped credit. The Administrator may not assess a fee on capital that is not
accessed by the small business concern.
(C) Considerations. 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.
(D) Marketing. The Administrator shall aggressively market its export financing program
to small businesses.
(15)
(A) The Administration may guarantee loans under this subsection—
(i) to qualified employee trusts with respect to a small business concern for the
purpose of purchasing, and for any transaction costs associated with 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; and
(ii) to a small business concern under a plan approved by the Administrator, if the
proceeds from the loan are only used to make a loan to a qualified employee trust, and

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for any transaction costs associated with making that loan, that results in the qualified
employee trust owning at least 51 percent of the small business concern.
(B) The plan requiring the Administrator's approval under subparagraph (A) shall be
submitted to the Administration by the trustee of such trust or by the small business
concern 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 the Internal
Revenue Code of 1954 [26 USCS § 401(a)]), 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,
(iii) there will be adequate management to assure management expertise and
continuity, and
(iv) with respect to a loan made to a trust, or to a cooperative in accordance with
paragraph (35)—
(I) a seller of the small business concern may remain involved as an officer,
director, or key employee of the small business concern when a qualified employee
trust or cooperative has acquired 100 percent of ownership of the small business
concern; and
(II) any seller of the small business concern who remains as an owner of the small
business concern, regardless of the percentage of ownership interest, shall be
required to provide a personal guarantee by the Administration.
(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, which shall include—
(i) the total number of loans made to employee-owned business concerns that were
guaranteed by the Administrator under section 7(a) of the Small Business Act (15
U.S.C. 636(a)) or section 502 of the Small Business Investment Act of 1958 (15 U.S.C.
696), including the number of loans made—

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(I) to small business concerns owned and controlled by socially and economically
disadvantaged individuals; and
(II) to cooperatives;
(ii) the total number of financings made to employee-owned business concerns by
companies licensed under section 301(c) of the Small Business Investment Act of 1958
(15 U.S.C. 696(c)), including the number of financings made—
(I) to small business concerns owned and controlled by socially and economically
disadvantaged individuals; and
(II) to cooperatives; and
(iii) any outreach and educational activities conducted by the Administration with
respect to employee-owned business concerns.
(F) A small business concern that makes a loan to a qualified employee trust under
subparagraph (A)(ii) is not required to contain the same terms and conditions as the loan
made to the small business concern that is guaranteed by the Administration under such
subparagraph.
(G) With respect to a loan made to a qualified employee trust under this paragraph, or to a
cooperative in accordance with paragraph (35), the Administrator may, as deemed
appropriate, elect to not require any mandatory equity to be provided by the qualified
employee trust or cooperative to make the loan.
(16) International trade.
(A) In general. If the Administrator determines that a loan guaranteed under this
subsection will allow an eligible small business concern that is engaged in or adversely
affected by international trade to improve its competitive position, the Administrator may
make such loan to assist such concern—
(i) 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;
(ii) in the refinancing of existing indebtedness that is not structured with reasonable
terms and conditions, including any debt that qualifies for refinancing under any other
provision of this subsection; or
(iii) by providing working capital.
(B) Security.
(i) In general. Except as provided in clause (ii), each loan made under this paragraph
shall be secured by a first lien position or first mortgage on the property or equipment
financed by the loan or on other assets of the small business concern.
(ii) Exception. A loan under this paragraph may be secured by a second lien position
on the property or equipment financed by the loan or on other assets of the small
business concern, if the Administrator determines the lien provides adequate assurance
of the payment of the loan.

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(C) Engaged in international trade. For purposes of this paragraph, a small business
concern is engaged in international trade if, as determined by the Administrator, the small
business concern is in a position to expand existing export markets or develop new export
markets.
(D) Adversely affected by international trade. For purposes of this paragraph, a small
business concern is adversely affected by international trade if, as determined by the
Administrator, the small business concern—
(i) is confronting increased competition with foreign firms in the relevant market; and
(ii) is injured by such competition.
(E) Findings by certain Federal agencies. For purposes of subparagraph (D)(ii) the
Administrator shall accept any finding of injury by the International Trade Commission or
any finding of injury by the Secretary of Commerce pursuant to chapter 3 of title II of the
Trade Act of 1974 [19 USCS §§ 2341 et seq.].
(F) List of export finance lenders.
(i) Publication of list required. The Administrator shall publish an annual list of the
banks and participating lending institutions that, during the 1-year period ending on the
date of publication of the list, have made loans guaranteed by the Administration
under—
(I) this paragraph;
(II) paragraph (14); or
(III) paragraph (34).
(ii) Availability of list. The Administrator shall—
(I) post the list published under clause (i) on the website of the Administration; and
(II) make the list published under clause (i) available, upon request, at each district
office of the Administration.
(17) The Administration shall authorize lending institutions and other entities in addition to
banks to make loans authorized under this subsection.
(18) Guarantee fees.
(A) In general. With respect to each loan guaranteed under this subsection (other than a
loan that is repayable in 1 year or less), the Administration shall collect a guarantee fee,
which shall be payable by the participating lender, and may be charged to the borrower, as
follows:
(i) A guarantee fee not to exceed 2 percent of the deferred participation share of a total
loan amount that is not more than $150,000.
(ii) A guarantee fee not to exceed 3 percent of the deferred participation share of a
total loan amount that is more than $150,000, but not more than $700,000.
(iii) A guarantee fee not to exceed 3.5 percent of the deferred participation share of a
total loan amount that is more than $700,000.

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(iv) In addition to the fee under clause (iii), a guarantee fee equal to 0.25 percent of
any portion of the deferred participation share that is more than $1,000,000.
(B) Retention of certain fees. Lenders participating in the programs established under this
subsection may retain not more than 25 percent of a fee collected under subparagraph
(A)(i).
(19)
(A) In addition to the Preferred Lenders Program authorized by the proviso in section
5(b)(7) [15 USCS § 634(b)(7)], 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) and section 8(a) [15 USCS § 637(a)]. 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

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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

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(ii) to a qualified individual or a veteran seeking to establish (or acquire) and operate a
small business concern.
(B) Recognizing that greater risk may be associated with a loan to a small business
concern described in subparagraph (A)(i), any reasonable doubts concerning the firm’s
proposed business plan for transition to nondefense-related markets shall be resolved in
favor of the loan applicant when making any determination regarding the sound value of
the proposed loan in accordance with paragraph (6).
(C) Loans pursuant to this paragraph shall be authorized in such amounts as provided in
advance in appropriation Acts for the purposes of loans under this paragraph.
(D) For purposes of this paragraph a qualified individual is—
(i) a member of the Armed Forces of the United States, honorably discharged from
active duty involuntarily or pursuant to a program providing bonuses or other
inducements to encourage voluntary separation or early retirement;
(ii) a civilian employee of the Department of Defense involuntarily separated from
Federal service or retired pursuant to a program offering inducements to encourage
early retirement; or
(iii) an employee of a prime contractor, subcontractor, or supplier at any tier of a
Department of Defense program whose employment is involuntarily terminated (or
voluntarily terminated pursuant to a program offering inducements to encourage
voluntary separation or early retirement) due to the termination (or substantial
reduction) of a Department of Defense program.
(E) Job creation and community benefit. In providing assistance under this paragraph, the
Administration shall develop procedures to ensure, to the maximum extent practicable, that
such assistance is used for projects that—
(i) have the greatest potential for—
(I) creating new jobs for individuals whose employment is involuntarily terminated
due to reductions in Federal defense expenditures; or
(II) preventing the loss of jobs by employees of small business concerns described
in subparagraph (A)(i); and
(ii) have substantial potential for stimulating new economic activity in communities
most affected by reductions in Federal defense expenditures.
(22) The Administration is authorized to permit participating lenders to impose and collect a
reasonable penalty fee on late payments of loans guaranteed under this subsection in an
amount not to exceed 5 percent of the monthly loan payment per month plus interest.
(23) Yearly fee.
(A) In general. With respect to each loan approved under this subsection, the
Administration shall assess, collect, and retain a fee, not to exceed 0.55 percent per year of
the outstanding balance of the deferred participation share of the loan, in an amount
established once annually by the Administration in the Administration’s annual budget
request to Congress, as necessary to reduce to zero the cost to the Administration of

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making guarantees under this subsection. As used in this paragraph, the term “cost” has the
meaning given that term in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C.
661a).
(B) Payer. The yearly fee assessed under subparagraph (A) shall be payable by the
participating lender and shall not be charged to the borrower.
(C) Lowering of borrower fees. If the Administration determines that fees paid by lenders
and by small business borrowers for guarantees under this subsection may be reduced,
consistent with reducing to zero the cost to the Administration of making such
guarantees—
(i) the Administration shall first consider reducing fees paid by small business
borrowers under clauses (i) through (iii) of paragraph (18)(A), to the maximum extent
possible; and
(ii) fees paid by small business borrowers shall not be increased above the levels in
effect on the date of enactment of this subparagraph [enacted Dec. 8, 2004].
(24) Notification requirement. The Administration shall notify the Committees on Small
Business of the Senate and the House of Representatives not later than 15 days before making
any significant policy or administrative change affecting the operation of the loan program
under this subsection.
(25) Limitation on conducting pilot projects.
(A) In general. Not more than 10 percent of the total number of loans guaranteed in any
fiscal year under this subsection may be awarded as part of a pilot program which is
commenced by the Administrator on or after October 1, 1996.
(B) Pilot program defined. In this paragraph, the term “pilot program” means any lending
program initiative, project, innovation, or other activity not specifically authorized by law.
(C) Low documentation loan program. The Administrator may carry out the low
documentation loan program for loans of $100,000 or less only through lenders with
significant experience in making small business loans. Not later than 90 days after the date
of enactment of this subsection, 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
502 of the Federal Credit Reform Act of 1990 [2 USCS § 661a]) to the Administration of
purchasing and guaranteeing loans under this Act.
(27) [Repealed]
(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.

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(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) In general. 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—
(i) shall be required by the Administration in connection with any such loan, if such
loan is in an amount greater than the Federal banking regulator appraisal threshold; or
(ii) may be required by the Administration or the lender in connection with any such
loan, if such loan is in an amount equal to or less than the Federal banking regulator
appraisal threshold, if such appraisal is necessary for appropriate evaluation of
creditworthiness.
(B) Federal banking regulator appraisal threshold defined. For purposes of this paragraph,
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.
(30) Ownership requirements. Ownership requirements to determine the eligibility of a small
business concern that applies for assistance under any credit program under this Act shall be
determined without regard to any ownership interest of a spouse arising solely from the
application of the community property laws of a State for purposes of determining marital
interests.
(31) Express loans.
(A) Definitions. As used in this paragraph:
(i) The term “disaster area” means the area for which the President has declared a
major disaster, during the 5-year period beginning on the date of the declaration.
(ii) The term “express lender” means any lender authorized by the Administration to
participate in the Express Loan Program.
(iii) The term “express loan” means any loan made pursuant to this paragraph in which
a lender utilizes to the maximum extent practicable its own loan analyses, procedures,
and documentation.
(iv) The term “Express Loan Program” means the program for express loans
established by the Administration under paragraph (25)(B), as in existence on April 5,
2004, with a guarantee rate of not more than 50 percent.
(B) Restriction to express lender. The authority to make an express loan shall be limited to
those lenders deemed qualified to make such loans by the Administration. Designation as
an express lender for purposes of making an express loan shall not prohibit such lender
from taking any other action authorized by the Administration for that lender pursuant to
this subsection.

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(C) Grandfathering of existing lenders. Any express lender shall retain such designation
unless the Administration determines that the express lender has violated the law or
regulations promulgated by the Administration or modifies the requirements to be an
express lender and the lender no longer satisfies those requirements.
(D) Maximum loan amount. The maximum loan amount under the Express Loan Program
is $500,000.
(E) Option to participate. Except as otherwise provided in this paragraph, the
Administration shall take no regulatory, policy, or administrative action, without regard to
whether such action requires notification pursuant to paragraph (24), that has the effect of
requiring a lender to make an express loan pursuant to subparagraph (D).
(F) Express loans for renewable energy and energy efficiency.
(i) Definitions. In this subparagraph—
(I) the term “biomass”—
(aa) means any organic material that is available on a renewable or recurring
basis, including—
(AA) agricultural crops;
(BB) trees grown for energy production;
(CC) wood waste and wood residues;
(DD) plants (including aquatic plants and grasses);
(EE) residues;
(FF) fibers;
(GG) animal wastes and other waste materials; and
(HH) fats, oils, and greases (including recycled fats, oils, and greases); and
(bb) does not include—
(AA) paper that is commonly recycled; or
(BB) unsegregated solid waste;
(II) the term “energy efficiency project” means the installation or upgrading of
equipment that results in a significant reduction in energy usage; and
(III) the term “renewable energy system” means a system of energy derived
from—
(aa) a wind, solar, biomass (including biodiesel), or geothermal source; or
(bb) hydrogen derived from biomass or water using an energy source described
in item (aa).
(ii) Loans. The Administrator may make a loan under the Express Loan Program for
the purpose of—
(I) purchasing a renewable energy system; or

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(II) carrying out an energy efficiency project for a small business concern.
(G) Guarantee fee waiver for veterans.
(i) Guarantee fee waiver. The Administrator may not collect a guarantee fee described
in paragraph (18) in connection with a loan made under this paragraph to a veteran or
spouse of a veteran on or after October 1, 2015.
(ii) Definition. In this subparagraph, the term “veteran or spouse of a veteran”
means—
(I) a veteran, as defined in section 3(q)(4) [15 USCS § 632(q)(4)];
(II) an individual who is eligible to participate in the Transition Assistance
Program established under section 1144 of title 10, United States Code;
(III) a member of a reserve component of the Armed Forces named in section
10101 of title 10, United States Code;
(IV) the spouse of an individual described in subclause (I), (II), or (III); or
(V) the surviving spouse (as defined in section 101 of title 38, United States Code)
of an individual described in subclause (I), (II), or (III) who died while serving on
active duty or as a result of a disability that is service-connected (as defined in such
section).
(iii) [Redesignated]
(H) Recovery opportunity loans.
(i) In general. The Administrator may guarantee an express loan to a small business
concern located in a disaster area in accordance with this subparagraph.
(ii) Maximums. For a loan guaranteed under clause (i)—
(I) the maximum loan amount is $150,000; and
(II) the guarantee rate shall be not more than 85 percent.
(iii) Overall cap. A loan guaranteed under clause (i) shall not be counted in
determining the amount of loans made to a borrower for purposes of subparagraph (D).
(iv) Operations. A small business concern receiving a loan guaranteed under clause (i)
shall certify that the small business concern was in operation on the date on which the
applicable major disaster occurred as a condition of receiving the loan.
(v) Repayment ability. A loan guaranteed under clause (i) may only be made to a small
business concern that demonstrates, to the satisfaction of the Administrator, sufficient
capacity to repay the loan.
(vi) Timing of payment of guarantees.
(I) In general. Not later than 90 days after the date on which a request for purchase
is filed with the Administrator, the Administrator shall determine whether to pay
the guaranteed portion of the loan.
(II) Recapture. Notwithstanding any other provision of law, unless there is a
subsequent finding of fraud by a court of competent jurisdiction relating to a loan

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guaranteed under clause (i), on and after the date that is 6 months after the date on
which the Administrator determines to pay the guaranteed portion of the loan, the
Administrator may not attempt to recapture the paid guarantee.
(vii) Fees.
(I) In general. Unless the Administrator has waived the guarantee fee that would
otherwise be collected by the Administrator under paragraph (18) for a loan
guaranteed under clause (i), and except as provided in subclause (II), the guarantee
fee for the loan shall be equal to the guarantee fee that the Administrator would
collect if the guarantee rate for the loan was 50 percent.
(II) Exception. Subclause (I) shall not apply if the cost of carrying out the program
under this subsection in a fiscal year is more than zero and such cost is directly
attributable to the cost of guaranteeing loans under clause (i).
(viii) Rules. Not later than 270 days after the date of enactment of this subparagraph
[enacted Nov. 25, 2015], the Administrator shall promulgate rules to carry out this
subparagraph.
(32) Loans for energy efficient technologies.
(A) Definitions. In this paragraph—
(i) the term “cost” has the meaning given that term in section 502 of the Federal Credit
Reform Act of 1990 (2 U.S.C. 661a);
(ii) the term “covered energy efficiency loan” means a loan—
(I) made under this subsection; and
(II) the proceeds of which are used to purchase energy efficient designs,
equipment, or fixtures, or to reduce the energy consumption of the borrower by 10
percent or more; and
(iii) the term “pilot program” means the pilot program established under subparagraph
(B)[.]
(B) Establishment. The Administrator shall establish and carry out a pilot program under
which the Administrator shall reduce the fees for covered energy efficiency loans.
(C) Duration. The pilot program shall terminate at the end of the second full fiscal year
after the date that the Administrator establishes the pilot program.
(D) Maximum participation. A covered energy efficiency loan shall include the maximum
participation levels by the Administrator permitted for loans made under this subsection.
(E) Fees.
(i) In general. The fee on a covered energy efficiency loan shall be equal to 50 percent
of the fee otherwise applicable to that loan under paragraph (18).
(ii) Waiver. The Administrator may waive clause (i) for a fiscal year if—

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(I) for the fiscal year before that fiscal year, the annual rate of default of covered
energy efficiency loans exceeds that of loans made under this subsection that are
not covered energy efficiency loans;
(II) the cost to the Administration of making loans under this subsection is greater
than zero and such cost is directly attributable to the cost of making covered energy
efficiency loans; and
(III) no additional sources of revenue authority are available to reduce the cost of
making loans under this subsection to zero.
(iii) Effect of waiver. If the Administrator waives the reduction of fees under clause
(ii), the Administrator—
(I) shall not assess or collect fees in an amount greater than necessary to ensure
that the cost of the program under this subsection is not greater than zero; and
(II) shall reinstate the fee reductions under clause (i) when the conditions in clause
(ii) no longer apply.
(iv) No increase of fees. The Administrator shall not increase the fees under paragraph
(18) on loans made under this subsection that are not covered energy efficiency loans
as a direct result of the pilot program.
(F) GAO report.
(i) In general. Not later than 1 year after the date that the pilot program terminates, the
Comptroller General of the United States shall submit to the Committee on Small
Business of the House of Representatives and the Committee on Small Business and
Entrepreneurship of the Senate a report on the pilot program.
(ii) Contents. The report submitted under clause (i) shall include—
(I) the number of covered energy efficiency loans for which fees were reduced
under the pilot program;
(II) a description of the energy efficiency savings with the pilot program;
(III) a description of the impact of the pilot program on the program under this
subsection;
(IV) an evaluation of the efficacy and potential fraud and abuse of the pilot
program; and
(V) recommendations for improving the pilot program.
(33) Increased veteran participation program.
(A) Definitions. In this paragraph—
(i) the term “cost” has the meaning given that term in section 502 of the Federal Credit
Reform Act of 1990 (2 U.S.C. 661a);
(ii) the term “pilot program” means the pilot program established under subparagraph
(B); and

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(iii) the term “veteran participation loan” means a loan made under this subsection to a
small business concern owned and controlled by veterans of the Armed Forces or
members of the reserve components of the Armed Forces.
(B) Establishment. The Administrator shall establish and carry out a pilot program under
which the Administrator shall reduce the fees for veteran participation loans.
(C) Duration. The pilot program shall terminate at the end of the second full fiscal year
after the date that the Administrator establishes the pilot program.
(D) Maximum participation. A veteran participation loan shall include the maximum
participation levels by the Administrator permitted for loans made under this subsection.
(E) Fees.
(i) In general. The fee on a veteran participation loan shall be equal to 50 percent of
the fee otherwise applicable to that loan under paragraph (18).
(ii) Waiver. The Administrator may waive clause (i) for a fiscal year if—
(I) for the fiscal year before that fiscal year, the annual estimated rate of default of
veteran participation loans exceeds that of loans made under this subsection that are
not veteran participation loans;
(II) the cost to the Administration of making loans under this subsection is greater
than zero and such cost is directly attributable to the cost of making veteran
participation loans; and
(III) no additional sources of revenue authority are available to reduce the cost of
making loans under this subsection to zero.
(iii) Effect of waiver. If the Administrator waives the reduction of fees under clause
(ii), the Administrator—
(I) shall not assess or collect fees in an amount greater than necessary to ensure
that the cost of the program under this subsection is not greater than zero; and
(II) shall reinstate the fee reductions under clause (i) when the conditions in clause
(ii) no longer apply.
(iv) No increase of fees. The Administrator shall not increase the fees under paragraph
(18) on loans made under this subsection that are not veteran participation loans as a
direct result of the pilot program.
(F) GAO report.
(i) In general. Not later than 1 year after the date that the pilot program terminates, the
Comptroller General of the United States shall submit to the Committee on Small
Business of the House of Representatives and the Committee on Small Business and
Entrepreneurship of the Senate a report on the pilot program.
(ii) Contents. The report submitted under clause (i) shall include—
(I) the number of veteran participation loans for which fees were reduced under the
pilot program;

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(II) a description of the impact of the pilot program on the program under this
subsection;
(III) an evaluation of the efficacy and potential fraud and abuse of the pilot
program; and
(IV) recommendations for improving the pilot program.
(34) Export express program.
(A) Definitions. In this paragraph—
(i) the term “export development activity” includes—
(I) obtaining a standby letter of credit when required as a bid bond, performance
bond, or advance payment guarantee;
(II) participation in a trade show that takes place outside the United States;
(III) translation of product brochures or catalogues for use in markets outside the
United States;
(IV) obtaining a general line of credit for export purposes;
(V) performing a service contract from buyers located outside the United States;
(VI) obtaining transaction-specific financing associated with completing export
orders;
(VII) purchasing real estate or equipment to be used in the production of goods or
services for export;
(VIII) providing term loans or other financing to enable a small business concern,
including an export trading company and an export management company, to
develop a market outside the United States; and
(IX) acquiring, constructing, renovating, modernizing, improving, or expanding a
production facility or equipment to be used in the United States in the production of
goods or services for export; and
(ii) the term “express loan” means a loan in which a lender uses to the maximum
extent practicable the loan analyses, procedures, and documentation of the lender to
provide expedited processing of the loan application.
(B) Authority. The Administrator may guarantee the timely payment of an express loan to
a small business concern made for an export development activity.
(C) Level of participation.
(i) Maximum amount. The maximum amount of an express loan guaranteed under this
paragraph shall be $500,000.
(ii) Percentage. For an express loan guaranteed under this paragraph, the Administrator
shall guarantee—
(I) 90 percent of a loan that is not more than $350,000; and
(II) 75 percent of a loan that is more than $350,000 and not more than $500,000.

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(35) Loans to cooperatives.
(A) Definition. In this paragraph, the term "cooperative" means an entity that is
determined to be a cooperative by the Administrator, in accordance with applicable Federal
and State laws and regulation.
(B) Authority. The Administration shall guarantee loans made to a cooperative for the
purpose described in paragraph (15).
(36) Paycheck protection program.
(A) Definitions. In this paragraph—
(i) the terms “appropriate Federal banking agency” and “insured depository
institution” have the meanings given those terms in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813);
(ii) the term “covered loan” means a loan made under this paragraph during the
covered period;
(iii) the term “covered period” means the period beginning on February 15, 2020 and
ending on June 30, 2021;
(iv) the term “eligible recipient” means an individual or entity that is eligible to receive
a covered loan;
(v) the term “eligible self-employed individual” has the meaning given the term in
section 7002(b) of the Families First Coronavirus Response Act (Public Law 116-127)
[26 USCS § 1401 note];
(vi) the term “insured credit union” has the meaning given the term in section 101 of
the Federal Credit Union Act (12 U.S.C. 1752);
(vii) the term “nonprofit organization” means an organization that is described in
section 501(c)(3) of the Internal Revenue Code of 1986 [26 USCS § 501(c)(3)] and that
is exempt from taxation under section 501(a) of such Code [26 USCS § 501(a)];
(viii) the term “payroll costs”—
(I) means—
(aa) the sum of payments of any compensation with respect to employees that
is a—
(AA) salary, wage, commission, or similar compensation;
(BB) payment of cash tip or equivalent;
(CC) payment for vacation, parental, family, medical, or sick leave;
(DD) allowance for dismissal or separation;
(EE) payment required for the provisions of group health care or group life,
disability, vision, or dental insurance benefits, including insurance
premiums;
(FF) payment of any retirement benefit; or

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(GG) payment of State or local tax assessed on the compensation of
employees; and
(bb) the sum of payments of any compensation to or income of a sole
proprietor or independent contractor that is a wage, commission, income, net
earnings from self-employment, or similar compensation and that is in an
amount that is not more than $100,000 on an annualized basis, as prorated for
the period during which the payments are made or the obligation to make the
payments is incurred; and
(II) shall not include—
(aa) the compensation of an individual employee in excess of $100,000 on an
annualized basis, as prorated for the period during which the compensation is
paid or the obligation to pay the compensation is incurred;
(bb) taxes imposed or withheld under chapters 21, 22, or 24 of the Internal
Revenue Code of 1986 [26 USCS §§ 3101 et seq., §§ 3201 et seq. or §§ 3401 et
seq.] during the applicable period;
(cc) any compensation of an employee whose principal place of residence is
outside of the United States;
(dd) qualified sick leave wages for which a credit is allowed under section
7001 of the Families First Coronavirus Response Act (Public Law 116-127) [26
USCS § 3111 note]; or
(ee) qualified family leave wages for which a credit is allowed under section
7003 of the Families First Coronavirus Response Act (Public Law 116-127) [26
USCS § 3111 note];
(ix) the term “veterans organization” means an organization that is described in section
501(c)(19) of the Internal Revenue Code [26 USCS § 501(c)(19)] that is exempt from
taxation under section 501(a) of such Code [26 USCS § 501(a)];
(x) the term “community development financial institution” has the meaning given the
term in section 103 of the Riegle Community Development and Regulatory
Improvement Act of 1994 (12 U.S.C. 4702)[)];
(xi) the term “community financial institutions” means—
(I) a community development financial institution;
(II) a minority depository institution, as defined in section 308 of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1463
note);
(III) a development company that is certified under title V of the Small Business
Investment Act of 1958 (15 U.S.C. 695 et seq.); and
(IV) an intermediary, as defined in section 7(m)(11) [15 USCS § 636(m)(11)];
(xii) the term “credit union” means a State credit union or a Federal credit union, as
those terms are defined, respectively, in section 101 of the Federal Credit Union Act
(12 U.S.C. 1752);

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(xiii) the term “seasonal employer” means an eligible recipient that—
(I) does not operate for more than 7 months in any calendar year; or
(II) during the preceding calendar year, had gross receipts for any 6 months of that
year that were not more than 33.33 percent of the gross receipts of the employer for
the other 6 months of that year;
(xiv) the term “housing cooperative” means a cooperative housing corporation (as
defined in section 216(b) of the Internal Revenue Code of 1986 [26 USCS § 216(b)])
that employs not more than 300 employees;
(xv) the term “destination marketing organization” means a nonprofit entity that is—
(I) an organization described in section 501(c) of the Internal Revenue Code of
1986 [26 USCS § 501(c)] and exempt from tax under section 501(a) of such Code
[26 USCS § 501(a)]; or
(II) a State, or a political subdivision of a State (including any instrumentality of
such entities)—
(aa) engaged in marketing and promoting communities and facilities to
businesses and leisure travelers through a range of activities, including—
(AA) assisting with the location of meeting and convention sites;
(BB) providing travel information on area attractions, lodging
accommodations, and restaurants;
(CC) providing maps; and
(DD) organizing group tours of local historical, recreational, and cultural
attractions; or
(bb) that is engaged in, and derives the majority of the operating budget of the
entity from revenue attributable to, providing live events;
(xvi) the terms “exchange”, “issuer”, and “security” have the meanings given those
terms in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)); and
(xvii) the term “additional covered nonprofit entity”—
(I) means an organization described in any paragraph of section 501(c) of the
Internal Revenue Code of 1986 [26 USCS § 501(c)], other than paragraph (3), (4),
(6), or (19), and exempt from tax under section 501(a) of such Code [26 USCS §
501(a)]; and
(II) does not include any entity that, if the entity were a business concern, would
be described in section 120.110 of title 13, Code of Federal Regulations (or in any
successor regulation or other related guidance or rule that may be issued by the
Administrator) other than a business concern described in paragraph (a) or (k) of
such section.
(B) Paycheck protection loans. Except as otherwise provided in this paragraph, the
Administrator may guarantee covered loans under the same terms, conditions, and
processes as a loan made under this subsection.

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(C) Registration of loans. Not later than 15 days after the date on which a loan is made
under this paragraph, the Administration shall register the loan using the TIN (as defined in
section 7701 of the Internal Revenue Code of 1986 [26 USCS § 7701]) assigned to the
borrower.
(D) Increased eligibility for certain small businesses and organizations.
(i) In general. During the covered period, in addition to small business concerns, any
business concern, nonprofit organization, housing cooperative, veterans organization,
or Tribal business concern described in section 31(b)(2)(C) [15 USCS § 657a(b)(2)(C)]
shall be eligible to receive a covered loan if the business concern, nonprofit
organization, housing cooperative, veterans organization, or Tribal business concern
employs not more than the greater of—
(I) 500 employees; or
(II) if applicable, the size standard in number of employees established by the
Administration for the industry in which the business concern, nonprofit
organization, housing cooperative, veterans organization, or Tribal business
concern operates.
(ii) Inclusion of sole proprietors, independent contractors, and eligible self-employed
individuals.
(I) In general. During the covered period, individuals who operate under a sole
proprietorship or as an independent contractor and eligible self-employed
individuals shall be eligible to receive a covered loan.
(II) Documentation. An eligible self-employed individual, independent contractor,
or sole proprietorship seeking a covered loan shall submit such documentation as
determined necessary by the Administrator and the Secretary, to establish the
applicant as eligible.
(iii) Business concerns with more than 1 physical location.
(I) In general. During the covered period, any business concern that employs not
more than 500 employees per physical location of the business concern and that is
assigned a North American Industry Classification System code beginning with 72
at the time of disbursal shall be eligible to receive a covered loan.
(II) Eligibility of news organizations.
(aa) Definition. In this subclause, the term “included business concern” means
a business concern, including any station which broadcasts pursuant to a license
granted by the Federal Communications Commission under title III of the
Communications Act of 1934 (47 U.S.C. 301 et seq.) without regard for
whether such a station is a concern as defined in section 121.105 of title 13,
Code of Federal Regulations, or any successor thereto—
(AA) that employs not more than 500 employees, or the size standard
established by the Administrator for the North American Industry
Classification System code applicable to the business concern, per physical
location of such business concern; or

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(BB) any nonprofit organization or any organization otherwise subject to
section 511(a)(2)(B) of the Internal Revenue Code of 1986 [26 USCS §
511(a)(2)(B)] that is a public broadcasting entity (as defined in section
397(11) of the Communications Act of 1934 (47 U.S.C. 397(11))).
(bb) Eligibility. During the covered period, an included business concern shall
be eligible to receive a covered loan if—
(AA) the included business concern is majority owned or controlled by a
business concern that is assigned a North American Industry Classification
System code beginning with 511110 or 5151 or, with respect to a public
broadcasting entity (as defined in section 397(11) of the Communications
Act of 1934 (47 U.S.C. 397(11))), has a trade or business that falls under
such a code; and
(BB) the included business concern makes a good faith certification that
proceeds of the loan will be used to support expenses at the component of
the included business concern that produces or distributes locally focused or
emergency information.
(III) Eligibility of certain organizations. Subject to the provisions in this
subparagraph, during the covered period—
(aa) a nonprofit organization shall be eligible to receive a covered loan if the
nonprofit organization employs not more than 500 employees per physical
location of the organization; and
(bb) an additional covered nonprofit entity and an organization that, but for
subclauses (I)(dd) and (II)(dd) of clause (vii), would be eligible for a covered
loan under clause (vii) shall be eligible to receive a covered loan if the entity or
organization employs not more than 300 employees per physical location of the
entity or organization.
(IV) Eligibility of internet publishing organizations. A business concern or other
organization that was not eligible to receive a covered loan the day before the date
of enactment of this subclause [enacted March 11, 2021], is assigned a North
American Industry Classification System code of 519130, certifies in good faith as
an Internet-only news publisher or Internet-only periodical publisher, and is
engaged in the collection and distribution of local or regional and national news and
information shall be eligible to receive a covered loan for the continued provision
of news, information, content, or emergency information if—
(aa) the business concern or organization employs not more than 500
employees, or the size standard established by the Administrator for that North
American Industry Classification code, per physical location of the business
concern or organization; and
(bb) the business concern or organization makes a good faith certification that
proceeds of the loan will be used to support expenses at the component of the
business concern or organization that supports local or regional news.

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(iv) Waiver of affiliation rules. During the covered period, the provisions applicable to
affiliations under section 121.103 of title 13, Code of Federal Regulations, or any
successor regulation, are waived with respect to eligibility for a covered loan for—
(I) any business concern with not more than 500 employees that, as of the date on
which the covered loan is disbursed, is assigned a North American Industry
Classification System code beginning with 72;
(II) any business concern operating as a franchise that is assigned a franchise
identifier code by the Administration;
(III) any business concern that receives financial assistance from a company
licensed under section 301 of the Small Business Investment Act of 1958 (15
U.S.C. 681);
(IV)
(aa) any business concern (including any station which broadcasts pursuant to
a license granted by the Federal Communications Commission under title III of
the Communications Act of 1934 (47 U.S.C. 301 et seq.) without regard for
whether such a station is a concern as defined in section 121.105 of title 13,
Code of Federal Regulations, or any successor thereto) that employs not more
than 500 employees, or the size standard established by the Administrator for
the North American Industry Classification System code applicable to the
business concern, per physical location of such business concern and is majority
owned or controlled by a business concern that is assigned a North American
Industry Classification System code beginning with 511110 or 5151; or
(bb) any nonprofit organization that is assigned a North American Industry
Classification System code beginning with 5151; and
(V) any business concern or other organization that was not eligible to receive a
covered loan the day before the date of enactment of this subclause [enacted March
11, 2021], is assigned a North American Industry Classification System code of
519130, certifies in good faith as an Internet-only news publisher or Internet-only
periodical publisher, and is engaged in the collection and distribution of local or
regional and national news and information, if the business concern or
organization—
(aa) employs not more than 500 employees, or the size standard established by
the Administrator for that North American Industry Classification code, per
physical location of the business concern or organization; and
(bb) is majority owned or controlled by a business concern or organization that
is assigned a North American Industry Classification System code of 519130.
(v) Employee. For purposes of determining whether a business concern, nonprofit
organization, veterans organization, or Tribal business concern described in section
31(b)(2)(C) employs not more than 500 employees under clause (i)(I), or for purposes
of determining the number of employees of a housing cooperative or a business
concern or organization made eligible for a loan under this paragraph under subclause
(II), (III), or (IV) of clause (iii), subclause (IV) or (V) of clause (iv), clause (vii), or

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clause (ix), the term “employee” includes individuals employed on a full-time, parttime, or other basis.
(vi) Affiliation. The provisions applicable to affiliations under section 121.103 of title
13, Code of Federal Regulations, or any successor thereto, shall apply with respect to a
nonprofit organization, a business concern or organization made eligible for a loan
under this paragraph under clause (vii), a housing cooperative, and a veterans
organization in the same manner as with respect to a small business concern.
(vii) Eligibility for certain 501(c)(6) organizations.
(I) In general. Any organization that is described in section 501(c)(6) of the
Internal Revenue Code [26 USCS § 501(c)(6)] and that is exempt from taxation
under section 501(a) of such Code [26 USCS § 501(a)] (excluding professional
sports leagues and organizations with the purpose of promoting or participating in a
political campaign or other activity) shall be eligible to receive a covered loan if—
(aa) the organization does not receive more than 15 percent of its receipts from
lobbying activities;
(bb) the lobbying activities of the organization do not comprise more than 15
percent of the total activities of the organization;
(cc) the cost of the lobbying activities of the organization did not exceed
$1,000,000 during the most recent tax year of the organization that ended prior
to February 15, 2020; and
(dd) the organization employs not more than 300 employees.
(II) Destination marketing organizations. Any destination marketing organization
shall be eligible to receive a covered loan if—
(aa) the destination marketing organization does not receive more than 15
percent of its receipts from lobbying activities;
(bb) the lobbying activities of the destination marketing organization do not
comprise more than 15 percent of the total activities of the organization;
(cc) the cost of the lobbying activities of the destination marketing organization
did not exceed $1,000,000 during the most recent tax year of the destination
marketing organization that ended prior to February 15, 2020; and
(dd) the destination marketing organization employs not more than 300
employees; and
(ee) the destination marketing organization—
(AA) is described in section 501(c) of the Internal Revenue Code [26 USCS
§ 501(c)] and is exempt from taxation under section 501(a) of such Code
[26 USCS § 501(a)]; or
(BB) is a quasi-governmental entity or is a political subdivision of a State
or local government, including any instrumentality of those entities.
(viii) Ineligibility of publicly-traded entities.

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(I) In general. Subject to subclause (II), and notwithstanding any other provision of
this paragraph, on and after the date of enactment of the Economic Aid to Hard-Hit
Small Businesses, Nonprofits, and Venues Act [enacted Dec. 27, 2020], an entity
that is an issuer, the securities of which are listed on an exchange registered as a
national securities exchange under section 6 of the Securities Exchange Act of 1934
(15 U.S.C. 78f), shall be ineligible to receive a covered loan under this paragraph.
(II) Rule for affiliated entities. With respect to a business concern or organization
made eligible by subclause (II) or (IV) of clause (iii) or subclause (IV) or (V) of
clause (iv) of this subparagraph, the Administrator shall not consider whether any
affiliated entity, which for purposes of this subclause shall include any entity that
owns or controls such business concern or organization, is an issuer.
(ix) Eligibility of additional covered nonprofit entities. An additional covered
nonprofit entity shall be eligible to receive a covered loan if—
(I) the additional covered nonprofit entity does not receive more than 15 percent of
its receipts from lobbying activities;
(II) the lobbying activities of the additional covered nonprofit entity do not
comprise more than 15 percent of the total activities of the organization;
(III) the cost of the lobbying activities of the additional covered nonprofit entity
did not exceed $1,000,000 during the most recent tax year of the additional covered
nonprofit entity that ended prior to February 15, 2020; and
(IV) the additional covered nonprofit entity employs not more than 300 employees.
(E) Maximum loan amount. Except as provided in subparagraph (V), during the covered
period, with respect to a covered loan, the maximum loan amount shall be the lesser of—
(i)
(I) the sum of—
(aa) the product obtained by multiplying—
(AA) the average total monthly payments by the applicant for payroll costs
incurred during the 1-year period before the date on which the loan is made,
except that an applicant that is a seasonal employer shall use the average
total monthly payments for payroll for any 12-week period selected by the
seasonal employer between February 15, 2019, and February 15, 2020; by
(BB) 2.5; and
(bb) the outstanding amount of a loan under subsection (b)(2) that was made
during the period beginning on January 31, 2020 and ending on the date on
which covered loans are made available to be refinanced under the covered
loan; or
(II) if requested by an otherwise eligible recipient that was not in business during
the period beginning on February 15, 2019 and ending on June 30, 2019, the sum
of—
(aa) the product obtained by multiplying—

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(AA) the average total monthly payments by the applicant for payroll costs
incurred during the period beginning on January 1, 2020 and ending on
February 29, 2020; by
(BB) 2.5; and
(bb) the outstanding amount of a loan under subsection (b)(2) that was made
during the period beginning on January 31, 2020 and ending on the date on
which covered loans are made available to be refinanced under the covered
loan; or
(ii) $10,000,000.
(F) Allowable uses of covered loans.
(i) In general. During the covered period, an eligible recipient may, in addition to the
allowable uses of a loan made under this subsection, use the proceeds of the covered
loan for—
(I) payroll costs;
(II) costs related to the continuation of group health care benefits during periods of
paid sick, medical, or family leave, and insurance premiums;
(III) employee salaries, commissions, or similar compensations;
(IV) payments of interest on any mortgage obligation (which shall not include any
prepayment of or payment of principal on a mortgage obligation);
(V) rent (including rent under a lease agreement);
(VI) utilities;
(VII) interest on any other debt obligations that were incurred before the covered
period;
(VIII) covered operations expenditures, as defined in section 7A(a) [15 USCS §
636m(a)];
(IX) covered property damage costs, as defined in section 7A(a) [15 USCS §
636m(a)];
(X) covered supplier costs, as defined in section 7A(a) [15 USCS § 636m(a)]; and
(XI) covered worker protection expenditures, as defined in section 7A(a) [15
USCS § 636m(a)].
(ii) Delegated authority.
(I) In general. For purposes of making covered loans for the purposes described in
clause (i), a lender approved to make loans under this subsection shall be deemed to
have been delegated authority by the Administrator to make and approve covered
loans, subject to the provisions of this paragraph.
(II) Considerations. In evaluating the eligibility of a borrower for a covered loan
with the terms described in this paragraph, a lender shall consider whether the
borrower—

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(aa) was in operation on February 15, 2020; and
(bb)
(AA) had employees for whom the borrower paid salaries and payroll
taxes; or
(BB) paid independent contractors, as reported on a Form 1099-MISC.
(iii) Additional lenders. The authority to make loans under this paragraph shall be
extended to additional lenders determined by the Administrator and the Secretary of the
Treasury to have the necessary qualifications to process, close, disburse and service
loans made with the guarantee of the Administration.
(iv) Refinance. A loan made under subsection (b)(2) during the period beginning on
January 31, 2020 and ending on the date on which covered loans are made available
may be refinanced as part of a covered loan.
(v) Nonrecourse. Notwithstanding the waiver of the personal guarantee requirement or
collateral under subparagraph (J), the Administrator shall have no recourse against any
individual shareholder, member, or partner of an eligible recipient of a covered loan for
nonpayment of any covered loan, except to the extent that such shareholder, member,
or partner uses the covered loan proceeds for a purpose not authorized under clause (i)
or (iv).
(vi) Prohibition. None of the proceeds of a covered loan may be used for—
(I) lobbying activities, as defined in section 3 of the Lobbying Disclosure Act of
1995 (2 U.S.C. 1602);
(II) lobbying expenditures related to a State or local election; or
(III) expenditures designed to influence the enactment of legislation,
appropriations, regulation, administrative action, or Executive order proposed or
pending before Congress or any State government, State legislature, or local
legislature or legislative body.
(G) Borrower requirements.
(i) Certification. An eligible recipient applying for a covered loan shall make a good
faith certification—
(I) that the uncertainty of current economic conditions makes necessary the loan
request to support the ongoing operations of the eligible recipient;
(II) acknowledging that funds will be used to retain workers and maintain payroll
or make mortgage payments, lease payments, and utility payments;
(III) that the eligible recipient does not have an application pending for a loan
under this subsection for the same purpose and duplicative of amounts applied for
or received under a covered loan; and
(IV) during the period beginning on February 15, 2020 and ending on December
31, 2020, that the eligible recipient has not received amounts under this subsection

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for the same purpose and duplicative of amounts applied for or received under a
covered loan.
(H) Fee waiver. With respect to a covered loan—
(i) in lieu of the fee otherwise applicable under paragraph (23)(A), the Administrator
shall collect no fee; and
(ii) in lieu of the fee otherwise applicable under paragraph (18)(A), the Administrator
shall collect no fee.
(I) Credit elsewhere. During the covered period, the requirement that a small business
concern is unable to obtain credit elsewhere, as defined in section 3(h) [15 USCS § 632(h)],
shall not apply to a covered loan.
(J) Waiver of personal guarantee requirement. With respect to a covered loan—
(i) no personal guarantee shall be required for the covered loan; and
(ii) no collateral shall be required for the covered loan.
(K) Maturity for loans with remaining balance after application of forgiveness. With
respect to a covered loan that has a remaining balance after reduction based on the loan
forgiveness amount under section 7A [15 USCS § 636m]—
(i) the remaining balance shall continue to be guaranteed by the Administration under
this subsection; and
(ii) the covered loan shall have a minimum maturity of 5 years and a maximum
maturity of 10 years from the date on which the borrower applies for loan forgiveness
under that section.
(L) Interest rate requirements. A covered loan shall bear an interest rate not to exceed 4
percent, calculated on a non-compounding, non-adjustable basis.
(M) Loan deferment.
(i) Definition of impacted borrower.
(I) In general. In this subparagraph, the term “impacted borrower” means an
eligible recipient that—
(aa) is in operation on February 15, 2020; and
(bb) has an application for a covered loan that is approved or pending approval
on or after the date of enactment of this paragraph [enacted March 27, 2020].
(II) Presumption. For purposes of this subparagraph, an impacted borrower is
presumed to have been adversely impacted by COVID-19.
(ii) Deferral. The Administrator shall—
(I) consider each eligible recipient that applies for a covered loan to be an
impacted borrower; and
(II) require lenders under this subsection to provide complete payment deferment
relief for impacted borrowers with covered loans, including payment of principal,

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interest, and fees, until the date on which the amount of forgiveness determined
under section 7A [15 USCS § 636m] is remitted to the lender.
(iii) Secondary market. With respect to a covered loan that is sold on the secondary
market, if an investor declines to approve a deferral requested by a lender under clause
(ii), the Administrator shall exercise the authority to purchase the loan so that the
impacted borrower may receive a deferral, including payment of principal, interest, and
fees, until the date on which the amount of forgiveness determined under section 7A
[15 USCS § 636m] is remitted to the lender.
(iv) Guidance. Not later than 30 days after the date of enactment of this paragraph
[enacted March 27, 2020], the Administrator shall provide guidance to lenders under
this paragraph on the deferment process described in this subparagraph.
(v) Rule of construction. If an eligible recipient fails to apply for forgiveness of a
covered loan within 10 months after the last day of the covered period defined in
section 7A(a) [15 USCS § 636m(a)], such eligible recipient shall make payments of
principal, interest, and fees on such covered loan beginning on the day that is not
earlier than the date that is 10 months after the last day of such covered period.
(N) Secondary market sales. A covered loan shall be eligible to be sold in the secondary
market consistent with this subsection. The Administrator may not collect any fee for any
guarantee sold into the secondary market under this subparagraph.
(O) Regulatory capital requirements.
(i) Risk weight. With respect to the appropriate Federal banking agencies or the
National Credit Union Administration Board applying capital requirements under their
respective risk-based capital requirements, a covered loan shall receive a risk weight of
zero percent.
(ii) Temporary relief from tdr disclosures. Notwithstanding any other provision of law,
an insured depository institution or an insured credit union that modifies a covered loan
in relation to COVID-19-related difficulties in a troubled debt restructuring on or after
March 13, 2020, shall not be required to comply with the Financial Accounting
Standards Board Accounting Standards Codification Subtopic 310-40 (“Receivables Troubled Debt Restructurings by Creditors”) for purposes of compliance with the
requirements of the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.), until such
time and under such circumstances as the appropriate Federal banking agency or the
National Credit Union Administration Board, as applicable, determines appropriate.
(P) Reimbursement for processing.
(i) In general. The Administrator shall reimburse a lender authorized to make a
covered loan as follows:
(I) With respect to a covered loan made during the period beginning on the date of
enactment of this paragraph [enacted March 27, 2020] and ending on the day before
the date of enactment of the Economic Aid to Hard-Hit Small Businesses,
Nonprofits, and Venues Act [enacted Dec. 27, 2020], the Administrator shall
reimburse such a lender at a rate, based on the balance of the financing outstanding
at the time of disbursement of the covered loan, of—

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(aa) 5 percent for loans of not more than $350,000;
(bb) 3 percent for loans of more than $350,000 and less than $2,000,000; and
(cc) 1 percent for loans of not less than $2,000,000.
(II) With respect to a covered loan made on or after the date of enactment of the
Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act [enacted
Dec. 27, 2020], the Administrator shall reimburse such a lender—
(aa) for a covered loan of not more than $50,000, in an amount equal to the
lesser of—
(AA) 50 percent of the balance of the financing outstanding at the time of
disbursement of the covered loan; or
(BB) $2,500; and
(bb) at a rate, based on the balance of the financing outstanding at the time of
disbursement of the covered loan, of—
(AA) 5 percent for a covered loan of more than $50,000 and not more than
$350,000;
(BB) 3 percent for a covered loan of more than $350,000 and less than
$2,000,000; and
(CC) 1 percent for a covered loan of not less than $2,000,000.
(ii) Fee limits. An agent that assists an eligible recipient to prepare an application for a
covered loan may not collect a fee in excess of the limits established by the
Administrator. If an eligible recipient has knowingly retained an agent, such fees shall
be paid by the eligible recipient and may not be paid out of the proceeds of a covered
loan. A lender shall only be responsible for paying fees to an agent for services for
which the lender directly contracts with the agent.
(iii) Timing. A reimbursement described in clause (i) shall be made not later than 5
days after the reported disbursement of the covered loan and may not be required to be
repaid by a lender unless the lender is found guilty of an act of fraud in connection with
the covered loan.
(iv) Sense of the Senate. It is the sense of the Senate that the Administrator should
issue guidance to lenders and agents to ensure that the processing and disbursement of
covered loans prioritizes small business concerns and entities in underserved and rural
markets, including veterans and members of the military community, small business
concerns owned and controlled by socially and economically disadvantaged individuals
(as defined in section 8(d)(3)(C) [15 USCS § 637(d)(3)(C)]), women, and businesses in
operation for less than 2 years.
(Q) Duplication. Nothing in this paragraph shall prohibit a recipient of an economic injury
disaster loan made under subsection (b)(2) that is for a purpose other than paying payroll
costs and other obligations described in subparagraph (F) from receiving assistance under
this paragraph.

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(R) Waiver of prepayment penalty. Notwithstanding any other provision of law, there
shall be no prepayment penalty for any payment made on a covered loan.
(S) Set-aside for insured depository institutions, credit unions, and community financial
institutions.
(i) Insured depository institutions and credit unions. In making loan guarantees under
this paragraph after the date of enactment of this clause [enacted April 24, 2020], the
Administrator shall guarantee not less than $30,000,000,000 in loans made by—
(I) insured depository institutions with consolidated assets of not less than
$10,000,000,000 and less than $50,000,000,000; and
(II) credit unions with consolidated assets of not less than $10,000,000,000 and
less than $50,000,000,000.
(ii) Community financial institutions, small insured depository institutions, and credit
unions. In making loan guarantees under this paragraph after the date of enactment of
this clause [enacted April 24, 2020], the Administrator shall guarantee not less than
$30,000,000,000 in loans made by—
(I) community financial institutions;
(II) insured depository institutions with consolidated assets of less than
$10,000,000,000; and
(III) credit unions with consolidated assets of less than $10,000,000,000.
(T) Requirement for date in operation. A business or organization that was not in
operation on February 15, 2020 shall not be eligible for a loan under this paragraph.
(U) Exclusion of entities receiving shuttered venue operator grants. An eligible person or
entity (as defined under of section 24 of the Economic Aid to Hard-Hit Small Businesses,
Nonprofits, and Venues Act [15 USCS § 9009a]) that receives a grant under such section
24 [15 USCS § 9009a] shall not be eligible for a loan under this paragraph.
(V) Calculation of maximum loan amount for farmers and ranchers.
(i) Definition. In this subparagraph, the term “covered recipient” means an eligible
recipient that—
(I) operates as a sole proprietorship or as an independent contractor, or is an
eligible self-employed individual;
(II) reports farm income or expenses on a Schedule F (or any equivalent successor
schedule); and
(III) was in business as of February 15, 2020.
(ii) No employees. With respect to covered recipient without employees, the maximum
covered loan amount shall be the lesser of—
(I) the sum of—
(aa) the product obtained by multiplying—

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(AA) the gross income of the covered recipient in 2019, as reported on a
Schedule F (or any equivalent successor schedule), that is not more than
$100,000, divided by 12; and
(BB) 2.5; and
(bb) the outstanding amount of a loan under subsection (b)(2) that was made
during the period beginning on January 31, 2020 and ending on April 3, 2020
that the borrower intends to refinance under the covered loan, not including any
amount of any advance under the loan that is not required to be repaid; or
(II) $2,000,000.
(iii) With employees. With respect to a covered recipient with employees, the
maximum covered loan amount shall be calculated using the formula described in
subparagraph (E), except that the gross income of the covered recipient described in
clause (ii)(I)(aa)(AA) of this subparagraph, as divided by 12, shall be added to the sum
calculated under subparagraph (E)(i)(I).
(iv) Recalculation. A lender that made a covered loan to a covered recipient before the
date of enactment of this subparagraph [enacted Dec. 27, 2020] may, at the request of
the covered recipient—
(I) recalculate the maximum loan amount applicable to that covered loan based on
the formula described in clause (ii) or (iii), as applicable, if doing so would result in
a larger covered loan amount; and
(II) provide the covered recipient with additional covered loan amounts based on
that recalculation.
(37) Paycheck protection program second draw loans.
(A) Definitions. In this paragraph—
(i) the terms “additional covered nonprofit entity”, “eligible self-employed individual”,
“housing cooperative”, “nonprofit organization”, “payroll costs”, “seasonal employer”,
and “veterans organization” have the meanings given those terms in paragraph (36),
except that “eligible entity” shall be substituted for “eligible recipient” each place it
appears in the definitions of those terms;
(ii) the term “covered loan” means a loan made under this paragraph;
(iii) the terms “covered mortgage obligation”, “covered operating expenditure”,
“covered property damage cost”, “covered rent obligation”, “covered supplier cost”,
“covered utility payment”, and “covered worker protection expenditure” have the
meanings given those terms in section 7A(a) [15 USCS § 636m(a)];
(iv) the term “eligible entity”—
(I) means any business concern, nonprofit organization, housing cooperative,
veterans organization, Tribal business concern, eligible self-employed individual,
sole proprietor, independent contractor, or small agricultural cooperative that—
(aa) employs not more than 300 employees; and

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(bb)
(AA) except as provided in subitems (BB), (CC), and (DD), had gross
receipts during the first, second, third, or, only with respect to an application
submitted on or after January 1, 2021, fourth quarter in 2020 that
demonstrate not less than a 25 percent reduction from the gross receipts of
the entity during the same quarter in 2019;
(BB) if the entity was not in business during the first or second quarter of
2019, but was in business during the third and fourth quarter of 2019, had
gross receipts during the first, second, third, or, only with respect to an
application submitted on or after January 1, 2021, fourth quarter of 2020
that demonstrate not less than a 25 percent reduction from the gross receipts
of the entity during the third or fourth quarter of 2019;
(CC) if the entity was not in business during the first, second, or third
quarter of 2019, but was in business during the fourth quarter of 2019, had
gross receipts during the first, second, third, or, only with respect to an
application submitted on or after January 1, 2021, fourth quarter of 2020
that demonstrate not less than a 25 percent reduction from the gross receipts
of the entity during the fourth quarter of 2019; or
(DD) if the entity was not in business during 2019, but was in operation on
February 15, 2020, had gross receipts during the second, third, or, only with
respect to an application submitted on or after January 1, 2021, fourth
quarter of 2020 that demonstrate not less than a 25 percent reduction from
the gross receipts of the entity during the first quarter of 2020;
(II) includes a business concern or organization made eligible for a loan under
paragraph (36) under subclause (II), (III), or (IV) of clause (iii), subclause (IV) or
(V) of clause (iv), clause (vii), or clause (ix) of subparagraph (D) of paragraph (36)
and that meets the requirements described in items (aa) and (bb) of subclause (I);
and
(III) does not include—
(aa) any entity that is a type of business concern (or would be, if such entity
were a business concern) described in section 120.110 of title 13, Code of
Federal Regulations (or in any successor regulation or other related guidance or
rule that may be issued by the Administrator) other than a business concern
described in subsection (a) or (k) of such section; or
(bb) any business concern or entity primarily engaged in political or lobbying
activities, which shall include any entity that is organized for research or for
engaging in advocacy in areas such as public policy or political strategy or
otherwise describes itself as a think tank in any public documents;
(cc) any business concern or entity—
(AA) for which an entity created in or organized under the laws of the
People’s Republic of China or the Special Administrative Region of Hong
Kong, or that has significant operations in the People’s Republic of China or

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the Special Administrative Region of Hong Kong, owns or holds, directly or
indirectly, not less than 20 percent of the economic interest of the business
concern or entity, including as equity shares or a capital or profit interest in
a limited liability company or partnership; or
(BB) that retains, as a member of the board of directors of the business
concern, a person who is a resident of the People’s Republic of China;
(dd) any person required to submit a registration statement under section 2 of
the Foreign Agents Registration Act of 1938 (22 U.S.C. 612); or
(ee) an eligible person or entity (as defined under section 24 of the Economic
Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act [15 USCS §
9009a]) that receives a grant under such section 24 [15 USCS § 9009a]; and
(v) the term “Tribal business concern” means a Tribal business concern described in
section 31(b)(2)(C) [15 USCS § 657a(b)(2)(C)].
(B) Loans. Except as otherwise provided in this paragraph, the Administrator may
guarantee covered loans to eligible entities under the same terms, conditions, and processes
as a loan made under paragraph (36).
(C) Maximum loan amount.
(i) In general. Except as otherwise provided in this subparagraph, the maximum
amount of a covered loan made to an eligible entity is the lesser of—
(I) the product obtained by multiplying—
(aa) at the election of the eligible entity, the average total monthly payment for
payroll costs incurred or paid by the eligible entity during—
(AA) the 1-year period before the date on which the loan is made; or
(BB) calendar year 2019; by
(bb) 2.5; or
(II) $2,000,000.
(ii) Seasonal employers. The maximum amount of a covered loan made to an eligible
entity that is a seasonal employer is the lesser of—
(I) the product obtained by multiplying—
(aa) at the election of the eligible entity, the average total monthly payments
for payroll costs incurred or paid by the eligible entity for any 12-week period
between February 15, 2019 and February 15, 2020; by
(bb) 2.5; or
(II) $2,000,000.
(iii) New entities. The maximum amount of a covered loan made to an eligible entity
that did not exist during the 1-year period preceding February 15, 2020 is the lesser
of—
(I) the product obtained by multiplying—

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(aa) the quotient obtained by dividing—
(AA) the sum of the total monthly payments by the eligible entity for
payroll costs paid or incurred by the eligible entity as of the date on which
the eligible entity applies for the covered loan; by
(BB) the number of months in which those payroll costs were paid or
incurred; by
(bb) 2.5; or
(II) $2,000,000.
(iv) NAICS 72 entities. The maximum amount of a covered loan made to an eligible
entity that is assigned a North American Industry Classification System code beginning
with 72 at the time of disbursal is the lesser of—
(I) the product obtained by multiplying—
(aa) at the election of the eligible entity, the average total monthly payment for
payroll costs incurred or paid by the eligible entity during—
(AA) the 1-year period before the date on which the loan is made; or
(BB) calendar year 2019; by
(bb) 3.5; or
(II) $2,000,000.
(D) Business concerns with more than 1 physical location.
(i) In general. For a business concern with more than 1 physical location, the business
concern shall be an eligible entity if the business concern would be eligible for a loan
under paragraph (36) pursuant to clause (iii) of subparagraph (D) of such paragraph, as
applied in accordance with clause (ii) of this subparagraph, and meets the revenue
reduction requirements described in item (bb) of subparagraph (A)(iv)(I).
(ii) Size limit. For purposes of applying clause (i), the Administrator shall substitute
“not more than 300 employees” for “not more than 500 employees” in paragraph
(36)(D)(iii).
(E) Waiver of affiliation rules.
(i) In general. The waiver described in paragraph (36)(D)(iv) shall apply for purposes
of determining eligibility under this paragraph.
(ii) Size limit. For purposes of applying clause (i), the Administrator shall substitute
“not more than 300 employees” for “not more than 500 employees” in subclause (I)
and (IV) of paragraph (36)(D)(iv).
(F) Loan number limitation. An eligible entity may only receive 1 covered loan.
(G) Exception from certain certification requirements. An eligible entity applying for a
covered loan shall not be required to make the certification described in clause (iii) or (iv)
of paragraph (36)(G).
(H) Fee waiver. With respect to a covered loan—

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(i) in lieu of the fee otherwise applicable under paragraph (23)(A), the Administrator
shall collect no fee; and
(ii) in lieu of the fee otherwise applicable under paragraph (18)(A), the Administrator
shall collect no fee.
(I) Gross receipts and simplified certification of revenue test.
(i) Loans of up to $150,000. For a covered loan of not more than $150,000, the eligible
entity—
(I) may submit a certification attesting that the eligible entity meets the applicable
revenue loss requirement under subparagraph (A)(iv)(I)(bb); and
(II) if the eligible entity submits a certification under subclause (I), shall, on or
before the date on which the eligible entity submits an application for forgiveness
under subparagraph (J), produce adequate documentation that the eligible entity
met such revenue loss standard.
(ii) For nonprofit and veterans organizations. For purposes of calculating gross receipts
under subparagraph (A)(iv)(I)(bb) for an eligible entity that is a nonprofit organization,
a veterans organization, or an organization described in subparagraph (A)(iv)(II), gross
receipts means gross receipts within the meaning of section 6033 of the Internal
Revenue Code of 1986 [26 USCS § 6033].
(J) Loan forgiveness.
(i) Definition of covered period. In this subparagraph, the term “covered period” has
the meaning given that term in section 7A(a) [15 USCS § 636m(a)].
(ii) Forgiveness generally. Except as otherwise provided in this subparagraph, an
eligible entity shall be eligible for forgiveness of indebtedness on a covered loan in the
same manner as an eligible recipient with respect to a loan made under paragraph (36)
of this section, as described in section 7A [15 USCS § 636m].
(iii) Forgiveness amount. An eligible entity shall be eligible for forgiveness of
indebtedness on a covered loan in an amount equal to the sum of the following costs
incurred or expenditures made during the covered period:
(I) Payroll costs, excluding any payroll costs that are—
(aa) qualified wages, as defined in subsection (c)(3) of section 2301 of the
CARES Act (26 U.S.C. 3111 note), taken into account in determining the credit
allowed under such section;
(bb) qualified wages taken into account in determining the credit allowed
under subsection (a) or (d) of section 303 of the Taxpayer Certainty and
Disaster Relief Act of 2020 [unclassified]; or
(cc) premiums taken into account in determining the credit allowed under
section 6432 of the Internal Revenue Code of 1986 [26 USCS § 6432].
(II) Any payment of interest on any covered mortgage obligation (which shall not
include any prepayment of or payment of principal on a covered mortgage
obligation).

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(III) Any covered operations expenditure.
(IV) Any covered property damage cost.
(V) Any payment on any covered rent obligation.
(VI) Any covered utility payment.
(VII) Any covered supplier cost.
(VIII) Any covered worker protection expenditure.
(iv) Limitation on forgiveness for all eligible entities. Subject to any reductions under
section 7A(d) [15 USCS § 636m(d)], the forgiveness amount under this subparagraph
shall be equal to the lesser of—
(I) the amount described in clause (ii); and
(II) the amount equal to the quotient obtained by dividing—
(aa) the amount of the covered loan used for payroll costs during the covered
period; and
(bb) 0.60.
(v) Submission of materials for forgiveness. For purposes of applying subsection (l)(1)
of section 7A [15 USCS § 636m] to a covered loan of not more than $150,000 under
this paragraph, an eligible entity may be required to provide, at the time of the
application for forgiveness, documentation required to substantiate revenue loss in
accordance with subparagraph (I).
(K) Lender eligibility. Except as otherwise provided in this paragraph, a lender approved
to make loans under paragraph (36) may make covered loans under the same terms and
conditions as in paragraph (36).
(L) Reimbursement for loan processing and servicing. The Administrator shall reimburse
a lender authorized to make a covered loan—
(i) for a covered loan of not more than $50,000, in an amount equal to the lesser of—
(I) 50 percent of the balance of the financing outstanding at the time of
disbursement of the covered loan; or
(II) $2,500;
(ii) at a rate, based on the balance of the financing outstanding at the time of
disbursement of the covered loan, of—
(I) 5 percent for a covered loan of more than $50,000 and not more than $350,000;
and
(II) 3 percent for a covered loan of more than $350,000.
(M) Publication of guidance. Not later than 10 days after the date of enactment of this
paragraph [enacted Dec. 27, 2020], the Administrator shall issue guidance addressing
barriers to accessing capital for minority, underserved, veteran, and women-owned
business concerns for the purpose of ensuring equitable access to covered loans.

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(N) Standard operating procedure. The Administrator shall, to the maximum extent
practicable, allow a lender approved to make covered loans to use existing program
guidance and standard operating procedures for loans made under this subsection.
(O) Supplemental covered loans. A covered loan under this paragraph may only be made
to an eligible entity that—
(i) has received a loan under paragraph (36); and
(ii) on or before the expected date on which the covered loan under this paragraph is
disbursed to the eligible entity, has used, or will use, the full amount of the loan
received under paragraph (36).
(b) Disaster loans; authorization, scope, terms and conditions, etc. Except as to agricultural
enterprises as defined in section 18(b)(1) of this Act [15 USCS § 647(b)(1)], the Administration
also is empowered to the extent and in such amounts as provided in advance in appropriation
Acts—
(1)
(A) to make such loans (either directly or in cooperation with banks or other lending
institutions through agreements to participate on an immediate or deferred (guaranteed)
basis) as the Administration may determine to be necessary or appropriate to repair,
rehabilitate or replace property, real or personal, damaged or destroyed by or as a result of
natural or other disasters: Provided, That such damage or destruction is not compensated
for by insurance or otherwise: And provided further, That the Administration may increase
the amount of the loan by up to an additional 20 per centum of the aggregate costs of such
damage or destruction (whether or not compensated for by insurance or otherwise) 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—
(i) construction of retaining walls and sea walls;
(ii) grading and contouring land; and
(iii) relocating utilities and modifying structures, including construction of a safe room
or similar storm shelter designed to protect property and occupants from tornadoes or
other natural disasters, if such safe room or similar storm shelter is constructed in
accordance with applicable standards issued by the Federal Emergency Management
Agency;
(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 amount 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

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Administrator may determine to be necessary or appropriate, to enable small businesses to
use mitigation techniques in support of a formal mitigation program established by the
Federal Emergency Management Agency, except that no loan or guarantee may be
extended to a small business under this subparagraph unless the Administration finds that
the small business is otherwise unable to obtain credit for the purposes described in this
subparagraph;
(2) to make such loans (either directly or in cooperation with banks or other lending
institutions through agreements to participate on an immediate or deferred (guaranteed) basis)
as the Administration may determine to be necessary or appropriate to any small business
concern, private nonprofit organization, or small agricultural cooperative located in an area
affected by a disaster[,] (including drought), with respect to both farm-related and nonfarmrelated small business concerns, if the Administration determines that the concern, the
organization, 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 Robert T. Stafford Disaster
Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.);
(B) a natural disaster, as determined by the Secretary of Agriculture pursuant to section
321 of the Consolidated Farm and Rural Development Act (7 U.S.C. 1961), in which case,
assistance under this paragraph may be provided to farm-related and nonfarm-related small
business concerns, subject to the other applicable requirements of this paragraph;
(C) a disaster, as determined by the Administrator of the Small Business Administration;
(D) an emergency involving Federal primary responsibility determined to exist by the
President under the section 501(b) of the Robert T. Stafford Disaster Relief and Emergency
Assistance Act (42 U.S.C. 5191(b)); or
(E) if no disaster or emergency declaration has been issued pursuant to subparagraph (A),
(B), (C), or D, the Governor of a State in which a disaster or emergency has occurred may
certify to the Small Business Administration that small business concerns, private nonprofit
organizations, or small agricultural cooperatives (1) have suffered economic injury as a
result of such disaster or emergency, and (2) are in need of financial assistance which is not
available on reasonable terms in the disaster- or emergency-stricken area. Not later than 30
days after the date of receipt of such certification by a Governor of a State, the
Administration shall respond in writing to that Governor on its determination and the
reasons therefore [therefor], and may then make such loans as would have been available
under this paragraph if a disaster or emergency 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: Provided further,
That for purposes of subparagraph (D), the Administrator shall deem that such an emergency
affects each State or subdivision thereof (including counties), and that each State or
subdivision has sufficient economic damage to small business concerns to qualify for
assistance under this paragraph and the Administrator shall accept applications for such
assistance immediately.
(3)

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(A) In this paragraph—
(i) the term “active service” has the meaning given that term in section 101(d)(3) of
title 10, United States Code;
(ii) 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; 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 perform active service for a period of more than 30
consecutive days.
(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 service and ending on the date that is 1 year after
the date on which such essential employee is discharged or released from active service.
The Administrator may, when appropriate (as determined by the Administrator), extend the
ending date specified in the preceding sentence by not more than 1 year.
(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, or have [has]
become due to changed economic circumstances, 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.
(G)
(i) Notwithstanding any other provision of law, the Administrator may make a loan
under this paragraph of not more than $50,000 without collateral.
(ii) The Administrator may defer payment of principal and interest on a loan described
in clause (i) during the longer of—

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(I) the 1-year period beginning on the date of the initial disbursement of the loan;
and
(II) the period during which the relevant essential employee is on active service.
(H) The Administrator shall give priority to any application for a loan under this
paragraph and shall process and make a determination regarding such applications prior to
processing or making a determination on other loan applications under this subsection, on a
rolling basis.
(4) Coordination with FEMA.
(A) In general. Notwithstanding any other provision of law, for any disaster declared
under this subsection or major disaster (including any major disaster relating to which the
Administrator declares eligibility for additional disaster assistance under paragraph (9)),
the Administrator, in consultation with the Administrator of the Federal Emergency
Management Agency, shall ensure, to the maximum extent practicable, that all application
periods for disaster relief under this Act correspond with application deadlines established
under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C.
5121 et seq.), or as extended by the President.
(B) Deadlines. Notwithstanding any other provision of law, not later than 10 days before
the closing date of an application period for a major disaster (including any major disaster
relating to which the Administrator declares eligibility for additional disaster assistance
under paragraph (9)), the Administrator, in consultation with the Administrator of the
Federal Emergency Management Agency, shall submit to the Committee on Small
Business and Entrepreneurship of the Senate and the Committee on Small Business of the
House of Representatives a report that includes—
(i) the deadline for submitting applications for assistance under this Act relating to that
major disaster;
(ii) information regarding the number of loan applications and disbursements
processed by the Administrator relating to that major disaster for each day during the
period beginning on the date on which that major disaster was declared and ending on
the date of that report; and
(iii) an estimate of the number of potential applicants that have not submitted an
application relating to that major disaster.
(5) Public awareness of disasters. If a disaster is declared under this subsection or the
Administrator declares eligibility for additional disaster assistance under paragraph (9), the
Administrator shall make every effort to communicate through radio, television, print, and
web-based outlets, all relevant information needed by disaster loan applicants, including—
(A) the date of such declaration;
(B) cities and towns within the area of such declaration;
(C) loan application deadlines related to such disaster;
(D) all relevant contact information for victim services available through the
Administration (including links to small business development center websites);

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(E) links to relevant Federal and State disaster assistance websites, including links to
websites providing information regarding assistance available from the Federal Emergency
Management Agency;
(F) information on eligibility criteria for Administration loan programs, including where
such applications can be found; and
(G) application materials that clearly state the function of the Administration as the
Federal source of disaster loans for homeowners and renters.
(6) Authority for qualified private contractors.
(A) Disaster loan processing. The Administrator may enter into an agreement with a
qualified private contractor, as determined by the Administrator, to process loans under this
subsection in the event of a major disaster (including any major disaster relating to which
the Administrator declares eligibility for additional disaster assistance under paragraph
(9)), under which the Administrator shall pay the contractor a fee for each loan processed.
(B) Loan loss verification services. The Administrator may enter into an agreement with a
qualified lender or loss verification professional, as determined by the Administrator, to
verify losses for loans under this subsection in the event of a major disaster (including any
major disaster relating to which the Administrator declares eligibility for additional disaster
assistance under paragraph (9)), under which the Administrator shall pay the lender or
verification professional a fee for each loan for which such lender or verification
professional verifies losses.
(7) Disaster assistance employees.
(A) In general. In carrying out this section, the Administrator may, where practicable,
ensure that the number of full-time equivalent employees—
(i) in the Office of the Disaster Assistance is not fewer than 800; and
(ii) in the Disaster Cadre of the Administration is not fewer than 1,000.
(B) Report. In carrying out this subsection, if the number of full-time employees for either
the Office of Disaster Assistance or the Disaster Cadre of the Administration is below the
level described in subparagraph (A) for that office, not later than 21 days after the date on
which that staffing level decreased below the level described in subparagraph (A), the
Administrator shall submit to the Committee on Appropriations and the Committee on
Small Business and Entrepreneurship of the Senate and the Committee on Appropriations
and Committee on Small Business of the House of Representatives, a report—
(i) detailing staffing levels on that date;
(ii) requesting, if practicable and determined appropriate by the Administrator,
additional funds for additional employees; and
(iii) containing such additional information, as determined appropriate by the
Administrator.
(8) Increased loan caps.

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(A) Aggregate loan amounts. Except as provided in subparagraph (B), and
notwithstanding any other provision of law, the aggregate loan amount outstanding and
committed to a borrower under this subsection may not exceed $2,000,000.
(B) Waiver authority. The Administrator may, at the discretion of the Administrator,
increase the aggregate loan amount under subparagraph (A) for loans relating to a disaster
to a level established by the Administrator, based on appropriate economic indicators for
the region in which that disaster occurred.
(9) Declaration of eligibility for additional disaster assistance.
(A) In general. If the President declares a major disaster, the Administrator may declare
eligibility for additional disaster assistance in accordance with this paragraph.
(B) Threshold. A major disaster for which the Administrator declares eligibility for
additional disaster assistance under this paragraph shall—
(i) have resulted in extraordinary levels of casualties or damage or disruption severely
affecting the population (including mass evacuations), infrastructure, environment,
economy, national morale, or government functions in an area;
(ii) be comparable to the description of a catastrophic incident in the National
Response Plan of the Administration, or any successor thereto, unless there is no
successor to such plan, in which case this clause shall have no force or effect; and
(iii) be of such size and scope that—
(I) the disaster assistance programs under the other paragraphs under this
subsection are incapable of providing adequate and timely assistance to individuals
or business concerns located within the disaster area; or
(II) a significant number of business concerns outside the disaster area have
suffered disaster-related substantial economic injury as a result of the incident.
(C) Additional economic injury disaster loan assistance.
(i) In general. If the Administrator declares eligibility for additional disaster assistance
under this paragraph, the Administrator may make such loans under this subparagraph
(either directly or in cooperation with banks or other lending institutions through
agreements to participate on an immediate or deferred basis) as the Administrator
determines appropriate to eligible small business concerns located anywhere in the
United States.
(ii) Processing time.
(I) In general. If the Administrator determines that the average processing time for
applications for disaster loans under this subparagraph relating to a specific major
disaster is more than 15 days, the Administrator shall give priority to the processing
of such applications submitted by eligible small business concerns located inside
the disaster area, until the Administrator determines that the average processing
time for such applications is not more than 15 days.
(II) Suspension of applications from outside disaster area. If the Administrator
determines that the average processing time for applications for disaster loans under

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this subparagraph relating to a specific major disaster is more than 30 days, the
Administrator shall suspend the processing of such applications submitted by
eligible small business concerns located outside the disaster area, until the
Administrator determines that the average processing time for such applications is
not more than 15 days.
(iii) Loan terms. A loan under this subparagraph shall be made on the same terms as a
loan under paragraph (2).
(D) Definitions. In this paragraph—
(i) the term “disaster area” means the area for which the applicable major disaster was
declared;
(ii) the term “disaster-related substantial economic injury” means economic harm to a
business concern that results in the inability of the business concern to—
(I) meet its obligations as it matures;
(II) meet its ordinary and necessary operating expenses; or
(III) market, produce, or provide a product or service ordinarily marketed,
produced, or provided by the business concern because the business concern relies
on materials from the disaster area or sells or markets in the disaster area; and
(iii) the term “eligible small business concern” means a small business concern—
(I) that has suffered disaster-related substantial economic injury as a result of the
applicable major disaster; and
(II) (aa) for which not less than 25 percent of the market share of that small
business concern is from business transacted in the disaster area;
(bb) for which not less than 25 percent of an input into a production process of
that small business concern is from the disaster area; or
(cc) that relies on a provider located in the disaster area for a service that is not
readily available elsewhere.
(10) Reducing closing and disbursement delays. The Administrator shall provide a clear and
concise notification on all application materials for loans made under this subsection and on
relevant websites notifying an applicant that the applicant may submit all documentation
necessary for the approval of the loan at the time of application and that failure to submit all
documentation could delay the approval and disbursement of the loan.
(11) Increasing transparency in loan approvals. The Administrator shall establish and
implement clear, written policies and procedures for analyzing the ability of a loan applicant to
repay a loan made under this subsection.
(12) Additional awards to small business development centers, women’s business centers, and
score for disaster recovery.
(A) In general. The Administration may provide financial assistance to a small business
development center, a women’s business center described in section 29 [15 USCS § 656],
the Service Corps of Retired Executives, or any proposed consortium of such individuals or

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entities to spur disaster recovery and growth of small business concerns located in an area
for which the President has declared a major disaster.
(B) Form of financial assistance. Financial assistance provided under this paragraph shall
be in the form of a grant, contract, or cooperative agreement.
(C) No matching funds required. Matching funds shall not be required for any grant,
contract, or cooperative agreement under this paragraph.
(D) Requirements. A recipient of financial assistance under this paragraph shall provide
counseling, training, and other related services, such as promoting long-term resiliency, to
small business concerns and entrepreneurs impacted by a major disaster.
(E) Performance.
(i) In general. The Administrator, in cooperation with the recipients of financial
assistance under this paragraph, shall establish metrics and goals for performance of
grants, contracts, and cooperative agreements under this paragraph, which shall include
recovery of sales, recovery of employment, reestablishment of business premises, and
establishment of new small business concerns.
(ii) Use of estimates. The Administrator shall base the goals and metrics for
performance established under clause (i), in part, on the estimates of disaster impact
prepared by the Office of Disaster Assistance for purposes of estimating loan-making
requirements.
(F) Term.
(i) In general. The term of any grant, contract, or cooperative agreement under this
paragraph shall be for not more than 2 years.
(ii) Extension. The Administrator may make 1 extension of a grant, contract, or
cooperative agreement under this paragraph for a period of not more than 1 year, upon
a showing of good cause and need for the extension.
(G) Exemption from other program requirements. Financial assistance provided under this
paragraph is in addition to, and wholly separate from, any other form of assistance
provided by the Administrator under this Act.
(H) Competitive basis. The Administration shall award financial assistance under this
paragraph on a competitive basis.
(13) Supplemental assistance for contractor malfeasance.
(A) In general. If a contractor or other person engages in malfeasance in connection with
repairs to, rehabilitation of, or replacement of real or personal property relating to which a
loan was made under this subsection and the malfeasance results in substantial economic
damage to the recipient of the loan or substantial risks to health or safety, upon receiving
documentation of the substantial economic damage or the substantial risk to health and
safety from an independent loss verifier, and subject to subparagraph (B), the
Administrator may increase the amount of the loan under this subsection, as necessary for
the cost of repairs, rehabilitation, or replacement needed to address the cause of the
economic damage or health or safety risk.

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(B) Requirements. The Administrator may only increase the amount of a loan under
subparagraph (A) upon receiving an appropriate certification from the borrower and person
performing the mitigation attesting to the reasonableness of the mitigation costs and an
assignment of any proceeds received from the person engaging in the malfeasance. The
assignment of proceeds recovered from the person engaging in the malfeasance shall be
equal to the amount of the loan under this section. Any mitigation activities shall be subject
to audit and independent verification of completeness and cost reasonableness.
(14) Business recovery centers.
(A) In general. The Administrator, acting through the district offices of the
Administration, shall identify locations that may be used as recovery centers by the
Administration in the event of a disaster declared under this subsection or a major disaster.
(B) Requirements for identification. Each district office of the Administration shall—
(i) identify a location described in subparagraph (A) in each county, parish, or similar
unit of general local government in the area served by the district office; and
(ii) ensure that the locations identified under subparagraph (A) may be used as a
recovery center without cost to the Government, to the extent practicable.
(15) Increased oversight of economic injury disaster loans. The Administrator shall increase
oversight of entities receiving loans under paragraph (2), and may consider—
(A) scheduled site visits to ensure borrower eligibility and compliance with requirements
established by the Administrator; and
(B) reviews of the use of the loan proceeds by an entity described in paragraph (2) to
ensure compliance with requirements established by the Administrator.
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 of 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 (d) of this section shall not be applicable to any such
loan having a maturity in excess of twenty years. Notwithstanding any other provision of law, and
except as provided in subsection (d), the interest rate on the Administration’s share of any loan
made under subsection (b), 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

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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 [Committee
on Small Business and Entrepreneurship] 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) and (2) 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 be not 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 resident by an individual who by reason of retirement, disability, or other
similar circumstances relies for support on survivor, disability, or retirement benefits under a

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pension, insurance, or other program, 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 per centum per annum.
(E) 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 USCS § 5155(a)] to a disaster loan under paragraph (1) [or] (2) of this
subsection.
With respect to any loan referred to in clause (D) which is outstanding on the date of enactment of
this paragraph [enacted Aug. 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 such date of enactment; and
(ii) in applying the limitation set forth in that clause with respect to the total amount of such
loan which may be canceled, considered 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 USCS § 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) Private disaster loans.
(1) Definitions. In this subsection—
(A) the term “disaster area” means any area for which the President declared a major
disaster relating to which the Administrator declares eligibility for additional disaster
assistance under subsection (b)(9), during the period of that major disaster declaration;
(B) the term “eligible individual” means an individual who is eligible for disaster
assistance under subsection (b)(1) relating to a major disaster relating to which the
Administrator declares eligibility for additional disaster assistance under subsection (b)(9);
(C) the term “eligible small business concern” means a business concern that is—
(i) a small business concern, as defined under this Act; or

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(ii) a small business concern, as defined in section 103 of the Small Business
Investment Act of 1958 [15 USCS § 662];
(D) the term “preferred lender” means a lender participating in the Preferred Lender
Program;
(E) the term “Preferred Lender Program” has the meaning given that term in subsection
(a)(2)(C)(ii); and
(F) the term “qualified private lender” means any privately-owned bank or other lending
institution that—
(i) is not a preferred lender; and
(ii) the Administrator determines meets the criteria established under paragraph (10).
(2) Program required. The Administrator shall carry out a program, to be known as the Private
Disaster Assistance program, under which the Administration may guarantee timely payment
of principal and interest, as scheduled, on any loan made to an eligible small business concern
located in a disaster area and to an eligible individual.
(3) Use of loans. A loan guaranteed by the Administrator under this subsection may be used
for any purpose authorized under subsection (b).
(4) Online applications.
(A) Establishment. The Administrator may establish, directly or through an agreement
with another entity, an online application process for loans guaranteed under this
subsection.
(B) Other Federal assistance. The Administrator may coordinate with the head of any
other appropriate Federal agency so that any application submitted through an online
application process established under this paragraph may be considered for any other
Federal assistance program for disaster relief.
(C) Consultation. In establishing an online application process under this paragraph, the
Administrator shall consult with appropriate persons from the public and private sectors,
including private lenders.
(5) Maximum amounts.
(A) Guarantee percentage. The Administrator may guarantee not more than 85 percent of a
loan under this subsection.
(B) Loan amount. The maximum amount of a loan guaranteed under this subsection shall
be $2,000,000.
(6) Terms and conditions. A loan guaranteed under this subsection shall be made under the
same terms and conditions as a loan under subsection (b).
(7) Lenders.
(A) In general. A loan guaranteed under this subsection made to—
(i) a qualified individual may be made by a preferred lender; and

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(ii) a qualified small business concern may be made by a qualified private lender or by
a preferred lender that also makes loans to qualified individuals.
(B) Compliance. If the Administrator determines that a preferred lender knowingly failed
to comply with the underwriting standards for loans guaranteed under this subsection or
violated the terms of the standard operating procedure agreement between that preferred
lender and the Administration, the Administrator shall do 1 or more of the following:
(i) Exclude the preferred lender from participating in the program under this
subsection.
(ii) Exclude the preferred lender from participating in the Preferred Lender Program
for a period of not more than 5 years.
(8) Fees.
(A) In general. The Administrator may not collect a guarantee fee under this subsection.
(B) Origination fee. The Administrator may pay a qualified private lender or preferred
lender an origination fee for a loan guaranteed under this subsection in an amount agreed
upon in advance between the qualified private lender or preferred lender and the
Administrator.
(9) Documentation. A qualified private lender or preferred lender may use its own loan
documentation for a loan guaranteed by the Administrator under this subsection, to the extent
authorized by the Administrator. The ability of a lender to use its own loan documentation for
a loan guaranteed under this subsection shall not be considered part of the criteria for
becoming a qualified private lender under the regulations promulgated under paragraph (10).
(10) Implementation regulations.
(A) In general. Not later than 1 year after the date of enactment of the Small Business
Disaster Response and Loan Improvements Act of 2008 [enacted June 18, 2008], the
Administrator shall issue final regulations establishing permanent criteria for qualified
private lenders.
(B) Report to Congress. Not later than 6 months after the date of enactment of the Small
Business Disaster Response and Loan Improvements Act of 2008 [enacted June 18, 2008],
the Administrator shall submit a report on the progress of the regulations required by
subparagraph (A) to the Committee on Small Business and Entrepreneurship of the Senate
and the Committee on Small Business of the House of Representatives.
(11) Authorization of appropriations.
(A) In general. Amounts necessary to carry out this subsection shall be made available
from amounts appropriated to the Administration to carry out subsection (b).
(B) Authority to reduce interest rates and other terms and conditions. Funds appropriated
to the Administration to carry out this subsection[,] may be used by the Administrator to
meet the loan terms and conditions specified in paragraph (6).
(12) Purchase of loans. The Administrator may enter into an agreement with a qualified
private lender or preferred lender to purchase any loan guaranteed under this subsection.

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(d) 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 [5 USCS § 903 note], or Reorganization Plan Numbered 1 of 1957 [5
USCS § 903 note], 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), 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 [to] the effective
date of this Act, on the Administration’s share of loans made pursuant to paragraph (1) of
subsection (b)—
(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) 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

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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) 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 oneeighth 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 section 7(a) of this Act [subsec. (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) 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 oneeighth 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

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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, private nonprofit organization, 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 to 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 section 7(a) of this Act
[subsec. (a) of this section], or (iii) 8 per centum per annum. Loans under this subparagraph
shall be limited to a maximum term of 7 years.
(6) Notwithstanding the provisions of any other law, such loans, subject to the reductions
required by subparagraphs (A) and (B) of paragraph 7(b)(1) [subsec. (b)(1)(A), (B) of this
section], shall be in amounts equal to 100 per centum of loss. The interest rates for loans made
under paragraphs 7(b)(1) and (2) [subsec. (b)(1), (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 paragraphs 7(b)(1) and (2) [subsec. (b)(1), (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 7(b) [subsec.
(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 paragraph
7(b)(1) [subsec. (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 $25,000 or less (or such higher amount
as the Administrator determines appropriate in the event of a disaster) which are made under
paragraph (1) of subsection (b): Provided further, That the Administrator, in obtaining the best
available collateral for a loan of not more than $200,000 under paragraph (1) or (2) of
subsection (b) relating to damage to or destruction of the property of, or economic injury to, a
small business concern, shall not require the owner of the small business concern to use the
primary residence of the owner as collateral if the Administrator determines that the owner has
other assets of equal quality and with a value equal to or greater than the amount of the loan
that could be used as collateral for the loan: Provided further, That nothing in the preceding
proviso may be construed to reduce the amount of collateral required by the Administrator in
connection with a loan described in the preceding proviso or to modify the standards used to
evaluate the quality (rather than the type) of such collateral. 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 the date of enactment of this paragraph [enacted
April 18, 1984] and which was made on account of a disaster commencing on or after October 1,

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1982, the Administrator shall make such change in the interest rate on the balance of such loan as
is required herein effective as of the date of enactment [enacted 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 section 7(b)(2) [subsec. (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.
(8) Disaster loans for Superstorm Sandy.
(A) In general. Notwithstanding any other provision of law, and subject to the same
requirements and procedures that are used to make loans pursuant to subsection (b), a small
business concern, homeowner, nonprofit entity, or renter that was located within an area
and during the time period with respect to which a major disaster was declared by the
President under section 401 of the Robert T. Stafford Disaster Relief and Emergency
Assistance Act (42 U.S.C. 5170) by reason of Superstorm Sandy may apply to the
Administrator—
(i) for a loan to repair, rehabilitate, or replace property damaged or destroyed by
reason of Superstorm Sandy; or
(ii) if such a small business concern has suffered substantial economic injury by reason
of Superstorm Sandy, for a loan to assist such a small business concern.
(B) Timing. The Administrator shall select loan recipients and make available loans for a
period of not less than 1 year after the date on which the Administrator carries out this
authority.
(C) Inspector General review. Not later than 6 months after the date on which the
Administrator begins carrying out this authority, the Inspector General of the
Administration shall initiate a review of the controls for ensuring applicant eligibility for
loans made under this paragraph.
(e) Funds for small business development centers under 15 USCS § 648. The Administration
shall not fund any Small Business Development Center or any variation thereof, except as authorized
in section 21 of this Act [15 USCS § 648].
(f) Additional requirements for subsection (b) loans.
(1) Increased deferment authorized.
(A) In general. In making loans under subsection (b), the Administrator may provide, to
the person receiving the loan, an option to defer repayment on the loan.
(B) Period. The period of a deferment under subparagraph (A) may not exceed 4 years.
(2) [Not enacted]
(g) Net earnings clauses prohibited for subsection (b) loans. In making loans under subsection
(b), the Administrator shall not require the borrower to pay any non-amortized amount for the first
five years after repayment begins.
(h) Loans to handicapped persons and organizations for handicapped.

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(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 4(c)(1)(B) of this Act [15 USCS § 633(c)(1)(B)] 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 2(b) of this Act, 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

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loans for a grace period and use such other methods as it deems necessary and appropriate to
assure the successful establishment and operation of such concern. The Administration may, in
its discretion, as a condition of such financial assistance, require that the borrower take steps to
improve his management skills by participating in a management training program approved
by the Administration: Provided, however, That any management training program so
approved must be of sufficient scope and duration to provide reasonable opportunity for the
individuals served to develop entrepreneurial and managerial self-sufficiency.
(2) The Administration shall encourage, as far as possible, the participation of the private
business community in the program of assistance to such concerns, and shall seek to stimulate
new private lending activities to such concerns through the use of the loan guarantees,
participations in loans, and pooling arrangements authorized by this subsection.
(3) To insure an equitable distribution between urban and rural areas for loans between $3,500
and $100,000 made under this subsection, the Administration is authorized to use the agencies
and agreements and delegations developed under title III of the Economic Opportunity Act of
1964, as amended, 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 10(a) of this Act [15 USCS § 639(a)].
(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. 3108 [3121] et seq.) shall not exceed the rate currently applicable to
new loans made under section 201 of that Act (42 U.S.C. 3142 [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 to small business

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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 sections 7(i), 7(j)(10), and 8(a) of this
Act [subsec. (i) of this section, para. (10) of this subsec., and 15 USCS § 637(a)], with special
attention to small businesses located in areas of high concentration of unemployed or lowincome individuals, to small businesses eligible to receive contracts pursuant to section 8(a) of
this Act [15 USCS § 637(a)].
(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 sections 7(i), (7)(j)(10), and
8(a) of this Act [subsec. (i) of this section para. (10) of this subsec., and 15 USCS §
637(a)];
(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 8(a) of this Act [15 USCS § 637(a)].
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 sections 7(i), 7(j), and 8(a) of this Act [subsec. (i) of this section, this
subsection, and 15 USCS § 637(a)].

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(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 8(a) of this
Act [15 USCS § 637(a)].
(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]
(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
sections 7(i), 7(j), and 8(a) of this Act [subsec. (i) of this section, this subsec., and 15 USCS §
637(a)].
(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 8(a) of
this Act [15 USCS § 637(a)]. The program, and all other services and activities authorized
under section 7(j) and 8(a) of this Act [this subsection and 15 USCS § 637(a)], 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). [;]
(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;

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(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 USCS §§ 694a et seq.].
(B) Small business concerns eligible to receive contracts pursuant to section 8(a) of this
Act [15 USCS § 637(a)] 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
8(a) [15 USCS § 637(a)] 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 8(a) [15 USCS § 637(a)]; or
(II) its original fixed program participation term (plus any extension thereof)
assigned prior to the effective date of this paragraph 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 8(a)(6) [15 USCS §
837(a)(6)]. 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 8(a) [15
USCS § 837(a)].
(ii) The plans submitted under this subparagraph shall include the following:

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(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 8(a) [15 USCS § 837(a)].
(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 8(a) [15 USCS § 637(a)] 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
8(a) [15 USCS § 637(a)].
(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 8(a) [15 USCS § 637(a)].
(iv) Each Program Participant shall annually forecast its needs for contract awards
under section 8(a) [15 USCS § 637(a)] 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 USCS § 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 8(a) [15 USCS § 637(a)], reflecting compliance with the
requirements of subparagraph (I) relating to attaining business activity from sources
other than contracts awarded pursuant to section 8(a) [15 USCS § 637(a)],
(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

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(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 8(a) [15 USCS
§ 637(a)] 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 8(a)(9) [15 USCS § 637(a)(9)]; or
(iv) is graduated pursuant to a graduation proceeding conducted in accordance with
section 8(a)(9) [15 USCS § 637(a)(9)].
(F) For purposes of this section and section 8(a) [15 USCS § 637(a)], the term
“terminated” and the term “termination” means the total denial or suspension of assistance
under this paragraph or under section 8(a) [15 USCS § 637(a)] 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 8(a) [15 USCS §
837(a)];
(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 16 [15 USCS
§ 645]. 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

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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 8(a)(9) [15 USCS § 837(a)(9)].
(H) For the purposes of sections 7(j) and 8(a) [15 USCS §§ 636(j), 637(a)] 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 8(a) [15 USCS §
637(a)].
(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 8(a)
[15 USCS § 637(a)] (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 8(a) [15 USCS § 637(a)], 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 the effective date of this
subparagraph;
(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 8(a) [15 USCS § 637(a)], 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

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(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 8(a) [15 USCS § 637(a)]; 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 8(a) [15 USCS §
637(a)]; except for actions that would constitute a termination, remedial measures
taken pursuant to this subclause shall not be reviewable pursuant to section 8(a)(9)
[15 USCS § 637(a)(9)].
(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 8(a) [15 USCS § 837(a)] 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 8(a) [15 USCS § 637(a)] 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” [15
USCS § 637 note], shall be eligible for award of a contract pursuant to section 8(a)
[15 USCS § 637(a)].
(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 section 7(i) of
this Act [subsec. (i) of this section] and small business concerns eligible to receive
contracts pursuant to section 8(a) of this Act [15 USCS § 637(a)].
(B)

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(i) Except as provided in clause (iii), no individual who was determined pursuant to
section 8(a) [15 USCS § 637(a)] to be socially and economically disadvantaged before
the effective date of this subparagraph shall be permitted to assert such disadvantage
with respect to any other concern making application for certification after such
effective date.
(ii) Except as provided in clause (iii), any individual upon whom eligibility is based
pursuant to section 8(a) [15 USCS § 637(a)(4)] 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 section 7(j)(10) and section
8(a) [para. 10 of this subsec. and 15 USCS § 637(a)] 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 8(a) [15
USCS § 637(a)], 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 8(a)(4) [15 USCS § 637(a)(4)]) to individuals who are determined to be
socially and economically disadvantaged pursuant to section 8(a) [15 USCS § 637(a)]. 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 8(a)(9) [15 USCS § 637(a)(9)], 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 8(a) [15 USCS § 637(a)];
(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;

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(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 8(a) [15 USCS § 637(a)];
(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 8 [15 USCS § 637(d)], 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 12month 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—

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(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 [(12)]:
(A) Contract support pursuant to section 8(a) [15 USCS § 637(a)].
(B) Financial assistance pursuant to section 7(a)(20) [15 USCS § 636(a)(20)].
(C) A maximum of two exemptions from the requirements of section 1(a) of the Act
entitled “An Act providing conditions for the purchase of supplies and the making of
contracts by the United States, and for other purposes”, approved June 30, 1936 (49 Stat.
2036), which exemptions shall apply only to contracts awarded pursuant to section (8)(a)
[15 USCS § 637(a)] and shall only be used to allow for contingent agreements by a small
business concern to acquire the machinery, equipment, facilities, or labor needed to
perform such contracts. No exemption shall be made pursuant to this subparagraph if the
contract to which it pertains has an anticipated value in excess of $10,000,000. This
subparagraph shall cease to be effective on October 1, 1992.
(D) A maximum of five exemptions from the requirements of the Act entitled “An Act
requiring contracts for the construction, alteration and repair of any public building or
public work of the United States to be accompanied by a performance bond protecting the
United States and by an additional bond for the protection of persons furnishing material
and labor for the construction, alteration, or repair of said public buildings or public
works”, approved August 24, 1935 (49 Stat. 793) [40 USCS §§ 3131–3133], which

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exemptions shall apply only to contracts awarded pursuant to section 8(a) [15 USCS §
637(a)], 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 18(a)
[15 USCS § 647(a)]. 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 Innovation and Opportunity Act [29 USCS §§
3111 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

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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)
(i) 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.
(ii)
(I) In this clause—
(aa) the term “covered period” means the 2-year period beginning on the date
on which the President declared the applicable major disaster; and
(bb) the term “disaster area” means the area for which the President has
declared a major disaster, during the covered period.
(II) The Administrator may transfer technology or surplus property under clause (i)
on a priority basis to a small business concern located in a disaster area if—
(aa) the small business concern meets the requirements for such a transfer,
without regard to whether the small business concern is a Program Participant;
and
(bb) for a small business concern that is a Program Participant, on and after the
date on which the President declared the applicable major disaster, the small
business concern has not received property under this subparagraph on the basis
of the status of the small business concern as a Program Participant.
(III) For any transfer of property under this clause to a small business concern, the
terms and conditions shall be the same as a transfer to a Program Participant, except
that the small business concern shall agree not to sell or transfer the property to any
party other than the Federal Government during the covered period.
(IV) A small business concern that receives a transfer of property under this clause
may not receive a transfer of property under clause (i) during the covered period.

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(V) If a small business concern sells or transfers property in violation of the
agreement described in subclause (III), the Administrator may initiate proceedings
to prohibit the small business concern from receiving a transfer of property under
this clause or clause (i), in addition to any other remedy available to the
Administrator.
(iii)
(I) In this clause, the term “covered period” means—
(aa) in the case of a Puerto Rico business, the period beginning on August 13,
2018, and ending on the date on which the Oversight Board established under
section 2121 of title 48 [48 USCS § 2121] terminates; and
(bb) in the case of a covered territory business, the period beginning on the
date of the enactment of this item [enacted Jan. 1, 2021] and ending on the date
that is 4 years after such date of enactment [enacted Jan. 1, 2021].
(II) The Administrator may transfer technology or surplus property under clause (i)
to a Puerto Rico business or a covered territory business if either such business
meets the requirements for such a transfer, without regard to whether either such
business is a Program Participant.
(G) Training assistance whereby the Administration shall conduct training sessions to
assist individuals and enterprises eligible to receive contracts under section 8(a) [15 USCS
§ 637(a)] 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 8(a) [15 USCS §
637(a)] 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.

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(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 the effective date of this paragraph.
(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 8(a) [15 USCS § 637(a)].
(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 8(a) [15 USCS § 637(a)], and
a description including (if appropriate) an estimate of the dollar value of all benefits
received pursuant to paragraphs (13) and (14) and section 7(a)(20) [15 USCS §
636(a)(13), (14), (20)] during such year.
(v) The total dollar value of contracts and options awarded during the preceding fiscal
year pursuant to section 8(a) [15 USCS § 637(a)] 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 8(a) [15 USCS §
637(a)].

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(vii) The total dollar value of contracts and options awarded pursuant to section 8(a)
[15 USCS § 637(a)], 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 lowincome individuals, or owned by low-income individuals. In carrying out its functions under
subsections 7(i), 7(j) and 8(a) of this Act [subsecs. (i) and (j) of this section and 15 USCS §
637(a)], 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 Act, 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
3679(b) of the Revised Statutes (31 U.S.C. 655(b)) [31 USCS § 1342]; and
(4) to employ experts and consultants or organizations thereof as authorized by section 15 of
the Administrative Expenses Act of 1946 (5 U.S.C. 55a) [5 USCS § 3109], 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, United States Code,
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 5
of such Act (5 U.S.C. 73b-2) [5 USCS § 5703] for persons in the Government service
employed intermittently, while so employed: Provided, however, That contracts for such
employment may be renewed annually.
(l) Small business intermediary lending pilot program.
(1) Definitions. In this subsection—
(A) the term “eligible intermediary”—
(i) means a private, nonprofit entity that—
(I) seeks or has been awarded a loan from the Administrator to make loans to small
business concerns under this subsection; and
(II) has not less than 1 year of experience making loans to startup, newly
established, or growing small business concerns; and
(ii) includes—
(I) a private, nonprofit community development corporation;

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(II) a consortium of private, nonprofit organizations or nonprofit community
development corporations; and
(III) an agency of or nonprofit entity established by a Native American Tribal
Government; and
(B) the term “Program” means the small business intermediary lending pilot program
established under paragraph (2).
(2) Establishment. There is established a 3-year small business intermediary lending pilot
program, under which the Administrator may make direct loans to eligible intermediaries, for
the purpose of making loans to startup, newly established, and growing small business
concerns.
(3) Purposes. The purposes of the Program are—
(A) to assist small business concerns in areas suffering from a lack of credit due to poor
economic conditions or changes in the financial market; and
(B) to establish a loan program under which the Administrator may provide loans to
eligible intermediaries to enable the eligible intermediaries to provide loans to startup,
newly established, and growing small business concerns for working capital, real estate, or
the acquisition of materials, supplies, or equipment.
(4) Loans to eligible intermediaries.
(A) Application. Each eligible intermediary desiring a loan under this subsection shall
submit an application to the Administrator that describes—
(i) the type of small business concerns to be assisted;
(ii) the size and range of loans to be made;
(iii) the interest rate and terms of loans to be made;
(iv) the geographic area to be served and the economic, poverty, and unemployment
characteristics of the area;
(v) the status of small business concerns in the area to be served and an analysis of the
availability of credit; and
(vi) the qualifications of the applicant to carry out this subsection.
(B) Loan limits. No loan may be made to an eligible intermediary under this subsection if
the total amount outstanding and committed to the eligible intermediary by the
Administrator would, as a result of such loan, exceed $1,000,000 during the participation
of the eligible intermediary in the Program.
(C) Loan duration. Loans made by the Administrator under this subsection shall be for a
term of 20 years.
(D) Applicable interest rates. Loans made by the Administrator to an eligible intermediary
under the Program shall bear an annual interest rate equal to 1.00 percent.
(E) Fees; collateral. The Administrator may not charge any fees or require collateral with
respect to any loan made to an eligible intermediary under this subsection.

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(F) Delayed payments. The Administrator shall not require the repayment of principal or
interest on a loan made to an eligible intermediary under the Program during the 2-year
period beginning on the date of the initial disbursement of funds under that loan.
(G) Maximum participants and amounts. During each of fiscal years 2011, 2012, and
2013, the Administrator may make loans under the Program—
(i) to not more than 20 eligible intermediaries; and
(ii) in a total amount of not more than $20,000,000.
(5) Loans to small business concerns.
(A) In general. The Administrator, through an eligible intermediary, shall make loans to
startup, newly established, and growing small business concerns for working capital, real
estate, and the acquisition of materials, supplies, furniture, fixtures, and equipment.
(B) Maximum loan. An eligible intermediary may not make a loan under this subsection of
more than $200,000 to any 1 small business concern.
(C) Applicable interest rates. A loan made by an eligible intermediary to a small business
concern under this subsection, may have a fixed or a variable interest rate, and shall bear an
interest rate specified by the eligible intermediary in the application of the eligible
intermediary for a loan under this subsection.
(D) Review restrictions. The Administrator may not review individual loans made by an
eligible intermediary to a small business concern before approval of the loan by the eligible
intermediary.
(6) Termination. The authority of the Administrator to make loans under the Program shall
terminate 3 years after the date of enactment of the Small Business Job Creation and Access to
Capital Act of 2010 [enacted Sept. 27, 2010].
(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 3(q) [15 USCS § 632(q)]), and minority entrepreneurs and business owners and
other such individuals possessing the capability to operate successful business
concerns; and
(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;

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(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 lowincome 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
$50,000 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) [(11)]; 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.

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(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 Administrator 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), 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 Act
would, as a result of such loan, exceed $750,000 in the first year of such intermediary’s
participation in the program, $7,000,000 (in the aggregate) in the remaining years of the
intermediary’s participation in the program, and $3,000,000 in any of those remaining
years.
(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.

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(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
[subclause] IV, the Administrator may reduce the annual loan loss reserve
requirement of an intermediary to reflect the actual average loan loss rate for the
intermediary during the preceding 5-year period, except that in no case shall the
loan loss reserve be reduced to less than 10 percent of the outstanding balance of
the notes receivable owed to the intermediary.
(IV) Requirements. The Administrator may reduce the annual loan loss reserve
requirement of an intermediary only if the intermediary demonstrates to the
satisfaction of the Administrator that—
(aa) the average annual loss rate for the intermediary during the preceding 5year period is less than 15 percent; and
(bb) [that] no other factors exist that may impair the ability of the intermediary
to repay all obligations owed to the Administration under this subsection.
(E) Unavailability of comparable credit. An intermediary may make a loan under this
subsection of more than $20,000 to a small business concern only if such small business
concern demonstrates that it is unable to obtain credit elsewhere at comparable interest
rates and that it has good prospects for success. In no case shall an intermediary make a
loan under this subsection of more than $50,000, or have outstanding or committed to any
1 borrower more than $50,000.
(F) Loan duration; interest rates.
(i) Loan duration. Loans made by the Administration under this subsection shall be for
a term of 10 years.
(ii) Applicable interest rates. Except as provided in clause (iii), loans made by the
Administration under this subsection to an intermediary shall bear an interest rate equal
to 1.25 percentage points below the rate determined by the Secretary of the Treasury
for obligations of the United States with a period of maturity of 5 years, adjusted to the
nearest one-eighth of 1 percent.
(iii) Rates applicable to certain small loans. Loans made by the Administration to an
intermediary that makes loans to small business concerns and entrepreneurs averaging
not more than $7,500, shall bear an interest rate that is 2 percentage points below the
rate determined by the Secretary of the Treasury for obligations of the United States
with a period of maturity of 5 years, adjusted to the nearest one-eighth of 1 percent.

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(iv) Rates applicable to multiple sites or offices. The interest rate prescribed in clause
(ii) or (iii) shall apply to each separate loan-making site or office of 1 intermediary only
if such site or office meets the requirements of that clause.
(v) Rate basis. The applicable rate of interest under this paragraph shall—
(I) be applied retroactively for the first year of an intermediary’s participation in
the program, based upon the actual lending practices of the intermediary as
determined by the Administration prior to the end of such year; and
(II) be based in the second and subsequent years of an intermediary’s participation
in the program, upon the actual lending practices of the intermediary during the
term of the intermediary’s participation in the program.
(vi) [Not enacted]
(vii) Covered intermediaries. The interest rates prescribed in this subparagraph shall
apply to all loans made to intermediaries under this subsection on or after October 28,
1991.
(G) Delayed payments. The Administration shall not require repayment of interest or
principal of a loan made to an intermediary under this subsection during the first year of
the loan.
(H) Fees; collateral. Except as provided in subparagraphs (B) and (D), the Administration
shall not charge any fees or require collateral other than an assignment of the notes
receivable of the microloans with respect to any loan made to an intermediary under this
subsection.
(4) Marketing, management and technical assistance grants to intermediaries. Grants made in
accordance with subparagraph (B)(ii) of paragraph (1) shall be subject to the following
requirements:
(A) Grant amounts. Except as otherwise provided in subparagraphs (C) and (G) and
subject to subparagraph (B), each intermediary that receives a loan under subparagraph
(B)(i) of paragraph (1) shall be eligible to receive a grant to provide marketing,
management, and technical assistance to small business concerns that are borrowers under
this subsection. Except as provided in subparagraphs (C) and (G), each intermediary
meeting the requirements of subparagraph (B) may receive a grant of not more than 25
percent of the total outstanding balance of loans made to it under this subsection.
(B) Contribution. As a condition of a grant made under subparagraph (A), the
Administrator shall require the intermediary to contribute an amount equal to 25 percent of
the amount of the grant, obtained solely from non-Federal sources. In addition to cash or
other direct funding, the contribution may include indirect costs or in-kind contributions
paid for under non-Federal programs.
(C) Additional technical assistance grants for making certain loans.
(i) In general. In addition to grants made under subparagraph (A) or (G), each
intermediary shall be eligible to receive a grant equal to 5 percent of the total
outstanding balance of loans made to the intermediary under this subsection if—

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(I) the intermediary provides not less than 25 percent of its loans to small business
concerns located in or owned by 1 or more residents of an economically distressed
area; or
(II) the intermediary has a portfolio of loans made under this subsection—
(aa) that averages not more than $10,000 during the period of the
intermediary’s participation in the program; or
(bb) of which not less than 25 percent is serving rural areas during the period
of the intermediary’s participation in the program.
(ii) Purposes. A grant awarded under clause (i) may be used to provide marketing,
management, and technical assistance to small business concerns that are borrowers
under this subsection.
(iii) Contribution exception. The contribution requirements in subparagraph (B) do not
apply to grants made under this subparagraph.
(D) Eligibility for multiple sites or offices. The eligibility for a grant described in
subparagraph (A)[,] or (C) shall be determined separately for each loan-making site or
office of 1 intermediary.
(E) Assistance to certain small business concerns.
(i) In general. Each intermediary may expend an amount not to exceed 50 percent of
the grant funds received under paragraph (1)(B)(ii) to provide information and
technical assistance to small business concerns that are prospective borrowers under
this subsection.
(ii) Technical assistance. An intermediary may expend not more than 50 percent of the
funds received under paragraph (1)(B)(ii) to enter into third party contracts for the
provision of technical assistance.
(F) Supplemental grant.
(i) In general. The Administration may accept any funds transferred to the
Administration from other departments or agencies of the Federal Government to make
grants in accordance with this subparagraph and section 202(b) of the Small Business
Reauthorization Act of 1997 [note to this section] to participating intermediaries and
technical assistance providers under paragraph (5), for use in accordance with clause
(iii) to provide additional technical assistance and related services to recipients of
assistance under a State program described in paragraph (1)(A)(iv) at the time they
initially apply for assistance under this subparagraph.
(ii) Eligible recipients; grant amounts. In making grants under this subparagraph, the
Administration may select, from among participating intermediaries and technical
assistance providers described in clause (i), not more than 20 grantees in fiscal year
1998, not more than 25 grantees in fiscal year 1999, and not more than 30 grantees in
fiscal year 2000, each of whom may receive a grant under this subparagraph in an
amount not to exceed $200,000 per year.
(iii) Use of grant amounts. Grants under this subparagraph—

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(I) are in addition to other grants provided under this subsection and shall not
require the contribution of matching amounts as a condition of eligibility; and
(II) may be used by a grantee—
(aa) to pay or reimburse a portion of child care and transportation costs of
recipients of assistance described in clause (i), to the extent such costs are not
otherwise paid by State block grants under the Child Care Development Block
Grant Act of 1990 (42 U.S.C. 9858 et seq.) or under part A of title IV of the
Social Security Act (42 U.S.C. 601 et seq.); and
(bb) for marketing, management, and technical assistance to recipients of
assistance described in clause (i).
(iv) Memorandum of understanding. Prior to accepting any transfer of funds under
clause (i) from a department or agency of the Federal Government, the Administration
shall enter into a Memorandum of Understanding with the department or agency, which
shall—
(I) specify the terms and conditions of the grants under this subparagraph; and
(II) provide for appropriate monitoring of expenditures by each grantee under this
subparagraph and each recipient of assistance described in clause (i) who receives
assistance from a grantee under this subparagraph, in order to ensure compliance
with this subparagraph by those grantees and recipients of assistance.
(G) Grant amounts based on appropriations. In any fiscal year in which the amount
appropriated to make grants under subparagraph (A) is sufficient to provide to each
intermediary that receives a loan under paragraph (1)(B)(i) a grant of not less than 25
percent of the total outstanding balance of loans made to the intermediary under this
subsection, the Administration shall make a grant under subparagraph (A) to each
intermediary of not less than 25 percent and not more than 30 percent of that total
outstanding balance for the intermediary.
(5) Private sector borrowing technical assistance grants. Grants made in accordance with
subparagraph (B)(iii) of paragraph (1) shall be subject to the following requirements:
(A) Grant amounts. Subject to the requirements of subparagraph (B), the Administration
may make not more than 55 grants annually, each in amounts not to exceed $200,000 for
the purposes specified in subparagraph (B)(iii) of paragraph (1).
(B) Contribution. As a condition of any grant made under subparagraph (A), the
Administration shall require the grant recipient to contribute an amount equal to 20 percent
of the amount of the grant, obtained solely from non-Federal sources. In addition to cash or
other direct funding, the contribution may include indirect costs or in-kind contributions
paid for under non-Federal programs.
(6) Loans to small business concerns from eligible intermediaries.
(A) In general. An eligible intermediary shall make short-term, fixed rate loans to startup,
newly established, and growing small business concerns from the funds made available to
it under subparagraph (B)(i) of paragraph (1) for working capital and the acquisition of
materials, supplies, furniture, fixtures, and equipment.

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(B) Portfolio requirement. To the extent practicable, each intermediary that operates a
microloan program under this subsection shall maintain a microloan portfolio with an
average loan size of not more than $15,000.
(C) Interest limit. Notwithstanding any provision of the laws of any State or the
constitution of any State pertaining to the rate or amount of interest that may be charged,
taken, received, or reserved on a loan, the maximum rate of interest to be charged on a
microloan funded under this subsection shall not exceed the rate of interest applicable to a
loan made to an intermediary by the Administration—
(i) in the case of a loan of more than $7,500 made by the intermediary to a small
business concern or entrepreneur by more than 7.75 percentage points; and
(ii) in the case of a loan of not more than $7,500 made by the intermediary to a small
business concern or entrepreneur by more than 8.5 percentage points.
(D) Review restriction. The Administration shall not review individual microloans made
by intermediaries prior to approval.
(E) Establishment of child care or transportation businesses. In addition to other eligible
small businesses concerns, borrowers under any program under this subsection may
include individuals who will use the loan proceeds to establish for-profit or nonprofit child
care establishments or businesses providing for-profit transportation services.
(7) Program funding for microloans.
(A) Number of participants. Under the program authorized by this subsection, the
Administration may fund, on a competitive basis, not more than 300 intermediaries.
(B) Allocation.
(i) Minimum allocation. Subject to the availability of appropriations, of the total
amount of new loan funds made available for award under this subsection in each fiscal
year, the Administration shall make available for award in each State (including the
District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin
Islands, Guam, and American Samoa) an amount equal to the sum of—
(I) the lesser of—
(aa) $800,000; or
(bb) 1/55 of the total amount of new loan funds made available for award under
this subsection for that fiscal year; and
(II) any additional amount, as determined by the Administration.
(ii) Redistribution. If, at the beginning of the third quarter of a fiscal year, the
Administration determines that any portion of the amount made available to carry out
this subsection is unlikely to be made available under clause (i) during that fiscal year,
the Administration may make that portion available for award in any one or more
States (including the District of Columbia, the Commonwealth of Puerto Rico, the
United States Virgin Islands, Guam, and American Samoa) without regard to clause (i).
(8) Equitable distribution of intermediaries. In approving microloan program applicants and
providing funding to intermediaries under this subsection, the Administration shall select and

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provide funding to such intermediaries as will ensure appropriate availability of loans for small
businesses in all industries located throughout each State, particularly those located in urban
and in rural areas.
(9) Grants for management, marketing, technical assistance, and related services.
(A) In general. The Administration may procure technical assistance for intermediaries
participating in the Microloan Program to ensure that such intermediaries have the
knowledge, skills, and understanding of microlending practices necessary to operate
successful microloan programs.
(B) Assistance amount. The Administration shall transfer 7 percent of its annual
appropriation for loans and loan guarantees under this subsection to the Administration’s
Salaries and Expense Account for the specific purpose of providing 1 or more technical
assistance grants to experienced microlending organizations and national and regional
nonprofit organizations that have demonstrated experience in providing training support for
microenterprise development and financing[.] to achieve the purpose set forth in
subparagraph (A).
(C) Welfare-to-work microloan initiative. Of amounts made available to carry out the
welfare-to-work microloan initiative under paragraph (1)(A)(iv) in any fiscal year, the
Administration may use not more than 5 percent to provide technical assistance, either
directly or through contractors, to welfare-to-work microloan initiative grantees, to ensure
that, as grantees, they have the knowledge, skills, and understanding of microlending and
welfare-to-work transition, and other related issues, to operate a successful welfare-to-work
microloan initiative.
(10) Report to Congress. On November 1, 1995, the Administration shall submit to the
Committees on Small Business of the Senate and the House of Representatives a report,
including the Administration’s evaluation of the effectiveness of the first 3 ½ years of the
microloan program and the following:
(A) the numbers and locations of the intermediaries funded to conduct microloan
programs;
(B) the amounts of each loan and each grant to intermediaries;
(C) a description of the matching contributions of each intermediary;
(D) the numbers and amounts of microloans made by the intermediaries to small business
concern borrowers;
(E) the repayment history of each intermediary;
(F) a description of the loan portfolio of each intermediary including the extent to which it
provides microloans to small business concerns in rural areas; and
(G) any recommendations for legislative changes that would improve program operations.
(11) Definitions. For purposes of this subsection—
(A) the term “intermediary” means—
(i) a private, nonprofit entity;

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(ii) a private, nonprofit community development corporation;
(iii) a consortium of private, nonprofit organizations or nonprofit community
development corporations;
(iv) a quasi-governmental economic development entity (such as a planning and
development district), other than a State, county, municipal government, or any agency
thereof, if—
(I) no application is received from an eligible nonprofit organization; or
(II) the Administration determines that the needs of a region or geographic area are
not adequately served by an existing, eligible nonprofit organization that has
submitted an application; or
(v) an agency of or nonprofit entity established by a Native American Tribal
Government,
that seeks to borrow or has borrowed funds from the Administration to make microloans to
small business concerns under this subsection;
(B) the term “microloan” means a short-term, fixed rate loan of not more than $50,000,
made by an intermediary to a startup, newly established, or growing small business
concern;
(C) the term “rural area” means any political subdivision or unincorporated area—
(i) in a nonmetropolitan county (as defined by the Secretary of Agriculture) or its
equivalent thereof; or
(ii) in a metropolitan county or its equivalent that has a resident population of less than
20,000 if the Small Business Administration has determined such political subdivision
or area to be rural; and
(D) the term “economically distressed area”, as used in paragraph (4), means a county or
equivalent division of local government of a State in which the small business concern is
located, in which, according to the most recent data available from the Bureau of the
Census, Department of Commerce, not less than 40 percent of residents have an annual
income that is at or below the poverty level.
(12) Deferred participation loan pilot. In lieu of making direct loans to intermediaries as
authorized in paragraph (1)(B), during fiscal years 1998 through 2000, the Administration
may, on a pilot program basis, participate on a deferred basis of not less than 90 percent and
not more than 100 percent on loans made to intermediaries by a for-profit or nonprofit entity or
by alliances of such entities, subject to the following conditions:
(A) Number of loans. In carrying out this paragraph, the Administration shall not
participate in providing financing on a deferred basis to more than 10 intermediaries in
urban areas or more than 10 intermediaries in rural areas.
(B) Term of loans. The term of each loan shall be 10 years. During the first year of the
loan, the intermediary shall not be required to repay any interest or principal. During the
second through fifth years of the loan, the intermediary shall be required to pay interest

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only. During the sixth through tenth years of the loan, the intermediary shall be required to
make interest payments and fully amortize the principal.
(C) Interest rate. The interest rate on each loan shall be the rate specified by paragraph
(3)(F) for direct loans.
(13) Evaluation of welfare-to-work microloan initiative. On January 31, 1999, and annually
thereafter, the Administration shall submit to the Committees on Small Business of the House
of Representatives and the Senate a report on any monies distributed pursuant to paragraph
(4)(F).
(n) Repayment deferred for active service reservists.
(1) Definitions. In this subsection:
(A) Active service. The term “active service” has the meaning given that term in section
101(d)(3) of title 10, United States Code.
(B) Eligible reservist. The term “eligible reservist” means a member of a reserve
component of the Armed Forces ordered to perform active service for a period of more
than 30 consecutive days.
(C) Essential employee. The term “essential employee” means an individual who is
employed by a small business concern and whose managerial or technical expertise is
critical to the successful day-to-day operations of that small business concern.
(D) Qualified borrower. The term “qualified borrower” means—
(i) an individual who is an eligible reservist and who received a direct loan under
subsection (a) or (b) before being ordered to active service; or
(ii) a small business concern that received a direct loan under subsection (a) or (b)
before an eligible reservist, who is an essential employee, was ordered to active service.
(2) Deferral of direct loans.
(A) In general. The Administration shall, upon written request, defer repayment of
principal and interest due on a direct loan made under subsection (a) or (b), if such loan
was incurred by a qualified borrower.
(B) Period of deferral. The period of deferral for repayment under this paragraph shall
begin on the date on which the eligible reservist is ordered to active service and shall
terminate on the date that is 180 days after the date such eligible reservist is discharged or
released from active service.
(C) Interest rate reduction during deferral. Notwithstanding any other provision of law,
during the period of deferral described in subparagraph (B), the Administration may, in its
discretion, reduce the interest rate on any loan qualifying for a deferral under this
paragraph.
(3) Deferral of loan guarantees and other financings. The Administration shall—
(A) encourage intermediaries participating in the program under subsection (m) to defer
repayment of a loan made with proceeds made available under that subsection, if such loan

Page 87 of 89
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was incurred by a small business concern that is eligible to apply for assistance under
subsection (b)(3); and
(B) not later than 30 days after the date of the enactment of this subsection [enacted Aug.
17, 1999], establish guidelines to—
(i) encourage lenders and other intermediaries to defer repayment of, or provide other
relief relating to, loan guarantees under subsection (a) and financings under section 504
of the Small Business Investment Act of 1958 [15 USCS § 697a] that were incurred by
small business concerns that are eligible to apply for assistance under subsection (b)(3),
and loan guarantees provided under subsection (m) if the intermediary provides relief
to a small business concern under this paragraph; and
(ii) implement a program to provide for the deferral of repayment or other relief to any
intermediary providing relief to a small business borrower under this paragraph.

History

HISTORY:
July 18, 1958, P. L. 85-536, § 2 [7], 72 Stat. 387; Aug. 21, 1958, P. L. 85-699, Title VI, § 602(c), 72 Stat.
698; Sept. 22, 1959, P. L. 86-367, § 2, 73 Stat. 647; June 30, 1961, P. L. 87-70, Title III, § 305(a), 75 Stat.
167; Sept. 26, 1961, P. L. 87-305, § 9, 75 Stat. 668; Feb. 5, 1964, P. L. 88-264, § 1, 78 Stat. 7; Sept. 2,
1964, P. L. 88-560, Title III, § 319, 78 Stat. 794; June 30, 1965, P. L. 89-59, § 1(a), (b), 79 Stat. 206; May
2, 1966, P. L. 89-409, § 3(a), 80 Stat. 133; Nov. 6, 1966, P. L. 89-769, § 7(b), 80 Stat. 1319; Oct. 11,
1967, P. L. 90-104, Title I, §§ 103, 104, 81 Stat. 268; Aug. 1, 1968, P. L. 90-448, Title XI, § 1106(a), 82
Stat. 567; Aug. 23, 1968, P. L. 90-495, § 31, 82 Stat. 835; Dec. 30, 1969, P. L. 91-173, Title V, § 504(a),
(b), 83 Stat. 802; Dec. 29, 1970, P. L. 91-596, § 28(a), (b), 84 Stat. 1618; Dec. 29, 1970, P. L. 91-597, §
25(a), (b), 84 Stat. 1633, 1634; Aug. 16, 1972, P. L. 92-385, §§ 1(a), 2(a), 86 Stat. 554, 555; Oct. 18,
1972, P. L. 92-500, § 8(a), 86 Stat. 898; Oct. 27, 1972, P. L. 92-595, § 3(b), 86 Stat. 1316; Jan. 2, 1974, P.
L. 93-237, §§ 2(a), (b), 3(a), 5, 6, 87 Stat. 1023, 1024; Aug. 23, 1974, P. L. 93-386, §§ 2(4), 3(2), 8, 9, 12,
88 Stat. 742, 746, 748, 749; June 4, 1976, P. L. 94-305, Title I, §§ 108(b), 109, 111, 112(c), (d), 114, 90
Stat. 666, 667; Aug. 4, 1977, P. L. 95-89, Title I, § 101(d), (e), Title III, §§ 301, 302, Title IV, §§ 402–
405, 91 Stat. 553, 558–560; July 4, 1978, P. L. 95-315, §§ 2, 3, 92 Stat. 377, 378; Oct. 24, 1978, P. L. 95507, Title II, ch 1, §§ 204, 205, Ch 4, § 231, 92 Stat. 1764, 1766, 1772; Oct. 24, 1978, P. L. 95-510, §
104, 92 Stat. 1782; July 25, 1979, P. L. 96-38, Title I, Ch IX, § 101(a), (b), 93 Stat. 118; July 2, 1980, P.
L. 96-302, Title I, Part B, §§ 119(a), (b), 122–124, Title II, § 203, Title V, § 505, 94 Stat. 840, 841, 843,
848, 852.; Oct. 21, 1980, P. L. 96-481, [Title I], Part A, §§ 104, 106(a), 107, Part B, § 112, 94 Stat. 2322,
2323; Aug. 13, 1981, P. L. 97-35, Title XIX, §§ 1902, 1911–1913(a), (c), 1914, 95 Stat. 767, 778–780;
Aug. 13, 1981, P. L. 97-35, Title XIX, § 1910, 95 Stat. 778; April 18, 1984, P. L. 98-270, Title III, §§
301, 304, 308, 309, 311, 98 Stat. 159–161; Aug. 21, 1984, P. L. 98-395, § 5, 98 Stat 1368; April 7, 1986,
P. L. 99-272, Title XVIII, §§ 18006(a)(1), (2), 18007, 18013, 100 Stat. 366, 370; Aug. 23, 1988, P. L.
100-418, Title VIII, §§ 8005, 8007(a), 102 Stat. 1557, 1559; Oct. 25, 1988, P. L. 100-533, Title III, §
302(a), 102 Stat. 2693; Nov. 3, 1988, P. L. 100-590, Title I, §§ 102(a), 103, 111(c), 119(a), 120-122, 102
Stat. 2992, 2995, 2999, 3000; Nov. 15, 1988, P. L. 100-656, Title II, §§ 201(a), 202, 205, 206, 208, Title
III, §§ 301, 302, 303(a), Title IV, § 408, Title V, § 505(h), 102 Stat. 3856, 3858, 3859, 3861, 3862, 3865,
3867, 3868, 3877, 3887); Nov. 23, 1988, P. L. 100-707, Title I, § 109(f), 102 Stat. 4708; June 15, 1989, P.

Page 88 of 89
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L. 101-37, §§ 4, 5, 6(a), 7(a), 8, 9, 10(a), (b), 103 Stat. 70-73; Nov. 21, 1989, P. L. 101-162, Title V, §§
(1), (2), 103 Stat. 1024, 1025; Nov. 15, 1990, P. L. 101-574, Title II, Part A, §§ 202, 204(a), 206, Part E,
§§ 242, 245, Title III, § 307, 104 Stat. 2818-2820, 2827, 2830; Oct. 28, 1991, P. L. 102-140, Title VI, §
609(b), (h), 105 Stat. 825, 827; Dec. 5, 1991, P. L. 102-191, § 4, 105 Stat. 1591; Sept. 4, 1992, P. L. 102366, Title I, Subtitle A, § 104, Subtitle B, § 113(a), Title II, Subtitle B, § 211, 106 Stat. 988, 989, 997;
Oct. 28, 1992, P. L. 102-564, Title III, § 307(b), (c), 106 Stat. 4263; Aug. 13, 1993, P. L. 103-81, §§ 4,
5(a), 7, 8, 107 Stat. 781, 782; Oct. 22, 1994, P. L. 103-403, Title II, §§ 201, 202, 204–208(a), (b), 209–
211, 311, Title VI, §§ 603–605(a), 108 Stat. 4180–4183, 4202, 4203.; Oct. 12, 1995, P. L. 104-36, §§ 2, 3,
4(a), 5, 109 Stat. 295, 297; Sept. 30, 1996, P. L. 104-208, Div D, Title I, §§ 103(a)–(d), (f), 105, 107, 111,
110 Stat. 3009-726, 3009-727, 3009-731, 3009-732, 3009-733; Dec. 2, 1997, P. L. 105-135, Title II,
Subtitle A, §§ 201–202(a), Subtitle C, § 231, Title VII, § 706, 111 Stat. 2597, 2606, 2637; Oct. 21, 1998,
P. L. 105-277, Div A, § 101(f) [Title VIII, Subtitle IV, § 405(d)(10), (f)(9)], 112 Stat. 2681-420, 2681430; April 2, 1999, P. L. 106-8, § 3(a), 113 Stat. 13; April 27, 1999, P. L. 106-22, §§ 2, 3, 113 Stat. 36;
April 27, 1999, P. L. 106-24, § 1(a), 113 Stat. 39; Aug. 17, 1999, P. L. 106-50, Title IV, §§ 401(b),
402(a), (b), 403, 404, 113 Stat. 244, 246; Dec. 21, 2000, P. L. 106-554, § 1(a)(9), 114 Stat. 2763; Dec. 21,
2001, P. L. 107-100, § 6(a), 115 Stat. 970; Dec. 8, 2004, Div K, Title I, Subtitle A, §§ 101(a), 102, 103(a),
107(a), (b), 118 Stat. 3442, 3443, 3445; Jan. 6, 2006, P. L. 109-163, Div A, Title VIII, Subtitle E, §
845(a)(2), (c), 119 Stat. 3390, 3391; Dec. 19, 2007, P. L. 110-140, Title XII, §§ 1201, 1202, 121 Stat.
1764; Feb. 14, 2008, P. L. 110-186, Title II, §§ 201(a), 203, 204, 208, 122 Stat. 627, 629, 631; May 22,
2008, P. L. 110-234, Title XII, Subtitle B, Part I, §§ 12061, 12063(a), (c)(2), 12065, 12066(a), 12068(a),
(b)(2), 12070, 12074, 12077, 12078(a), (b)(1), (c), Part II, §§ 12081–12083(a), 122 Stat. 1406, 1407,
1409, 1410, 1411, 1414, 1415, 1416.; June 18, 2008, P. L. 110-246, § 4(a), Title XII, Subtitle B, Part I, §§
12061, 12063(a), (c)(2), 12065, 12066(a), 12068(a), (b)(2), 12070, 12074, 12077, 12078(a), (b)(1), (c),
Part II, §§ 12081–12083(a), 122 Stat. 1664, 2168, 2169, 2171, 2172, 2173, 2176, 2177, 2178.; Sept. 27,
2010, P. L. 111-240, Title I, Subtitle A, Part I, §§ 1111, 1113, Part III, §§ 1131(a), 1133, 1135, Subtitle B,
§ 1206(a)–(g), Subtitle D, § 1401(a), (c)(1), 124 Stat. 2507, 2508, 2512, 2514, 2520, 2530, 2547, 2549;
Dec. 23, 2011, P. L. 112-74, Div C, Title V, § 531, 125 Stat. 922; Jan. 2, 2013, P. L. 112-239, Div A, Title
XVI, Subtitle C, Part I, § 1622(c), 126 Stat. 2069; July 22, 2014, P. L. 113-128, Title V, Subtitle B, §
512(cc), 128 Stat. 1717; July 28, 2015, P. L. 114-38, §§ 2, 4(b), 129 Stat. 437, 438; Nov. 25, 2015, P. L.
114-88, Div A, Title I, §§ 1101–1104, Div B, Title I, §§ 2101, 2102(a), (b), 2105–2107, 2109, Title II, §
2201, Title III, §§ 2301(a), 129 Stat. 687, 688, 689, 690, 692, 694–696.; Nov. 25, 2015, P. L. 114-92, Div
A, Title VIII, Subtitle F, § 865(a)(2), 129 Stat. 928; March 23, 2018, P. L. 115-141, Div E, Title V, § 532,
132 Stat. 581; June 21, 2018, P.L. 115-189, § 4(a)(2), 132 Stat. 1497; Aug. 13, 2018, P.L. 115-232, Div
A, Title VIII, Subtitle F, §§ 853(b), 861(c), 862(b)(1), (f), 132 Stat. 1885, 1896, 1897, 1900; Dec. 21,
2018, P.L. 115-370, § 2, 132 Stat. 5105; Dec. 20, 2019, P.L. 116-92, Div A, Title VIII, Subtitle G, §
877(a), 133 Stat. 1529; Mar. 27, 2020, P.L. 116-136, Div A, Title I, §§ 1102(a), (c), (d), 1110(f), 134 Stat.
286, 294, 308; Apr. 24, 2020, P.L. 116-139, Div A, § 101(d), 134 Stat. 621; June 5, 2020, P.L. 116-142,
§§ 2(a), 3(a), (c), 134 Stat. 641, 642; Dec. 27, 2020, P.L. 116-260, Div N, Title III, §§ 304(a),
(b)(1)(C)(ii), 308(a), 310(a)(1), (b), 311(a), 313(a), 315(a), 316-319, 326, 329(a), 334, 335(a), 336(a),
337(a), 338(a), 339(b), 340(a), (b)(1), 341, 342, 343(a), 344, 134 Stat. 1993, 1994, 2000, 2001, 2008,
2011, 2013, 2015, 2036, 2041, 2047-2051; Jan. 1, 2021, P.L. 116-283, Div A, Title VIII, Subtitle E, §
866(b)(1), (2), 134 Stat. 3785, 3786; Mar. 11, 2021, P.L. 117-2, Title V, § 5001(a), (b), (c)(2), 135 Stat.
81, 83, 84; Mar. 30, 2021, P.L. 117-6, § 2(a), 135 Stat. 250.
United States Code Service
Copyright © 2022 Matthew Bender & Company, Inc.

Page 89 of 89
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a member of the LexisNexis Group (TM) All rights reserved.

End of Document

15 USCS § 650
Current through Public Law 117-130, approved June 6, 2022.
United States Code Service > TITLE 15. COMMERCE AND TRADE (Chs. 1 — 120) > CHAPTER 14A. AID
TO SMALL BUSINESS (§§ 631 — 657u)

§ 650. Supervisory and enforcement authority for small business lending companies
(a) In general. The Administrator is authorized—
(1) to supervise the safety and soundness of small business lending companies and nonFederally regulated lenders;
(2) with respect to small business lending companies to set capital standards to regulate, to
examine, and to enforce laws governing such companies, in accordance with the purposes of
this Act; and
(3) with respect to non-Federally regulated lenders to regulate, to examine, and to enforce
laws governing the lending activities of such lenders under section 7(a) [15 USCS § 636(a)] in
accordance with the purposes of this Act.
(b) Capital directive.
(1) In general. If the Administrator determines that a small business lending company is being
operated in an imprudent manner, the Administrator may, in addition to any other action
authorized by law, issue a directive to such company to increase capital to such level as the
Administrator determines will result in the safe and sound operation of such company.
(2) Delegation. The Administrator may not delegate the authority granted under paragraph (1)
except to an Associate Deputy Administrator.
(3) Regulations. The Administrator shall issue regulations outlining the conditions under
which the Administrator may determine the level of capital pursuant to paragraph (1).
(c) Civil action. If a small business lending company violates this Act, the Administrator may
institute a civil action in an appropriate district court to terminate the rights, privileges, and
franchises of the company under this Act.
(d) Revocation or suspension of loan authority.
(1) The Administrator may revoke or suspend the authority of a small business lending
company or a non-Federally regulated lender to make, service or liquidate business loans
authorized by section 7(a) of this Act [15 USCS § 636(a)]—
(A) for false statements knowingly made in any written submission required under this
Act;
(B) for omission of a material fact from any written submission required under this Act;
(C) for willful or repeated violation of this Act;

Page 2 of 7
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(D) for willful or repeated violation of any condition imposed by the Administrator with
respect to any application, request, or agreement under this Act; or
(E) for violation of any cease and desist order of the Administrator under this section.
(2) The Administrator may revoke or suspend authority under paragraph (1) only after a
hearing under subsection (f). The Administrator may delegate power to revoke or suspend
authority under paragraph (1) only to the Deputy Administrator and only if the Administrator
is unavailable to take such action.
(A) The Administrator, after finding extraordinary circumstances and in order to protect
the financial or legal position of the United States, may issue a suspension order without
conducting a hearing pursuant to subsection (f). If the Administrator issues a suspension
under the preceding sentence, the Administrator shall within two business days follow the
procedures set forth in subsection (f).
(B) Any suspension under paragraph (1) shall remain in effect until the Administrator
makes a decision pursuant to subparagraph (4) to permanently revoke the authority of the
small business lending company or non-Federally regulated lender, suspend the authority
for a time certain, or terminate the suspension.
(3) The small business lending company or non-Federally regulated lender must notify
borrowers of a revocation and that a new entity has been appointed to service their loans. The
Administrator or an employee of the Administration designated by the Administrator may
provide such notice to the borrower.
(4) Any revocation or suspension under paragraph (1) shall be made by the Administrator
except that the Administrator shall delegate to an administrative law judge as that term is used
in section 3105 of title 5, United States Code, the authority to conduct any hearing required
under subsection (f). The Administrator shall base the decision to revoke on the record of the
hearing.
(e) Cease and desist order.
(1) Where a small business lending company, a non-Federally regulated lender, or other
person violates this Act or is engaging or is about to engage in any acts or practices which
constitute or will constitute a violation of this Act, the Administrator may order, after the
opportunity for hearing pursuant to subsection (f), the company, lender, or other person to
cease and desist from such action or failure to act. The Administrator may delegate the
authority under the preceding sentence only to the Deputy Administrator and only if the
Administrator is unavailable to take such action.
(2) The Administrator, after finding extraordinary circumstances and in order to protect the
financial or legal position of the United States, may issue a cease and desist order without
conducting a hearing pursuant to subsection (f). If the Administrator issues a cease and desist
order under the preceding sentence, the Administrator shall within two business days follow
the procedures set forth in subsection (f).
(3) The Administrator may further order such small business lending company or nonFederally regulated lender or other person to take such action or to refrain from such action as
the Administrator deems necessary to insure compliance with this Act.

Page 3 of 7
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(4) A cease and desist order under this subsection may also provide for the suspension of
authority to lend in subsection (d).
(f) Procedure for revocation or suspension of loan authority and for cease and desist order.
(1) Before revoking or suspending authority under subsection (d) or issuing a cease and desist
order under subsection (e), the Administrator shall serve an order to show cause upon the small
business lending company, non-Federally regulated lender, or other person why an order
revoking or suspending the authority or a cease and desist order should not be issued. The
order to show cause shall contain a statement of the matters of fact and law asserted by the
Administrator and the legal authority and jurisdiction under which a hearing is to be held, and
shall set forth that a hearing will be held before an administrative law judge at a time and place
stated in the order. Such hearing shall be conducted pursuant to the provisions of sections 554,
556, and 557 of title 5, United States Code. If after hearing, or a waiver thereof, the
Administrator determines that an order revoking or suspending the authority or a cease and
desist order should be issued, the Administrator shall promptly issue such order, which shall
include a statement of the findings of the Administrator and the grounds and reasons therefor
and specify the effective date of the order, and shall cause the order to be served on the small
business lending company, non-Federally regulated lender, or other person involved.
(2) Witnesses summoned before the Administrator shall be paid by the party at whose instance
they were called the same fees and mileage that are paid witnesses in the courts of the United
States.
(3) A cease and desist order, suspension or revocation issued by the Administrator, after the
hearing under this subsection is final agency action for purposes of chapter 7 of title 5, United
States Code [5 USCS §§ 701 et seq.]. An adversely aggrieved party shall have 20 days from
the date of issuance of the cease and desist order, suspension or revocation, to seek judicial
review in an appropriate district court.
(g) Removal or suspension of management official.
(1) Definition. In this section, the term “management official” means, with respect to a small
business lending company or a non-Federally regulated lender, an officer, director, general
partner, manager, employee, agent, or other participant in the management of the affairs of the
company’s or lender’s activities under section 7(a) of this Act [15 USCS § 636(a)].
(2) Removal of management official.
(A) Notice. The Administrator may serve upon any management official a written notice
of its intention to remove that management official if, in the opinion of the Administrator,
the management official—
(i) willfully and knowingly commits a substantial violation of—
(I) this Act;
(II) any regulation issued under this Act;
(III) a final cease-and-desist order under this Act; or
(IV) any agreement by the management official, the small business lending
company or non-Federally regulated lender under this Act; or

Page 4 of 7
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(ii) willfully and knowingly commits a substantial breach of a fiduciary duty of that
person as a management official and the violation or breach of fiduciary duty is one
involving personal dishonesty on the part of such management official.
(B) Contents of notice. A notice under subparagraph (A) shall contain a statement of the
facts constituting grounds therefor and shall fix a time and place at which a hearing,
conducted pursuant to sections 554, 556, and 557 of title 5, United States Code, will be
held thereon.
(C) Hearing.
(i) Timing. A hearing under subparagraph (B) shall be held not earlier than 30 days
and later than 60 days after the date of service of notice of the hearing, unless an earlier
or a later date is set by the Administrator at the request of—
(I) the management official, and for good cause shown; or
(II) the Attorney General.
(ii) Consent. Unless the management official appears at a hearing under this paragraph
in person or by a duly authorized representative, the management official shall be
deemed to have consented to the issuance of an order of removal under subparagraph
(A).
(D) Order of removal.
(i) In general. In the event of consent under subparagraph (C)(ii), or if upon the record
made at a hearing under this subsection, the Administrator finds that any of the grounds
specified in the notice of removal has been established, the Administrator may issue
such orders of removal from office as the Administrator deems appropriate.
(ii) Effectiveness. An order under clause (i) shall—
(I) take effect 30 days after the date of service upon the subject small business
lending company or non-Federally regulated lender and the management official
concerned (except in the case of an order issued upon consent as described in
subparagraph (C)(ii), which shall become effective at the time specified in such
order); and
(II) remain effective and enforceable, except to such extent as it is stayed,
modified, terminated, or set aside by action of the Administrator or a reviewing
court in accordance with this section.
(3) Authority to suspend or prohibit participation.
(A) In general. In order to protect a small business lending company, a non-Federally
regulated lender or the interests of the Administration or the United States, the
Administrator may suspend from office or prohibit from further participation in any
manner in the management or conduct of the affairs of a small business lending company
or a non-Federally regulated lender a management official by written notice to such effect
served upon the management official. Such suspension or prohibition may prohibit the
management official from making, servicing, reviewing, approving, or liquidating any loan
under section 7(a) of this Act [15 USCS § 636(a)].

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(B) Effectiveness. A suspension or prohibition under subparagraph (A)—
(i) shall take effect upon service of notice under paragraph (2); and
(ii) unless stayed by a court in proceedings authorized by subparagraph (C), shall
remain in effect—
(I) pending the completion of the administrative proceedings pursuant to a notice
of intention to remove served under paragraph (2); and
(II) until such time as the Administrator dismisses the charges specified in the
notice, or, if an order of removal or prohibition is issued against the management
official, until the effective date of any such order.
(C) Judicial review of suspension prior to hearing. Not later than 10 days after a
management official is suspended or prohibited from participation under subparagraph (A),
the management official may apply to an appropriate district court for a stay of the
suspension or prohibition pending the completion of the administrative proceedings
pursuant to a notice of intent to remove served upon the management official under
paragraph (2).
(4) Authority to suspend on criminal charges.
(A) In general. If a management official is charged in any information, indictment, or
complaint authorized by a United States attorney, with a felony involving dishonesty or
breach of trust, the Administrator may, by written notice served upon the management
official, suspend the management official from office or prohibit the management official
from further participation in any manner in the management or conduct of the affairs of the
small business lending company or non-Federally regulated lender.
(B) Effectiveness. A suspension or prohibition under subparagraph (A) shall remain in
effect until the information, indictment, or complaint is finally disposed of, or until
terminated by the Administrator or upon an order of a district court.
(C) Authority upon conviction. If a judgment of conviction with respect to an offense
described in subparagraph (A) is entered against a management official, then at such time
as the judgment is not subject to further judicial review (and for purposes of this
subparagraph shall not include any petition for a writ of habeas corpus), the Administrator
may issue and serve upon the management official an order removing the management
official, effective upon service of a copy of the order upon the small business lending
company or non-Federally regulated lender.
(D) Authority upon dismissal or other disposition. A finding of not guilty or other
disposition of charges described in subparagraph (A) shall not preclude the Administrator
from instituting proceedings under subsection (e) or (f).
(5) Notification to small business lending company or a non-Federally regulated lender.
Copies of each notice required to be served on a management official under this section shall
also be served upon the small business lending company or non-Federally regulated lender
involved.
(6) Final agency action and judicial review.

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(A) Issuance of orders. After a hearing under this subsection, and not later than 30 days
after the Administrator notifies the parties that the case has been submitted for final
decision, the Administrator shall render a decision in the matter (which shall include
findings of fact upon which its decision is predicated), and shall issue and cause to be
served upon each party to the proceeding an order or orders consistent with this section.
The decision of the Administrator shall constitute final agency action for purposes of
chapter 7 of title 5, United States Code [5 USCS §§ 701 et seq.].
(B) Judicial review. An adversely aggrieved party shall have 20 days from the date of
issuance of the order to seek judicial review in an appropriate district court.
(h) Appointment of receiver.
(1) In any proceeding under subsection (f)(4) or subsection (g)(6)(C), the court may take
exclusive jurisdiction of a small business lending company or a non-Federally regulated lender
and appoint a receiver to hold and administer the assets of the company or lender.
(2) Upon request of the Administrator, the court may appoint the Administrator as a receiver
under paragraph (1).
(i) Possession of assets.
(1) If a small business lending company or a non-Federally regulated lender is not in
compliance with capital requirements or is insolvent, the Administrator may take possession of
the portfolio of loans guaranteed by the Administrator and sell such loans to a third party by
means of a receiver appointed under subsection (h).
(2) If a small business lending company or a non-Federally regulated lender is not in
compliance with capital requirements or is insolvent or otherwise operating in an unsafe and
unsound condition, the Administrator may take possession of servicing activities of loans that
are guaranteed by the Administrator and sell such servicing rights to a third party by means of
a receiver appointed under subsection (h).
(j) Penalties and forfeitures.
(1) Except as provided in paragraph (2), a small business lending company or a non-Federally
regulated lender which violates any regulation or written directive issued by the Administrator
regarding the filing of any regular or special report shall pay to the United States a civil
penalty of not more than $5,000 for each day of the continuance of the failure to file such
report, unless it is shown that such failure is due to reasonable cause and not due to willful
neglect. The civil penalties under this subsection may be enforced in a civil action brought by
the Administrator. The penalties under this subsection shall not apply to any affiliate of a small
business lending company that procures at least 10 percent of its annual purchasing
requirements from small manufacturers.
(2) The Administrator may by rules and regulations that shall be codified in the Code of
Federal Regulations, after an opportunity for notice and comment, or upon application of an
interested party, at any time previous to such failure, by order, after notice and opportunity for
hearing which shall be conducted pursuant to sections 554, 556, and 557 of title 5, United
States Code, exempt in whole or in part, any small business lending company or non-Federally
regulated lender from paragraph (1), upon such terms and conditions and for such period of
time as it deems necessary and appropriate, if the Administrator finds that such action is not

Page 7 of 7
15 USCS § 650

inconsistent with the public interest or the protection of the Administration. The Administrator
may for the purposes of this section make any alternative requirements appropriate to the
situation.

History

HISTORY:
July 18, 1958, P. L. 85-536, § 2 [23], as added Oct. 12, 1984, P. L. 98-473, Title I, § 111A, 98 Stat. 1965;
Dec. 8, 2004, P. L. 108-447, Div K, Title I, Subtitle F, § 161, 118 Stat. 3458.
United States Code Service
Copyright © 2022 Matthew Bender & Company, Inc.
a member of the LexisNexis Group (TM) All rights reserved.

End of Document

15 USCS § 657t
Current through Public Law 117-130, approved June 6, 2022.
United States Code Service > TITLE 15. COMMERCE AND TRADE (Chs. 1 — 120) > CHAPTER 14A. AID
TO SMALL BUSINESS (§§ 631 — 657u)

§ 657t. Office of Credit Risk Management
(a) Establishment. There is established within the Administration the Office of Credit Risk
Management (in this section referred to as the “Office”).
(b) Duties. The Office shall be responsible for supervising—
(1) any lender making loans under section 7(a) [15 USCS § 636(a)] (in this section referred to
as a “7(a) lender”);
(2) any Lending Partner or Intermediary participant of the Administration in a lending
program of the Office of Capital Access of the Administration; and
(3) any small business lending company or a non-Federally regulated lender without regard to
the requirements of section 23 [15 USCS § 650].
(c) Director.
(1) In general. The Office shall be headed by the Director of the Office of Credit Risk
Management (in this section referred to as the “Director”), who shall be a career appointee in
the Senior Executive Service (as defined in section 3132 of title 5, United States Code).
(2) Duties. The Director shall be responsible for oversight of the lenders and participants
described in subsection (b), including by conducting periodic reviews of the compliance and
performance of such lenders and participants.
(d) Supervision duties for 7(a) lenders.
(1) Reviews. With respect to 7(a) lenders, an employee of the Office shall—
(A) be present for and supervise any such review that is conducted by a contractor of the
Office on the premise [premises] of the 7(a) lender; and
(B) supervise any such review that is not conducted on the premise [premises] of the 7(a)
lender.
(2) Review report timeline.
(A) In general Notwithstanding any other requirements of the Office or the Administrator,
the Administrator shall develop and implement a review report timeline which shall—
(i) require the Administrator to—
(I) deliver a written report of the review to the 7(a) lender not later than 60
business days after the date on which the review is concluded; or

Page 2 of 4
15 USCS § 657t

(II) if the Administrator expects to submit the report after the end of the 60-day
period described in clause (i), notify the 7(a) lender of the expected date of
submission of the report and the reason for the delay; and
(ii) if a response by the 7(a) lender is requested in a report submitted under
subparagraph (A), require the 7(a) lender to submit responses to the Administrator not
later than 45 business days after the date on which the 7(a) lender receives the report.
(B) Extension. The Administrator may extend the time frame described in subparagraph
(A)(i)(II) with respect to a 7(a) lender as the Administrator determines necessary.
(e) Enforcement authority against 7(a) lenders.
(1) Informal enforcement authority. The Director may take an informal enforcement action
against a 7(a) lender if the Director finds that the 7(a) lender has violated a statutory or
regulatory requirement under section 7(a) or any requirement in a Standard Operating
Procedures Manual or Policy Notice related to a program or function of the Office of Capital
Access.
(2) Formal enforcement authority.
(A) In general. With the approval of the Lender Oversight Committee established under
section 48 [15 USCS § 657u], the Director may take a formal enforcement action against
any 7(a) lender if the Director finds that the 7(a) lender has violated—
(i) a statutory or regulatory requirement under section 7(a) [15 USCS § 636(a)],
including a requirement relating to credit elsewhere; or
(ii) any requirement described in a Standard Operating Procedures Manual or Policy
Notice, related to a program or function of the Office of Capital Access.
(B) Enforcement actions. An enforcement action imposed on a 7(a) lender by the Director
under subparagraph (A) shall be based on the severity or frequency of the violation and
may include assessing a civil monetary penalty against the 7(a) lender in an amount that is
not greater than $250,000.
(3) Appeal by lender. A 7(a) lender may appeal an enforcement action imposed by the
Director described in this subsection to the Office of Hearings and Appeals established under
section 5(i) [15 USCS § 634(i)] or to an appropriate district court of the United States.
(f) Regulations. Not later than 1 year after the date of the enactment of this section [enacted June
21, 2018], the Administrator shall issue regulations, after opportunity for notice and comment, to
carry out subsection (e).
(g) Servicing and liquidation responsibilities. During any period during which a 7(a) lender is
suspended or otherwise prohibited from making loans under section 7(a) [15 USCS § 636(a)], the
7(a) lender shall remain obligated to maintain all servicing and liquidation activities delegated to
the lender by the Administrator, unless otherwise specified by the Director.
(h) Portfolio risk analysis of 7(a) loans.
(1) In general. The Director shall annually conduct a risk analysis of the portfolio of the
Administration with respect to all loans guaranteed under section 7(a) [15 USCS § 636(a)].

Page 3 of 4
15 USCS § 657t

(2) Report to congress. On December 1, 2018, and every December 1 thereafter, the Director
shall submit to Congress a report containing the results of each portfolio risk analysis
conducted under paragraph (1) during the fiscal year preceding the submission of the report,
which shall include—
(A) an analysis of the overall program risk of loans guaranteed under section 7(a) [15
USCS § 636(a)];
(B) an analysis of the program risk, set forth separately by industry concentration;
(C) without identifying individual 7(a) lenders by name, a consolidated analysis of the risk
created by the individual 7(a) lenders responsible for not less than 1 percent of the gross
loan approvals set forth separately for the year covered by the report by—
(i) the dollar value of the loans made by such 7(a) lenders; and
(ii) the number of loans made by such 7(a) lenders;
(D) steps taken by the Administrator to mitigate the risks identified in subparagraphs (A),
(B), and (C);
(E) the number of 7(a) lenders, the number of loans made, and the gross and net dollar
amount of loans made;
(F) the number and dollar amount of total losses, the number and dollar amount of total
purchases, and the percentage and dollar amount of recoveries at the Administration;
(G) the number and type of enforcement actions recommended by the Director;
(H) the number and type of enforcement actions approved by the Lender Oversight
Committee established under section 48 [15 USCS § 657u];
(I) the number and type of enforcement actions disapproved by the Lender Oversight
Committee; and
(J) the number and dollar amount of civil monetary penalties assessed.
(i) Budget submission and justification. The Director shall annually provide, in writing, a fiscal
year budget submission for the Office and a justification for such submission to the Administrator.
Such submission and justification shall—
(1) include salaries and expenses of the Office and the charge for the lender oversight fees;
(2) be submitted at or about the time of the budget submission by the President under section
1105(a) of title 31 [31 USCS § 1105a]; and
(3) be maintained in an indexed form and made available for public review for a period of not
less than 5 years beginning on the date of submission and justification.

History

July 18, 1958, P. L. 85-536, § 2 [47], as added and amended June 21, 2018, P. L. 115-189, § 3(a)(2), (b),
132 Stat. 1492, 1495.

Page 4 of 4
15 USCS § 657t

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15 USCS § 697e
Current through Public Law 117-130, approved June 6, 2022.
United States Code Service > TITLE 15. COMMERCE AND TRADE (Chs. 1 — 120) > CHAPTER 14B.
SMALL BUSINESS INVESTMENT PROGRAM (§§ 661 — 697g) > LOANS TO STATE AND LOCAL
DEVELOPMENT COMPANIES (§§ 695 — 697g)

§ 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 loans and servicing its loan portfolio;
(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) [if] the 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,

Page 2 of 7
15 USCS § 697e

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 the date of the
enactment of this subparagraph [enacted 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.

Page 3 of 7
15 USCS § 697e

(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

Page 4 of 7
15 USCS § 697e

(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 purpose 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 the date of the enactment of this paragraph [enacted 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;

Page 5 of 7
15 USCS § 697e

(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 the date of the enactment of this paragraph
[enacted 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 the date of the enactment of this Act—
(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 section 503(b)(6) [15 USCS § 697(b)(6)], and subject to such
terms and conditions as the Administration may establish, the Administration may permit a
company designated as a premier certified lender under this section to approve, authorize,

Page 6 of 7
15 USCS § 697e

close, service, foreclose, litigate (except that the Administration may monitor the conduct of
any such litigation to which a premier certified lender is a party), and liquidate loans that are
funded with the proceeds of a debenture issued by such company and may authorize the
guarantee of such debenture.
(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 section
503(a) [15 USCS § 697(a)], but such final approval shall not include review of decisions by the
lender involving creditworthiness, loan closing, or compliance with legal requirements
imposed by law or regulation.
(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 section 504 [15 USCS § 697a] pursuant to the program
authorized under this section.
(j) Report. Not later than 1 year after the date of enactment of this Act, 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.

History

Page 7 of 7
15 USCS § 697e

HISTORY:
Aug. 21, 1958, P. L. 85-699, Title V, § 508, as added Oct. 22, 1994, P. L. 103-403, Title II, § 217(a), 108
Stat. 4185; Dec. 2, 1997, P. L. 105-135, Title II, Subtitle C, § 223(a), 111 Stat. 2604; Dec. 21, 2000, P. L.
106-554, § 1(a)(9), 114 Stat. 2763; May 28, 2004, P. L. 108-232, §§ 2, 3(a)–(c), 118 Stat. 649.
United States Code Service
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13 CFR 120.440
This document is current through the June 13, 2022 issue of the Federal Register, with the exception of
the amendments appearing at 87 FR 34131, 87 FR 34154, 87 FR 35660, and 87 FR 35675.
Code of Federal Regulations > Title 13 Business Credit and Assistance > Chapter I — Small Business
Administration > Part 120 — Business Loans > Subpart D — Lenders > Delegated Authority Criteria

§ 120.440 How does a 7(a) Lender obtain delegated authority?
(a) In making its decision to grant or renew a delegated authority, SBA considers whether the Lender,
as determined by SBA in its discretion:
(1) Has the continuing ability to evaluate, process, close, disburse, service, liquidate and
litigate SBA loans. This includes the ability to develop and analyze complete loan packages.
SBA may consider the experience and capability of Lender’s management and staff.
(2) Has satisfactory SBA performance (as defined in § 120.410(a)(2));
(3) Is in compliance with SBA Loan Program Requirements (e.g., Form 1502 reporting, timely
payment of all fees to SBA);
(4) Has completed to SBA’s satisfaction all required corrective actions;
(5) Whether Lender is subject to any enforcement action, order or agreement with a regulator
or the presence of other regulatory concerns as determined by SBA; and
(6) Whether Lender exhibits other risk factors (e.g., has rapid growth; low SBA activity; SBA
loan volume; Lender, an officer or director is under investigation or indictment).
(b) Delegated authority decisions are made by the appropriate SBA official in accordance with
Delegations of Authority, and are final.
(c) If delegated authority is approved or renewed, Lender must execute a Supplemental Guarantee
Agreement, which will specify a term not to exceed two years. SBA may grant shortened renewals
based on risk or any of the other delegated authority criteria. Lenders with less than 3 years of SBA
lending experience will be limited to a term of 1 year or less.

Statutory Authority
Authority Note Applicable to 13 CFR Ch. I, Pt. 120

History

[61 FR 3226, 3248, Jan. 31, 1996, as corrected at 61 FR 7985, 7986, Mar. 1, 1996; 72 FR 18349, 18360,
Apr. 12, 2007; 82 FR 39491, 39503, Aug. 21, 2017; 85 FR 80581, 80588, Dec. 14, 2020]

Page 2 of 2
13 CFR 120.440

Annotations

Notes

[EFFECTIVE DATE NOTE:
82 FR 39491 , 39503, Aug. 21, 2017, revised this section, effective Sept. 20, 2017; 85 FR 7622 , 7648,
Feb. 10, 2020, revised paragraph (c), effective Mar. 11, 2020; 85 FR 80581, 80588, Dec. 14, 2020, revised
paragraph (c), effective Mar. 27, 2020.]

Research References & Practice Aids

Hierarchy Notes:
13 CFR Ch. I
13 CFR Ch. I, Pt. 120
LEXISNEXIS’ CODE OF FEDERAL REGULATIONS
Copyright © 2022 All rights reserved.

End of Document

13 CFR 120.1000
This document is current through the June 13, 2022 issue of the Federal Register, with the exception of
the amendments appearing at 87 FR 34131, 87 FR 34154, 87 FR 35660, and 87 FR 35675.
Code of Federal Regulations > Title 13 Business Credit and Assistance > Chapter I — Small Business
Administration > Part 120 — Business Loans > Subpart I — Risk-Based Lender Oversight > Supervision

§ 120.1000 Risk-Based Lender Oversight.
(a) Risk-Based Lender Oversight. SBA monitors, supervises, examines, regulates, and enforces laws
against SBA Supervised Lenders and the SBA operations of SBA Lenders and Intermediaries.
(b) Scope. Most rules and standards set forth in this subpart apply to SBA Lenders as well as
Intermediaries; however, SBA has separate regulations for enforcement grounds and formal
enforcement actions for Intermediaries at §§ 120.1425 and 120.1540.

Statutory Authority
Authority Note Applicable to 13 CFR Ch. I, Pt. 120

History

[73 FR 75498, 75519, Dec. 11, 2008; 85 FR 14772, 14781, Mar. 16, 2020, amended this section, effective
Apr. 15, 2020]
Annotations

Notes

[EFFECTIVE DATE NOTE:
73 FR 75498 , 75519, Dec. 11, 2008, added this section, effective Jan. 12, 2009; 85 FR 14772 , 14781,
Mar. 16, 2020, revised this section, effective Apr. 15, 2020.]

Research References & Practice Aids

Hierarchy Notes:
13 CFR Ch. I

Page 2 of 2
13 CFR 120.1000

13 CFR Ch. I, Pt. 120
LEXISNEXIS’ CODE OF FEDERAL REGULATIONS
Copyright © 2022 All rights reserved.

End of Document

13 CFR 120.1025
This document is current through the June 13, 2022 issue of the Federal Register, with the exception of
the amendments appearing at 87 FR 34131, 87 FR 34154, 87 FR 35660, and 87 FR 35675.
Code of Federal Regulations > Title 13 Business Credit and Assistance > Chapter I — Small Business
Administration > Part 120 — Business Loans > Subpart I — Risk-Based Lender Oversight > Supervision

§ 120.1025 Monitoring.
SBA may conduct monitoring of SBA Lenders and Intermediaries including, but not limited to,
SBA Lenders’ or Intermediaries’ self-assessments.

Statutory Authority
Authority Note Applicable to 13 CFR Ch. I, Pt. 120

History

[73 FR 75498, 75519, Dec. 11, 2008; 82 FR 39491, 39504, Aug. 21, 2017; 85 FR 14772, 14781, Mar. 16,
2020]
Annotations

Notes

[EFFECTIVE DATE NOTE:
73 FR 75498 , 75519, Dec. 11, 2008, added this section, effective Jan. 12, 2009; 82 FR 39491 , 39504,
Aug. 21, 2017, amended this section, Sept. 20, 2017; 85 FR 14772 , 14781, Mar. 16, 2020, revised this
section, effective Apr. 15, 2020.]

Research References & Practice Aids

Hierarchy Notes:
13 CFR Ch. I
13 CFR Ch. I, Pt. 120
LEXISNEXIS’ CODE OF FEDERAL REGULATIONS

Page 2 of 2
13 CFR 120.1025
Copyright © 2022 All rights reserved.

End of Document

13 CFR 120.1050
This document is current through the June 13, 2022 issue of the Federal Register, with the exception of
the amendments appearing at 87 FR 34131, 87 FR 34154, 87 FR 35660, and 87 FR 35675.
Code of Federal Regulations > Title 13 Business Credit and Assistance > Chapter I — Small Business
Administration > Part 120 — Business Loans > Subpart I — Risk-Based Lender Oversight > Supervision

§ 120.1050 Reviews and examinations.
(a) reviews. SBA may conduct reviews of the SBA loan operations of SBA Lenders. The review may
include, but is not limited to, an evaluation of the following:
(1) Portfolio performance;
(2) SBA operations management;
(3) Credit administration; and
(4) Compliance with Loan Program Requirements.
(b) examinations. SBA may conduct safety and soundness examinations of SBA Supervised Lenders,
except SBA will not conduct safety and soundness examinations of Other Regulated SBLCs under §§
120.1510 and 1511. The safety and soundness examination may include, but is not limited to, an
evaluation of:
(1) Capital adequacy;
(2) Asset quality (including credit administration and allowance for loan losses);
(3) Management quality (including internal controls, loan portfolio management, and
asset/liability management);
(4) Earnings;
(5) Liquidity; and
(6) Compliance with Loan Program Requirements.
(c) reviews/examinations of Intermediaries SBA may perform reviews or examinations of
Intermediaries.
(d) Other reviews or examinations. SBA may perform other reviews/examinations as needed as
determined by SBA in its discretion.

Statutory Authority
Authority Note Applicable to 13 CFR Ch. I, Pt. 120

History

Page 2 of 2
13 CFR 120.1050

[73 FR 75498, 75519, Dec. 11, 2008; 82 FR 39491, 39504, Aug. 21, 2017; 85 FR 14772, 14781, Mar. 16,
2020]
Annotations

Notes

[EFFECTIVE DATE NOTE:
73 FR 75498 , 75519, Dec. 11, 2008, added this section, effective Jan. 12, 2009; 82 FR 39491 , 39504,
Aug. 21, 2017, amended this section, Sept. 20, 2017; 85 FR 14772 , 14781, Mar. 16, 2020, amended this
section, effective Apr. 15, 2020.]

Research References & Practice Aids

Hierarchy Notes:
13 CFR Ch. I
13 CFR Ch. I, Pt. 120
LEXISNEXIS’ CODE OF FEDERAL REGULATIONS
Copyright © 2022 All rights reserved.

End of Document

13 CFR 120.1055
This document is current through the June 13, 2022 issue of the Federal Register, with the exception of
the amendments appearing at 87 FR 34131, 87 FR 34154, 87 FR 35660, and 87 FR 35675.
Code of Federal Regulations > Title 13 Business Credit and Assistance > Chapter I — Small Business
Administration > Part 120 — Business Loans > Subpart I — Risk-Based Lender Oversight > Supervision

§ 120.1055 Review and examination results.
(a) Written Reports. SBA will provide an SBA Lender and Intermediary a copy of SBA’s written
report prepared as a result of the SBA Lender or Intermediary review or examination (“Report”). SBA
will provide the Report generally within 60 business days following SBA’s conclusion of the
review/examination unless SBA notifies the SBA Lender or Intermediary of a later date and the reason
for the delay. The Report may contain findings, conclusions, corrective actions, and recommendations.
Each director (or manager, in the absence of a Board of Directors) of the SBA Lender or Intermediary,
in keeping with his or her responsibilities, must become fully informed regarding the contents of the
Report.
(b) Response to review and examination Reports. SBA Lenders and Intermediaries must respond to
Report findings, recommendations, and corrective actions, if any, in writing to SBA and, if requested,
submit proposed corrective actions and/or a capital restoration plan. An SBA Lender or Intermediary
must respond within 45 business days from the date the Report is received unless SBA notifies the
SBA Lender or Intermediary in writing that the response, proposed corrective actions or capital
restoration plan is to be filed within a different time period (either shortened or extended in SBA’s
discretion). The SBA Lender or Intermediary response must address each finding, recommendation,
and corrective action. In proposing a corrective action or capital restoration plan, the SBA Lender or
Intermediary must detail the steps it will take to correct the finding(s); the time within which each step
will be taken; the timeframe for accomplishing the entire corrective action plan; and the person(s) or
department at the SBA Lender or Intermediary charged with carrying out the corrective action or
capital restoration plan, as applicable. In addition, SBA Lenders and Intermediaries must implement
corrective actions within 90 calendar days from the date the Report or SBA’s letter requiring
corrective action is received, unless SBA provides written notice of another timeframe. For purposes
of this paragraph (b), a Report will be deemed to have been received on the date it was emailed to the
last known email address of the SBA Lender or Intermediary unless the SBA Lender or Intermediary
can provide compelling evidence to the contrary.
(c) SBA response. SBA will provide written notice of whether the response and, if applicable, any
corrective action or capital restoration plan, is approved, or whether SBA will seek additional
information or require other action.
(d) Failure to respond or to submit or implement an acceptable plan. If an SBA Lender or
Intermediary fails to respond in writing to SBA, respond timely to SBA, or provide a response
acceptable to SBA within SBA’s discretion, or respond to all findings and required corrective actions
in a Report, then SBA may take enforcement action under this subpart. If an SBA Lender or
Intermediary that is requested to submit a corrective action plan or capital restoration plan to SBA

Page 2 of 2
13 CFR 120.1055

fails to do so in writing; fails to submit timely such plan to SBA; or fails to submit a plan acceptable to
SBA within SBA’s discretion, then SBA may take enforcement action under this subpart. If an SBA
Lender or Intermediary fails to implement in any material respect a corrective action or capital
restoration plan within the required timeframe, then SBA may undertake enforcement action under
this subpart.

Statutory Authority
Authority Note Applicable to 13 CFR Ch. I, Pt. 120

History

[73 FR 75498, 75519, Dec. 11, 2008; 85 FR 14772, 14781, Mar. 16, 2020]
Annotations

Notes

[EFFECTIVE DATE NOTE:
73 FR 75498 , 75519, Dec. 11, 2008, added this section, effective Jan. 12, 2009; 85 FR 14772 , 14781,
Mar. 16, 2020, amended this section, effective Apr. 15, 2020.]

Research References & Practice Aids

Hierarchy Notes:
13 CFR Ch. I
13 CFR Ch. I, Pt. 120
LEXISNEXIS’ CODE OF FEDERAL REGULATIONS
Copyright © 2022 All rights reserved.

End of Document

13 CFR 120.180
This document is current through the June 13, 2022 issue of the Federal Register, with the exception of
the amendments appearing at 87 FR 34131, 87 FR 34154, 87 FR 35660, and 87 FR 35675.
Code of Federal Regulations > Title 13 Business Credit and Assistance > Chapter I — Small Business
Administration > Part 120 — Business Loans > Subpart A — Policies Applying to All Business Loans >
Applicability and Enforceability of Loan Program Requirements

§ 120.180 Compliance with Loan Program Requirements.
SBA Lenders and Intermediaries must comply and maintain familiarity with Loan Program
Requirements for the 7(a) Loan Program, 504 Loan Program, and the Microloan Program, as
applicable, and as such requirements are revised from time to time. Loan Program Requirements in
effect at the time that an SBA Lender or Intermediary takes an action in connection with a
particular loan govern that specific action. For example, although loan closing requirements in
effect when an SBA Lender closes a loan will govern the closing actions, an SBA Lender’s
liquidation actions on the same loan are subject to the liquidation requirements in effect at the time
that a liquidation action is taken. An SBA Lender or Intermediary must maintain sufficient
documentation to demonstrate that Loan Program Requirements have been satisfied.

Statutory Authority
Authority Note Applicable to 13 CFR Ch. I, Pt. 120

History

[61 FR 3226, 3242, Jan. 31, 1996; 72 FR 18349, 18360, Apr. 12, 2007; 85 FR 14772, 14781, Mar. 16,
2020]
Annotations

Notes

[EFFECTIVE DATE NOTE:
72 FR 18349 , 18360, Apr. 12, 2007, revised this section, effective May 14, 2007; 85 FR 14772 , 14781,
Mar. 16, 2020, revised this section, effective Apr. 15, 2020.]

Research References & Practice Aids

Page 2 of 2
13 CFR 120.180

Hierarchy Notes:
13 CFR Ch. I
13 CFR Ch. I, Pt. 120
LEXISNEXIS’ CODE OF FEDERAL REGULATIONS
Copyright © 2022 All rights reserved.

End of Document

13 CFR 120.461
This document is current through the June 13, 2022 issue of the Federal Register, with the exception of
the amendments appearing at 87 FR 34131, 87 FR 34154, 87 FR 35660, and 87 FR 35675.
Code of Federal Regulations > Title 13 Business Credit and Assistance > Chapter I — Small Business
Administration > Part 120 — Business Loans > Subpart D — Lenders > Sba Supervised Lenders

§ 120.461 What are SBA’s additional requirements for SBA Supervised Lenders
concerning records?
(a) Report filing. All SBA Supervised Lender-specific reports (including all SBLC-only reports) must
be filed with the appropriate Office of Capital Access official in accordance with Delegations of
Authority.
(b) Maintenance of records. An SBA Supervised Lender must maintain at its principal business office
accurate and current financial records, including books of accounts, minutes of stockholder, directors,
and executive committee meetings, and all documents and supporting materials relating to the SBA
Supervised Lender’s transactions. However, securities held by a custodian pursuant to a written
agreement are exempt from this requirement.
(c) Permanent preservation of records. An SBA Supervised Lender must permanently preserve in a
manner permitting immediate (one business day) retrieval the following documentation for the
financial statements and other reports required by § 120.464 (and the accompanying certified public
accountant’s opinion):
(1) All general and subsidiary ledgers (or other records) reflecting asset, liability, capital stock
and additional paid-in capital, income, and expense accounts;
(2) All general and special journals (or other records forming the basis for entries in such
ledgers); and
(3) The corporate charter, bylaws, application for determination of eligibility to participate
with SBA, and all minutes books, capital stock certificates or stubs, stock ledgers, and stock
transfer registers.
(d) Other preservation of records. An SBA Supervised Lender must preserve for at least 6 years
following final disposition of each individual SBA loan:
(1) All applications for financing;
(2) Lending, participation, and escrow agreements;
(3) Financing instruments; and
(4) All other documents and supporting material relating to such loans, including
correspondence.
(e) Electronic preservation. Records and other documents referred to in this section may be preserved
electronically if the original is available for retrieval within 15 working days.

Page 2 of 2
13 CFR 120.461

Statutory Authority
Authority Note Applicable to 13 CFR Ch. I, Pt. 120

History

[73 FR 75498, 75512, Dec. 11, 2008]
Annotations

Notes

[EFFECTIVE DATE NOTE:
73 FR 75498, 75512, Dec. 11, 2008, added this section, effective Jan. 12, 2009.]

Research References & Practice Aids

Hierarchy Notes:
13 CFR Ch. I
13 CFR Ch. I, Pt. 120
LEXISNEXIS’ CODE OF FEDERAL REGULATIONS
Copyright © 2022 All rights reserved.

End of Document

13 CFR 120.464
This document is current through the June 13, 2022 issue of the Federal Register, with the exception of
the amendments appearing at 87 FR 34131, 87 FR 34154, 87 FR 35660, and 87 FR 35675.
Code of Federal Regulations > Title 13 Business Credit and Assistance > Chapter I — Small Business
Administration > Part 120 — Business Loans > Subpart D — Lenders > Sba Supervised Lenders

§ 120.464 Reports to SBA.
(a) An SBA Supervised Lender must submit the following to SBA:
(1) Annual Report. Within three months after the close of each fiscal year, each SBA
Supervised Lender must submit to SBA two copies of an annual report including audited
financial statements as prepared by a certified public accountant in accordance with § 120.463.
Specifically, the annual report must, at a minimum, include the following:
(i) Audited balance sheet;
(ii) Audited statement of income and expense;
(iii) Audited reconciliation of capital accounts;
(iv) Audited source and application of funds;
(v) Such footnotes as are necessary to an understanding of the report;
(vi) Auditor’s letter to management on internal control weaknesses; and
(vii) The auditor’s report.
(2) Quarterly Condition Reports. By the 45th calendar day following the end of each calendar
quarter, each SBA Supervised Lender must submit a Quarterly Condition Report in a form and
content as the SBA may prescribe from time to time. At a minimum, the Quarterly Condition
Report must include the SBA Supervised Lender’s quarterly financial statements, which may
be internally prepared. The SBA Supervised Lender must apply uniform definitions to
categories of nonperforming loans and include recovery amounts on liquidated loans. SBA
may, on a case-by-case basis, depending on an SBA Supervised Lender’s size and the quality
of its assets, adjust the requirements for content and frequency of filing Quarterly Condition
Reports.
(3) Legal and Administrative Proceeding Report. Each SBA Supervised Lender must report
any legal or administrative proceeding by or against the SBA Supervised Lender, or against
any officer, director or employee of the SBA Supervised Lender for an alleged breach of
official duty, within ten business days after initiating or learning of the proceeding, and also
must notify the SBA of the terms of any settlement or final judgment. The SBA Supervised
Lender must include such information in any reporting required under other provisions of SBA
regulations.

Page 2 of 3
13 CFR 120.464

(4) Stockholder Reports. Each SBA Supervised Lender must submit to SBA a copy of any
report furnished to its stockholders in any manner, within 30 calendar days after submission to
stockholders, including any prospectus, letter, or other document, concerning the financial
operations or condition of the SBA Supervised Lender.
(5) Reports of Changes. Each SBA Supervised Lender must submit to SBA a summary of any
changes in the SBA Supervised Lender’s organization or financing (within 30 calendar days of
the change), such as:
(i) Any change in its name, address or telephone number;
(ii) Any change in its charter, bylaws, or its officers or directors (to be accompanied by a
statement of personal history on the form approved by SBA);
(iii) Any change in capitalization, including such types of change as are identified in this
part 120;
(iv) Any changes affecting an SBA Supervised Lender’s eligibility to continue to
participate as an SBA Supervised Lender; and
(v) Notice of any pledge of stock (within 30 calendar days of the transaction) if 10 percent
or more of the stock is pledged by any person (or group of persons acting in concert) as
collateral for indebtedness.
(6) Report of Changes in Financial Condition. In addition to other reports required under this
part 120, each SBA Supervised Lender must submit a report to SBA on any material change in
financial condition. The SBA Supervised Lender must submit such report promptly, but no
later than ten days after its management becomes aware of such change (except as provided for
in § 120.462(d)). Failure to promptly notify SBA concerning a material change in financial
condition may lead to enforcement action.
(7) Other Reports. Each SBA Supervised Lender must submit such other reports as SBA from
time to time may in writing require.
(b) Preparing financial reports for filing. Each SBA Supervised Lender must prepare financial reports:
(1) In accordance with all applicable laws, regulations, procedures, standards, and such
instructions and specifications and in such form and media format as may be prescribed by
SBA from time to time;
(2) On an accrual basis, in accordance with GAAP principles and such other accounting
requirements, standards, and procedures as may be prescribed by the SBA from time to time;
(3) That contain all applicable footnotes in accordance with GAAP principals, one of which
includes a brief analysis of how the SBA Supervised Lender complies with SBA’s capital
regulations, as applicable; and
(4) In such manner as to facilitate the reconciliation of these reports with the books and records
of the SBA Supervised Lender.
(c) Responsibility for assuring the accuracy of filed financial reports. Each financial report filed with
SBA must be certified as having been prepared in accordance with all applicable regulations, SOPs,
notices, and instructions and to be a true, accurate, and complete representation of the financial
condition and financial performance of the SBA Supervised Lender to which it applies. The reports

Page 3 of 3
13 CFR 120.464

must be certified by the officer of the reporting SBA Supervised Lender named for that purpose by
action of the institution’s board of directors. If the institution’s board of directors has not acted to
name an officer to certify the correctness of its reports of financial condition and financial
performance, then the reports must be certified by the president or chief executive officer of the
reporting SBA Supervised Lender.
(d) Waiver. The appropriate Office of Capital Access official in accordance with Delegations of
Authority may in his/her discretion waive any § 120.464 reporting requirement for SBA Supervised
Lenders for good cause (including, but not limited to, where an SBA Supervised Lender has a
relatively small SBA loan portfolio), as determined by SBA. SBA Supervised Lenders must request
the waiver in writing and include all supporting reasons and documentation. The waiver decision of
the appropriate Office of Capital Access official in accordance with Delegations of Authority is final.

Statutory Authority
Authority Note Applicable to 13 CFR Ch. I, Pt. 120

History

[73 FR 75498, 75514, Dec. 11, 2008]
Annotations

Notes

[EFFECTIVE DATE NOTE:
73 FR 75498, 75514, Dec. 11, 2008, added this section, effective Jan. 12, 2009.]

Research References & Practice Aids

Hierarchy Notes:
13 CFR Ch. I
13 CFR Ch. I, Pt. 120
LEXISNEXIS’ CODE OF FEDERAL REGULATIONS
Copyright © 2022 All rights reserved.

End of Document

13 CFR 120.830
This document is current through the June 13, 2022 issue of the Federal Register, with the exception of
the amendments appearing at 87 FR 34131, 87 FR 34154, 87 FR 35660, and 87 FR 35675.
Code of Federal Regulations > Title 13 Business Credit and Assistance > Chapter I — Small Business
Administration > Part 120 — Business Loans > Subpart H — Development Company Loan Program (504) >
Requirements for CDC Certification and Operation

§ 120.830 Reports a CDC must submit.
A CDC must submit the following reports to SBA:
(a) An Annual Report within one hundred-eighty days after the end of the CDC’s fiscal year (to
include Federal tax returns for that year). A CDC that is certified by SBA within 6 months of the
CDC’s fiscal year-end is not required to submit an Annual Report for that year. The Annual Report
must include, but is not limited to, the following:
(1) Audited or Reviewed Financial Statements as required in § 120.826(c) and (d) for the CDC
and any affiliates or subsidiaries of the CDC.
(i) Audited financial statements must, at a minimum, include the following:
(A) Audited balance sheet;
(B) Audited statement of income (or receipts) and expenses;
(C) Audited statement of source and application of funds;
(D) Such footnotes as are necessary to an understanding of the financial statements;
(E) Auditor’s letter to management on internal control weaknesses; and
(F) The auditor’s report; and
(ii) Reviewed financial statements must, at a minimum, include the following:
(A) Balance sheet;
(B) Statement of income (or receipts) and expenses;
(C) Statement of source and application of funds;
(D) Such footnotes as are necessary to an understanding of the financial statements;
(E) The accountant’s review report; and
(2) Report on compensation: CDCs are required to provide detailed information on total
compensation (including salary, bonuses and expenses) paid within the CDC’s most recent tax
year for current and former officers and directors, and for current and former employees and
independent contractors with total compensation of more than $ 100,000 during that period.
(3) Certification of members of the Board of Directors. Written annual certification by each
Board member that he or she has read and understands the requirements set forth in § 120.823.

Page 2 of 3
13 CFR 120.830

(4) Report on investment in economic development. Written report on investments in
economic development in each State in which the CDC has an outstanding 504 loan.
(b) For each new associate and staff, a Statement of Personal History (for use by non-bank lenders and
CDCs) and other information required by SBA;
(c) Reports of involvement in any legal proceeding;
(d) Changes in organizational status;
(e) Changes in any condition that affects its eligibility to continue to participate in the 504 program;
and
(f) Quarterly service reports on each loan in its portfolio which is 60 days or more past due (and
interim reports upon request by SBA).
(g) Other reports as required by SBA.

Statutory Authority
Authority Note Applicable to 13 CFR Ch. I, Pt. 120

History

[61 FR 3226, 3259, Jan. 31, 1996; 68 FR 57960, 57981, Oct. 7, 2003; 73 FR 75498, 75518, Dec. 11,
2008; 79 FR 15641, 15651, Mar. 21, 2014]
Annotations

Notes

[EFFECTIVE DATE NOTE:
79 FR 15641, 15651, Mar. 21, 2014, revised paragraph (a), effective Apr. 21, 2014.]

Research References & Practice Aids

Hierarchy Notes:
13 CFR Ch. I
13 CFR Ch. I, Pt. 120
LEXISNEXIS’ CODE OF FEDERAL REGULATIONS
Copyright © 2022 All rights reserved.

Page 3 of 3
13 CFR 120.830

End of Document

13 CFR 120.1010
This document is current through the June 13, 2022 issue of the Federal Register, with the exception of
the amendments appearing at 87 FR 34131, 87 FR 34154, 87 FR 35660, and 87 FR 35675.
Code of Federal Regulations > Title 13 Business Credit and Assistance > Chapter I — Small Business
Administration > Part 120 — Business Loans > Subpart I — Risk-Based Lender Oversight > Supervision

§ 120.1010 SBA access to SBA Lender, Intermediary, and NTAP files.
An SBA Lender and Intermediary must allow SBA’s authorized representatives, including
representatives authorized by the SBA Inspector General, during normal business hours, access to
its files to review, inspect, and copy all records and documents, relating to SBA guaranteed loans
or as requested for SBA oversight.

Statutory Authority
Authority Note Applicable to 13 CFR Ch. I, Pt. 120

History

[73 FR 75498, 75519, Dec. 11, 2008; 85 FR 14772, 14781, Mar. 16, 2020]
Annotations

Notes

[EFFECTIVE DATE NOTE:
73 FR 75498 , 75519, Dec. 11, 2008, added this section, effective Jan. 12, 2009; 85 FR 14772 , 14781,
Mar. 16, 2020, amended this section, effective Apr. 15, 2020.]

Research References & Practice Aids

Hierarchy Notes:
13 CFR Ch. I
13 CFR Ch. I, Pt. 120
LEXISNEXIS’ CODE OF FEDERAL REGULATIONS

Page 2 of 2
13 CFR 120.1010
Copyright © 2022 All rights reserved.

End of Document