Helping Small Businesses THRIVE Act
The Helping Small Businesses THRIVE Act would create a pilot program within the Small Business Administration (SBA) to help eligible small business concerns hedge against rising input costs in certain commodities by participating in commodity futures markets. The SBA would determine which commodities are covered (initially including gasoline and diesel, with up to three additional commodities) and could arrange “agreements” with eligible entities to purchase or derive value from these commodities (including certain derivatives) at a price set by the SBA. The program is designed to operate for up to five years and to avoid physical delivery of commodities except in extreme cases. The SBA would oversee the program (including forming a commodity pool if needed) and would coordinate with the Commodity Futures Trading Commission (CFTC) and Treasury. Reports would be required to track participation, exposure, costs, and effects on participating small businesses.
Key Points
- 1Establishment of the Helping Small Businesses Thrive Program within the SBA within one year, in collaboration with the CFTC, Treasury, and other appropriate federal officials, to help eligible small businesses limit exposure to volatile commodity costs.
- 2Eligible entities: defined as small business concerns that are not financial institutions or other highly regulated or potentially conflicted entities; excludes certain entities and requires a merit-based selection process.
- 3Agreements to hedge: the SBA may enter into one or more agreements with eligible entities to purchase a covered commodity (or a related derivative) at a price set by the SBA, with agreements offered at cost to the entity and lasting 60 days to 3 years (with a preference for durations of at least 120 days).
- 4Covered commodities and expansion: the SBA must include gasoline and diesel as covered commodities, may add up to three more commodities in the first year (with limits, including only one for specific industry use), and may remove a commodity with at least 90 days’ notice; use of regulated market contracts is encouraged.
- 5Risk management tools: options-based tools (including call purchase options) may be used to protect against price increases, with the entity responsible for all costs; the program emphasizes minimizing complexity and trading friction.
- 6Administration and compliance: the SBA may issue necessary rules and could form a commodity pool or register as a commodity pool operator; no physical delivery except in extreme cases, with positions closed as needed to stay compliant.
- 7Proceeds and funding: any program proceeds are to offset operating costs for the year; excess proceeds would go back to the U.S. Treasury.
- 8Reporting: initial and annual reports to Congress covering structure, participation, notional value of hedges, and impacts on participating entities, with some limits on frequency of data reporting.