[Federal Register Volume 67, Number 194 (Monday, October 7, 2002)]
[Rules and Regulations]
[Pages 62335-62339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-25143]


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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121 and 123

RIN 3245-AE44


Pre-Disaster Mitigation Loans

AGENCY: Small Business Administration (SBA).

ACTION: Final rule.

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SUMMARY: The U.S. Small Business Administration (SBA) is amending its 
regulations to implement the Pre-Disaster Mitigation Loan Program 
(Program), which is a five-year pilot program authorized by statute in 
1999. The statute allows SBA to make low interest, fixed rate loans to 
small businesses for the purpose of implementing mitigation measures to 
protect their property from disaster related damage. The Program was 
developed in support of the Federal Emergency Management Agency (FEMA) 
Pre-Disaster Mitigation Program and covers businesses located in 
eligible participating communities, as determined by FEMA. This rule 
also describes how much a person could borrow from SBA to provide post-
disaster mitigation for a damaged primary residence.

DATES: This rule is effective November 6, 2002.

FOR FURTHER INFORMATION CONTACT: Herbert L. Mitchell, Associate 
Administrator, Office of Disaster Assistance, 202-205-6734.

SUPPLEMENTARY INFORMATION: The Program is a pilot authorized by statute 
at a level of $15 million for each of five (5) fiscal years from 2000 
through 2004. The Program enables SBA to make low interest, fixed rate 
loans to small businesses for the purpose of implementing mitigation 
measures that will protect them from disaster related damage. The 
Program was developed in support of FEMA's Pre-Disaster Mitigation 
Program, which covers businesses located in eligible communities as 
determined by FEMA. This program encourages prevention rather than 
relying solely on a response and recovery approach to emergency 
management. The purpose of the Program is to implement techniques and 
technologies that will mitigate the effects of natural disasters. 
Implementation will enable SBA to lend to small businesses in disaster 
prone areas to help them avert and lessen the costs of future disaster 
inflicted damages. This is the first time, since SBA has administered 
the disaster loan program beginning in 1953, that SBA is empowered to 
administer a pre-disaster mitigation loan program.
    SBA's current Program rules were effective October 1, 1999. 64 FR 
48275 (September 3, 1999). However, SBA has not made any loans under 
these rules for several reasons. First, SBA is required by statute to 
``use mitigation techniques in support of a formal mitigation program 
established by the [FEMA] * * *'' 15 U.S.C. 636(b)(1)(C). In 1999, FEMA 
had not yet completely established its pre-disaster mitigation program, 
then known as ``Project Impact.'' Communities had to apply to FEMA to 
be accepted as a pre-disaster mitigation eligible community. This took 
time. Next, FEMA's pre-disaster mitigation program was placed on hold, 
pending appropriations in the FY02 Departments of Veterans Affairs, 
Housing and Urban Development and Independent Agencies Appropriations 
Act. On November 26, 2001, the appropriations act provided $25 million 
to FEMA for its pre-disaster mitigation grant program. FEMA is now re-
evaluating, revisiting and revamping its pre-disaster program. 
Therefore, SBA decided to proceed with this final rule to provide clear 
guidance and complete instructions to the public to support the FEMA 
program.
    On June 14, 2000, SBA published a proposed rule on the Program in 
the Federal Register requesting public comment (65 FR 37307). This 
final rule clarifies the application and loan approval processes and 
makes editorial changes to make the regulation more understandable. The 
final rule explains the Program, defines ``mitigation measure,'' 
provides the purpose of pre-disaster mitigation loans, and explains how 
to apply for the loans, the maximum amount and interest rate of the 
loans, how SBA makes Program funding decisions, and what happens if 
Program funds run out or an application is denied. The final rule also 
contains a new application package for the Program approved by the 
Office of Management and Budget.
    SBA received only one comment, from FEMA, which suggests several 
minor changes.
    First, FEMA suggests that SBA refer to the Program as a ``community 
based initiative'' instead of referencing it as Project Impact. We 
agree with FEMA's recommendation and have deleted any reference to 
Project Impact in the final rule.
    Second, FEMA recommends that SBA clarify that an applicant for a 
pre-disaster mitigation loan needs to submit a ``written statement'' 
from a local or State coordinator and that the written statement must 
include the information contained in the regulation. We agree with 
FEMA's recommendation and use the phrase ``written statement'' 
consistently in this final rule along with an appropriate cross-
reference to the requirements in Sec.  123.408.
    Third, FEMA requests that SBA add a clarifying sentence which 
states that ``the State or local coordinator's written statement does 
not constitute an endorsement or technical approval of the project and 
is not a guarantee that the project will prevent damage in future 
disasters.'' SBA agrees with this comment and adds the requested 
language to Sec.  123.408.
    SBA has not adopted one of FEMA's comments. FEMA requested that SBA 
delete the references to participating pre-disaster mitigation 
community locations in Sec.  123.403(a) because these communities may 
grow and change over time. SBA decided to retain the references to 
participating pre-disaster mitigation communities in Sec.  123.403(a) 
because these are general references and we encourage the public to 
contact FEMA for more detailed information. SBA anticipates that at a 
minimum, the general information will serve to inform applicants in 
unique communities (e.g., the District of Columbia and Puerto Rico) 
that they may be eligible to participate in the Program.
    In addition to the changes made in response to FEMA's comments, SBA

[[Page 62336]]

makes a few changes in this final rule for the purpose of 
clarification.
    In Sec.  123.21 (``What is a mitigation measure?'') SBA clarifies 
that mitigation measures can occur before a disaster (pre-disaster) or 
after a disaster (post-disaster). In addition, we include appropriate 
cross-references for further information on either pre-or post-disaster 
mitigation efforts for homes or businesses.
    SBA also revised the final rule in an effort to accurately define 
borrowing limits for each mitigation category: pre-disaster mitigation 
loans for businesses; post-disaster mitigation loans for businesses; 
and post-disaster mitigation loans for homes. SBA did not alter the 
substance of text dealing with the borrowing limits, but simply changed 
the location of the information within the rule so that each borrowing 
limit is addressed under the appropriate mitigation category. To 
accomplish this, we deleted the proposed Sec.  123.22 (``How much can 
your business borrow for mitigation?'') and we have relocated this 
information to Sec.  123.204 (``How much can your business borrow for 
post-disaster mitigation?'') and Sec.  123.405 (``How much can your 
business borrow with a pre-disaster mitigation loan?''). When 
relocating this information, SBA deleted the inappropriate text 
references to primary residences or personal property. These references 
should not have been included in the borrowing limit section for 
business mitigation loans. These references to primary residences or 
personal property should have been included in the section addressing 
the borrowing limit for mitigation loans for homes. As such, we have 
added a new Sec.  123.107 (``How much can I borrow for post-disaster 
mitigation for my home?'').
    Another change is included in Sec. Sec.  123.400 (``What is the 
Pre-Disaster Mitigation Loan Program?'') and 123.401(a) (``What types 
of mitigation measures can your business include in its application for 
a pre-disaster mitigation loan?''). In these sections we inadvertently 
left out the word ``contents'' from the text. The Pre-Disaster 
Mitigation Loan Program is designed, in part, to support mitigation 
measures geared towards protecting commercial real property, leasehold 
improvements, and the contents of either. As such, SBA adds the word 
``contents'' to the relevant Sec. Sec.  123.400 and 123.401(a).
    Proposed Sec.  123.410 (``When will SBA make funding decisions?'') 
would have required SBA to wait to make funding decisions until 60 days 
after the opening of a 30-day application window. This would have 
allowed SBA to receive and process all applications before deciding 
which applications to fund. SBA has concluded, however, that there is 
no reason to delay funding decisions since each application is 
evaluated on its own merits and not in comparison to the other 
applications received during that application window. Accordingly, SBA 
has deleted proposed Sec.  123.410. SBA has redesignated proposed 
Sec. Sec.  123.411--123.413 as Sec. Sec.  123.410--123.412, 
respectively.
    SBA also has concluded that it should date stamp each application 
when it is received, rather than after it is screened for completeness. 
Since SBA will be using multiple screeners to review the applications, 
an applicant's ranking should not be dependent upon the efficiency or 
schedule of a particular screener. Date stamping upon receipt will 
eliminate this possibility. In addition, SBA has decided against time-
stamping applications. Instead, applications that are received on the 
same date will be assigned a ranking through the use of a computerized 
random number generator. SBA believes this is a more equitable way to 
assign priorities to applications received essentially at the same 
time. New Sec.  123.410 is revised to reflect these changes.

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. Chapter 35)

    This rule is a ``significant'' regulatory action within the meaning 
of Executive Order 12866 and was reviewed by the Office of Management 
and Budget. As a new pilot program authorized at $15 million for 5 
years, OMB determined that the Program raised potential budgetary, 
legal and policy issues and required coordination with another Federal 
agency (FEMA). In 1999 Congressional Budget Office (CBO) estimated that 
the SBA would require an annual appropriation of $3 million to cover 
the subsidy costs of the proposed program at a 22 percent subsidy rate. 
Outlays would be about $2 million in 2000 and $3 million in each year 
during the 2001-2004 period, assuming appropriations of the necessary 
amounts. CBO estimates that administrative costs, both for managing the 
Program and preparing a report to Congress required by the bill, would 
be well below $500,000 in any year.
    When an agency issues a rulemaking proposal, the Regulatory 
Flexibility Act (RFA) requires the agency to prepare a final regulatory 
flexibility analysis describing the need for and objectives of the 
rule; a summary of the issues raised by the public comments in response 
to the initial regulatory flexibility analysis; and a description of 
the significant alternatives to the rule consistent with the stated 
objectives of applicable statutes and designed to minimize any 
significant economic impact of the rule on small entities. 5 U.S.C. 
604(a). Section 605 of the RFA allows an agency to certify a rule, in 
lieu of preparing an analysis, if the rulemaking is not expected to 
have a significant economic impact on a substantial number of small 
entities.
    In the proposed rule, SBA certified that the proposed rule would 
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. The basis of the certification was that since Congress has 
limited the funding level for this pilot program, the program can only 
serve a limited number of small businesses. With a maximum loan amount 
of $50,000, the number of small businesses affected under the program 
would be 300. Even if the loan amounts did not reach the maximum level, 
and amounted to only $25,000 per loan, the number of small businesses 
affected would only be 600. SBA did not consider the number to be 
substantial, in view of the fact that there could be as many as some 
13-16 million small businesses across the country. No comments were 
received on the certification.
    SBA has also determined that the final rule will not have a 
significant economic impact on a substantial number of small 
businesses. While the amount of the loan may have a significant impact 
on the businesses that receive them, the loans will not be going to a 
substantial number of small businesses. As stated in the proposal, at 
the maximum level, the loans will only affect 600 small businesses. 
Also as stated in the proposal, there are 13 to 16 million small 
businesses across the country, and 600 is not a substantial number. 
Accordingly, the Administrator of the SBA hereby certifies to the Chief 
Counsel of Advocacy of the SBA that this rule will not have a 
significant economic impact on a substantial number of small 
businesses.
    For the purposes of the Paperwork Reduction Act, 44 U.S.C. chapter 
35, SBA has submitted the Pre-Disaster Mitigation Small Business Loan 
Application (application) to the Office of Management and Budget (OMB) 
for review and OMB has given its clearance. SBA did not receive any 
comments from the public regarding this proposed collection of 
information and only non-substantive, clarifying changes have

[[Page 62337]]

been made to the proposed application package. The application will 
allow small businesses to apply for pre-disaster mitigation loans and 
will provide SBA with the information necessary to evaluate applicants. 
The application requests such information as name, address, location 
and type of mitigation project, type of business, management 
information, organization type, and financial information to permit SBA 
to determine repayment ability. The applicant will have to complete an 
application each time it applies for a pre-disaster mitigation loan. 
SBA estimates that the time necessary to complete an application for 
the Program will average 2 hours.
    For purposes of Executive Order 13132, SBA has determined that this 
final rule has no federalism implications.
    For purposes of Executive Order 12988, SBA has determined that this 
final rule is drafted, to the extent practicable, to be in accordance 
with the standards set forth in section 3 of that Order.

List of Subjects

13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Individuals with 
disabilities, Loan programs--business, Reporting and recordkeeping 
requirements, Small business.

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 parts 121 
and 123 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

    1. The authority citation for part 121 is revised to read as 
follows:

    Authority: 15 U.S.C. 632(a), 634(b)(6), 636(b), 637(a), and 
644(c), and 662(5); and sec. 304, Pub. L. 103-403, 108 Stat. 4175, 
4188, Pub. L. 106-24, 113 Stat. 39.


    2. In Sec.  121.302, add two sentences at the end of paragraph (c) 
to read as follows:


Sec.  121.302  When does SBA determine the size status of an applicant?

* * * * *
    (c) * * * For pre-disaster mitigation loans, size status is 
determined as of the date SBA accepts a complete Pre-Disaster 
Mitigation Small Business Loan Application for processing. Refer to 
Sec.  123.408 of this chapter to find out what SBA considers to be a 
complete Pre-Disaster Mitigation Small Business Loan Application.
* * * * *

PART 123--DISASTER LOAN PROGRAM

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

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

    2. Redesignate Sec.  123.107 as a new Sec.  123.21 and revise the 
section to read as follows:


Sec.  123.21  What is a mitigation measure?

    A mitigation measure is something done for the purpose of 
protecting real and personal property against disaster related damage. 
You may implement mitigation measures after a disaster occurs (post-
disaster) to protect against recurring disaster related damage, or 
before a disaster occurs (pre-disaster) to protect against future 
disaster related damage. Examples of mitigation measures include 
building retaining walls, sea walls, grading and contouring land, 
elevating flood prone structures, relocating utilities, or retrofitting 
structures to protect against high winds, earthquakes, flood, 
wildfires, or other physical disasters. Section 123.107 specifically 
addresses post-disaster mitigation for home disaster loans, and Sec.  
123.204 specifically addresses post-disaster mitigation for businesses. 
Sections 123.400 through 123.412 specifically address pre-disaster 
mitigation.

    3. Add a new Sec.  123.107 to read as follows:


Sec.  123.107  How much can I borrow for post-disaster mitigation for 
my home?

    For mitigation measures implemented after a disaster has occurred, 
you can borrow the lesser of the cost of the mitigation measure, or up 
to 20 percent of the amount of your approved home disaster loan to 
repair or replace your damaged primary residence and personal property.

    4. Add a new Sec.  123.204 to read as follows:


Sec.  123.204  How much can your business borrow for post-disaster 
mitigation?

    For mitigation measures implemented after a disaster has occurred, 
you can borrow the lesser of the cost of the mitigation measure, or up 
to 20 percent of the amount of your approved physical disaster business 
loan to repair or replace your damaged business real estate and other 
business assets.

    5. Revise subpart E to read as follows:
Subpart E--Pre-Disaster Mitigation Loans
Sec.
123.400 What is the Pre-Disaster Mitigation Loan Program?
123.401 What types of mitigating measures can your business include 
in an application for a pre-disaster mitigation loan?
123.402 Can your business include its relocation as a mitigation 
measure in an application for a pre-disaster mitigation loan?
123.403 When is your business eligible to apply for a pre-disaster 
mitigation loan?
123.404 When is your business ineligible to apply for a pre-disaster 
mitigation loan?
123.405 How much can your business borrow with a pre-disaster 
mitigation loan?
123.406 What is the interest rate on a pre-disaster mitigation loan?
123.407 When does your business apply for a pre-disaster mitigation 
loan and where does your business get the application?
123.408 How does your business apply for a pre-disaster mitigation 
loan?
123.409 Which pre-disaster mitigation loan requests will SBA 
consider for funding?
123.410 Which loan requests will SBA fund?
123.411 What if SBA determines that your business loan request meets 
the selection criteria of Sec.  123.409 but SBA is unable to fund it 
because SBA has already allocated all program funds?
123.412 What happens if SBA declines your business' pre-disaster 
loan request?

Subpart E--Pre-Disaster Mitigation Loans


Sec.  123.400  What is the Pre-Disaster Mitigation Loan Program?

    The Pre-Disaster Mitigation Loan Program allows SBA to make low 
interest, fixed rate loans to small businesses for the purpose of 
implementing mitigation measures to protect their commercial real 
property (building) or leasehold improvements or contents from disaster 
related damage. This program supports the Federal Emergency Management 
Agency (FEMA's) Pre-Disaster Mitigation Program. This pilot program is 
authorized for 5 fiscal years (October--September), from 2000 through 
2004, and has only been approved for limited funding. Therefore, 
approved loan requests are funded on a first come, first served basis 
up to the limit of program funds available (see Sec.  123.411).


Sec.  123.401  What types of mitigation measures can your business 
include in an application for a pre-disaster mitigation loan?

    To be included in a pre-disaster mitigation loan application, each 
of

[[Page 62338]]

your business' mitigation measures must satisfy the following criteria:
    (a) The mitigation measure, as described in the application, must 
serve the purpose of protecting your commercial real property 
(building) or leasehold improvements or contents from damage that may 
be caused by future disasters; and
    (b) The mitigation measure must conform to the priorities and goals 
of the State or local government's mitigation plan for the community in 
which the business subject to the measure is located. To show that this 
factor is satisfied your business must submit to SBA, as a part of your 
complete application, a written statement from a State or local 
emergency management coordinator confirming this fact (see Sec.  
123.408). Contact your regional FEMA office for a list of your State's 
emergency management coordinators or visit the FEMA Web site at http://www.fema.gov.


Sec.  123.402  Can your business include its relocation as a mitigation 
measure in an application for a pre-disaster mitigation loan?

    Yes, you may request a pre-disaster mitigation loan for the 
relocation of your business if:
    (a) Your commercial real property (building) is located in a SFHA 
(Special Flood Hazard Area); and
    (b) Your business relocates outside the SFHA but remains in the 
same participating pre-disaster mitigation community. Contact your 
regional FEMA office for a listing of communities participating in the 
Pre-Disaster Mitigation Program and SFHAs or visit the FEMA Web site at 
http://www.fema.gov.


Sec.  123.403  When is your business eligible to apply for a pre-
disaster mitigation loan?

    To be eligible to apply for a pre-disaster mitigation loan your 
business must meet each of the following criteria:
    (a) Your business, which is the subject of the pre-disaster 
mitigation measure, must be located in a participating pre-disaster 
mitigation community. Each State, the District of Columbia, Puerto 
Rico, and the Virgin Islands have at least one participating pre-
disaster mitigation community. Contact your regional FEMA office to 
find out the locations of participating pre-disaster mitigation 
communities or visit the FEMA Web site at http://www.fema.gov.;
    (b) If your business is proposing a mitigation measure that 
protects against a flood hazard, the location of your business which is 
the subject of the mitigation measure must be located in a Special 
Flood Hazard Area (SFHA). Contact your FEMA regional office to find out 
the locations of SFHAs or visit the FEMA Web site at http://www.fema.gov.;
    (c) As of the date your business submits a complete Pre-Disaster 
Mitigation Small Business Loan Application to SBA (see Sec.  123.408 
for what SBA's considers to be a complete application), your business, 
along with its affiliates, must be a small business concern as defined 
in part 121 of this chapter. The definition of small business concern 
encompasses sole proprietorships, partnerships, corporations, limited 
liability entities, and other legal entities recognized under State 
law;
    (d) Your business, which is the subject of the mitigation measure, 
must have operated as a business in its present location for at least 
one year before submitting its application;
    (e) Your business, along with its affiliates and owners, must not 
have the financial resources to fund the proposed mitigation measures 
without undue hardship. SBA makes this determination based on the 
information your business submits as a part of its application; and
    (f) If your business is owning and leasing out real property, the 
mitigation measures must be for protection of a building leased 
primarily for commercial rather than residential purposes (SBA will 
determine this based upon a comparative square footage basis).


Sec.  123.404  When is your business ineligible to apply for a pre-
disaster mitigation loan?

    Your business is ineligible to apply for a pre-disaster mitigation 
loan if your business (including its affiliates) satisfies any of the 
following conditions:
    (a) Any of your business' principal owners is presently 
incarcerated, or on probation or parole following conviction of a 
serious criminal offense, or has been indicted for a felony or a crime 
of moral turpitude;
    (b) Your business' only interest in the business property is in the 
form of a security interest, mortgage, or deed of trust;
    (c) The building, which is the subject of the mitigation measure, 
was newly constructed or substantially improved on or after February 9, 
1989, and (without significant business justification) is located 
seaward of mean high tide or entirely in or over water;
    (d) Your business is an agricultural enterprise. Agricultural 
enterprise means a business primarily engaged (see Sec.  121.107 of 
this chapter) in the production of food and fiber, ranching and raising 
of livestock, aquaculture and all other farming and agriculture-related 
industries. Sometimes a business is engaged in both agricultural and 
non-agricultural business activities. If the primary business activity 
of your business is not an agricultural enterprise, it may apply for a 
pre-disaster mitigation loan, but loan proceeds may not be used, 
directly or indirectly, for the benefit of the agricultural activities;
    (e) Your business is engaged in any illegal activity;
    (f) Your business is a government owned entity (except for a 
business owned or controlled by a Native American tribe);
    (g) Your business presents live performances of a prurient sexual 
nature or derives directly or indirectly more than de minimis gross 
revenue through the sale of products or services, or the presentation 
of any depictions or displays, of a prurient sexual nature;
    (h) Your business engages in lending, multi-level sales 
distribution, speculation, or investment (except for real estate 
investment with property held for commercial rental);
    (i) Your business is a non-profit or charitable concern;
    (j) Your business is a consumer or marketing cooperative;
    (k) Your business derives more than one-third of its gross annual 
revenue from legal gambling activities;
    (l) Your business is a loan packager that earns more than one-third 
of its gross annual revenue from packaging SBA loans;
    (m) Your business principally engages in teaching, instructing, 
counseling, or indoctrinating religion or religious beliefs, whether in 
a religious or secular setting; or
    (n) Your business is primarily engaged in political or lobbying 
activities.


Sec.  123.405  How much can your business borrow with a pre-disaster 
mitigation loan?

    Your business, together with its affiliates, may borrow up to 
$50,000 each fiscal year. This loan amount may be used to fund only 
those projects that were a part of your business' approved loan 
request. SBA will consider mitigation measures costing more than 
$50,000 per year if your business can identify, as a part of its Pre-
Disaster Mitigation Small Business Loan Application, sources that will 
fund the cost above $50,000.


Sec.  123.406  What is the interest rate on a pre-disaster mitigation 
loan?

    The interest rate on a pre-disaster mitigation loan will be fixed 
at 4 percent per annum or less. The exact

[[Page 62339]]

interest rate will be stated in the Federal Register notice announcing 
each filing period (see Sec.  123.407).


Sec.  123.407  When does your business apply for a pre-disaster 
mitigation loan and where does your business get an application?

    SBA will publish a notice in the Federal Register announcing the 
availability of pre-disaster mitigation loans. The notice will 
designate a 30-day application filing period with a specific opening 
date and filing deadline, as well as the locations for obtaining and 
filing loan applications. In addition to the Federal Register, SBA will 
coordinate with FEMA, and will issue press releases to the local media 
to inform potential loan applicants where to obtain loan applications. 
SBA will not accept any applications postmarked after the filing 
deadline; however, SBA may announce additional application periods each 
year depending on the availability of program funds.


Sec.  123.408  How does your business apply for a pre-disaster 
mitigation loan?

    To apply for a pre-disaster mitigation loan your business must 
submit a complete Pre-Disaster Mitigation Small Business Loan 
Application (application) within the announced filing period. Complete 
applications mailed to SBA and postmarked within the announced filing 
period will be accepted. The complete application serves as your 
business' loan request. A complete application supplies all of the 
filing requirements specified on the application form including a 
written statement from the local or State coordinator confirming:
    (a) The business that is the subject of the mitigation measure is 
located within the participating pre-disaster mitigation community; and
    (b) The mitigation measure is in accordance with the specific 
priorities and goals of the local participating pre-disaster mitigation 
community in which the business is located. (The local or State 
coordinator's written statement does not constitute an endorsement or 
technical approval of the project and is not a guarantee that the 
project will prevent damage in future disasters).


Sec.  123.409  Which pre-disaster mitigation loan requests will SBA 
consider for funding?

    (a) SBA will consider a loan request for funding if, after 
reviewing a complete application, SBA determines that it meets the 
following selection criteria:
    (1) Your business satisfies the requirements of Sec. Sec.  123.401, 
123.402 and 123.403;
    (2) None of the conditions specified in Sec.  123.404 apply to your 
business, its affiliates, or principal owners;
    (3) Your business has submitted a reasonable cost estimate for the 
proposed mitigation measure and has chosen to undertake a mitigation 
measure that is likely to accomplish the desired mitigation result 
(SBA's determination of this point is not a guaranty that the project 
will prevent damage in future disasters);
    (4) Your business is creditworthy; and
    (5) There is a reasonable assurance of loan repayment in accordance 
with the terms of a loan agreement.
    (b) SBA will notify you in writing if your loan request does not 
meet the criteria in this section.


Sec.  123.410  Which loan requests will SBA fund?

    SBA will date stamp each application (loan request) as it is 
received. SBA will fund loan requests which meet the selection criteria 
specified in Sec.  123.409 on a first come, first served basis using 
this date stamp, until it has allocated all available program funds. 
Multiple applications received on the same day will be ranked by a 
computer based random selection system to determine their funding 
order. SBA will notify you in writing of its funding decision.


Sec.  123.411  What if SBA determines that your business loan request 
meets the selection criteria of Sec.  123.409 but SBA is unable to fund 
it because SBA has already allocated all program funds?

    If SBA determines that your business' loan request meets the 
selection criteria of Sec.  123.409 but we are unable to fund it 
because we have already allocated all available program funds, your 
request will be given priority status, based on the original acceptance 
date, once more program funds become available. However, if more than 6 
months pass since SBA determined to fund your request, SBA may request 
updated or additional financial information.


Sec.  123.412  What happens if SBA declines your business' pre-disaster 
mitigation loan request?

    If SBA declines your business' loan request, SBA will notify your 
business in writing giving specific reasons for decline. If your 
business disagrees with SBA's decision, it may respond in accordance 
with Sec.  123.13. If SBA reverses its decision, SBA will use the date 
it received your business' last request for reconsideration or appeal 
as the basis for determining the order of funding.

    Dated: July 12, 2002.
Hector V. Barreto,
Administrator.
[FR Doc. 02-25143 Filed 10-4-02; 8:45 am]
BILLING CODE 8025-01-P