504 Modernization and Small Manufacturer Enhancement Act of 2020

IIB 116TH CONGRESS 2D SESSION H. R. 8211 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 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 VerDate Sep 11 2014 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 2 HR 8211 RFS SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘504 Modernization and 2 Small Manufacturer Enhancement Act of 2020’’. 3 SEC. 2. ADDITIONS TO POLICY GOALS FOR THE DEVELOP- 4 MENT COMPANY PROGRAM. 5 Section 501(d)(3) of the Small Business Investment 6 Act of 1958 (15 U.S.C. 695(d)(3)) is amended— 7 (1) by redesignating subparagraphs (A) through 8 (L) as subparagraphs (B) through (M), respectively; 9 (2) by inserting before subparagraph (B) (as so 10 redesignated) the following: 11 ‘‘(A) workforce development through work- 12 based or work-integrated training, which shall 13 be satisfied by demonstrating that a small busi- 14 ness concern that is a subject of the project 15 has— 16 ‘‘(i) a documented in-house training 17 program, the duration of which is not 18 shorter than 12 weeks; or 19 ‘‘(ii) entered into a contract with an 20 entity— 21 ‘‘(I) to provide trained applicants 22 for any open position of employment 23 at the small business concern; and 24 ‘‘(II) that ensures that any appli- 25 cant provided to the small business 26 VerDate Sep 11 2014 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 3 HR 8211 RFS concern under subclause (I) has un- 1 dergone not fewer than 12 weeks of 2 training that is relevant to the open 3 position described in that subclause,’’; 4 (3) by amending subparagraph (D) (as so re- 5 designated) to read as follows: 6 ‘‘(D) expansion of minority-owned, em- 7 ployee-owned, or women-owned business devel- 8 opment,’’; 9 (4) in subparagraph (L) (as so redesignated), 10 by striking ‘‘producers, or’’ and inserting ‘‘pro- 11 ducers,’’; 12 (5) in subparagraph (M) (as so redesignated), 13 by striking the period at the end and inserting a 14 comma; 15 (6) by inserting after subparagraph (M) the fol- 16 lowing new subparagraphs: 17 ‘‘(N) enhanced ability for small business 18 concerns to reduce costs by using energy effi- 19 cient products and generating renewable en- 20 ergy, 21 ‘‘(O) aid revitalizing of any area for which 22 a disaster has been declared or determined 23 under subparagraph (A), (B), (C), or (E) of 24 section 7(b)(2) of the Small Business Act, or 25 VerDate Sep 11 2014 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 4 HR 8211 RFS ‘‘(P) expansion of small business concerns 1 with 10 or fewer employees.’’; and 2 (7) in the flush text following subparagraph 3 (P), as added by paragraph (6), by striking ‘‘sub- 4 paragraphs (J) and (K)’’ and inserting ‘‘subpara- 5 graphs (K) and (L)’’. 6 SEC. 3. INCREASE IN LOAN AMOUNTS FOR MANUFAC- 7 TURING LOANS. 8 Section 502 of the Small Business Investment Act 9 of 1958 (15 U.S.C. 696) is amended— 10 (1) in the matter preceding paragraph (1), by 11 striking ‘‘The Administration’’ and inserting the fol- 12 lowing: 13 ‘‘(a) IN GENERAL.—The Administration’’; and 14 (2) in subsection (a), as so designated— 15 (A) in paragraph (2)(A)— 16 (i) in the matter preceding clause (i), 17 by striking ‘‘section’’ and inserting ‘‘sub- 18 section’’; and 19 (ii) in clause (iii), by striking 20 ‘‘$5,500,000’’ and inserting ‘‘$6,500,000’’; 21 and 22 (B) in paragraph (3)(A), by striking ‘‘this 23 section’’ and inserting ‘‘this subsection’’. 24 VerDate Sep 11 2014 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 5 HR 8211 RFS 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 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 6 HR 8211 RFS ‘‘(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 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 7 HR 8211 RFS 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) EXPRESS PROGRAM.—An accredited lender cer- 22 tified company may, with respect to a covered loan, take 23 any of the following actions with respect to the loan: 24 VerDate Sep 11 2014 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 8 HR 8211 RFS ‘‘(1) Any action described in any of subpara- 1 graphs (A) through (J) of subsection (b)(1). 2 ‘‘(2) If the borrower is not delinquent with re- 3 spect to the loan payments— 4 ‘‘(A) permit the loan to subordinate to a 5 new third-party lender loan for the purposes of 6 refinancing that third-party lender loan, except 7 that no refinanced amount with respect to the 8 loan may be increased in order to provide cash 9 to the borrower; 10 ‘‘(B) permit a new party to assume respon- 11 sibility for the loan if the original borrower re- 12 mains on the loan as the original guarantor; 13 ‘‘(C) obtain force placed insurance cov- 14 erage for the loan if the borrower has allowed 15 insurance coverage with respect to the loan to 16 lapse; and 17 ‘‘(D) endorse an insurance check with re- 18 spect to the property that is financed by the 19 loan in an amount that is less than $100,000. 20 ‘‘(3) Certify that the loan is compliant with the 21 appraisal requirements and environmental policies 22 and procedures applicable to the loan under Stand- 23 ard Operating Procedure 50 10 6 of the Administra- 24 VerDate Sep 11 2014 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 9 HR 8211 RFS tion, effective August 28, 2020, or any successor 1 Standard Operating Procedure. 2 ‘‘(d) DEFINITIONS.—In this section— 3 ‘‘(1) the term ‘accredited lender certified com- 4 pany’ means a certified development company that 5 meets the requirements under section 507(b), includ- 6 ing a certified development company that the Ad- 7 ministration has designated as an accredited lender 8 under such section 507(b); and 9 ‘‘(2) the term ‘covered loan’— 10 ‘‘(A) means a loan made under subsection 11 (a) in an amount that is not more than 12 $500,000; and 13 ‘‘(B) does not include a loan made to a 14 borrower that is a franchise that, or is in an in- 15 dustry that, has a high rate of default, as annu- 16 ally determined by the Administrator.’’; and 17 (2) by adding at the end the following new sec- 18 tion: 19 ‘‘SEC. 511. CLOSING AND OVERSIGHT. 20 ‘‘(a) SBA DISTRICT COUNSELS.—Beginning on the 21 date of enactment of this section, with respect to the pro- 22 gram established under this title, district counsels of the 23 Administration shall be subject to the same requirements, 24 and shall have the same authority and responsibilities, as 25 VerDate Sep 11 2014 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 10 HR 8211 RFS in effect with respect to that program on the day before 1 the date of enactment of this section, except that— 2 ‘‘(1) the Office of Credit Risk Management of 3 the Administration shall have the responsibility for 4 all duties relating to conducting file reviews of loans 5 made under this title; and 6 ‘‘(2) district counsels of the Administration 7 shall not have any responsibility relating to the re- 8 view of closing packages with respect to a loan made 9 under this title. 10 ‘‘(b) DESIGNATED ATTORNEYS.—For the purposes of 11 this title, the following provisions and requirements shall 12 apply with respect to a designated attorney of a certified 13 development company: 14 ‘‘(1) A designated attorney that meets the re- 15 quirements determined under paragraph (2) shall be 16 responsible for certifying documents relating to the 17 closing of a loan described in this title. 18 ‘‘(2) The Administrator may determine any 19 continuing education requirements that the des- 20 ignated attorney shall be required to satisfy in order 21 to be permitted to close a loan made under this title. 22 ‘‘(3) If, as of the date of enactment of this sec- 23 tion, a certified development company does not have 24 a designated attorney, during the 270-day period be- 25 VerDate Sep 11 2014 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 11 HR 8211 RFS ginning on that date of enactment, the certified de- 1 velopment company may identify such an attorney, 2 subject to the approval of the Administrator.’’. 3 SEC. 5. CERTIFIED DEVELOPMENT COMPANY LOANS FOR 4 SMALL MANUFACTURERS. 5 (a) CONTRIBUTION REQUIREMENT.—Section 6 502(a)(3)(C) of the Small Business Investment Act of 7 1958, as designated by section 3, is amended— 8 (1) by redesignating clauses (i), (ii), (iii), and 9 (iv) as subclauses (I), (II), (III), and (IV), respec- 10 tively, and adjusting the margins of such subclauses 11 accordingly; 12 (2) by inserting before subclause (I), as so re- 13 designated, the following: 14 ‘‘(i) for a small business concern that 15 is not a small manufacturer (as defined in 16 section 501(e)(7))—’’; 17 (3) in subclause (III), as so redesignated, by 18 striking ‘‘clauses (i) and (ii)’’ and inserting ‘‘sub- 19 clauses (I) and (II)’’; 20 (4) in subclause (IV) as so redesignated, by 21 striking the period and the end and inserting ‘‘; or’’; 22 and 23 (5) by adding at the end the following: 24 VerDate Sep 11 2014 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 12 HR 8211 RFS ‘‘(ii) for a small manufacturer (as de- 1 fined in section 501(e)(7))— 2 ‘‘(I) at least 5 percent of the 3 total cost of the project financed, if 4 the small business concern has been in 5 operation for a period of 2 years or 6 less; 7 ‘‘(II) at least 5 percent of the 8 total cost of the project financed, if 9 the project involves a limited or single 10 purpose building or structure; 11 ‘‘(III) at least 10 percent of the 12 total cost of the project financed if the 13 project involves both of the conditions 14 set forth in subclauses (I) and (II); or 15 ‘‘(IV) at least 5 percent of the 16 total cost of the project financed, in 17 all other circumstances, at the discre- 18 tion of the development company.’’. 19 (b) CREATION OR RETENTION OF JOBS REQUIRE- 20 MENT.—Section 501(e) of the Small Business Investment 21 Act of 1958 (15 U.S.C. 695(e)) is amended— 22 (1) in paragraph (1), by striking ‘‘creates or re- 23 tains’’ and all that follows through the period at the 24 end and inserting ‘‘creates or retains 1 job for every 25 VerDate Sep 11 2014 03:35 Dec 08, 2020 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H8211.RFS H8211 pbinns on DSKJLVW7X2PROD with BILLS 13 HR 8211 RFS $75,000 guaranteed by the Administration, except 1 that the amount is $150,000 in the case of a project 2 of a small manufacturer.’’; 3 (2) in paragraph (2), by striking ‘‘creates or re- 4 tains’’ and all that follows through the period at the 5 end and inserting ‘‘creates or retains 1 job for every 6 $75,000 guaranteed by the Administration, except 7 that the amount is $150,000 in the case of a project 8 of a small manufacturer.’’; 9 (3) by redesignat [Text truncated for display. Full text available on Congress.gov.]