[Federal Register Volume 60, Number 212 (Thursday, November 2, 1995)]
[Rules and Regulations]
[Pages 55653-55655]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27155]
=======================================================================
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Part 122
Business Loans; Microloans
AGENCY: Small Business Administration (SBA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: Under this final rule, SBA is implementing certain provisions
of the ``Small Business Administration Reauthorization and Amendments
Act of 1994'', enacted on October 22, 1994, which are relevant to the
SBA microloan financing program (Program). On a pilot basis, the rule
authorizes SBA to guarantee up to 100 percent of loans made to
intermediary lenders. It adds native American tribal governments as
eligible intermediaries in the Program, authorizes SBA to provide
additional grant assistance to an intermediary which by its lending
assists residents in economically distressed areas, and extends the
sunset date of the Program for an additional fiscal year.
EFFECTIVE DATE: This rule is effective November 2, 1995.
FOR FURTHER INFORMATION CONTACT: John R. Cox, 202/205-6490.
SUPPLEMENTARY INFORMATION: On January 24, 1995, SBA published in the
Federal Register (60 FR 4574) a notice of proposed rulemaking with
respect to amendments made by Pub. L. 103-403, enacted on October 22,
1994 (1994 legislation), to subsection 7(m) of the Act (15 U.S.C.
636(m)), relating to the Program. SBA received four favorable comments
in response to the proposed rule. Accordingly, SBA is promulgating this
final rule basically as proposed.
Consistent with section 202 of the 1994 legislation, section
122.61-2 of SBA's regulations (13 CFR 122.61-2) is amended by including
in the definition of an intermediary eligible to participate in the
Program as a microloan lender an agency or nonprofit entity established
by a native American tribal government. Currently, only private,
nonprofit entities or quasi-governmental entities can be microlenders.
Consistent with section 203 of the 1994 legislation, section
122.61-1 of SBA's regulations is amended to extend the sunset date for
the Program an additional year, to October 1, 1997.
Consistent with section 206 of the 1994 legislation, section
122.61-6 of SBA's regulations is amended to increase the aggregate
maximum amount of SBA lending available to an intermediary during the
intermediary's participation in the Program. The previous limit was
$1,250,000; the new aggregate maximum is $2,500,000.
Consistent with section 207 of the 1994 legislation, section
122.61-9 of SBA's regulations is amended to authorize (but not require)
an intermediary to expend up to fifteen percent of any grant funds
provided to it by the SBA for the provision of information and
technical assistance to small businesses which are prospective
borrowers. This final rule recognizes that intermediaries hold outreach
seminars, perform screening analyses, and provide other assistance for
prospective borrowers. It encourages them to continue these programs
and to use their technical assistance grants efficiently and cost
effectively.
SBA presently ensures that at least one-half of its intermediaries
provide
[[Page 55654]]
microloans to small businesses in rural areas. Consistent with section
205 of the 1994 legislation, section 122.61-3 of SBA's regulations is
amended so that SBA now must select entities that will ensure
availability of loans for small businesses in all industries located
throughout the lender's jurisdiction in both rural and urban areas. The
SBA is no longer required to meet numerical requirements based on
intended borrowers in selecting entities to participate as
intermediaries in the Program, but it will consider whether a proposed
intermediary would provide assistance to a variety of industries.
Under SBA's present rules, an intermediary seeking to qualify for
an SBA grant must contribute matching funds equal to twenty-five
percent of the amount of the grant. Consistent with section 208(a)(1)
of the 1994 legislation, section 122.61-9 of SBA's regulations is
amended to provide that this twenty-five percent requirement is
inapplicable to an intermediary which provides more than half of its
loans to small businesses located in or owned by residents of an
economically distressed area. Thus, if an intermediary would make sixty
percent of its loans in an economically distressed geographic area, it
would not have to provide a twenty-five percent match to an SBA grant.
Under current rules, each intermediary can receive an SBA grant
equal to twenty-five percent of the outstanding balance of its loans
from SBA. Consistent with section 208(a)(2) of the 1994 legislation,
section 122.61-9 of SBA's regulations is amended to provide that an
intermediary can receive an SBA grant of an additional five percent
(which it is not required to match) if it will provide no less than
twenty-five percent of its loans to small businesses located in or
owned by residents of an economically distressed area.
Consistent with section 208(b) of the 1994 legislation, section
122.61-2 of SBA's regulations is amended to define ``economically
distressed area'' to mean a county or equivalent division of local
government in which not less than forty percent of the residents have
an annual income that is at or below the poverty level. SBA will obtain
this information from the Bureau of the Census.
Consistent with section 201 of the 1994 legislation, new section
122.61-13 of SBA's regulations implements a microloan financing pilot
in which SBA can guarantee no less than ninety and no more than one
hundred percent of a loan made to an intermediary by a for-profit or
non-profit entity or by an alliance of such entities. This guaranty
authority by SBA terminates on September 30, 1997. Under this pilot,
SBA will guarantee loans to no more than ten intermediaries in urban
areas and ten in rural areas. The loans will have a maturity of ten
years, with interest calculated as set forth in section 122.61-6 of
SBA's regulations (13 CFR 122.61-6). During the first year of the loan,
interest accrues, but the intermediary will not be required to repay
principal or interest. During the second through fifth years of the
loan, the intermediary pays only interest. During the sixth through
tenth years of the loan, the intermediary must make interest payments
and fully amortize the principal. There are no balloon payments.
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.
For purposes of the Regulatory Flexibility Act, 5 U.S.C. 601 et
seq., SBA certifies that this final rule does not have a significant
economic impact on a substantial number of small entities.
SBA certifies that this final rule does not constitute a
significant regulatory action for the purposes of Executive Order
12866, since it is not likely to result in an annual effect on the
economy of $100 million or more.
SBA certifies that this final rule does not impose additional
reporting or recordkeeping requirements which would be subject to the
Paperwork Reduction Act, 44 U.S.C. Chapter 35, and does not have
federalism implications warranting the preparation of a Federalism
Assessment in accordance with Executive Order 12612.
For purposes of 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 that Order.
(Catalog of Federal Domestic Assistance Programs, No. 59.012)
List of Subjects in 13 CFR Part 122
Loan programs--business, Small businesses.
Accordingly, pursuant to the authority contained in section 5(b)(6)
of the Small Business Act (15 U.S.C. 634(b)(6)), SBA amends 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. Section 122.61-1(a) is amended by revising the last sentence to
read as follows:
Sec. 122.61-1 Policy.
(a) Program. * * * This Microloan Demonstration Program terminates
on October 1, 1997.
* * * * *
3. Section 122.61-2 is amended by republishing (d) introductory
text, by removing the ``or'' at the end of paragraph (d)(3), by
removing the period at the end of paragraph (d)(4) and adding ``; or''
in its place, and adding new paragraphs (d)(5) and (h) to read as
follows:
Sec. 122.61-2 Definitions.
* * * * *
(d) Intermediary means: * * *
(5) An agency of or a nonprofit entity established by a Native
American Tribal Government.
* * * * *
(h) Economically distressed area means a county or equivalent
division of local government of a state in which, according to the most
recent data available from the United States Bureau of the Census, not
less than 40 percent of residents have an annual income that is at or
below the poverty level.
4. Section 122.61-3 is amended by adding a new sentence at the end
of paragraph (a) to read as follows:
Sec. 122.61-3 Participation of intermediary.
(a) Eligibility. * * * In evaluating applications to become an
intermediary, SBA shall select intermediaries that will ensure
appropriate availability of loans for small business concerns in all
industries located throughout each state, in both urban and in rural
areas.
* * * * *
5. Section 122.61-6 is amended by revising paragraph (e) to read as
follows:
Sec. 122.61-6 Conditions on SBA loan to intermediary.
* * *
(e) Loan limits by SBA. No loan shall be made to an intermediary by
SBA under this program if the total amount outstanding and committed
(excluding outstanding grants) to the intermediary (and its affiliates,
if any) from the business loan and investment fund established under
section 4(c) of the Act would, as a result of such loan, exceed
$750,000 in the first year of the intermediary's participation in the
program, and $2,500,000 in the
[[Page 55655]]
remaining years of the intermediary's participation in the program.
* * * * *
6. Section 122.61-9 is amended by adding a new third sentence in
paragraph (a), by revising paragraph (b)(1), and by adding a new
sentence at the end of paragraph (b)(2) to read as follows:
Sec. 122.61-9 SBA grant to intermediary for marketing, management, and
technical assistance.
(a) General. * * * Each intermediary is authorized to expend up to
15% of any SBA grant funds to provide information and technical
assistance to small business concerns that are prospective borrowers
under this program. * * *
(b) Amount of grant. (1) Subject to the requirement of paragraph
(b)(2) of this section, and the availability of appropriations, each
intermediary under this program shall be eligible to receive a grant
equal to 25% of the outstanding balance of loans made to it by SBA. If
an intermediary provides no less than 25% of its loans to small
business concerns located in or owned by one or more residents of an
economically distressed area, it shall be eligible to receive an
additional grant from SBA equal to 5% of the outstanding balance of SBA
loans made to the intermediary (with no obligation to match this
additional amount).
(2) * * * This requirement for an intermediary contribution is
inapplicable if the intermediary provides at least 50% of its loans to
small business concerns located in or owned by one or more residents of
an economically distressed area.
* * * * *
7. A new Sec. 122.61-13 is added to read as follows:
Sec. 122.61-13 SBA guaranteed loans to intermediaries.
(a) General. For up to 10 intermediaries in urban areas and 10
intermediaries in rural areas, SBA may guarantee not less than 90
percent nor more than 100 percent of a loan made by a for-profit or
non-profit entity or by an alliance of such entities.
(b) Maturity and repayment. Any SBA guaranteed loan made to an
intermediary under this section shall have a maturity of 10 years.
During the first year of the loan, interest shall accrue, but the
intermediary shall not be required to repay any interest or principal.
During the second through fifth years of the loan, the intermediary
shall pay interest only. During the sixth through tenth years of the
loan, the intermediary shall make interest payments and fully amortize
the principal.
(c) Interest rate. The interest rate on an SBA guaranteed loan to
an intermediary shall be calculated as set forth in Sec. 122.61-6.
(d) Termination of SBA authority to guarantee. The authority of SBA
to guarantee loans to intermediaries under this Sec. 122.61-13 shall
terminate on September 30, 1997.
Dated: July 26, 1995.
Philip Lader,
Administrator.
[FR Doc. 95-27155 Filed 11-1-95; 8:45 am]
BILLING CODE 8025-01-U