[Federal Register Volume 73, Number 185 (Tuesday, September 23, 2008)]
[Rules and Regulations]
[Pages 54673-54675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-21995]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 123

RIN 3245-AF78


Military Reservist Economic Injury Disaster Loans

AGENCY: U.S. Small Business Administration.

ACTION: Direct final rule.

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SUMMARY: SBA makes economic injury disaster loans to small businesses 
that have been adversely affected by specific events. If a small 
business has an essential employee or owner who is a member of a 
reserve component of the

[[Page 54674]]

Armed Forces, the Small Business Act authorizes SBA to provide Military 
Reservist Economic Injury Disaster Loan (MREIDL) assistance in the 
event that the essential employee or owner is called to active duty 
during a period of military conflict. Recent legislation authorized 
changes to make the program more accessible to affected small 
businesses by extending the application period, increasing the 
unsecured loan threshold, increasing the maximum loan limit and 
expediting processing of the application. This Direct Final Rule will 
implement these legislative changes.

DATES: This rule is effective on October 28, 2008 without further 
action, unless SBA receives a significant adverse comment by October 
23, 2008. If SBA receives any significant adverse comments, the Agency 
will publish a timely withdrawal of the subject portion of this rule in 
the Federal Register.

ADDRESSES: You may submit comments, identified by RIN 3245-AF78, by any 
of the following methods: (1) Federal Rulemaking Portal: http://www.regulations.gov, following the specific instructions for submitting 
comments; (2) Fax (202) 481-2226; or e-mail: [email protected]; 
or (3) Mail/Hand Delivery/Courier: Herbert L. Mitchell, Associate 
Administrator for Disaster Assistance, 409 3rd Street, SW., Washington, 
DC 20416.

FOR FURTHER INFORMATION CONTACT: Roger B. Garland, Office of Disaster 
Assistance, 202-205-6734 or [email protected].

SUPPLEMENTARY INFORMATION: SBA is amending Part 123 of Title 13 of the 
CFR to reflect the recent changes to the Small Business Act (Act) 
contained in Public Law 110-186, enacted on February 14, 2008 
(Legislation), which broaden SBA's authority to make MREIDL assistance 
to otherwise eligible small businesses, and also Public Law 110-234, 
enacted on May 22, 2008, which increases the maximum MREIDL limit from 
$1.5 million to $2.0 million.
    SBA's MREIDL financing is available to small businesses that have 
suffered substantial economic injury as a result of a declared 
disaster, or the call-up to active duty of an essential employee as a 
result of military conflict. A business incurs substantial economic 
injury if it is unable to meet its obligations as they mature or it is 
unable to pay its ordinary and necessary operating expenses. Neither 
loss of anticipated profits nor a drop in sales is considered to be 
substantial economic injury for MREIDL purposes.
    To reflect changes made by the Legislation, SBA is adding a new 
second sentence in the introductory text of section 123.11 to reflect 
that for purposes of MREIDL, as described in section 123.513, SBA will 
generally not require that the business pledge collateral to secure a 
loan of $50,000 or less.
    To reflect changes made by the Legislation, SBA is changing section 
123.503 to reflect that a small business can apply for a MREIDL before 
the essential employee receives call-up orders. The business may apply 
from the date the essential employee receives a notice of expected 
call-up and ending one year (an increase from 90 days) after the 
employee is discharged or released from active duty. In addition, the 
section is amended to show that the Associate Administrator for 
Disaster Assistance (or designee) (AA/DA) may extend the one year limit 
for no more then one additional year after finding extraordinary or 
unforeseeable circumstances.
    To reflect changes made by the Legislation, section 123.504(a) is 
amended to reflect that a MREIDL application shall include the 
essential employee's notice of expected call-up or official call-up 
orders.
    To reflect changes made by the Legislation, section 123.511 is 
amended to add a sentence stating that funds will only be disbursed 
after the essential employee has been called to active duty.
    SBA is adding a new section 123.513 to reflect the statutory change 
which provides that SBA will not generally require the business to 
pledge collateral to secure a MREIDL of $50,000 or less. For loans 
larger than $50,000, the business will be required to provide available 
collateral. The new section makes clear that SBA will not decline a 
loan if the business lacks a particular amount of collateral so long as 
SBA is reasonably sure that the business can repay the loan.
    In addition, Public Law 110-234, effective May 22, 2008, increased 
the SBA MREIDL limit from $1.5 million to $2 million. SBA is amending 
sections 123.506 and 123.507 to reflect this statutory change.
    SBA is also making a technical correction in section 123.3. There 
are five ways in which disaster declarations are made, and these are 
described in section 123.3. However, the first sentence of that section 
refers to four ways. SBA is correcting the first sentence in section 
123.3 to state that there are five ways in which disaster declarations 
are made.

Consideration of Comments

    This is a direct final rule and SBA will review all comments. SBA 
believes that this rule is routine and non-controversial since it 
implements changes required by statute, and SBA anticipates no 
significant adverse comments to this rulemaking. If SBA receives any 
significant adverse comments, it will publish a timely withdrawal of 
this direct final rule.

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

    The Office of Management and Budget (OMB) has determined that this 
rule does not constitute a significant regulatory action under 
Executive Order 12866.
    This action meets applicable standards set forth in sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have retroactive or preemptive effect.
    The final rule will not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, or the distribution of power and responsibilities among the 
various levels of government. Therefore, for the purposes of Executive 
Order 13132, Federalism, SBA determines that this final rule has no 
federalism implications warranting preparation of a federalism 
assessment.
    SBA has determined that this final rule does not impose additional 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act, 44 U.S.C., Chapter 35.
    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small entities, including small businesses. Pursuant to the RFA, when 
an agency issues a rule, the agency must prepare an analysis to 
determine whether the impact of the rule will have a significant 
economic impact on a substantial number of small entities. However, the 
RFA requires analysis of a rule only where notice and comment 
rulemaking are required. Rules are exempt from Administrative Procedure 
Act (APA) notice and comment requirements and therefore from the RFA 
requirements when the agency for good cause finds (and incorporates the 
finding and brief statement of reasons in the rules issued) that notice 
and public procedure thereon is impracticable, unnecessary, or contrary 
to the public interest. In this case it would be impracticable given 
the emergency nature of the recent legislation authorizing the new 
requirements.

[[Page 54675]]

List of Subjects in 13 CFR Part 123

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

0
For the reasons set forth in the preamble, the Small Business 
Administration amends 13 CFR part 123 as follows:

PART 123--DISASTER LOAN PROGRAM

0
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; and Pub. L. 110-186.


0
2. Amend Sec.  123.3(a) by revising the first sentence to read as 
follows:


Sec.  123.3  How are disaster declarations made?

    (a) There are five ways in which disaster declarations are issued 
which make SBA disaster loans possible:
* * * * *

0
3. Revise Sec.  123.11, introductory text, to read as follows:


Sec.  123.11  Does SBA require collateral for any of its disaster 
loans?

    Generally, SBA will not require that you pledge collateral to 
secure a disaster home loan or a physical disaster business loan of 
$10,000 or less, or an economic injury disaster loan of $5,000 or less. 
However, for the purposes of the Military Reservist EIDL only, as 
described in section 123.513, SBA will not generally require that you 
pledge collateral to secure a loan of $50,000 or less. For loans larger 
than these amounts, you will be required to provide available 
collateral such as a lien on the damaged or replacement property, a 
security interest in personal property, or both.
* * * * *

0
4. Revise the heading of Sec.  123.501 to read as follows:


Sec.  123.501  Under what circumstances is your business eligible to be 
considered for a Military Reservist Economic Injury Disaster Loan?

* * * * *

0
5. Revise the heading of Sec.  123.502 to read as follows:


Sec.  123.502  Under what circumstances is your business ineligible to 
be considered for a Military Reservist Economic Injury Disaster Loan?

* * * * *

0
6. Revise Sec.  123.503 to read as follows:


Sec.  123.503  When can you apply for a Military Reservist EIDL?

    Your small business can apply for a Military Reservist EIDL any 
time beginning on the date your essential employee receives notice of 
expected call-up and ending one year after the date the essential 
employee is discharged or released from active duty. The Associate 
Administrator for Disaster Assistance (AA/DA) or designee may extend 
the one year limit by no more then one additional year after finding 
extraordinary or unforeseeable circumstances.
* * * * *

0
7. Revise Sec.  123.504(a) to read as follows:


Sec.  123.504  How do you apply for a Military Reservist EIDL?

* * * * *
    (a) A copy of the essential employee's official call-up orders for 
active duty showing the date of call-up, and, if known, the date of 
release from active duty. For an essential employee who expects to be 
called up and who has not received official call-up orders, the 
application shall include the notice of the expected call-up including, 
if known, the expected date of call-up and expected date of release 
from active duty;
* * * * *

0
8. Revise Sec.  123.506 to read as follows:


Sec.  123.506  How much can you borrow under the Military Reservist 
EIDL Program?

    You can borrow an amount equal to the substantial economic injury 
you have suffered or are likely to suffer until normal operations 
resume as a result of the absence of one or more essential employees 
called to active duty, up to a maximum of $2 million.

0
9. Revise the heading of Sec.  123.507, the introductory text and 
paragraph (b) to read as follows:


Sec.  123.507  Under what circumstances will SBA consider waiving the 
$2 million loan limit?

    SBA will consider waiving the $2 million dollar limit if you can 
certify to the following conditions and SBA approves of such 
certification based on the information supplied in your application:
* * * * *
    (b) Your small business is in imminent danger of going out of 
business as a result of one or more essential employees being called up 
to active duty during a period of military conflict, and a loan in 
excess of $2 million is necessary to reopen or keep open the small 
business; and
* * * * *

0
10. Revise Sec.  123.511 to read as follows:


Sec.  123.511  How will SBA disburse Military Reservist EIDL funds?

    Funds will be disbursed only after the essential employee has been 
called to active duty, and you have provided a copy of the essential 
employee's official call-up orders for active duty showing the date of 
the call-up. SBA will disburse your funds in quarterly installments 
(unless otherwise specified in your loan authorization agreement) based 
on a continued need as demonstrated by comparative financial 
information. On or about 30 days before your scheduled fund 
disbursement, SBA will request ordinary and usual financial statements 
(including balance sheets and profit and loss statements). Based on 
this information, SBA will assess your continued need for disbursements 
under this program. Upon making such assessment, SBA will notify you of 
the status of future disbursements.

0
11. Add Sec.  123.513 to read as follows:


Sec.  123.513  Does SBA require collateral on its Military Reservist 
EIDL?

    SBA will not generally require you to pledge collateral to secure a 
Military Reservist EIDL of $50,000 or less. For loans larger than 
$50,000, you will be required to provide available collateral such as a 
lien on business property, a security interest in personal property, or 
both. SBA will not decline a loan if you do not have a particular 
amount of collateral so long as SBA is reasonably sure that you can 
repay the loan. If you refuse to pledge the available collateral when 
requested by SBA, however, SBA may decline or cancel your loan.

Sandy K. Baruah,
Acting Administrator.
[FR Doc. E8-21995 Filed 9-22-08; 8:45 am]
BILLING CODE 8025-01-P