[Federal Register Volume 59, Number 27 (Wednesday, February 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2934]


[[Page Unknown]]

[Federal Register: February 9, 1994]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 122

 

Business Loans--Defense Economic Assistance

AGENCY: Small Business Administration (SBA).

ACTION: Final rule.

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SUMMARY: This final regulation implements Section 7(a)(21) of the Small 
Business Act (``Act''), enacted on September 4, 1992. Under this final 
rule, SBA could make or guarantee loans to small business concerns 
which have been detrimentally affected by the closure or substantial 
reduction of a Department of Defense installation.

EFFECTIVE DATE: February 9, 1994.

FOR FURTHER INFORMATION CONTACT:Charles R. Hertzberg, Assistant 
Administrator for Financial Assistance, Small Business Administration, 
409 3rd Street SW., Washington, DC 20416 Telephone 202/205-6490.

SUPPLEMENTARY INFORMATION: Section 7(a)(21) of the Act (Pub. L. 102-
366, 106 Stat. 997-968 15 U.S.C. 636(a)(21)) was enacted on September 
4, 1992. On August 26, 1993, SBA published in the Federal Register (58 
FR 45078) a proposed regulation which would implement Section 7(a)(21) 
of the Act. The Agency received no comments. Accordingly, the final 
regulation is being promulgated without change from the proposed rule.
    Under this final regulation SBA is authorized to make direct or 
guaranteed loans to assist a small business concern that has been, or 
can reasonably be expected to be, detrimentally affected by the closure 
or substantial reduction of a Department of Defense (DOD) installation. 
SBA is also authorized under this final rule to assist a small business 
concern which has been detrimentally affected by the termination, or 
substantial reduction, of a DOD program on which such small business 
was a prime contractor or subcontractor (or supplier) at any tier.
    Under this final regulation, the Agency is also authorized to make 
or guarantee loans to a qualified individual who seeks to establish, or 
acquire, and operate a small business concern in an area that has been 
or can reasonably be expected to be detrimentally affected by such 
closure or substantial reduction. For purposes of Section 7(a)(21) of 
the Act, ``qualified individual'' is defined to be: (1) A member of the 
Armed Forces of the United States, honorably discharged from active 
duty involuntarily or pursuant to a program providing bonuses or other 
inducements to encourage voluntary separation or early retirement; or 
(2) a civilian DOD employee involuntarily separated from Federal 
service or retired pursuant to a program offering inducements to 
encourage early retirement; or (3) an employee of a prime contractor, 
subcontractor, or supplier at any tier of a DOD program whose 
employment is involuntarily terminated (or voluntarily terminated 
pursuant to a program offering inducements to encourage voluntary 
separation or early retirement) due to the termination (or substantial 
reduction) of a DOD program.
    In recognition that greater risk may be associated with a loan to 
an applicant under this program, the final rule resolves any reasonable 
doubts concerning the small business concern's proposed business loan 
for transition to nondefense-related markets in favor of the loan 
applicant when SBA makes any determination regarding the sound value of 
the proposed loan. In order to determine ``sound value'', SBA will 
consider such factors as quality of the product or service, technical 
qualifications of the applicant's management and employees, sales 
projections and the applicant's financial status.
    Because the Act requires SBA to resolve any credit doubts in favor 
of the loan applicant under this program, the final rule does not 
authorize any loan under section 7(a)(21) of the Act to be made under 
the certified lenders program (where the lender is entitled to a three 
day review by SBA) or the preferred lenders program (where the lender 
has authority to commit the Agency's guaranty without submitting any 
paperwork to SBA for review).

Compliance With Executive Orders 12612, 12778 and 12866, the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq., and the Paperwork Reduction Act, 
44 U.S.C. ch. 35

Executive Order 12866 and Regulatory Flexibility Act

    SBA certifies that this final rule would not be a significant 
regulatory action for purposes of E.O. 12866 and, for purposes of the 
Regulatory, Flexibility Act, 5 U.S.C. 601 et seq., would not have a 
significant economic impact on a substantial number of small entities, 
for the following reasons:
    1. It would not result in an annual economic effect of $100 million 
or more or adversely affect in a material way the economy, a sector of 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or state, local, or tribal governments or 
communities.
    2. It would not create a serious inconsistency or otherwise 
interfere with an action taken or planned by another agency.
    3. It would not materially alter the budgetary impact of 
entitlements grants, user fees, or loan programs or the rights and 
obligations of recipients thereof.
    4. It would not raise novel legal or policy issues arising out of 
legal mandates, the President's priorities, or the principles set forth 
in E.O. 12866.

Executive Order 12612

    SBA certifies that this final rule would have no Federalism 
implications warranting the preparation of a Federalism Assessment in 
accordance with Executive Order 12612.

Paperwork Reduction Act

    For purposes of the Paperwork Reduction Act, 44 U.S.C., ch 35, SBA 
hereby certifies that this final rule imposes no new reporting or 
recordkeeping requirements.

Executive Order 12778

    SBA certifies that this final rule is drafted, to the extent 
practicable, in accordance with the standards set forth in Section 2 of 
E.O. 12778.

[Catalog of Federal Domestic Assistance Programs, No. 59-012, Small 
Business Loans]

List of Subjects in 13 CFR Part 122

    Loan programs--business.

    Pursuant to the authority contained in section 5(b)(6) of the Small 
Business Act (15 U.S.C. 634(b)(6)), SBA is amending Part 122, Chapter 
I, Title 13, Code of Federal Regulations, as follows:

PART 122--BUSINESS LOANS

    1. The authority citation for part 122 continues to read as 
follows:

    Authority: 15 U.S.C. 634(b)(6), 636(a), 636(m).

    2. Sections 122.62 through 122.62-4 are added to read as follows:


Sec. 122.62  Defense Economic Transition Assistance under Section 
7(a)(21) of the Act.


Sec. 122.62-1  General rule.

    (a) Business. The Act authorizes SBA, subject to the availability 
of funds appropriated for this purpose, to make direct or guaranteed 
loans to assist a small business concern that has been (or can 
reasonably be expected to be) detrimentally affected by:
    (1) Closure. The closure (or substantial reduction) of a Department 
of Defense installation; or
    (2) Termination. The termination (or substantial reduction) of a 
Department of Defense program on which such small business was a prime 
contractor or subcontractor (or supplier) at any tier.
    (b) Qualified Individual. Under this program, SBA is authorized to 
make direct or guaranteed loans to a qualified individual who seeks to 
establish (or acquire) and operate a small business concern.


Sec. 122.62-2  Qualified individual.

    Qualified individual, for purposes of this program, is:
    (a) Military status. A member of the Armed Forces of the United 
States, honorably discharged from active duty involuntarily or pursuant 
to a program providing bonuses or other inducements to encourage 
voluntary separation or early retirement; or
    (b) Civilian status. A civilian employee of the Department of 
Defense involuntarily separated from Federal service or retired 
pursuant to a program offering inducements to encourage early 
retirement; or
    (c) Contractor or supplier. An employee of a prime contractor, 
subcontractor, or supplier at any tier of a Department of Defense 
program whose employment is involuntarily terminated (or voluntarily 
terminated pursuant to a program offering inducements to encourage 
voluntary separation or early retirement) due to the termination (or 
substantial reduction) of a Department of Defense program.


Sec. 122.62-3  Repayment ability.

    Any reasonable doubts concerning the small business concern's 
proposed business plan for transition to nondefense-related markets 
shall be resolved in favor of the loan applicant when making any 
determination regarding the sound value of the proposed loan. In order 
to determine ``sound value'', SBA will consider such factors as quality 
of the product or service, technical qualifications of the applicant's 
management and employees, sales projections and the applicant's 
financial status.


Sec. 122.62-4  Loan making authority.

    Since greater risk may be associated with a loan to an applicant 
under this program, any defense economic assistance loan made by a 
participating lender cannot be made under the Certified Lenders Program 
pursuant to part 120, subpart E of this chapter, or under the Preferred 
Lenders Program pursuant to part 120, subpart D of this chapter.

    Dated: November 15, 1993.
Erskine B. Bowles,
Administrator.
[FR Doc. 94-2934 Filed 2-8-94; 8:45 am]
BILLING CODE 8025-01-M