-
Start Preamble
AGENCY:
Small Business Administration (SBA).
ACTION:
Final rule.
SUMMARY:
SBA is implementing changes to the microloan program as required by law. This final rule terminates the designation of the microloan program as a “demonstration,” allows a nonprofit child care business to qualify for the microloan program, and authorizes a microloan intermediary to use up to 25 percent of grant funds for technical assistance to prospective microloan borrowers. This final rule also establishes procedures for SBA to revoke or suspend a microloan intermediary or non-lending technical assistance provider.
DATES:
This rule is effective October 11, 2001.
Start Further InfoFOR FURTHER INFORMATION CONTACT:
Jody Raskind, Chief, Microenterprise Development Branch, Office of Financial Assistance, Office of Capital Access, 202-205-6497.
End Further Info End Preamble Start Supplemental InformationSUPPLEMENTARY INFORMATION:
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 U.S.C. 636(m)) (Act). On August 11, 1999, SBA published a proposed rule in the Federal Register (64 FR 43636), to implement: (1) Changes to the microloan program as required by the 1997 legislation, and (2) standards and procedures SBA could use to suspend or revoke the status of a non-lending technical assistance provider (hearing and appeal regulatory proposal). SBA received three comments in response to this proposed rule, all of which addressed the hearing and appeal regulatory proposal.
The following is a summary of the portion of the proposed rule relating to the implementation of the 1997 legislation which SBA is publishing as final.
The 1997 legislation terminated the designation of the microloan program as a “demonstration.” This final rule deletes that designation wherever it was in SBA's rules, including the heading for subpart G of this part.
SBA is amending § 120.706 of its regulations (13 CFR 120.706) to increase the aggregate amount that a microloan intermediary may borrow from SBA from the previous statutory limit of $2,500,000 to the new statutory limit of $3,500,000.
Generally, microloan borrowers must engage in for profit activities. However, SBA is amending § 120.707(a) of its regulations to implement the 1997 legislation which authorizes 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 final rule amends § 120.712 to reflect the increased percentage. SBA is also implementing another provision from the 1997 legislation by amending § 120.712 to allow an intermediary to use up to 25 percent of the grant funds it receives from SBA to contract with 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 final rule amends § 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, § 120.715 of SBA's regulations incorrectly places a limit on the number of loans to intermediaries that SBA may guarantee. SBA is amending § 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 had proposed adding § 120.716 to its regulations to implement the 1997 legislation's welfare-to-work initiative. The 1997 legislation envisioned that funding would be appropriated through fiscal year 2000. Since this initiative was not funded, and by its own terms was scheduled to terminate at the end of the current fiscal year, SBA is not including it in this final rule.
In the proposed rule, SBA proposed adding a new section to the regulations describing the procedures that SBA would use to suspend or revoke a microloan intermediary or non-lending technical assistance provider (NTAP). The new provision also would have given such an entity the right to appeal any such suspension or revocation to the agency's Office of Hearings and Appeals (OHA). A commenter advised that OHA, under its present rules, did Start Printed Page 47073not have specific jurisdictional authority to hear an appeal from a microloan intermediary or NTAP. While it is true that such specific authority does not exist, § 134.102 (Jurisdiction of OHA) does allow OHA to hear any determination, appeal or other proceeding referred to OHA by the Administrator of SBA. This language allows for SBA to hear appeals from microloan intermediaries or NTAPs. However, despite this language and in an effort to ensure clarity, SBA is amending part 134 in this rule to give the OHA the specific authority to consider appeals from an agency decision to suspend or revoke a microloan intermediary or NTAP.
Compliance With Executive Orders 13132, 12988, and 12866, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork Reduction Act (44 U.S.C. Ch. 35)
For purposes of Executive Order 13132, SBA has determined that this final rule has no federalism implications.
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.
The Office of Management and Budget reviewed this rule as a “significant” regulatory action under Executive Order 12866.
SBA has determined that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612. Based on our program experience, SBA estimates that there are only 130 small business intermediaries that may be affected by this rule. Furthermore, SBA anticipates that of these 130 intermediaries only a small number will utilize the new initiatives created by the 1997 legislation. In addition, based on program history, SBA expects that it will only rely on its authority to suspend or revoke the status of an intermediary lender or non-lending technical assistance provider in an insignificant number of cases and only under extreme circumstances.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch 35, SBA certifies that this final rule does not impose any additional reporting or recordkeeping requirements.
Start List of SubjectsList of Subjects
13 CFR Part 120
- Loan programs—business
- Small businesses
13 CFR Part 134
- Administrative practice and procedure
- Organization and function (Government agencies)
For the reasons stated in the preamble and pursuant to the authority contained in section 5(b)(6) of the Small Business Act (15 U.S.C. 634(b)(6)), SBA amends parts 120 and 134, chapter I, title 13, Code of Federal Regulations as follows:
End Amendment Part Start PartPART 120—BUSINESS LOANS
End Part Start Amendment Part1. The authority citation for part 120 continues to read as follows:
End Amendment Part Start Amendment Part2. Revise the heading for subpart G of part 120, title 13, Code of Federal Regulations to read as follows:
End Amendment PartSubpart G—Microloan Program
Start Amendment Part3. In § 120.700, revise the first sentence to read as follows:
End Amendment PartWhat 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 § 120.701, redesignate paragraph (h) as paragraph (i), and add new paragraph (h) to read as follows:
End Amendment PartDefinitions.* * * * *(h) Non-lending technical assistance provider (NTAP) is an entity which receives grant funds from SBA to provide technical assistance to Microloan borrowers.
* * * * *5. In § 120.706(a), revise the heading and second sentence to read as follows:
End Amendment PartWhat 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.
* * * * *6. Revise § 120.707(a) to read as follows:
End Amendment PartWhat 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. Proceeds from Microloans may be used only for working capital and acquisition of materials, supplies, furniture, fixtures, and equipment. SBA does not review Microloans for creditworthiness.
* * * * *7. In § 120.712, revise the heading and paragraphs (b)(1) and (e) to read as follows:
End Amendment PartHow 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.
8. In § 120.714, revise the heading, add an introductory text, and revise paragraph (b) to read as follows:
End Amendment PartHow are grants made to non-lending technical assistance providers (NTAP)?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.
* * * * *9. Revise § 120.715(a) to read as follows:
End Amendment PartDoes 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 § 120.10).
* * * * *10. Add § 120.7l6 to read as follows:
End Amendment PartSuspension 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 Start Printed Page 47074the 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% or more (that is loans that are no more than 30 days late in scheduled payments),
(vi) Maintain a default rate of 15% 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;
(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.
PART 134—[AMENDED]
End Part Start Amendment Part11. The authority citation for Part 134 continues to read as follows:
End Amendment Part Start Amendment Part12. In § 134.102 remove “and” at the end of paragraph (l), redesignate paragraph (m) as paragraph (n), and add a new paragraph (m) to read as follows:
End Amendment PartJurisdiction of OHA.* * * * *(m) Appeals from the determination of the SBA under part 120 of this chapter to revoke or suspend a microloan intermediary or microloan non-lending technical assistance provider; and
* * * * *Dated: August 28, 2001.
Hector V. Barreto,
Administrator.
[FR Doc. 01-22193 Filed 9-10-01; 8:45 am]
BILLING CODE 8025-01-P
Document Information
- Effective Date:
- 10/11/2001
- Published:
- 09/11/2001
- Department:
- Small Business Administration
- Entry Type:
- Rule
- Action:
- Final rule.
- Document Number:
- 01-22193
- Dates:
- This rule is effective October 11, 2001.
- Pages:
- 47072-47074 (3 pages)
- RINs:
- 3245-AE51: Microloan Program--Changes Required by the 1997 Reauthorization Act
- RIN Links:
- https://www.federalregister.gov/regulations/3245-AE51/microloan-program-changes-required-by-the-1997-reauthorization-act
- Topics:
- Administrative practice and procedure, Loan programs-business, Organization and functions (Government agencies), Small businesses
- PDF File:
- 01-22193.pdf
- CFR: (9)
- 13 CFR 120.700
- 13 CFR 120.701
- 13 CFR 120.706
- 13 CFR 120.707
- 13 CFR 120.712
- More ...