Sec. 501. Micro-SBIC Program
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Title III of the Small Business Investment Act of 1958 ( 15 U.S.C. 681 et seq.) is amended by adding at the end the following: There is established in the Administration a program to be known as the Micro-SBIC Program under which the Administrator shall issue a license to an applicant for the purpose of making loans to and investments in small business concerns. An applicant licensed under this section shall have the same benefits as an applicant licensed under section 301. An applicant desiring to receive a license to operate as a micro-SBIC shall submit an application to the Administrator at such time, in such manner, and containing such information as the Administrator may require, including— evidence that the applicant holds private capital of not less than $5,000,000; evidence that the management of the applicant is qualified and has significant business expertise relevant to the applicant’s strategy; and an election to receive a seed investment under section 399C or leverage from the Administrator.
Not later than 90 days after the initial receipt by the Administrator of an application under this section, the Administrator shall provide the applicant with a written report detailing the status of the application and any requirements remaining for completion of the application. Except as provided in subparagraph
(C)and within a reasonable time after providing the report under subparagraph (A), and in accordance with such requirements as the Administrator may prescribe by regulation, the Administrator shall— approve the application and issue to the applicant a license to operate as a micro-SBIC; or disapprove the application and notify the applicant in writing of the disapproval. The Administrator may provide provisional approval for an applicant for a period of not more than 12 months before making a final determination of approval or disapproval under subparagraph (B). An applicant may submit to the Administrator a request for a written explanation regarding the disapproval of an application under subparagraph (B)(ii). With respect to an application that is disapproved under paragraph (1)(B)(ii)— not later than 30 days after the date on which the application is disapproved, the applicant may submit an appeal to the Chair of the Investment Division Licensing Committee of the Administration (referred to in this paragraph as the Chair ); and not later than 30 days after the date on which the applicant submits an appeal under clause (i), the Chair shall issue a ruling with respect to the appeal and notify the applicant regarding such ruling. With respect to an application that the Chair denies in an appeal submitted under subparagraph (A)— not later than 30 days after the date on which the Chair submits the notification required under subparagraph (A)(ii), the applicant may submit to the Administrator an appeal of the ruling made by the Chair; and not later than 30 days after the date on which the applicant submits an appeal under clause (i), the Administrator shall issue a final ruling with respect to the appeal and notify the applicant regarding such ruling. In reviewing applications and issuing licenses under this section, the Administrator shall give priority to an applicant the management of which consists of not fewer than 2 socially disadvantaged individuals or economically disadvantaged individuals and not fewer than 1 track record investment committee member. The Administrator shall establish expedited procedures for the consideration of an application submitted under subsection (b), including a written report under paragraph (1)(A) not later than 45 days after the initial receipt of an application, for— a small business investment company licensed under section 301; a rural business investment company; or a bank-owned applicant. For a micro-SBIC that elects to receive leverage under subsection (b)(3), the maximum amount of outstanding leverage made available to any one micro-SBIC may not exceed— 50 percent of the private capital of the micro-SBIC, not to exceed $25,000,000; or in the case of a micro-SBIC owned by persons who also own a small business investment company licensed under section 301, 100 percent of the private capital of the micro-SBIC, not to exceed $50,000,000. In calculating the outstanding leverage of a micro-SBIC for purposes of paragraph (1), the Administrator shall exclude the amount of the cost basis of any investments made in an early-stage small business, growth-stage small business, scale-up small business, or covered small business in an amount not to exceed— $25,000,000; or in the case of a micro-SBIC owned by persons who also own a small business investment company licensed under section 301, $50,000,000. A micro-SBIC that voluntarily surrenders a license issued under this part shall enter into an agreement with Administrator for the repayment of leverage received. Such agreement may not require the micro-SBIC to immediately repay all leverage received. To the extent practicable, for a micro-SBIC that elects to receive leverage under section 399A(b)(3), the Administrator shall administer the Micro-SBIC Program in a similar manner to the program under section 301. The Administrator shall establish and carry out an equity investment program (in this part referred to as the Seed Investment Program ) to provide seed investments to a micro-SBIC to invest in small business concerns. A micro-SBIC that elects to receive a seed investment under section 399A(b)(3) shall submit to the Administrator an application that includes the following: A business plan describing how the applicant intends to make successful investments in early-stage small businesses, growth-stage small businesses, scale-up small businesses, or covered small businesses, as applicable. A description of the extent to which the applicant meets the selection criteria under subsection (c). Not later than 90 days after the date of receipt of an application under subsection (b), the Administrator shall make a final determination to approve or disapprove the applicant as a participant in the Seed Investment Program and shall submit such determination to the applicant in writing. In making a determination under paragraph (1), the Administrator shall consider each of the following criteria: The likelihood that the applicant will meet the goals specified in the business plan of the applicant. The likelihood that the investments of the applicant will directly and indirectly create or preserve jobs. The character and fitness of the management of the applicant. The experience and background of the management of the applicant. The extent to which the applicant will concentrate investment activities on early-stage small businesses, growth-stage small businesses, scale-up small businesses, or covered small businesses, as applicable. The likelihood that the applicant will achieve profitability. The experience of the management of the applicant with respect to establishing a profitable investment track record. The Administrator may make 1 seed investment to a Program participant, which shall be held in an account from which the Program participant may make withdrawals. A seed investment made to a Program participant may not exceed the amount of capital of the Program participant that— is not from a Federal source; and is available for investment, including through legally binding commitments, on or before the date on which the seed investment is approved. The amount of a seed investment made to a Program participant may not exceed the lesser of— $25,000,000; or 100 percent of the private capital committed to the Program participant. Amounts held in an account under this section shall remain available to a Program participant— for initial seed investments, during the 5-year period beginning on the date on which the Program participant first accesses amounts from the account; and for follow-on investments and management fees, during the 10-year period beginning on the date on which the Program participant first accesses amounts from the account. Upon request by a Program participant, the Administrator may grant a 1-year extension of the period described in paragraph (1)(B) not more than 2 times. A Program participant shall invest all amounts held in an account under this section during the 10-year period beginning on the date on which the Program participant first accesses amounts from the account. The Administrator shall prioritize making seed investments under this section to Program participants in underlicensed States. A Program participant that receives a seed investment under this part shall make all of the investments of the Program participant in small business concerns, of which not less than 50 percent shall be in covered small businesses. On the date on which a Program participant first accesses amounts from a seed investment received under this Part, the Program participant may not own or control not more than 50 percent of the shares of any small business concern in which the Program participant invests. A Program participant described in subparagraph
(A)shall not pursue a buyout strategy as a primary purpose of an investment in a small business concern, but may take control in follow-on investments if necessary for the success of any such small business concern. The Administrator shall evaluate the compliance of a Program participant with the requirements under this section once the Program participant has expended 75 percent of the amount of a seed investment made under this part. Subject to paragraph (4), a Program participant that receives a seed investment under this part shall convey a seed investment interest to the Administrator in accordance with subparagraph (B). The seed investment interest conveyed under paragraph
(1)shall— have all the rights and attributes of other investors with respect to the Program participant, but shall not assign control or voting rights to the Administrator; and entitle the Administrator to a pro rata portion of any distributions made by the Program participant equal to the percentage of capital in the Program participant that the seed investment comprises. The Administrator shall receive distributions from a Program participant under this paragraph at the same times and in the same amounts as any other investor in the Program participant with a similar interest. A Program participant shall make allocations of income, gain, loss, deduction, and credit to the Administrator with respect to a seed investment interest received under this part as if the Administrator were an investor. The manager profits interest payable to the managers of a Program participant shall not exceed 20 percent of profits, exclusive of any profits that may accrue as a result of the capital contributions of any such managers with respect to the Program participant. Any excess of the amount described in subparagraph (A), less taxes payable thereon, shall be returned by the managers and paid to the investors and the Administrator in proportion to the capital contributions and seed investments paid in. No manager profits interest (other than a tax distribution) shall be paid prior to the repayment to the investors and the Administrator of all contributed capital and seed investments made. A manager of a Program participant may charge reasonable and customary management and organizational fees. A Program participant that receives a seed investment under this part shall make all distributions to all investors in cash and shall make distributions within a reasonable time after exiting investments, including following a public offering or market sale of underlying investments. Once the Administrator has received an amount equal to 110 percent of the amount of the seed investment made to a Program participant, the requirement to convey seed investment interest under this subsection shall be terminated and no further distributions of profits shall be made to the Administrator. The Administrator shall permit the electronic submission of any document submitted under this part or pursuant to a regulation carrying out this part, including by permitting an electronic signature for any signature that is required on such a document. To the extent not inconsistent with requirements under this part, the Administrator may take such action as set forth in sections 309, 311, 312, 313, and 314 to activities under this part and an officer, director, employee, agent, or other participant in a micro-SBIC shall be subject to the requirements under such sections. The Administrator shall include in the annual report required under section 10(a) of the Small Business Act a description of— the number of applications received under this part, including the number of applications received from applicants for which the management consists of at least two socially disadvantaged individuals or economically disadvantaged individuals; and the number of licenses issued under section 399A, including the number of such licenses issued to applicants for which the management consists of at least two socially disadvantaged individuals or economically disadvantaged individuals. In this part: The term applicant means— an incorporated body, a limited liability corporation, or a limited partnership organized and chartered or otherwise existing under State law solely for the purpose of performing the functions and conducting the activities contemplated under this section; or a bank-owned applicant, rural business investment company, or small business investment company licensed under section 301 that submits an application to operate as a micro-SBIC under section 399A. The term bank-owned applicant means an applicant for a license to operate as a small business investment company under this part that— is a national bank or any member bank of the Federal Reserve System or nonmember insured bank that bears the same name as the small business investment company that is the subject of the application; is domestically domiciled within the United States; and has not had a license issued under this Act revoked or involuntarily surrendered during the 10-year period preceding the date on which the application is submitted. The term covered small business means a small business concern that— is a small business concern owned and controlled by women (as defined in section 3(n) of the Small Business Act ( 15 U.S.C. 632(n) )), small business concern owned and controlled by socially and economically disadvantaged individuals (as defined in section 8(d)(3)(C) of such Act ( 15 U.S.C. 637(d)(3)(C) )), a small business concern owned and controlled by veterans (as defined in section 3(q) of such Act ( 15 U.S.C. 632(q) )) or a Tribal business concern (as described in section 31(b)(2)(C) of such Act ( 15 U.S.C. 657a(b)(2)(C) )); has its principal place of business located in a rural census tract (as determined under the most recent rural urban commuting area code as set forth by the Office of Management and Budget); is a domestic manufacturing business that is assigned a North American Industry Classification System code beginning with 31, 32, or 33 at the time at which the small business concern receives an investment from a micro-SBIC under this section; or either— had gross receipts during the first or second quarter in 2020 that are not less than 50 percent less than the gross receipts of the concern during the same quarter in 2019; if the concern was not in business during the first or second quarter of 2019, but was in business during the third and fourth quarter of 2019, had gross receipts during the first or second quarter of 2020 that are less than 50 percent of the amount of the gross receipts of the concern during the third or fourth quarter of 2019; if the concern was not in business during the first, second, or third quarter of 2019, but was in business during the fourth quarter of 2019, had gross receipts during the first or second quarter of 2020 that are less than 50 percent of the amount of the gross receipts of the concern during the fourth quarter of 2019; or if the concern was not in business during 2019, but was in operation on February 15, 2020, had gross receipts during the second quarter of 2020 that are less than 50 percent of the amount of the gross receipts of the concern during the first quarter of 2020. The term early-stage small business means a small business concern that— is domestically domiciled within the United States; during the 3-year period preceding the date of application, has not generated gross annual sales revenues exceeding $15,000,000; produces a majority of its goods or provides a majority of its services in the United States; and does not move production or employment outside the United States. The terms economically disadvantaged individual and socially disadvantaged individual have the meanings given those terms in section 8(a) of the Small Business Act ( 15 U.S.C. 637(a) ). The term growth-stage small business means a small business concern that— is domestically domiciled within the United States; during the 3-year period preceding the date of application, has not generated gross annual sales revenues exceeding $30,000,000; produces a majority of its good or provides a majority of its services in the United States; and does not move production or employment outside the United States. The term management means a general partner of an applicant or member of the investment committee of an applicant. The term micro-SBIC means an applicant licensed under section 399A. The term Program participant means a micro-SBIC that received a seed investment under the Seed Investment Program established by section 399C. The term scale-up small business means a small business concern that— is domestically domiciled within the United States; during the 3-year period preceding the date of application, has not generated earnings before interest, tax, depreciation, and amortization in excess of $3,000,000; produces a majority of its goods or provides a majority of its services in the United States; and does not move production or employment outside the United States. The term small business concern has the meaning given the term in section 3(a) of the Small Business Act ( 15 U.S.C. 632(a) ). The term track record investment committee member means a current or former small business investment company licensed under section 301, a private small- and lower-middle-market venture capital firm, or a private equity fund manager with the knowledge, experience, and capability necessary to serve as management for an applicant. The term United States means each of the several States, the District of Columbia, each territory or possession of the United States, and each federally recognized Indian Tribe. There is authorized to be appropriated to the revolving fund established under subsection
(b)$1,000,000,000 for the first full fiscal year beginning after the date of enactment of this part to carry out the requirements of this part. There is created within the Administration a separate revolving fund for the Seed Investment Program established under section 399C, which shall be available to the Administrator subject to annual appropriations. All amounts received by the Administrator, including any money, property, or assets derived by the Administrator from operations in connection with the Seed Investment Program, including repayments of seed investments, shall be deposited in the revolving fund described in paragraph (1). All expenses and payments, excluding administrative expenses, pursuant to the operations of the Administrator under the Seed Investment Program shall be paid from the revolving fund described in paragraph (1). .
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