[Federal Register Volume 66, Number 204 (Monday, October 22, 2001)]
[Rules and Regulations]
[Pages 53329-53332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26565]



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  Federal Register / Vol. 66, No. 204 / Monday, October 22, 2001 / 
Rules and Regulations  

[[Page 53329]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 123

RIN 3245-AE82


Disaster Loan Program

AGENCY: U.S. Small Business Administration (SBA).

ACTION: Interim final rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: In response to the President's major disaster declarations 
with respect to the World Trade Center and the Pentagon and the 
attendant economic repercussions from those disasters, the SBA is 
revising its disaster loan regulations. This Interim Final Rule allows 
SBA to make economic injury disaster loans to eligible small business 
concerns outside the declared disaster areas that suffered substantial 
economic injury as a direct result of the destruction of the World 
Trade Center, New York, New York, or the damage to the Pentagon on 
September 11, 2001, or as a direct result of any related Federal action 
taken between September 11, 2001 and October 22, 2001. Because these 
affected small business concerns need economic injury disaster 
assistance quickly, SBA is issuing this regulation as an interim final 
rule.

DATES: Effective Date: This rule is effective on October 22, 2001.
    Comment Date: Comments must be received on or before November 21, 
2001.

ADDRESSES: Address all comments concerning the interim rule to Herbert 
Mitchell, Associate Administrator for Disaster Assistance, U.S. Small 
Business Administration, 409 Third Street, SW., Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: James Rivera, Deputy Associate 
Administrator, Office of Disaster Assistance, 202-205-6734.

SUPPLEMENTARY INFORMATION:

I. General Description of New Program

    The President made major disaster declarations for the terrorist 
attacks on the World Trade Center, New York, New York and the Pentagon 
that took place on September 11, 2001. Notices, 66 FR 48682-48638, 
Sept. 21, 2001, amended 66 FR 49674, Sept. 28, 2001, and 66 FR 51435, 
Oct. 9, 2001, (NY) and 66 FR 51535, Oct. 9, 2001 (VA). Pursuant to 
SBA's current regulations, SBA has issued disaster declarations which 
provide economic injury disaster loans (EIDL) to eligible small 
business concerns in geographic areas contiguous to the declared 
disaster areas. Notices, 66 FR 48154, Sept. 18, 2001 (NY), amended 66 
FR 50702-50703, Oct. 4, 2001 (NY), and 66 FR 49736, Sept. 28, 2001 
(VA), corrected 66 FR 50703, Oct. 4, 2001; and Military Reservist 
Economic Injury Disaster Loan (EIDL) Notices, 66 FR 50241-50242, Oct. 
2, 2001.
    Under section 4(d) of the Small Business Act the SBA has a 
statutory obligation to act in the public interest when determining 
eligibility for assistance under the Small Business Act. 15 U.S.C. 
633(d). In addition, the SBA is specifically authorized to provide 
economic injury disaster assistance to small businesses suffering 
substantial economic injury in areas affected by disasters. 15 U.S.C. 
636(b)(2). Further, there is nothing in the Small Business Act that 
precludes SBA from expanding EIDL assistance to businesses located 
beyond the areas contiguous to the declared disaster areas. 
Accordingly, SBA is adding a new subpart G, with respect to the 
terrorist attacks on September 11, 2001, to authorize it to provide 
EIDL assistance to eligible small businesses located beyond such 
contiguous areas.
    This action is being taken in recognition of the widespread 
economic dislocation caused by the terrorist attacks and the related 
Federal actions taken directly thereafter. Many small business concerns 
have suffered economic injury directly attributable to the terrorist 
attacks on September 11, 2001 or to certain necessary Federal actions 
taken in response to those attacks. These economic injuries have ranged 
from interruptions of normal business activities for brief periods of 
time to significant changes to normal business practices and 
procedures.
    Under section 123.601 of the new subpart, SBA EIDL assistance will 
be available to such businesses if they can show that they suffered 
substantial economic injury as a direct result of the destruction of 
the World Trade Center, New York, New York, or the damage to the 
Pentagon on September 11, 2001, or any related Federal action occurring 
between September 11, 2001 and the date of publication of this interim 
final rule such that they are unable to meet their obligations as they 
mature or are unable to pay their ordinary and necessary operating 
expenses. The proceeds of an EIDL loan can be used by a business for 
working capital necessary to carry the business until resumption of 
normal operations and for expenditures necessary to alleviate the 
economic injury attributable to the terrorist attacks. EIDL assistance 
is not available for economic losses attributable to an economic 
downturn, and it may not exceed the amount attributable to the 
September 11, 2001 attacks or the specified Federal action. A loss of 
anticipated profits or a drop in sales is not considered substantial 
economic injury for this purpose.
    Under section 123.601 of the new subpart, in order to obtain SBA 
EIDL assistance the business must show that it was a small business, as 
defined in part 121 of SBA's regulations (13 CFR part 121), on 
September 11, 2001. It must also demonstrate that the principal owners 
of the business have used all reasonably available funds, and that the 
business is unable to obtain credit elsewhere.
    Under section 123.602 of the new subpart, not all small businesses 
are legally eligible for EIDL assistance. For example, SBA cannot 
provide EIDL assistance to a nonprofit or charitable entity or a 
business that derives more than one-third of its gross annual revenue 
from legal gambling activities. It is also unable to provide EIDL 
assistance to a business principally engaged in teaching, instructing, 
counseling, or indoctrinating religion or religious beliefs, whether in 
a religious or secular setting. Further, EIDL assistance cannot be used 
to refinance indebtedness that the business incurred prior to the 
terrorist attacks on September 11, 2001. Nor can such assistance be 
used to pay dividends or other disbursements to owners, partners, 
officers or stockholders, except

[[Page 53330]]

for reasonable remuneration directly related to their performance of 
services for the business.
    The window to apply for assistance under this subpart will expire 
ninety days from the date of publication of this rule. Therefore, all 
applications must be postmarked on or before that date. The SBA may 
extend this deadline in its discretion for good cause. Any request for 
an increase in EIDL assistance must be made not later than one year 
after the date SBA approves the initial loan request.
    Eligible small business concerns may apply for assistance under 
this subpart using existing SBA Forms for the existing EIDL Program. 
The forms needed are SBA Form #5 ``Disaster Business Loan Application 
(OMB #3245-0017), SBA Form #1368 ``Additional Filing Requirements 
EIDL'' (OMB #3245-0017), SBA Form #413 ``Personal Financial Statement'' 
(OMB #3245-0188), and IRS Form #8821 ``Tax Information Authorization'' 
(OMB #1545-1165). Applications can be filed at the SBA disaster office 
servicing the applicant's state. Such offices are located in Niagara 
Falls, NY; Atlanta, GA; Ft. Worth, TX; and Sacramento, CA. Small 
business concerns may obtain additional information by contacting the 
Disaster Area Office responsible for their state: Niagara Falls 
Disaster Office (Area 1), Telephone: (800) 659-2955; Facsimile: (716) 
282-1472; (Connecticut, Delaware, Maryland, Maine, Massachusetts, New 
Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia, 
Vermont, West Virginia, District of Columbia, Commonwealth of Puerto 
Rico, Virgin Islands); Atlanta Disaster Office (Area 2), Telephone: 
(800) 359-2227; Facsimile: (404) 347-4183; (Alabama, Florida, Georgia, 
Illinois, Indiana, Kentucky, Michigan, Minnesota, Mississippi, North 
Carolina, Ohio, South Carolina, Tennessee, Wisconsin); Dallas/Ft. Worth 
Disaster Office (Area 3); Telephone: (800) 366-6303; Facsimile: (817) 
885-7616; (Arkansas, Colorado, Iowa, Kansas, Louisiana, Missouri, 
Montana, North Dakota, Nebraska, New Mexico, South Dakota, Oklahoma, 
Texas, Utah, Wyoming); or Sacramento Disaster Office (Area 4); 
Telephone: (800) 488-5323; Facsimile: (916) 566-7280; (Alaska, Arizona, 
California, Hawaii, Idaho, Nevada, Oregon, Washington; The Islands of 
American Samoa, Marshall Islands, Micronesia, and Guam).

II. Justification for Publication as Interim Final Status Rule

    In general, SBA publishes a rule for public comment before issuing 
a final rule, in accordance with the Administrative Procedure Act and 
SBA regulations. 5 U.S.C. 553 and 13 CFR 101.108. The Administrative 
Procedure Act provides an exception to this standard rulemaking 
process, however, where an agency finds good cause to adopt a rule 
without prior public participation. 5 U.S.C. 553(b)(3)(B). The good 
cause requirement is satisfied when prior public participation is 
impracticable, unnecessary, or contrary to the public interest. Under 
such circumstances, an agency may publish an interim final rule without 
soliciting public comment.
    In enacting the good cause exception to standard rulemaking 
procedures, Congress recognized that emergency situations arise where 
an agency must issue a rule without public participation. The President 
declared a national emergency as a result of the events of September 
11, 2001. The events of that day have affected U.S. businesses both in 
the declared disaster areas and across the nation. Many of the affected 
businesses would qualify for SBA and other Federal assistance but for 
their location outside the contiguous counties.
    Accordingly, SBA finds that good cause exists to publish this rule 
as an interim final rule in light of the urgent need to make economic 
injury disaster loans available to businesses that have suffered 
economic injury, but that do not qualify under SBA's existing 
geographic restrictions. Advance solicitation of comments for this 
rulemaking would be impracticable and contrary to the public interest, 
as it would delay the delivery of critical assistance to these 
businesses by a minimum of three to six months. Any such delay would be 
extremely prejudicial to the affected businesses. It is likely that 
some would be forced to cease operations before a rule could be 
promulgated under standard notice and comment rulemaking procedures.
    Furthermore, SBA has a statutory obligation to act in the public 
interest in determining eligibility for Federal assistance under the 
Small Business Act. 15 U.S.C. 633(d). In addition, SBA also has the 
specific statutory authority to provide economic injury assistance to 
small businesses in areas affected by disasters. 15 U.S.C. 636(b)(2). 
SBA also notes the failure to adopt this rule immediately would work to 
the detriment of many small businesses.
    Although this rule is being published as an interim final rule, 
comments are hereby solicited from interested members of the public. 
These comments must be received on or before November 21, 2001. SBA may 
then consider these comments in making any necessary revisions to these 
regulations.

III. Justification for Immediate Effective Date of Interim Final 
Rule

    The APA requires that ``publication or service of a substantive 
rule shall be made not less than 30 days before its effective date, 
except * * * as otherwise provided by the agency for good cause found 
and published with the rule.'' 5 U.S.C. 553(d)(3). SBA finds that good 
cause exists to make this final rule effective the same day it is 
published in the Federal Register.
    The purpose of the APA provision is to provide interested and 
affected members of the public sufficient time to adjust their behavior 
before the rule takes effect. For the reasons set forth above in II, 
Justification of Publication of Interim Final Status Rule, SBA finds 
that good cause exists for making this interim final rule effective 
immediately, instead of observing the 30-day period between publication 
and effective date.
    SBA also believes, based on its contacts with interested members of 
the public, that there is strong interest in immediate implementation 
of this rule. SBA is aware of many entities that will be assisted by 
the immediate adoption of this rule.

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

    For purposes of Executive Order 12988, SBA has determined that this 
rule is drafted, to the extent practicable, in accordance with the 
standards set forth in section 3 of that Order.
    This regulation will not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibility among the 
various levels of government. Therefore, under Executive Order 13132, 
SBA determines that this rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment.
    This rule does not impose any new information collection 
requirements from SBA which require the approval of OMB under the 
Paperwork Reduction Act of 1980, 44 U.S.C. 3501-3520. The new rule 
increases access to SBA programs that assist small businesses, but uses 
existing SBA Forms with current OMB control numbers. Eligible small 
business concerns may apply for assistance under this subpart using 
existing SBA Forms for the existing EIDL Program. The forms needed are 
SBA Form #5 ``Disaster Business Loan

[[Page 53331]]

Application (OMB #3245-0017), SBA Form #1368 ``Additional Filing 
Requirements EIDL'' (OMB #3245-0017), SBA Form #413 ``Personal 
Financial Statement'(OMB #3245-0188), and IRS Form 8821 ``Tax 
Information Authorization'' (OMB #1545-1165). Applications can be filed 
at the SBA disaster office servicing the state where the business is 
located. Such offices are located in Niagara Falls, NY; Atlanta, GA; 
Ft. Worth, TX; and Sacramento, CA. Small business concerns may obtain 
additional information by contacting the Disaster Area Office 
responsible for their state: Niagara Falls Disaster Office (Area 1), 
Telephone: (800) 659-2955; Facsimile: (716) 282-1472; Atlanta Disaster 
Office (Area 2), Telephone: (800) 359-2227; Facsimile: (404) 347-4183; 
Dallas/Ft. Worth Disaster Office (Area 3); Telephone: (800) 366-6303; 
Facsimile: (817) 885-7616; or Sacramento Disaster Office (Area 4); 
Telephone: (800) 488-5323; Facsimile: (916) 566-7280.
    Due to its publication as an interim final rule, SBA has determined 
that the provisions of the Regulatory Flexibility Act, 5 U.S.C. 601-
612, do not apply.
    The Office of Management and Budget (OMB) reviewed this rule as a 
``significant regulatory action'' under section 3(f) under Executive 
Order 12866. SBA estimates that the final rule will have a significant 
economic impact of more than $100 million.
    Under section 4(d) of the Small Business Act, the SBA has a 
statutory responsibility to act in the public interest in determining 
eligibility for Federal assistance under the Small Business Act. 15 
U.S.C. 633(d). In addition, the SBA is specifically authorized to 
provide disaster assistance to small business concerns suffering 
substantial economic injury in areas affected by disasters. 15 U.S.C. 
636(b)(2). SBA believes this regulation is necessary to reduce the 
adverse economic impact of the terrorist attacks and provide assistance 
to small business concerns affected.

Description of Potential Benefits of the Rule

    The most significant benefit to small businesses as a result of 
this rule is their eligibility for economic injury disaster assistance 
programs. As stated above, SBA estimates that approximately $852 
million will be loaned to small businesses as a result of this change. 
These small businesses will, as a result, be able to meet basic 
operational costs and payroll obligations. SBA believes that, while the 
subsidy cost of this lending will be approximately $250,000,000, the 
economic benefit of keeping these small businesses operating will be 
significant. The events of September 11, 2001 deepened the economic 
slowdown the country was experiencing, and in many instances it also 
raised unforeseen economic consequences for certain small businesses. 
In addition, many small businesses find themselves directly affected by 
certain necessary Federal regulatory action made necessary by the need 
for heightened security. As such, many small businesses that would have 
otherwise successfully weathered an ordinary economic downturn find 
themselves faced with extraordinary situations. The survival of these 
businesses presents a potential net increase to the economy. 
Furthermore, it will ameliorate the negative effects of the downturn 
and reduce or prevent additional costs to the government (through 
increased payments in entitlement programs, and reduced revenues) and 
the economy as a whole (through increased business failures and loss of 
capacity).

List of Subjects in 13 CFR Part 123

    Disaster assistance, Loan programs-business, Reporting and 
recordkeeping requirements, Small businesses.

    For the reasons stated in the preamble, SBA amends 13 CFR part 123 
as follows:

PART 123--DISASTER LOAN PROGRAM

    1. The authority citation for part 123 continues to read as 
follows:

    Authority: 15 U.S.C. 634(b)(6), 636(b), 636(c) and 636(f); Pub. 
L. 102-395, 106 Stat. 1828, 1864; Pub. L. 103-75, 107 Stat. 739; and 
Pub. L. 106-50, 113 Stat. 245.


    2. In part 123, add new subpart G to read as follows:
Subpart G--Economic Injury Disaster Loans as a Result of the September 
11, 2001 Terrorist Attacks
Sec.
123.600   Are economic injury disaster loans under this subpart 
limited to the geographic areas contiguous to the declared disaster 
areas?
123.601   Is my business eligible to apply for an economic injury 
disaster loan under this subpart?
123.602   When would my business not be eligible to apply for an 
economic injury disaster loan under this subpart?
123.603   What is the interest rate on an economic injury disaster 
loan under this subpart?
123.604   How can my business spend my economic injury disaster loan 
under this subpart?
123.605   How long do I have to apply for a loan under this subpart?
123.606   May I request an increase in the amount of an economic 
injury disaster loan under this subpart?

Subpart G--Economic Injury Disaster Loans as a Result of the 
September 11, 2001 Terrorist Attacks


Sec. 123.600  Are economic injury disaster loans under this subpart 
limited to the geographic areas contiguous to the declared disaster 
areas?

    No. Notwithstanding Sec. 123.4, SBA may make economic injury 
disaster loans outside the declared disaster areas and the contiguous 
geographic areas to small business concerns that have suffered 
substantial economic injury as a direct result of the destruction of 
the World Trade Center or the damage to the Pentagon on September 11, 
2001, or as a direct result of any related federal action taken between 
September 11, 2001 and October 22, 2001.


Sec. 123.601  Is my business eligible to apply for an economic injury 
disaster loan under this subpart?

    (a) If your business has suffered substantial economic injury as a 
direct result of the destruction of the World Trade Center or the 
damage to the Pentagon on September 11, 2001, or as a direct result of 
any related federal action taken between September 11, 2001 and October 
22, 2001, you are eligible to apply for an economic injury disaster 
loan under this subpart.
    (1) Substantial economic injury is such that a business concern is 
unable to meet its obligations as they mature or to pay its ordinary 
and necessary operating expenses.
    (2) Loss of anticipated profits or a drop in sales is not 
considered substantial economic injury for this purpose.
    (b) Economic injury disaster loans are available under this subpart 
only if you were a small business (as defined in part 121 of this 
chapter) on September 11, 2001, you and your affiliates and principal 
owners (20% or more ownership interest) have used all reasonably 
available funds, and you are unable to obtain credit elsewhere (see 
Sec. 123.104).
    (c) Eligible businesses do not include agricultural enterprises, 
but do include small agricultural cooperatives and producer 
cooperatives.


Sec. 123.602  When would my business not be eligible to apply for an 
economic injury disaster loan under this subpart?

    Your business is not eligible for an economic injury disaster loan 
under this subpart if you (or any principal of the business) fit into 
any of the categories in Secs. 123.101 and 123.201, or if your business 
is:

[[Page 53332]]

    (a) Engaged in lending, multi-level sales distribution, 
speculation, or investment (except for real estate investment with 
property held for rental on September 11, 2001);
    (b) A non-profit or charitable concern;
    (c) A consumer or marketing cooperative;
    (d) Not a small business concern; or
    (e) Deriving more than one-third of gross annual revenue from legal 
gambling activities;
    (f) A loan packager which earns more than one-third of its gross 
annual revenue from packaging SBA loans;
    (g) Principally engaged in teaching, instructing, counseling, or 
indoctrinating religion or religious beliefs, whether in a religious or 
secular setting; or
    (h) Primarily engaged in political or lobbying activities.


Sec. 123.603  What is the interest rate on an economic injury disaster 
loan under this subpart?

    Your economic injury disaster loan under this subpart will have an 
interest rate of 4 percent per annum or less.


Sec. 123.604  How can my business spend my economic injury disaster 
loan under this subpart?

    (a) You can only use the loan proceeds for working capital 
necessary to carry your concern until resumption of normal operations 
and for expenditures necessary to alleviate the specific economic 
injury, but not to exceed that which the business could have provided 
had the injury not occurred.
    (b) Loan proceeds may not be used to:
    (1) Refinance indebtedness which you incurred prior to September 
11, 2001;
    (2) Make payments on loans owned by another federal agency 
(including SBA) or a Small Business Investment Company licensed under 
the Small Business Investment Act;
    (3) Pay, directly or indirectly, any obligations resulting from a 
federal, state or local tax penalty as a result of negligence or fraud, 
or any non-tax criminal fine, civil fine, or penalty for non-compliance 
with a law, regulation, or order of a federal, state, regional, or 
local agency or similar matter;
    (4) Repair physical damage; or
    (5) Pay dividends or other disbursements to owners, partners, 
officers, or stockholders, except for reasonable remuneration directly 
related to their performance of services for the business.


Sec. 123.605  How long do I have to apply for a loan under this 
subpart?

    You have until January 22, 2002 to apply for a loan under this 
subpart. Your application must be postmarked no later than this date. 
SBA has the discretion, for good cause, to extend the application 
deadline by publication of a notice in the Federal Register.


Sec. 123.606  May I request an increase in the amount of an economic 
injury disaster loan under this subpart?

    Yes. Notwithstanding Sec. 123.20, you may request an increase in 
the amount of an economic injury disaster loan under this subpart not 
later than one year after the date SBA approves your initial request.

    Dated: October 16, 2001.
Hector V. Barreto,
Administrator.
[FR Doc. 01-26565 Filed 10-19-01; 8:45 am]
BILLING CODE 8025-01-P