[Federal Register Volume 75, Number 57 (Thursday, March 25, 2010)]
[Rules and Regulations]
[Pages 14331-14333]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-6430]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 123

RIN 3245-AF98


Disaster Assistance Loan Program

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

ACTION: Direct final rule.

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SUMMARY: SBA is amending its disaster assistance regulations to reflect 
statutory changes to the disaster assistance program contained in the 
Food, Conservation, and Energy Act of 2008 (the Farm Act). Except for 
several grammatical corrections, this direct final rule conforms the 
regulations to the Farm Act by adopting the new statutory requirements 
without change.

DATES: This rule is effective May 10, 2010 without further action, 
unless significant adverse comment is received by April 26, 2010. If 
significant adverse comment is received, SBA will publish a timely 
withdrawal of the rule in the Federal Register.

ADDRESSES: You may submit comments, identified by RIN 3245-AF98, 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: James E. Rivera, 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: Section 7(b) of the Small Business Act, 15 
U.S.C. 636(b), authorizes SBA to make long-term disaster loans to 
homeowners, renters, businesses, and non-profit organizations that have 
been adversely affected by a declared disaster. The Farm Act, Public 
Law 110-246, enacted June 18, 2008, amended the Small Business Act and 
authorized changes to make the disaster assistance program more 
accessible to disaster victims by raising the statutory loan limit for 
loans to businesses, increasing the collateral threshold, and amending 
the basis for calculation of eligibility for post-disaster mitigation 
funds. The legislation also amended the statutory definition of 
disaster to include ice storms and blizzards, deferred the additional 
payment on net earnings for certain business loans for five years, and 
extended eligibility for economic injury disaster loan assistance to 
non-profit organizations. Finally, the legislation amended the date for 
determining the applicant's status as a major source of employment for 
Military Reserve Economic Injury Disaster Loan applicants. The 
regulatory amendments described below reflect these statutory changes.

Section-by-Section Analysis

    SBA is amending section 123.11 to reflect that SBA will not require 
a borrower to pledge collateral on a disaster home loan or a physical 
disaster business loan of $14,000 or less. The present threshold is 
$10,000, so the Farm Act raised the amount by $4,000. As contemplated 
by the statute, the regulation will also authorize the Administrator to 
increase the $14,000 threshold in the event of a major disaster.
    SBA is amending sections 123.202(a) and 123.202(b) to reflect the 
increased aggregate loan limit for businesses and non-profit 
organizations from $1.5 million to $2 million. The change applies to 
both physical and economic injury disaster loans to the same borrower, 
together with its affiliates. The loan limit may be waived if the 
borrower is a major source of employment as described in the section 
presently. SBA is adding a new paragraph (e) to section in 123.202 
which, as authorized by the Farm Act, states that a higher loan limit 
may be established by the Administrator for a particular disaster based 
on appropriate economic indicators for the region in which that 
disaster occurred.
    SBA is adding a new paragraph (c) to section 123.203(c) to describe 
the supplementary payment, based on a percentage of net earnings that 
may be required to reduce the balance of a disaster loan. To reflect 
the recent statutory changes, SBA specifies that the supplementary 
payment, if applicable, will not be due until 5 years after repayment 
of the loan commences. SBA is also correcting a grammatical error in 
the second sentence in section 123.203(a), by changing the word 
``have'' to ``has.''
    SBA is changing the method of calculating eligibility for 
additional loan funds for mitigation measures that would protect the 
damaged property from possible future disasters. Currently, eligibility 
is calculated based on the approved loan amount. The Farm Act 
authorizes SBA to calculate eligibility based on the verified loss 
amount instead. Accordingly, SBA is changing sections 123.105(a)(4), 
123.107 and 123.204 to reflect that, for mitigation purposes, the 
borrower can request an increase in the approved loan by the lesser of 
the cost of the mitigation measure or up to 20 percent of the verified 
loss before deducting compensation from other sources. For home loans 
only, to remain consistent with the regulatory limits placed on 
disaster home loan amounts generally, mitigation is limited to a 
maximum of

[[Page 14332]]

$200,000 in sections 123.105(a)(4) and 123.107.
    SBA is amending section 123.300 to designate private non-profit 
organizations as eligible for economic injury disaster loan assistance 
and to define an eligible private non-profit organization. SBA is 
adopting FEMA's definition of a private non-profit organization set 
forth in 44 CFR 206.221(f). For consistency, SBA is also amending 
section 123.301 to revise the eligibility exclusion for non-profit or 
charitable organizations to say that such organizations are ineligible 
unless they are an eligible private non-profit organization. SBA is 
also amending 123.300(b) to remove the exception for applications filed 
under declarations for hurricanes Katrina, Rita, and Wilma, since the 
declarations for these disasters have closed, and further applications 
are not anticipated. SBA is also correcting a spelling error in section 
123.300(b), changing ``principle'' to ``principal''.
    SBA is amending section 123.507 to amend the date used to determine 
if an applicant business qualifies as a major source of employment 
(MSE) for Military Reservist Economic Injury Disaster Loan (MREIDL) 
assistance. SBA may waive the $2 million limit for MREIDL assistance if 
the applicant is an MSE. The Farm Act authorizes SBA to waive the limit 
if the MREIDL applicant is an MSE, or if it has become an MSE as a 
result of changed economic circumstances. SBA has previously determined 
whether an applicant business qualified as an MSE based on its status 
on the date on which the disaster commenced. As a result of the Farm 
Act changes, SBA may make the determination based on the MREIDL 
applicant's status on or after the date the disaster commenced.
    The Farm Act also contained a statutory change that codifies SBA 
existing practice of treating ice storms and blizzards as disasters. 
Because ice storms and blizzards have previously qualified under SBA's 
existing regulations as disasters for purposes of both physical as well 
as economic injury disaster loan assistance, SBA has determined that no 
regulatory amendment is necessary to reflect this statutory change.
    Consideration of comments: SBA believes that this rule is routine 
and non-controversial since it merely 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)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
rule does not constitute a significant regulatory action under 
Executive Order 12866.

Executive Order 12988

    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.

Executive Order 13132

    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, SBA determines that this final 
rule has no federalism implications warranting preparation of a 
federalism assessment.

Paperwork Reduction Act

    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.

Regulatory Flexibility Act

    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. According 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 allows an agency to certify a rule in lieu of preparing an 
analysis, if the rulemaking is not expected to have a significant 
impact on a substantial number of small entities. This rule only makes 
conforming amendments to recent legislation on the disaster loan 
program, and does not implement new agency policies. Some of these 
amendments will affect small entities; however SBA certifies that these 
amendments will not have a significant economic impact on a substantial 
number of such entities.

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 SBA 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; Pub. L. 103-75, 107 Stat. 739; Pub. L. 106-50, 113 
Stat. 245; Pub. L. 110-246, 122 Stat. 1651.


0
2. Amend Sec.  123.11 by revising the first sentence of the 
introductory paragraph, and the second sentence of paragraph (a) 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 
$14,000 or less (or such higher amount as the Administrator determines 
appropriate in the event the President declares a major disaster), or 
an economic injury disaster loan of $5,000 or less. * * *
    (a) * * * In deciding whether collateral is required, SBA will add 
up all physical disaster loans to see if they exceed $14,000 and all 
economic injury disaster loans to see if they exceed $5,000.
* * * * *

0
3. Amend Sec.  123.105 by revising paragraph (a)(4) to read as follows:


Sec.  123.105  How much can I borrow with a home disaster loan and what 
limits apply on use of funds and repayment terms?

    (a) * * *
    (4) 20 percent of the verified loss (not including refinancing), 
before deduction compensation from other sources, up to a maximum of 
$200,000 (see Sec.  123.107).
* * * * *

0
4. Revise 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 request that the approved home disaster loan amount be 
increased by the lesser of the cost of the mitigation measure, or up to 
20 percent of the verified loss (before deducting compensation from 
other sources), to a maximum of $200,000.


0
5. Amend Sec.  123.202 by revising paragraphs (a), (b) introductory 
text,

[[Page 14333]]

(b)(1) and adding a new paragraph (e) to read as follows:


Sec.  123.202  How much can my business borrow with a physical disaster 
loan?

    (a) Disaster business loans, including both physical disaster and 
economic injury loans to the same borrower, together with its 
affiliates, cannot exceed the lesser of the uncompensated physical loss 
and economic injury or $2 million. Physical disaster loans may include 
amounts to meet current building code requirements. If your business is 
a major source of employment, SBA may waive the $2 million limitation. 
A major source of employment is a business concern that has one or more 
locations in the disaster area, on or after the date of the disaster, 
which:
* * * * *
    (b) SBA will consider waiving the $2 million loan limit for a major 
source of employment only if:
    (1) Your damaged location or locations are out of business or in 
imminent danger of going out of business as a result of the disaster, 
and a loan in excess of $2 million is necessary to reopen or keep open 
the damaged locations in order to avoid substantial unemployment in the 
disaster area; and
* * * * *
    (e) The SBA Administrator may increase the $2 million loan limit 
for disaster business physical and economic injury loans under an 
individual disaster declaration based on appropriate economic 
indicators for the region(s) in which the disaster occurred. SBA will 
publish the increased loan amount in the Federal Register.


0
6. Amend Sec.  123.203 by revising the second sentence of paragraph (a) 
and adding new paragraph (c) to read as follows:


Sec.  123.203  What interest rate will my business pay on a physical 
disaster business loan and what are the repayment terms?

    (a) * * * If your business, together with its affiliates and 
principal owners, has credit elsewhere, your interest rate is set by a 
statutory formula, but will not exceed 8 percent per annum. * * *
* * * * *
    (c) For certain disaster business physical and economic injury 
loans, an additional payment, based on a percentage of net earnings, 
will be required to reduce the balance of the loan. This additional 
payment will not be required until 5 years after repayment begins.


0
7. Revise 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 request an increase in the approved physical disaster business 
loan by the lesser of the cost of the mitigation measure, or up to 20 
percent of the verified loss, before deducting compensation from other 
sources, to repair or replace your damaged business.


0
8. Amend Sec.  123.300 by revising paragraph (b), (c)(3) and adding new 
paragraph (d) to read as follows:


Sec.  123.300  Is my business eligible to apply for an economic injury 
disaster loan?

* * * * *
    (b) Economic injury disaster loans are available only if you were a 
small business (as defined in part 121 of this chapter) or a private 
non-profit organization when the declared disaster commenced, 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) * * *
    (3) Producer cooperatives; and
    (d) An eligible private non-profit organization is a non-
governmental agency or entity that currently has:
    (1) An effective ruling letter from the U.S. Internal Revenue 
Service, granting tax exemption under sections 510(c), (d), or (e) of 
the Internal Revenue Code of 1954, or
    (2) Satisfactory evidence from the State that the non-revenue 
producing organization or entity is a non-profit one organized or doing 
business under State law.


0
9. Amend Sec.  123.301 by revising paragraph (b) to read as follows:


Sec.  123.301  When would my business not be eligible to apply for an 
economic injury disaster loan?

* * * * *
    (b) A non-profit or charitable concern, other than a private non-
profit organization;
* * * * *

0
10. Amend Sec.  123.507 by revising the introductory paragraph and 
paragraph (a) 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 limit if you can certify 
to the following conditions and SBA approves of such certification 
based on the information supplied in your application:
    (a) Your small business is a major source of employment. A major 
source of employment is a business concern that, on or after the date 
of the disaster:
* * * * *

    Dated: March 5, 2010.
Karen G. Mills,
Administrator.
[FR Doc. 2010-6430 Filed 3-24-10; 8:45 am]
BILLING CODE 8025-01-P