[Federal Register Volume 66, Number 14 (Monday, January 22, 2001)]
[Notices]
[Pages 6729-6730]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1787]


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SMALL BUSINESS ADMINISTRATION


SBA Minority Contractors Finance Pilot Loan Program

AGENCY: Small Business Administration.

ACTION: Notice of pilot program ``SBA Minority Contractors Finance 
Pilot Loan Program''

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SUMMARY: The Small Business Administration (SBA) is establishing a 
pilot program in which certain lenders will be permitted to use their 
own documentation forms to expeditiously approve loan amounts up to 
$250,000 for small business contractors and subcontractors in Rhode 
Island using the Section 7(a) loan program. The program will offer a 
technical assistance component provided by a Small Business Development 
Center (SBDC) and additional guaranty support from non-SBA sources for 
a lower risk exposure that is attractive to lenders and other 
modifications to SBA's normal lending practices and procedures. This 
program will be called the SBA Minority Contractors Finance Pilot Loan 
Program. The purpose for this 18-month pilot program is to address the

[[Page 6730]]

difficulties that small business contractors and subcontractors 
generally experience with access to capital and bonding. This loan 
pilot program is a key part of an initiative that will first operate in 
Rhode Island and, may be expanded to other areas of the country.

EFFECTIVE DATE: This pilot will be effective on January 22, 2001 and 
will remain in effect for 18 months.

FOR FURTHER INFORMATION CONTACT: Mark Hayward, District Director, U.S. 
Small Business Administration--Rhode Island District Office, 380 
Westminster Mall, 5th floor, Providence, RI 02903, (401) 528-4540; FAX: 
(401) 528-4539.

SUPPLEMENTARY INFORMATION: The Small Business Administration is 
establishing a streamlined, user friendly loan pilot program designed 
to help contractors and subcontractors more readily obtain financing 
and bonding.
    SBA found that small business contractors and sub-contractors 
historically have not received the procurement, management, technical, 
and financial assistance necessary to maintain their viability. A Rhode 
Island advisory panel comprised of local lenders, contractors, bonding 
agents, and state agencies examined the problem and determined that 
lending to contractors and subcontractors was specialized financing and 
that the local lending community was disinclined to provide the same 
level of underwriting and post approval oversight on loans of $250,000 
or less as they were for larger contract loans. Moreover, the interest 
of the taxpayers whose funds support the SBA guaranty had to be 
protected.
    The principal barriers were seen as (i) too much risk and (ii) 
excessive cost of monitoring. SBA concluded that if borrowers received 
specialized technical assistance and the contribution of additional 
guaranty support from sources outside SBA, financing might be more 
forthcoming from local lenders.
    To that end, the Agency has authorized the acceptance of a 
supplemental guaranty on a portion (up to 90 percent) of the 
unguaranteed percentage of SBA 7(a) loans, that will be offered by a 
lending entity of the Rhode Island Economic Development Corporation. 
The lending entity will contribute as much as $250,000 to assist 
minority business enterprises.
    The specialized technical assistance component will include the 
utilization of a SBDC to provide the loan packaging assistance that 
would help the contractors and sub-contractors prepare their commercial 
loan applications. Non-SBA funds will support the hiring of an 
experienced team of contracting professionals with the proper 
knowledge, skills, and abilities to assist the 15-30 client contractors 
expected to participate in the pilot in bidding, managing, and 
completing their projects for 18 months. These professionals will be 
selected by an Executive Committee consisting of SBA staff, local 
lenders, contractors, bonding agents, and state agencies in a private/
state/federal partnership. The Executive Committee also will provide 
guidance and oversight of the program. The non-SBA funding and resource 
partners are private foundations, state agencies, banks, and 
corporations who are committed to producing positive results. Finally, 
as part of the technical assistance, an Advisory Board is being formed 
consisting of prime contractors and state agencies to assure deal flow 
and expertise.
    This pilot program emphasizes collaboration and partnerships with 
Federal, state and local agencies, as well as private sector partners. 
The pilot program is scheduled to last 18 months, beginning January 22, 
2001. Prior to the termination date, SBA will evaluate the program to 
determine if it should be continued as is, expanded, or ended.

    Program authority: 15 U.S.C. 636(a)(25)(b) or Section 
7(a)(25)(b) of the Small Business Act.

    Dated: January 11, 2001.
Charles D. Tansey,
Associate Deputy Administrator for Capital Access.
[FR Doc. 01-1787 Filed 1-19-01; 8:45 am]
BILLING CODE 8025-01-U