LOCAL REVOLVING FUNDS.

SEC. 2314. LOCAL REVOLVING FUNDS. (a) Establishment.— (1) In general.— Each eligible entity approved by the Board to participate in the program established under this chapter shall establish a local revolving fund account in which to deposit— (A) (i) amounts received from the Fund under this chapter; (ii) any local matching funds described in section 2313(c)(3)(A); and (iii) any profits or income, repayments of loans, proceeds from the sale of equity investments, or other gains or returns on investments or loans, derived from the activities of the revolving fund established under this subsection; less (B) reasonable operating expenses or losses incurred in administering such fund. (2) Place of establishment.— Each local revolving fund established under this subsection may be established in one or more member banks of the Federal Reserve System, any Federally insured State nonmember bank (as defined in section 3(b) of104 STAT. 3992 the Federal Deposit Insurance Act (12 U.S.C. 1813(b))), or any State owned bank whose deposits are backed by the full faith and credit of the State, and the funds, except as provided in subsection (b) of this section, shall be held in cash and receive interest or be invested in direct obligations of the United States or in obligations guaranteed by the United States or an agency thereof. (b) Use of Fund.— Amounts in a local revolving fund may be used— (1) to provide loans or equity capital, or loan guarantees, to approved local businesses as authorized in this chapter, under procedures established by the Board; (2) to cover the costs of providing training, business or financial planning, or management or technical assistance to approved local businesses in amounts that do not exceed amounts or levels described in standards established by the Board; (3) if financial investments are made in the eligible entity, in accordance with item (aa) or (bb) of section 2313(c)(3)(A)(ii)(I), to provide for a return of capital to non-Federal investors in the revolving fund, except that if such revolving fund experiences capital or other losses the share of returned capital under this paragraph shall be proportionately, or otherwise appropriately reduced to reflect such losses, under procedures established by the Board; or (4) to cover reasonable operating or capital expenses, losses, or for other charges as prescribed in rules or standards established by the Board. (c) Decisions Concerning Funding.— Eligible entities that receive a line of credit under section 2313 shall make case-by-case determinations concerning applications submitted by each local business for loans, equity capital, or loan guarantees, under general procedures and requirements established by the Board. (d) Requirement of Partnerships for Loans or Investments.— Funds in each local revolving fund shall be loaned, invested, or used to provide a guarantee, only if one or more depository institutions (as defined in section 3(c)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(1)) or community development credit unions described in section 2312(a) of this Act, under procedures established by the Board, match each investment or loan made by each such revolving fund to each such local business, on at least a dollar-for-dollar basis, or provide the funds for the loans that are guaranteed by such local revolving fund. (e) Investment Size Limits.— (1) In general.— (A) Amount per local business.— The amount of Federal funds provided from any revolving fund for use in making loans or investments, or available regarding each guarantee, shall not exceed $250,000 in any given calendar year, to any single approved local business or to other local businesses that are financially connected or otherwise related to such local business as defined by the Board. (B) Other sources.— This chapter shall not be construed to limit the total amount of loans, investments, or guarantees that each local business may receive from sources other than eligible entities. 104 STAT. 3993 (C) Procedures.— In implementing this paragraph the Board shall develop procedures to establish, impute, or determine the amount of Federal funds that shall be considered available in the revolving funds created by approved eligible entities. (2) Ineligibility.— Any local business that employs 100 or more employees shall not be eligible to receive assistance from a local revolving fund that receives assistance under this chapter. (f) Subordinated Interest of Local Revolving Fund.— If a depository institution (as defined in section 3(c)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(1)) or a community development credit union described in section 2312(a) of this Act has made an investment or loan in a local business in conjunction with an investment or loan made out of the revolving fund of an approved eligible entity, the amount invested or loaned by such revolving fund in such local business may be subordinated to any degree and in any manner. (g) Other Investors.— A depository institution (as defined in section 3(c)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(1)), community development credit union described in section 2312(a) of this Act, similar Federally regulated financial institution, State owned bank, local or State government, private philanthrophic foundation, or other entity that contributes capital to an eligible entity that receives Federal assistance under this chapter may establish contractual arrangements with such eligible entity concerning the return of such investments in the local revolving fund consistent with subsection (b)(3). (h) Additional Capital.— The Board shall promulgate regulations that provide each participating eligible entity with a sufficient amount of time to obtain additional capital, lines of credit, or letters of intent, if any investor, pursuant to the contract with the eligible entity under subsection (g), withdraws some or all of its investment. (i) Continuation of Line of Credit.— A line of credit provided to an approved eligible entity under section 2313 for use in a local revolving fund shall be available to be drawn upon until the Investment Board is terminated or until the line of credit is canceled, revoked, or suspended by the Board or the Secretary as described in section 2315 or subsection (1) of this section. (j) Continuation of Business Promotion Activities.— The Federal assistance provided to any eligible entity under this chapter shall become the property of such entity on the termination of the Investment Board if— (1) the Board determines that the eligible entity that administers the local revolving fund has operated the fund in a manner that is consistent with this chapter; and (2) the eligible entity contracts with the Secretary to continue to provide lending, investment, and guarantee assistance consistent with this chapter. (k) Development of Monitoring Procedures.— On and after the date on which the Investment Board is terminated, the Secretary shall act in place of the Board and shall monitor the operations of eligible entities that receive Federal assistance under this chapter which continue to exist on such date. (l) Refund of Funds.— Notwithstanding subsection (j), and in addition to any actions taken under section 2315, if the Secretary finds that the purpose of any eligible entity is no longer to promote business development in a manner consistent with this chapter, the104 STAT. 3994 Secretary shall revoke the approval of the eligible entity, obtain a refund in an amount equal to the amount of funds drawn out of the Federal line of credit issued to the eligible entity together with an appropriate amount of interest on such amount, as determined by the Secretary, and succeed to, or acquire the rights, privileges, and assets, investments of, and the payments due from such eligible entity, as described in section 2315(h). (m) Annual Reports to the Board.— (1) In general.— Each eligible entity that receives assistance under this chapter shall annually prepare and submit to the Board, at such time and in such form as the Board may require, a report describing the financial condition of the eligible entity, and the investments, cash revenues, income from investments, loans made, equity positions taken, guarantees issued, losses sustained or taken, any training, business, or technical assistance, or financial planning provided, operating expenses, loss rates, and such other matters as the Board determines appropriate concerning the eligible entity. (2) Post termination.— After the Board terminates under subsection (n), the reports required under paragraph (1) shall be submitted to the Secretary who shall stand in the same position as the Board. (n) Termination of Board.— The Investment Board established by section 2312(a) shall terminate on the last day of the 5th calendar year following the date of enactment of this chapter and on and after such date the Secretary shall act in place of such Board.