To amend the Small Business Act to establish the Community Advantage Loan Program.

IIB 116TH CONGRESS 2D SESSION H. R. 7903 IN THE SENATE OF THE UNITED STATES DECEMBER 7, 2020 Received; read twice and referred to the Committee on Small Business and Entrepreneurship AN ACT To amend the Small Business Act to establish the Community Advantage Loan Program. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 2 HR 7903 RFS SECTION 1. COMMUNITY ADVANTAGE LOAN PROGRAM. 1 Section 7(a) of the Small Business Act (15 U.S.C. 2 636(a)) is amended by adding at the end the following: 3 ‘‘(37) COMMUNITY ADVANTAGE LOAN PRO- 4 GRAM.— 5 ‘‘(A) PURPOSES.—The purposes of the 6 Community Advantage Loan Program are— 7 ‘‘(i) to create a mission-oriented loan 8 guarantee program that builds on the dem- 9 onstrated success of the Community Ad- 10 vantage Pilot Program of the Administra- 11 tion, as established in 2011, to reach more 12 underserved small business concerns; 13 ‘‘(ii) to increase lending to small busi- 14 ness concerns in underserved and rural 15 markets, including veterans and members 16 of the military community, small business 17 concerns owned and controlled by socially 18 and economically disadvantaged individ- 19 uals, women, and startups; 20 ‘‘(iii) to ensure that the program 21 under this subsection (in this paragraph 22 referred to as the ‘7(a) loan program’) is 23 more inclusive and more broadly meets 24 congressional intent to reach borrowers 25 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 3 HR 7903 RFS who are unable to get credit elsewhere on 1 reasonable terms and conditions; 2 ‘‘(iv) to help underserved small busi- 3 ness concerns become bankable by utilizing 4 the small-dollar financing and business 5 support experience of mission-oriented 6 lenders; 7 ‘‘(v) to allow certain mission-oriented 8 lenders, primarily nonprofit financial inter- 9 mediaries focused on economic develop- 10 ment in underserved markets, to access 11 guarantees for loans under this subsection 12 (in this paragraph referred to as ‘7(a) 13 loans’) of not more than $250,000 and 14 provide management and technical assist- 15 ance to small business concerns as needed; 16 ‘‘(vi) to provide certainty for the lend- 17 ing partners that make loans under this 18 subsection and to attract new lenders; and 19 ‘‘(vii) to encourage collaboration be- 20 tween mission-oriented and conventional 21 lenders under this subsection in order to 22 support underserved small business con- 23 cerns. 24 ‘‘(B) DEFINITIONS.—In this paragraph— 25 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 4 HR 7903 RFS ‘‘(i) the term ‘covered institution’ 1 means— 2 ‘‘(I) a development company, as 3 defined in section 103 of the Small 4 Business Investment Act of 1958 (15 5 U.S.C. 662), participating in the 504 6 Loan Guaranty program established 7 under title V of such Act (15 U.S.C. 8 695 et seq.); 9 ‘‘(II) a nonprofit intermediary, as 10 defined in subsection (m)(12), partici- 11 pating in the microloan program 12 under subsection (m); 13 ‘‘(III) a non-Federally regulated 14 entity certified as a community devel- 15 opment financial institution by the 16 Community Development Financial 17 Institutions Fund established under 18 section 104(a) of the Riegle Commu- 19 nity Development and Regulatory Im- 20 provement Act of 1994 (12 U.S.C. 21 4703(a)); and 22 ‘‘(IV) an eligible intermediary, as 23 defined in subsection (l)(1), as in ef- 24 fect on the day before the date of en- 25 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 5 HR 7903 RFS actment of this paragraph, that par- 1 ticipated in the Intermediary Lending 2 Pilot Program established under sub- 3 section (l)(2); 4 ‘‘(ii) the term ‘existing business’ 5 means a small business concern that has 6 been in existence for not less than 2 years 7 on the date on which a loan is made to the 8 small business concern under the program; 9 ‘‘(iii) the term ‘new business’ means a 10 small business concern that has been exist- 11 ence for not more than 2 years on the date 12 on which a loan is made to the small busi- 13 ness concern under the program; 14 ‘‘(iv) the term ‘program’ means the 15 Community Advantage Loan Program es- 16 tablished under subparagraph (C); 17 ‘‘(v) the term ‘Reservist’ means a 18 member of a reserve component of the 19 Armed Forces named in section 10101 of 20 title 10, United States Code; 21 ‘‘(vi) the term ‘rural area’ means any 22 county that the Bureau of the Census has 23 defined as mostly rural or completely rural 24 in the most recent decennial census; 25 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 6 HR 7903 RFS ‘‘(vii) the term ‘service-connected’ has 1 the meaning given the term in section 2 101(16) of title 38, United States Code; 3 ‘‘(viii) the term ‘small business con- 4 cern in an underserved market’ means a 5 small business concern— 6 ‘‘(I) that is located in— 7 ‘‘(aa) a low- to moderate-in- 8 come community; 9 ‘‘(bb) a HUBZone; 10 ‘‘(cc) a community that has 11 been designated as an empower- 12 ment zone or an enterprise com- 13 munity under section 1391 of the 14 Internal Revenue Code of 1986; 15 ‘‘(dd) a community that has 16 been designated as a promise 17 zone by the Secretary of Housing 18 and Urban Development; 19 ‘‘(ee) a community that has 20 been designated as a qualified 21 opportunity zone under section 22 1400Z–1 of the Internal Revenue 23 Code of 1986; 24 ‘‘(ff) a rural area; or 25 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 7 HR 7903 RFS ‘‘(gg) any area for which a 1 disaster declaration or determina- 2 tion described in subparagraphs 3 (A), (B), (C), or (E) of sub- 4 section (b)(2) has been made 5 that has not terminated or ex- 6 pired more than 2 years before 7 the date (or later, as determined 8 by the Administrator) on which a 9 loan is made to such concern 10 under the program; 11 ‘‘(II) for which more than 50 12 percent of the employees reside in a 13 low- or moderate-income community; 14 ‘‘(III) that is a startup or new 15 business; 16 ‘‘(IV) owned and controlled by 17 socially and economically disadvan- 18 taged individuals, including Black 19 Americans, Hispanic Americans, Na- 20 tive Americans, Asian Pacific Ameri- 21 cans, and other minorities; 22 ‘‘(V) owned and controlled by 23 women; 24 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 8 HR 7903 RFS ‘‘(VI) owned and controlled by 1 veterans; 2 ‘‘(VII) owned and controlled by 3 service-disabled veterans; 4 ‘‘(VIII) not less than 51 percent 5 owned and controlled by one or 6 more— 7 ‘‘(aa) members of the Armed 8 Forces participating in the Tran- 9 sition Assistance Program of the 10 Department of Defense; 11 ‘‘(bb) Reservists; 12 ‘‘(cc) spouses of veterans, 13 members of the Armed Forces, or 14 Reservists; or 15 ‘‘(dd) surviving spouses of 16 veterans who died on active duty 17 or as a result of a service-con- 18 nected disability; or 19 ‘‘(IX) that is eligible to receive a 20 veterans advantage loan; 21 ‘‘(ix) the term ‘small business concern 22 owned and controlled by socially and eco- 23 nomically disadvantaged individuals’ has 24 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 9 HR 7903 RFS the meaning given the term in section 1 8(d)(3)(C); 2 ‘‘(x) the term ‘startup’ means a busi- 3 ness that has not yet opened; and 4 ‘‘(xi) the term ‘veterans advantage 5 loan’ means a loan made to a small busi- 6 ness concern under this subsection that is 7 eligible for a waiver of the guarantee fee 8 under paragraph (18) or the yearly fee 9 under paragraph (23) because the small 10 business concern is a concern described in 11 subclause (VI), (VII), or (VIII) of clause 12 (viii). 13 ‘‘(C) ESTABLISHMENT.—There is estab- 14 lished a Community Advantage Loan Program 15 under which the Administration may guarantee 16 loans made by covered institutions under this 17 subsection, including loans made to small busi- 18 ness concerns in underserved markets. 19 ‘‘(D) PROGRAM LEVELS.—In each of fiscal 20 years 2021 through 2025, not more than 10 21 percent of the number of loans guaranteed 22 under this subsection may be guaranteed under 23 the program. 24 ‘‘(E) NEW LENDERS.— 25 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 10 HR 7903 RFS ‘‘(i) FISCAL YEARS 2021 AND 2022.—In 1 each of fiscal years 2021 and 2022— 2 ‘‘(I) not more than 150 covered 3 institutions shall participate in the 4 program; and 5 ‘‘(II) the Administrator shall 6 allow for new applicants and give pri- 7 ority to applications submitted by any 8 covered institution that is located in 9 an area with insufficient lending 10 under the program. 11 ‘‘(ii) FISCAL YEARS 2023, 2024, AND 12 2025.— 13 ‘‘(I) IN GENERAL.—In each of 14 fiscal years 2023, 2024, and 2025— 15 ‘‘(aa) except as provided in 16 subclause (II), not more than 17 175 covered institutions shall 18 participate in the program; and 19 ‘‘(bb) the Administrator 20 shall allow for new applicants 21 and give priority to applications 22 submitted by any covered institu- 23 tion that is located in an area 24 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 11 HR 7903 RFS with insufficient lending under 1 the program. 2 ‘‘(II) EXCEPTION FOR FISCAL 3 YEAR 2025.—In fiscal year 2025, not 4 more than 200 covered institutions 5 may participate in the program if— 6 ‘‘(aa) after reviewing the re- 7 port under subparagraph 8 (M)(iii), the Administrator deter- 9 mines that not more than 200 10 covered institutions may partici- 11 pate in the program; 12 ‘‘(bb) the Administrator no- 13 tifies Congress in writing of the 14 determination of the Adminis- 15 trator under item (aa); and 16 ‘‘(cc) not later than July 30, 17 2024, the Administrator notifies 18 the public of the determination of 19 the Administrator under item 20 (aa). 21 ‘‘(F) GRANDFATHERING OF EXISTING 22 LENDERS.—Any covered institution that par- 23 ticipated in the Community Advantage Pilot 24 Program of the Administration and is in good 25 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 12 HR 7903 RFS standing on the day before the date of enact- 1 ment of this paragraph— 2 ‘‘(i) shall retain designation in the 3 program; and 4 ‘‘(ii) shall not be required to submit 5 an application to participate in the pro- 6 gram. 7 ‘‘(G) REQUIREMENT TO MAKE LOANS TO 8 UNDERSERVED MARKETS.—Not less than 75 9 percent of loans made by a covered institution 10 under the program shall consist of loans made 11 to small business concerns in underserved mar- 12 kets. 13 ‘‘(H) MAXIMUM LOAN AMOUNT.— 14 ‘‘(i) IN GENERAL.—Except as pro- 15 vided in clause (ii), the maximum loan 16 amount for a loan guaranteed under the 17 program is $250,000. 18 ‘‘(ii) EXCEPTION.— 19 ‘‘(I) IN GENERAL.—The Admin- 20 istration may, in the discretion of the 21 Administration, approve a guarantee 22 of a loan under the program that is 23 more than $250,000 and not more 24 than $350,000. 25 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 13 HR 7903 RFS ‘‘(II) NOTIFICATION.—Not later 1 than 2 days after approving the guar- 2 antee of a loan under subclause (I), 3 the Administration shall provide noti- 4 fication of the approval to the covered 5 institution making the loan. 6 ‘‘(I) INTEREST RATES.— 7 ‘‘(i) IN GENERAL.—Except as pro- 8 vided in clause (ii), the maximum allowable 9 interest rate prescribed by the Administra- 10 tion on any financing made on a deferred 11 basis pursuant to the program shall not 12 exceed the maximum allowable interest 13 rate in effect on September 1, 2018. 14 ‘‘(ii) MODIFICATION.—The Adminis- 15 tration shall not modify the maximum al- 16 lowable interest rate described in clause (i) 17 unless the Administration provides the 18 public with an opportunity to comment for 19 a period of not less than 180 days before 20 implementing the modified interest rate. 21 ‘‘(J) TRAINING AND TECHNICAL ASSIST- 22 ANCE.—The Administration— 23 ‘‘(i) shall in person and online, pro- 24 vide upfront and ongoing training and 25 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 14 HR 7903 RFS technical assistance for covered institutions 1 making loans under the program in order 2 to support prudent lending standards and 3 improve the interface between the covered 4 institutions and the Administration; 5 ‘‘(ii) shall ensure that the training 6 and technical assistance described in clause 7 (i) is provided for free or at a low-cost; 8 and 9 ‘‘(iii) may enter into a contract to 10 provide the training or technical assistance 11 described in clause (i) with an organization 12 with expertise in lending under this sub- 13 section, mission-oriented lending, and lend- 14 ing to underserved markets. 15 ‘‘(K) DELEGATED AUTHORITY.—A covered 16 institution is not eligible to receive delegated 17 authority from the Administration under the 18 program until the covered institution makes not 19 less than 7 loans under the program. 20 ‘‘(L) REGULATIONS.— 21 ‘‘(i) IN GENERAL.—Not later than 22 180 days after the date of enactment of 23 this paragraph and in accordance with the 24 notice and comment procedures under sec- 25 VerDate Sep 11 2014 03:32 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\H7903.RFS H7903 pbinns on DSKJLVW7X2PROD with BILLS 15 HR 7903 RFS tion 553 of title 5, United States Code, the 1 Administrator shall promulgate regulations 2 to carry out the program, which shall— 3 ‘‘(I) outline the requirements for 4 participation by covered institutions in 5 [Text truncated for display. Full text available on Congress.gov.]