PL Regulations

PUBLIC LAW 96-302—JULY 2, 1980

94 STAT. 833

Public Law 96-302
96th Congress
An Act
To provide authorizations for the Small Business Administration, and for other
purposes.

July 2, 1980—
[S. 2698]

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
Small Business
Administration,

TITLE I-AUTHORIZATIONS AND MISCELLANEOUS
AMENDMENTS

authorizations.

PART A—PROGRAM LEVELS AND AUTHORIZATIONS

SEC. 101. Section 20 of the Small Business Act is amended by adding
at the end thereof the following new subsections:
"(h) The following program levels are authorized for fiscal year
1981:
"(1) For the programs authorized by section 7(a) of this Act, the
Administration is authorized to make $300,000,000 in direct and
immediate participation loans, and $4,000,000,000 in deferred
participation loans.
"(2) For the programs authorized by section 7(h) of this Act, the
Administration is authorized to make $25,000,000 in direct and
immediate participation loans and $12,000,000 in guaranteed
loans.
"(3) For the programs authorized by section 7(i) of this Act, the
Administration is authorized to make $76,000,000 in direct and
immediate participation loans and $90,000,000 in guaranteed
loans.
"(4) For the programs authorized by section 7(1) of this Act, the
Administration is authorized to make $45,000,000 in direct and
immediate participation loans and $33,000,000 in guaranteed
loans.
"(5) For the programs authorized by sections 501, 502, and 503
of the Small Business Investment Act of 1958, the Administration is authorized to make $55,000,000 in direct and immediate
participation loans and $115,000,000 in guaranteed loans and
guarantees of debentures.
"(6) For the programs authorized by title III of the Small
Business Investment Act of 1958, the Administration is authorized to make $42,000,000 in direct purchase of debentures and
preferred securities, and to make $228,000,000 in guarantees of
debentures.
"(7) For the programs authorized in part B of title IV of the
Small Business Investment Act of 1958, the Administration is
authorized to enter into guarantees not to exceed $2,530,000,000.
"(8) For the programs authorized by sections 7(b)(3) through
7(b)(9) and 7(g) of this Act, the Administration is authorized to
enter into $110,000,000 in loans, guarantees, and other obligations or commitments.

15 USC 631 note,

15 USC 636,
P^*' P- ^52.

15 USC 695, 696,
^^^' P- ^^'^•

15 USC 681.

15 USC 694a.
15 USC 636,
P^^*' P- ^^^•

94 STAT. 834
15 use 694-1,
"^^"

93 Stat. 118.
15 y^^cSf'
pos, p. 4d.
Salaries and
expenses.

15 use 694c,
post, p. 837.
15 use 694.

90 Stat. 663.

PUBLIC LAW 96-302—JULY 2, 1980
"(9) For the programs authorized by sections 404 and 405 of the
Small Business Investment Act of 1958, the Administration is
authorized to enter into guarantees not to exceed $110,000,000.
"(10) There are hereby authorized to be appropriated such
sums as may be necessary and appropriate for the carrying out of
the provisions and purposes, including administrative expenses,
of sections IQo) and 7(g) of this Act; and there are authorized to be
transferred from the disaster loan revolving fund such sums as
jjj^y jjg necessary and appropriate for such administrative
expenses.
"(i) There are authorized to be appropriated to the Administration
f^j. gg^j^Q y^^^ jggj^ $1,187,000,000. Of such sum, $865,000,000 shall be
available for the purpose of carrying out the programs referred to in
subsection (h), paragraphs (1) through (6); $76,000,000 shall be available for the purpose of canying out the provisions of section 412 of the
Small Business Investment Act of 1958; $4,000,000 shall be available
fQj. ^jjg purpose of carrying out the provisions of section 403 of the
Small Business Investment Act of 1958; and $242,000,000 shall be
available for salaries and expenses of the Administration of which
amount—
"(1) $13,200,000 shall be available for procurement and technical assistance; of which amount not less than $2,000,000 shall be
available for technical assistance, and of this amount not less
than $629,000 shall be used to pay for the continued development
of a procurement automated source system, and not less than
$825,000 shall be used to develop and maintain technology
assistance centers which shall have direct or indirect access to a
minimum of thirty technology data banks to define the technology problems or needs of smedl businesses by searching technology data banks or other sources to locate, obtain, and interpret
the appropriate technology for such small businesses and not
more than $200,000 shall be available for a study the purpose of
which shall be to define and describe the forest products industry
and, in particular, to define and describe that portion of the
forest products industry which consists of small businesses, to
identify the trends and conditions affecting the survival of small
businesses as a viable portion of the forest products industry, and
to propose actions and programs to assist and promote a broadly
based, nonconcentrated, healthy forest products industry.
"(2) $23,100,000 shall be available for management assistance,
of which amount not less than $880,000 shall be used to sustain
the small business export development program and to employ
not less than seventeen staff people for the Office of International Trade, ten of whom shall serve as export development
specialists, with each of the Administration s regional offices
being assigned one such specialist.
"(3) $8,800,000 shall be available for economic research and
analysis and advocacy, of which amount not less than $2,200,000
shall be used to employ at least sixty-nine staff people for the
Office of the Chief Counsel for Advocacy to carry out research
and those functions prescribed by Public Law 94-305; not less
than $1,650,000 shall be used to develop an external small

PUBLIC LAW 96-302—JULY 2, 1980
business data bank and small business index; and not less than
$1,650,000 shall be used for research.
"(4) $27,500,000 shall be available for the Office of Minority
Small Business and Capital Ownership Development,
$12,414,000 of which shall be used to carry out those functions,
including administrative expenses, prescribed by section 7(j) of
this Act.
"(5) $9,900,000 shall be available for program evaluation and
data management with priority given to the development of an
automated internal Administration management data base, to
the enhancement of the Administration's document tracking
system, to the installation of terminals in Administration field
offices, and to the development of an indicative small business
data base comprised of names and addresses and related information, of which amount not less than $1,100,000 shall be used to
pay for development of such indicative small business data base.
"(6) $20,000,000 shall be available for matching grants to small
business development centers, and an additional $550,000 shall
be available for the administration of the small business development center program.
"(j) The Administrator may transfer no more than 10 percent of
each of the total levels for salaries and expenses authorized in
paragraphs (1) through (6) of section 20(i) of this Act: Provided,
however, That no level authorized in such paragraphs may be
increased more than 20 percent by any such transfers.
"(k) The following program levels are authorized for each of fiscal
years 1982, 1983, and 1984:
"(1) For the programs authorized by section 7(a) of this Act, the
Administration is authorized to make $330,000,000 in direct and
immediate participation loans, and $4,400,000,000 in deferred
participation loans.
"(2) For the programs authorized by section 7(h) of this Act, the
Administration is authorized to make $28,000,000 in direct and
immediate participation loans, and $14,000,000 in guaranteed
loans.
"(3) For the programs authorized by section 7(i) of this Act, the
Administration is authorized to make $83,000,000 in direct and
immediate participation loans, and $99,000,000 in guaranteed
loans.
"(4) For the programs authorized by section 7(1) of this Act, the
Administration is authorized to make $45,000,000 in direct and
immediate participation loans, and $37,000,000 in guaranteed
loans.
"(5) For the programs authorized by sections 501, 502, and 503
of the Small Business Investment Act of 1958, the Administration is authorized to make $61,000,000 in direct and immediate
participation loans, and $125,000,000 in guaranteed loans and
guarantees of debentures.
"(6) For the programs authorized by title III of the Small
Business Investment Act of 1958, the Administration is authorized to make $47,000,000 in direct purchases of debentures and
preferred securities and to make $251,000,000 in guarantees of
debentures.
"(7) For the programs authorized by part B of title IV of the
Small Business Investment Act of 1958, the Administration is
authorized to enter into guarantees not to exceed $2,780,000,000.

94 STAT. 835

15 use 636.

Funding
transfers.

15 USC 636,
P°^^' P- 8^2.

15 USC 695, 696,
P°^*' P- ^^'^•

15 USC 681.

15 USC 694a.

94 STAT. 836
15 use 636,
P°^^' P- 8^215 use 694-1,

93 Stat. 118.
^^ y^^^fl'
P°^ '^-

15 use 694c,
post, p. 837.
15 use 694.

90 Stat. 663.

15 use 636.

PUBLIC LAW 96-302—JULY 2, 1980
"(8) For the programs authorized by sections 7(b)(3) through
7(b)(9) and 7(g) of this Act, the Administration is authorized to
enter into $121,000,000 in loans, guarantees, and other obligations or commitments.
"(9) For the programs authorized in sections 404 and 405 of the
Small Business Investment Act of 1958, the Administration is
authorized to enter into guarantees not to exceed $125,000,000.
"(10) There are hereby authorized to be appropriated such
sums as may be necessary and appropriate for the carrying out of
the provisions and purposes, including administrative expenses
of sections 7(b) and 7(g), of this Act; and there are authorized to be
transferred from the disaster loan revolving funds such sums as
may be necessary and appropriate for such administrative
expenses.
"(1) There are authorized to be appropriated to the Administration
for fiscal year 1982, $1,375,000,000, and an identical amount for each
of fiscal years 1983 and 1984. Of such sum, $1,022,000,000 shall be
available for the purpose of carrying out the programs referred to in
subsection (k), paragraph (1) through (6); $83,000,000 shall be available for the purpose of carrying out the provisions of section 412 of the
Small Business Investment Act of 1958; $4,000,000 shall be available
fQj. ^YiQ purpose of carrying out the provisions of section 403 of the
Small Business Investment Act of 1958; and $266,000,000 shall be
available for salaries and expenses of the Administration of which
amount—
"(1) $14,520,000 shall be available for procurement and technical assistance; of which amount not less than $2,100,000 shall be
available for technical assistance, and of this amount not less
than $692,000 shall be used to pay for the continued development
of a procurement automated source system, and not less than
$907,500 shall be used to develop and maintain technology
assistance centers which shall have direct or indirect access to a
minimum of thirty technology data banks to define the technology problems or needs of small businesses by searching technology data banks or other sources to locate, obtain and interpret
the appropriate technology for such small businesses.
"(2) $25,400,000 shall be available for management assistance
of which amount not less than $968,000 shall be used to sustain
the small business export development program and to employ
not less than seventeen staff people for the Office of International Trade, ten of whom shall serve as export development specialists with each of the Administration's regional offices being
assigned one such specialist.
"(3) $9,680,000 shall be available for economic research and
analysis and advocacy, of which amount not less than $2,420,000
shall be used to employ at least sixty-nine staff people for the
Office of the Chief Counsel for Advocacy to carry out research
and those functions prescribed by Public Law 94-305; not less
than $1,815,000 shall be used to develop an external small
business data bank and small business index; and not less than
$1,815,000 shall be used for research.
"(4) $30,250,000 shall be available for the Office of Minority
Small Business and Capital Ownership Development,
$13,655,000 of which shall be used to carry out those functions,
including administrative expenses, prescribed by section 7(j) of
this Act.

PUBLIC LAW 96-302—JULY 2, 1980

94 STAT. 837

"(5) $10,900,000 shall be available for program evaluation and
data management with priority given to the development of an
automated internal Administration management data base, to
the enhancement of the Administration's document tracking
system, to the installation of terminals in Administration field
offices, and to the development of an indicative small business
data base comprised of names and addresses and related information, of which amount not less than $1,210,000 shall be used to
pay for development of such indicative small business data base,
"(m) The Administrator may transfer no more than 10 percent of
each of the total levels for salaries and expenses authorized in
paragraphs (1) through (5) of section 20(1) of this Act: Provided,
however, That no level authorized in such paragraphs may be
increased more than 20 percent by any such transfers.".
PART B—MISCELXANEOUS AND TECHNICAL AMENDMENTS

SEC. 110. Section 20(a) of the Small Business Act is amended to read 15 USC 631 note,
as follows: "For fiscal years 1981, 1982, 1983 and 1984 there are
hereby authorized to be appropriated such sums as may be necessary
and appropriate to carry out the provisions and purposes of this Act
other than those for which appropriations are specifically authorized.
For fiscal year 1985 and every year thereafter, there are hereby
authorized to be appropriated such sums as may be necessary and
appropriate to carry out the provisions and purposes of this Act other
than those for which appropriations are specifically authorized. All
appropriations whether specifically or generally authorized shall
remain available until expended.".
INVESTMENT OF IDLE FUNDS

SEC. I l l , The last sentence of section 412 of the Small Business
Investment Act of 1958 is repealed.
15 USC 694c.
SEC. 112. Section 405 of the Small Business Investment Act of 1958 15 USC 694-2.
is amended by adding at the end thereof the following: "Moneys in
the fund not needed for the payment of current operating expenses or
for the payment of claims arising under this part may be invested in
bonds or other obligations of, or bonds or other obligations guaranteed as to principal and interest by, the United States; except that
moneys provided as capital for the fund shall not be so invested.".
DEVELOPMENT COMPANY DEBENTURES

SEC. 113. (a) Title V of the Small Business Investment Act of 1958 is
amended by adding at the end thereof the following new section:
"DEVELOPMENT COMPANY DEBENTURES

"SEC. 503. (a)(1) Except as provided in subsection (b), the Adminis- Guarantees,
tration may guarantee the timely payment of all principal and 15 USC 697.
interest as scheduled on any debenture issued by any qualified State
or local development company.
"(2) Such guarantees may be made on such terms and conditions as
the Administration may by regulation determine to be appropriate.
"(3) The full faith and credit of the United States is pledged to the
payment of aU amounts guaranteed under this subsection.
"(4) Any debenture issued by any State or local development
company with respect to which a guarantee is made under this

94 STAT. 838

15 u s e 696.

15 u s e 683.

Administrative
expenses,
additional
charge.
"Qualified State
or local development company."

PUBLIC LAW 96-302—JULY 2, 1980
subsection, may be subordinated by the Administration to any other
debenture, promissory note, or other debt or obligation of such
company.
"(b) No guarantee may be made with respect to any debenture
under subsection (a) unless—
"(1) such debenture is issued for the purpose of making one or
more loans to small business concerns, the proceeds of which
shall be used by such concern for the purposes set forth in section
502;
"(2) necessary funds for making such loans are not available to
such company from private sources on reasonable terms;
"(3) the interest rate on such debenture is not less than the rate
of interest determined by the Secretary of the Treasury for
purposes of section 303(b);
"(4) the aggregate amount of such debenture does not exceed
the amount of loans to be made from the proceeds of such
debenture (other than any excess attributable to the administrative costs of such loans);
"(5) the amount of any loan to be made from such proceeds does
not exceed an amount equal to 50 percent of the cost of the
project with respect to which such loan is made; and
"(6) the Administration approves each loan to be made from
such proceeds.
"(c) The Administration may impose an additional charge for
administrative expenses with respect to each debenture for which
payment of principal and interest is guaranteed under subsection (a).
"(d) For purposes of this section, the term 'qualified State or local
development company' means any State or local development company which, as determined by the Administration, has—
"(1) a full-time professional staff;
"(2) professional management ability (including adequate
accounting, legal, and business-servicing abilities); and
"(3) a board of directors, or membership, which meets on a
regular basis to make management decisions for such company,
including decisions relating to the making and servicing of loans
by such company.".
(b) The table of contents of the Small Business Investment Act of
1958 is amended by inserting after the item relating to section 502 the
following new item:
"Sec. 503. Development company debentures.".
REGULAR BUSINESS LOAN REFORM

15 use 634.

SEC. 114. Section 5(b)(7) of the Small Business Act is amended to
read as follows:
"(7) in addition to any powers, functions, privileges and immunities otherwise vested in him, take any and all actions (including the procurement of the services of attorneys by contract in
any office where an attorney or attorneys are not or cannot be
economically employed full time to render such services) when
he determines such actions are necessary or desirable in making,
servicing, compromising, modifying, liquidating, or otherwise
dealing with or realizing on loans made under the provisions of
this Act: Provided, That nothing herein shall be construed as
authorizing the Administrator to contract or otherwise delegate
his responsibility for loan servicing to other than Administration
personnel, but with respect to deferred participation loans he

PUBLIC LAW 96-302—JULY 2, 1980

94 STAT. 839

may authorize participating lending institutions, in his discretion pursuant to regulations promulgated by him, to take such
actions on his behalf, including, but not limited to the determination of eligibility and creditworthiness, and loan monitoring,
collection and liquidation;".
SURETY BOND GUARANTEE

SEC. 115. Section 411(c) of the Small Business Investment Act of
1958 is amended to read as follows:
"(c) Any guarantee or agreement to indemnify under this section
shall obligate the Administration to pay to the surety a sum not to
exceed (1) in the case of a breach of contract, 90 percent of the loss
incurred and paid by the surety as the result of the breach; or (2) in a
case in which (b) applies, the amount determined under (b).".

15 u s e 694b.

PROCUREMENT SYSTEMS

SEC. 116. Section 15(c) of the Small Business Act is amended to read
as follows:
"(c)(1) During fiscal years 1981, 1982, and 1983, public and private
not-for-profit organizations eligible for assistance under section 7(h)
of this Act shall be eligible to participate in programs authorized
under this section in an aggregate amount not to exceed $100,000,000
for each such year: Provided, That the Administrator shall monitor
and evaluate such participation and in any case where the Administrator and the Executive Director of the Committee for the Purchase
from the Blind and Severely Handicapped find that the participation
of such organizations has or may cause severe economic injury to forprofit small businesses, the Administrator shall and is hereby authorized to direct and require every agency and department having
procurement powers to take such actions as the Administrator and
the Executive Director of the Committee for the Purchase from the
Blind and Severely Handicapped may deem appropriate to alleviate
the economic injury sustained or likely to be sustained by such forprofit small businesses.
"(2) The Administration shall, not later than January 1, 1982,
prepare and transmit to the Senate Select Committee on Small
Business and the Committee on Small Business of the House of
Representatives, a report on the impact of contracts awarded to such
organizations on for-profit small businesses.".
SEC. 117. (a) The first sentence of section 15(d) of the Small Business
Act is amended by inserting "small business" before "concerns".
(b) Subsections (e) and (f) of section 15 of such Act are amended to
read as follows:
"(e) In carrying out small business set-aside programs, departments, agencies, and instrumentalities of the executive branch shall
award contracts, and encourage the placement of subcontracts for
procurement to the following in the manner and in the order stated:
"(1) concerns which are small business concerns and which are
located in labor surplus areas, on the basis of a total set-aside;
"(2) concerns which are small business concerns, on the basis of
a total set-aside;
"(3) concerns which are small business concerns and which are
located in a labor surplus area, on the basis of a partial set-aside;
"(4) concerns which are small business concerns, on the basis of
a partial set-aside.

15 u s e 644.

15 u s e 636.
Participating
organizations,
monitoring
and evaluation.

Contract impact,
report to
congressional
committees.
15 u s e 644.

Contract award,
priorities.

94 STAT. 840

PUBLIC LAW 96-302—JULY 2, 1980
"(f) After priority is given to the small business concerns specified
in subsection (e), priority shall also be given to the awarding of
contracts and the placement of subcontracts, on the basis of a total
set-aside, to concerns which—
"(1) are not eligible under subsection (e);
"(2) are not small business concerns; and
"(3) will perform a substantial proportion of the production on
those contracts and subcontracts within areas of concentrated
unemplojnnent or underemployment or within labor surplus
areas.".
ASIAN PACIFIC AMERICANS

15 use 631.

SEC. 118. (a) Section 2(eXl)(C) of the Small Business Act is amended
by inserting "Asian Pacific Americans," after "Native Americans,".
(b) The last sentence of subparagraph (C) of the clause contained in
15 use 637.
section 8(dX3) of the Small Business Act is amended by inserting
"Asian Pacific Americans," after "Native Americans,".
Applicability.
(cXl) The amendment made by subsection (a) shall apply as if
15 use 631 note, included in the amendment made by section 201 of the Act entitled
"An Act to amend the Small Business Act and the Small Business
Investment Act of 1958", approved October 24, 1978 (Public Law
15 use 631.
95-507).
Applicability.
(2) The amendment made by subsection (b) shall apply as if
15 use 637 note, included in the amendment made by section 211 of the Act so entitled.
15 u s e 637.

?t fisf' 6'lfi
5 ut)C bib.

"^
DISASTER LOAN INTEREST RATES

^^^' ^^^' ^^^ Section 7(c) of the Small Business Act is amended by
striking the period at the end and inserting in lieu thereof "; and"
and by adding the following new paragraph:
"(C) if the loan proceeds are to repair or replace property
damaged or destroyed and if the applicant is a business concern
which is able to obtain sufficient credit elsewhere, the interest
rate shall not exceed the current average market yield on
outstanding marketable obligations of the United States with
remaining periods to maturity comparable to the average maturities of such loans and adjusted to the nearest one-eighth of 1
percent, and an additional amount as determined by the Administration, but not to exceed 1 percent: Provided, That three years
after such loan is fully disbursed and every two years thereafter for the term of the loan, if the Administration determines
that the borrower is able to obtain a loan from non-Federal
sources at reasonable rates and terms for loans of similar
purposes and periods of time, the borrower shall, upon request by
the Administration, apply for and accept such a loan in sufficient
amount to repay the Administration: Provided further. That no
loan under subsection (bXD shall be made, either directly or in
cooperation with banks or other lending institutions through
agreements to participate on an immediate or deferred b£isis, if
the total amount outstanding and committed to the borrower
under such subsection would exceed $500,000 for each disaster,
unless an applicant constitutes a major source of employment in
an area suffering a disaster, in which case the Administration, in
its discretion, may waive the $500,000 limitation.".

PUBLIC LAW 96-302—JULY 2, 1980
(b) Section 7(c) of the Small Business Act is further amended by
striking "October 1, 1982" and inserting in lieu thereof "October 1,
1983".
(c) Section 18 of the Small Business Act is amended by—
(1) striking the comma after the phrase "agricultural related
industries" and inserting the following: ": Provided, That prior to
October 1, 1983, an agricultural enterprise shall not be eligible
for loan assistance under paragraph (1) of section 7(b) to repair or
replace property other than residences and/or personal property
unless it is declined for, or would be declined for, emergency loan
assistance at substantially similar interest rates from the Farmers Home Administration under subchapter III of the Consolidated Farm and Rural Development Act," and
(2) striking subsection (b) and inserting in lieu thereof the
following:
"(b) As used in this Act—
"(1) 'agricultural enterprises' means those businesses engaged
in the production of food and fiber, ranching, and raising of
livestock, aquaculture, and all other farming and agricultural
related industries; and
"(2) 'credit elsewhere' means the availability of sufficient
credit from non-Federal sources at reasonable rates and terms,
taking into consideration prevailing private rates and terms in
the community in or near where the concern transacts business
for similar purposes and periods of time.".
(d) The amendments made by this section to sections 7(c)(3)(C) and
18 of the Small Business Act shall not apply to any disaster which
commenced on or before the effective date of this Act.

94 STAT. 841
93 Stat. 118.
15 u s e 636.
93 Stat. 119.
15 u s e 647.

7 u s e 1961.

"Agricultural
enterprises."

"eredit
elsewhere."

Applicability.
15 u s e 636 note.
Ante, p. 840.

AMENDMENTS TO CONSOUDATED FARM AND RURAL DEVELOPMENT ACT

SEC. 120. (a) Section 321 of the Consolidated Farm and Rural
Development Act is amended by striking out in the first sentence all
that follows after "with the assistance of such loan" through the end
of the sentence and inserting in lieu thereof a period.
(b) Section 324(a) of the Consolidated Farm and Rural Development
Act is amended by—
(1) striking out the first sentence and inserting in lieu thereof
the following: "Loans made or insured under this subtitle shall
be at rates of interest as follows:
"(1) with respect to loans or portions of loans up to the amount
of the applicant's actual loss caused by the disaster, (A) if the
applicant is unable to obtain sufficient credit elsewhere to
finance the applicant's actual needs at reasonable rates and
terms, taking into consideration prevailing private and cooperative rates and terms in the community in or near which the
applicant resides for loans for similar purposes and periods of
time, the interest rate shall be a rate prescribed by the Secretary
not in excess of 5 percent per annum, and (B) if the applicant is
able to obtain sufficient credit elsewhere, the interest rate shall
be the rate prescribed by the Secretary, but not in excess of the
current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity
comparable to the average maturities of such loans, plus not to
exceed 1 percent, as determined by the Secretary, and adjusted to
the nearest one-eighth of 1 percent: Provided, That the total

7 u s e 1961.

Loan interest
rates.
7 u s e 1964.

94 STAT. 842

PUBLIC LAW 96-302—JULY 2, 1980
amount outstanding and committed to the borrower under this
paragraph (1) shall not exceed $500,000 for each disaster; and
"(2) with respect to loans or portions of loans exceeding the
amount of actual loss caused by the disaster, the interest rate
shall be that prevailing in the private market for similar loans,
as determined by the Secretary."; and
(2) inserting in the second sentence after "Provided, That" the
following: "for loans approved under subsection (aXl)(B), three
years after such loan is made or insured and every two years
thereafter for the term of the loan, if the Secretary determines
that the borrower is able to obtain a loan from non-Federal
sources at reasonable rates and terms for loans of similar
purposes and periods of time, the borrower shall, upon request by
the Secretary, apply for and accept such loan in sufficient
amount to repay the Secretary: Provided further. That".
BORROWING AUTHORITY FOR SMALL BUSINESS ADMINISTRATION
REVOLVING FUNDS

15 use 633.

31 use 774.

SEC. 121. Section 4(cX5) of the Small Business Act is amended to
read as follows:
"(5XA) The Administration is authorized to make and issue notes to
the Secretary of the Treasury for the purpose of obtaining funds
necessary for discharging obligations under the revolving funds
created by section 4(cXl) of this Act and for authorized expenditures
out of the funds. Such notes shall be in such form and denominations
and have such maturities and be subject to such terms and conditions
as may be prescribed by the Administration with the approval of the
Secretary of the Treasury. Such notes shall bear interest at a rate
fixed by the Secretary of the Treasury, taking into consideration the
current average market yield of outstanding marketable obligations
of the United States having maturities comparable to the notes issued
by the Administration under this paragraph. The Secretary of the
Treasury is authorized and directed to purcheise any notes of the
Administration issued hereunder, and, for that purpose, the Secretary of the Treasury is authorized to use as a public debt transaction
the proceeds from the sale of any securities issued under the Second
Liberty Bond Act, as amended, and the purposes for which such
securities may be issued under such Act, as amended, are extended to
include the purchase of notes issued by the Administration. All
redemptions, purchases, and sales by the Secretary of the Treasury of
such notes shall be treated as public debt transactions of the United
States. All borrowing authority contained herein shall be effective
only to such extent or in such amounts as are provided in advance in
appropriation Acts.
"(BXi) Moneys in the funds established in subsection (c)(1) not
needed for current operations may be paid into miscellaneous
receipts of the Treasury.
"(ii) The Administration shall pay into miscellaneous receipts of
the Treasury, following the close of each fiscal year, interest on the
average of loan disbursements outstanding throughout the year
providing such disbursements are made from amounts appropriated
after October 1, 1980 or are made from repayments of principal of
loans made from appropriated funds. This interest shall be calculated
solely on the amount of loan disbursements net of losses at the rate
provided under subsection (c)(5)(A).

PUBLIC LAW 96-302—JULY 2, 1980
"(C) Except on those loan disbursements on which interest is paid
under subsection (B)(ii), the Administration shall pay into miscellaneous receipts of the Treasury, following the close of each fiscal year,
interest received by the Administration on financing functions performed under this Act and titles III and V of the Small Business
Investment Act of 1958 providing the capital used to perform such
functions originated from appropriated funds. Such payments shall
be treated by the Department of the Treasury as interest income, not
as retirement of indebtedness.
"(D) There are authorized to be appropriated, in any fiscal year,
such sums as may be necessary for losses and interest subsidies
incurred by the funds established by subsection (c)(1), but not previously reimbursed.".

94 STAT. 843

15 u s e 681, 695.

Appropriation
authorization.

ENERGY SHORTAGE LOANS

SEC. 122. Section 7(b)(8) of the Small Business Act is amended by
inserting after "energy-producing resources," the following: "including, but not limited to, a shortage of coal or other energy-producing
resource caused by a strike, boycott, or embargo, unless such strike,
boycott, or embargo is directly against such small business concern,".

93 Stat. 118.
15 u s e 636.

PRODUCT DISASTER LOANS

SEC. 123. Section 7(b)(4) of the Small Business Act is amended by
striking "undetermined causes" and inserting in lieu thereof "other
causes: Provided, That any small business which intentionally adulterates its product in order to attempt to establish eligibility under
this program shall not be eligible for loan assistance hereunder".
DUPLICATION OF DISASTER BENEFITS

SEC. 124. Section 7(b) of the Small Business Act is amended by
adding at the end thereof the following: "(E) A State grant made on or
prior to July 1, 1979, shall not be considered compensation for the
purpose of applying the provisions of subsection (b) of section 315 of
Public Law 93-288 (42 U.S.C. 5155) to a disaster loan under paragraph
(1), (2), or (4) of this subsection.".
TITLE II—SMALL BUSINESS DEVELOPMENT CENTERS
SHORT TITLE

Small Business
Development
Center
Act of 1980.

SEC. 201. This title may be cited as the 'Small Business Develop- 15 USC 631 note.
ment Center Act of 1980".
PROGRAM AUTHORIZATION

SEC. 202. The Small Business Act is amended by redesignating
section 21 as section 30 and by inserting the following new section:
"SEC. 21. (a)(1) The Administration is authorized to make grants
(including contracts and cooperative agreements) to any State government or any agency thereof, any regional entity, any Statechartered development, credit or finance corporation, any public or
private institution of higher education, including but not limited to
any land-grant college or university, any college or school of business,
engineering, commerce, or agriculture, community college or junior
college, or to any entity formed by two or more of the above entities
(herein referred to as 'applicants') to assist in establishing small

15 USC 631 note.
Grants,
recipients
and purposes.
15 USC 648.

94 STAT, 844

Non-Federal
additional
amount.

Plan, submittal
to SBA.

Review.

Assistance to
out-of-State
businesses.

Problem-solving
assistance.

PUBLIC LAW 96-302—JULY 2, 1980
business development centers and to any such body for: small
business oriented employment or natural resources development
programs; studies, research, and counseling concerning the managing, financing, and operation of small business enterprises; delivery
or distribution of such services and information; and providing access
to business analysts who can refer small business concerns to available experts.
"(2) The Administration shall require, as a condition to any grant
(or amendment or modification thereof) made to an applicant under
this section, that an additional amount (excluding any fees collected
from recipients of such assistance) equal to the amount of such grant
be provided from sources other than the Federal Government: Provided, That the additional amount shall not include any amount of
indirect costs or in-kind contributions paid for under any Federal
program, nor shall such indirect costs or in-kind contributions exceed
50 percent of the non-Federal additional amount: Provided further.
That no recipient of funds under this section shall receive a grant
which would exceed its pro-rata share of a $65,000,000 program based
upon the population to be served by the small business development
center as compared to the total population in the United States, or
$200,000, whichever is greater.
"(b)(1) During fiscal years 1981,1982, and 1983, financial assistance
shall not be made available to any applicant if approving such
assistance would be inconsistent with a plan for the area involved
which has been adopted by an agency recognized by the State
government as authorized to do so and approved by the Administration in accordance with the standards and requirements established
pursuant to this section,
"(2) An applicant may apply to participate in the program by
submitting to the Administration for approval a plan naming those
authorized in subsection (a) to participate in the program, the
geographic area to be served, the services that it would provide, the
method for delivering services, a budget, and any other information
and assurances the Administration may require to insure that the
applicant will carry out the activities eligible for assistance. The
Administration is authorized to approve, conditionally approve or
reject a plan or combination of plans submitted. In all cases, the
Administration shall review plans for conformity with the plan
submitted pursuant to paragraph (1) of this subsection, and with a
view toward providing small business with the most comprehensive
and coordinated assistance in the State or part thereof to be served.
"(3) At the discretion of the Administration, the Administration is
authorized to permit a small business development center to provide
advice, information and £issistance, as described in subsection (c), to
small businesses located outside the State, but only to the extent such
businesses are located within close geographical proximity to the
small business development center, as determined by the
Administration.
"(c)(1) Applicants receiving grants under this section shall assist
small businesses in solving problems concerning operations, manufacturing, engineering, technology exchange and development, personnel administration, marketing, sales, merchandising, finance,
accounting, business strategy development, and other disciplines
required for small business growth and expansion, innovation,
increased productivity, and management improvement, and for
decreasing industry economic concentrations.

PUBLIC LAW 96-302—JULY 2, 1980
"(2) A small business development center shall provide services as
close as possible to small businesses by providing extension services
and utilizing satellite locations when necessary. To the extent possible, it also shall make full use of other Federal and State government
programs that are concerned with aiding small business. A small
business development center shall have—
"(A) a full-time staff, including a staff director to manage the
program activities;
"(B) access to business analysts to counsel, assist, and inform
small business clients;
"(C) access to technology transfer agents to provide state of art
technology to small businesses through coupling with national
and regional technology data sources;
"(D) access to information specialists to assist in providing
information searches and referrals to small business;
"(E) access to part-time professional specialists to conduct
research or to provide counseling assistance whenever the need
arises; and
"(F) access to laboratory and adaptive engineering facilities.
"(3) Services provided by a small business development center shall
include, but shall not be limited to—
"(A) furnishing one-to-one individual counseling to small
businesses;
"(B) assisting in technology transfer, research, and coupling
from existing sources to small businesses;
"(C) maintaining current information concerning Federal,
State, and local regulations that affect small businesses and
counsel small businesses on methods of compliance. Counseling
and technology development shall be provided when necessary to
help small businesses find solutions for complying with environmental, energy, health, safety, and other Federal, State, and
local regulations;
"(D) coordinating and conducting research into technical and
general small business problems for which there are no ready
solutions;
"(E) providing and maintaining a comprehensive library that
contains current information and statistical data needed by
small businesses;
"(F) maintaining a working relationship and open communications with the financial and investment communities, legal
associations, local and regional private consultants, and local
and regional small business groups and associations in order to
help address the various needs of the small business community;
"(G) conducting in-depth surveys for local small business
groups in order to develop general information regarding the
local economy and general small business strengths and weaknesses in the locality; and
"(H) maintaining lists of local and regional private consultants
to whom small businesses can be referred.
A small business development center shall continue to upgrade and
modify its services, as needed, in order to meet the changing and
evolving needs of the small business community.
"(4) In addition to the methods prescribed in section 21(cX2), a small
business development center shall utilize and compensate as one of
its resources qualified small business vendors, including but not
limited to, private management consultants, private consulting engineers and private testing laboratories, to provide services as

94 STAT. 845
Development
center extension
services.
Staff and access
requirements.

Assistance
services.

Qualified small
business
vendors.

94 STAT. 846

Laboratory
assistance.

National Science
Foundation and
innovation
centers.
Report to SBA
and Congress.

NASA and
industrial
application
centers.
Report to SBA
and Congress.

Deputy
Associate
Administrator
for
Management
Assistance.
5 u s e 5101 ef
seq., 5331.
44 FR 58671.
Duties.

National Small
Business
Development
Center Advisory
Board,
establishment.

PUBLIC LAW 96-302—JULY 2, 1980
described in this subsection to small businesses on behalf of such
small business development center.
"(d) Laboratories operated and funded by the Federal Government
are authorized and directed to cooperate with the Administration in
developing and establishing programs to support small business
development centers by making facilities and equipment available;
providing experiment station capabilities in adaptive engineering;
providing library and technical information processing capabilities;
and providing professional staff for consulting. The Administration is
authorized to reimburse the laboratories for such services.
"(e) The National Science Foundation and innovation centers
supported by the National Science Foundation are authorized and
directed to cooperate with small business development centers participating in this program. The National Science Foundation shall
report annually on the performance of such innovation centers with
recommendations to the Administration and the Congress on how
such innovation centers can be strengthened and expanded. The
National Science Foundation shall include in its report to Congress
information on the ability of innovation centers to interact with the
Nation's small business community and recommendations to the
Administration on continued funding.
"(f) The National Aeronautics and Space Administration and
industrial application centers supported by the National Aeronautics
and Space Administration are authorized and directed to cooperate
with small business development centers participating in this program. The National Aeronautics and Space Administration shall
report annually on the performance of such industrial application
centers with recommendations to the Administration and the Congress on how such industrial application centers can be strengthened
and expanded. The National Aeronautics and Space Administration
shall include in its report to Congress information on the ability of
industrial application centers to interact with the Nation's small
business community and recommendations to the Administration on
continued funding.
"(g)(1) The Administrator shall appoint a Deputy Associate Administrator for Management Assistance who shall report to the Associate
Administrator for Management Assistance and who shall serve
without regard to the provisions of title 5, United States Code,
governing appointments in the competitive service, and without
regard to chapter 51, and subchapter III of chapter 53 of such title
relating to classification and General Schedule pay rates, but at a
rate not less than the rate of GS-17 of the General Schedule.
"(2) The sole responsibility of the Deputy Associate Administrator
for Management Assistance shall be to administer the small business
development center program. Duties of the position shall include, but
are not limited to, recommending the annual program budget,
reviewing the annual budgets submitted by each applicant, establishing appropriate funding levels therefore, selecting applicants to
participate in this program, implementing the provisions of this
section, maintaining a clearinghouse to provide for the dissemination
and exchange of information between small business development
centers and conducting audits of recipients of grants under this
section. The Deputy Associate Administrator for Management Assistance shall confer with and seek the advice and counsel of the Board in
carrying out the responsibilities described in this subsection.
"(h)(1) There is established a National Small Business Development Center Advisory Board (herein referred to as 'Board') which

PUBLIC LAW 96-302—JULY 2, 1980
shall consist of nine members appointed from civilian life by the
Administrator and who shall be persons of outstanding qualifications
known to be familiar and sympathetic with small business needs and
problems. No more than three members shall be from universities or
their affiliates and six shall be from small businesses or associations
representing small businesses. At the time of the appointment of the
Board, the Administrator shall designate one-third of the members
and at least one from each category whose term shall end in two years
from the date of appointment, a second third whose term shall end in
three years from the date of appointment, and the final third whose
term shall end in four years from the date of appointment. Succeeding Boards shall have three-year terms, with one-third of the Board
changing each year.
"(2) The Board shall elect a Chairman and advise, counsel, and
confer with the Deputy Associate Administrator for Management
Assistance in carrying out the duties described in this section. The
Board shall meet at least quarterly and at the call of the Chairman of
the Board. Each member of the Board shall be entitled to be
compensated at the rate not in excess of the per diem equivalent of
the highest rate of pay for individuals occupying the position under
GS-18 of the General Schedule for each day engaged in activities of
the Board and shall be entitled to be reimbursed for expenses as a
member of the Board.
"(i)(l) Each small business development center may establish an
advisory board.
"(2) Each small business development center advisory board shall
elect a chairman and advise, counsel, and confer with the director of
the small business development center on all policy matters pertaining to the operation of the small business development center,
including who may be eligible to receive assistance from, and how
local and regional private consultants may participate with the small
business development center.
"(j) The Administration, with the advice of the Board, shall establish a plan for evaluation of the small business development center
program which may include the retaining of an independent concern
to conduct such an evaluation. The evaluation shall be both quantitative and qualitative and shall determine—
"(1) the impact of the small business development center
program on small businesses, including private consultants, and
the socio-economic base of the area served;
"(2) the multidisciplinary resources the small business development center program was able to coordinate to assist small
businesses; and
"(3) the extent to which various types of small businesses
engaged in areas such as manufacturing, retailing, wholesaling
and services have been assisted by the small business development center program.
For the purpose of this evaluation, the Administration is authorized
to require any small business development center or party receiving
assistance under this section to furnish it with such information
annually or otherwise as it deems appropriate. Such evaluation shall
be completed and submitted to the Senate Select Committee on Small
Business and the Committee on Small Business of the House of
Representatives by January 31,1983.
"(k) The authority to enter into contracts shall be in effect for each
fiscal year only to the extent or in the amounts as are provided in
advance in appropriations Acts.".

79-194

O—81—pt. 1

57 : QL3

94 STAT. 847

Chairman.
Meetings.
Compensation.

44 FR 58671.

Advisory board.

Program
evaluation
plan.

Submittal to
congressional
committees.
Contract
authority.

94 STAT. 848
15 u s e 636.

Ante, p. 843.

Repeal.
Ante, p. 843.
15 u s e 648 note.
Small Business
Economic Policy
Act of 1980.

PUBLIC LAW 96-302—JULY 2, 1980
SEC. 203. Section 7(d)(1) of the Small Business Act is amended to
read as follows:
"(d)(1) On OP after October 1, 1980, the Administration shall not
fund any small business development center or any variation thereof,
except as authorized in section 21 of this Act: Provided, That in fiscal
year 1980 nothing in this section or in section 21 shall be deemed to
affect the operation of any small business development center which
w£is funded by the Administration prior to October 1,1979: Provided
further. That no small business development center which was
funded in fiscal year 1979 may be funded in excess of $300,000 in fiscal
year 1980.".
SEC. 204. Sections 201 and 202 of this title are repealed effective
October 1,1984.
TITLE III—SMALL BUSINESS ECONOMIC POLICY
SHORT TITLE

15 u s e 631 note.

SEC. 301. This title may be cited as the 'Small Business Economic
Policy Act of 1980".
DECLARATION OF SMALL BUSINESS ECONOMIC POUCY

15 u s e 631a.

SEC. 302. (a) For the purpose of preserving and promoting a
competitive free enterprise economic system, Congress hereby
declares that it is the continuing policy and responsibility of the
Federal Government to use all practical means and to take such
actions as are necessary, consistent with its needs and obligations and
other essential considerations of national policy, to implement and
coordinate all Federal department, agency, and instrumentality
policies, programs, and activities in order to: foster the economic
interests of small businesses; insure a competitive economic climate
conducive to the development, growth and expansion of small businesses; establish incentives to assure that adequate capital and other
resources at competitive prices are available to small businesses;
reduce the concentration of economic resources and expand competition; and provide an opportunity for entrepreneurship, inventiveness,
and the creation and growth of small businesses.
(b) Congress further declares that the Federal Government is
committed to a policy of utilizing all reasonable means, consistent
with the overall economic policy goals of the Nation and the preservation of the competitive free enterprise system of the Nation, to
establish private sector incentives that will help assure that adequate
capital at competitive prices is available to small businesses. To fulfill
this policy, departments, agencies, and instrumentalities of the
Federal Government shall use all reasonable means to coordinate,
create, and sustain policies and programs which promote investment
in small businesses, including those investments which expand
employment opportunities and which foster the effective and efficient use of human and natural resources in the economy of the
Nation.
STATE OP SMALL BUSINESS

Report to
eongress.
15 u s e 631b.

SEC. 303. (a) The President shall transmit to the Congress not later
than January 20 of each year a Report on Small Business and
Competition which shall—

PUBLIC LAW 96-302—JULY 2, 1980
(1) examine the current role of small business in the economy
on an industry-by-industry basis;
(2) present current and historical data on production, employment, investment, and other economic variables for small business in the economy as a whole and for small business in each
sector of the economy;
(3) identify economic trends which will or may affect the small
business sector and the state of competition;
(4) examine the effects on small business and competition of
policies, programs, and activities, including, but not limited to
the Internal Revenue Code, the Employee Retirement Income
Security Act, the Securities Act of 1933, and the Securities
Exchange Act of 1934, and regulations promulgated thereunder;
identify problems generated by such policies, programs, and
activities; and recommend legislative and administrative solutions to such problems; and
(5) recommend a program for carrying out the policy declared
in section 302 of this Act, together with such recommendations
for legislation £is he may deem necessary or desirable.
(b) The President also shall transmit simultaneously as an appendix to such annual report, a report, by agency and department, on the
total dollar value of all Federal contracts exceeding $10,000 in
amount and the dollar amount (including the subcontracts thereunder in excess of $10,000) awarded to small, minority-owned and
female-owned businesses.
(c) The President may transmit from time to time to the Congress
reports supplementary to the Report on Small Business and Competition, each of which shall include such supplementary or revised
recommendations as he may deem necessary or desirable to achieve
the policy declared in section 302 of this Act.
(d) The Report on Small Business and Competition and all supplementary reports transmitted under subsections (h) and (c) of this
section shall, when transmitted to Congress, be referred to the Senate
Select Committee on Small Business and the Committee on Small
Business of the House of Representatives.

94 STAT. 849

26 u s e
29 u s e
note,
15 u s e
15 u s e

1 et seq.
1001
77a.
78a.

Appendix to
report,
transmittal to
eongress.

Supplementary
reports,
transmittal to
eongress.
Referral to congressional
committees.

TITLE IV—SMALL BUSINESS ECONOMIC RESEARCH AND
ANALYSIS
SEC. 401. The Small Business Act is amended by redesignating
subsection 4(b) as subsection 4(bXl) and inserting thereafter the 15USC633
following:
"(2) The Administrator also shall be responsible for—
"(A) establishing and maintaining an external small business Data base.
economic data base for the purpose of providing the Congress and
the Administration information on the economic condition and
the expansion or contraction of the small business sector. To that Economic
end, the Administrator shall publish on a regular basis national indices,
small business economic indices and, to the extent feasible, publication.
regional small business economic indices, which shall include,
but need not be limited to, data on—
"(i) employment, layoffs, and new hires;
"(ii) number of business establishments and the types of
such establishments such as sole proprietorships, corporations, and partnerships;
"(iii) number of business formations and failures;
"(iv) sales and new orders;

94 STAT. 850

Annual report,
publication.

44 FR 58671.
5 u s e 5315.

Credit-need
studies, report
to Clongress.

Referral to
congressional
committees.

Small Business
Employee
Ownership
Act of 1980.
15 u s e 631 note.
Findings and
declaration.
15 u s e 636 note.

PUBLIC LAW 96-302—JULY 2, 1980
"(v) back orders;
"(vi) investment in plant and equipment;
"(vii) changes in inventory and rate of inventory turnover;
"(viii) sources and amounts of capital investment, including debt, equity, and internally generated funds;
"(ix) debt to equity ratios;
"(x) exports;
"(xi) number and dollar amount of mergers and acquisitions by size of acquiring and acquired firm; and
"(xii) concentration ratios; and
"(B) publishing annually a report giving a comparative analysis and interpretation of the historic£il trends of the small
business sector as reflected by the data acquired pursuant to
subparagraph (A) of this subsection.".
SEC. 402. Section 634d(l) of title 15, United States Code, is amended
by striking the word "Schedule;" and inserting in lieu thereof
"Schedule: Provided, however, That not more than ten staff personnel
at any one time may be employed and compensated at a rate not in
excess of GS-15, step 10, of the General Schedule;".
SEC. 403. Section 5315 of title 5 of the United States Code is
amended by adding the following new paragraph:
"(128) Chief Counsel for Advocacy, Small Business
Administration.".
SEC. 404. In consultation with the Administrator of the Small
Business Administration and the Bureau of the Census, the Board of
Governors of the Federal Reserve System, the Comptroller of the
Currency, and the Federal Deposit Insurance Corporation shall
conduct such studies of the credit needs of smgdl business as may be
appropriate to determine the extent to which such needs are being
met by commercial banks and shall report the results of such studies
to the Congress by January 1, 1982, together with their views and
recommendations as to the feasibility and cost of conducting periodic
sample surveys, by region and nationwide, of the number and dollar
amount of commercial and industrial loans extended by commercial
banks to small business. Reports shall, when transmitted to the
Congress, be referred to the Senate Select Committee on Small
Business and the Committee on Small Business of the House of
Representatives.
TITLE V—EMPLOYEE OWNERSHIP
SEC. 501. This title may be cited as the "Small Business Employee
Ownership Act of 1980".
SEC. 502. The Congress hereby finds and declares that—
(1) employee ownership of firms provides a means for preserving jobs and business activity;
(2) employee ownership of firms provides a means for keeping a
small business small when it might otherwise be sold to a
conglomerate or other large enterprise;
(3) employee ownership of firms provides a means for creating
a new small business from the sale of a subsidiary of a large
enterprise;
(4) unemployment insurance programs, welfare payments, and
job creation programs are less desirable and more costly for both
the Government and program beneficiaries than loan guarantee
programs to maintain employment in firms that would otherwise
be closed, liquidated, or relocated; and

PUBLIC LAW 96-302—JULY 2, 1980
(5) by guaranteeing loans to qualified employee trusts and
similar employee organizations, the Small Business Administration can provide feasible and desirable methods for the transfer
of all or part of the ownership of a small business concern to its
employees.
SEC. 503. (a) The purposes of this title are—
(1) to provide that a qualified employee trust shall be eligible
for loan guarantees under section 7(a) of the Small Business Act
with respect to a small business concern, regardless of the
percentage of stock of the concern held by the trust, and
(2) to provide in section 505 of this Act authority to address the
specific case in which the Small Business Administration guarantees loans under section 7(a) of the Small Business Act for
purposes of providing funds to a qualified employee trust (and
other employee organizations which are treated as qualified
employee trusts) for the purchase, by at least 51 percent of the
employees, of at least 51 percent of the stock of a business which
is operated for profit and which is—
(A) a small business concern, or
(B) a corporation which is controlled by another person if,
after the plan for the purchase of such corporation is carried
out, such corporation would be a small business concern.
(b) Nothing in this title shall be construed to prohibit the Small
Business Administration from making loan guarantees under section
7(a) of the Small Business Act to qualified employee trusts which own
less than 51 percent of the stock of a continuing business.
SEC. 504. Section 3 of the Small Business Act is amended by adding
at the end thereof the following new subsection:
"(cXD For purposes of this Act, a qualified employee trust shall be
eligible for any loan guarantee under section 7(a) with respect to a
small business concern on the same basis as if such trust were the
same legal entity as such concern.
"(2) For purposes of this Act, the term 'qualified employee trust'
means, with respect to a small business concern, a trust—
"(A) which forms part of an employee stock ownership plan (as
defined in section 4975(e)(7) of the Internal Revenue Code of
1954)—
"(i) which is maintained by such concern, and
"(ii) which provides that each participant in the plan is
entitled to direct the plan as to the manner in which voting
rights under qualifying employer securities (as defined in
section 4975(e)(8) of such Code) which are allocated to the
account of such participant are to be exercised with respect
to a corporate matter which Ot)y law or charter) must be
decided by a majority vote of outstanding common shares
voted; and
"(B) in the case of any loan guarantee under section 7(a), the
trustee of which enters into an agreement with the Administrator which is binding on the trust and on such small business
concern and which provides that—
"(i) the loan guaranteed under section 7(a) shall be used
solely for the purchase of qualifying employer securities of
such concern,
"(ii) all funds acquired by the concern in such purchase
shall be used by such concern solely for the purposes for
which such loan was guaranteed.

94 STAT. 851

Purposes.
15 u s e 636 note.
15 u s e 636,
post, p. 852.

15 u s e 632.
Loan guarantee
eligibility.
15 u s e 636,
post, p. 852.
"Qualified
employee
trust.'
26 u s e 4975.

94 STAT. 852

PUBLIC LAW 96-302—JULY 2, 1980

"(iii) such concern will provide such funds as may be
necessary for the timely repayment of such loan, and the
property of such concern shall be available as security for
repayment of such loan, and
"(iv) all qualifying employer securities acquired by such
trust in such purchase shall be allocated to the accounts of
participants in such plan who are entitled to share in such
allocation, and each participant h£is a nonforfeitable right,
not later than the date such loan is repaid, to all such
qualifying employer securities which are so allocated to the
participant's account.
"(3) Under regulations which may be prescribed by the Administrator, a trust may be treated as a qualified employee trust with respect
to a small business concern if^
"(A) the trust is maintained by an employee organization
which represents at least 51 percent of the employees of such
concern, and
"(B) such concern maintains a plan—
"(i) which is an employee benefit plan which is designed to
invest primarily in qualifying employer securities (as
defined in section 4975(e)(8) of the Internal Revenue Code of
26 use 4975.
1954),
"(ii) which provides that each participant in the plan is
entitled to direct the plan as to the manner in which voting
rights under qualifying employer securities which are allocated to the account of such participant are to be exercised
with respect to a corporate matter which (by law or charter)
must be decided by a majority vote of the outstanding
common shares voted,
"(iii) which provides that each participant who is entitled
to distribution from the plan has a right, in the case of
qualifying employer securities which are not readily tradable on an established market, to require that the concern
repurchase such securities under a fair valuation formula,
and
"(iv) which meets such other requirements (similar to
requirements applicable to employee stock ownership plans
as defined in section 4975(e)(7) of the Internal Revenue Code
of 1954) as the Administrator may prescribe, and
15 use 636.
"(C) in the case of a loan guarantee under section 7(a), such
organization enters into an agreement with the Administration
which is described in paragraph (2)(B).".
SEC. 505. Section 7(a) of the Small Business Act is amended by
adding at the end thereof the following new paragraph:
Loan guarantee.
"(8)(A) The Administration may guarantee under subsection (a) a
loan to a qualified employee trust with respect to a small business
concern for the purpose of purchasing stock of the concern under a
plan approved by the Administrator which, when carried out, results
in the qualified employee trust owning at least 51 percent of the stock
of the concern.

PUBLIC LAW 96-302—JULY 2, 1980
"(B) The plan requiring the Administrator's approval under subparagraph (A) shall be submitted to the Administration by the
trustee of such trust with its application for the guarantee. Such plan
shall include an agreement with the Administrator which is binding
on such trust and on the small business concern and which provides
that—
"(i) not later than the date the loan guaranteed under subparagraph (A) is repaid (or as soon thereafter as is consistent with the
requirements of section 401(a) of the Internal Revenue Code of
1954), at least 51 percent of the total stock of such concern shall
be allocated to the accounts of at least 51 percent of the
employees of such concern who are entitled to share in such
allocation,
"(ii) there will be periodic reviews of the role in the management of such concern of employees to whose accounts stock is
allocated, and
"(iii) there will be adequate management to assure management expertise and continuity.
"(C) In determining whether to guarantee any loan under this
paragraph, the individual business experience or personal assets of
employee-owners shall not be used as criteria, except inasmuch as
certain employee-owners may assume managerial responsibilities, in
which case business experience may be considered.
"(D) For purposes of this paragraph, a corporation which is controlled by any other person shall be treated as a small business
concern if such corporation would, after the plan described in
subparagraph (B) is carried out, be treated as a small business
concern.
"(E) The Administrator shall compile a separate list of applications
for assistance under this paragraph, indicating which applications
were accepted and which were denied, and shall report periodically to
the Congress on the status of employee-owned firms assisted by the
Administration.''.
SEC. 506. (a) The Administrator of the Small Business Administration shall enter into a contract with an independent consultant which
provides for a study by such consultant of the feasibility of making
loan guarantees under section 7(a) of the Small Business Act directly
to the seller of a small business concern in connection with the
installment sale of such concern. Such study shall include an analysis
of at least the following:
(1) the extent and nature of the use of installment sales for the
sale of small business concerns,
(2) the ability of the Small Business Administration to make
credit judgments in connection with installment sales,
(3) the need for Small Business Administration loan guarantees to facilitate installment sales,
(4) the willingness of banks and other financial institutions to
participate in the evaluation of installment sales, and
(5) the anticipated cost of such a guarantee program in comparison to other loan guarantee programs of the Small Business
Administration.

94 STAT. 853
Plan, submittal
to SBA.

26 u s e 401.

Periodic review.

Loan guarantee
criteria,
restriction.

Applications list;
report to
Ck)ngress.

Feasibility study
by independent
consultant.

94 STAT. 854

Feasibility
transmittal to
congressional
committees.
Effective date.

PUBLIC LAW 96-302—JULY 2, 1980
Nothing in this section shall be construed as authorizing the Administrator to enter into contracts or incur obligations except to such
extent and in such amounts as are provided in appropriations Acts.
(ij) jyfQ^ i^^gj. ^j^g^jj ^pj.ii 1^ ;L98I^ ^Yie Administrator of the Small
Business Administration shall transmit the findings of such study,
along with his recommendations, to the Senate Select Committee on
Small Business and the Committee on Small Business of the House
of Representatives.
SEC. 507. This Act shall take effect October 1,1980.

15 u s e 631 note.

Approved July 2, 1980.

LEGISLATIVE HISTORY:
HOUSE REPORTS: No. 96-998 accompanying H.R. 7297 (Comm. on Small Business)
and No. 96-1087 (Comm. of Conference).
SENATE REPORT No. 96-703 (Comm. on Small Business).
CONGRESSIONAL RECORD, Vol. 126 (1980):
May 28, considered and passed Senate.
June 3, H.R. 7297 considered and passed House; passage vacated and S. 2698,
amended, passed in lieu.
June 17, Senate agreed to conference report.
June 19, House agreed to conference report; receded from its amendment to
title of bill.
[See also the following bills and their accompanying reports: H.R. 7250, H.R.
7259, H.R. 7288, H.R. 7289, H.R. 7298]
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 16, No. 27:
July 2, Presidential statement.