[Federal Register Volume 66, Number 179 (Friday, September 14, 2001)]
[Rules and Regulations]
[Pages 47877-47878]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-22959]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

RIN 3245-AE73


Microloan Program

AGENCY: Small Business Administration (SBA).

ACTION: Direct final rule.

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SUMMARY: The Consolidated Appropriations Act, 2001 (``2000 
legislation'') was enacted on December 21, 2000. It made several 
changes to SBA's microloan program, increasing in several places the 
dollar amounts used to define aspects of the program. Because there is 
no need for SBA to interpret the statutory changes, SBA is implementing 
them with this direct final rule.

DATES: Unless adverse comment is received prior to October 15, 2001, 
the rule will become effective as a final rule on November 14, 2001. If 
adverse comment is received, SBA will publish a timely withdrawal of 
the rule in the Federal Register.

ADDRESSES: Send written comments to Jody Raskind, Chief, Office of 
Microenterprise Development, U.S. Small Business Administration, 409 
3rd Street, SW., Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: Jody Raskind, (202) 205-6497.

SUPPLEMENTARY INFORMATION: Section 7(m) of the Small Business Act (15 
U.S.C. 636(m)) (``Act'') sets forth the statutory rules with respect to 
SBA's microloan program which authorizes SBA to assist small businesses 
that need small amounts of financial assistance. Under the program, SBA 
makes direct and guaranteed loans available to intermediaries who use 
the proceeds to make microloans to eligible borrowers. SBA is also 
authorized to make grants to intermediaries and other qualified 
nonprofit entities to be used for marketing, management, and technical 
assistance.
    Section 210 of Pub. L. 106-554 (``2000 legislation'') amended 
section 7(m) of the Act, and this direct final rule implements the 
statutory changes by conforming SBA's regulations to the statutory 
changes. Thus, SBA is amending Sec. 120.701 of its regulations to 
define a Microloan as a loan of not more than $35,000 (formerly 
$25,000) by an intermediary to a small business. The definition of 
Specialized Intermediary is changed to mean an intermediary that 
maintains a portfolio of microloans averaging $10,000 (up from $7,500) 
or less. SBA is amending Sec. 120.702 of its regulations to reflect 
that an organization, to become an intermediary, must have made and 
serviced short-term fixed rate loans of not more than $35,000 (up from 
$25,000) to newly established or growing small businesses for at least 
one year.
    SBA is amending Sec. 120.704 of its regulations so that in 
selecting intermediaries for the microloan program, SBA will give 
priority to applicants that maintain a portfolio of loans averaging 
$10,000 (up from $7,500) or less. SBA is amending Sec. 120.705 so that 
a specialized intermediary would have to maintain a portfolio of 
microloans averaging $10,000 (up from $7,500).
    SBA is amending Sec. 120.707(b) of its regulations to reflect that 
an intermediary may not make a microloan of more than $20,000 (up from 
$15,000) unless the borrower demonstrates that it is unable to obtain 
credit elsewhere. In addition, Sec. 120.707(b) is amended to show that 
an intermediary may not make a loan of more than $35,000 (up from 
$25,000), and no borrower may owe an intermediary more than $35,000 (up 
from $25,000) at any one time. SBA is amending Sec. 120.707(c) to 
reflect the statutory change which increased the dollar amount to 
$10,000 (up from $7,500).
    SBA is amending Sec. 120.714(a) of its regulations so that any 
eligible nonprofit entity that is not an intermediary may apply to SBA 
for a grant for the purpose of assisting eligible businesses to obtain 
private sector financing in amounts of $35,000 (up from $25,000) or 
less. SBA is amending Sec. 120.714(b) to reflect the statutory changes 
which increased the (1) number of grants it can make to non-
Intermediaries each year to 55 (up from 25), and (2) amount of the 
grant to $200,000 (up from $125,000).

[[Page 47878]]

    SBA is publishing this regulation as a direct final rule because 
SBA believes the rule is noncontroversial since it is merely 
implementing changes required by P.L. 106-554 without any need for 
interpretations by SBA. As such, SBA believes that this rule will not 
elicit any significant adverse comment.

Compliance With Executive Orders 13132, 12988, and 12866, the 
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork 
Reduction Act (44 U.S.C., Ch. 35)

    For the purposes of Executive Order 13132, SBA has determined that 
this direct final rule has no federalism implications warranting 
preparation of a federalism assessment.
    This direct final rule does not constitute a ``significant'' 
regulatory action under Executive Order 12866 and therefore, was not 
reviewed by the Office of Management and Budget.
    SBA certifies that this direct final rule will not have a 
significant economic impact on a substantial number of small entities 
within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612. 
This rule is merely implementing changes required by Pub. L. 106-554 
without any need for interpretations by SBA. Any impact on small 
entities results from the 2000 legislation and not from this 
rulemaking.
    SBA certifies that this final rule does not impose any additional 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act, 44 U.S.C., chapter 35.
    For purposes of Executive Order 12988, SBA certifies that this 
final rule is drafted, to the extent practicable, to accord with the 
standards set forth in paragraph 3 of that Order.

List of Subjects in 13 CFR Part 120

    Loan programs-business, Small Businesses.

    For the reasons set forth above, SBA amends 13 CFR part 120 as 
follows:
    1.The authority citation for part 120 continues to read as follows:

    Authority: 15 U.S.C. 634(b)(6), 636(a) and (h), 696(3), and 
697(a)(2).

    2. Amend Sec. 120.701 by revising paragraphs (f) and (i) to read as 
follows:


Sec. 120.701  Definitions.

* * * * *
    (f) Microloan is a short-term, fixed interest rate loan of not more 
than $35,000 made by an Intermediary to an eligible small business.
    * * *
    (i) Specialized Intermediary is an Intermediary which maintains a 
portfolio of Microloans averaging $10,000 or less.

    3. Revise Sec. 120.702(a)(1) to read as follows:


Sec. 120.702  Are there limitations on who can be an Intermediary or on 
where an Intermediary may operate?

    (a) * * *
    (1) Have made and serviced short-term fixed rate loans of not more 
than $35,000 to newly established or growing small businesses for at 
least one year: and
* * * * *
    4. Revise Sec. 120.704(b) to read as follows:


Sec. 120.704  How are applications evaluated?

    (a) * * *
    (b) Preference for organizations which make very small loans. In 
selecting Intermediaries, SBA will give priority to applicants which 
maintain a portfolio of loans averaging $10,000 or less.
* * * * *
    5. Amend Sec. 120.705 by revising the second sentence to read as 
follows:


Sec. 120.705  What is a Specialized Intermediary?

    * * * An Intermediary qualifies as a Specialized Intermediary if it 
maintains a portfolio of Microloans averaging $10,000 or less. * * *
    6. Amend Sec. 120.707 as follows:
    a. By revising the second and third sentences of paragraph (b); and
    b. Revising paragraphs (c)(1) and (c)(2).


Sec. 120.707  What conditions apply to loans by Intermediaries to 
Microloan borrowers?

* * * * *
    (b) * * * An Intermediary may not make a Microloan of more than 
$20,000 unless the borrower demonstrates that it is unable to obtain 
credit elsewhere at comparable interest rates and that it has good 
prospects for success. An Intermediary may not make a Microloan of more 
than $35,000, and no borrower may owe an Intermediary more than $35,000 
at any one time. * * *
    (c) * * *
    (1) On loans of more than $10,000, the interest rate charged on the 
SBA loan to the Intermediary, plus 7.75 percentage points; and
    (2) On loans of $10,000 or less, the interest rate charged on the 
SBA loan to the Intermediary, plus 8.5 percentage points.
    7. Amend Sec. 120.714 as follows:
    a. By revising the first sentence of paragraph (a); and
    b. By revising paragraph (b).


Sec. 120.714  How does a non-Intermediary get a grant?

    (a) Grant procedure for non-Intermediaries. Any nonprofit entity 
that is not an Intermediary may apply to SBA for a grant to provide 
marketing, management and technical assistance to low-income 
individuals for the purpose of assisting them in obtaining private 
sector financing in amounts of $35,000 or less. * * *
    (b) Number and amount of grants. In each year of the Microloan 
Program, SBA may make no more than 55 grants to non-Intermediaries for 
terms of up to five years. A grant may not exceed $200,000.
* * * * *

    Dated: June 26, 2001.
John Whitmore,
Acting Administrator.
[FR Doc. 01-22959 Filed 9-13-01; 8:45 am]
BILLING CODE 8025-01-P