§ 695. — State development companies.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC695]
TITLE 15--COMMERCE AND TRADE
CHAPTER 14B--SMALL BUSINESS INVESTMENT PROGRAM
SUBCHAPTER V--LOANS TO STATE AND LOCAL DEVELOPMENT COMPANIES
Sec. 695. State development companies
(a) Congressional finding and declaration of purpose
The Congress hereby finds and declares that the purpose of this
subchapter is to foster economic development and to create or preserve
job opportunities in both urban and rural areas by providing long-term
financing for small business concerns through the development company
program authorized by this subchapter.
(b) Loans; obligations of development companies
The Administration is authorized to make loans to State development
companies to assist in carrying out the purposes of this chapter. Any
funds advanced under this subsection shall be in exchange for
obligations of the development company which bear interest at such rate,
and contain such other terms, as the Administration may fix, and funds
may be so advanced without regard to the use and investment by the
development company of funds secured by it from other sources.
(c) Maximum loans to development companies
The total amount of obligations purchased and outstanding at any one
time by the Administration under this section from any one State
development company shall not exceed the total amount borrowed by it
from all other sources. Funds advanced to a State development company
under this section shall be treated on an equal basis with those funds
borrowed by such company after August 21, 1958, regardless of source,
which have the highest priority, except when this requirement is waived
by the Administrator.
(d) Eligibility for assistance
In order to qualify for assistance under this subchapter, the
development company must demonstrate that the project to be funded is
directed toward at least one of the following economic development
objectives--
(1) the creation of job opportunities within two years of the
completion of the project or the preservation or retention of jobs
attributable to the project;
(2) improving the economy of the locality, such as stimulating
other business development in the community, bringing new income
into the area, or assisting the community in diversifying and
stabilizing its economy; or
(3) the achievement of one or more of the following public
policy goals:
(A) business district revitalization,
(B) expansion of exports,
(C) expansion of minority business development or women-
owned business development,
(D) rural development,
(E) expansion of small business concerns owned and
controlled by veterans, as defined in 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 retooling, conversion to robotics, or
competition with imports,
(G) changes necessitated by Federal budget cutbacks,
including defense related industries, or
(H) business restructuring arising from Federally mandated
standards or policies affecting the environment or the safety
and health of employees.
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.
(Pub. L. 85-699, title V, Sec. 501, Aug. 21, 1958, 72 Stat. 696; Pub. L.
100-590, title I, Sec. 115(a), (b)(1), Nov. 3, 1988, 102 Stat. 2997;
Pub. L. 101-574, title II, Sec. 214(a), (b), Nov. 15, 1990, 104 Stat.
2821; Pub. L. 106-50, title IV, Sec. 405, Aug. 17, 1999, 113 Stat. 246;
Pub. L. 106-554, Sec. 1(a)(9) [title III, Sec. 302], Dec. 21, 2000, 114
Stat. 2763, 2763A-684.)
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
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, Sec. 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, Sec. 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.
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, Sec. 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 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. 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, Sec. 307(b)] of Pub. L. 106-554, set out as
a Regulations note under section 697g of this title.]
Section Referred to in Other Sections
This section is referred to in section 696 of this title.
