[Federal Register Volume 63, Number 170 (Wednesday, September 2, 1998)]
[Rules and Regulations]
[Pages 46643-46644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23657]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 123
Disaster Loan Program
AGENCY: Small Business Administration.
ACTION: Final rule.
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SUMMARY: Under this final rule SBA amends its regulations to conform
the eligibility criteria for disaster loans to those applicable in
SBA's business loan program. Under the final rule, a business can not
obtain a physical disaster loan if it is engaged in any illegal
activity; if it is a government owned entity (other than one owned or
controlled by a Native American tribe); or if it engages in products or
services of a prurient sexual nature. Under the final rule, a business
is not eligible for an economic injury disaster loan if more than one-
third of its revenues are from legal gambling operations or from
packaging SBA loans; if it is principally engaged in teaching or
indoctrinating religion; or is primarily engaged in political or
lobbying activities.
DATES: This rule is effective September 2, 1998.
FOR FURTHER INFORMATION CONTACT: Bernard Kulik, 202-205-6734.
SUPPLEMENTARY INFORMATION: On April 23, 1998, SBA published a notice of
proposed rulemaking (63 FR 20140) to amend section 123.201 of its
regulations so that an applicant would not be eligible for a physical
disaster business loan if it is engaged in any illegal activity; if it
is a government owned entity (other than a business owned or controlled
by a Native American tribe); or if the business (1) presents live
performances of a prurient sexual nature, or (2) derives directly or
indirectly more than de minimis gross revenue from activities of a
prurient sexual nature. The proposed rule was intended to codify SBA's
existing policy of using the same ineligibility criteria for SBA's
disaster and business loan programs. Thus, a business that would not be
eligible to receive an SBA guaranteed business loan because it met
these criteria, would also not be eligible to obtain a physical
disaster loan.
SBA also proposed to amend section 123.301 of its regulations so
that a business would not be eligible for an economic injury disaster
loan if it: (1) derived more than one-third of its gross annual revenue
from legal gambling activities; (2) earned more than one-third of its
gross annual revenue from packaging SBA loans; (3) was principally
engaged in teaching, instructing, counseling, or indoctrinating
religion or religious beliefs, whether in a religious or secular
setting; or (4) primarily engaged in political or lobbying activities.
These proposed changes were intended to codify SBA's existing policy of
using the same ineligibility criteria for its economic injury disaster
and business loan program. Thus, if a business is not eligible, because
of these criteria, for an SBA guaranteed loan under the business loan
program, it would not be eligible for an economic injury disaster loan.
SBA received one comment. The commenter was concerned that if the
proposed economic injury amendments were finalized, SBA would not be
able to assist non-profit entities which provide community services and
derive more than one third of their revenue from legal gambling
activities. Under SBA's rules, non-profit entities presently do not
qualify for economic
[[Page 46644]]
injury loans, so the proposed amendment would not change their
eligibility. Accordingly, the final rule is identical to the proposed
rule.
In this final rule, SBA also corrects a typographical error in
section 123.202(a) by substituting ``lesser'' for ``greater'' in the
first sentence which now reads: ``Disaster business loans, including
both physical disaster and economic injury loans to the same borrower,
together with its affiliates, cannot exceed the lesser of the
uncompensated physical loss and economic injury or $1.5 million.'' This
ensures that an applicant receives disaster assistance for an
uncompensated loss or injury without obtaining excessive SBA assistance
at lower than market rates.
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)
SBA certifies that this final rule does not constitute a
significant rule within the meaning of Executive Order 12866 and does
not have significant economic impact on a substantial number of small
entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C.
et seq. 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. This final rule codifies current SBA practices and will not
affect additional businesses or impose any costs.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch 35, SBA
certifies that this final rule contains no new reporting or record
keeping requirements.
For purposes of Executive Order 12612, SBA certifies that this
final rule has no federalism implications warranting the preparation of
a Federalism Assessment.
For purposes of Executive Order 12778, SBA certifies that this rule
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 and
59.008)
List of Subjects in 13 CFR Part 123
Disaster assistance, 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 amends part 123,
chapter I, title 13, Code of Federal Regulations, as follows:
PART 123--DISASTER LOAN ASSISTANCE
1. The authority citation for part 123 continues to read as
follows:
Authority: 15 U.S.C. 634(b)(6), 636(b), 636(c) and 636(f); Pub.
L. 102-395, 106 Stat. 1828, 1864; and Pub. L. 103-75, 107 Stat. 739.
2. Add new paragraphs (d), (e), and (f) to Sec. 123.201 to read as
follows:
Sec. 123.201 When am I not eligible to apply for a physical disaster
business loan?
* * * * *
(d) You are not eligible if your business is engaged in any illegal
activity.
(e) You are not eligible if you are a government owned entity
(except for a business owned or controlled by a Native American tribe).
(f) You are not eligible if your business presents live
performances of a prurient sexual nature or derives directly or
indirectly more than de minimis gross revenue through the sale of
products or services, or the presentation of any depictions or
displays, of a prurient sexual nature.
Sec. 123.202 [Amended]
3. Amend Sec. 123.202(a) by removing the word ``greater'' and
adding, in its place, the word ``lesser'' in the first sentence.
4. Amend Sec. 123.301 as follows:
a. Remove ``gambling'' and ``loan packaging'' in paragraph (a);
b. Remove ``or'' at the end of paragraph (c);
(c) Remove the period and insert ``; or'' at the end of paragraph
(d); and
(d) Add new paragraphs (e), (f), (g), and (h) to read as follows:
Sec. 123.301 When would my business not be eligible to apply for an
economic injury disaster loan?
* * * * *
(e) Deriving more than one-third of gross annual revenue from legal
gambling activities;
(f) A loan packager which earns more than one-third of its gross
annual revenue from packaging SBA loans;
(g) Principally engaged in teaching, instructing, counseling, or
indoctrinating religion or religious beliefs, whether in a religious or
secular setting; or
(h) Primarily engaged in political or lobbying activities.
Dated: July 20, 1998.
Aida Alvarez,
Administrator.
[FR Doc. 98-23657 Filed 9-1-98; 8:45 am]
BILLING CODE 8025-01-P
