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106th CONGRESS
2d Session
H. R. 5663
To provide for community renewal and new markets initiatives.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 14, 2000
Mr. Talent (for himself and Ms. Velazquez) introduced the following
bill; which was referred to the Committee on Small Business
_______________________________________________________________________
A BILL
To provide for community renewal and new markets initiatives.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. NEW MARKETS VENTURE CAPITAL PROGRAM.
(a) Short Title.--This section may be cited as the ``New Markets
Venture Capital Program Act of 2000''.
(b) New Markets Venture Capital Program.--Title III of the Small
Business Investment Act of 1958 (15 U.S.C. 681 et seq.) is amended--
(1) in the heading for the title, by striking ``SMALL
BUSINESS INVESTMENT COMPANIES'' and inserting ``INVESTMENT
DIVISION PROGRAMS'';
(2) by inserting before the heading for section 301 the
following:
``Part A--Small Business Investment Companies'';
and
(3) by adding at the end the following:
``Part B--New Markets Venture Capital Program
``SEC. 351. DEFINITIONS.
``In this part, the following definitions apply:
``(1) Developmental venture capital.--The term
`developmental venture capital' means capital in the form of
equity capital investments in businesses made with a primary
objective of fostering economic development in low-income
geographic areas. For the purposes of this paragraph, the term
`equity capital' has the same meaning given such term in
section 303(g)(4).
``(2) Low-income individual.--The term `low-income
individual' means an individual whose income (adjusted for
family size) does not exceed--
``(A) for metropolitan areas, 80 percent of the
area median income; and
``(B) for nonmetropolitan areas, the greater of--
``(i) 80 percent of the area median income;
or
``(ii) 80 percent of the statewide
nonmetropolitan area median income.
``(3) Low-income geographic area.--the term `low-income
geographic area' means--
``(A) any population census tract (or in the case
of an area that is not tracted for population census
tracts, the equivalent county division, as defined by
the Bureau of the Census of the Department of Commerce
for purposes of defining poverty areas), if--
``(i) the poverty rate for that census
tract is not less than 20 percent;
``(ii) in the case of a tract--
``(I) that is located within a
metropolitan area, 50 percent or more
of the households in that census tract
have an income equal to less than 60
percent of the area median gross
income; or
``(II) that is not located within a
metropolitan area, the median household
income for such tract does not exceed
80 percent of the statewide median
household income; or
``(iii) as determined by the Administrator
based on objective criteria, a substantial
population of low-income individuals reside, an
inadequate access to investment capital exists,
or other indications of economic distress exist
in that census tract; or
``(B) any area located within--
``(i) a HUBZone (as defined in section 3(p)
of the Small Business Act and the implementing
regulations issued under that section);
``(ii) an urban empowerment zone or urban
enterprise community (as designated by the
Secretary of Housing and Urban Development); or
``(iii) a rural empowerment zone or rural
enterprise community (as designated by the
Secretary of Agriculture).
``(4) New markets venture capital company.--The term `New
Markets Venture Capital company' means a company that--
``(A) has been granted final approval by the
Administrator under section 354(e); and
``(B) has entered into a participation agreement
with the Administrator.
``(5) Operational assistance.--The term `operational
assistance' means management, marketing, and other technical
assistance that assists a small business concern with business
development.
``(6) Participation agreement.--The term `participation
agreement' means an agreement, between the Administrator and a
company granted final approval under section 354(e), that--
``(A) details the company's operating plan and
investment criteria; and
``(B) requires the company to make investments in
smaller enterprises at least 80 percent of which are
located in low-income geographic areas.
``(7) Specialized small business investment company.--The
term `specialized small business investment company' means any
small business investment company that--
``(A) invests solely in small business concerns
that contribute to a well-balanced national economy by
facilitating ownership in such concerns by persons
whose participation in the free enterprise system is
hampered because of social or economic disadvantages;
``(B) is organized or chartered under State
business or nonprofit corporations statutes, or formed
as a limited partnership; and
``(C) was licensed under section 301(d), as in
effect before September 30, 1996.
``(8) State.--The term `State' means such of the several
States, the District of Columbia, the Commonwealth of Puerto
Rico, the Virgin Islands, Guam, American Samoa, the
Commonwealth of the Northern Mariana Islands, and any other
commonwealth, territory, or possession of the United States.
``SEC. 352. PURPOSES.
``The purposes of the New Markets Venture Capital Program
established under this part are--
``(1) to promote economic development and the creation of
wealth and job opportunities in low-income geographic areas and
among individuals living in such areas by encouraging
developmental venture capital investments in smaller
enterprises primarily located in such areas; and
``(2) to establish a developmental venture capital program,
with the mission of addressing the unmet equity investment
needs of small enterprises located in low-income geographic
areas, to be administered by the Administrator--
``(A) to enter into participation agreements with
New Markets Venture Capital companies;
``(B) to guarantee debentures of New Markets
Venture Capital companies to enable each such company
to make developmental venture capital investments in
smaller enterprises in low-income geographic areas; and
``(C) to make grants to New Markets Venture Capital
companies, and to other entities, for the purpose of
providing operational assistance to smaller enterprises
financed, or expected to be financed, by such
companies.
``SEC. 353. ESTABLISHMENT.
``In accordance with this part, the Administrator shall establish a
New Markets Venture Capital Program, under which the Administrator
may--
``(1) enter into participation agreements with companies
granted final approval under section 354(e) for the purposes
set forth in section 352;
``(2) guarantee the debentures issued by New Markets
Venture Capital companies as provided in section 355; and
``(3) make grants to New Markets Venture Capital companies,
and to other entities, under section 358.
``SEC. 354. SELECTION OF NEW MARKETS VENTURE CAPITAL COMPANIES.
``(a) Eligibility.--A company shall be eligible to apply to
participate, as a New Markets Venture Capital company, in the program
established under this part if--
``(1) the company is a newly formed for-profit entity or a
newly formed for-profit subsidiary of an existing entity;
``(2) the company has a management team with experience in
community development financing or relevant venture capital
financing; and
``(3) the company has a primary objective of economic
development of low-income geographic areas.
``(b) Application.--To participate, as a New Markets Venture
Capital company, in the program established under this part a company
meeting the eligibility requirements set forth in subsection (a) shall
submit an application to the Administrator that includes--
``(1) a business plan describing how the company intends to
make successful developmental venture capital investments in
identified low-income geographic areas;
``(2) information regarding the community development
finance or relevant venture capital qualifications and general
reputation of the company's management;
``(3) a description of how the company intends to work with
community organizations and to seek to address the unmet
capital needs of the communities served;
``(4) a proposal describing how the company intends to use
the grant funds provided under this part to provide operational
assistance to smaller enterprises financed by the company,
including information regarding whether the company intends to
use licensed professionals, when necessary, on the company's
staff or from an outside entity;
``(5) with respect to binding commitments to be made to the
company under this part, an estimate of the ratio of cash to
in-kind contributions;
``(6) a description of the criteria to be used to evaluate
whether and to what extent the company meets the objectives of
the program established under this part;
``(7) information regarding the management and financial
strength of any parent firm, affiliated firm, or any other firm
essential to the success of the company's business plan; and
``(8) such other information as the Administrator may
require.
``(c) Conditional Approval.--
``(1) In general.--From among companies submitting
applications under subsection (b), the Administrator shall, in
accordance with this subsection, conditionally approval
companies to participate in the New Markets Venture Capital
Program.
``(2) Selection criteria.--In selecting companies under
paragraph (1), the Administrator shall consider the following:
``(A) The likelihood that the company will meet the
goal of its business plan.
``(B) The experience and background of the
company's management team.
``(C) The need for developmental venture capital
investments in the geographic areas in which the
company intends to invest.
``(D) The extent to which the company will
concentrate its activities on serving the geographic
areas in which it intends to invest.
``(E) The likelihood that the company will be able
to satisfy the conditions under subsection (d).
``(F) The extent to which the activities proposed
by the company will expand economic opportunities in
the geographic areas in which the company intends to
invest.
``(G) The strength of the company's proposal to
provide operational assistance under this part as the
proposal relates to the ability of the applicant to
meet applicable cash requirements and properly utilize
in-kind contributions, including the use of resources
for the services of licensed professionals, when
necessary, whether provided by persons on the company's
staff or by persons outside of the company.
``(H) Any other factors deemed appropriate by the
Administrator.
``(3) Nationwide distribution.--The Administrator shall
select companies under paragraph (1) in such a way that
promotes investment nationwide.
``(d) Requirements To Be Met for Final Approval.--The Administrator
shall grant each conditionally approved company a period of time, not
to exceed 2 years, to satisfy the following requirements:
``(1) Capital requirement.--Each conditionally approved
company shall raise not less than $5,000,000 of private capital
or binding capital commitments from one or more investors
(other than agencies or departments of the Federal Government)
who met criteria established by the Administrator.
``(2) Nonadministration resources for operational
assistance.--
``(A) In general.--In order to provide operational
assistance to smaller enterprises expected to be
financed by the company, each conditionally approved
company--
``(i) shall have binding commitments (for
contribution in cash or in kind)--
``(I) from any sources other than
the Small Business Administration that
meet criteria established by the
Administrator;
``(II) payable or available over a
multiyear period acceptable to the
Administrator (not to exceed 10 years);
and
``(III) in an amount not less than
30 percent of the total amount of
capital and commitments raised under
paragraph (1);
``(ii) shall have purchased an annuity--
``(I) from an insurance company
acceptable to the Administrator;
``(II) using funds (other than the
funds raised under paragraph (1)), from
any source other than the
Administrator; and
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