Privacy Act

Page 1041

TITLE 15—COMMERCE AND TRADE

concerns, small business concerns owned and controlled
by women, and small business concerns owned and controlled by socially and economically disadvantaged individuals.

§ 695

SUBCHAPTER V—LOANS TO STATE AND
LOCAL DEVELOPMENT COMPANIES
§ 695. State development companies

EVALUATION OF PREFERRED SURETY BOND GUARANTEE
PROGRAM; REPORT

(a) Congressional finding and declaration of purpose

Pub. L. 100–590, title II, § 206, Nov. 3, 1988, 102 Stat.
3009, as amended by Pub. L. 101–574, title II, § 216(b),
Nov. 15, 1990, 104 Stat. 2823, directed Comptroller General, not later than 3 years after Nov. 3, 1988, to transmit a report to Congress evaluating the preferred surety bond guarantee program, with such report to be
transmitted not later than Mar. 1, 1994, and cover the
period Oct. 1, 1990, through Sept. 30, 1993.

The Congress hereby finds and declares that
the purpose of this subchapter is to foster economic development and to create or preserve job
opportunities in both urban and rural areas by
providing long-term financing for small business
concerns through the development company program authorized by this subchapter.
(b) Loans; obligations of development companies
The Administration is authorized to make
loans to State development companies to assist
in carrying out the purposes of this chapter.
Any funds advanced under this subsection shall
be in exchange for obligations of the development company which bear interest at such rate,
and contain such other terms, as the Administration may fix, and funds may be so advanced
without regard to the use and investment by the
development company of funds secured by it
from other sources.
(c) Maximum loans to development companies
The total amount of obligations purchased and
outstanding at any one time by the Administration under this section from any one State development company shall not exceed the total
amount borrowed by it from all other sources.
Funds advanced to a State development company under this section shall be treated on an
equal basis with those funds borrowed by such
company after August 21, 1958, regardless of
source, which have the highest priority, except
when this requirement is waived by the Administrator.
(d) Eligibility for assistance
In order to qualify for assistance under this
subchapter, the development company must
demonstrate that the project to be funded is directed toward at least one of the following economic development objectives—
(1) the creation of job opportunities within
two years of the completion of the project or
the preservation or retention of jobs attributable to the project;
(2) improving the economy of the locality,
such as stimulating other business development in the community, bringing new income
into the area, or assisting the community in
diversifying and stabilizing its economy; or
(3) the achievement of one or more of the
following public policy goals:
(A) business district revitalization,
(B) expansion of exports,
(C) expansion of minority business development or women-owned business development,
(D) rural development,
(E) expansion of small business concerns
owned and controlled by veterans, as defined
in section 632(q) of this title, especially service-disabled veterans, as defined in such section 632(q) of this title,
(F) enhanced economic competition, including the advancement of technology, plan

§ 694c. Revolving fund for surety bond guarantees
(a) There is created within the Treasury a separate fund for guarantees which shall be available to the Administrator without fiscal year
limitation as a revolving fund for the purposes
of this part. All amounts received by the Administrator, including any moneys, property, or assets derived by him from his operations in connection with this part, shall be deposited in the
fund. All expenses and payments, excluding administrative expenses, pursuant to operations of
the Administrator under this part shall be paid
from the fund.
(b) Such sums as may be appropriated to the
Fund to carry out the programs authorized by
this part shall be without fiscal year limitation.
(Pub. L. 85–699, title IV, § 412, as added Pub. L.
93–386, § 6(a)(4), Aug. 23, 1974, 88 Stat. 747; amended Pub. L. 94–305, title I, § 113, June 4, 1976, 90
Stat. 667; Pub. L. 95–14, § 4, Mar. 24, 1977, 91 Stat.
25; Pub. L. 95–89, title I, § 105, Aug. 4, 1977, 91
Stat. 556; Pub. L. 96–302, title I, § 111, July 2, 1980,
94 Stat. 837; Pub. L. 100–590, title II, § 208, Nov. 3,
1988, 102 Stat. 3009.)
AMENDMENTS
1988—Pub. L. 100–590 designated existing provisions as
subsec. (a) and added subsec. (b).
1980—Pub. L. 96–302 repealed investment of idle funds
provision, which is covered in section 694–2 of this title.
1977—Pub. L. 95–89 prohibited payment of administrative expenses from the fund and deleted provisions
which authorized: a $110,000,000 appropriation of capital
for the fund; and payment during the fiscal year into
the Treasury as miscellaneous receipts, from the fund,
of interest on the cumulative amount of appropriations
available as capital to the fund less the average undisbursed cash balance in the fund during the year.
Pub.
L.
95–14
substituted
‘‘$110,000,000’’
for
‘‘$56,500,000’’.
1976—Pub. L. 94–305 substituted ‘‘$56,500,000’’ for
‘‘$35,000,000’’.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100–590 effective on expiration
of 180 days after Nov. 3, 1988, see section 209 of Pub. L.
100–590, set out as an Effective and Termination Dates
of 1988 Amendment note under section 694b of this title.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96–302 effective Oct. 1, 1980,
see section 507 of Pub. L. 96–302, set out as a note under
section 631 of this title.
EFFECTIVE DATE OF 1977 AMENDMENT
Amendment by Pub. L. 95–89 effective Oct. 1, 1977, see
section 106 of Pub. L. 95–89, set out as a note under section 633 of this title.

§ 695

TITLE 15—COMMERCE AND TRADE

retooling, conversion to robotics, or competition with imports,
(G) changes necessitated by Federal budget cutbacks, including defense related industries,
(H) business restructuring arising from
Federally mandated standards or policies affecting the environment or the safety and
health of employees,
(I) reduction of energy consumption by at
least 10 percent,
(J) increased use of sustainable design, including designs that reduce the use of greenhouse gas emitting fossil fuels, or low-impact design to produce buildings that reduce
the use of non-renewable resources and minimize environmental impact,
(K) plant, equipment and process upgrades
of renewable energy sources such as the
small-scale production of energy for individual buildings or communities consumption,
commonly known as micropower, or renewable fuels producers including biodiesel and
ethanol producers, or
(L) reduction of rates of unemployment in
labor surplus areas, as such areas are determined by the Secretary of Labor.
In subparagraphs (J) and (K), terms have the
meanings given those terms under the Leadership in Energy and Environmental Design
(LEED) standard for green building certification, as determined by the Administrator.
If eligibility is based upon the criteria set forth
in paragraph (2) or (3), the project need not meet
the job creation or job preservation criteria developed by the Administration if the overall
portfolio of the development company meets or
exceeds such job creation or retention criteria.
(e) Creation or retention of jobs
(1) A project meets the objective set forth in
subsection (d)(1) if the project creates or retains
one job for every $65,000 guaranteed by the Administration, except that the amount is $100,000
in the case of a project of a small manufacturer.
(2) Paragraph (1) does not apply to a project
for which eligibility is based on the objectives
set forth in paragraph (2) or (3) of subsection (d),
if the development company’s portfolio of outstanding debentures creates or retains one job
for every $65,000 guaranteed by the Administration.
(3) For projects in Alaska, Hawaii, State-designated enterprise zones, empowerment zones
and enterprise communities, labor surplus areas,
as determined by the Secretary of Labor, and for
other areas designated by the Administrator,
the development company’s portfolio may average not more than $75,000 per job created or retained.
(4) Loans for projects of small manufacturers
shall be excluded from calculations under paragraph (2) or (3).
(5) Under regulations prescribed by the Administrator, the Administrator may waive, on a
case-by-case basis or by regulation, any requirement of this subsection (other than paragraph
(4)). With respect to any waiver the Administrator is prohibited from adopting a dollar
amount that is lower than the amounts set forth
in paragraphs (1), (2), and (3).

Page 1042

(6) As used in this subsection, the term ‘‘small
manufacturer’’ means a small business concern—
(A) the primary business of which is classified in sector 31, 32, or 33 of the North American Industrial Classification System; and
(B) all of the production facilities of which
are located in the United States.
(Pub. L. 85–699, title V, § 501, Aug. 21, 1958, 72
Stat. 696; Pub. L. 100–590, title I, § 115(a), (b)(1),
Nov. 3, 1988, 102 Stat. 2997; Pub. L. 101–574, title
II, § 214(a), (b), Nov. 15, 1990, 104 Stat. 2821; Pub.
L. 106–50, title IV, § 405, Aug. 17, 1999, 113 Stat.
246; Pub. L. 106–554, § 1(a)(9) [title III, § 302], Dec.
21, 2000, 114 Stat. 2763, 2763A–684; Pub. L. 108–447,
div. K, title I, § 105, Dec. 8, 2004, 118 Stat. 3444;
Pub. L. 110–140, title XII, § 1204(a), Dec. 19, 2007,
121 Stat. 1772; Pub. L. 111–5, div. A, title V,
§ 504(b), Feb. 17, 2009, 123 Stat. 156; Pub. L.
111–240, title I, § 1132, Sept. 27, 2010, 124 Stat.
2514.)
REFERENCES IN TEXT
For definition of ‘‘this chapter’’, referred to in subsec. (b), see References in Text note set out under section 661 of this title.
AMENDMENTS
2010—Subsec. (d)(3)(L). Pub. L. 111–240 added subpar.
(L).
2009—Subsec. (e)(1), (2). Pub. L. 111–5, which directed
amendment of section 501(e)(1), (2) of the Small Business Investment Act by substituting ‘‘$65,000’’ for
‘‘$50,000’’, was executed by making the substitution in
subsec. (e)(1), (2) of this section, which is section 501 of
the Small Business Investment Act of 1958, to reflect
the probable intent of Congress.
2007—Subsec. (d)(3). Pub. L. 110–140, § 1204(a)(4), inserted the following concluding provisions: ‘‘In subparagraphs (J) and (K), terms have the meanings given
those terms under the Leadership in Energy and Environmental Design (LEED) standard for green building
certification, as determined by the Administrator.’’
Subsec. (d)(3)(I) to (K). Pub. L. 110–140, § 1204(a)(1)–(3),
added subpars. (I) to (K).
2004—Subsec. (e). Pub. L. 108–447 added subsec. (e).
2000—Subsec. (d)(3)(C). Pub. L. 106–554 inserted ‘‘or
women-owned business development’’ before comma at
end.
1999—Subsec. (d)(3)(E)–(H). Pub. L. 106–50 added subpar. (E) and redesignated former subpars. (E) to (G) as
(F) to (H), respectively.
1990—Subsec. (a). Pub. L. 101–574, § 214(a), amended
subsec. (a) generally. Prior to amendment, subsec. (a)
read as follows: ‘‘The Congress hereby finds and declares that the purpose of this subchapter is to foster
economic development in both urban and rural areas by
providing long term financing for small business concerns through the development company program authorized by this subchapter. In order to carry out this
objective, the Administration is hereby directed to
place greater emphasis on the needs of rural areas and
the promotion of the development company program in
such areas, and is further directed to develop a plan for
greater outreach of procurement and export trade seminars in such areas. As used in this subchapter, the term
‘rural areas’ means those localities with populations of
less than 20,000.’’
Subsec. (d). Pub. L. 101–574, § 214(b), added subsec. (d).
1988—Pub. L. 100–590 inserted ‘‘State development
companies’’ as section catchline, added subsec. (a), and
redesignated former subsecs. (a) and (b) as (b) and (c),
respectively.
EFFECTIVE DATE OF 2007 AMENDMENT
Amendment by Pub. L. 110–140 effective on the date
that is 1 day after Dec. 19, 2007, see section 1601 of Pub.

Page 1043

TITLE 15—COMMERCE AND TRADE

L. 110–140, set out as an Effective Date note under section 1824 of Title 2, The Congress.
BUDGETARY TREATMENT OF LOANS AND FINANCINGS
Assistance made available under any financings made
under this subchapter during 2-year period beginning
Oct. 1, 2002, to be treated as a separate program of the
Small Business Administration for purposes of the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.)
only, see section 6(c) of Pub. L. 107–100, set out as a
note under section 636 of this title.
LOAN LIQUIDATION PILOT PROGRAM
Pub. L. 104–208, div. D, title II, § 204, Sept. 30, 1996, 110
Stat. 3009–736, provided that:
‘‘(a) IN GENERAL.—The Administrator shall carry out
a loan liquidation pilot program (in this section referred to as the ‘pilot program’) in accordance with the
requirements of this section.
‘‘(b) SELECTION OF DEVELOPMENT COMPANIES.—
‘‘(1) IN GENERAL.—Not later than 90 days after the
date of the enactment of this Act [Sept. 30, 1996], the
Administrator shall establish a pilot program under
which certain development companies authorized to
make loans and issue debentures under title V of the
Small Business Investment Act of 1958 [15 U.S.C. 695
et seq.] are selected by the Administrator in accordance with this subsection to carry out loan liquidations.
‘‘(2) CONFLICTS OF INTEREST.—The development
companies selected under paragraph (1) shall agree
not to take any action that would create a potential
conflict of interest involving the development company, the third party lender, or an associate of the
third party lender.
‘‘(3) QUALIFICATIONS.—In order to qualify to participate in the pilot program under this section, each development company shall—
‘‘(A) have not less than 6 years of experience in
the program established by title V of the Small
Business Investment Act of 1958;
‘‘(B) have made, during the 6 most recent fiscal
years, an average of not less than 10 loans per year
through the program established by such title V of
the Small Business Investment Act of 1958;
‘‘(C) have not less than 2 years of experience in
liquidating loans under the authority of a Federal,
State, or other lending program; and
‘‘(D) meet such other requirements as the Administration may establish.
‘‘(c) AUTHORITY OF DEVELOPMENT COMPANIES.—The
development companies selected under subsection (b)
shall, for loans in their portfolio of loans made through
debentures guaranteed under title V of the Small Business Investment Act of 1958 [15 U.S.C. 695 et seq.] that
are in default after the date of enactment of this Act
[Sept. 30, 1996], be authorized to—
‘‘(1) perform all liquidation and foreclosure functions, including the acceleration or purchase of community injection funds, subject to such company obtaining prior written approval from the Administrator before committing the agency to purchase any
other indebtedness secured by the property: Provided,
That the Administrator shall approve or deny a request for such purchase within a period of 10 business
days; and
‘‘(2) liquidate such loans in a reasonable and sound
manner and according to commercially accepted
practices pursuant to a liquidation plan approved by
the administrator in advance of its implementation.
If the administrator does not approve or deny a request for approval of a liquidation plan within 10
business days of the date on which the request is
made (or with respect to any routine liquidation activity under such a plan, within 5 business days) such
request shall be deemed to be approved.
‘‘(d) AUTHORITY OF THE ADMINISTRATOR.—In carrying
out the pilot program, the Administrator shall—
‘‘(1) have full authority to rescind the authority
granted any development company under this section

§ 696

upon a 10-day written notice stating the reasons for
the rescission; and
‘‘(2) not later than 90 days after the admission of
the development companies specified in subsection
(b), implement the pilot program.
‘‘(e) REPORT.—
‘‘(1) IN GENERAL.—The Administrator shall issue a
report on the results of the pilot program to the Committees on Small Business of the House of Representatives and the Senate [Committee on Small Business
of Senate now Committee on Small Business and Entrepreneurship of Senate]. The report shall include
information relating to—
‘‘(A) the total dollar amount of each loan and
project liquidated;
‘‘(B) the total dollar amount guaranteed by the
Administration;
‘‘(C) total dollar losses;
‘‘(D) total recoveries both as percentage of the
amount guaranteed and the total cost of the
project; and
‘‘(E) a comparison of the pilot program information with the same information for liquidation conducted outside the pilot program over the period of
time.
‘‘(2) REPORTING PERIOD.—The report shall be based
on data from, and issued not later than 90 days after
the close of, the first eight 8 [sic] fiscal quarters of
the pilot program’s operation after the date of implementation.’’
[Section 204 of title II of div. D of Pub. L. 104–208, set
out above, to cease to have effect beginning on the date
on which final regulations are issued to carry out section 697g of this title, see section 1(a)(9) [title III,
§ 307(b)] of Pub. L. 106–554, set out as a Regulations note
under section 697g of this title.]

§ 696. Loans for plant acquisition, construction,
conversion and expansion
The Administration may, in addition to its authority under section 695 of this title, make
loans for plant acquisition, construction, conversion or expansion, including the acquisition
of land, to State and local development companies, and such loans may be made or effected either directly or in cooperation with banks or
other lending institutions through agreements
to participate on an immediate or deferred
basis: Provided, however, That the foregoing powers shall be subject to the following restrictions
and limitations:
(1) USE OF PROCEEDS.—The proceeds of any
such loan shall be used solely by the borrower to
assist 1 or more identifiable small business concerns and for a sound business purpose approved
by the Administration.
(2) MAXIMUM AMOUNT.—
(A) IN GENERAL.—Loans made by the Administration under this section shall be limited
to—
(i) $5,000,000 for each small business concern if the loan proceeds will not be directed
toward a goal or project described in clause
(ii), (iii), (iv), or (v);
(ii) $5,000,000 for each small business concern if the loan proceeds will be directed toward 1 or more of the public policy goals described under section 695(d)(3) of this title;
(iii) $5,500,000 for each project of a small
manufacturer;
(iv) $5,500,000 for each project that reduces
the borrower’s energy consumption by at
least 10 percent; and
(v) $5,500,000 for each project that generates renewable energy or renewable fuels,
such as biodiesel or ethanol production.