03-27946. Development Company Program Job Opportunity Requirement

Title V of the Small Business Investment Act, section 501, defines the purpose of the Development Company Loan Program (504 Program) as fostering economic development and creating and preserving job opportunities in both urban and rural areas by providing long-term financing for small business concerns through the development company program. 504 loans are principally used by small businesses to build or to purchase long-term fixed assets (mostly acquiring land and constructing or renovating commercial buildings) to assist in the growth of the business. The 504 Program is required to create a certain minimum number of jobs as a result of 504 loans. A 504 loan is required to either create or retain a minimum number of jobs within two years of the disbursement of the loan as a result of the project, or to meet other defined economic development objectives (13 CFR 120.861-120.862). In the final rule published on October 7, 2003, effective November 6, 2003, 13 CFR 120.861 states 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. Such Job Opportunity average remains in effect until changed by subsequent Federal Register publication.” The current standard which was established in 1990 requires a 504 project to create or retain one Job Opportunity for every $35,000 guaranteed by SBA. During the past twelve years since the Job Opportunity requirement was last modified, the cost of acquiring real estate has increased substantially. For example, construction wages have increased more than 65 percent and the consumer price index has increased 50 percent during the same period. Due to the substantial increases in costs, SBA is modifying the Job Opportunity requirements by approximately 43 percent effective November 6, 2003, as follows:

A Project must create or retain one Job Opportunity for every $50,000 guaranteed by SBA.

James E. Rivera,

Associate Administrator for Financial Assistance.