[Federal Register Volume 62, Number 49 (Thursday, March 13, 1997)]
[Rules and Regulations]
[Pages 11759-11760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5740]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 107


Small Business Investment Companies

AGENCY: Small Business Administration.

ACTION: Final rule.

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SUMMARY: The Small Business Administration (SBA) is amending Part 107 
Section 710 and Part 107 Section 50 of its Small Business Investment 
Companies (SBIC) regulations by deleting the term ``Smaller Business'' 
and replacing it with the statutory term ``Smaller Enterprise.'' These 
revisions to SBA's regulations are in accordance with Section 208 of 
the Small Business Programs Improvement Act of 1996 (SBPIAct).

EFFECTIVE DATE: March 13, 1997.

FOR FURTHER INFORMATION CONTACT: Gary M. Jackson, Assistant 
Administrator for Size Standards, 409 3rd Street, SW., Washington, 
DC 20416, (202)205-6618.

SUPPLEMENTARY INFORMATION: Division D of the Omnibus Consolidated 
Appropriations Act for Fiscal Year 1997 (Public Law 104-208) is the 
Small Business Programs Improvement Act of 1996 (SBPIAct), which 
amended the Small Business Investment Act of 1958 (SBIAct). Title II, 
Section 208 of the SBPIAct adds Section 103(12) to the SBIAct where it 
includes and defines the term ``smaller enterprise.'' A ``smaller 
enterprise'' is a small business, including its affiliates, with net 
financial worth no greater than $6 million and average net income of no 
more than $2 million, or that meets the size standards established by 
SBA in 13 CFR Part 121.
    Current regulations at 13 CFR Sec. 107.710 require SBICs to make a 
certain proportion of their total financings into ``smaller 
businesses,'' which are defined in Sec. 107.710(a). Section 208 of the 
SBPIAct, however, established the same size criteria for an entity 
named ``smaller enterprise'' that SBA has in its regulations for a 
``smaller business.'' Therefore, SBA is changing the terminology of its 
regulations to require SBICs to finance smaller enterprises to be 
consistent with this legislation.
    SBA is issuing a final rule because this constitutes only a change 
of terminology with no substantive effect upon current regulations. 
That is, SBA is merely adopting no more than a statutory change to a 
term. SBA is not modifying or otherwise changing its regulations in any 
way other than to the extent that the statute directs the Agency to do 
so.

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. 5)

    Under the Regulatory Flexibility Act (RFA), SBA is not required to 
analyze the impact on small businesses of this revision of its SBIC 
Program regulations because: the RFA applies to federal rules that 
require public comment; and this is a final rule, incorporating into 
the Regulations the Congressionally mandated definition of a smaller 
enterprise. In any event, SBA does not believe this rule has a 
significant impact on small businesses, since the size applicable to a 
``smaller enterprise'' remains unchanged from that for a ``smaller 
business'' which definition it replaces, and does not affect other SBA 
programs.
    For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA 
certifies that this final rule contains no new reporting or 
recordkeeping requirements. For purposes of Executive Order 12612, SBA 
certifies that this rule does not have federalism implications 
warranting the preparation of a Federalism Assessment. For purposes of 
Executive Order 12778, SBA certifies that this rule is drafted, to the 
extent practicable, in accordance with the standards set forth in 
Section 2 of that Order.

List of Subjects in 13 CFR Part 107

    Investment companies, Loan Programs--business, reporting and 
recordkeeping requirements, Small businesses.

PART 107--[AMENDED]

    1. The authority citation for 13 CFR part 107 is revised to read as 
follows:

    Authority: 15 U.S.C. 662 (12).

    2. Section 107.50 is amended by removing the definition for 
``Smaller Business'' and by adding a new definition in alphabetical 
order to read as follows:


Sec. 107.50  Definition of terms.

* * * * *

[[Page 11760]]

    Smaller Enterprise has the meaning set forth in Sec. 107.710.
* * * * *
    3. Section 107.710 is revised to read as follows:


Sec. 107.710  Requirement to Finance Smaller Enterprises.

    Your Portfolio must include Financings to Smaller Enterprises.
    (a) Definition of Smaller Enterprise. A Smaller Enterprise means 
any small business concern that:
    (1) Together with its Affiliates has a net worth of not more than 
$6.0 million and average net income after Federal income taxes 
(excluding any carry-over losses) for the preceding two years no 
greater than $2.0 million; or
    (2) Both together with its Affiliates, and by itself, meets the 
size standard of Sec. 121.201 of this chapter at the time of Financing 
for the industry in which it is then primarily engaged.
    (b) Phase 1 of Smaller Enterprise Financing requirement. At the 
close of your first complete fiscal year beginning on or after April 
25, 1994, at least 10 percent of the total dollar amount of the 
Financings you extended since April 25, 1994, must have been in Smaller 
Enterprises.
    (c) Phase 2 of Smaller Enterprise Financing requirement. At the 
close of each of your next fiscal years, at least 20 percent of the 
total dollar amount of the Financings you extended since April 25, 
1994, must have been invested in Smaller Enterprises.
    (d) Financing a change of ownership which results in the creation 
of a Smaller Enterprises. The Financing of a change of ownership under 
Sec. 107.750 which results in the creation of a Smaller Enterprise 
qualifies as a Smaller Enterprise Financing..
    (e) Non-compliance with this section. If you have not reached the 
required percentage of Smaller Enterprise Financings at the end of any 
fiscal year, then you must be in compliance by the end of the following 
fiscal year.
Aida Alvarez,
Administrator.
[FR Doc. 97-5740 Filed 3-12-97; 8:45 am]
BILLING CODE 8025-01-P