LOANS.

SEC. 302. LOANS. Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) is amended by adding at the end thereof the following new paragraph: “(20) (A) The Administration is empowered to make loans either directly or in cooperation with banks or other financial institutions through agreements to participate on an immediate or deferred (guaranteed) basis to small business concerns eligible for assistance under subsection (j)(10) and section 8(a). Such assistance may be provided only if the Administration determines that— “(i) the type and amount of such assistance requested by such concern is not otherwise available on reasonable terms from other sources; 102 STAT. 3868 “(ii) with such assistance such concern has a reasonable prospect for operating soundly and profitably within a reasonable period of time; “(iii) the proceeds of such assistance will be used within a reasonable time for plant construction, conversion, or expansion, including the acquisition of equipment, facilities, machinery, supplies, or material or to supply such concern with working capital to be used in the manufacture of articles, equipment, supplies, or material for defense or civilian production or as may be necessary to insure a well-balanced national economy; and “(iv) such assistance is of such sound value as reasonably to assure that the terms under which it is provided will not be breached by the small business concern. “(B) (i) No loan shall be made under this paragraph if the total amount outstanding and committed (by participation or otherwise) to the borrower would exceed $750,000. “(ii) Subject to the provisions of clause (i), in agreements to participate in loans on a deferred (guaranteed) basis, participation by the Administration shall be not less than 85 per centum of the balance of the financing outstanding at the time of disbursement. “(iii) The rate of interest on financings made on a deferred (guaranteed) basis shall be legal and reasonable. “(iv) Financings made pursuant to this paragraph shall be subject to the following limitations: “(I) No immediate participation may be purchased unless it is shown that a deferred participation is not available. “(II) No direct financing may be made unless it is shown that a participation is unavailable. “(C) A direct loan or the Administration’s share of an immediate participation loan made pursuant to this paragraph shall be any secured debt instrument— “(i) that is subordinated by its terms to all other borrowings of the issuer; “(ii) the rate of interest on which 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 loan and adjusted to the nearest one-eighth of 1 per centum; “(iii) the term of which is not more than twenty-five years; and “(iv) the principal on which amortized at such rate as may be deemed appropriate by the Administration, and the interest on which is payable not less often than annually.”.