[Federal Register Volume 85, Number 149 (Monday, August 3, 2020)]
[Notices]
[Pages 46775-46776]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16792]


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SMALL BUSINESS ADMINISTRATION


504 Debt Refinancing Without Expansion--Borrower's Contribution 
for Projects Involving Limited or Single Purpose Buildings During 
Recession

AGENCY: U.S. Small Business Administration.

ACTION: Notice.

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SUMMARY: The U.S. Small Business Administration (``SBA'') is announcing 
that, due to an economic recession as determined by the National Bureau 
of Economic Research, Borrowers in the 504 Loan Program may contribute 
not less than 10%, instead of not less than 15%, to Projects involving 
limited or special purpose buildings or structures when refinancing 
debt without expansion. The lower required contribution will be in 
effect until the first day of the calendar quarter following the end of 
the economic recession as determined by the National Bureau of Economic 
Research or its equivalent.

DATES: The lower required contribution will apply to applications 
submitted on or after August 3, 2020.

FOR FURTHER INFORMATION CONTACT: Linda Reilly, Chief, 504 Loan 
Division, (202) 205-9949, [email protected].

SUPPLEMENTARY INFORMATION: The 504 Loan Program is an SBA business loan 
program authorized under title V of the Small Business Investment Act 
of 1958, 15 U.S.C. 695 et seq. The core mission of the 504 Loan Program 
is to provide long-term financing to small businesses for the purchase 
or improvement of land, buildings, and major equipment, to promote the 
creation or retention of jobs and local economic development. Under the 
504 Loan Program, loans are provided to small businesses 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 with: 
A loan obtained from a private sector lender with a senior lien for at 
least 50% of the project cost (the ``Third Party Loan''); a loan 
obtained through a CDC (the ``504 Loan'') with a junior lien covering 
up to 40% of the total cost (funded through a 100% SBA-guaranteed 
debenture sold in private pooling transactions); and a contribution 
from the Borrower of at least 10% equity. However, for 504 Projects 
that involve limited or special purpose buildings or structures, the 
Borrower is required to contribute at least 15% equity to the Project.
    In accordance with 13 CFR 120.882(g), a Project in the 504 Loan 
Program may also be used to refinance debt where there is no expansion 
of the small business concern (``Refinancing Without Expansion 
Project''). Generally, if the Refinancing Without Expansion Project 
involves a limited or single purpose building or structure, the 
Borrower must contribute not less than 15% (excluding administrative 
costs) of the Project's costs, unless SBA determines, in its 
discretion, and publishes in the Federal Register that, due to an 
economic recession as determined by the National Bureau of Economic 
Research or its equivalent, Borrowers may contribute not less than 10% 
of the Project's costs during the recession. See 13 CFR 120.882(g)(5).

[[Page 46776]]

    On June 8, 2020, the National Bureau of Economic Research published 
a report by its Business Cycle Dating Committee, https://www.nber.org/cycles/june2020.html, in which it determined that a peak in monthly 
economic activity occurred in the U.S. economy in February 2020, and 
that this peak marked the end of the expansion that began in June 2009 
and the beginning of a recession. The report noted that the usual 
definition of a recession involves a decline in economic activity that 
lasts more than a few months but recognized that the pandemic and the 
public health response have resulted in a downturn with different 
characteristics and dynamics than prior recessions. The report 
concluded that ``the unprecedented magnitude of the decline in 
employment and production, and its broad reach across the entire 
economy, warrants the designation of this episode as a recession, even 
if it turns out to be briefer than earlier contractions.''
    Based on the National Bureau of Economic Research's determination, 
SBA is announcing in accordance with 13 CFR 120.882(g)(5) that, 
beginning with applications submitted on or after publication of this 
Notice, Borrowers may contribute not less than 10% of the costs for 
Refinancing Without Expansion Projects involving limited or special 
purpose buildings or structures. This lower percentage for the 
Borrower's contribution will remain in effect until the first day of 
the calendar quarter following the end of the economic recession as 
determined by the National Bureau of Economic Research or its 
equivalent. SBA will publish a notice in the Federal Register 
announcing the date on which the requirement of the lower Borrower 
contribution ended.

    Authority: 15 U.S.C. 696; 13 CFR 120.882.

Jovita Carranza,
Administrator.
[FR Doc. 2020-16792 Filed 7-31-20; 8:45 am]
BILLING CODE P