Helping Small Businesses THRIVE Act
- Sponsor
- Sen. Shaheen, Jeanne [D-NH]
- Committees
- Small Business and Entrepreneurship Committee (primary)
- Last action
- Jan 23, 2025
Bottom line
This bill creates a new federal program under the Small Business Administration to enable small businesses to mitigate the financial risks associated with fluctuating commodity prices through a government-facilitated hedging mechanism.
What it actually does
This bill establishes the 'Helping Small Businesses Thrive Program' within the Small Business Administration (SBA). The program will allow eligible small businesses to purchase commodity futures or derivatives through the SBA to hedge against volatile input costs for covered commodities like gasoline and diesel. The SBA will form a commodity pool and act as a commodity pool operator, offering these agreements to small businesses at cost.
Proponents argue
Supporters argue that this program provides a crucial tool for small businesses, which often lack the resources or expertise to engage in commodity hedging independently, to manage unpredictable input costs. This stability can help them plan better, protect profit margins, and foster growth, ultimately strengthening the small business sector and the broader economy.
Opponents contend
Critics might express concerns about the federal government's role in commodity markets, potential for moral hazard, administrative complexities, and the risk of the program incurring losses that would fall on taxpayers. They might also question the SBA's expertise in managing commodity pools and the potential for market distortion.
The bill is concise and can be read in a few minutes, allowing for a quick understanding of its core provisions.
Section 1
Short Title
This section establishes the official short titles for the Act: the 'Helping Small Businesses To Hedge Risk and Insure against Volatile Expenses Act' and the 'Helping Small Businesses THRIVE Act'. These titles clearly communicate the bill's primary purpose of assisting small businesses with risk management related to volatile expenses.
Supporters argue
Supporters argue that clear and descriptive short titles help the public and policymakers quickly understand the intent and scope of the legislation, facilitating public discourse and legislative processes.
Critics contend
No specific opposition is typically raised against short titles, as they are primarily for identification and communication purposes.
Tradeoffs
None apparent, as short titles are standard legislative practice.
Section 2
Definitions and Eligible Entity Exclusions
This section defines key terms used throughout the Act, such as 'Administrator' (SBA Administrator), 'Commission' (CFTC), 'commodity', and 'Program'. Crucially, it defines an 'eligible entity' as a small business concern but explicitly excludes financial institutions, entities subject to CFTC jurisdiction, registered investment advisers, brokers, and businesses in operation for less than one year. It also allows the Administrator to exclude other entities to preserve program integrity.
Section 3
Establishment and Administration of the Helping Small Businesses Thrive Program
This section mandates the SBA Administrator to establish the 'Helping Small Businesses Thrive Program' within one year of enactment, in consultation with the CFTC and Treasury. The program's purpose is to help eligible entities limit risk from rising commodity input costs. It outlines application procedures, requires the SBA to develop guidance for applicants, and mandates outreach to small businesses. The Administrator is authorized to form a commodity pool and register as a commodity pool operator, but is generally prohibited from taking physical delivery of commodities.
Section 4
Commodity Futures Market Assistance and Covered Commodities
This section details how the SBA will assist small businesses in commodity futures markets. The Administrator will enter into agreements with eligible entities to purchase covered commodities or derivatives at a price established by the Administrator for durations of 60 days to 3 years (majority 120+ days). Agreements must be offered 'at cost' to the eligible entity, including fees. The program may offer call option purchase agreements to protect against price increases over 5%. Gasoline and diesel gasoline are required covered commodities, with up to three additional commodities allowed in the first year. The Administrator will conduct or facilitate necessary transactions and may contract with commodity trading advisors. Any program proceeds will first offset operating costs, with the remainder returned to the Treasury.
Section 5
Reporting Requirements
This section mandates the Administrator to submit an initial report to Congress within 120 days of enactment, detailing the program's structure, management plan, and participant selection process. Annually thereafter, the Administrator must submit reports including the number of applications, agreements, total notional value of covered commodities (disaggregated), and the program's effect on participating eligible entities, including feedback on costs, benefits, and growth plans. Reporting frequency from eligible entities is limited.
Excludes small business concerns that have been in operation for less than 1 year from being an 'eligible entity' for the program.
Section 2(4)(B)(v)
Why it matters:This is standard legislative practice to define eligibility criteria precisely within the definitions section, rather than in the main program description. It's not necessarily evasive but can be easily overlooked by a casual reader focusing on the program's positive offerings.
Case for: Proponents would argue that requiring a business to be in operation for at least one year ensures a baseline of stability and operational history, making it more likely that the business can effectively utilize the hedging program and less likely to be a speculative venture. This helps preserve the integrity and focus of the program.
Case against: Critics might contend that this exclusion could disadvantage new, rapidly growing small businesses that are particularly vulnerable to volatile input costs during their critical early stages. Some startups might have significant commodity exposure from day one and could greatly benefit from hedging.
Estimated impact: Excludes an unknown number of startup small businesses from participating in the program during their initial year of operation.
Authorizes the Administrator of the Small Business Administration, in consultation with the Commission (CFTC), to form a commodity pool and apply for registration as a commodity pool operator under the Commodity Exchange Act.
Section 3(d)(1)(B)
Why it matters:While not intentionally evasive, the technical nature of forming a commodity pool and registering as an operator might not immediately strike a casual reader as a major expansion of the SBA's traditional role. It's a specific mechanism for program implementation.
Case for: Proponents argue this is the essential legal authority for the SBA to aggregate the hedging needs of numerous small businesses and execute transactions efficiently in commodity markets, leveraging economies of scale that individual small businesses cannot achieve. It's a necessary step for the program's functionality.
Case against: Critics would highlight this as a substantial and potentially risky expansion of the SBA's mandate into complex financial market operations, requiring significant new expertise, infrastructure, and regulatory compliance. Concerns about potential taxpayer liability if the pool is mismanaged would be central.
Estimated impact: Grants the SBA authority to directly engage in commodity derivatives markets as a regulated financial entity, a significant shift in its operational scope.
Specifies that the Administrator, through the Program, 'may offer to enter into a call option purchase agreement with an eligible entity to protect the eligible entity in any case in which the price of the applicable covered commodity increases by more than 5 percent.'
Section 4(a)(2)(D)(i)
Why it matters:This is a technical specification of the financial product offered, which is often detailed in sub-sections. It's not evasive, but its specificity means a reader might miss the precise nature of the risk protection being provided.
Case for: Proponents would argue that offering call options, specifically triggered by a 5% price increase, provides targeted and cost-effective protection against significant upward price spikes, which is a primary concern for small businesses managing input costs. It's a clear, defined benefit.
Case against: Critics might point out that this specific mechanism offers limited protection. It only hedges against price increases, not decreases (which could also affect revenue models), and only after a 5% threshold. This means small businesses are still exposed to the first 5% of any price increase and all price decreases, potentially not providing comprehensive risk management.
Estimated impact: Defines the specific financial instrument and its trigger point for hedging, limiting the scope of price risk protection offered to participating small businesses.