FACT SHEET: Emerging Business Encouragement Act

As we continue to recover from our recent economic downturn, Congressman Carson is introducing legislation to better serve the distinct needs and to promote the growth and development of emerging businesses. This fact sheet outlines how the bill will provide valuable support to job creators looking to grow their businesses.

SBA Emerging Business Enterprise Designation

• The Small Business Administration (SBA) will establish "Emerging Business Enterprise" (EBE) designations for each industry category for which there is a small business designation. The designation would apply to any business that:
  • Is 10% or less of the size of a small business, if industry uses employee based standard, or 25 employees, whichever is larger.
  • Is less than five years old at the time of certification
  • Annual compensation of individuals in management positions does not exceed 200% of the annual mean wage for "Management Occupations" reported in the most recent Occupational Employment and Wage Estimates developed by the Department of Labor.

• An EBE designation expires immediately upon:
  • Failing to stay within the annual compensation limits for management positions.
  • Reaching 5 years from time of achieving EBE designation.
  • Size exceeds 50% of the SBA small business standard in the associated SBA category.
• Businesses will initially self-certify with the SBA as an EBE, using a process established by the Administrator.
• SBA will collect annual documentation from self-certifying EBE businesses demonstrating continued compliance with EBE terms.
• Self-certifications and annual documentation will be auditable.

Agency Contracting Requirements

• Each federal agency is required to set contracting goals for EBE equal to not less than 5%, including subcontracts. EBE contracts can contribute to the overall small business contracting goal.
• Each agency will have the authority to provide preference to EBE contracting applicants for the purpose of meeting goals.
• The President will include in his annual report on the state of small business a breakdown of individual agency contracting goals for EBEs and EBE participation.

Amendments to SBA Express Program

• The SBA Express Program will be amended as follows:
  • The percentage of federal guaranty for new loans to EBE businesses will be 65% (as opposed to usual 50%).
  • One year after the first EBE loans (at 65% rate) are issued, lenders will report to SBA the annual volume (by total number and total dollars) and default rate (percentage) of SBA guaranteed loans issued to EBE qualified businesses.
  • If in any year the volume of EBE lending volume (by total number and total dollars) grows by more than 10% on the previous year's total EBE volume, the federal guaranty will increase by an additional 10% (to 75%) for loans made in the following year.
  • If the default rate increases by more than 10% in a given year from the rate of the previous year, the guaranty percentage will drop back to 50% for loans made in the following year.
• Lenders will be required to verify qualification of a business as an EBE prior to issuing a guaranteed loan.
• Any EBE recipient of a guaranteed loan that is found to be fraudulently or inaccurately self-certified will be required to repay the full amount of the loan plus a fee levied by the SBA.

SBA Contractor Training

• SBA will make available to all certified EBEs an online training program on federal contracting, to ensure that businesses are aware of requirements, responsibilities and resources. The SBA will be authorized to offer training in person.

SBA Informing the Public

• SBA will establish a process for informing SBA registered small businesses about the EBE designation, associated lending programs, and contracting set aside program.