The Administration may, in addition to its authority under section 695 of this title, make loans for plant acquisition, construction, conversion or expansion, including the acquisition of land, to State and local development companies, and such loans may be made or effected either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred basis: Provided, however, That the foregoing powers shall be subject to the following restrictions and limitations:
(1)
(2)
(A)
(i) $5,000,000 for each small business concern if the loan proceeds will not be directed toward a goal or project described in clause (ii), (iii), (iv), or (v);
(ii) $5,000,000 for each small business concern if the loan proceeds will be directed toward 1 or more of the public policy goals described under section 695(d)(3) of this title;
(iii) $5,500,000 for each project of a small manufacturer;
(iv) $5,500,000 for each project that reduces the borrower's energy consumption by at least 10 percent; and
(v) $5,500,000 for each project that generates renewable energy or renewable fuels, such as biodiesel or ethanol production.
(B)
(i) the primary business of which is classified in sector 31, 32, or 33 of the North American Industrial Classification System; and
(ii) all of the production facilities of which are located in the United States.
(3)
(A)
(B)
(i)
(I) State or local governments;
(II) banks or other financial institutions;
(III) foundations or other not-for-profit institutions; or
(IV) the small business concern (or its owners, stockholders, or affiliates) receiving assistance through a body authorized by this subchapter.
(ii)
(C)
(i) at least 15 percent of the total cost of the project financed, if the small business concern has been in operation for a period of 2 years or less;
(ii) at least 15 percent of the total cost of the project financed if the project involves the construction of a limited or single purpose building or structure;
(iii) at least 20 percent of the total cost of the project financed if the project involves both of the conditions set forth in clauses (i) and (ii); or
(iv) at least 10 percent of the total cost of the project financed, in all other circumstances, at the discretion of the development company.
(D)
(E)
(i)
(ii)
(I) In general.—With respect to commercial real property provided by the small business concern as collateral, an appraisal of the property by a State licensed or certified appraiser—
(aa) shall be required by the Administration before disbursement of the loan if the estimated value of that property is more than the Federal banking regulator appraisal threshold; or
(bb) may be required by the Administration or the lender before disbursement of the loan if the estimated value of that property is equal to or less than the Federal banking regulator appraisal threshold, and such appraisal is necessary for appropriate evaluation of creditworthiness.
(II) Federal banking regulator appraisal threshold defined.—For purposes of this clause, the term "Federal banking regulator appraisal threshold" means the lesser of the threshold amounts set by the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation for when a federally related transaction that is a commercial real estate transaction requires an appraisal prepared by a State licensed or certified appraiser.
(4) If the project is to construct a new facility, up to 33 per centum of the total project may be leased, if reasonable projections of growth demonstrate that the assisted small business concern will need additional space within three years and will fully utilize such additional space within ten years.
(5)
(6)
(7)
(A)
(B)
(i) the proceeds of the indebtedness were used to acquire land, including a building situated thereon, to construct a building thereon, or to purchase equipment;
(ii) the existing indebtedness is collateralized by fixed assets;
(iii) the existing indebtedness was incurred for the benefit of the small business concern;
(iv) the financing under this subchapter will be used only for refinancing existing indebtedness or costs relating to the project financed under this subchapter;
(v) the financing under this subchapter will provide a substantial benefit to the borrower when prepayment penalties, financing fees, and other financing costs are accounted for;
(vi) the borrower has been current on all payments due on the existing debt for not less than 1 year preceding the date of refinancing; and
(vii) the financing under section 697a of this title will provide better terms or rate of interest than the existing indebtedness at the time of refinancing.
(C) 2 Repealed. Pub. L. 111–240, title I, §1122(b), Sept. 27, 2010, 124 Stat. 2512.
Amendments
2018—Par. (3)(E)(ii). Pub. L. 115–371 redesignated introductory provisions of cl. (ii) as subcl. (I) of cl. (ii) and inserted heading, redesignated former subcls. (I) and (II) as items (aa) and (bb), respectively, of subcl. (I) and realigned margins, in item (aa), substituted "is more than the Federal banking regulator appraisal threshold" for "is more than $250,000", in item (bb), substituted "is equal to or less than the Federal banking regulator appraisal threshold" for "is $250,000 or less", and added subcl. (II).
2010—Par. (2)(A)(i). Pub. L. 111–240, §1122(c), substituted "clause (ii), (iii), (iv), or (v)" for "subparagraph (B) or (C)".
Pub. L. 111–240, §1112(1), substituted "$5,000,000" for "$1,500,000".
Par. (2)(A)(ii). Pub. L. 111–240, §1112(2), substituted "$5,000,000" for "$2,000,000".
Par. (2)(A)(iii) to (v). Pub. L. 111–240, §1112(3)–(5), substituted "$5,500,000" for "$4,000,000".
Par. (7)(C). Pub. L. 111–240, §1122(b), struck out subpar. (C) relating to refinancing not involving expansions. Text read as follows:
"(i)
"(I) the term 'borrower' means a small business concern that submits an application to a development company for financing under this subparagraph;
"(II) the term 'eligible fixed asset' means tangible property relating to which the Administrator may provide financing under this section; and
"(III) the term 'qualified debt' means indebtedness—
"(aa) that—
"(AA) was incurred not less than 2 years before the date of the application for assistance under this subparagraph;
"(BB) is a commercial loan;
"(CC) is not subject to a guarantee by a Federal agency;
"(DD) the proceeds of which were used to acquire an eligible fixed asset;
"(EE) was incurred for the benefit of the small business concern; and
"(FF) is collateralized by eligible fixed assets; and
"(bb) for which the borrower has been current on all payments for not less than 1 year before the date of the application.
"(ii)
"(I) the amount of the financing is not more than 90 percent of the value of the collateral for the financing, except that, if the appraised value of the eligible fixed assets serving as collateral for the financing is less than the amount equal to 125 percent of the amount of the financing, the borrower may provide additional cash or other collateral to eliminate any deficiency;
"(II) the borrower has been in operation for all of the 2-year period ending on the date of the loan; and
"(III) for a financing for which the Administrator determines there will be an additional cost attributable to the refinancing of the qualified debt, the borrower agrees to pay a fee in an amount equal to the anticipated additional cost.
"(iii)
"(I)
"(II)
"(aa) a specific description of the expenses for which the additional financing is requested; and
"(bb) an itemization of the amount of each expense.
"(III)
"(iv)
"(I)
"(aa)
"(bb)
"(II)
"(aa) the number of full-time employees of the borrower on the date on which the borrower applies for a loan under this subparagraph; and
"(bb) the product obtained by multiplying—
"(AA) the number of part-time employees of the borrower on the date on which the borrower applies for a loan under this subparagraph; by
"(BB) the quotient obtained by dividing the average number of hours each part time employee of the borrower works each week by 40.
"(v)
"(vi)
Pub. L. 111–240, §1122(a), added subpar. (C).
2009—Par. (7). Pub. L. 111–5 added par. (7).
2007—Par. (2)(A)(iv), (v). Pub. L. 110–140 added cls. (iv) and (v).
2004—Par. (2). Pub. L. 108–447 amended par. (2) generally. Prior to amendment, par. (2) read as follows: "Loans made by the Administration under this section shall be limited to $1,000,000 for each such identifiable small business concern, except loans meeting the criteria specified in section 695(d)(3) of this title, which shall be limited to $1,300,000 for each such identifiable small business concern."
2000—Par. (2). Pub. L. 106–554, §1(a)(9) [title III, §303], amended par. (2) generally. Prior to amendment, par. (2) read as follows: "Loans made by the Administration under this section shall be limited to $750,000 for each such identifiable small-business concern, except loans meeting the criteria specified in section 695(d)(3) of this title shall be limited to $1,000,000 for each such identifiable small business concern."
Par. (3)(E). Pub. L. 106–554, §1(a)(9) [title II, §208(b)], designated existing provisions as cl. (i), inserted heading, and added cl. (ii).
Par. (6). Pub. L. 106–554, §1(a)(9) [title VIII, §802(b)], added par. (6).
1997—Par. (1). Pub. L. 105–135, §221(1), added par. (1) and struck out former par. (1) which read as follows: "The proceeds of any such loan shall be used solely by such borrower to assist in identifiable small-business concern and for a sound business purpose approved by the Administration."
Par. (3)(D), (E). Pub. L. 105–135, §221(2), added subpars. (D) and (E).
Par. (5). Pub. L. 105–135, §221(3), added par. (5).
1996—Par. (3). Pub. L. 104–208 inserted heading and amended text of par. (3) generally. Prior to amendment, text read as follows: "Any development company assisted under this section must meet criteria established by the Administration, including the extent of participation to be required or amount of paid-in capital to be used in each instance as is determined to be reasonable by the Administration. Community injection funds may be derived, in whole or in part, from—
"(A) State or local governments;
"(B) banks or other financial institutions;
"(C) foundations or other not-for-profit institutions; or
"(D) a small business concern (or its owners, stockholders, or affiliates) receiving assistance through bodies authorized under this subchapter."
1990—Par. (2). Pub. L. 101–574 struck out period at end and inserted ", except loans meeting the criteria specified in section 695(d)(3) of this title shall be limited to $1,000,000 for each such identifiable small business concern."
1988—Pub. L. 100–590, §116(b)(1), inserted "Loans for plant acquisition, construction, conversion, and expansion" as section catchline.
Par. (2). Pub. L. 100–418 substituted "$750,000" for "$500,000".
Par. (4). Pub. L. 100–590, §116(a), added par. (4).
1981—Pars. (1) to (4). Pub. L. 97–35 redesignated pars. (2) to (4) as (1) to (3), respectively. Former par. (1), which provided that all loans made shall be so secured as reasonably to assure repayment and that in agreements to participate in loans on a deferred basis, such participation by the Administration shall not be in excess of 90 per centum of the balance of the loan outstanding at the time of disbursement, was struck out.
Par. (5). Pub. L. 97–35 struck out par. (5) which provided that loans, including extensions and renewals, may be made for a period not exceeding twenty-five years and that an extension may be granted up to ten years, if such extension will aid in the orderly liquidation of the loan, and that the Administration may fix the rate of interest.
1978—Par. (4). Pub. L. 95–507 inserted provisions relating to derivation of community injection funds.
1976—Pub. L. 94–305, §108(a), inserted "acquisition," after "plant" in introductory text.
Par. (3). Pub. L. 94–305, §110, substituted "$500,000" for "$350,000".
1961—Par. (3). Pub. L. 87–341, §10(1), substituted "$350,000" for "$250,000".
Par. (5). Pub. L. 87–341, §10(2), substituted "twenty-five" for "ten" before "years plus such additional period".
Par. (6). Pub. L. 87–27 struck out par. (6) which provided for termination of authority of the Administration to make loans to local development companies after June 30, 1961.
Effective Date of 2010 Amendment
Pub. L. 111–240, title I, §1122(b), Sept. 27, 2010, 124 Stat. 2512, provided that the amendment made by section 1122(b) is effective 2 years after Sept. 27, 2010.
Effective Date of 2007 Amendment
Amendment by Pub. L. 110–140 effective on the date that is 1 day after Dec. 19, 2007, see section 1601 of Pub. L. 110–140, set out as an Effective Date note under section 1824 of Title 2, The Congress.
Effective Date of 1997 Amendment
Amendment by Pub. L. 105–135 effective Oct. 1, 1997, see section 3 of Pub. L. 105–135, set out as a note under section 631 of this title.
Effective Date of 1996 Amendment
Amendment by Pub. L. 104–208 effective Oct. 1, 1996, see section 3 of Pub. L. 104–208, set out as a note under section 633 of this title.
Effective Date of 1981 Amendment
Amendment by Pub. L. 97–35 effective Oct. 1, 1981, see section 1918 of Pub. L. 97–35, set out as a note under section 631 of this title.
Refinancing Not Involving Expansions
Pub. L. 114–113, div. E, title V, §521(a), Dec. 18, 2015, 129 Stat. 2463, provided that: "Subparagraph (C) of section 502(7) of the Small Business Investment Act of 1958 (15 U.S.C. 696(7)) [former 15 U.S.C. 696(7)(C), see 2010 Amendment note above for text], as in effect on September 25, 2012, shall be in effect in any fiscal year during which the cost to the Federal Government of making guarantees under such subparagraph (C) and section 503 of the Small Business Investment Act of 1958 (15 U.S.C. 697) is zero, except that—
"(1) subclause (I)(bb) and subclause (II) of clause (iv) of such subparagraph (C) shall not be in effect;
"(2) unless, upon application by a development company and after determining that the refinance loan is needed for good cause, the Administrator of the Small Business Administration waives this paragraph, a development company shall limit its financings under section 502 of the Small Business Investment Act of 1958 (15 U.S.C. 696) so that, during any fiscal year, new financings under such subparagraph (C) shall not exceed 50 percent of the dollars loaned under title V of the Small Business Investment Act of 1958 (15 U.S.C. 695 et seq.) during the previous fiscal year; and
"(3) clause (iv)(I)(aa) of such subparagraph (C) shall be applied by substituting 'job creation and retention' for 'job creation'."
1 So in original. Probably should be "clause". 2 See Refinancing Not Involving Expansions note below.Tried the LawStack mobile app?
Join thousands and try LawStack mobile for FREE today.
- Carry the law offline, wherever you go.
- Download CFR, USC, rules, and state law to your mobile device.
