Sec. 22. Spurring innovation in underserved markets
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The Small Business Act ( 15 U.S.C. 631 et seq.) is amended— by redesignating section 49 ( 15 U.S.C. 631 note) as section 50; and by inserting after section 48 ( 15 U.S.C. 657u ) the following: In this section: The term accelerator means an organization— that— works with a startup or growing small business concern for a predetermined period; and provides mentorship and instruction to scale businesses; and that may— provide, but is not exclusively designed to provide, seed investment in exchange for a small amount of equity; and offer startup capital or the opportunity to raise capital from outside investors.
The term federally recognized area of economic distress means— a HUBZone; or an area that has been designated as— an empowerment zone under section 1391 of the Internal Revenue Code of 1986; a qualified opportunity zone under section 1400Z–1 of the Internal Revenue Code of 1986; a Promise Zone by the Secretary of Housing and Urban Development; or a low-income neighborhood or moderate-income neighborhood for purposes of the Community Reinvestment Act of 1977 ( 12 U.S.C. 2901 et seq.).
The terms growing , newly established , and startup , with respect to a small business concern, mean growing, newly established, and startup, respectively, within the meaning given those terms under section 7(m). The term incubator means an organization— that— tends to work with startup and newly established small business concerns; and provides mentorship to startup and newly established small business concerns; and that may— provide a co-working environment or a month-to-month lease program; and work with a startup or newly established small business concern for a predetermined period or an open-ended period.
The term individuals with a disability means more than one individual with a disability, as defined in section 3 of the Americans with Disabilities Act of 1990 ( 42 U.S.C. 12102 ). The term eligible entity means— an institution described in any of paragraphs
(1)through
(7)of section 371(a) of the Higher Education Act of 1965 ( 20 U.S.C. 1067q(a) ); a junior or community college, as defined in section 312 of the Higher Education Act of 1965 ( 20 U.S.C. 1058 ); or any nonprofit organization associated with an entity described in subparagraph
(A)or (B). The term rural area has the meaning given that term in section 7(m)(11). The term socially and economically disadvantaged individual means a socially and economically disadvantaged individual within the meaning given that term under section 8(d)(3)(C). Not later than 18 months after the date of enactment of the COVID–19 Recovery by Enhancing Loan, Investment, and Education Funds for Small Businesses Act of 2020 , the Administrator shall develop and begin implementing a program (to be known as the Innovation Centers Program ) to enter into cooperative agreements with eligible entities under this section. The purposes of the Innovation Centers Program are to— stimulate economic growth in underserved communities by creating good paying jobs and pathways to prosperity, which are especially important in times of economic downturn; increase prospects for success for small business concerns in underserved communities, which often suffer from higher business failure rates than the national average; help create a pipeline for small business concerns in underserved and rural markets into high-growth sectors, where they are generally underrepresented; help address the multi-decade decline in the rate of new business creation; close the gaps that underserved small business concerns often have in terms of revenue and number of employees, which represent lost opportunity for the economy; and encourage collaboration between the Administration and institutions of higher learning that serve low-income and minority communities. The Administrator may— enter into cooperative agreements to provide financial assistance to eligible entities to conduct 5-year projects for the benefit of startup, newly established, or growing small business concerns; and renew a cooperative agreement entered into under this section for additional 3-year periods, in accordance with paragraph (3). A project conducted under a cooperative agreement under this section shall— include operating as an accelerator, an incubator, or any other small business innovation-focused project as the Administrator approves; be carried out in such locations as to provide maximum accessibility and benefits to the small business concerns that the project is intended to serve; have a full-time staff, including a full-time director who shall— have the authority to make expenditures under the budget of the project; and manage the activities carried out under the project; include the joint provision of programs and services by the eligible entity and the Administration, which— shall be jointly developed, negotiated, and agreed upon, with full participation of both parties, pursuant to an executed cooperative agreement between the eligible entity and the Administration; and shall include— 1-to-1 individual counseling as described in section 21(c)(3)(A); and a formal, structured mentorship program; incorporate continuous upgrades and modifications to the services and programs offered under the project, as needed to meet the changing and evolving needs of the business community; involve working with underserved groups, which include— women; socially and economically disadvantaged individuals; veterans; individuals with disabilities; or startup, newly established, or growing small business concerns located in rural areas; not impose or otherwise collect a fee or other compensation in connection with participation in the programs and services described in subparagraph (D)(ii); and ensure that small business concerns participating in the project have access, including through resource partners, to information concerning Federal, State, and local regulations that affect small business concerns. An eligible entity that enters into an initial cooperative agreement or a renewal of a cooperative under paragraph
(1)may submit an application for a 3-year renewal of the cooperative agreement at such time, in such manner, and accompanied by such information as the Administrator may establish. The Administrator shall develop and publish criteria for the consideration and approval of applications for renewals by eligible entities under this paragraph, which shall take into account the structure and the stated goals of the project. Not later than 60 days after the date of the deadline to submit applications for each fiscal year, the Administrator shall approve or deny any application under this paragraph and notify the applicant for each such application. In allocating funds made available for cooperative agreements under this section, the Administrator shall give applications under this paragraph priority over first-time applications for cooperative agreements under paragraph (1)(A). Amounts received by an eligible entity under a cooperative agreement under this section may not be used to provide capital to a participant in the project carried out under the cooperative agreement. The authority of the Administrator to enter into cooperative agreements under this section shall be in effect for each fiscal year only to the extent and in the amounts as are provided in advance in appropriations Acts. After the Administrator has entered into a cooperative agreement with an eligible entity under this section, the Administrator shall not suspend, terminate, or fail to renew or extend the cooperative agreement unless the Administrator provides the eligible entity with written notification setting forth the reasons therefore and affords the eligible entity an opportunity for a hearing, appeal, or other administrative proceeding under chapter 5 of title 5, United States Code. The Administrator shall— establish and rank in terms of relative importance the criteria the Administrator shall use in awarding cooperative agreements under this section, which shall include— whether the proposed project will be located in— a federally recognized area of economic distress; a rural area; or an area lacking sufficient entrepreneurial development resources, as determined by the Administrator; and whether the proposed project demonstrates a commitment to partner with core stakeholders working with small business concerns in the relevant area, including— investment and lending organizations; nongovernmental organizations; programs of State and local governments that are concerned with aiding small business concerns; Federal agencies; and for-profit organizations with an expertise in small business innovation; make publicly available, including on the website of the Administration, and state in each solicitation for applications for cooperative agreements under this section the selection criteria and ranking established under subparagraph (A); and evaluate and rank applicants for cooperative agreements under this section in accordance with the selection criteria and ranking established under subparagraph (A). The criteria established under paragraph (1)(A)— for eligible entities that have in operation an accelerator, incubator, or other small business innovation-focused project shall include the record of the eligible entity in assisting growing, newly established, and startup small business concerns, including, for each of the 3 full years before the date on which the eligible entity applies for a cooperative agreement under this section, or if the accelerator, incubator, or other small business innovation-focused project has been in operation for less than 3 years, for the most recent full year the accelerator, incubator, or other small business innovation-focused project was in operation— the number and retention rate of growing, newly established, and startup business concerns in the program of the eligible entity; the average period of participation by growing, newly established, and startup small business concerns in the program of the eligible entity; the total and median capital raised by growing, newly established, and startup small business concerns participating in the program of the eligible entity; the number of investments or loans received by growing, newly established, and startup small business concerns participating in the program of the eligible entity; and the total and median number of employees of growing, newly established, and startup small business concerns participating in the program of the eligible entity; and for all eligible entities— shall include whether the eligible entity— indicates the structure and goals of the project; demonstrates ties to the business community; identifies the resources available for the project; describes the capabilities of the project, including coordination with local resource partners and local or national lending partners of the Administration; addresses the unique business and economic challenges faced by the community in which the eligible entity is located and businesses in that community; and provides a proposed budget and plan for use of funds; and may include any other criteria determined appropriate by the Administrator. The Administrator shall— develop and implement an annual programmatic and financial examination of each project conducted under this section, under which each eligible entity entering into a cooperative agreement under this section shall provide to the Administrator— an itemized cost breakdown of actual expenditures for costs incurred during the preceding year; and documentation regarding— the amount of matching assistance from non-Federal sources obtained and expended by the eligible entity during the preceding year in order to meet the matching requirement; and with respect to any in-kind contributions that were used to satisfy the matching requirement, verification of the existence and valuation of those contributions; and analyze the results of each examination conducted under subparagraph
(A)and, based on that analysis, make a determination regarding the programmatic and financial viability of each eligible entity. In determining whether to continue or renew a cooperative agreement under this section, the Administrator— shall consider the results of the most recent examination of the project under paragraph (1); and may terminate or not renew a cooperative agreement, if the Administrator determines that the eligible entity has failed to provide any information required to be provided (including information provide for purpose of the annual report by the Administrator under subsection (n)) or the information provided by the eligible entity is inadequate. The Administrator— shall provide in person or online training and technical assistance to each eligible entity entering into a cooperative agreement under this section at the beginning of the participation of the eligible entity in the Innovation Centers Program, or as requested by the eligible entity, in order to build the capacity of the eligible entity and ensure compliance with procedures established by the Administrator; shall ensure that the training and technical assistance described in paragraph
(1)is provided at no cost or at a low cost; and may enter into a contract to provide the training or technical assistance described in paragraph
(1)with 1 or more organizations with expertise in the entrepreneurial development programs of the Administration, innovation, and entrepreneurial development. In carrying out a project under this section, an eligible entity may coordinate with— resource and lending partners of the Administration; programs of State and local governments that are concerned with aiding small business concerns; and other Federal agencies, including to provide services to and assist small business concerns in participating in the SBIR and STTR programs, as defined in section 9(e). The amount of financial assistance provided to an eligible entity under a cooperative agreement entered into under this section shall be not more than $400,000 during each year. An eligible entity shall contribute toward the cost of the project carried out under the cooperative agreement under this section an amount equal to 50 percent of the amount received under the cooperative agreement. Not more than 75 percent of the contribution of an eligible entity under paragraph
(1)may be in the form of in-kind contributions. If the Administrator determines that an eligible entity is unable to meet the contribution requirement under paragraph (1), the Administrator may reduce the required contribution. The Administration shall, by regulation, establish criteria to determine which eligible entities are presumed to be unable to meet the contribution requirement under paragraph (1). In establishing the criteria under clause (i), the Administrator shall work with stakeholders immediately impacted by the criteria. The Administration shall periodically review the criteria established under clause
(i)not less than every 5 years to ensure that the criteria aligns with economic conditions. If an eligible entity fails to obtain the required non-Federal contribution during any project, or the reduced non-Federal contribution as determined by the Administrator— the eligible entity shall not be eligible thereafter for any other project for which it is or may be funded by the Administration; and prior to approving assistance for the eligible entity for any other projects, the Administrator shall specifically determine whether the Administrator believes that the eligible entity will be able to obtain the requisite non-Federal funding and enter a written finding setting the forth the reasons for making that determination. The demonstrated inability of an eligible entity to meet the contribution requirement under paragraph
(1)shall not disqualify the eligible entity from entering into a cooperative agreement under this section. An eligible entity may enter into a contract with a Federal department or agency to provide specific assistance to startup, newly established, or growing small business concerns. Performance of a contract entered into under paragraph
(1)may not hinder the eligible entity in carrying out the terms of the cooperative agreement under this section. A contract entered into under paragraph
(1)shall not be subject to the matching requirement under subsection (j). Notwithstanding any other provision of law, a contract for assistance under paragraph
(1)shall not be applied to any Federal department or agency's small business, woman-owned business, or socially and economically disadvantaged business contracting goal under section 15(g). An eligible entity may not disclose the name, address, or telephone number of any individual or small business concern receiving assistance under this section without the consent of such individual or small business concern, unless— the Administrator is ordered to make such a disclosure by a court in any civil or criminal enforcement action initiated by a Federal or State agency; or the Administrator considers such a disclosure to be necessary for the purpose of conducting a financial audit of an eligible entity, but a disclosure under this subparagraph shall be limited to the information necessary for such audit. This subsection shall not— restrict Administration access to program activity data; or prevent the Administration from using client information (other than the information described in subparagraph (A)) to conduct client surveys. The Administrator shall issue regulations to establish standards for requiring disclosures during a financial audit under paragraph (1)(B). The Administrator shall— publish information about the program under this section online, including— on the website of the Administration; and on the social media of the Administration; and request that the resource and lending partners of the Administration and the district offices of the Administration publicize the program. Not later than 1 year after the date on which the Administrator establishes the program under this section, and every year thereafter, the Administrator shall submit to Congress a report on the activities under the program, including— a list of all eligible entities participating in the program; the number of startup, newly established, and growing small business concerns participating in the project carried out by each eligible entity under a cooperative agreement under this section (in this paragraph referred to as participants ), including a breakdown of the owners of the participants by race, gender, veteran status, and urban versus rural location; the retention rate for participants; the total and median amount of capital accessed by participants, including the type of capital accessed; the total and median number of employees of participants; the number and median wage of jobs created by participants; the number of jobs sustained by participants; and information regarding such other metrics as the Administrator determines appropriate. There are authorized to be appropriated to carry out this section— $4,000,000 for the first fiscal year beginning after the date of enactment of the COVID–19 Recovery by Enhancing Loan, Investment, and Education Funds for Small Businesses Act of 2020 ; $7,500,000 for the second fiscal year beginning after such date of enactment; and $12,000,000 for each of the third, fourth, and fifth fiscal years beginning after such date of enactment. Of the amount made available to carry out this section for any fiscal year, not more than 10 percent may be used by the Administrator for administrative expenses. . The Administrator shall promulgate regulations to carry out section 49 of the Small Business Act, as added by subsection (b).
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Sec. 22
Spurring innovation in underserved markets
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