Mr. KERRY . Mr. President, the availability of capital and credit still remains one of the most significant impediments to small business creation and growth, and it is the Small Business Administration (SBA ) that continues to effectively serve as the principal ``gap'' lender to our nation's 24 million small businesses.

SBA's loan and investment programs are a bargain. For very little, taxpayers leverage their money to fuel the economy and help thousands of small businesses every year. In the 7(a) program, taxpayers spend $1.24 for every $100 loaned to small business owners. Well-known successes like Winnebago and Ben & Jerry's are examples of the program's effectiveness. In the 504 program, taxpayers don't spend a penny to lend or leverage investments because they are self-funded.

Today we will vote on H.R. 2614, the Certified Development Company Program Improvements Act of 2000. This bill makes changes to the 504 Certified Development Company (CDC or 504 program) loan program that will greatly increase the opportunity for small businesses to build a facility, buy more equipment, or acquire a new building. These loans create a ripple effect that enables small business owners to expand their companies, hire more workers and ultimately improve the local economy.

This bill also includes a manager's amendment with three provisions. One, it addresses prompt approval of applications from certified development companies (CDCs) to operate in multiple states. Two, it restores much of the shortfall in 7(a) funding for FY2000 by giving SBA the authority to reprogram unused funds. Three, it maintains continuity in the HUBZone program by grandfathering in existing HUBZone companies as zones are redefined when the Bureau of Labor Statistics releases its new data.

Before I get into the details of this bill, I would like to spend a minute describing the 504 Certified Development Company (CDC) loan program. This program is mission-driven, designed to provide capital to growing small businesses and create jobs. The professionals who work at CDCs do much more than make loans--they better communities. They usually have a mixture of expertise, part economic development specialist and part lender. They know their communities, and they know how to package loans and help prospective borrowers get financing. In fact, if you were to talk to them, you would learn that many are former lenders from commercial banks who wanted to get out from behind a desk and get involved in their communities. Instead of turning away meritorious projects because they didn't fit the profile of a traditional borrower, using the 504 program they could put together a loan that spreads the risk among commercial lenders, CDCs, the state or local governments, and the small business owners. These loans jumpstart or complement the economic development in CDCs' communities.

Specifically, the 504 program provides businesses with long-term, fixed-rated financing for major fixed assets, such as buildings and equipment. CDCs work with the SBA and private-sector lenders to provide financing to small businesses and ultimately contribute to the economic development of their communities or the regions they serve. There are about 290 CDCs nationwide, and each CDC covers a specific area. Each CDC's portfolio must create or retain one job for every $35,000 provided by the SBA .

As I mentioned earlier, but will expand on here, proceeds from 504 loans must be used for fixed-asset projects. Projects range from land purchases and improvements--including existing buildings, grading, street improvements, utilities, parking lots and landscaping--to the construction of new facilities, or modernization, renovation or conversion of existing facilities, to the purchase of long-term machinery and equipment. The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.

I strongly support SBA's 504 loan program. Since 1980, more than 25,000 businesses have received more than $20 billion in fixed-asset financing through the 504 program. In Massachusetts, over the last decade, small businesses got $318 million in 504 loans that created more than 10,000 jobs. The stories behind those numbers say a lot about how SBA's 504 loans help business owners and communities. In Fall River, owners Patricia Ladino and Russell Young developed a custom packing plans for scallops and shrimp that has grown from ten to 30 employees in just two short years and is in the process of another expansion that will add as many as 25 new jobs. In Danvers, there's the car dealership that used a 504 loan to grow a company over 15 years from 25 to 395 employees. In Berkshire County, the 504 program has helped support the growth of the plastics mold and tool industry. One good example of success in this area is the development of Starbase Technologies in Pittsfield which now employs 65 people.

H.R. 2614 would build on that success by implementing the following. First, it will increase the maximum debenture size for Section 504 loans from $750,000 to $1 million, and the size of debentures for loans that meet special public policy goals from $1 million to $1,300,000. It has been 10 years since the Committee acted to increase the maximum guarantee amount in the 504 program. To keep pace with inflation, the maximum guarantee amount should be increased to approximately $1.25 million. However, consistent with my colleagues on the House Small Business Committee, I believe that a simple increase to $1 million is probably sufficient.

H.R. 2614 also adds women-owned businesses to the current list of businesses eligible for the larger public policy loans with guarantees of up to $1.3 million. Currently, the higher guaranty is available for business district revitalization; expansion of exports; expansion of minority business development; rural development; enhanced economic competition; and, added just last year, veteran-owned businesses, with an emphasis on service-disabled veterans.



This small legislative change was significant and long overdue. Throughout America's history, countless men and women have served our country and fought for its ideals as members of our armed services. However, when they return to civilian life, veterans have often encountered barriers to starting or expanding a business. Although there are a number of programs at the SBA to provide assistance, many of these are not specifically targeted at veterans. Making them eligible for the higher debenture should help to remedy some of the inequalities that our service men and women face upon their return to civilian life and provide greater opportunity for the 5.5 million businesses owned or operated by veterans. That change also should help the 104,000 service-disabled veterans within the business community.

I originally introduced the provision to add women-owned businesses to the list of public policy goals in the 105th Congress as part of S. 2448, the Small Business Loan Enhancement Act. Though it eventually was included in and passed by the Senate as part of H.R. 3412, a comprehensive small business bill, it was never enacted. Unfortunately, the House received the bill too late to act before the 105th Congress adjourned. I am very pleased that the Committee continues to recognize the important role women-owned businesses play in the economy and is making this change to facilitate the expansion of this sector of our economy.

Women-owned businesses are increasing in number, range, diversity and earning power. They constitute one-third of the 24 million small businesses in the United States, generate $3.6 trillion annually in revenues to the economy and range in industry from advertising agencies to manufacturing. Addressing the special needs of women-owned businesses serves not only these entrepreneurs, but also the economic strength of this nation as a whole. Since 1992, SBA has managed to increase access to capital for women and has worked in earnest to move women entrepreneurs away from expensive credit card financing to more affordable loans for financing their business ventures. While the percentage of 504 loans to women-owned businesses has increased nationwide from 4.2 percent in 1987 to 13 percent in 1999, and I applaud that, we need to increase lending opportunities to better reflect that 38 percent of all businesses are owned by women.

By expanding the public policy goals of the 504 loan program to include women-owned businesses, we are ensuring that loans to eligible women business owners aren't capped at $1 million but are now available for as much as $1.3 million. According to Certified Development Company professionals, loan underwriters are conservative when it comes to approving loans for more than $750,000 and this directive would undoubtedly help eligible women business owners get the financing they need to expand their facilities and buy equipment as their businesses grow.

H.R. 2614 also reauthorizes the fees currently levied on the borrower, the Certified Development Company, and the participating bank. The fees in the 504 program cover all its costs, resulting in a program that operates at no cost to the taxpayer. Without this legislation, the fees sunset on October 1, 2000. H.R. 2614 will continue them through October 1, 2003.

Additionally, H.R. 2614 will grant permanent status to the Preferred Certified Lender Program before it sunsets at the end of fiscal year 2000. This program enables experienced CDCs to use streamlined procedures for loan making and liquidation, resulting in improved service to the small business borrower and reduced losses and liquidation costs.

H.R. 2614 also makes the Loan Liquidation Pilot Program a permanent program. This gives qualified and experienced CDCs the ability to handle the liquidation of loans with only minimal involvement of the SBA . It is the goal of this liquidation program to increase the recovery rates of the 504 loan program, and to bring about a corresponding reduction in the fees charged to the borrowers and the lenders.

Importantly, this bill includes Senator WELLSTONE's provision to authorize the program for three more years, making it a complete package. I believe it is better to act now on a bill that already has the House's blessing than to wait for the comprehensive reauthorization bill, H.R. 3843, to make its way to the President's desk. Taking this action now will enable the CDCs to plan for the year ahead, because they know that the program levels for fiscal years 2001 through 2003 are $4 billion, $5 billion and $6 billion.

In addition to these changes, and as I mentioned earlier, this bill includes a manager's amendment. The first provision deals with long-pending applications from CDCs that are seeking to expand into multiple states. To address the problem, this provision establishes a one-time automatic approval of applications for multi-state operation that have been pending at SBA headquarters for 12 months or more. Unless SBA acts to approve or disapprove the applications, automatic approval would go into effect 21 days after the bill is signed by the President.

While I urge the SBA to process applications in a timely manner, and while I understand the frustration of the applicants who have been waiting, I believe, in general, that it is in the best interest of the taxpayers for applicants and their proposals to be thoroughly screened, rather than blindly approved. This program, above all else, was designed to help small businesses, and I believe we should carefully review policy changes that are intended to expand a CDC's territory to make sure that the real goal--increasing access to the program for small businesses--is achieved.

The second provision gives the SBA the authority to reprogram unused funds to make up for the significant shortfall of appropriations for the 7(a) loan program. In its budget request for FY 2000, and again recently, the SBA estimated that the demand in this popular lending program would grow to a program level of $10.5 billion. Unfortunately, it was only appropriated enough to support a level of close to $9.8 billion. The Administration's estimate has proven to be more accurate than Congress anticipated, and the SBA needs additional funds to keep the program running throughout this fiscal year. This bill restores $500 million of the $700 million shortfall. I strongly support this provision and worked with Senator BOND to draft this legislation. I appreciate his cooperation and respectfully urge the appropriators in both the Senate and House to work with us.

Lastly, Mr. President, this bill also includes a technical change to the Historically Underutilized Business Zone small business contracting program (HUBZone program) administered by the SBA . The HUBZone program is designed to provide contracting opportunities in economically distressed areas of this country. One of the criteria for this program is that a small business must be located in a qualified census tract or nonmetropolitan county based on unemployment statistics from the Department of Labor and the Department of the Census.

As new data becomes available, there is a possibility that HUBZone firms would lose their eligibility, because the data could reflect that the census tract the firm is located in is technically no longer considered an economically depressed area. As ranking member of the Committee on Small Business and as a cosponsor of the original HUBZone law passed in 1997, I am concerned that when a particular area is no longer deemed HUBZone-eligible, small business owners in that area will lose the ability to bid on contracting opportunities under the program with little or no warning. This will be disruptive to the program and could discourage participation by qualified small businesses.

Because it is better policy to provide both small firms and the SBA with some sort of warning before a firm is deemed ineligible, this amendment is intended to allow a HUBZone firm located in an economically depressed area that has been redesignated by either Bureau of Labor Statistics (BLS) or Census data, to remain eligible under the program for three additional years. Thus the firm is put on notice that contracting opportunities under the program may not be available in the future, and the business is given time to plan for this change.

While I understand only a handful of firms were affected by a change in designated areas when new BLS data was released last year, I support the chairman's effort to ensure that no firm is taken by surprise this year. I am pleased that Senator BYRD and his staff worked together with my staff to come up with appropriate language for this amendment.

In closing, I want to thank my colleagues for supporting this bill. If, as expected, it is enacted, they will have improved the business climate and taken a few more steps to ensure that small businesses have access to capital and expanded procurement opportunities.