504 Modernization and Small Manufacturer Enhancement Act of 2021

II 117TH CONGRESS 1ST SESSION S. 2231 To amend the Small Business Investment Act of 1958 to improve the loan guaranty program, enhance the ability of small manufacturers to access affordable capital, and for other purposes. IN THE SENATE OF THE UNITED STATES JUNE 24, 2021 Ms. KLOBUCHAR (for herself, Mr. YOUNG, Mr. BOOKER, and Mr. RUBIO) in- troduced the following bill; which was read twice and referred to the Com- mittee on Small Business and Entrepreneurship A BILL To amend the Small Business Investment Act of 1958 to improve the loan guaranty program, enhance the ability of small manufacturers to access affordable capital, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘504 Modernization and 4 Small Manufacturer Enhancement Act of 2021’’. 5 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2231.IS S2231 kjohnson on DSK79L0C42PROD with BILLS 2 •S 2231 IS SEC. 2. ADDITIONS TO POLICY GOALS FOR THE DEVELOP- 1 MENT COMPANY PROGRAM. 2 Section 501(d)(3) of the Small Business Investment 3 Act of 1958 (15 U.S.C. 695(d)(3)) is amended— 4 (1) by redesignating subparagraphs (A) through 5 (L) as subparagraphs (B) through (M), respectively; 6 (2) by inserting before subparagraph (B) (as so 7 redesignated) the following: 8 ‘‘(A) workforce development through work- 9 based or work-integrated training, which shall 10 be satisfied by demonstrating that a small busi- 11 ness concern that is a subject of the project 12 has— 13 ‘‘(i) a documented in-house training 14 program, the duration of which is not 15 shorter than 12 weeks; or 16 ‘‘(ii) entered into a contract with an 17 entity— 18 ‘‘(I) to provide trained applicants 19 for any open position of employment 20 at the small business concern; and 21 ‘‘(II) that ensures that any appli- 22 cant provided to the small business 23 concern under subclause (I) has un- 24 dergone not fewer than 12 weeks of 25 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2231.IS S2231 kjohnson on DSK79L0C42PROD with BILLS 3 •S 2231 IS training that is relevant to the open 1 position described in that subclause,’’; 2 (3) by amending subparagraph (D) (as so re- 3 designated) to read as follows: 4 ‘‘(D) expansion of minority-owned, em- 5 ployee-owned, or women-owned business devel- 6 opment,’’; 7 (4) in subparagraph (L) (as so redesignated), 8 by striking ‘‘producers, or’’ and inserting ‘‘pro- 9 ducers,’’; 10 (5) in subparagraph (M) (as so redesignated), 11 by striking the period at the end and inserting a 12 comma; 13 (6) by inserting after subparagraph (M) (as so 14 redesignated) the following new subparagraphs: 15 ‘‘(N) enhanced ability for small business 16 concerns to reduce costs by using energy effi- 17 cient products and generating renewable en- 18 ergy, 19 ‘‘(O) aid revitalizing of any area for which 20 a disaster has been declared or determined 21 under subparagraph (A), (B), (C), or (E) of 22 section 7(b)(2) of the Small Business Act, or 23 ‘‘(P) expansion of small business concerns 24 with 10 or fewer employees.’’; and 25 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2231.IS S2231 kjohnson on DSK79L0C42PROD with BILLS 4 •S 2231 IS (7) in the flush text following subparagraph 1 (P), as added by paragraph (6), by striking ‘‘sub- 2 paragraphs (J) and (K)’’ and inserting ‘‘subpara- 3 graphs (K) and (L)’’. 4 SEC. 3. INCREASE IN LOAN AMOUNTS FOR MANUFAC- 5 TURING LOANS. 6 Section 502 of the Small Business Investment Act 7 of 1958 (15 U.S.C. 696) is amended— 8 (1) in the matter preceding paragraph (1), by 9 striking ‘‘The Administration’’ and inserting the fol- 10 lowing: 11 ‘‘(a) IN GENERAL.—The Administration’’; and 12 (2) in subsection (a), as so designated— 13 (A) in paragraph (2)(A)— 14 (i) in the matter preceding clause (i), 15 by striking ‘‘section’’ and inserting ‘‘sub- 16 section’’; and 17 (ii) in clause (iii), by striking 18 ‘‘$5,500,000’’ and inserting ‘‘$6,500,000’’; 19 and 20 (B) in paragraph (3)(A), by striking ‘‘this 21 section’’ and inserting ‘‘this subsection’’. 22 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2231.IS S2231 kjohnson on DSK79L0C42PROD with BILLS 5 •S 2231 IS SEC. 4. IMPROVEMENTS TO 504 LOAN CLOSING PROCE- 1 DURE. 2 Title V of the Small Business Investment Act of 1958 3 (15 U.S.C. 695 et seq.) is amended— 4 (1) in section 502, as amended by section 3, by 5 adding at the end the following new subsections: 6 ‘‘(b) CLOSING.— 7 ‘‘(1) AUTHORITY OF CERTAIN DEVELOPMENT 8 COMPANIES.—An accredited lender certified com- 9 pany may take any of the following actions to facili- 10 tate the closing of a loan made under subsection (a): 11 ‘‘(A) Reallocate the cost of the project with 12 respect to which the loan is made in an amount 13 that is not more than 10 percent of the overall 14 cost of the project. 15 ‘‘(B) Correct any name that is applicable 16 to the loan, including the name of any bor- 17 rower, guarantor, eligible passive company de- 18 scribed in subparagraph (C)(i), and operating 19 company described in subparagraph (C)(ii). 20 ‘‘(C) Form any of the following to receive 21 proceeds of the loan: 22 ‘‘(i) An eligible passive company that 23 complies with section 120.111 of title 13, 24 Code of Federal Regulations, or any suc- 25 cessor regulation. 26 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2231.IS S2231 kjohnson on DSK79L0C42PROD with BILLS 6 •S 2231 IS ‘‘(ii) If an eligible passive company is 1 formed under clause (i), an operating com- 2 pany with respect to that eligible passive 3 company. 4 ‘‘(D) Correct the address of any property 5 with respect to which the loan is made. 6 ‘‘(E) Correct the name of any interim 7 lender or third-party lender. 8 ‘‘(F) Change any third-party lender or in- 9 terim lender if that lender is a financial institu- 10 tion that is regulated by the Federal Govern- 11 ment or a State government. 12 ‘‘(G) Make a guarantor a co-borrower or a 13 co-borrower a guarantor. 14 ‘‘(H) Add a guarantor that does not 15 change ownership with respect to the loan. 16 ‘‘(I) Reduce the amount of standby debt 17 before the closing as a result of regularly sched- 18 uled payments. 19 ‘‘(J) Reduce the cost of the project with 20 respect to which the loan is made. 21 ‘‘(2) FEES.—The Administrator shall— 22 ‘‘(A) issue a rule regarding the amount of 23 a closing fee that may be financed in a deben- 24 ture that is issued by a certified development 25 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2231.IS S2231 kjohnson on DSK79L0C42PROD with BILLS 7 •S 2231 IS company to make one or more loans to small 1 business concerns, the proceeds of which are 2 used by that concern for the purposes described 3 in subsection (a), except that such amount shall 4 be not less than $3,500; and 5 ‘‘(B) periodically update the rule issued 6 under subparagraph (A). 7 ‘‘(3) NO ADVERSE CHANGE AND FINANCIAL 8 STATEMENT.—Before the closing with respect to a 9 loan made under subsection (a), the borrower and 10 any operating company shall— 11 ‘‘(A) make the certification required under 12 section 120.892 of title 13, Code of Federal 13 Regulations, or any successor regulation; and 14 ‘‘(B) submit to the certified development 15 company a financial statement that is not more 16 than 180 days old, which the company shall 17 certify not later than 120 days before the date 18 on which the certified development company 19 issues a debenture with respect to the project to 20 which the loan relates. 21 ‘‘(c) ACCREDITED LENDER CERTIFIED COMPANY 22 DEFINED.—In this section, the term ‘accredited lender 23 certified company’ means a certified development company 24 that meets the requirements under section 507(b), includ- 25 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2231.IS S2231 kjohnson on DSK79L0C42PROD with BILLS 8 •S 2231 IS ing a certified development company that the Administra- 1 tion has designated as an accredited lender under such 2 section 507(b).’’; and 3 (2) by adding at the end the following new sec- 4 tion: 5 ‘‘SEC. 511. CLOSING AND OVERSIGHT. 6 ‘‘(a) SBA DISTRICT COUNSELS.—Beginning on the 7 date of enactment of this section, with respect to the pro- 8 gram established under this title, district counsels of the 9 Administration shall be subject to the same requirements, 10 and shall have the same authority and responsibilities, as 11 in effect with respect to that program on the day before 12 the date of enactment of this section, except that— 13 ‘‘(1) the Office of Credit Risk Management of 14 the Administration shall have the responsibility for 15 all duties relating to conducting file reviews of loans 16 made under this title; and 17 ‘‘(2) district counsels of the Administration 18 shall not have any responsibility relating to the re- 19 view of closing packages with respect to a loan made 20 under this title. 21 ‘‘(b) DESIGNATED ATTORNEYS.—For the purposes of 22 this title, the following provisions and requirements shall 23 apply with respect to a designated attorney of a certified 24 development company: 25 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2231.IS S2231 kjohnson on DSK79L0C42PROD with BILLS 9 •S 2231 IS ‘‘(1) A designated attorney that meets the re- 1 quirements determined under paragraph (2) shall be 2 responsible for certifying documents relating to the 3 closing of a loan described in this title. 4 ‘‘(2) The Administrator may determine any 5 continuing education requirements that the des- 6 ignated attorney shall be required to satisfy in order 7 to be permitted to close a loan made under this title. 8 ‘‘(3) If, as of the date of enactment of this sec- 9 tion, a certified development company does not have 10 a designated attorney, during the 270-day period be- 11 ginning on that date of enactment, the certified de- 12 velopment company may identify such an attorney, 13 subject to the approval of the Administrator.’’. 14 SEC. 5. CERTIFIED DEVELOPMENT COMPANY LOANS FOR 15 SMALL MANUFACTURERS. 16 (a) CONTRIBUTION REQUIREMENT.—Section 17 502(a)(3)(C) of the Small Business Investment Act of 18 1958, as designated by section 3, is amended— 19 (1) by redesignating clauses (i), (ii), (iii), and 20 (iv) as subclauses (I), (II), (III), and (IV), respec- 21 tively, and adjusting the margins of such subclauses 22 accordingly; 23 (2) by inserting before subclause (I), as so re- 24 designated, the following: 25 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2231.IS S2231 kjohnson on DSK79L0C42PROD with BILLS 10 •S 2231 IS ‘‘(i) for a small business concern that 1 is not a small manufacturer (as defined in 2 section 501(e)(7))—’’; 3 (3) in subclause (III), as so redesignated, by 4 striking ‘‘clauses (i) and (ii)’’ and inserting ‘‘sub- 5 clauses (I) and (II)’’; 6 (4) in subclause (IV) as so redesignated, by 7 striking the period and the end and inserting ‘‘; or’’; 8 and 9 (5) by adding at the end the following: 10 ‘‘(ii) for a small manufacturer (as de- 11 fined in section 501(e)(7))— 12 ‘‘(I) at least 5 percent of the 13 total cost of the project financed, if 14 the small business concern has been in 15 operation for a period of 2 years or 16 less; 17 ‘‘(II) at least 5 percent of the 18 total cost of the project financed, if 19 the project involves a limited or single 20 purpose building or structure; 21 ‘‘(III) at least 10 percent of the 22 total cost of the project financed if the 23 project involves both of the conditions 24 set forth in subclauses (I) and (II); or 25 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2231.IS S2231 kjohnson on DSK79L0C42PROD with BILLS 11 •S 2231 IS ‘‘(IV) at least 5 percent of the 1 total cost of the project financed, in 2 all other circumstances, at the discre- 3 tion of the development company.’’. 4 (b) CREATION OR RETENTION OF JOBS REQUIRE- 5 MENT.—Section 501(e) of the Small Business Investment 6 Act of 1958 (15 U.S.C. 695(e)) is amended— 7 (1) in paragraph (1), by striking ‘‘creates or re- 8 tains’’ and all that follows through the period at the 9 end and inserting ‘‘creates or retains 1 job for every 10 $75,000 guaranteed by the Administration, except 11 that the amount is $150,000 in the case of a project 12 of a small manufacturer.’’; 13 (2) in paragraph (2), by striking ‘‘creates or re- 14 tains’’ and all that follows through the period at the 15 end and inserting ‘‘creates or retains 1 job for every 16 $75,000 guaranteed by the Administration, except 17 that the amount is $150,000 in the case of a project 18 of a small manufacturer.’’; 19 (3) by redesignating paragraph (6) as para- 20 graph (7); and 21 (4) by inserting after paragraph (5) the fol- 22 lowing: 23 ‘‘(6) For a loan for a project directed toward the cre- 24 ation of job opportunities under subsection (d)(1), the Ad- 25 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2231.IS S2231 kjohnson on DSK79L0C42PROD with BILLS 12 •S 2231 IS ministrator shall publish on the website of the Administra- 1 tion the number of jobs created or retained under the 2 project as of the date that is 2 years after the completion 3 (as determined based on information provided by the de- 4 velopment company) of the project.’’. 5 (c) COLLATERAL REQUIREMENTS.—Section 6 502(a)(3)(E)(i) of the Small Business Investment Act of 7 1958, as designated by section 3, is amended by adding 8 at the end the following: ‘‘Additional collateral shall not 9 be required in the case of a small manufacturer (as de- 10 fined in section 501(e)(7)).’’. 11 (d) DEBT REFINANCING.—Section 502(a)(7)(B) of 12 the Small Business Investment Act of 1958, as designated 13 by section 3, is amended— 14 (1) in the matter preceding clause (i), by insert- 15 ing ‘‘(or in the case of a small manufacturer (as de- 16 fined in section 501(e)(7)), that does not exceed 100 17 percent of the project cost of the expansion)’’ after 18 ‘‘cost of the expansion’’; 19 (2) in clause (v), by adding ‘‘and’’ at the end; 20 (3) by striking clause (vi); and 21 (4) by redesignating clause (vii) as clause (vi). 22 (e) AMOUNT OF GUARANTEED DEBENTURE.—Sec- 23 tion 503(a) of the Small Business Investment Act of 1958 24 VerDate Sep 11 2014 05:26 Jul 02, 2021 Jkt 019200 PO 00000 Frm 00012 [Text truncated for display. 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