[Federal Register Volume 83, Number 213 (Friday, November 2, 2018)]
[Notices]
[Pages 55224-55226]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24033]


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SMALL BUSINESS ADMINISTRATION

[Docket No.: SBA-2018-0010]


Development Company Loan Program--Job Creation and Retention 
Requirements; Additional Areas for Higher Portfolio Average

AGENCY: U.S. Small Business Administration.

ACTION: Notification of changes to Development Company Program; request 
for comments.

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SUMMARY: The Small Business Administration (SBA) is changing the job 
creation or retention requirements under its Development Company Loan 
Program (504 Loan Program) by increasing the dollar amounts used in 
calculating the number of jobs that must be created or retained for 
each 504 Project and for the portfolio average of each Certified 
Development Company. In addition, SBA is designating additional areas 
for application of the higher portfolio average.

DATES: Applicability Date: The job creation or retention requirements 
and the designation of the additional areas that are described in this 
document will apply to all 504 loans that are approved

[[Page 55225]]

under the 504 Loan Program on or after November 2, 2018.
    Comment Date: SBA must receive comments on or before December 3, 
2018.

ADDRESSES: You may submit comments, identified by Docket No. SBA-2018-
0010, by any of the following methods: (1) Federal eRulemaking Portal: 
https://www.regulations.gov, following the instructions for submitting 
comments; or (2) Mail/Hand Delivery/Courier: Babak Hosseini, Finance 
and Loan Specialist, Office of Financial Assistance, U.S. Small 
Business Administration, 409 3rd Street SW, Washington DC 20416.
    SBA will post all comments on https://www.regulations.gov. If you 
wish to submit confidential business information (CBI) as defined in 
the User Notice at https://www.regulations.gov, you must submit such 
information to U.S. Small Business Administration, 409 3rd Street SW, 
Washington, DC 20416, Attn: Babak Hosseini, Finance and Loan 
Specialist; or send an email to [email protected]. Highlight the 
information that you consider to be CBI and explain why you believe SBA 
should hold this information as confidential. SBA will review your 
information and determine whether it will make the information public.

FOR FURTHER INFORMATION CONTACT: Babak Hosseini, Finance and Loan 
Specialist, Office of Financial Assistance, U.S. Small Business 
Administration; telephone: 202-205-7076; email: [email protected].

SUPPLEMENTARY INFORMATION: The 504 Loan Program is an SBA financing 
program authorized under Title V of the Small Business Investment Act 
of 1958 (the SBIAct), 15 U.S.C. 695 et seq. The purpose of the 504 Loan 
Program is to foster economic development and to create or preserve job 
opportunities in both urban and rural areas by providing long-term 
financing for small business concerns. See section 501(a) of the 
SBIAct, 15 U.S.C. 695(a). Under the 504 Loan Program, loans are made to 
small business applicants by Certified Development Companies (CDCs), 
which are certified and regulated by SBA to promote economic 
development within their community. In general, a project in the 504 
Loan Program (a 504 Project) is financed through: A loan obtained from 
a private sector lender with a senior lien covering at least 50 percent 
of the project cost; a loan obtained from a CDC (a 504 Loan) with a 
junior lien covering up to 40 percent of the total cost (backed by a 
100 percent SBA-guaranteed debenture); and a contribution from the 
Borrower of at least 10 percent equity.
    To qualify for financing under the 504 Loan Program, each 504 
Project must satisfy one of the economic development objectives or 
public policy goals set forth in sections 501(d)(1) through (3) of the 
SBIAct. Under section 501(d)(1), a Project is eligible for 504 
financing if it creates job opportunities within two years of 
completion of the Project or if it preserves jobs attributable to the 
Project. To satisfy this objective under current requirements, each 504 
Project must create or preserve one job for every $65,000 guaranteed by 
SBA; in the case of a small manufacturing Project, the amount is 
$100,000. See section 501(e)(1) of the SBIAct and 74 FR 16432 (April 
10, 2009).
    If the Project is eligible for financing under one of the 
objectives or goals set forth in section 501(d)(2) or (3), the Project 
need not satisfy the job creation or preservation criteria described 
above, but the CDC's overall portfolio of outstanding debentures must 
meet or exceed the job creation or preservation criteria of one job for 
every $65,000 guaranteed by SBA. See section 501(e)(2) of the SBIAct 
and 74 FR 16432 (April 10, 2009). In addition, for projects in Alaska, 
Hawaii, State-designated enterprise zones, empowerment zones and 
enterprise communities, labor surplus areas (as determined by the 
Secretary of Labor), and for other areas designated by SBA, the CDC's 
portfolio may average not more than $75,000 per job created or 
retained. See section 501(e)(3) of the SBIAct; 74 FR 16432 (April 10, 
2009). (Loans for Projects of small manufacturers are excluded from the 
overall portfolio calculations.)
    In the application for a loan under the 504 Loan Program, the 
borrower enters the number of jobs to be created or retained as a 
result of the Project and the CDC verifies that the Project meets the 
job creation or retention requirements. In addition, the job impact 
data is entered into SBA's database, and the application data combined 
with data from annual CDC reports is used to report the total number of 
jobs created or retained.
    The SBIAct authorizes SBA to develop the job creation or job 
preservation criteria that apply to the 504 Loan Program. See section 
501(d) of SBIAct (last freestanding paragraph after paragraph 
501(d)(3)(L)). SBA's regulations provide that ``[a] Project must create 
or retain one Job Opportunity per an amount of 504 loan funding that 
will be specified by SBA from time to time in a Federal Register 
notice.'' 13 CFR 120.861. SBA's regulations also provide that ``[a] 
CDC's portfolio must maintain a minimum average of one Job Opportunity 
per an amount of 504 loan funding that will be specified by SBA from 
time to time in a Federal Register notice.'' 13 CFR 120.829(a).
    The standard of one job for every $65,000 guaranteed by SBA, which 
applies to both individual Projects and to the CDC's overall portfolio 
average, has been in effect since it was adopted in 2009. See section 
504(b) of the American Recovery and Reinvestment Act of 2009, Public 
Law 111-5. In addition, the standards for both (1) Projects of small 
manufacturers, and (2) Projects in Alaska, Hawaii, State-designated 
enterprise zones, empowerment zones and enterprise communities, labor 
surplus areas (as determined by the Secretary of Labor), and other 
areas designated by the Administrator of SBA, have not been changed 
since they were first enacted in 2004 by section 105 of the Small 
Business Reauthorization and Manufacturing Assistance Act of 2004, 
Public Law 108-447. For small manufacturing Projects, the standard is 
one job for every $100,000 guaranteed by SBA; for Projects in Alaska, 
Hawaii and other designated areas, the standard is that the CDC's 
portfolio may average not more than $75,000 per job created or 
retained.
    Although the job creation or retention standards for the 504 Loan 
Program have not been increased since 2009, and in some cases earlier, 
the Consumer Price Index for All Urban Consumers has increased 19% from 
2009 through August 2018 according to the Bureau of Labor Statistics of 
the U.S. Department of Labor. Accordingly, pursuant to 13 CFR 
120.829(a) and 120.861, SBA is modifying the Job Opportunity 
requirements as follows:
    (1) A Project must create or retain one Job Opportunity per $75,000 
guaranteed by SBA except that, in the case of a Project of a small 
manufacturer, the Project must create or retain one Job Opportunity per 
$120,000 guaranteed by SBA;
    (2) For Projects that are eligible under 13 CFR 120.862, ``Other 
economic development objectives,'' a CDC's portfolio must reflect an 
average of one Job Opportunity for every $75,000 guaranteed by SBA; and
    (3) For Projects in Alaska, Hawaii, State-designated enterprise 
zones, empowerment zones and enterprise communities, labor surplus 
areas (as determined by the Secretary of Labor), and for other areas 
designated by SBA, the CDC's portfolio may average not more than 
$85,000 per job created or retained.
    In addition, pursuant to section 501(e)(3) of the SBIAct, 15 U.S.C.

[[Page 55226]]

695(e)(3), SBA is designating ``Opportunity Zones'' as additional areas 
for which the higher portfolio average described in paragraph (3) above 
would apply. An Opportunity Zone is an economically distressed 
community that has been nominated by the State and certified by the 
Secretary of the U.S. Treasury as a community in which new investments, 
under certain conditions, may be eligible for preferential tax 
treatment. More information and a list of Opportunity Zones for all 
States are available at https://www.cdfifund.gov/Pages/Opportunity-Zones.aspx.
    SBA has determined that the changes described in this Notice should 
apply immediately to any 504 Loan that is approved on or after November 
2, 2018 in order to give CDCs and small business applicants the 
benefits of these changes as soon as possible and because neither the 
new job creation/retention requirements nor the additional areas 
designated for application of the higher portfolio average will 
adversely affect either CDCs or their small business applicants.
    SBA invites public comments on these new job creation or 
preservation standards and the designation of additional areas for 
application of the higher portfolio average described above. Please 
clearly identify paper and electronic comments as ``Public Comments on 
504 Loan Program's Job Opportunity Requirements, Docket No. SBA-2018-
0010'' and submit them by one of the methods identified in the 
ADDRESSES section of this document. SBA will consider the comments and 
determine whether any revisions are necessary.

    Authority: 15 U.S.C. 695(d); 13 CFR 120.829(a) and 120.861.

    Dated: October 29, 2018.
Linda E. McMahon,
Administrator.
[FR Doc. 2018-24033 Filed 11-1-18; 8:45 am]
 BILLING CODE 8025-01-P