What This Bill Does
This bill creates a new investment program to help small manufacturing businesses grow. The government will purchase special bonds from investment companies that promise to invest money into these small manufacturers. The goal is to strengthen the manufacturing supply chain and make it more resilient (able to recover from disruptions).
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Who It Affects
- Small manufacturing businesses (those classified as manufacturing under industry codes 31, 32, or 33)
- Small business investment companies (private firms that invest in small companies)
- The Small Business Administration (the federal agency running the program)
- Investors and managers of participating investment companies
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Key Provisions
- The Small Business Administration will create a facility to give financial help to investment companies that invest in eligible small manufacturing businesses (Sec. 321(b))
- To receive government funding, investment companies must invest at least 50 percent of their money into eligible small manufacturing businesses (Sec. 321(e)(5)(A))
- The government will purchase bonds from investment companies that have a term of at least 15 years and charge interest of no more than 2 percent (Sec. 321(e)(2)(A))
- The government will receive a share of profits from these investments and can receive up to 2 percent in profit sharing payments, which gets deposited back into the program fund (Sec. 321(e)(2)(C))
- Investment companies must submit a business plan, information about their managers' experience, and explanation of how they meet selection criteria to participate (Sec. 321(c)(2))
- The Administrator must approve or disapprove applications within 60 days of receiving them (Sec. 321(d)(1)(A))
- A special "pathway-protégé program" allows newer or underrepresented investment company managers to receive voluntary technical assistance from participating companies (Sec. 321(g))
- The bill allows documents submitted to the Small Business Administration under this program to be submitted electronically, including electronic signatures (Sec. 322)
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What Changes
If this becomes law, the Small Business Administration will have new authority to purchase bonds from investment companies focusing on small manufacturers. New investment companies will face reduced application requirements to encourage participation. Investment companies will be able to raise private capital more easily by referencing the government's commitment. The government will create a special fund to manage money coming in and going out of the program. Banks that own investment companies will have a faster approval process (45 days instead of the regular timeline).
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Important Definitions
- **Eligible small business concern**: A manufacturing business with an industry classification code starting with 31, 32, or 33 that receives investment from a participating investment company (Sec. 321(a)(1))
- **Participating investment company**: A small business investment company approved by the Administrator to participate in the facility (Sec. 321(a)(4))
- **Protégé investment company**: A small business investment company managed mostly by new, inexperienced, or underrepresented fund managers that participates in the pathway-protégé program (Sec. 321(a)(5))
- **Facility**: The investment program established under this section (Sec. 321(a)(2))
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Effective Date
Not specified in bill text
II
118TH CONGRESS
1ST SESSION
S. 46
To establish a small business and domestic production recovery investment
facility, and for other purposes.
IN THE SENATE OF THE UNITED STATES
JANUARY 24 (legislative day, JANUARY 3), 2023
Mr. RUBIO (for himself and Mr. RISCH) introduced the following bill; which
was read twice and referred to the Committee on Small Business and En-
trepreneurship
A BILL
To establish a small business and domestic production
recovery investment facility, 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 ‘‘American Innovation
4
and Manufacturing Act’’.
5
SEC. 2. SMALL BUSINESS INVESTMENT COMPANY PRO-
6
GRAM.
7
(a) IN GENERAL.—Part A of title III of the Small
8
Business Investment Act of 1958 (15 U.S.C. 681 et seq.)
9
is amended—
10
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(1) in section 302(a) (15 U.S.C. 682(a))—
1
(A) in paragraph (1)—
2
(i) in subparagraph (A), by striking
3
‘‘or’’ at the end;
4
(ii) in subparagraph (B), by striking
5
the period at the end and inserting ‘‘; or’’;
6
and
7
(iii) by adding at the end the fol-
8
lowing:
9
‘‘(C) $20,000,000, adjusted every 5 years
10
for inflation, with respect to each licensee au-
11
thorized or seeking authority to sell bonds to
12
the Administration as a participating invest-
13
ment company under section 321.’’; and
14
(2) by adding at the end the following:
15
‘‘SEC. 321. SMALL BUSINESS AND DOMESTIC PRODUCTION
16
RECOVERY INVESTMENT FACILITY.
17
‘‘(a) DEFINITIONS.—In this section:
18
‘‘(1) ELIGIBLE SMALL BUSINESS CONCERN.—
19
The term ‘eligible small business concern’—
20
‘‘(A) means a small business concern that
21
is a manufacturing business that is assigned a
22
North American Industry Classification System
23
code beginning with 31, 32, or 33 at the time
24
at which the small business concern receives an
25
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investment from a participating investment
1
company under the facility; and
2
‘‘(B) does not include an entity described
3
in section 7(a)(37)(A)(iv)(III) of the Small
4
Business
Act
(15
U.S.C.
5
636(a)(37)(A)(iv)(III)).
6
‘‘(2) FACILITY.—The term ‘facility’ means the
7
facility established under subsection (b).
8
‘‘(3) FUND.—The term ‘Fund’ means the fund
9
established under subsection (h).
10
‘‘(4) PARTICIPATING INVESTMENT COMPANY.—
11
The term ‘participating investment company’ means
12
a small business investment company approved
13
under subsection (d) to participate in the facility.
14
‘‘(5) PROTE´GE´
INVESTMENT
COMPANY.—The
15
term ‘prote´ge´ investment company’ means a small
16
business investment company that—
17
‘‘(A) is majority managed by new, inexperi-
18
enced, or otherwise underrepresented fund man-
19
agers; and
20
‘‘(B) elects and is selected by the Adminis-
21
tration to participate in the pathway-prote´ge´
22
program under subsection (g).
23
‘‘(6) SMALL
BUSINESS
CONCERN.—The term
24
‘small business concern’ has the meaning given the
25
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term in section 3(a) of the Small Business Act (15
1
U.S.C. 632(a)).
2
‘‘(b) ESTABLISHMENT.—
3
‘‘(1) FACILITY.—The Administrator shall estab-
4
lish and carry out a facility to increase resiliency in
5
the manufacturing supply chain of eligible small
6
business concerns by providing financial assistance
7
to participating investment companies that facilitate
8
equity financings to eligible small business concerns
9
in accordance with this section.
10
‘‘(2) ADMINISTRATION OF FACILITY.—The fa-
11
cility shall be administered by the Administrator act-
12
ing through the Associate Administrator described in
13
section 201.
14
‘‘(c) APPLICATIONS.—
15
‘‘(1) IN GENERAL.—Any small business invest-
16
ment company may submit to the Administrator an
17
application to participate in the facility.
18
‘‘(2) REQUIREMENTS
FOR
APPLICATION.—An
19
application to participate in the facility shall include
20
the following:
21
‘‘(A) A business plan describing how the
22
applicant intends to make successful equity in-
23
vestments in eligible small business concerns.
24
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‘‘(B) Information regarding the relevant
1
investment qualifications and backgrounds of
2
the individuals responsible for the management
3
of the applicant.
4
‘‘(C) A description of the extent to which
5
the applicant meets the selection criteria under
6
subsection (d)(2).
7
‘‘(3) EXCEPTIONS TO APPLICATION FOR NEW
8
LICENSEES.—Not later than 90 days after the date
9
of enactment of this section, the Administrator shall
10
reduce requirements for applicants applying to oper-
11
ate as a participating investment company under
12
this section in order to encourage the participation
13
of new small business investment companies in the
14
facility under this section, which may include the re-
15
quirements established under part 107 of title 13,
16
Code of Federal Regulations, or any successor regu-
17
lation, relating to—
18
‘‘(A) the approval of initial management
19
expenses;
20
‘‘(B) the management ownership diversity
21
requirement;
22
‘‘(C) the disclosure of general compen-
23
satory practices and fee structures; or
24
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•S 46 IS
‘‘(D) any other requirement that the Ad-
1
ministrator determines to be an obstacle to
2
achieving the purposes described in this para-
3
graph.
4
‘‘(d) SELECTION
OF PARTICIPATING INVESTMENT
5
COMPANIES.—
6
‘‘(1) DETERMINATION.—
7
‘‘(A) IN GENERAL.—Except as provided in
8
paragraph (3), not later than 60 days after the
9
date on which the Administrator receives an ap-
10
plication under subsection (c), the Adminis-
11
trator shall—
12
‘‘(i) make a final determination to ap-
13
prove or disapprove such applicant to par-
14
ticipate in the facility; and
15
‘‘(ii) transmit the determination to the
16
applicant in writing.
17
‘‘(B) COMMITMENT
AMOUNT.—Except as
18
provided in paragraph (3), at the time of ap-
19
proval of an applicant, the Administrator shall
20
make a determination of the amount of the
21
commitment that may be awarded to the appli-
22
cant under this section.
23
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‘‘(2) SELECTION CRITERIA.—In making a de-
1
termination under paragraph (1), the Administrator
2
shall consider—
3
‘‘(A) the probability that the investment
4
strategy of the applicant will successfully repay
5
any financial assistance provided by the Admin-
6
istration, including the probability of a return
7
significantly in excess thereof;
8
‘‘(B) the probability that the investments
9
made by the applicant will—
10
‘‘(i) provide capital to eligible small
11
business concerns; or
12
‘‘(ii) create or preserve jobs in the
13
United States;
14
‘‘(C) the probability that the applicant will
15
meet the objectives in the business plan of the
16
applicant, including the financial goals, and, if
17
applicable, the pathway-prote´ge´ program in ac-
18
cordance with subsection (g); and
19
‘‘(D) the probability that the applicant will
20
assist eligible small business concerns in achiev-
21
ing profitability.
22
‘‘(3) APPROVAL
OF
PARTICIPATING
INVEST-
23
MENT COMPANIES.—
24
‘‘(A) PROVISIONAL APPROVAL.—
25
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‘‘(i) IN
GENERAL.—Notwithstanding
1
paragraph (1), with respect to an applica-
2
tion submitted by an applicant to operate
3
as a participating investment company
4
under this section, the Administrator may
5
provide provisional approval for the appli-
6
cant in lieu of a final determination of ap-
7
proval and determination of the amount of
8
the commitment under that paragraph.
9
‘‘(ii) PURPOSE.—The purpose of a
10
provisional approval under clause (i) is
11
to—
12
‘‘(I) encourage applications from
13
investment companies with an invest-
14
ment mandate from the committed
15
private market capital of the invest-
16
ment company that does not conform
17
to the requirements described in this
18
section at the time of application;
19
‘‘(II) allow the applicant to more
20
effectively raise capital commitments
21
in the private markets by referencing
22
the intent of the Administrator to
23
award the applicant a commitment;
24
and
25
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‘‘(III) allow the applicant to more
1
precisely request the desired amount
2
of commitment pending the securing
3
of capital from private market inves-
4
tors.
5
‘‘(iii) LIMIT
ON
PERIOD
OF
THE
6
TIME.—The period between a provisional
7
approval under clause (i) and the final de-
8
termination of approval under paragraph
9
(1) shall not exceed 12 months.
10
‘‘(e) COMMITMENTS AND SBIC BONDS.—
11
‘‘(1) IN
GENERAL.—The Administrator may,
12
out of amounts available in the Fund, purchase or
13
commit to purchase from a participating investment
14
company 1 or more accruing bonds that include eq-
15
uity features as described in this subsection.
16
‘‘(2) BOND TERMS.—A bond purchased by the
17
Administrator from a participating investment com-
18
pany under this subsection shall have the following
19
terms and conditions:
20
‘‘(A) TERM AND INTEREST.—
21
‘‘(i) IN GENERAL.—The bond shall be
22
issued for a term of not less than 15 years
23
and shall bear interest at a rate deter-
24
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•S 46 IS
mined by the Administrator of not more
1
than 2 percent.
2
‘‘(ii) ACCRUAL OF INTEREST.—Inter-
3
est on the bond shall accrue and shall be
4
payable in accordance with subparagraph
5
(D).
6
‘‘(iii) PREPAYMENT.—The bond shall
7
be prepayable without penalty after the
8
end of the 1-year period beginning on the
9
date on which the bond was purchased.
10
‘‘(B) PROFITS.—
11
‘‘(i) IN
GENERAL.—The Administra-
12
tion shall be entitled to receive a share of
13
the profits net of any profit sharing per-
14
formance compensation of the participating
15
investment company equal to the quotient
16
obtained by dividing—
17
‘‘(I) one-third of the commitment
18
that the participating investment com-
19
pany is approved for under subsection
20
(d); by
21
‘‘(II) the commitment approved
22
under subsection (d) plus the regu-
23
latory capital of the participating in-
24
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•S 46 IS
vestment company at the time of ap-
1
proval under that subsection.
2
‘‘(ii) DETERMINATION
OF
PERCENT-
3
AGE.—The share to which the Administra-
4
tion is entitled under clause (i)—
5
‘‘(I) shall be determined at the
6
time of approval under subsection (d);
7
and
8
‘‘(II) without the approval of the
9
Administration, shall not be revised,
10
including to reflect subsequent dis-
11
tributions of profits, returns of cap-
12
ital, or repayments of bonds, or other-
13
wise.
14
‘‘(C)
PROFIT
SHARING
PERFORMANCE
15
COMPENSATION.—
16
‘‘(i) RECEIPT BY ADMINISTRATION.—
17
The Administration shall receive a share of
18
profits of not more than 2 percent, which
19
shall be deposited into the Fund and be
20
available to make commitments under this
21
subsection.
22
‘‘(ii) RECEIPT
BY
MANAGERS.—The
23
managers of the participating investment
24
company may receive a maximum profit
25
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sharing performance compensation of 25
1
percent minus the share of profits paid to
2
the Administration under clause (i).
3
‘‘(D) PROHIBITION ON DISTRIBUTIONS.—
4
No distributions on capital, including profit dis-
5
tributions, shall be made by the participating
6
investment company to the investors or man-
7
agers of the participating investment company
8
until the Administration has received payment
9
of all accrued interest on the bond committed
10
under this section.
11
‘‘(E) REPAYMENT OF PRINCIPAL.—Except
12
as described in subparagraph (F), repayments
13
of principal of the bond of a participating in-
14
vestment company shall be—
15
‘‘(i) made at the same time as returns
16
of private capital; and
17
‘‘(ii) in amounts equal to the pro rata
18
share of the Administration of the total
19
amount being repaid or returned at such
20
time.
21
‘‘(F) LIQUIDATION
OR
DEFAULT.—Upon
22
any liquidation event or default, as defined by
23
the Administration, any unpaid principal or ac-
24
crued interest on the bond shall—
25
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‘‘(i) have a priority over all equity of
1
the participating investment company; and
2
‘‘(ii) be paid before any return of eq-
3
uity or any other distributions to the inves-
4
tors or managers of the participating in-
5
vestment company.
6
‘‘(3) AMOUNT
OF
COMMITMENTS
AND
PUR-
7
CHASES.—
8
‘‘(A) MAXIMUM AMOUNT.—The maximum
9
amount of outstanding bonds and commitments
10
to purchase bonds for any participating invest-
11
ment company under the facility shall be the
12
lesser of—
13
‘‘(i) twice the amount of the regu-
14
latory capital of the participating invest-
15
ment company; or
16
‘‘(ii) $200,000,000.
17
‘‘(4) COMMITMENT PROCESS.—Commitments by
18
the Administration to purchase bonds under the fa-
19
cility shall remain available to be sold by a partici-
20
pating investment company until the end of the
21
fourth fiscal year following the year in which the
22
commitment is made, subject to review and approval
23
by the Administration based on regulatory compli-
24
ance, financial status, change in management, devi-
25
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