House bill would update SBA 504 loans with training goals, easier closings, and flexible leasing rules

The bill would add three goals for 504 loans: workforce training, aid to disaster areas, and growth of very small businesses. Training is met if the business has an in-house training program of at least 12 weeks or contracts with a group that provides applicants trained for at least 12 weeks. Disaster aid covers areas declared disasters under the Small Business Act. Growth covers businesses with 10 or fewer employees. The disaster goal lasts 5 years from the declaration, and the Administrator may extend it for one-year periods if that helps the area recover.

A business that gets a 504 loan could lease part of its project to commercial or residential tenants within set limits. For a new building, up to 20 percent may be leased if the business occupies at least 60 percent (50 percent for small manufacturers), plans to use more within 3 years, and plans to occupy 80 percent within 10 years. For an existing building, up to 50 percent may be leased, or up to 66 percent under an exception. The 66 percent exception requires 12 months of prior use, a plan to use less than 50 percent, written notice to the Administrator, and regular checks and signed anti-investor certifications. Residential leases may run up to 1 year, and commercial leases up to 5 years. The Administrator must report to Congress on the effects within 5 years of enactment.

Accredited lender certified companies could make certain changes to ease closing a loan, and the Small Business Administration's file review duties would shift. Allowed steps include moving up to 10 percent of project costs, fixing typographical errors, adding an eligible passive company or its operating company, switching a guarantor and co-borrower, adding a guarantor, and lowering debt or project cost. The agency's Office of Credit Risk Management would handle file reviews of loans closed by designated attorneys, and district counsels would not review those closing packages. A designated attorney must show a license in good standing, malpractice insurance, and an approved training course. The district counsel and review changes start 180 days after enactment.

The bill would exempt certain loans from clause (i) of section 7(a)(1)(A) of the Small Business Act, which its heading calls the credit elsewhere rule. The exemption covers loans under paragraph (13) of that subsection, loans or financings under the Small Business Investment Act of 1958, and other loans the Administrator makes to a certified development company. The excerpt does not show what clause (i) requires.

The Small Business Administration Administrator would have to develop and carry out a marketing and outreach plan about the loans available under this program. The Administrator may partner with one or more resource partners. The Administrator must begin carrying out the plan within 1 year after enactment.