
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 23, 2000]
[Document not affected by Public Laws enacted between
  January 23, 2000 and December 4, 2001]
[CITE: 38USC3742]

 
                      TITLE 38--VETERANS' BENEFITS
 
               PART III--READJUSTMENT AND RELATED BENEFITS
 
              CHAPTER 37--HOUSING AND SMALL BUSINESS LOANS
 
                   SUBCHAPTER IV--SMALL BUSINESS LOANS
 
Sec. 3742. Small business loan program

    (a)(1) Subject to subsection (b) of this section, the Secretary may 
provide financial assistance to veterans' small business concerns for 
the purpose of (A) financing plant construction, conversion, or 
expansion (including the acquisition of land), (B) financing the 
acquisition of equipment, facilities, machinery, supplies, or materials, 
or (C) supplying such concerns with working capital.
    (2) Subject to paragraph (3)(A) of this subsection, financial 
assistance under this section may be provided in the form of (A) loan 
guaranties, or (B) direct loans.
    (3) The Secretary shall specify in regulations the criteria to be 
met for a business concern to qualify as a veterans' small business 
concern for the purposes of this subchapter. Such regulations shall 
include requirements--
        (A) that at least 51 percent of a business concern must be owned 
    by individuals who are veterans of the Vietnam era or disabled 
    veterans in order for such concern to qualify for a loan guaranty 
    and that at least 51 percent of a business concern must be owned by 
    disabled veterans in order for such concern to qualify for a direct 
    loan; and
        (B) that the management and daily business operations of the 
    concern must be directed by one or more of the veterans whose 
    ownership interest is part of the majority ownership for the 
    purposes of meeting the requirement in clause (A) of this paragraph.

    (b) The availability of financial assistance under subsection (a) of 
this section is subject to the following limitations:
        (1) The Secretary may not make a direct loan under this section 
    unless the veterans' small business concern applying for the loan 
    shows to the satisfaction of the Secretary that the concern is 
    unable to obtain a loan guaranteed by the Department under this 
    section or made or guaranteed by the Small Business Administration.
        (2) The Secretary may not guarantee a loan under this section if 
    the loan bears a rate of interest in excess of the maximum rate of 
    interest prescribed under section 3745 of this title.
        (3) The Secretary may not make or guarantee a loan under this 
    section for an amount in excess of $200,000.
        (4) The original liability of the Secretary on any loan 
    guaranteed under this section may not exceed 90 percent of the 
    amount of the loan, and such liability shall decrease or increase 
    pro rata with any decrease or increase of the amount of the unpaid 
    portion of the loan, but such liability may not exceed the amount of 
    the original guaranty.

    (c) Each loan made or guaranteed under this subchapter shall be of 
such sound value, taking into account the creditworthiness of the 
veterans' small business concern (and the individual owners) applying 
for such loan, or so secured as reasonably to assure payment.
    (d)(1) Except as provided in paragraph (2) of this subsection, the 
Secretary may not make or guarantee a loan under this subchapter to a 
veterans' small business concern in which an ownership interest is held 
by a veteran who also has an ownership interest in another small 
business concern if such ownership interest was considered in qualifying 
that other concern for an outstanding loan made or guaranteed under this 
subchapter or the Small Business Act (15 U.S.C. 631 et seq.).
    (2) Paragraph (1) of this subsection shall not apply if 51 percent 
or more of the business concern seeking a direct or guaranteed loan 
under this subchapter is owned by veterans of the Vietnam era or 
disabled veterans without including the ownership interest of the 
veteran whose ownership interest in another small business concern was 
previously considered in qualifying that other concern for an 
outstanding guaranteed or direct business loan under this subchapter or 
the Small Business Act (15 U.S.C. 631 et seq.).
    (e)(1) In order to protect the interest of the United States, upon 
application by a veterans' small business concern which is the recipient 
of a loan guaranteed under this subchapter, the Secretary (subject to 
the provisions of this subsection) may undertake the veterans' small 
business concern's obligation to make payments under such loan or, if 
the loan was a direct loan made by the Secretary, may suspend such 
obligation. While such payments are being made by the Secretary pursuant 
to the undertaking of such obligation or while such obligation is 
suspended, no such payment with respect to the loan may be required from 
the concern.
    (2) The Secretary may undertake or suspend a veterans' small 
business concern's obligation under this subsection only if--
        (A) such undertaking or suspension of the obligation is, in the 
    judgment of the Secretary, necessary to protect the interest of the 
    United States;
        (B) with the undertaking or suspension of the obligation, the 
    small business concern would, in the judgment of the Secretary, 
    become or remain a viable small business entity; and
        (C) the small business concern executes an agreement in writing 
    satisfactory to the Secretary as provided by paragraph (4) of this 
    subsection.

    (3) The period of time for which the Secretary undertakes or 
suspends the obligation on a loan under this subsection may not exceed 
five years. The Secretary may extend the maturity of any loan on which 
the Secretary undertakes or suspends the obligation under this 
subsection for a corresponding period of time.
    (4)(A) Before the Secretary may undertake or suspend a veterans' 
small business concern's obligation under this subsection, the Secretary 
shall require the small business concern to execute an agreement to 
repay the aggregate amount of the payments which were required under the 
loan during the period for which the obligation was undertaken or 
suspended--
        (i) by periodic payments not less in amount or less frequently 
    falling due than those which were due under the loan during such 
    period,
        (ii) pursuant to a repayment schedule agreed upon by the 
    Secretary and the small business concern, or
        (iii) by a combination of the method of payments described in 
    clauses (i) and (ii) of this subparagraph.

    (B) In addition to requiring the small business concern to execute 
the agreement described in subparagraph (A) of this paragraph, the 
Secretary shall, before the undertaking or suspension of the obligation, 
take such action and require the small business concern to take such 
action as the Secretary considers appropriate in the circumstances, 
including the provision of such security as the Secretary considers 
necessary or appropriate, to assure that the rights and interest of the 
United States and any lender will be safeguarded adequately during and 
after the period in which such obligation is so undertaken or suspended.

(Added Pub. L. 97-72, title III, Sec. 302(a), Nov. 3, 1981, 95 Stat. 
1055, Sec. 1842; amended Pub. L. 99-576, title VII, Sec. 702(10), Oct. 
28, 1986, 100 Stat. 3302; Pub. L. 101-237, title III, Sec. 313(b)(1), 
Dec. 18, 1989, 103 Stat. 2077; renumbered Sec. 3742 and amended Pub. L. 
102-83, Secs. 4(a)(3), (4), 5(a), (c)(1), Aug. 6, 1991, 105 Stat. 404, 
406.)

                       References in Text

    The Small Business Act, referred to in subsec. (d), is Pub. L. 85-
536, July 18, 1958, 72 Stat. 384, as amended, which is classified 
generally to chapter 14A (Sec. 631 et seq.) of Title 15, Commerce and 
Trade. For complete classification of this Act to the Code, see Short 
Title note set out under section 631 of Title 15 and Tables.


                               Amendments

    1991--Pub. L. 102-83, Sec. 5(a), renumbered section 1842 of this 
title as this section.
    Subsec. (b)(1). Pub. L. 102-83, Sec. 4(a)(3), (4), substituted 
``Department'' for ``Veterans' Administration''.
    Subsec. (b)(2). Pub. L. 102-83, Sec. 5(c)(1), substituted ``3745'' 
for ``1845''.
    1989--Subsecs. (a), (b), (d), (e). Pub. L. 101-237 substituted 
``Secretary'' for ``Administrator'' wherever appearing.
    1986--Subsecs. (a)(3)(A), (b)(4), (d)(2). Pub. L. 99-576 substituted 
``percent'' for ``per centum'' wherever appearing.
