15 U.S.C. § 696 — Loans for plant acquisition, construction,

Page 1136 TITLE 15—COMMERCE AND TRADE § 696 Subsec. (d)(3)(I) to (K). Pub. L. 110–140, § 1204(a)(1)–(3), added subpars. (I) to (K). 2004—Subsec. (e). Pub. L. 108–447 added subsec. (e). 2000—Subsec. (d)(3)(C). Pub. L. 106–554 inserted ‘‘or women-owned business development’’ before comma at end. 1999—Subsec. (d)(3)(E)–(H). Pub. L. 106–50 added sub- par. (E) and redesignated former subpars. (E) to (G) as (F) to (H), respectively. 1990—Subsec. (a). Pub. L. 101–574, § 214(a), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: ‘‘The Congress hereby finds and de- clares that the purpose of this subchapter is to foster economic development in both urban and rural areas by providing long term financing for small business con- cerns through the development company program au- thorized by this subchapter. In order to carry out this objective, the Administration is hereby directed to place greater emphasis on the needs of rural areas and the promotion of the development company program in such areas, and is further directed to develop a plan for greater outreach of procurement and export trade semi- nars in such areas. As used in this subchapter, the term ‘rural areas’ means those localities with populations of less than 20,000.’’ Subsec. (d). Pub. L. 101–574, § 214(b), added subsec. (d). 1988—Pub. L. 100–590 inserted ‘‘State development companies’’ as section catchline, added subsec. (a), and redesignated former subsecs. (a) and (b) as (b) and (c), respectively. Statutory Notes and Related Subsidiaries 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 sec- tion 1824 of Title 2, The Congress. BUDGETARY TREATMENT OF LOANS AND FINANCINGS Assistance made available under any financings made under this subchapter during 2-year period beginning Oct. 1, 2002, to be treated as a separate program of the Small Business Administration for purposes of the Fed- eral Credit Reform Act of 1990 (2 U.S.C. 661 et seq.) only, see section 6(c) of Pub. L. 107–100, set out as a note under section 636 of this title. LOAN LIQUIDATION PILOT PROGRAM Pub. L. 104–208, div. D, title II, § 204, Sept. 30, 1996, 110 Stat. 3009–736, provided that: ‘‘(a) IN GENERAL.—The Administrator shall carry out a loan liquidation pilot program (in this section re- ferred to as the ‘pilot program’) in accordance with the requirements of this section. ‘‘(b) SELECTION OF DEVELOPMENT COMPANIES.— ‘‘(1) IN GENERAL.—Not later than 90 days after the date of the enactment of this Act [Sept. 30, 1996], the Administrator shall establish a pilot program under which certain development companies authorized to make loans and issue debentures under title V of the Small Business Investment Act of 1958 [15 U.S.C. 695 et seq.] are selected by the Administrator in accord- ance with this subsection to carry out loan liquida- tions. ‘‘(2) CONFLICTS OF INTEREST.—The development companies selected under paragraph (1) shall agree not to take any action that would create a potential conflict of interest involving the development com- pany, the third party lender, or an associate of the third party lender. ‘‘(3) QUALIFICATIONS.—In order to qualify to partici- pate in the pilot program under this section, each de- velopment company shall— ‘‘(A) have not less than 6 years of experience in the program established by title V of the Small Business Investment Act of 1958; ‘‘(B) have made, during the 6 most recent fiscal years, an average of not less than 10 loans per year through the program established by such title V of the Small Business Investment Act of 1958; ‘‘(C) have not less than 2 years of experience in liquidating loans under the authority of a Federal, State, or other lending program; and ‘‘(D) meet such other requirements as the Admin- istration may establish. ‘‘(c) AUTHORITY OF DEVELOPMENT COMPANIES.—The development companies selected under subsection (b) shall, for loans in their portfolio of loans made through debentures guaranteed under title V of the Small Busi- ness Investment Act of 1958 [15 U.S.C. 695 et seq.] that are in default after the date of enactment of this Act [Sept. 30, 1996], be authorized to— ‘‘(1) perform all liquidation and foreclosure func- tions, including the acceleration or purchase of com- munity injection funds, subject to such company ob- taining prior written approval from the Adminis- trator before committing the agency to purchase any other indebtedness secured by the property: Provided, That the Administrator shall approve or deny a re- quest for such purchase within a period of 10 business days; and ‘‘(2) liquidate such loans in a reasonable and sound manner and according to commercially accepted practices pursuant to a liquidation plan approved by the administrator in advance of its implementation. If the administrator does not approve or deny a re- quest for approval of a liquidation plan within 10 business days of the date on which the request is made (or with respect to any routine liquidation ac- tivity under such a plan, within 5 business days) such request shall be deemed to be approved. ‘‘(d) AUTHORITY OF THE ADMINISTRATOR.—In carrying out the pilot program, the Administrator shall— ‘‘(1) have full authority to rescind the authority granted any development company under this section upon a 10-day written notice stating the reasons for the rescission; and ‘‘(2) not later than 90 days after the admission of the development companies specified in subsection (b), implement the pilot program. ‘‘(e) REPORT.— ‘‘(1) IN GENERAL.—The Administrator shall issue a report on the results of the pilot program to the Com- mittees on Small Business of the House of Represent- atives and the Senate [Committee on Small Business of Senate now Committee on Small Business and En- trepreneurship of Senate]. The report shall include information relating to— ‘‘(A) the total dollar amount of each loan and project liquidated; ‘‘(B) the total dollar amount guaranteed by the Administration; ‘‘(C) total dollar losses; ‘‘(D) total recoveries both as percentage of the amount guaranteed and the total cost of the project; and ‘‘(E) a comparison of the pilot program informa- tion with the same information for liquidation con- ducted outside the pilot program over the period of time. ‘‘(2) REPORTING PERIOD.—The report shall be based on data from, and issued not later than 90 days after the close of, the first eight 8 [sic] fiscal quarters of the pilot program’s operation after the date of imple- mentation.’’ [Section 204 of title II of div. D of Pub. L. 104–208, set out above, to cease to have effect beginning on the date on which final regulations are issued to carry out sec- tion 697g of this title, see section 1(a)(9) [title III, § 307(b)] of Pub. L. 106–554, set out as a Regulations note under section 697g of this title.] § 696. Loans for plant acquisition, construction, conversion and expansion The Administration may, in addition to its au- thority under section 695 of this title, make loans for plant acquisition, construction, con- Page 1137 TITLE 15—COMMERCE AND TRADE § 696 1 So in original. Probably should be ‘‘clause’’. version or expansion, including the acquisition of land, to State and local development compa- nies, and such loans may be made or effected ei- ther 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 pow- ers shall be subject to the following restrictions and limitations: (1) USE OF PROCEEDS.—The proceeds of any such loan shall be used solely by the borrower to assist 1 or more identifiable small business con- cerns and for a sound business purpose approved by the Administration. (2) MAXIMUM AMOUNT.— (A) IN GENERAL.—Loans made by the Admin- istration under this section shall be limited to— (i) $5,000,000 for each small business con- cern 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 con- cern if the loan proceeds will be directed to- ward 1 or more of the public policy goals de- scribed 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 gen- erates renewable energy or renewable fuels, such as biodiesel or ethanol production. (B) DEFINITION.—As used in this paragraph, the term ‘‘small manufacturer’’ means a small business concern— (i) the primary business of which is classi- fied in sector 31, 32, or 33 of the North Amer- ican Industrial Classification System; and (ii) all of the production facilities of which are located in the United States. (3) CRITERIA FOR ASSISTANCE.— (A) IN GENERAL.—Any development company assisted under this section or section 697 of this title must meet the 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 de- termined to be reasonable by the Administra- tion. (B) COMMUNITY INJECTION FUNDS.— (i) SOURCES OF FUNDS.—Community injec- tion funds may be derived, in whole or in part, from— (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) receiv- ing assistance through a body authorized by this subchapter. (ii) FUNDING FROM INSTITUTIONS.—Not less than 50 percent of the total cost of any project financed pursuant to clauses 1 (i), (ii), or (iii) of subparagraph (C) shall come from the institutions described in subclauses (I), (II), and (III) of clause (i). (C) FUNDING FROM A SMALL BUSINESS CON- CERN.—The small business concern (or its own- ers, stockholders, or affiliates) receiving as- sistance through a body authorized by this subchapter shall provide— (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 pur- pose 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 cir- cumstances, at the discretion of the develop- ment company. (D) SELLER FINANCING.—Seller-provided fi- nancing may be used to meet the requirements of subparagraph (B), if the seller subordinates the interest of the seller in the property to the debenture guaranteed by the Administration. (E) COLLATERALIZATION.— (i) IN GENERAL.—The collateral provided by the small business concern shall generally include a subordinate lien position on the property being financed under this sub- chapter, and is only 1 of the factors to be evaluated in the credit determination. Addi- tional collateral shall be required only if the Administration determines, on a case-by- case basis, that additional security is nec- essary to protect the interest of the Govern- ment. (ii) APPRAISALS.— (I) In general.—With respect to commer- cial real property provided by the small business concern as collateral, an ap- praisal of the property by a State licensed or certified appraiser— (aa) shall be required by the Adminis- tration 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 Adminis- tration or the lender before disburse- ment 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 nec- essary for appropriate evaluation of creditworthiness. (II) Federal banking regulator appraisal threshold defined.—For purposes of this clause, the term ‘‘Federal banking regu- lator appraisal threshold’’ means the less- er 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 Cor- poration for when a federally related transaction that is a commercial real es- tate transaction requires an appraisal pre- Page 1138 TITLE 15—COMMERCE AND TRADE § 696 pared by a State licensed or certified ap- praiser. (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 dem- onstrate that the assisted small business con- cern will need additional space within three years and will fully utilize such additional space within ten years. (5) LIMITATION ON LEASING.—In addition to any portion of the project permitted to be leased under paragraph (4), not to exceed 20 percent of the project may be leased by the assisted small business to 1 or more other tenants, if the as- sisted small business occupies permanently and uses not less than a total of 60 percent of the space in the project after the execution of any leases authorized under this section. (6) OWNERSHIP REQUIREMENTS.—Ownership re- quirements to determine the eligibility of a small business concern that applies for assist- ance under any credit program under this sub- chapter shall be determined without regard to any ownership interest of a spouse arising solely from the application of the community property laws of a State for purposes of determining mar- ital interests. (7) PERMISSIBLE DEBT REFINANCING.— (A) IN GENERAL.—Any financing approved under this subchapter may include a limited amount of debt refinancing. (B) EXPANSIONS.—If the project involves ex- pansion of a small business concern, any amount of existing indebtedness that does not exceed 100 percent of the project cost of the expansion may be refinanced and added to the expansion cost, if— (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 in- debtedness or costs relating to the project fi- nanced under this subchapter; (v) the financing under this subchapter will provide a substantial benefit to the bor- rower 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 refi- nancing; 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) REFINANCING NOT INVOLVING EXPAN- SIONS.— (i) DEFINITIONS.—In this subparagraph— (I) the term ‘‘borrower’’ means a small business concern that submits an applica- tion to a development company for financ- ing 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 in- debtedness— (aa) that was incurred not less than 6 months before the date of the applica- tion for assistance under this subpara- graph; (bb) that is a commercial loan; (cc) the proceeds of which were used to acquire an eligible fixed asset; (dd) that was incurred for the benefit of the small business concern; and (ee) that is collateralized by eligible fixed assets. (ii) AUTHORITY.—A project that does not involve the expansion of a small business concern may include the refinancing of qualified debt if— (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 as- sets serving as collateral for the financing is less than the amount equal to 125 per- cent of the amount of the financing, the borrower may provide additional cash or other collateral to eliminate any defi- ciency; (II) the borrower has been in operation for all of the 2-year period ending on the date the loan application is submitted; and (III) for a financing for which the Admin- istrator determines there will be an addi- tional cost attributable to the refinancing of the qualified debt, the borrower agrees to pay a fee in an amount equal to the an- ticipated additional cost. (iii) FINANCING FOR BUSINESS EXPENSES.— (I) FINANCING FOR BUSINESS EXPENSES.— The Administrator may provide financing to a borrower that receives financing that includes a refinancing of qualified debt under clause (ii), in addition to the refi- nancing under clause (ii), to be used solely for the payment of business expenses. (II) APPLICATION FOR FINANCING.—An ap- plication for financing under subclause (I) shall include— (aa) a specific description of the ex- penses for which the additional financing is requested; and (bb) an itemization of the amount of each expense. (III) CONDITION ON ADDITIONAL FINANC- ING.—A borrower may not use any part of the financing under this clause for non- business purposes. (iv) LOANS BASED ON JOBS.— (I) JOB CREATION AND RETENTION GOALS.— (aa) IN GENERAL.—The Administrator may provide financing under this sub- paragraph for a borrower that meets the job creation goals under subsection (d) or (e) of section 695 of this title. (bb) ALTERNATE JOB RETENTION GOAL.— The Administrator may provide financ- ing under this subparagraph to a bor- rower that does not meet the goals de- Page 1139 TITLE 15—COMMERCE AND TRADE § 696 scribed in item (aa) in an amount that is not more than the product obtained by multiplying the number of employees of the borrower by $75,000. (II) NUMBER OF EMPLOYEES.—For pur- poses of subclause (I), the number of em- ployees of a borrower is equal to the sum of— (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 multi- plying— (AA) the number of part-time em- ployees of the borrower on the date on which the borrower applies for a loan under this subparagraph, by (BB) the quotient obtained by divid- ing the average number of hours each part time employee of the borrower works each week by 40. (v) TOTAL AMOUNT OF LOANS.—The Admin- istrator may provide not more than a total of $7,500,000,000 of financing under this sub- paragraph for each fiscal year. (Pub. L. 85–699, title V, § 502, Aug. 21, 1958, 72 Stat. 697; Pub. L. 87–27, § 26, May 1, 1961, 75 Stat. 63; Pub. L. 87–341, § 10, Oct. 3, 1961, 75 Stat. 756; Pub. L. 94–305, title I, §§ 108(a), 110, June 4, 1976, 90 Stat. 666, 667; Pub. L. 95–507, title I, § 112, Oct. 24, 1978, 92 Stat. 1760; Pub. L. 97–35, title XIX, § 1909, Aug. 13, 1981, 95 Stat. 778; Pub. L. 100–418, title VIII, § 8007(b), Aug. 23, 1988, 102 Stat. 1561; Pub. L. 100–590, title I, § 116(a), (b)(1), Nov. 3, 1988, 102 Stat. 2997, 2998; Pub. L. 101–574, title II, § 214(c), Nov. 15, 1990, 104 Stat. 2822; Pub. L. 104–208, div. D, title II, § 202(a), Sept. 30, 1996, 110 Stat. 3009–734; Pub. L. 105–135, title II, § 221, Dec. 2, 1997, 111 Stat. 2603; Pub. L. 106–554, § 1(a)(9) [title II, § 208(b), title III, § 303, title VIII, § 802(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–683, 2763A–684, 2763A–702; Pub. L. 108–447, div. K, title I, § 104, Dec. 8, 2004, 118 Stat. 3444; Pub. L. 110–140, title XII, § 1204(b), Dec. 19, 2007, 121 Stat. 1772; Pub. L. 111–5, div. A, title V, § 504(a), Feb. 17, 2009, 123 Stat. 155; Pub. L. 111–240, title I, §§ 1112, 1122, Sept. 27, 2010, 124 Stat. 2508, 2510; Pub. L. 115–371, § 2, Dec. 21, 2018, 132 Stat. 5106; Pub. L. 116–260, div. N, title III, § 328(a)(2), Dec. 27, 2020, 134 Stat. 2038.) Editorial Notes AMENDMENTS 2020—Par. (7)(B). Pub. L. 116–260, § 328(a)(2)(A), sub- stituted ‘‘100 percent’’ for ‘‘50 percent’’ in introductory provisions. Par. (7)(C). Pub. L. 116–260, § 328(a)(2)(B), added sub- par. (C). 2018—Par. (3)(E)(ii). Pub. L. 115–371 redesignated in- troductory 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 bank- ing regulator appraisal threshold’’ for ‘‘is $250,000 or less’’, and added subcl. (II). 2010—Par. (2)(A)(i). Pub. L. 111–240, § 1122(c), sub- stituted ‘‘clause (ii), (iii), (iv), or (v)’’ for ‘‘subpara- graph (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), sub- stituted ‘‘$5,500,000’’ for ‘‘$4,000,000’’. Par. (7)(C). Pub. L. 111–240, § 1122(b), struck out sub- par. (C) relating to refinancing not involving expan- sions. 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) gen- erally. 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 cri- teria 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 identifi- able small business concern.’’ Par. (3)(E). Pub. L. 106–554, § 1(a)(9) [title II, § 208(b)], designated existing provisions as cl. (i), inserted head- ing, 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 amend- ment, text read as follows: ‘‘Any development company assisted under this section must meet criteria estab- lished by the Administration, including the extent of participation to be required or amount of paid-in cap- ital to be used in each instance as is determined to be reasonable by the Administration. Community injec- tion 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 institu- tions; or ‘‘(D) a small business concern (or its owners, stock- holders, 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 speci- fied in section 695(d)(3) of this title shall be limited to $1,000,000 for each such identifiable small business con- cern.’’ 1988—Pub. L. 100–590, § 116(b)(1), inserted ‘‘Loans for plant acquisition, construction, conversion, and expan- sion’’ 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 agree- ments to participate in loans on a deferred basis, such participation by the Administration shall not be in ex- cess of 90 per centum of the balance of the loan out- standing at the time of disbursement, was struck out. Par. (5). Pub. L. 97–35 struck out par. (5) which pro- vided that loans, including extensions and renewals, Page 1140 TITLE 15—COMMERCE AND TRADE § 697 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 liquida- tion of the loan, and that the Administration may fix the rate of interest. 1978—Par. (4). Pub. L. 95–507 inserted provisions relat- ing 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 pe- riod’’. Par. (6). Pub. L. 87–27 struck out par. (6) which pro- vided for termination of authority of the Administra- tion to make loans to local development companies after June 30, 1961. Statutory Notes and Related Subsidiaries 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 sec- tion 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 sec- tion 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 sec- tion 631 of this title. REFINANCING SENIOR PROJECT DEBT Pub. L. 116–260, div. N, title III, § 328(c), Dec. 27, 2020, 134 Stat. 2040, provided that: ‘‘During the 1-year period beginning on the date of enactment of this Act [Dec. 27, 2020], a development company described in title V of the Small Business Investment Act of 1958 (15 U.S.C. 695 et seq.) is authorized to allow the refinancing of a sen- ior loan on an existing project in an amount that, when combined with the outstanding balance on the develop- ment company loan, is not more than 90 percent of the total loan to value. Proceeds of such refinancing can be used to support business operating expenses.’’ REFINANCING NOT INVOLVING EXPANSIONS UNDER FORMER PAR. (7)(C) Pub. L. 114–113, div. E, title V, § 521(a), Dec. 18, 2015, 129 Stat. 2463, which provided that former par. (7)(C) of this section as in effect on Sept. 25, 2012, would be in ef- fect in any fiscal year during which the cost to the Fed- eral Government of making guarantees under such par. and section 697 of this title would be zero, with certain exceptions, was repealed by Pub. L. 116–260, div. N, title III, § 328(a)(1), Dec. 27, 2020, 134 Stat. 2038. § 697. Development company debentures (a) Guarantees; Administration authority; regu- latory terms and conditions; full faith and credit; subordination of debentures (1) Except as provided in subsection (b), the Administration may guarantee the timely pay- ment of all principal and interest as scheduled on any debenture issued by any qualified State or local development company. (2) Such guarantees may be made on such terms and conditions as the Administration may be regulation determine to be appropriate: Pro- vided, That the Administration shall not decline to issue such guarantee when the ownership in- terests of the small business concern and the ownership interests of the property to be fi- nanced with the proceeds of a loan made pursu- ant to subsection (b)(1) are not identical because one or more of the following classes of relatives have an ownership interest in either the small business concern or the property: father, moth- er, son, daughter, wife, husband, brother, or sis- ter: Provided further, That the Administrator or his designee has determined on a case-by-case basis that such ownership interest, such guar- antee, and the proceeds of such loan, will sub- stantially benefit the small business concern. (3) The full faith and credit of the United States in pledged to the payment of all amounts guaranteed under this subsection. (4) Any debenture issued by any State or local development company with respect to which a guarantee is made under this subsection, may be subordinated by the Administration to any other debenture, promissory note, or other debt or obligation of such company. (b) Statutory terms and conditions No guarantee may be made with respect to any debenture under subsection (a) unless— (1) such debenture is issued for the purpose of making one or more loans to small business concerns, the proceeds of which shall be used by such concern for the purposes set forth in section 696 of this title; (2) necessary funds for making such loans are not available to such company from pri- vate sources on reasonable terms; (3) the interest rate on such debenture is not less than the rate of interest determined by the Secretary of the Treasury for purposes of section 683(b) of this title; (4) the aggregate amount of such debenture does not exceed the amount of loans to be made from the proceeds of such debenture (other than any excess attributable to the ad- ministrative costs of such loans); (5) the amount of any loan to be made from such proceeds does not exceed an amount equal to 50 percent of the cost of the project with respect to which such loan is made; (6) the Administration approves each loan to be made from such proceeds; and (7) with respect to each loan made from the proceeds of such debenture, the Administra- tion— (A) assesses and collects a fee, which shall be payable by the borrower, in an amount es- tablished annually by the Administration, which amount shall not exceed— (i) the lesser of— (I) 0.9375 percent per year of the out- standing balance of the loan; and (II) the minimum amount necessary to reduce the cost (as defined in section 661a of title 2) to the Administration of purchasing and guaranteeing debentures under this chapter to zero; and