[Federal Register Volume 64, Number 154 (Wednesday, August 11, 1999)]
[Proposed Rules]
[Pages 43636-43638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20324]
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Proposed Rules
Federal Register
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This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 64, No. 154 / Wednesday, August 11, 1999 /
Proposed Rules
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
Business Loan Program
AGENCY: Small Business Administration (SBA).
ACTION: Proposed rule.
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SUMMARY: SBA proposes to implement changes in the microloan program
required by the Small Business Reauthorization Act of 1997, enacted on
December 2, 1997. The proposed rule would terminate the designation of
the microloan program as a ``demonstration,'' add a welfare-to-work
microloan initiative, allow a nonprofit child care business to qualify
for the microloan program, and authorize a microloan intermediary to
use up to 25 percent of grant funds for technical assistance to
prospective microloan borrowers. The proposed rule would also establish
procedures for SBA to suspend or revoke the status of an intermediary
lender or non-lending technical assistance provider from the microloan
program for its failure to meet certain minimum performance standards.
DATES: Submit comments on or before September 10, 1999.
ADDRESSES: Comments should be mailed to Small Business Administration,
409 Third Street, SW, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT: Jody Raskind, 202-205-6497.
SUPPLEMENTARY INFORMATION: Section 201 of Pub. L. 105-135, enacted on
December 2, 1997, (1997 legislation) amends SBA's microloan program in
section 7(m) of the Small Business Act (15 USC 636(m)) (Act). Section
202 of the 1997 legislation adds a welfare-to-work microloan
initiative. These proposed rules would implement the statutory changes.
The 1997 legislation terminated the designation of the microloan
program as a ``demonstration.'' This proposed rule deletes that
designation wherever it was in SBA's rules, including the heading for
subpart G of this part.
SBA proposes to amend Sec. 120.706 of its regulations (13 CFR
120.706) to increase the aggregate amount which a microloan
intermediary may borrow from SBA from the previous statutory limit of
$2.5 million to the new statutory limit of $3.5 million.
Generally, microloan borrowers must engage in for profit
activities. However, SBA proposes to amend Sec. 120.707(a) of its
regulations to implement the 1997 legislation authorizing microloan
assistance to a borrower to establish a nonprofit child care business.
The 1997 legislation increases, from 15 percent to 25 percent, the
amount of grant funds a microloan intermediary may use for technical
assistance to prospective microloan borrowers. This proposed rule would
amend Sec. 120.712 to reflect the increased percentage. SBA will also
implement a new provision in the 1997 legislation by amending
Sec. 120.712 to allow an intermediary to use up to 25 percent of the
grant funds it receives from SBA to contract to enable third parties to
provide technical assistance to microloan borrowers.
Under section 7(m) of the Act, SBA may give grants to a maximum of
25 non-lending technical assistance providers. Under prior rules, SBA
could provide the 25 grants for a maximum of 5 annual terms. The
proposed rule would amend Sec. 120.714 of SBA's regulations to reflect
the changes in the 1997 legislation that authorize SBA to provide the
annual grants without any maximum term limits.
Section 7(m)(12) of the Act authorizes SBA, on a pilot basis, to
guarantee loans made to microloan intermediaries. Currently,
Sec. 120.715 of SBA's regulations incorrectly places a limit on the
number of loans to intermediaries which SBA may guarantee. SBA proposes
to amend Sec. 120.715 of its regulations to clarify that there is no
statutorily prescribed limit on the number of loans which SBA is
authorized to guarantee to microloan intermediaries.
SBA proposes to add Sec. 120.716 to its regulations to implement
the 1997 legislation's welfare-to-work initiative. The initiative will
give supplemental technical assistance grants to existing program
participants for low-income individuals who get assistance under a
State program funded under part A of title IV of the Social Security
Act, or under any comparable State funded means tested program (``State
Program''). The supplemental grants would be used to help new small
businesses eliminate their dependence on State Programs. SBA would
obtain funds to provide these supplemental grants from other
departments and agencies of the federal government. To get such funds,
SBA would enter into memoranda of understanding with the departments
and agencies specifying the terms and conditions of the supplemental
grants and providing for monitoring of expenditures by each grantee and
each recipient.
Under the welfare-to-work initiative, SBA would select from its
participating intermediaries and non-lending technical assistance
providers up to 20 grantees in fiscal year 1998, 25 grantees in fiscal
year 1999, and 30 grantees in fiscal year 2000. Each selected
intermediary and non-lending technical assistance provider would be
eligible to receive a supplemental grant from SBA of up to $200,000 a
year, which SBA has the sole authority to determine.
A grantee who gets a supplemental grant under this initiative would
not have to match the grant. A grantee could use the supplemental grant
to pay or reimburse a portion of child care and transportation costs of
the recipients of State Programs if the recipients certify that they
are not being paid for such costs under state block grants under the
Child Care Development Block Grant Act of 1990 or under part A, title
IV of the Social Security Act. A grantee also could use the
supplemental grants for marketing, management, and technical assistance
to recipients of State Programs. SBA may use up to 5 percent of the
grant amounts it provides under the welfare-to-work microloan
initiative in any fiscal year for technical assistance to the grantees
to ensure that they have the knowledge, skills, and understanding of
making microloans and operating a welfare-to-work microloan program.
SBA also proposes to add a new Sec. 120.717 to authorize the SBA
Associate Administrator for Financial Assistance (AA/FA) to terminate
or otherwise act regarding an intermediary lender or non-lending
technical assistance provider that fails to meet certain minimum
performance standards. This authority is similar to that held by the
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AA/FA regarding the termination or suspension of lenders or pool
assemblers in the agency's 7(a) business loan program. It is important
for SBA to be able to terminate the services of, or impose other
sanctions on, a microloan entity which operates to bring discredit on
the program. SBA must be able to discipline an intermediary or non-
lending technical assistance provider whose failure to operate properly
may adversely affect microloan borrowers or imperil the safety and
soundness of the microloan program.
Compliance With Executive Orders 12612, 12988, and 12866, the
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
SBA certifies that this proposed rule is not a significant rule
within the meaning of Executive Order 12866 and does not have
significant impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612. It is not
likely to have an annual economic effect of $100 million or more,
result in a major increase in costs or prices, or have a significant
adverse effect on competition or the United States economy.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch 35, SBA
certifies that this proposed rule requires the microloan intermediaries
and technical assistance providers to formally count, and account for,
welfare clients and expenditures for those clients.
For purposes of Executive Order 12612, SBA certifies that this
proposed rule has no federalism implications requiring a Federalism
Assessment.
For purposes of Executive Order 12988, SBA certifies that this rule
is drafted, to the extent practicable, in accordance with the standards
set forth in section 3 of that Order.
(Catalog of Federal Domestic Assistance Programs, Nos. 59.012 and
59.013)
List of Subjects in 13 CFR Part 120
Loan programs--business, Small businesses.
For the reasons stated in the preamble, SBA proposes to amend 13
CFR part 120 as follows:
PART 120--BUSINESS LOANS
1. The authority citation for part 120 continues to read as
follows:
Authority: 15 U.S.C. 634(b)(6) and 636 (a) and (h).
2. Revise the heading for subpart G of part 120, title 13, Code of
Federal Regulations to read as follows:
Subpart G--Microloan Program
3. In 120.700, revise the first sentence to read as follows:
Sec. 120.700 What is the Microloan Program?
The Microloan Program assists women, low income individuals,
minority entrepreneurs, and other small businesses which need small
amounts of financial assistance. * * *
4. In 120.706, revise the section heading and last sentence to read
as follows:
Sec. 120.706 What are the terms and conditions of an SBA loan to an
Intermediary?
(a) * * * In later years, the Intermediary's obligation to SBA may
not exceed an aggregate of $3.5 million, subject to statutory
limitations on the total amount of funds available per state.
* * * * *
5. In Sec. 120.707(a), remove the first sentence and add two new
sentences in its place to read as follows:
Sec. 120.707 What conditions apply to loans by Intermediaries to
Microloan borrowers?
(a) General. An intermediary may make Microloans to any small
business eligible to receive financial assistance under this part. A
borrower may also use Microloan proceeds to establish a nonprofit child
care business. * * *
* * * * *
6. In Sec. 120.712, revise paragraphs (b)(1) and (e) to read as
follows:
Sec. 120.712 How does an Intermediary get a grant to assist Microloan
borrowers?
* * * * *
(b) * * *
(1) Up to 25 percent of the grant funds may be used to provide
information and technical assistance to prospective Microloan
borrowers; and
* * * * *
(e) Third party contracts for technical assistance. An Intermediary
may use no more than 25 percent of the grant funds it receives from SBA
for contracts with third parties for the latter to provide technical
assistance to Microloan borrowers.
7. In Sec. 120.714, revise the section heading, add an introductory
text, and revise paragraph (b) to read as follows:
Sec. 120.714 How are grants made to non-lending technical assistance
providers?
SBA selects non-lending technical assistance providers (NTAP) to
receive grant funds for technical assistance to Microloan borrowers.
* * * * *
(b) Number and amount of grants. In each year of the Microloan
Program, SBA may make no more than 25 grants to NTAPs. A grant may not
exceed $125,000.
* * * * *
8. In Sec. 120.715, revise paragraph (a) to read as follows:
Sec. 120.715 Does SBA guarantee any loans an Intermediary obtains from
another source?
(a) SBA may guarantee not less than 90 percent of loans made by
for-profit or nonprofit entities (or an alliance of such entities) to
no more than 10 Intermediaries in urban areas and 10 Intermediaries in
Rural Areas (as defined in section 120.10).
* * * * *
9. Add Sec. 120.716 to read as follows:
Sec. 120.716 Welfare-to-work initiative.
(a) Purpose. The purpose of the welfare-to-work initiative is to
supplement the technical assistance grants provided under the microloan
program for the purpose of helping low-income individuals who receive
assistance under a State program funded under Part A of title IV of the
Social Security Act (42 U.S.C. 601), or under any comparable State
funded means tested program of assistance (State Program). These
supplemental grants are to be used to help the individuals to establish
small businesses and eliminate their dependence on such State Programs.
(b) Supplemental grant. SBA may accept funds transferred to it from
other agencies or departments of the Federal government to make the
supplemental grants under the welfare-to-work initiative. SBA will make
such grants to microloan Intermediaries and NTAPs (as defined in
Sec. 120.714) in order to provide technical assistance and related
services to individuals receiving State Program aid at the time they
initially apply for a microloan.
(c) Number of Intermediaries and NTAPs. SBA may give supplemental
grants to no more than 20 participating microloan Intermediaries and
NTAPs in fiscal year 1998, no more than 25 grantees in fiscal year
1999, and no more than 30 grantees in fiscal year 2000.
(d) Amount of supplemental grant. Each of the selected
Intermediaries and NTAPs may receive a supplemental grant from SBA of
no more than $200,000 a year.
(e) Supplemental grant needs no matching. A supplemental grant made
by SBA under this initiative does not have to be matched by the grantee
Intermediary or NTAP.
(f) Use of supplemental grant. A grantee may use the supplemental
grant:
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(1) To pay or reimburse a portion of child care and transportation
costs of recipients of State Programs, if the recipients certify that
they are not being paid for such costs under State block grants under
the Child Care Development Block Grant Act of 1990 (42 U.S.C. 9858) or
under part A, title IV of the Social Security Act (42 U.S.C. 601); and
(2) For marketing, management, and technical assistance to the
recipients of State Programs.
(g) Memorandum of understanding. Before SBA accepts a transfer of
funds from an agency or department of the Federal government, under
this initiative, it must enter into a memorandum of understanding with
the agency or department which will specify the terms and conditions of
the supplemental grants, including monitoring of expenditures.
(h) Additional condition for welfare-to-work supplemental grant.
SBA may use up to 5 percent of the grant amounts it provides under the
welfare-to-work microloan initiative in any fiscal year for technical
assistance to the grantees to ensure that the grantees have the
knowledge, skills, and understanding of making microloans and operating
a welfare-to-work microloan program.
10. Add Sec. 120.717 to read as follows:
Sec. 120.717 Suspension or revocation of an Intermediary or NTAP.
(a) The AA/FA may suspend or revoke the participation status of an
Intermediary or NTAP from the Microloan Program, or may impose other
sanctions in the best interests of the program, if it fails to comply
with the laws, regulations, and policies governing the program or if it
fails to meet any one of the following minimum performance standards.
(1) For Intermediaries only--An Intermediary must:
(i) Close and fund a minimum of four microloans per year; and
(ii) Satisfactorily provide in-house technical assistance to
microloan clients and prospective microloan clients.
(2) For NTAPs only--An NTAP must show that, for every thirty
clients for which it provided technical assistance, one client received
a loan from the private sector.
(3) For Intermediaries and NTAPs--An Intermediary and an NTAP must:
(i) Cover the service territory assigned by SBA, including honoring
the SBA determined boundaries of neighboring Intermediaries and NTAPs;
(ii) Fulfill reporting requirements;
(iii) Manage program funds and matching funds in a satisfactory and
financially sound manner;
(iv) Communicate and file reports via the internet within six
months after beginning participation in the program;
(v) Maintain a currency rate of 85 percent or more (that is loans
that are no more than 30 days late in scheduled payments);
(vi) Maintain a default rate of 15 percent or less of the
cumulative dollars loaned under the program; and
(vii) Attend Microloan Program training conferences offered by SBA,
or such substitute training as may be approved by SBA on a case-by-case
basis.
(b) The AA/FA, on a case by case basis, may impose pre-suspension
or revocation sanctions which may include, but are not limited to, the
following:
(1) Accelerated reporting requirements;
(2) Accelerated loan repayment requirements for outstanding program
debt to SBA; and
(3) Imposition of a temporary lending and/or training moratorium.
(c) Revocation from the Microloan Program will include:
(1) Removal from the program;
(2) Liquidation of MRF and LLRF accounts, by SBA, and application
of liquidated funds to any outstanding balance owed to SBA;
(3) Payment of outstanding debt to SBA by the Intermediary;
(4) Forfeiture or repayment of any unused grant funds by the
Intermediary or NTAP; and
(5) Debarment of the organization from receipt of Federal funds
until loan and grant repayment requirements are met.
(d) An Intermediary or NTAP may appeal a suspension or revocation
under procedures found in part 134 of this chapter. The action of the
AA/FA remains in effect pending resolution of the appeal.
Dated: July 30, 1999.
Aida Alvarez,
Administrator.
[FR Doc. 99-20324 Filed 8-10-99; 8:45 am]
BILLING CODE 8025-01-P
