05-22834. Gulf Opportunity Pilot Loan Program (GO Loan Pilot); Waiver of Regulatory Provisions

AGENCY:

U.S. Small Business Administration (SBA).

ACTION:

Notice of waiver of regulatory provisions.

SUMMARY:

The U.S. Small Business Administration (SBA) announces the waiver for SBA's GO Loan Pilot of certain Agency regulations applicable to the 7(a) Business Loan Program, including those relating to personal assets of borrowers, interest rates and provisions that prohibit lenders from charging certain fees. SBA's GO Loan Pilot provides expedited small business financing to those communities severely impacted by Hurricanes Katrina and Rita. SBA intends for these waivers to minimize the burden on businesses applying for loans through the GO Loan Pilot and to provide incentives for lenders to participate in the pilot.

DATES:

The waiver is effective for GO Loan Pilot loans approved from November 17, 2005 until September 30, 2006.

FOR FURTHER INFORMATION CONTACT:

Charles Thomas, Office of Financial Assistance, U.S. Small Business Administration, 409 Third Street, SW., Washington, DC 20416; Telephone [phone], e-mail address: [e-mail].

SUPPLEMENTARY INFORMATION:

SBA is continuing to respond to the unprecedented devastation incurred by those small businesses located in the communities affected by Hurricanes Katrina and Rita. The Agency has announced a new initiative called the GO Loan Pilot, which is one important component of the Agency's response. The GO Loan Pilot generally will apply the policies and procedures in place for the Agency's SBAExpress program, although there will be several substantial differences. The pilot is designed to streamline SBA financing on an emergency basis to those small businesses located in, locating to or re-locating in the parishes/counties that have been Presidentially-declared as disaster areas resulting from Hurricanes Katrina and Rita, plus any contiguous parishes/counties. The maximum loan amount under the pilot is $150,000 and loans carry a full 85 percent guaranty by SBA. The GO Loan Pilot will be available for use in FY 2006 and will expire on September 30, 2006.

To maximize the effectiveness of the GO Loan Pilot, SBA is waiving certain Agency regulations for the 7(a) Business Loan Program. These waivers will also minimize the burdens on the businesses applying for loans through the GO Loan Pilot and provide incentives for lenders to participate in the pilot.

Under § 120.102 of SBA's regulations (13 CFR 120.102), an applicant for an SBA-guaranteed loan through the 7(a) program must show that the desired funds are not available from the personal resources of any owner of 20 percent or more of the equity of the applicant. If such personal resources are readily available, SBA requires that those resources above a certain amount, which varies with the size of the loan, must be injected into the applicant firm's financing package to reduce the amount of SBA's funding. Under the GO Loan Pilot, the maximum loan amount is limited to $150,000, so under standard 7(a) program procedures, each 20 percent or more owner of the applicant business normally would be required to inject any personal liquid assets which are in excess of two times the total financing package, or in excess of $100,000, whichever is greater.

However, in recognition of the scope and magnitude of the destruction suffered by these communities as a result of Hurricanes Katrina and Rita, and the need for immediate reconstruction, SBA believes that, due to other disaster-related exigencies, prospective borrowers under the GO Loan Pilot will be unable to expediently meet SBA's requirement that personal resources above a certain amount must be injected into the firm's capitalization. Therefore, to further facilitate and expedite the processing of SBA loans under the GO Loan Pilot, and to avoid over-taxing the resources of financially-strapped borrowers, SBA is waiving § 120.102 for loans approved under this pilot.

Under §§ 120.213 through 120.215, SBA prescribes the maximum interest rates that a Lender may charge a borrower. For loans approved under the GO Loan Pilot, SBA is waiving the regulatory provisions set out at §§ 120.213(a), 120.214(a) through (e) and 120.215. GO Loan Pilot lenders may charge the interest rates applicable to the SBAExpress program as set forth in the SBAExpress Program Guide, available on SBA's Web site at http://www.sba.gov/​banking/​exguide.pdf. SBA is also waiving § 120.222, which prohibits lenders from charging certain fees to borrowers. Thus, under the Pilot, lenders will be permitted to charge the same fees on GO Loans as they charge on their non-SBA guaranteed commercial loans. SBA is waiving §§ 120.213(a), 120.214(a) through (e), 120.215 and 120.222 to provide incentives to lenders to participate in the pilot program.

SBA's waiver of these provisions is authorized by § 120.3 of its regulations (13 CFR 120.3). These waivers apply only to those loans approved under the GO Loan Pilot and will last only for the duration of the pilot, which expires September 30, 2006. As part of the GO Loan Pilot, these waivers apply only to those small businesses located in, locating to or re-locating in the parishes/counties that have been Presidentially-declared as disaster areas resulting from Hurricanes Katrina or Rita, plus any contiguous parishes/counties. (A list of all eligible parishes/counties is located at http://www.sba.gov/​financing/​index.html.)

Authority: 15 U.S.C. 636(a)(24); 13 CFR 120.3.

Hector V. Barreto,

Administrator.