E7-12099. Patriot Express Pilot Loan Initiative

AGENCY:

U.S. Small Business Administration (SBA).

ACTION:

Notice of SBA's establishment of the Patriot Express Pilot Loan Initiative.

SUMMARY:

To support the entrepreneurial sector of the Nation's military community that are being significantly affected by what is expected to be a protracted war on terror, SBA is introducing a 7(a) pilot loan initiative to provide needed financial assistance to these entrepreneurs. Under this initiative, which will operate as a pilot through December 31, 2010, SBA will provide streamlined documentation and expedited loan processing and its 75-85 percent guaranty for loans up to $500,000 made to eligible members of the military community.

DATES:

The Patriot Express Pilot Loan Initiative will operate through December 31, 2010, after which the SBA will evaluate its performance and make a decision whether to modify and/or continue the initiative.

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].

SUPPLEMENTARY INFORMATION:

Under the Patriot Express Pilot Loan Initiative, SBA is implementing a 7(a) loan product targeted to the small business financing needs of the military community and is incorporating that initiative into a comprehensive, new strategy that integrates, markets and promotes SBA's available financial, procurement and technical assistance programs to this community. The Patriot Express Pilot Loan Initiative will adopt many of the streamlined documentation and expedited processes and procedures of SBA's highly successful SBAExpress loan program; however, there will be several critical differences. SBA's guaranty of up to 85 percent will apply to Patriot Express loans of $150,000 or less and its guaranty of up to 75 percent will apply to Patriot Express loans above $150,000, which contrasts with the 50 percent SBA guaranty that is applicable to all SBAExpress loans. Also, the maximum loan amount under the Patriot Express Pilot Loan Initiative is $500,000, compared to the maximum loan amount of $350,000 available under the SBAExpress loan program. Lenders must use their existing prudent collateral practices for Patriot Express loans. For loans above $350,000, lenders must obtain all available collateral. Maximum interest rates for Patriot Express loans are the same as those allowed under SBA regulations for the 7(a) program, as opposed to the higher interest rates allowed under the SBAExpress program.

In addition to the standard 7(a) loan eligibility requirements, eligibility for Patriot Express loans will be limited to certain members of the military community, and lenders will be required to document each borrower's eligibility using approved Department of Defense or Veterans' Administration documentation and that documentation must be furnished to SBA with any purchase request. In an effort to support a substantial segment of the military community affected by military call-ups, SBA is making the following persons eligible for Patriot Express: (1) Veterans (other than dishonorably discharged); (2) Service-disabled veterans; (3) Active-duty military participating in the military's Transition Assistance Program for potential retirees within 24 months of separation and discharging active duty members within 12 months of discharge; (4) Reservists and National Guard members; and (5) The current spouse of the above and the widowed spouse of a service member or veteran who died during service or of a service-connected disability. However, SBA emphasizes that this definition of eligibility for the Patriot Express Pilot Loan Initiative will be limited to just Patriot Express 7(a) loans, and it will not apply to other SBA loan programs, procurement programs, etc. Lender participants in the Patriot Express Pilot Loan Initiative will be limited to SBAExpress lenders and PLP lenders, which must meet certain SBA prescribed proficiency and performance standards. Lenders that are not either PLP or SBAExpress lenders may apply to participate in SBAExpress and Patriot Express at the same time. Additionally, Patriot Express lenders must maintain a satisfactory lending performance as determined by SBA, in its sole discretion, to retain authority to make Patriot Express loans.

Pursuant to the authority provided to SBA under 13 CFR 120.3 to waive certain regulations in establishing and testing pilot loan initiatives for some stated period of time, SBA will waive the following regulations, which otherwise apply to 7(a) loans, for loans made under the Patriot Express Pilot Loan Initiative only: (1) § 120.130(c), which prohibits revolving lines of credit, is waived in order to allow revolving lines of credit under the Patriot Express Pilot Loan Initiative; (2) § 120.150, which specifies certain credit criteria, is waived in order for SBA to delegate the credit decision to the lender, but lenders are still required to use their existing, proven, and prudent loan practices used for similarly sized non SBA guaranteed small business loans; (3) § 120.160(b) and (c), which require hazard insurance and appraisals is waived and SBA will defer to the lender's existing, prudent policy used for its similarly sized non-SBA guaranteed small business loans regarding hazard insurance and appraisals; and (4) § 120.191, which specifies the information a 7(a) loan application must include is waived to allow lenders to use mostly their own documents consistent with the documentation requirements for SBAExpress loans.

Authority: 13 CFR 120.3

Grady B. Hedgespeth,

Director/Office of Financial Assistance.