lease guarantees for certain small business concerns

lease guarantees for certain small business concerns Sec. 316. (a) The Small Business Investment Act of 1958 is amended by adding after title III a new title as follows: “TITLE IV— LEASE GUARANTEES “authority of tile administration “Sec. 401. (a) The Administration may, whenever it determines such action to be necessary or desirable, and upon such terms and conditions as it. may prescribe, guarantee the payment of rentals under leases of commercial and industrial property entered into by small business concerns that are (1) eligible for loans under section 7(b)(3) of the Small Business Act, or (2) eligible for loans under title IV of the Economic Opportunity Act of 1964, to enable such concerns to obtain such leases. Any such guarantee may be made or effected either directly or in cooperation with any qualified surety company or other qualified company through a participation agreement with such company. The foregoing powers shall be subject, however, to the following restrictions and limitations: “(1) No guarantee shall be issued by the Administration (A) if a guarantee meeting the requirements of the applicant is other-79 Stat. 483wise available on reasonable terms, and (B) unless the Administration determines that there exists a reasonable expectation that the small business concern in behalf of which the guarantee is issued will perform the covenants and conditions of the lease. “(2) The Administration shall, to the greatest extent practicable, exercise the powers conferred by this section in cooperation with qualified surety or other companies on a participation basis. “(b) The Administration shall fix a uniform annual fee for its share of any guarantee under this section which shall lie payable in advance at such time as may be prescribed by the Administrator. The amount of any such fee shall be determined in accordance with sound actuarial practices and procedures, to (he extent practicable, but in no case shall such amount exceed, on the Administration’s share of any guarantee made under this title, 21/2 per centum per annum of the minimum annual guaranteed rental payable, under any guaranteed lease: Provided, That the Administration shall fix the lowest fee that experience under the program established hereby has shown to be, justified. The Administration may also fix such uniform fees for the processing of applications for guarantees under this section as the Administrator determines are reasonable and necessary to pay the administrative expenses that are incurred in connection therewith. “(c) In connection with the guarantee of rentals under any lease pursuant, to authority conferred by this section, the Administrator may require, in order to minimize the financial risk assumed under such guarantee— “(1) that the lessee pay an amount, not to exceed one-fourth of the minimum guaranteed annual rental required under the lease, which shall be held in escrow and shall be available (A) to meet rental charges accruing in any month for which the lessee is in default, or (B) if no default occurs during the term of the lease, for application (with accrued interest) toward final payments or rental charges under the lease; “(2) that upon occurrence of a default under the. lease, the lessor shall, as a condition precedent to enforcing any claim under the lease guarantee, utilize the entire period, for which there are funds available in escrow for payment of rentals, in reasonably diligent efforts to eliminate or minimize losses, by releasing the commercial or industrial property covered by the lease to another qualified tenant, and no claim shall be made or paid under the guarantee, until such effort has been made and such escrow funds have been exhausted; “(3) that any guarantor of the lease will become a successor of the lessor for the purpose of collecting from a lessee in default rentals which are in arrears and with respect to which the lessor has received payment under a guarantee made pursuant to this section; and “(4) such other provisions, not inconsistent with the purposes of this title, as the Administrator may in his discretion require, “powers “Sec. 402. Without, limiting the authority conferred upon the Administrator and the Administration by section 201 of this Act, the Administrator and the Administration shall have, in the performance, of and with respect to the functions, powers, and duties conferred by this title, all the authority and be subject to the same conditions prescribed in section 5(b) of the Small Business Act with respect to loans, including the authority to execute subleases, assignments of lease and 79 Stat. 484new leases with any person, firm, organization, or other entity, in order to aid in the liquidation of obligations of the Administration hereunder. “fund “Sec. 403. There is hereby established a revolving fund for use by the Administration in carrying out the provisions of this title. Initial capital for such fund shall consist of not to exceed $0,000,000 transferred from the fund established under section 4(c) of the Small Business Act: Provided, That the last sentence of such section 4(c) shall not apply to any amounts so transferred. Into the fund established by this section there shall be deposited all receipts from the guarantee program authorized by this title. Moneys in such fund not needed for the payment of current operating expenses or for the payment of claims arising under such program 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 initial capital for such fund shall be returned to the fund established by section 4(c) of the Small Business Act, in such amounts and at such rimes as the Administration determines to be appropriate, whenever the level of the fund herein established is sufficiently high to permit the return of such moneys without danger to the solvency of the program under this title.” (b) Section 201 of such Act is amended by striking out the third sentence and inserting in lieu thereof the following: “The powers conferred by this Act upon the Administration and upon the Administrator, with the exception of those conferred by titles IV and V hereof, shall be exercised through the Small Business Investment Division and through the Deputy Administrât or appointed hereunder. The powers conferred by this Act. upon the Administration and upon the Administrator by titles IV and V hereof shall be exercised through such division, section, or other personnel as the Administrator in his discretion shall determine.” (c) The table of contents of such Act is amended by inserting after the analysis of title III the following: “TITLE IV— LEASE GUARANTEES “Sec. 401. Authority of the Administration. “Sec. 402. Powers. “Sec. 403. Fund.” (d) Section 4(c) of the Small Business Act is amended— (1) by striking out “$1,716,000,000” and inserting in lieu thereof “$1,721,000,000,”; and (2) by striking out the period at the end of the fifth sentence and inserting in lieu thereof the following: “: Provided, That such limitation shall not apply to functions under title IV thereof. ”