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SMALL BUSINESS ADMINISTRATION-Continued Public enterprise funds-Continued

REVOLVING FUND-Continued

This fund finances business and disaster loans and prime contracting activities as authorized by the Small Business Act, as amended (15 U.S.C. 631 et seq.), business loans as authorized by title IV of the Economic Opportunity Act of 1964 (78 Stat. 526), and investment and development company assistance activities, as authorized by the Small Business Investment Act, as amended (15 U.S.C. 661 et seq.). The Congress has authorized appropriations to the fund of $1,666 million. Of this amount, not to exceed $1,325 million may be outstanding for the authorized activities under the Small Business Act and the Economic Opportunity Act of 1964 and not to exceed $341 million may be outstanding for investment and development company assistance. It is estimated that the limitation on investment and development company assistance will be reached in 1965. Thus, legislation will be proposed to increase the limitation.

Outstanding loans and reservations at the end of each year for the programs financed by the fund are as follows (in millions of dollars):

1964 actual 1965 estimate 1966 estimate

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1. Financial assistance program-Business loans (sec. 7(a), Small Business Act).-Business loans may be made directly or in participation with banks or other lending institutions, and shall be of such sound value or so secured as reasonably to assure repayment. No loan may be made unless the financial assistance is not otherwise available on reasonable terms. No direct loan may be made unless it is shown that a bank participation loan is not available and no loan on an immediate participation basis may be made unless it is shown that a guaranteed loan is not available. Under the guarantee plan, Small Business Administration agrees to purchase the guaranteed portion of the loan only upon default.

The agency's share of an immediate participation or guaranteed loan is limited to 90% and its maximum outstanding loan and/or commitment to any one borrower is limited by statute to $350 thousand, except for a loan to a corporation formed and capitalized by a group of small business concerns for purposes authorized in the Small Business Act. With respect to such "pool" loans, the limitation is $250 thousand multiplied by the number of separate small businesses participating in the corporation. Business loans, except for the purpose of constructing facilities, are limited to a maturity of 10 years and except for "pool" loans and loans in "redevelopment areas" under the Area Redevelopment Act, bear interest at a maximum rate of 5% per annum on the agency's share thereof. For "pool" loans, the rate of interest on the Small Business Administration's share is no less than 4% nor more than 5% per annum. For loans in ARA designated areas, the rate of interest on the Small Business Administration's share is 4% per annum.

The Small Business Administration assists businessmen operating small firms to secure credit for constructive purposes on terms that will meet the borrower's individual requirements. Assistance includes counseling as well as the lending of funds. From the beginning of the lending program on September 29, 1953, through June 30, 1964, 43,915 loans had been approved in a total amount of $2,192.5 million (including participating banks' share of $379.4 million). Sixty-three percent of these loans have been on a participation or guarantee basis. In 1966, it is estimated that 11,800 loans will be approved, compared with an estimated 12,800 in 1965.

The following tabulation reflects certain data on busi ness loans and includes funds disbursed or collected by

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750-100-65- -61

257.5

203.0

Total amount..

222.6

Small Business Administration share... 181.1

415.6

342.9

884.8

730.0

338.3

279.1

250.7

207.0

353.4 291.6

942.3

777.4

318.3

262.6

260.8

215.2

Business loans (Economic Opportunity Act of 1964).Pursuant to the authority contained in title IV of the Economic Opportunity Act of 1964 (78 Stat. 526), the Small Business Administration under delegation from the Director, Office of Economic Opportunity administers a program of financial assistance to very small business concerns and to qualified persons seeking to establish such concerns. Loans are authorized on a direct, immediate participation, or guaranteed basis, in an amount not to exceed $25 thousand, for a maximum term of 15 years. Provision is made for management training as an integral part of the loan program. The credit and collateral requirements are more flexible and relaxed than those applicable to loans made under the provisions of section 7(a) of the Small Business Act. It is estimated that a total of 3,000 loans for $15 million will be approved in 1966 compared with an estimated 1,000 loans for $5 million in 1965, the first year of the program.

Disaster loans.-No restrictions exist on the amount which may be loaned to an individual or business firm suffering loss from a disaster. The maximum term for disaster loans is 20 years except for home loans made in Alaska for the purpose of replacing, reconstructing, or repairing dwellings damaged or destroyed by the 1964 earthquake and subsequent seismic waves. For these Alaska home loans the maximum term is 30 years.

For other than "displaced business" disaster loans the interest rate may not exceed 3% on the Small Business Administration's share of the loan. For "displaced business" disaster loans, authorized by the Housing Act of 1961, the rate on the Small Business Administration share of the loan is determined pursuant to a formula prescribed by legislation. For 1964 the rate was 3%% per annum, while in 1965 the rate will be 3%.

Through June 30, 1964, a total of 23,217 disaster loans for $249.1 million had been approved, including 278 "displaced business" loans in the amount of $17.5 million. Approvals during 1964 were 2,604 for $55.7 million (the highest year of record) and included 95 "displaced business" loans for $6.9 million.

The Housing Act of 1964 amended the legislative authority so as to provide that "displaced business" disaster loans may be made for the purchase or construction of buildings for small firms which were tenants in the area from which relocated. For this reason, as well as

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2. Investment and development company assistancePurchase of debentures of small business investment companies.-A primary function of these companies is to provide a source of needed equity capital for small business concerns. To facilitate the formation and growth of such companies with capital adequate to meet the demands from small business firms, the Small Business Investment Act, as amended, authorizes the Small Business Administration with certain limitations, to purchase subordinated debentures of any such company in an amount not to exceed the lesser of $700 thousand or the amount of the paid-in capital and surplus of the company from other sources. It is estimated that the Small Business Administration will approve purchase of debentures in the amount of $30 million in 1965 and $35 million in 1966.

Loans to small business investment companies.-To further encourage the formation and growth of such companies, the Small Business Administration is also authorized under certain circumstances to lend funds to them in amounts which may not exceed 50% of the paid-in capital and surplus of a company or $4 million, whichever is less. In addition to $10 million estimated to be loaned directly to such companies by Small Business Administration in 1966, $30 million of loans is anticipated to be made to these companies by financial institutions under a guaranteed loan program under which the guarantee right can be exercised against Small Business Administration only upon default by the borrowing small business investment company. For 1965 it is estimated that $22 million in direct loans and $18 million in guaranteed loans will be approved. This guarantee program replaces the former "standby" bank-loan program inaugurated in 1962. Under the "standby" plan, a bank makes a loan to a small business investment company on the basis of a note drawn to Small Business Administration but assigned to the bank. The bank has the right to reassign it at any time to the Small Business Administration and receive payment of the principal then due. A fund reservation of 50% has been established against these "standby" loans whereas only 10% is being established under the default-guarantee program.

SMALL BUSINESS ADMINISTRATION—Continued of processing an increasing number of business loan appli-
Public enterprise funds-Continued

cations of which only about 60% result in interest-earning
loans, and the cost of servicing the expanding number of
widely scattered loans which are relatively small in size.

Revenue, Expense, and Retained Earnings (in thousands of dollars)

REVOLVING FUND-Continued

Loans to State and local development companies.-The Small Business Administration is authorized to lend funds to State development companies for general use purposes and to State and local development companies for plant construction, conversion, or expansion, including the acquisition of land. The latter type loans must be so secured as reasonably to assure repayment, may be made directly or in participation with banks or other lending institutions, may be made only when the proceeds are for use solely to assist an identifiable small business concern and for a sound business purpose approved by the agency, and are limited to a maximum of $350 thousand for each such identifiable small business concern. A total of $40 million is estimated to be approved in 1966, compared with an estimate of $30 million in 1965. Legislation is being proposed to terminate the authority for loans to State development companies for general use purposes.

Operating costs-1. Interest expense. As required by the Small Business Act, interest is payable into miscellaneous receipts of the Treasury on outstanding disbursements from the fund, at rates determined by the Secretary of the Treasury, taking into consideration the current average yields on outstanding interest-bearing marketable public debt obligations of the United States of comparable maturities. With respect to disbursements made in 1965, the Secretary of the Treasury has set rates of 4% per annum for business loans and small business investment company loans, and 4%% per annum for disaster loans, State development company loans, local development company loans, and small business investment company debentures. The rates stated above for 1965 have also been used in computing interest expense for 1966. Of the estimated $45.1 million interest expense in 1966, $33.3 million is applicable to the financial assistance program and $11.8 million is applicable to the investment and development company assistance program. The comparable figures for 1965 are $28.9 million and $9.4 million, respectively.

2. Administrative expenses.-These expenses for the two programs are financed by transfer of funds from the revolving fund to the appropriation Salaries and expenses. The distribution of the amounts by program for each of the years is accordingly shown on the program and financing schedule for that appropriation account.

Financing. The capital of the revolving fund is provided by direct appropriations. Appropriations made to date total $1,395 million. Appropriation requests for increased capital funds are based on the additional amount required to finance an estimated program volume (and related interest, administrative, and other expenses) after taking into consideration unobligated funds from prior years and funds becoming available through principal To finance the estimated repayments and revenue. program level in 1966, after taking into consideration funds to be provided by repayments and revenues, additional appropriations of $150 million will be required. The estimates for 1965 require an additional supplemental appropriation of $100 million.

Operating results.-The deficit is estimated to continue to increase. Interest and fee income will not be sufficient to cover interest and administrative expenses and a provision for estimated losses, primarily because of the cost

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Total costs, funded... 94.0 Change in selected resources..

99.0

Total obligations.---

Identification code 32-45-3900-0-4-506

Total number of permanent positions..
Full-time equivalent of other positions.
Average number of all employees...
Average GS grade.........
Average GS salary_

1964 actual

1,665 -1,666

Personnel Summary

General and special funds:

-1

60 -77

-11

-30

1,342
10

3

1,355

96

156

2

37

7

2

13

1,668
-3

1,665

1964 actual

1965 estimate

167
1

154

9.6 $9,235

1,850 -1,850

77 -74

3

1,442

5

1,447

109

243

3

20

1

9

12

3

3

1,850

1,850

SMITHSONIAN INSTITUTION

150
0
150

9.4
$9,542

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1965 1966 estimate estimate

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268

218

$9,105

The Smithsonian Institution maintains public exhibits representative of the arts, American history, aeronautics, anthropology, geology, technology, and biology; preserves for reference and study purposes millions of valuable items of scientific, cultural, and historical interest; conducts research in the natural sciences and in the history of cultures, technology, and the arts, particularly those 9.2 indigenous to North America; and participates in the international exchange of scientific literature. The areas of research in the natural sciences include anthropology, biology, geology, solar radiations, and astrophysics. The Smithsonian is also undertaking an intensive program classification and study of marine organisms collected in connection with the Government's expanded oceanographic program. The Institution operates 3 museums, 4 scientific bureaus, 3 art galleries, the Armed Forces Museum Advisory Board, and the International Exchange Service. Service. It is responsible also for the operation and 7 main buildings, the Astro

of

physical Observatory in Cambridge, Mass.; the Canal Zone Biological Area; the River Basin Surveys in Lincoln, Nebr.; a facility at Silver Hill, Md.; and an exhibits

laboratory.

During the budget year the move of the collections and staff into the new west wing of the Natural History

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SALARIES AND EXPENSES

research; preservation, sources; international exchanges; anthropo

For necessary expenses of the Smithsonian Institution, including
exhibition, from

Government
logical researches; maintenance of the Astrophysical Observatory
and making necessary observations in high altitudes; administration
of the National Collection of Fine Arts and the National Portrait
Gallery; including [not to exceed $35,000 for] services as authorized
by section 15 of the Act of August 2, 1946 (5 U.S.C. 55a); purchase,
repair, and cleaning of uniforms for guards and elevator operators,
and uniforms or allowances therefor, as authorized by law (5 U.S.C.

2131), for other employees; repairs and alterations of buildings and Building will be completed. The National Collection of

approaches; [and] preparation of manuscripts, drawings, and illustrations for publications; [$15,000,000] and not to exceed $2,000 for official reception and representation expenses; $20,865,000. (5 U.S.C. 150; 20 U.S.C. 41-79e; 44 U.S.C. 139a; 72 Stat. 68; Public Law 87-139; Public Law 87-186; Public Law 87-443; Public Law

Fine Arts and the National Portrait Gallery will continue to prepare exhibition plans and improve the condition of their collections prior to the move into the Fine Arts and Portrait Galleries scheduled to be substantially completed

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