[Federal Register Volume 82, Number 198 (Monday, October 16, 2017)]
[Rules and Regulations]
[Pages 47958-47959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22385]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
Express Bridge Loan Pilot Program; Modification of Lending
Criteria
AGENCY: U.S. Small Business Administration.
ACTION: Notification of Express Bridge Loan Pilot Program and impact on
regulatory provision.
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SUMMARY: The U.S. Small Business Administration (SBA) announces SBA's
Express Bridge Loan Pilot Program (Express Bridge Pilot), as described
in this document, and its impact on an Agency regulation relating to
loan underwriting for loans made under the Express Bridge Pilot. This
pilot will provide expedited guaranteed bridge loan financing for
disaster-related purposes to small businesses located in communities
impacted by a Presidentially-declared disaster, while those small
businesses apply for and await long-term financing (including through
SBA's direct disaster loan program, if eligible). The modification of
the lending criteria will minimize the burden on businesses applying
for loans through the Express Bridge Pilot and provide an incentive for
SBA Express lenders to participate in the pilot.
DATES: The Express Bridge Pilot, including the modification of lending
criteria under 13 CFR 120.150, will be available from October 16, 2017,
through September 30, 2020.
FOR FURTHER INFORMATION CONTACT: Dianna Seaborn, Director, Office of
Financial Assistance, U.S. Small Business Administration, 409 Third
Street SW., Washington, DC 20416; Telephone (202) 205-3645; email
address: [email protected].
SUPPLEMENTARY INFORMATION: Pursuant to its authority under the Small
Business Act, SBA provides assistance to small businesses located in
the communities affected by Presidentially-declared disasters. The
Agency has announced an initiative called the Express Bridge Pilot,
which is designed to supplement the Agency's disaster response
capabilities. The Express Bridge Pilot will authorize the Agency's 7(a)
Lenders with SBA Express lending authority to deliver expedited SBA-
guaranteed financing on an emergency basis for disaster-related
purposes to small businesses located in these communities while the
businesses apply for and await long-term financing (including through
SBA's direct disaster loan program, if eligible).
The Express Bridge Pilot will apply the policies and procedures in
place for the Agency's SBA Express program, except as outlined in this
document, and include the following:
(1) The maximum loan amount under the pilot is $25,000 and the
loans will carry a 50 percent guaranty from the Agency.
(2) Express Bridge Pilot loans in a particular disaster area can
only be made by SBA Express lenders that were participants in the SBA
Express program as of the date of the applicable disaster.
(3) Eligible small businesses are those that were located, as of
the date of the applicable disaster, in the counties that have been
Presidentially-declared as disaster areas, plus any contiguous
counties.
(4) SBA Express lenders may make loans under the Express Bridge
Pilot only to eligible small businesses that had an existing banking
relationship with the SBA Express lender as of the date of the
applicable disaster. A relationship with any of the SBA Express
lender's affiliates will not satisfy this requirement.
(5) SBA Express lenders must certify to SBA, for each Express
Bridge Pilot loan, that the loan funds will be used to support the
survival and/or reopening of the small business within the affected
counties.
(6) The maximum maturity for an Express Bridge Pilot loan is seven
years. The SBA Express lender may require a borrower to pay down or pay
off the Express Bridge Pilot loan if the borrower is approved for long-
term disaster financing (including an SBA direct disaster loan) that
allows proceeds to be used for Express Bridge Pilot loan reimbursement.
(7) Express Bridge Pilot loans cannot be sold in SBA's secondary
market. Express Bridge Pilot loans are intended to be interim loans,
thus SBA has determined pursuant to 13 CFR 120.612(a)(3) that the sale
of such loans in SBA's secondary market would not be conducive to the
successful operation of the secondary market program.
(8) Loans under the Express Bridge Pilot in a particular disaster
area can only be made up to six months after the date of the applicable
Presidential disaster declaration.
(9) The Express Bridge Pilot will be available for use starting
October 16, 2017, and will expire on September 30, 2020. Express Bridge
Pilot loans must be approved on or before such date, as evidenced by
the issuance of an SBA loan number.
To maximize the effectiveness of the Express Bridge Pilot, SBA is
modifying an Agency regulation (13 CFR 120.150) that applies to loans
made in the 7(a) Business Loan Program. (SBA uses the term ``modify''
as contemplated under 13 CFR 120.3.) This modification will also
minimize the burdens on the businesses applying for loans through the
Express Bridge Pilot and expand the opportunities for SBA Express
lenders to participate in the pilot.
Under Sec. 120.150 of SBA's regulations, a small business
applicant must be creditworthy and loans must be so sound as to
reasonably assure repayment. In making this determination, character,
reputation, credit history of the applicant and guarantors, past
earnings, projected cash flow, and future prospects, among other
things, must be considered. Currently, SBA Express lenders are
authorized to make the credit decision using credit analysis processes
and procedures (which may include credit scoring) that are consistent
with those used for their similarly-sized non-SBA guaranteed commercial
loans.
In order to streamline the loan underwriting process for the
Express Bridge Pilot, SBA is modifying the requirements of 13 CFR
120.150 to allow SBA Express lenders to underwrite Express Bridge Pilot
loans by considering only the following:
(1) A minimum acceptable credit score of 130 for the applicant
issued by E-Tran upon submission of the loan application for screening;
(2) a personal credit score for each guarantor; and
(3) Lender must obtain a signed IRS Form 4506-T and an IRS tax
transcript. For businesses in operation prior to the disaster but not
long enough to have been required to file a tax return, Lender must
provide an alternative to verify existence of the business.
The screening credit score is a FICO[supreg] Small Business Scoring
Service\SM\ Score. SBA may adjust the minimum acceptable credit score
up or down from time to time during the pilot, and will post any such
adjusted score on its Web site at www.sba.gov/for-lenders.
[[Page 47959]]
The modification of this regulation will allow SBA Express lenders
to expedite the processing of these small guaranteed loans in order to
provide immediate cash to assist the small business with rebuilding and
continuing or restarting its operations while awaiting long-term
disaster financing. Because an Express Bridge Pilot loan applicant must
have had an existing banking relationship with the SBA Express lender,
SBA expects this will help mitigate the risk associated with the
modification of 13 CFR 120.150. SBA Express lenders are cautioned that
the provisions of 13 CFR 120.140 (``What ethical requirements apply to
participants?'') continue to apply to the Express Bridge Pilot.
SBA's modification of 13 CFR 120.150 is authorized by 13 CFR 120.3
of its regulations, which provides that the SBA Administrator may
suspend, modify or waive rules for a limited period of time to test new
programs or ideas. This modification applies only to those loans made
under the Express Bridge Pilot and will last only for the duration of
the pilot, which expires September 30, 2020. As part of the Express
Bridge Pilot, this modification applies only to those small businesses
that were located, as of the date of the applicable disaster, in
counties that have been Presidentially-declared as disaster areas, plus
any contiguous counties. A listing of Presidentially-declared disaster
declarations, including primary and contiguous counties can be located
at www.sba.gov/disaster.
Not more than ten percent of the total number of 7(a) loans
guaranteed by SBA in any fiscal year may be made under the Express
Bridge Pilot. 15 U.S.C. 636(a)(25). While SBA does not expect the
number of Express Bridge Pilot loans to reach that limit, SBA will
provide public notice of the need to suspend lending under the pilot
for the remainder of the fiscal year if SBA determines that the number
of pilot loans is approaching the limit.
SBA will be using the following criteria to evaluate the Express
Bridge Pilot to determine how well it is achieving its objectives and
other aspects of performance: (1) The measurable objectives to be
achieved through the Express Bridge Pilot, including the number of
small business concerns served, the percentage of Express Bridge Pilot
loans made that were paid off or paid down using lower fixed rate
disaster loans versus those that are held to term, and the default rate
on the Express Bridge Pilot loans compared to regular SBA Express loans
of similar size in the 7(a) portfolio; and (2) the costs and standards
of performance which, in order to be acceptable, must not impact the
subsidy model for the 7(a) Loan Program. The following method for data
collection will be used: All loans will be entered directly using E-
Tran or SBA One, which track eligibility by the county in which the
small business is located, and which will facilitate tracking of
performance on these loans.
Authority: 15 U.S.C. 636(a)(25); 13 CFR 120.3.
Dated: October 6, 2017.
Linda E. McMahon,
Administrator.
[FR Doc. 2017-22385 Filed 10-13-17; 8:45 am]
BILLING CODE 8025-01-P