Community Advantage Loan Program Act of 2024

Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) is amended by adding at the end the following:

The purposes of the Community Advantage Loan Program are—

(i) to create a mission-oriented loan guarantee program;

(ii) to increase lending to small business concerns in underserved and rural markets, including to new businesses;

(iii) to ensure that the program under this subsection expands inclusion and more broadly meets congressional intent to reach borrowers who are unable to get credit elsewhere on reasonable terms and conditions;

(iv) to help underserved small business concerns become bankable by utilizing the small dollar financing and business support experience of mission-oriented lenders;

(v) to allow certain mission-oriented lenders, primarily financial intermediaries focused on economic development in underserved markets, access to guarantees for loans under this subsection and provide management and technical assistance to small business concerns as needed; and

(vi) to assist covered institutions with providing business support services and technical assistance to small business concerns, when needed.

In this paragraph:

The term Community Advantage Network Partner —

(I) means a nonprofit, mission-oriented organization that acts as a Referral Agent to covered institutions in order to expand the reach of the program to small business concerns in underserved markets; and

(II) does not include a covered institution making loans under the program.

The term covered institution means an entity that—

(I) is—

(aa) a development company, as defined in section 103 of the Small Business Investment Act of 1958 (15 U.S.C. 662), participating in the program established under title V of such Act (15 U.S.C. 695 et seq.);

(bb) a nonprofit intermediary, as defined in subsection (m)(11), participating in the microloan program under subsection (m);

(cc) a non-Federally regulated entity certified as a community development financial institution by the Community Development Financial Institutions Fund established under section 104(a) of the Community Development Banking and Financial Institutions Act of 1994 (12 U.S.C. 4703(a)); or

(dd) an eligible intermediary, as defined in subsection (l)(1), participating in the small business intermediary lending program established under subsection (l)(2);

(II) has approved and disbursed 10 similarly sized loans during the 24-month period preceding the date on which such entity submits an application to participate in the program; and

(III) is servicing, as of the date on which such entity begins participation in the program, not less than 10 similarly sized loans (other than a loan described in subclause (II)) to small business concerns in the portfolio of the entity.

The term existing business means a small business concern that has been in existence for not less than 2 years on the date on which a loan is made to such small business concern under the program.

The term low- or moderate-income community means a census tract designated as low-income or moderate-income by the Financial Institutions Examination Council on a public website of the Council.

The term new business means a small business concern that has been in existence for not more than 2 years on the date on which a loan is made to such small business concern under the program.

The term program means the Community Advantage Loan Program established under subparagraph (C).

The term Referral Agent has the meaning given the term in section 103.1(f) of title 13, Code of Federal Regulations, or any successor regulation.

The term rural area means any county that the Bureau of the Census has defined as mostly rural or completely rural in the most recent decennial census.

The term State means each of the several States, the District of Columbia, and each territory of the United States.

The term small business concern in underserved markets means a small business concern—

(I) that is located in—

(aa) a low- or moderate-income community;

(bb) a HUBZone, as that term is defined in section 31(b);

(cc) a rural area;

(dd) a community that has been designated as an empowerment zone or enterprise community under section 1391 of the Internal Revenue Code of 1986;

(ee) a community that has been designated as a qualified opportunity zone under section 1400Z–1 of the Internal Revenue Code of 1986; or

(ff) a community that has been designated as a promise zone by the Secretary of Housing and Urban Development;

(II) for which more than 50 percent of the employees reside in a low- or moderate-income community;

(III) that is a new business;

(IV) that is owned and controlled by one or more veterans or spouses of veterans;

(V) that is located in any area for which a disaster declaration or determination described in subparagraph (A), (B), (C), or (E) of subsection (b)(2) has been made that has not terminated more than 2 years before the date on which a loan is made to the small business concern under the program, except—

(aa) in the case of a disaster that is not a major disaster described in subsection (b)(2)(A), the Administrator may extend such period; and

(bb) in the case of major disaster described in subsection (b)(2)(A), that period shall be 5 years;

(VI) that is owned and controlled by a member of an Indian Tribe individually identified (including parenthetically) in the most recent list published pursuant to section 104 of the Federally Recognized Indian Tribe List Act of 1994 (25 U.S.C. 5131);

(VII) that is owned and controlled by an individual who has completed a term of imprisonment in a Federal, State, or local jail, or prison; or

(VIII) that is owned and controlled by an individual with a disability, as that term is defined in section 3 of the Americans with Disabilities Act of 1990 (42 U.S.C. 12102).

There is established a Community Advantage Loan Program under which the Administration may guarantee loans made by covered institutions under this subsection, with an emphasis on loans made to small business concerns in underserved markets.

In fiscal year 2024 and each fiscal year thereafter, not more than 10 percent of the number of loans guaranteed under this subsection may be guaranteed under the program.

Any covered institution that was licensed by the Administrator as a Community Advantage small business lending company during the period beginning on May 1, 2023, and ending on October 31, 2023, or that participated in the Community Advantage Pilot Program of the Administration, and was in good standing, as determined by the Administration—

(i) shall be designated as participants in the program;

(ii) shall not be required to submit an application to participate in the program; and

(iii) for the purpose of determining the loan loss reserve amount of the covered institution, shall have participation in the Community Advantage Pilot Program included in the calculation under subparagraph (J).

Not less than 60 percent of loans made by a covered institution under the program shall consist of loans made to small business concerns in underserved markets.

Except as provided in subclause (II), the maximum loan amount for a loan guaranteed under the program is $350,000.

The Administrator may select not more than 8 covered institutions to be designated as experienced lenders to be eligible to make loans under this paragraph. An experienced lender shall have not less than 5 years of experience making loans under the Community Advantage Pilot Program of the Administration or the program established under this paragraph.

An experienced lender may make a loan guaranteed under the program in an amount that is not more than $750,000, but not less than 60 percent of the total number of such loans made by an experienced lender shall be in an amount that is less than or equal to $350,000.

With respect to an agreement to participate in a loan made under this subclause on a deferred basis, the participation by the Administration shall be—

(AA) 75 percent of the balance of the financing outstanding at the time of the disbursement of the loan, if that balance is more than $350,000;

(BB) as described in clause (i) of paragraph (2)(G), if the balance of the financing outstanding at the time of the disbursement of the loan is as described in that clause; or

(CC) as described in clause (ii) of paragraph (2)(G), if the balance of the financing outstanding at the time of the disbursement of the loan is as described in that clause.

A covered institution may not require collateral with respect to a loan guaranteed under the program if the amount of that loan is less than or equal to $50,000.

In determining the amount of collateral required with respect to a loan guaranteed under the program, a covered institution may use the collateral policies and procedures of the covered institution with respect to similarly sized commercial loans made by the covered institution that are not guaranteed by the Administrator.

The maximum allowable interest rate prescribed by the Administration on any financing made on a deferred basis pursuant to the program shall not exceed the maximum allowable interest rate under sections 120.213 and 120.214 of title 13, Code of Federal Regulations, or any successor regulations.

A loan guaranteed under the program or guaranteed under the Community Advantage Pilot Program of the Administration may be refinanced into another loan under this subsection that is made by a lender that does not participate in the program.

A covered institution—

(I) with not more than 5 years of participation in the program shall maintain a loan loss reserve account with an amount equal to 5 percent of the outstanding amount of the unguaranteed portion of the loan portfolio of the covered institution under the program; and

(II) with more than 5 years of participation in the program shall maintain a loan loss reserve account with an amount equal to the average repurchase rate of the covered institution over the 36-month period preceding the most recent recalculation conducted under clause (iii), except that such amount shall not be less than 3 percent of the outstanding amount of the unguaranteed portion of the loan portfolio of the covered institution under the program.

In addition to the amount required in the loan loss reserve account under clause (i), a covered institution that sells a program loan on the secondary market shall be required to maintain the following additional amounts in the loan loss reserve account:

(I) For a covered institution with less than 5 years of experience selling program loans on the secondary market, an amount equal to 3 percent of the guaranteed portion of each program loan sold on the secondary market.

(II) For a covered institution with more than 5 years of experience selling program loans on the secondary market, an amount equal to the average repurchase rate for loans sold by the covered institution on the secondary market over the 36-month period preceding the most recent recalculation conducted under clause (iii), except that such amount shall be not less than 2 percent of the guaranteed portion of each program loan sold into the secondary market.

On October 1 of each year, the Administrator shall recalculate the loan loss reserve required under clauses (i) and (ii).

Upon the initial entry of a covered institution into the program, and on an ongoing basis, the Administrator shall provide accessible trainings to support compliance by the covered institution with program requirements and to improve communication between the covered institution and the Administration. Such trainings shall include—

(I) guidance with respect to the program for following the regulations of the Administration; and

(II) guidance for covered institutions participating in the program that is intended to help lenders effectively reach and support small business concerns in underserved markets, including management and technical assistance delivery.

The Administrator may enter into a contract to provide any training described in clause (i) with an organization—

(I) with expertise in lending under this subsection; and primarily specializing in—

(aa) mission-oriented lending; and

(bb) lending to small business concerns in underserved markets.

The Administrator shall provide any training described in clause (i) for the employees and contractors of the Administration that regularly engage with covered institutions or borrowers under the program.

The Administrator—

(i) shall develop and implement a plan—

(I) to promote the program to prospective covered institutions; and

(II) to conduct outreach and educate prospective covered institutions about the program; and

(ii) may enter into contracts with 1 or more nonprofit organizations experienced in working with and training mission-driven lenders (that are not Community Advantage Network Partners) to provide the promotion, outreach, and education described in clause (i).

A covered institution that uses a Community Advantage Network Partner shall abide by policies and procedures of the Administration concerning the use of Referral Agent fees permitted by the Administration and disclosure of those fees.

Notwithstanding any other provision of law, all fees described in clause (i) shall be paid by the covered institution to the Community Advantage Network Partner upon disbursement of the applicable program loan.

A covered institution is not eligible to receive delegated authority from the Administration under the program until the covered institution has satisfied the following applicable requirements:

(i) For a covered institution actively participating in the Community Advantage Pilot Program of the Administration, as of the day before the date of enactment of this paragraph—

(I) the covered institution has approved and fully disbursed not fewer than 10 loans under that Pilot Program; and

(II) the Administrator has evaluated the ability of the covered institution to fulfill program requirements.

(ii) For any covered institution not described in clause (i)—

(I) the covered institution has approved and fully disbursed not fewer than 20 loans under the program; and

(II) the Administrator has evaluated the ability of the covered institution to fulfill program requirements.

The Administrator shall report on the website of the Administration, as part of the weekly reports on lending approvals under this subsection—

(aa) on and after the date of enactment of this paragraph, the number and dollar amount of loans guaranteed under the Community Advantage Pilot Program of the Administration; and

(bb) on and after the date on which the Administrator begins to approve loans under the program, the number and dollar amount of loans guaranteed under the program.

The number and dollar amount of loans reported in a weekly report under subclause (I) for loans guaranteed under the Community Advantage Pilot Program of the Administration and under the program shall include a breakdown by the demographic information of the owners of the small business concerns, by whether the small business concern is a new business or an existing business, and by whether the small business concern is located in an urban area or rural area, further disaggregated by—

(aa) loans less than or equal to $50,000;

(bb) loans greater than $50,000 and less than or equal to $150,000;

(cc) loans greater than $150,000 and less than or equal to $250,000;

(dd) loans greater than $250,000 and less than or equal to $350,000; and

(ee) loans greater than $350,000 and less than or equal to $750,000.

For each fiscal year in which the program is in effect, the Administration shall submit to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the House of Representatives, and make publicly available on the internet, information about loans provided under the program and under the Community Advantage Pilot Program of the Administration.

Each report submitted and made publicly available under subclause (I) shall include—

(aa) the number and dollar amounts of loans provided to small business concerns under the program, including a breakdown by—

(AA) the demographic information of the owners of the small business concern;

(BB) whether the small business concern is located in an urban area or rural area; and

(CC) whether the small business concern is an existing business or a new business, as provided in the weekly reports on lending approvals under this subsection;

(bb) the proportion of loans described in item (aa) compared to—

(AA) other loans made under this subsection of any amount;

(BB) other loans made under this subsection of similar amounts;

(CC) express loans provided under paragraph (31) of similar amounts; and

(DD) other loans made under this subsection of similar amounts provided to small business concerns in underserved markets;

(cc) a comparison of the number and dollar amounts of loans provided to small business concerns under the program and under each category of loans described in item (aa), broken down by—

(AA) loans less than or equal to $50,000;

(BB) loans greater than $50,000 and less than or equal to $150,000;

(CC) loans greater than $150,000 and less than or equal to $250,000;

(DD) loans greater than $250,000 and less than or equal to $350,000; and

(EE) loans greater than $350,000 and less than or equal to $750,000;

(dd) the number and dollar amounts of loans provided to small business concerns under the program by State, and the jobs created or retained within each State; and

(ee) a list of covered institutions participating in the program and the Community Advantage Pilot Program of the Administration, including—

(AA) the name, location, and contact information, such as the website and telephone number, of each covered institution; and

(BB) a breakdown by the number and dollar amount of the loans approved for small business concerns.

An annual report required under this clause shall—

(aa) be submitted and made publicly available not later than December 1 of each year; and

(bb) cover the lending activity for the fiscal year that ended on September 30 of that same year.

Not later than 5 years after the date of the enactment of this paragraph, the Comptroller General of the United States shall submit to the Administrator, the Committee on Small Business and Entrepreneurship of the Senate, and the Committee on Small Business of the House of Representatives a report—

(i) assessing—

(I) the extent to which the program fulfills the requirements of this paragraph; and

(II) the performance of covered institutions participating in the program; and

(ii) providing recommendations on the administration of the program and the findings under subclauses (I) and (II) of clause (i).

Not later than 180 days after the date of enactment of this paragraph, the Administrator shall issue rules governing the program, including metrics for lender performance, metrics of success and benchmarks of the program, and criteria for appropriate management and technical assistance.

The Administrator shall consult the report submitted under subparagraph (P) and, not later than 180 days after the date on which the Comptroller General of the United States submits such report, amend any existing rules of the Administration based on the recommendations contained in such report.

Section 7(a)(2) of the Small Business Act (15 U.S.C. 636(a)(2)) is amended—

(1) in subparagraph (A), in the matter preceding clause (i), by striking and (F) and inserting (F), and (G); and

(2) by adding at the end the following:

Subject to subparagraph (G)(i)(II)(cc) of paragraph (38), in an agreement to participate in a loan on a deferred basis under that paragraph, the participation by the Administration shall be—

(i) 80 percent of the balance of the financing outstanding at the time of the disbursement of the loan, if that balance is greater than $150,000 and less than or equal to $350,000; or

(ii) 90 percent of the balance of the financing outstanding at the time of the disbursement of the loan, if that balance is less than or equal to $150,000.