2011-25186. Gulf Opportunity Pilot Loan Program (GO Loan Pilot)

AGENCY:

U.S. Small Business Administration (SBA).

ACTION:

Notice of extension of waiver of regulatory provisions.

SUMMARY:

This notice announces the extension of SBA's GO Loan Pilot, with modifications, until December 31, 2013. Due to the scope and magnitude of the devastation to Presidentially-declared disaster areas resulting from Hurricanes Katrina and Rita, as well as the further devastation by the April 2011 severe storms, tornadoes and flooding along the Mississippi River and its tributaries, and most recently Tropical Storm Lee, which together have had a long-term negative impact on the recovery of small businesses in the region, the Agency is extending its full guaranty and streamlined and centralized loan processing available through the GO Loan Pilot to small businesses in the eligible parishes/counties through December 31, 2013.

DATES:

The waiver of regulatory provisions published in the Federal Register on November 17, 2005, is extended with modifications until December 31, 2013.

FOR FURTHER INFORMATION CONTACT:

W. Sloan Coleman, Office of Financial Assistance, U.S. Small Business Administration, 409 Third Street, SW., Washington, DC 20416; Telephone [phone]; [e-mail].

SUPPLEMENTARY INFORMATION:

On November 8, 2005, SBA initiated the GO Loan Pilot program, which was designed to provide expedited small business financial assistance to businesses located in those communities severely impacted by Hurricanes Katrina and Rita. Under this unique initiative, SBA provides its full (85%) guaranty and streamlined and centralized loan processing to all eligible lenders that agree to make expedited SBA 7(a) loans available to 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.

To maximize the effectiveness of the GO Loan Pilot, on November 17, 2005, SBA published a notice in the Federal Register waiving for the GO Loan Pilot certain Agency regulations for the 7(a) Business Loan Program. (70 FR 69645). The pilot, including the waiver of regulations, was designed as a temporary program and was originally scheduled to expire on September 30, 2006, but was extended to September 30, 2011. The Agency believes, however, that there is a continuing, substantial need for the specific SBA assistance provided by this pilot in the affected areas. SBA, therefore, is extending the GO Loan Pilot, but with a modification to the previous regulatory waiver published in the Federal Register on November 17, 2005, as described more fully below.

Under SBA's regulations at 13 CFR120.102, 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. As stated in the Federal Register notice published on November 17, 2005, this regulation was waived “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.” Because the devastation caused by Hurricanes Katrina and Rita occurred more than six years ago, SBA no longer believes it is necessary to waive this regulation for loans under the GO Loan Pilot and, therefore, is not extending the waiver of 13 CFR 120.102.

SBA is extending the waiver of all other regulatory provisions published in the Federal Register on November 17, 2005 as part of the GO Loan Pilot program. Specifically, SBA is continuing to waive 13 CFR 120.213(a), 120.214(a) through (e), and 120.215 in order to allow GO Loan Pilot Lenders to charge the interest rates applicable to the SBA Express Program as set forth in SOP 50 10 5, Subpart B, Chapter 3. (SOP 50 10 5 may be found on SBA's Web site at http://www.sba.gov/​for-lenders,, then click on Standard Operating Procedures for a listing of SOPs.) SBA is also continuing to waive 13 CFR § 120.222 in order to permit GO Loan Pilot lenders to charge the same fees on GO Loans as they charge on their similarly sized non-SBA guaranteed commercial loans.

When compared to other similarly-sized Section 7(a) loans, the GO Loan Pilot portfolio is performing very well, at about one-half the rate of liquidation and one-quarter the rate of loan purchase compared to all other 7(a) loans of $150,000 or less. In addition, the demand for GO Loans has continued during FY2011 in response to the ongoing need to rebuild the Gulf Coast areas devastated by Hurricanes Katrina and Rita and the setback in these efforts caused by the several natural disasters that affected the region this year. The approximate number of GO Loans is only slightly less than the number of loans approved in FY 2010 at approximately 520 loans.

Thus, the Agency believes it is appropriate to extend this unique and vital program through December 31, 2013, with no further extensions after that. In the interim, the Agency will determine whether a program should be developed that provides for disaster recovery financial assistance under SBA's 7(a) Business Loan Program that could be applied to any region that meets a predetermined set of criteria. Accordingly, the SBA is also extending its waiver of the Agency regulations identified in the Federal Register notice at 70 FR 69645 with the exception noted above through December 31, 2013 only.

SBA's waiver of these regulations is authorized by 13 CFR 120.3. These waivers apply only to those loans approved under the GO Loan Pilot, which expires December 31, 2013. As part of the GO Loan Pilot, these waivers apply only to those small businesses located in, locating to, or relocating 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 will be included in an SBA procedural notice that will announce the extension of the GO Loan Pilot.

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

Dated: September 26, 2011.

Steven J. Smits,

Associate Administrator, Office of Capital Access.