II
109th CONGRESS
2d Session
S. 3664
IN THE SENATE OF THE UNITED STATES
July 14, 2006
Ms. Landrieu (for herself, Mr. Kerry, Mr. Bayh, and Mr. Pryor) introduced the following bill; which was read twice and referred to the Committee on Small Business and Entrepreneurship
A BILL
To amend the Small Business Act to improve assistance after a major disaster, to authorize emergency bridge loans, bridge loan guarantees, and recovery grants, and for other purposes.
Short title
This Act may be cited as
the Small Business Disaster Recovery
Assistance Improvements Act of 2006
.
Findings
Congress finds that—
43 percent of businesses that close following a natural disaster never reopen;
an additional 29 percent of businesses close down permanently within 2 years of a natural disaster;
businesses affected by a natural disaster require, within the first 60 days following the disaster, immediate access to capital and technical assistance to fully recover and prosper;
in the aftermath of Hurricanes Katrina and Rita of 2005, due to initial Administration response issues, as well as extensive destruction in the region and wide distribution of affected business owners around the country—
Administration loan approvals took longer than 3 months, on average, for homeowner disaster loans, and longer than 2 months, on average, for business disaster loans; and
closings on disaster loans added an additional month to the process;
the Administration requires new tools and authority to be more effective in responding to major disasters and to be responsive to the needs of affected small business concerns and homeowners;
for major disasters, State-administered bridge loan programs can serve as an effective means of providing immediate capital, to allow businesses to make repairs, make payroll, and continue operations, as demonstrated by the fact that—
following the 2004 hurricanes in Florida, the Florida State Bridge Loan Program was a successful program in providing immediate capital to struggling businesses, providing 1,679 small business concerns with $35,400,000 in bridge loans;
following the 2005 impacts of Hurricanes Katrina and Rita on the Louisiana Gulf Coast, the Louisiana Bridge Loan Program was a successful program in providing immediate capital to struggling businesses, providing 407 small business concerns with $9,750,000 in bridge loans;
following the 2005 impact of Hurricane Katrina on the Mississippi Gulf Coast, the Mississippi Bridge Loan Program was a successful program in providing immediate capital to struggling businesses, providing 464 small business concerns with $11,233,850 in bridge loans; and
following the 2005 impact of Hurricane Wilma on the Florida Gulf Coast, the Florida State Bridge Loan Program was a successful program in providing immediate capital to struggling businesses, providing 593 small business concerns with $12,900,000 in bridge loans;
in the aftermath of Hurricane Katrina of 2005 and Hurricane Rita of 2005, small business development centers had difficulties entering and utilizing disaster recovery centers of the Administration, resulting in delays of technical assistance service to affected businesses; and
there is a need for greater cooperation between the Federal Government and State governments on bridge loans programs to respond to major disasters.
Definitions
In this Act—
the terms Administration and Administrator mean the Small Business Administration and the Administrator thereof, respectively;
the term approved State Bridge Loan Program means a State Bridge Loan Program approved under section 5(b);
the term major disaster has the meaning given the term in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122);
the term small business concern has the meaning given the term in section 3 of the Small Business Act; and
the term State means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Northern Mariana Islands, the Virgin Islands, Guam, American Samoa, and any territory or possession of the United States.
Emergency bridge loans and grants after major disasters
Section 7(b) of the Small Business Act (15 U.S.C. 636(b)) is amended by inserting immediately after paragraph (3) the following:
Emergency bridge loans and business recovery grants after major disasters
Definitions
In this paragraph—
the term disaster area means an area for which a major disaster was declared, during the period of such declaration; and
the term major disaster has the meaning given the term in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122).
Bridge loans
Definition
In this subparagraph, the term qualified small business concern means a small business concern—
located in a disaster area; and
that is directly adversely affected by the major disaster for which such disaster area was declared.
Loan authority
The Administrator shall make such loans under this subparagraph (either directly (including through a district office of the Administration located in a disaster area) or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred basis) as the Administrator determines appropriate to a qualified small business concern, to provide assistance until such small business concern is able to obtain funding through insurance claims, other Federal assistance programs, or other sources, based on such criteria as the Administrator may set by rule, regulation, or order.
Loan terms
Prepayment
A loan under this subparagraph may have no prepayment penalty.
Interest
For not more than 6 months after the date on which a loan is made under this subparagraph, the interest rate on such a loan may be the same as for a loan under paragraph (2).
Transfer
A loan under this subparagraph may include as a term that such loan may be transferred to a local bank or other financial institution in a disaster area.
Technical assistance
The borrower for a loan under this subparagraph shall certify the intent of such borrower to participate in technical assistance consultation (either with a local small business development center or other technical assistance group approved by the Administrator) before the borrower may utilize funds received under the loan.
Use of funds
A loan under this subparagraph may be used for—
paying salaries, bills, and other existing financial obligations;
making minor repairs;
purchasing inventory; or
paying other costs.
Maximum amount
Notwithstanding any other provision of law, the Administrator may make a loan under this subparagraph of not more than $150,000 to a qualified small business concern.
Deferred payment
In general
The Administrator, or a bank or other lending institution, may defer payments of principal and interest on a loan under this subparagraph for not more than 180 days after the date on which the loan is made.
Capitalization of interest
If payments are deferred under subclause (I), any interest accrued during the period for which such payments are deferred shall be capitalized.
Notice to borrowers
In making any loan under this subparagraph—
the borrower shall be made aware that such loans are for those directly adversely affected by the major disaster; and
if such loans are made in cooperation with a bank or other lending institution, the lender shall document for the Administrator how the borrower was directly adversely affected by the major disaster.
Reports
Inspector general
For any major disaster, not later than 6 months after the date on which such disaster is declared, and every 6 months thereafter until the date that is 18 months after the date on which such disaster is declared, the Inspector General of the Administration shall submit a report to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the House of Representatives regarding loans described in clause (vii)(II), including verification that the program is being administered appropriately and that such loans are being used for purposes authorized by this subparagraph.
GAO
Not later than 12 months after the date on which a final report for a major disaster is submitted by the Inspector General under subclause (I), the Comptroller General of the United States shall conduct a review of the loan program authorized under this subparagraph and submit a report to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the House of Representatives containing the findings of the review and any recommendations.
Business recovery grants
Definition
In this subparagraph, the term eligible small business concern means a small business concern—
directly adversely affected by a major disaster;
that has been declined for other assistance under this subsection and from private lending institutions and State-provided bridge loans;
that certifies that it intends—
to reopen in the disaster area for which the major disaster described in subclause (I) was declared; and
to participate in technical assistance consultation (either with a local small business development center or other technical assistance group approved by the Administrator).
Authorization
The Administrator shall make such grants under this subparagraph as the Administrator determines appropriate to an eligible small business concern, to assist such small business concern in recovery from a major disaster.
Maximum amount
The Administrator may make a grant in an amount not more than $25,000 under this subparagraph.
Documentation of technical assistance
An eligible small business concern receiving a grant under this subparagraph shall submit to the Administrator documentation indicating that such small business concern received technical assistance support through a small business development center or other technical assistance provider determined appropriate by the Administrator.
Authorization of appropriations
There are authorized to be appropriated to the Administration such sums as are necessary to carry out this paragraph.
.
State bridge loan guarantee
Authorization
After issuing guidelines under subsection (c), the Administrator may guarantee loans made under an approved State Bridge Loan Program.
Approval
Application
A State desiring approval of a State Bridge Loan Program shall submit an application to the Administrator at such time, in such manner, and accompanied by such information as the Administrator may require.
Criteria
The Administrator may approve an application submitted under paragraph (1) based on such criteria as the Administrator may establish under this section.
Guidelines
In general
Not later than 90 days after the date of enactment of this Act, the Administrator shall issue to the appropriate economic development officials in each State, the Committee on Small Business and Entrepreneurship of the Senate, and the Committee on Small Business of the House of Representatives, guidelines regarding approved State Bridge Loan Programs.
Contents
The guidelines issued under paragraph (1) shall—
identify appropriate uses of funds under an approved State Bridge loan Program;
set terms and conditions for loans under an approved State Bridge loan Program;
address whether—
an approved State Bridge Loan Program may charge administrative fees; and
loans under an approved State Bridge Loan Program shall be disbursed through local banks and other financial institutions; and
establish the percentage of a loan the Administrator will guarantee under an approved State Bridge Loan Program.
Authority to make expedited 7(a) disaster loans to small business concerns
Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) is amended by adding at the end the following:
Expedited loans
Definitions
In this paragraph—
the term disaster area means an area for which a major disaster was declared, during the period of such declaration;
the term major disaster has the meaning given the term in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122); and
the term essential small business concern in good standing means a small business concern that the Administrator, in consultation with appropriate officials in district offices of the Administration determines has the ability to repay the subject loan, and—
is in good standing and has a history of compliance with the terms of a program of the Administration (including having repaid, or being in the process of repaying, a loan under a program of the Administration, as required under the terms of such loan); or
has a bona fide reason for receiving an expedited loan under this paragraph (including being a major source of employment in a disaster area or essential to economic recovery of the area, such as by supplying building materials, housing, or debris removal services).
Loan authorization
Notwithstanding any other provision of law, the Administrator may make a loan under this subsection to an essential small business concern in good standing under expedited procedures, including expedited loss verification, loan processing, and approval.
Authorization of appropriations
There are authorized to be appropriated to the Administrator, such sums as are necessary to carry out this paragraph.
.
Maximum loan amounts
In general
Section 7(a)(3)(A) of the Small Business Act is amended
by striking $1,500,000 (or if the gross loan amount would exceed
$2,000,000
and inserting $2,250,000 (or if the gross loan amount
would exceed $3,000,000
.
Disaster loans
Section 7(c)(6) of the Small Business Act (15 U.S.C. 636(c)(6)) is amended—
by striking
$500,000
each place such term appears and inserting
$2,250,000
;
by striking
$100,000
and inserting $250,000
; and
by striking
$20,000
and inserting $50,000
.
Conforming amendment
Chapter I of the Emergency Supplemental Appropriations
for Relief From the Major, Widespread Flooding in the Midwest Act of 1993
(Public Law 103-75; 107 Stat. 740) is amended by striking :
Provided further, That notwithstanding any other provision of
law, the $500,000 limitation on the amounts outstanding and committed to a
borrower provided in paragraph 7(c)(6) of the Small Business Act shall be
increased to $1,500,000 for disasters commencing on or after April 1,
1993
.
Increasing collateral requirements
Section 7(c)(6)
of the Small Business Act (15 U.S.C. 636(c)(6)) is amended by striking
$10,000
and inserting $20,000
.
Catastrophic regional or national disasters
Section 7(b)(2) of the Small Business Act (15 U.S.C. 636(b)(2)) is amended—
by redesignating subparagraphs (A), (B), (C), and (D) as clauses (i), (ii), (iii), and (v), respectively;
by striking
(2) to make such loans
and inserting (2)(A) to make such
loans
;
in subparagraph (A), as so designated by this section—
by striking
or
at the end of each of clauses (i), (ii), and (iii), as so
redesignated by paragraph (1) of this section;
by inserting after clause (iii), as so redesignated by paragraph (1) of this section, the following:
a catastrophic regional or national disaster, as declared by the Secretary of Homeland Security, that is an actual or potential high-impact event that requires a coordinated and effective response by an appropriate combination of Federal, State, local, tribal, nongovernmental, or private-sector entities in order to save lives and minimize damage and provide the basis for long-term community recovery and mitigation activities; or
; and
in clause (v), as
so redesignated by paragraph (1) of this section, by striking
subparagraph (A), (B), or (C)
and inserting clause (i),
(ii), (iii), or (iv)
; and
by adding at the end the following:
Notwithstanding subsection (c)(6), in the case of a catastrophic regional or national disaster declared under subparagraph (A)(iv) of this paragraph, the Administrator may increase the maximum amount that may be outstanding and committed to borrower under this paragraph to $10,000,000.
.
Full-time disaster planning staff
Increase in small business administration full-time disaster planning staff
The Administrator shall hire a full-time disaster planning specialist in the Office of Disaster Assistance of the Administration.
Responsibilities
The disaster planning specialist hired under subsection (a) shall be responsible for—
creating and maintaining the comprehensive disaster response plan of the Administration;
ensuring in-service and pre-service training procedures for the disaster response staff of the Administration;
coordinating Administration training exercises, including mock disaster responses, with other Federal agencies; and
other responsibilities, as determined by the Administrator.
Authorization of appropriations
In general
There are authorized to be appropriated to the Administration such sums as are necessary to carry out this section.
Availability of funds
Amounts made available under this section shall remain available until expended.
Additional authority for district offices of the Administration
Section 7(b) of the Small Business Act (15 U.S.C. 636(b)) is amended by inserting immediately after paragraph (4), as added by this Act, the following:
Use of district offices
In the event of a major disaster (as that term is defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), the Administrator may authorize a district office of the Administration to process loans under paragraph (1) or (2).
.
Economic injury disaster loans to nonprofits
In general
Section 7(b)(2)(A) of the Small Business Act, as redesignated by this Act, is amended—
in the matter preceding clause (i)—
by inserting
after small business concern
the following: , private
nonprofit organization,
; and
by inserting
after the concern
the following: , organization,
; and
in clause (v), by
inserting after small business concerns
the following: ,
private nonprofit organizations,
.
Conforming amendment
Section 7(c) of the Small Business Act (15 U.S.C.
636(c)) is amended in paragraph (5)(C), by inserting ,
organization,
after business
.
Small business development center portability grants
Section 21(a)(4) of the Small Business Act (15 U.S.C. 648(a)(4), as amended by this Act, is amended by adding at the end the following:
Waiver of maximum amount
In the event of a major disaster (as that term is defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), the Administrator may waive the maximum amount of $100,000 for grants under subparagraph (C)(viii), and such grants shall be made available for small business development centers assisting small business concerns adversely affected by such major disaster.
.
Disaster loan program monthly accounting report
Definition
In this section, the term applicable period means the period beginning on the date on which the President declares a major disaster and ending on the date that is 30 days after the later of the closing date for applications for physical disaster loans for such disaster and the closing date for applications for economic injury disaster loans for such disaster.
Report to congress
Not later than the 5th business day of each month during the applicable period for a major disaster, the Administrator shall provide to the Committee on Small Business and Entrepreneurship and the Committee on Appropriations of the Senate and to the Committee on Small Business and the Committee on Appropriations of the House of Representatives a report on the operation of the disaster loan program authorized under section 7 of the Small Business Act (15 U.S.C. 636) for such disaster during the preceding month.
Content of reports
Each report under subsection (b) shall include—
the daily average lending volume, in number of loans and dollars, and the percent by which each category has increased or decreased since the previous report under subsection (b);
the weekly average lending volume, in number of loans and dollars, and the percent by which each category has increased or decreased since the previous report under subsection (b);
the amount of funding spent over the month for loans, both in appropriations and program level, and the percent by which each category has increased or decreased since the previous report under subsection (b);
the amount of funding available for loans, both in appropriations and program level, and the percent by which each category has increased or decreased, noting the source of any additional funding;
an estimate of how long the available funding for such loans will last, based on the spending rate;
the amount of funding spent over the month for staff, along with the number of staff, and the percent by which each category has increased or decreased since the previous report under subsection (b);
the amount of funding spent over the month for administrative costs, and the percent by which such spending has increased or decreased since the previous report under subsection (b);
the amount of funding available for salaries and expenses combined, and the percent by which such funding has increased or decreased, noting the source of any additional funding; and
an estimate of how long the available funding for salaries and expenses will last, based on the spending rate.
Disaster loans after major disasters
Section 7(b) of the Small Business Act (15 U.S.C. 636(b)) is amended by inserting immediately after paragraph (5), as added by this Act, the following:
Authority for lenders to process disaster loans
The Administrator may enter into an agreement with a qualified lender, as determined by the Administrator, to process loans under this section, under which the Administrator shall pay the lender a fee for each loan processed.
Authority for the administrator to contract with lenders for loan loss verification services
The Administrator may enter into an agreement with a qualified lender or loss verification professional, as determined by the Administrator, to verify losses for loans under this section, under which the Administrator shall pay the lender or verification professional a fee for each loan for which such lender or verification professional verifies losses.
.
Waiver of geographic restrictions on SBDC counselors
Section 21(b) of the Small Business Act (15 U.S.C. 648(b)) is amended by adding at the end the following:
Waiver of geographic restrictions on SBDC counselors
In general
The Administrator shall authorize any small business development center, regardless of location, to provide advice, information, and assistance, as described in subsection (c), to a small business concern located in an area in which the President declared a major disaster (as defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), during the period of such declaration.
Continuity of services
A small business development center that provides counselors to an area described in subparagraph (A) shall, to the maximum extent practicable, ensure continuity of services in the State it currently serves.
Access to disaster recovery facilities
For purposes of providing recovery assistance under this paragraph, the Administrator shall permit small business development center personnel to use any site or facility designated by the Administration for use for such purpose.
.