[Federal Register Volume 60, Number 15 (Tuesday, January 24, 1995)]
[Proposed Rules]
[Pages 4574-4576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1742]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 122
Business Loans--Microloans
AGENCY: Small Business Administration (SBA).
ACTION: Notice of Proposed Rulemaking.
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SUMMARY: On October 22, 1994, the ``Small Business Administration
Reauthorization and Amendments Act of 1994'' was enacted. It amends
section 7(m) of the Small Business Act (Act) regarding the SBA
microloan financing program. These proposed rules would implement that
amendment. Included among the proposed changes are regulations
implementing a pilot program which authorizes SBA to guarantee up to
100 percent of loans made to intermediary lenders, the inlcusion of
native American tribal governments as eligible to participate as
intermediaries in the program, authorization for SBA to provide
additional grant assistance to an intermediary which by its lending
assists residents in economically distressed areas, and an extension of
the sunset date of the microloan for an additional fiscal year.
DATES: Comments may be submitted on or before March 27, 1995.
ADDRESSES: Comments may be mailed to John R. Cox, Associate
Administrator for Financial Assistance, Small Business Administration,
409 Third Street, S.W., Washington, D.C. 20416.
FOR FURTHER INFORMATION CONTACT:
John R. Cox, 202/205-6490.
SUPPLEMENTARY INFORMATION: Pub. L. 103-403, enacted on October 22, 1994
(1994 legislation), amends various portions of subsection 7(m) of the
Act (15 U.S.C. 636(m)), relating to the SBA microloan financing
program. These proposed rules, if promulgated in final form, would
implement the statutory amendments in the following ways.
Consistent with section 202 of the 1994 legislation, Sec. 122.61-2
of SBA's regulations (13 CFR 122.61-2) would be amended by including in
the definition of an intermediary eligible to participate in the
program as a mircoloan lender an agency or a nonprofit entity
established by a native American tribal government. This proposed
change would expand the category of intermediary lenders beyond the
present regulatory parameters which prescribe private, nonprofit
entities or quasi-governmental entities as microlenders.
Consistent with section 203 of the 1994 legisltion, Sec. 122.61-1
of SBA's regulations would be amended to extend the sunset date for the
entire microloan program an additional year, to October 1, 1997.
Consistent with section 206 of the 1994 legislation, Sec. 122.61-6
of SBA's present regulations would be amended to increase the aggregate
maximum amount of SBA lending available to an intermediary during the
intermediary's partiicpation in the microloan program. The previous
limitation was $1,250,000 and the proposed new aggregate maximum would
be $2,500,000.
Consistent with section 207 of the 1994 legislation, Sec. 122.61-9
of SBA's present regulations would be amended to authorize an
intermediary to expend no more than fifteen percent of grant funds
provided to it by the SBA for the provision of information and
technical assistance to small business concerns which are prospective
borrowers. An intermediary receiving a grant would not be required to
provide such assistance to prospective microloan borrowers, but this
proposed rule recognizes that intermediaries do hold outreach seminars,
perform screening analysis, and provide other assistance for
prospective borrowers, and it should encourage intermediaries to
continue these programs and to use their technical assistance grants
efficiently and cost effectively.
Under its present rules, SBA ensures that at least one half of the
intermediaries provide microloans to small business concerns located in
rural areas. Consistent with section 205 of the 1994 legislation,
Sec. 122.61-3 of SBA's regulations would be amended so that, in
selecting intermediaries for the program, SBA must select entities that
will ensure availability of loans for small business concerns in all
industries located throughout the lender's jurisdiction in both rural
and urban areas. Thus, the SBA would no longer be required to meet
numerical requirements for its portfolio of lenders based on intended
borrowers in selecting entities to participate as intermediaries in the
microloan program. Under the proposed rule, SBA would consider,
however, the additional criterion of whether a proposed intermediary
would provide assistance to a variety of industries.
Under SBA's present rules, in order for an intermediary to qualify
for an SBA grant, it must contribute or match an amount equal to
twenty-five percent of the amount of such grant. Consistent with
section 208(a)(1) of the 1994 legislation, Sec. 122.61-9 SBA's
regulations would be amended to provide that such twenty-five percent
requirement would be inapplicable to an intermediary which provides not
less than fifty percent of its loans to small business concerns located
in or owned by one or more residents of an economically distressed
area. As a result, if this rule is promulgated in final form, if an
intermediary would make sixty percent of its loans in an economically
distressed geographic area, it would not have to provide a twenty-five
percent match to an SBA grant. [[Page 4575]]
Under current rules, each intermediary is eligible to receive an
SBA grant equal to twenty-five percent of the total outstanding balance
of loans which SBA had made to it. Consistent with section 208(a)(2) of
the 1994 legislation, Sec. 122.61-9 of SBA's regulations would be
amended to provide that if an intermediary would provide no less than
twenty-five percent of its loans to small business concerns located in
or owned by residents of an economically distressed area, it would be
entitled to receive an additional SBA grant equal to five percent of
the total outstanding balance of SBA loans made to the intermediary.
Thus, if an intermediary made at least twenty five percent of its loans
in an economically distressed area, it would be eligible for an
additional SBA grant of five percent which it would not be required to
match.
Consistent with section 208(b) of the 1994 legislation,
Sec. 122.61-2 of SBA's regulations would be amended to define
``economically distressed area'' to mean a county or equivalent
division of local government of a state in which the small business
concern is located in which, according to the Bureau of the Census, not
less than forty percent of the residents have an annual income that is
at or below the poverty level. SBA will obtain this information from
the Bureau of the Census.
Finally, consistent with section 201 of the 1994 legislation,
proposed new Sec. 122.61-13 of SBA's regulations would implement a
microloan financing pilot in which SBA would have the authority to
guarantee no less than ninety and no more than one hundred percent of a
loan made to an intermediary by a for-profit or non-profit entity or by
an alliance of such entities. This guaranty authority by SBA would
terminate on September 30, 1997. Under this proposed rule, SBA would
not guarantee loans to more than ten intermediaries in urban areas and
ten in rural areas. An SBA guaranteed loan to an intermediary under
this pilot would have a maturity of ten years. During the first year of
the loan, the intermediary would not be required to repay principal or
interest, although interest would continue to accrue during this
period. During the second through fifth years of such a loan, the
intermediary would pay only interest. During the sixth through tenth
years of the loan, the intermediary would make interest payments and
fully amortize the principal. There would be no balloon payments.
Interest on these SBA guaranteed loans to intermediaries would be
calculable as set forth in Sec. 122.61-6 of SBA's regulations (13 CFR
122.61-6).
Compliance With Executive Orders 12612, 12778 and 12866, the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq. and the Paperwork Reduction Act,
44 U.S.C. Ch. 35
For purposes of the Regulatory Flexibility Act, 5 U.S.C. 601 et
seq., SBA certifies that this proposed rule, if promulgated in final
form, will not have a significant economic impact on a substantial
number of small entities.
SBA certifies that this proposed rule, if promulgated in final
form, will not constitute a significant regulatory action for the
purposes of Executive Order 12866, since the proposed change is not
likely to result in an annual effect on the economy of $100 million or
more.
SBA certifies that the proposed rule, if promulgated in final form,
would not impose additional reporting or recordkeeping requirements
which would be subject to the Paperwork Reduction Act, 44 U.S.C.
Chapter 35.
SBA certifies that this proposed rule would not have federalism
implications warranting the preparation of a Federalism Assessment in
accordance with Executive Order 12612.
Further, for purposes of Executive Order 12778, SBA certifies that
this proposed rule, if promulgated in final form, is drafted, to the
extent practicable, in accordance with the standards set forth in
section 2 of that Order.
(Catalog of Federal Domestic Assistance Programs, No. 59.012)
List of Subjects in 13 CFR Part 122
Loan programs--business, Small businesses.
Accordingly, pursuant to the authority contained in section 5(b)(6)
of the Small Business Act (15 U.S.C. 634(b)(6)), SBA proposes to amend
part 122, chapter I, title 13, Code of Federal Regulations, as follows:
PART 122--BUSINESS LOANS
1. The authority citation for Part 122 would continue to read as
follows:
Authority: 15 U.S.C. 634(b)(6), 636(a), 636(m).
2. Section 122.61-1(a) would be amended by revising the last
sentence to read as follows:
Sec. 122.61-1 Policy.
(a) Program. * * * This Microloan Demonstration Program terminates
on October 1, 1997.
* * * * *
3. Section 122.61-2 would be amended by republishing paragraph (d)
introductory text, by removing the ``or'' at the end of paragraph
(d)(3), by removing the period at the end of paragraph (d)(4) and
adding ``; or'' in its place, and adding new paragraphs (d)(5) and (h)
to read as follows:
Sec. 122.61-2 Definitions.
* * * * *
(d) Intermediary menas: * * *
(5) An agency or a nonprofit entity established by a Native
American Tribal Government.
* * * * *
(h) Economically distressed area means a county or equivalent
division of local government of a state in which, according to the most
recent data available from the United States Bureau of the Census, not
less than 40 percent of residents have an annual income that is at or
below the poverty level.
4. Section 122.61-3 would be amended by adding a new sentence at
the end of paragraph (a) to read as follows:
Sec. 122.61-3 Participation of intermediary.
(a) Eligibility. * * * In evaluating applications to become an
intermediary, SBA shall select such intermediaries as will ensure
appropriate availability of loans for small business concerns in all
industries located throughout each state, located in both urban and in
rural areas.
* * * * *
5. Section 122.61-6 would be amended by revising paragraph (e) to
read as follows:
Sec. 122.61-6 Conditions on SBA loan to intermediary.
* * * * *
(e) Loan Limits by SBA. Notwithstanding any other provision of law
to the contrary, no loan shall be made to an intermediary by SBA under
this program if the total amount outstanding and committed (excluding
outstanding grants) to such intermediary (and its affiliates, if any)
from the business loan and investment fund established under section
4(c) of the Act would, as a result of such loan, exceed $750,000 in the
first year of such intermediary's participation in the program, and
$2,500,000 in the remaining years of the intermediary's participation
in the program.
* * * * *
6. Section 122.61-9 would be amended by adding a new sentence after
the second sentence in paragraph (a), by revising paragraph (b)(1), and
by adding a new sentence at the end of paragraph (b)(2) to read as
follows: [[Page 4576]]
Sec. 122.61-9 SBA grant to intermediary for marketing, management, and
technical assistance.
(a) General. * * * In addition, each intermediary is authorized to
expend no more than fifteen (15) percent of the grant funds received
from SBA to provide information and technical assistance to small
business concerns that are prospective borrowers under this program. *
* *
(b) Amount of Grant. (1) Subject to the requirement of paragraph
(b)(2) of this section, and the availability of appropriations, each
intermediary under this program shall be eligible to receive a grant
equal to 25 percent of the total outstanding balance of loans made to
it by SBA, provided, however, that if an intermediary provides no less
than 25 percent of its loans to small business concerns located in or
owned by one or more residents of an economically distressed area, it
shall be eligible to receive an additional grant from SBA equal to 5
percent of the total outstanding balance of SBA loans made to the
intermediary. The intermediary shall not be required to match such
grant.
(2) * * * The requirement that the intermediary contribute 25
percent of the amount of the SBA grant is inapplicable to an
intermediary which provides not less than 50 percent of its loans to
small business concerns located in or owned by one or more residents of
an economically distressed area.
* * * * *
7. A new Sec. 122.61-13 would be added to read as follows:
Sec. 122.61-13 SBA guaranteed loans to intermediaries.
(a) Purpose. SBA may guarantee not less than 90 percent nor more
than 100 percent of a loan made to an intermediary by a for-profit or
non-profit entity or by alliances of such entities.
(b) Number of Intermediaries. SBA shall not guarantee loans to more
than 10 intermediaries in urban areas or more than 10 intermediaries in
rural areas.
(c) Maturity and Repayment of Microloan Guaranteed Loan. An SBA
guaranteed loan made to an intermediary under this section shall have a
maturity of 10 years. During the first year of each such loan, the
intermediary shall not be required to repay any interest or principal,
although interest will continue to accrue during this period. During
the second through fifth years of such a loan, the intermediary shall
pay interest only. During the sixth through tenth years of the loan,
the intermediary shall make interest payments and fully amortize the
principal.
(d) Interest rate. The interest rate on a SBA guaranteed loan to an
intermediary shall be calculable as set forth in Sec. 122.61-6.
(e) Termination of SBA Authority to Guarantee. The authority of SBA
to guarantee loans to intermediaries under this Sec. 122.61-13 shall
terminate on September 30, 1997.
Dated: December 21, 1994.
Philip Lader,
Administrator.
[FR Doc. 95-1742 Filed 1-23-95; 8:45 am]
BILLING CODE 8025-01-M
