Small Business Cybersecurity Enhancement Act

I 116TH CONGRESS 1ST SESSION H. R. 4915 To amend the Small Business Act to provide loan guarantees for the acquisi- tion of cybersecurity technology and services by eligible small businesses, and for other purposes. IN THE HOUSE OF REPRESENTATIVES OCTOBER 30, 2019 Mr. SCHNEIDER (for himself, Mr. FITZPATRICK, and Mr. CROW) introduced the following bill; which was referred to the Committee on Small Business A BILL To amend the Small Business Act to provide loan guarantees for the acquisition of cybersecurity technology and serv- ices by eligible small businesses, 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 ‘‘Small Business Cyber- 4 security Enhancement Act’’. 5 SEC. 2. LOAN GUARANTEES FOR CYBERSECURITY TECH- 6 NOLOGY AND SERVICES. 7 (a) IN GENERAL.—The Small Business Act (15 8 U.S.C. 631 et seq.) is amended— 9 VerDate Sep 11 2014 02:28 Nov 05, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4915.IH H4915 kjohnson on DSK79L0C42 with BILLS 2 •HR 4915 IH (1) by redesignating section 49 as section 50; 1 and 2 (2) by inserting the following new section after 3 section 48: 4 ‘‘SEC. 49. LOAN GUARANTEES FOR CYBERSECURITY TECH- 5 NOLOGY AND SERVICES. 6 ‘‘(a) DEFINITIONS.—As used in this section: 7 ‘‘(1) CYBERSECURITY TECHNOLOGY AND SERV- 8 ICES.—The term ‘cybersecurity technology and serv- 9 ices’— 10 ‘‘(A) means— 11 ‘‘(i) computer hardware, software, and 12 related technology that— 13 ‘‘(I) supports the prevention of 14 damage to, protection of, and restora- 15 tion of computers, electronic commu- 16 nications systems, electronic commu- 17 nications services, wire communica- 18 tion, and electronic communication, 19 including information contained there- 20 in, to ensure its availability, integrity, 21 authentication, confidentiality, and 22 nonrepudiation; 23 ‘‘(II) is purchased by an eligible 24 small business; 25 VerDate Sep 11 2014 02:28 Nov 05, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4915.IH H4915 kjohnson on DSK79L0C42 with BILLS 3 •HR 4915 IH ‘‘(III) provides for encryption of 1 data, detection of malware, or protec- 2 tion of information and information 3 systems from unauthorized access, 4 use, disclosure, disruption, modifica- 5 tion, or destruction; 6 ‘‘(IV) meets any requirements es- 7 tablished by the Small Business De- 8 velopment Center Cyber Strategy de- 9 veloped under section 1841(a) of the 10 National Defense Authorization Act 11 for Fiscal Year 2017 (Public Law 12 114–328; 130 Stat. 2662); and 13 ‘‘(V) meets any industry best 14 practices standards; 15 ‘‘(ii) an insurance product available 16 for purchase by an eligible small business 17 that provides coverage for losses caused by 18 a cyber attack on such business; 19 ‘‘(iii) services related to— 20 ‘‘(I) the installation of computer 21 hardware, software, and related tech- 22 nology described under clause (i); or 23 VerDate Sep 11 2014 02:28 Nov 05, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4915.IH H4915 kjohnson on DSK79L0C42 with BILLS 4 •HR 4915 IH ‘‘(II) training on security prin- 1 ciples for employees of an eligible 2 small business; or 3 ‘‘(iv) has the meaning given such term 4 by the Administrator; and 5 ‘‘(B) does not include information tech- 6 nology whose sole use is financial management, 7 maintenance of inventory of basic supplies, or 8 appointment scheduling. 9 ‘‘(2) ELIGIBLE SMALL BUSINESS.—The term 10 ‘eligible small business’ means a small business con- 11 cern that— 12 ‘‘(A) has 100 or fewer employees; 13 ‘‘(B) has been in business for at least 1 14 year; and 15 ‘‘(C) has obtained training from a small 16 business development center. 17 ‘‘(3) PRIME RATE.—The term ‘prime rate’ 18 means the discount window primary credit interest 19 rate most recently published in the Federal Reserve 20 Statistical Release on selected interest rates (daily or 21 weekly), commonly referred to as the H.15 release, 22 or any successor publication. 23 ‘‘(b) LOAN GUARANTEES FOR ELIGIBLE SMALL 24 BUSINESSES.— 25 VerDate Sep 11 2014 02:28 Nov 05, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4915.IH H4915 kjohnson on DSK79L0C42 with BILLS 5 •HR 4915 IH ‘‘(1) GUARANTEE PERCENTAGE.—Subject to 1 paragraph (2), the Administrator may guarantee up 2 to 90 percent of the amount of a loan made to an 3 eligible small business for— 4 ‘‘(A) the acquisition of cybersecurity tech- 5 nology and services for use in the business oper- 6 ations of the eligible small business; and 7 ‘‘(B) the costs associated with the installa- 8 tion or use of such cybersecurity technology and 9 services. 10 ‘‘(2) LIMITATIONS ON GUARANTEE AMOUNTS.— 11 The maximum amount of the principal of a loan 12 guaranteed under this section may not exceed 13 $50,000. The aggregate total amount of the prin- 14 cipal of loans guaranteed under this section in a 15 year may not exceed $500,000,000. 16 ‘‘(c) FEES.—With respect to each loan guaranteed 17 under this section, the Administration shall assess, collect, 18 and retain such fees as are necessary to reduce to zero 19 the cost to the Administration of making guarantees under 20 this section. As used in this subsection, the term ‘cost’ 21 has the meaning given that term in section 502 of the 22 Federal Credit Reform Act of 1990 (2 U.S.C. 661a). 23 ‘‘(d) INTEREST RATES.— 24 VerDate Sep 11 2014 02:28 Nov 05, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4915.IH H4915 kjohnson on DSK79L0C42 with BILLS 6 •HR 4915 IH ‘‘(1) FIXED RATE LOANS.—With respect to a 1 fixed rate loan guaranteed under this section, the in- 2 terest rate for such a loan may not exceed— 3 ‘‘(A) for a loan in an amount greater than 4 $25,000, the prime rate; and 5 ‘‘(B) for a loan in an amount less than or 6 equal to $25,000, the prime rate plus 3.25 per- 7 cent. 8 ‘‘(2) VARIABLE RATE LOANS.— 9 ‘‘(A) IN GENERAL.—With respect to a 10 variable rate loan guaranteed under this sec- 11 tion, the interest rate for such a loan shall 12 equal— 13 ‘‘(i) the prime rate plus the spread de- 14 scribed under subparagraph (B); or 15 ‘‘(ii) the optional peg rate, as cal- 16 culated quarterly by the Administrator and 17 published in the Federal Register, plus the 18 spread described under subparagraph (B). 19 ‘‘(B) NEGOTIATION OF SPREAD AND RATE 20 OF CHANGE.—The lender and the borrower 21 shall negotiate the amount of the spread which 22 will be added to the interest rate described 23 under subparagraph (A) and select the fre- 24 quency at which the spread will change, which 25 VerDate Sep 11 2014 02:28 Nov 05, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H4915.IH H4915 kjohnson on DSK79L0C42 with BILLS 7 •HR 4915 IH shall be no more often than monthly and shall 1 be consistent over the term of the loan. 2 ‘‘(e) DEFERRAL PERIOD.—The Administrator may 3 defer payment of the principal and interest on a loan guar- 4 anteed under this section for a period not to exceed 3 5 years. 6 ‘‘(f) TERMS AND CONDITIONS FOR LOAN GUARAN- 7 TEES.— 8 ‘‘(1) IN GENERAL.—A loan guaranteed under 9 this section shall be subject to such terms and condi- 10 tions as the Administrator may prescribe, includ- 11 ing— 12 ‘‘(A) explicit standards for use in periodi- 13 cally assessing the credit risk of guaranteed 14 loans; 15 ‘‘(B) a requirement that the final maturity 16 of such a loan may not exceed 7 years; and 17 ‘‘(C) a requirement that such a loan may 18 not be subordinated to another debt contracted 19 by the borrower or to any other claims against 20 the borrower in the case of default. 21 ‘‘(2) RESTRICTIONS.—The Administrator may 22 not guarantee a loan under this section— 23 ‘‘(A) unless the Administrator determines 24 that the lender is responsible, that there is a 25 VerDate Sep 11 2014 02:28 Nov 05, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4915.IH H4915 kjohnson on DSK79L0C42 with BILLS 8 •HR 4915 IH reasonable assurance of repayment, and that 1 adequate provision is made for servicing the 2 loan on reasonable terms and protecting the fi- 3 nancial interest of the United States; 4 ‘‘(B) except to the extent that appropria- 5 tions of budget authority to cover their costs 6 are made in advance, as required under section 7 504 of the Federal Credit Reform Act of 1990; 8 and 9 ‘‘(C) if— 10 ‘‘(i) the income from such loan is ex- 11 cluded from gross income for purposes of 12 chapter 1 of the Internal Revenue Code of 13 1986; or 14 ‘‘(ii) the guarantee provides signifi- 15 cant collateral or security, as determined 16 by the Administrator, for other obligations 17 the income from which is so excluded. 18 ‘‘(3) GUARANTEES.—A loan guarantee provided 19 under this section shall be conclusive evidence that— 20 ‘‘(A) the guarantee has been properly ob- 21 tained; 22 ‘‘(B) the underlying loan qualified for such 23 guarantee; and 24 VerDate Sep 11 2014 02:28 Nov 05, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H4915.IH H4915 kjohnson on DSK79L0C42 with BILLS 9 •HR 4915 IH ‘‘(C) absent fraud or material misrepresen- 1 tation by the holder and the lender, the guar- 2 antee is presumed to be valid, legal, and en- 3 forceable. 4 ‘‘(g) PAYMENT OF LOSSES.— 5 ‘‘(1) IN GENERAL.—If, as a result of a default 6 by a borrower under a loan guaranteed under this 7 section, and after the holder of the loan has made 8 collection efforts and instituted enforcement pro- 9 ceedings as the Administrator may require, the Ad- 10 ministrator determines that the holder of the loan 11 has suffered a loss, the Administrator shall pay to 12 such holder the percentage of such loss specified in 13 the guarantee contract. Upon making any such pay- 14 ment, the Administrator shall be subrogated to all 15 the rights of the recipient of the payment. The Ad- 16 ministrator shall be entitled to recover from the bor- 17 rower the amount of any payments made to the 18 holder of the loan under this paragraph. 19 ‘‘(2) FORBEARANCE.—Nothing in this section 20 may be construed to preclude any forbearance for 21 the benefit of the borrower which may be agreed 22 upon by the parties to the guaranteed loan and ap- 23 proved by the Administrator, if budget authority for 24 any resulting subsidy costs (as defined in section 25 VerDate Sep 11 2014 02:28 Nov 05, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H4915.IH H4915 kjohnson on DSK79L0C42 with BILLS 10 •HR 4915 IH 502(5) of the Federal Credit Reform Act of 1990) 1 is available. 2 ‘‘(3) MANAGEMENT OF PROPERTY.—Notwith- 3 standing any other provision of law relating to the 4 acquisition, handling, or disposal of property by the 5 United States, the Administrator may complete, re- 6 condition, reconstruct, renovate, repair, maintain, 7 operate, or sell any property acquired by the Admin- 8 istrator pursuant to this section. 9 ‘‘(h) SUNSET OF AUTHORITY.—The authority of the 10 Administrator to make new loan guarantees under this 11 section shall terminate after the end of the 5-year period 12 beginning on the date of the enactment of this section.’’. 13 (b) EFFECTIVE DATE.—The amendments made by 14 subsection (a) shall take effect on the date that is 180 15 days after the date of the enactment of this Act. 16 Æ VerDate Sep 11 2014 02:28 Nov 05, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6301 E:\BILLS\H4915.IH H4915 kjohnson on DSK79L0C42 with BILLS