Sec. 5. Reduction of risk
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Section 7(a)(1) of the Small Business Act ( 15 U.S.C. 636(a)(1) ) is amended by adding at the end the following: Not later than December 31 of each year, the Administrator shall calculate, as of September 30 of the year in which the calculation is made and for each lender that issues loans under this section, the percentage of loans in the portfolio of the lender that were made without a contribution of equity by the borrower when the purpose of the loan was to establish a new small business concern, to effectuate a change of ownership of a small business concern, or to purchase real estate.
If, after making the calculation required under subclause (I), the Administrator determines that more than 15 percent of the loans of a lender are as described in that subclause, any loan application submitted to the lender that would provide financing without a contribution of equity by the borrower and for one of the purposes described in that subclause may not be approved under the authority delegated to a lender as a participant in the Preferred Lenders Program, as defined in paragraph (2)(C)(iii) and if applicable.
Subclause
(II)shall not apply to any lender that originates loans under section 7(a), the aggregate amount of which equals less than 1 percent of the annual total program authorization, based upon gross loan approvals for the fiscal year preceding the year in which the calculation is made under subclause (I). Not later than December 31 of each year, the Administrator shall calculate, as of September 30 of the year in which the calculation is made, for each lender that issues loans under this section, and using the applicable 6-digit classification code under the North American Industry Classification System, industry concentrations for each lender. If, after making the calculation required under subclause (I), the Administrator determines that more than 20 percent of the loans of a lender are concentrated in a single industry, any loan application submitted to the lender from a small business concern operating in that industry may not be approved under the authority delegated to the lender as a participant in the Preferred Lenders Program, as defined in paragraph (2)(C)(iii) and if applicable. Subclause
(II)shall not apply to any lender that originates loans under section 7(a), the aggregate amount of which equals less than 1 percent of the annual total program authorization, based upon gross loan approvals for the fiscal year preceding the year in which the calculation is made under subclause (I). The Administrator may not approve a loan under subparagraph
(D)if the loan provides financing in an amount that is more than 100 percent of the project costs. . The Administrator of the Small Business Administration shall— not later than 180 days after the date of enactment of this Act, issue proposed regulations to implement this section and the amendments made by this section; and not later than 1 year after the date of enactment of this Act, publish final regulations implementing this section and the amendments made by this section. The regulations described in subparagraphs
(A)and
(B)of paragraph
(1)shall include factors, such as the balance sheet equity of a borrower, that a lender may consider when determining whether and how much equity will be required to ensure that a loan is creditworthy.
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