§ 696. — Loans for plant acquisition, construction, conversion and expansion.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC696]
TITLE 15--COMMERCE AND TRADE
CHAPTER 14B--SMALL BUSINESS INVESTMENT PROGRAM
SUBCHAPTER V--LOANS TO STATE AND LOCAL DEVELOPMENT COMPANIES
Sec. 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) Loans made by the Administration under this section shall be
limited to $1,000,000 for each such identifiable small business concern,
except loans meeting the criteria specified in section 695(d)(3) of this
title, which shall be limited to $1,300,000 for each such identifiable
small business concern.
(3) Criteria for assistance.--
(A) In general.--Any development company assisted under this
section or section 697 of this title must meet the criteria
established by the Administration, including the extent of
participation to be required or amount of paid-in capital to be used
in each instance as is determined to be reasonable by the
Administration.
(B) Community injection funds.--
(i) Sources of funds.--Community injection funds may be
derived, in whole or in part, from--
(I) State or local governments;
(II) banks or other financial institutions;
(III) foundations or other not-for-profit institutions;
or
(IV) the small business concern (or its owners,
stockholders, or affiliates) receiving assistance through a
body authorized by this subchapter.
(ii) Funding from institutions.--Not less than 50 percent of
the total cost of any project financed pursuant to clauses \1\
(i), (ii), or (iii) of subparagraph (C) shall come from the
institutions described in subclauses (I), (II), and (III) of
clause (i).
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\1\ So in original. Probably should be ``clause''.
(C) Funding from a small business concern.--The small business
concern (or its owners, stockholders, or affiliates) receiving
assistance through a body authorized by this subchapter shall
provide--
(i) at least 15 percent of the total cost of the project
financed, if the small business concern has been in operation
for a period of 2 years or less;
(ii) at least 15 percent of the total cost of the project
financed if the project involves the construction of a limited
or single purpose building or structure;
(iii) at least 20 percent of the total cost of the project
financed if the project involves both of the conditions set
forth in clauses (i) and (ii); or
(iv) at least 10 percent of the total cost of the project
financed, in all other circumstances, at the discretion of the
development company.
(D) Seller financing.--Seller-provided financing may be used to
meet the requirements of subparagraph (B), if the seller
subordinates the interest of the seller in the property to the
debenture guaranteed by the Administration.
(E) Collateralization.--
(i) In general.--The collateral provided by the small
business concern shall generally include a subordinate lien
position on the property being financed under this subchapter,
and is only 1 of the factors to be evaluated in the credit
determination. Additional collateral shall be required only if
the Administration determines, on a case-by-case basis, that
additional security is necessary to protect the interest of the
Government.
(ii) Appraisals.--With respect to commercial real property
provided by the small business concern as collateral, an
appraisal of the property by a State licensed or certified
appraiser--
(I) shall be required by the Administration before
disbursement of the loan if the estimated value of that
property is more than $250,000; or
(II) may be required by the Administration or the lender
before disbursement of the loan if the estimated value of
that property is $250,000 or less, and such appraisal is
necessary for appropriate evaluation of creditworthiness.
(4) If the project is to construct a new facility, up to 33 per
centum of the total project may be leased, if reasonable projections of
growth demonstrate that the assisted small business concern will need
additional space within three years and will fully utilize such
additional space within ten years.
(5) Limitation on leasing.--In addition to any portion of the
project permitted to be leased under paragraph (4), not to exceed 20
percent of the project may be leased by the assisted small business to 1
or more other tenants, if the assisted small business occupies
permanently and uses not less than a total of 60 percent of the space in
the project after the execution of any leases authorized under this
section.
(6) Ownership requirements.--Ownership requirements to determine the
eligibility of a small business concern that applies for assistance
under any credit program under this subchapter 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.
(Pub. L. 85-699, title V, Sec. 502, Aug. 21, 1958, 72 Stat. 697; Pub. L.
87-27, Sec. 26, May 1, 1961, 75 Stat. 63; Pub. L. 87-341, Sec. 10, Oct.
3, 1961, 75 Stat. 756; Pub. L. 94-305, title I, Secs. 108(a), 110, June
4, 1976, 90 Stat. 666, 667; Pub. L. 95-507, title I, Sec. 112, Oct. 24,
1978, 92 Stat. 1760; Pub. L. 97-35, title XIX, Sec. 1909, Aug. 13, 1981,
95 Stat. 778; Pub. L. 100-418, title VIII, Sec. 8007(b), Aug. 23, 1988,
102 Stat. 1561; Pub. L. 100-590, title I, Sec. 116(a), (b)(1), Nov. 3,
1988, 102 Stat. 2997, 2998; Pub. L. 101-574, title II, Sec. 214(c), Nov.
15, 1990, 104 Stat. 2822; Pub. L. 104-208, div. D, title II,
Sec. 202(a), Sept. 30, 1996, 110 Stat. 3009-734; Pub. L. 105-135, title
II, Sec. 221, Dec. 2, 1997, 111 Stat. 2603; Pub. L. 106-554,
Sec. 1(a)(9) [title II, Sec. 208(b), title III, Sec. 303, title VIII,
Sec. 802(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A-683, 2763A-684,
2763A-702.)
Amendments
2000--Par. (2). Pub. L. 106-554, Sec. 1(a)(9) [title III, Sec. 303],
amended par. (2) generally. Prior to amendment, par. (2) read as
follows: ``Loans made by the Administration under this section shall be
limited to $750,000 for each such identifiable small-business concern,
except loans meeting the criteria specified in section 695(d)(3) of this
title shall be limited to $1,000,000 for each such identifiable small
business concern.''
Par. (3)(E). Pub. L. 106-554, Sec. 1(a)(9) [title II, Sec. 208(b)],
designated existing provisions as cl. (i), inserted heading, and added
cl. (ii).
Par. (6). Pub. L. 106-554, Sec. 1(a)(9) [title VIII, Sec. 802(b)],
added par. (6).
1997--Par. (1). Pub. L. 105-135, Sec. 221(1), added par. (1) and
struck out former par. (1) which read as follows: ``The proceeds of any
such loan shall be used solely by such borrower to assist in
identifiable small-business concern and for a sound business purpose
approved by the Administration.''
Par. (3)(D), (E). Pub. L. 105-135, Sec. 221(2), added subpars. (D)
and (E).
Par. (5). Pub. L. 105-135, Sec. 221(3), added par. (5).
1996--Par. (3). Pub. L. 104-208 inserted heading and amended text of
par. (3) generally. Prior to amendment, text read as follows: ``Any
development company assisted under this section must meet criteria
established by the Administration, including the extent of participation
to be required or amount of paid-in capital to be used in each instance
as is determined to be reasonable by the Administration. Community
injection funds may be derived, in whole or in part, from--
``(A) State or local governments;
``(B) banks or other financial institutions;
``(C) foundations or other not-for-profit institutions; or
``(D) a small business concern (or its owners, stockholders, or
affiliates) receiving assistance through bodies authorized under
this subchapter.''
1990--Par. (2). Pub. L. 101-574 struck out period at end and
inserted ``, except loans meeting the criteria specified in section
695(d)(3) of this title shall be limited to $1,000,000 for each such
identifiable small business concern.''
1988--Pub. L. 100-590, Sec. 116(b)(1), inserted ``Loans for plant
acquisition, construction, conversion, and expansion'' as section
catchline.
Par. (2). Pub. L. 100-418 substituted ``$750,000'' for ``$500,000''.
Par. (4). Pub. L. 100-590, Sec. 116(a), added par. (4).
1981--Pars. (1) to (4). Pub. L. 97-35 redesignated pars. (2) to (4)
as (1) to (3), respectively. Former par. (1), which provided that all
loans made shall be so secured as reasonably to assure repayment and
that in agreements to participate in loans on a deferred basis, 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, was struck out.
Par. (5). Pub. L. 97-35 struck out par. (5) which provided that
loans, including extensions and renewals, may be made for a period not
exceeding twenty-five years and that an extension may be granted up to
ten years, if such extension will aid in the orderly liquidation of the
loan, and that the Administration may fix the rate of interest.
1978--Par. (4). Pub. L. 95-507 inserted provisions relating to
derivation of community injection funds.
1976--Pub. L. 94-305, Sec. 108(a), inserted ``acquisition,'' after
``plant'' in introductory text.
Par. (3). Pub. L. 94-305, Sec. 110, substituted ``$500,000'' for
``$350,000''.
1961--Par. (3). Pub. L. 87-341, Sec. 10(1), substituted ``$350,000''
for ``$250,000''.
Par. (5). Pub. L. 87-341, Sec. 10(2), substituted ``twenty-five''
for ``ten'' before ``years plus such additional period''.
Par. (6). Pub. L. 87-27 struck out par. (6) which provided for
termination of authority of the Administration to make loans to local
development companies after June 30, 1961.
Effective Date of 1997 Amendment
Amendment by Pub. L. 105-135 effective Oct. 1, 1997, see section 3
of Pub. L. 105-135, set out as a note under section 631 of this title.
Effective Date of 1996 Amendment
Amendment by Pub. L. 104-208 effective Oct. 1, 1996, see section 3
of Pub. L. 104-208, set out as a note under section 633 of this title.
Effective Date of 1981 Amendment
Amendment by Pub. L. 97-35 effective Oct. 1, 1981, see section 1918
of Pub. L. 97-35, set out as a note under section 631 of this title.
Section Referred to in Other Sections
This section is referred to in sections 634, 697, 697d, 697g of this
title; title 42 section 9815.
