[Federal Register Volume 88, Number 91 (Thursday, May 11, 2023)]
[Notices]
[Pages 30379-30381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10055]


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SMALL BUSINESS ADMINISTRATION

[Docket No.: SBA-2023-0005]


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

AGENCY: Small Business Administration.

[[Page 30380]]


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.

DATES: 
    Applicability Date: The job creation or retention requirements that 
are described in this document will apply to all 504 loans that are 
approved under the 504 Loan Program on or after May 11, 2023.
    Comment Date: SBA must receive comments on or before June 12, 2023.

ADDRESSES: You may submit comments, identified by Docket No. SBA-2023-
0005, 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: Greg Suryadi, 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: Greg Suryadi, 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: Greg Suryadi, Finance and Loan 
Specialist, Office of Financial Assistance, U.S. Small Business 
Administration; telephone: (202) 205-6806; 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 (SBI Act), 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 SBI 
Act, 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 
SBI Act. 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 or retains jobs 
attributable to the Project. Section 501(e)(1) of the SBI Act required 
each 504 Project to create or preserve one job for every $65,000 
guaranteed by SBA; in the case of a small manufacturing Project, the 
amount was $100,000. Under section 501(e)(2) of the SBI Act, if the 
Project was eligible for financing under one of the objectives or goals 
set forth in section 501(d)(2) or (3), the Project did not need to 
satisfy the job creation or preservation criteria described section 
501(e) provided that the CDC's overall portfolio of outstanding 
debentures met or exceeded the job creation or preservation criteria of 
one job for every $65,000 guaranteed by SBA. In addition, under section 
501(e)(3) of the SBI Act, 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 did 
not have to average more than $75,000 per job created or retained. See 
section 501(e)(3) of the SBI Act. (Loans for Projects of small 
manufacturers are excluded from the overall portfolio calculations.)
    In 2018 SBA changed the job creation or retention requirements 
under the 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, and designated Opportunity Zones as additional 
areas for which the higher portfolio average described in section 
501(e)(3) of the SBI Act. See 83 FR 55224 (November 2, 2018). 
Consequently, under current requirements, to satisfy the economic 
development objectives or public policy goals set forth in sections 
501(d)(1) through (3) of the SBI Act, each 504 Project must create or 
preserve one job for every $75,000 guaranteed by SBA; in the case of a 
small manufacturing Project, the amount is $120,000. Further, under 
current requirements, 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 in section 501(e)(1) provided that the CDC's overall 
portfolio of outstanding debentures meets or exceeds the job creation 
or preservation criteria of one job for every $75,000 guaranteed by 
SBA. Finally, under current requirements, 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, which 
include Opportunity Zones (as described by section 13823 of the Tax 
Cuts and Jobs Act of 2017, Public Law 115-97), the CDC's portfolio may 
average not more than $85,000 per job created or retained.
    The SBI Act authorizes SBA to develop the job creation or job 
preservation criteria that apply to the 504 Loan Program. See section 
501(d) of SBI Act. 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).
    Although the job creation or retention standards for the 504 Loan 
Program have not been increased since 2018, the Consumer Price Index 
for All Urban Consumers has increased 19% from 2018 through January 
2023 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 $90,000 
guaranteed by SBA except that, in the case of a Project of a small 
manufacturer or a project that meets an energy public policy goal, the 
Project must create or

[[Page 30381]]

retain one Job Opportunity per $140,000 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 $90,000 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 (which include Opportunity Zones), the CDC's 
portfolio may average not more than $100,000 per job created or 
retained.
    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-2023-
0005'' 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.

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2023-10055 Filed 5-10-23; 8:45 am]
BILLING CODE 8026-09-P