[Federal Register: June 14, 2000 (Volume 65, Number 115)]
[Proposed Rules]
[Page 37308-37311]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14jn00-22]
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SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121 and 123
Pre-Disaster Mitigation Loans
AGENCY: Small Business Administration (SBA).
ACTION: Proposed rule.
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SUMMARY: With this rule SBA proposes to amend its Pre-Disaster
Mitigation Loan Program (program) regulations. This rule proposes
amendments that will clarify program requirements and procedures. The
Pre-Disaster Mitigation Loan Program is a pilot program that was
authorized by Congress in 1999. It allows SBA to make low interest,
fixed rate loans to small businesses for the purpose of implementing
mitigation measures to protect their property from disaster related
damage. The Pre-Disaster Mitigation Loan Program was developed in
support of Project Impact, a formal mitigation program established by
the Federal Emergency Management Agency (FEMA).
DATES: Submit comments on or before July 14, 2000.
ADDRESSES: Written comments should be sent to Bernard Kulik, Associate
Administrator, Office of Disaster Assistance, U.S. Small Business
Administration, 409 3rd Street, SW., Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT: Bernard Kulik, Associate
Administrator, Office of Disaster Assistance, 202-205-6734.
SUPPLEMENTARY INFORMATION: SBA proposes to amend its regulations
dealing with the Pre-Disaster Mitigation Loan Program (program). This
proposed rule would clarify the application and loan approval processes
and will make plain language edits to support the Administration's
efforts to communicate clearly with the public.
The Pre-Disaster Mitigation Loan Program is a pilot program
authorized by Congress at a level of 15 million dollars for each of 5
fiscal years from 2000 through 2004. The program allows SBA to make low
interest, fixed rate loans to small businesses for the purpose of
implementing mitigation measures that will protect the small business
from disaster related damage. The Pre-Disaster Mitigation Loan Program
was developed in support of Project Impact, a formal mitigation program
established by FEMA. These initiatives encourage preparedness rather
than rely solely on a response and recovery approach to emergency
management.
Compliance With Executive Orders 12866, 12988, and 13132, the
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
SBA has determined that this proposed rule is a significant rule
within the meaning of Executive Order 12866. However, 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 U.S. economy.
SBA has determined that this proposed 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.
Given that Congress has limited the funding level for this pilot
program, the program can only serve a limited number of small
businesses. With a maximum loan amount of $50,000, the number of small
businesses affected under this program would be 300. Even if the loan
amounts did not reach the maximum level, and amounted to only $25,000
per loan, the number of small businesses affected would only be 600.
This is not substantial, in view of the fact that there are some 13-16
million small businesses across the country.
For the purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35,
SBA has submitted the Pre-Disaster Mitigation Small Business Loan
Application (application) to the Office of Management and Budget (OMB)
for review. SBA is requesting that OMB approve or disapprove of this
collection of information within 30 days of submission. This
application will allow small businesses to apply for pre-disaster
mitigation loans and will provide SBA with the information necessary to
evaluate applicants. The application will request such information as
name, address, location and type of mitigation project, type of
business, management information, organization type, and financial
information to permit SBA to determine repayment ability. The applicant
will have to complete an application each time it applies for a pre-
disaster mitigation loan. SBA estimates that the time necessary to
complete an application for the Pre-Disaster Mitigation Loan Program
will average 2 hours.
SBA is seeking comments on: (a) Whether the information SBA
proposes to collect on the application is necessary for the proper
performance of this program, (b) the accuracy of the burden estimate
(time estimated to complete the application), (c) ways to minimize the
burden estimate, and (d) ways to enhance the quality of the information
being collected. Please send comments regarding this proposed
collection to Bernard Kulik, Associate Administrator, Office of
Disaster Assistance, 409 3rd Street, SW., Washington, DC 20416, and to
David Rostker, Office of Management and Budget, Office of Information
and Regulatory Affairs, 725 17th Street, NW., Washington, DC 20503.
For purposes of Executive Order 13132, SBA has determined that this
proposed rule has no federalism implications.
For purposes of Executive Order 12988, SBA certifies that this
proposed rule is drafted, to the extent practicable, to be in
accordance with the standards set forth in section 3 of that Order.
List of Subjects
13 CFR Part 121
Government procurement, Government property, Grant programs--
business, Loan programs--business, Small businesses.
13 CFR Part 123
Disaster assistance, Loan programs--business, Reporting and
recordkeeping requirements, Small businesses.
For the reasons stated in the preamble, SBA proposes to amend 13
CFR parts 121 and 123 as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
1. The authority citation for part 121 is revised to read as
follows:
Authority: 15 U.S.C. 632(a), 634(b)(6), 636(b), 636(c), 637(a),
644(c); 42 U.S.C. 13556; and Sec. 601 et. seq., Pub. L. 105-135, 111
Stat. 2592.
2. In Sec. 121.302, remove the last sentence of paragraph (c) and
add two new sentences in its place to read as follows:
Sec. 121.302 When does SBA determine the size status of an applicant?
* * * * *
(c) * * * For pre-disaster mitigation loans, size status is
determined as of the date SBA accepts a complete Pre-
[[Page 37309]]
Disaster Mitigation Small Business Loan Application for processing.
Refer to Sec. 123.408 of this chapter to find out what SBA considers to
be a complete Pre-Disaster Mitigation Small Business Loan Application.
* * * * *
PART 123--DISASTER LOAN PROGRAM
1. The authority citation for part 123 is revised to read as
follows:
Authority: 15 U.S.C. 634(b)(6), 636(b), and 636(c).
2. Designate the undesignated center headings, Overview, Home
Disaster Loans, Physical Disaster Business Loans, Economic Injury
Disaster Loans, and Pre-Disaster Mitigation Loans and the sections
under each as Subparts A, B, C, D, and E respectively.
Subpart A--Overview
3. Redesignate Sec. 123.107 as Sec. 123.21, and transfer it to
newly designated Subpart A, and revise it as follows:
Sec. 123.21 What is a mitigation measure?
A mitigation measure is something done for the purpose of
protecting real and personal property against disaster related damage.
You may implement mitigation measures after a disaster occurs, to
protect against recurring disaster related damage, or before a disaster
occurs (pre-disaster), to protect against future disaster related
damage. Sections 123.400 through 123.413 specifically address pre-
disaster mitigation. Examples of mitigation measures include retaining
walls, sea walls, grading and contouring land, elevating flood prone
structures, relocating utilities, retrofitting structures to protect
against high winds, earthquakes, flood, wildfires, or other natural
disasters.
4. Add Sec. 123.22 to Subpart A to read as follows:
Sec. 123.22 How much can your business borrow for mitigation?
For mitigation measures implemented after a disaster has occurred
your business can borrow the lesser of the cost of mitigation measure,
or 20 percent of the amount of your approved physical disaster loan to
repair or replace your damaged primary residence, personal property,
and business property. To find out how much your business can borrow
for pre-disaster mitigation measures, see Sec. 123.405.
5. Add Sec. 123.23 to Subpart A to read as follows:
Sec. 123.23 Can you request a loan increase to use for mitigation
measures?
Yes, you can request a loan increase to use for mitigation measures
by sending SBA a written request before the final disbursement of your
original disaster loan. The written request must detail the nature and
expected cost of the mitigation measure. If you send a written request
for a loan increase after the final disbursement of your original
disaster loan, SBA will only accept this request if, as a part of the
request, you demonstrate that the request was late because of
substantial reasons beyond your control.
6. Revise newly designated Subpart E to read as follows:
Subpart E--Pre-Disaster Mitigation Loans
Sec.
123.400 What is the Pre-Disaster Mitigation Loan Program?
123.401 What types of mitigating measures can your business
include in an application for a pre-disaster mitigation loan?
123.402 Can your business include its relocation as a mitigation
measure in an application for a pre-disaster mitigation loan?
123.403 When is your business eligible to apply for a pre-disaster
mitigation loan?
123.404 When is your business ineligible to apply for a pre-
disaster mitigation loan?
123.405 How much can your business borrow with a pre-disaster
mitigation loan?
123.406 What is the interest rate on a pre-disaster mitigation
loan?
123.407 When does your business apply for a pre-disaster
mitigation loan and where does your business get the application?
123.408 How does your business apply for a pre-disaster mitigation
loan?
123.409 Which pre-disaster mitigation loan requests will SBA
consider for funding?
123.410 When will SBA make funding decisions?
123.411 Which loan requests will SBA fund?
123.412 What if SBA determines that your business loan request
meets the selection criteria of Sec. 123.409 but SBA is unable to
fund it because SBA has already allocated all program funds?
123.413 What happens if SBA declines your business' pre-disaster
loan request?
Subpart E--Pre-Disaster Mitigation Loans
Sec. 123.400 What is the Pre-Disaster Mitigation Loan Program?
The Pre-Disaster Mitigation Loan Program allows SBA to make low
interest, fixed rate loans to small businesses for the purpose of
implementing mitigation measures to protect their commercial real
property (building) or leasehold improvements from disaster related
damage. This program supports Project Impact, a formal mitigation
program established by the Federal Emergency Management Agency (FEMA).
This pilot program is authorized for 5 fiscal years (October--
September), from 2000 through 2004, and has approved only limited
program funding. Therefore, approved loan requests are funded on a
first come, first serve basis up to the limit of program funds
available (see Sec. 123.411).
Sec. 123.401 What types of mitigation measures can your business
include in an application for a pre-disaster mitigation loan?
To be included in a pre-disaster mitigation loan application, each
of your business' mitigation measures must satisfy the following
criteria:
(a) The mitigation measure, as described in the application, must
serve the purpose of protecting your commercial real property
(building) or leasehold improvements from damage that may be caused by
future disasters, and
(b) The mitigation measure must conform with the priorities and
goals of the Project Impact community in which the business subject to
the measure is located. To show that this factor is satisfied your
business must submit to SBA, as a part of your complete application, a
letter from your business' local Project Impact coordinator confirming
this fact. Contact your regional FEMA office for a list of Project
Impact coordinators or visit the FEMA Website at www.fema.gov.
Sec. 123.402 Can your business include its relocation as a mitigation
measure in an application for a pre-disaster mitigation loan?
Yes, you may request a pre-disaster mitigation loan for the
relocation of your business if: (a) Your commercial real property
(building) is located in a SFHA (Special Flood Hazard Area), and (b)
your business relocates outside the SFHA but remains in the same
Project Impact community. Contact your regional FEMA office for a
listing of Project Impact Communities and SFHAs or visit the FEMA
Website at www.fema.gov.
Sec. 123.403 When is your business eligible to apply for a pre-
disaster mitigation loan?
To be eligible to apply for a pre-disaster mitigation loan your
business must meet each of the following criteria:
(a) Your business, which is the subject of the pre-disaster
mitigation measure, must be located in a Project Impact community. Each
State, the District of Columbia, Puerto Rico, and the Virgin Islands
have at least one Project Impact
[[Page 37310]]
community. Contact your regional FEMA office to find out the locations
of Project Impact communities or visit the FEMA Website at
www.fema.gov.
(b) If your business is proposing a mitigation measure that
protects against a flood hazard, the location of your business which is
the subject of the mitigation measure must be located in a Special
Flood Hazard Area (SFHA). Contact your FEMA regional office to find out
the locations of SFHAs or visit the FEMA Website at www.fema.gov.
(c) As of the date your business submits a complete Pre-Disaster
Mitigation Small Business Loan Application to SBA (see Sec. 123.408 for
what SBA considers to be a complete application), your business, along
with its affiliates, must be a small business concern as defined in
part 121 of this chapter. The definition of small business concern
encompasses sole proprietorships, partnerships, corporations, limited
liability companies, and other legal entities recognized under State
law.
(d) Your business, which is the subject of the mitigation measure,
must have operated as a business in its present location for at least
one year before submitting its application.
(e) Your business, along with its affiliates and owners, must not
have the financial resources to fund the proposed mitigation measures
without undue hardship. SBA makes this determination based on the
information your business submits as a part of its application.
(f) If your business is owning and leasing out real property, the
mitigation measures must be for protection of a building leased
primarily for commercial rather than residential purposes (SBA will
determine this based upon a comparative square footage basis).
Sec. 123.404 When is your business ineligible to apply for a pre-
disaster mitigation loan?
Your business is ineligible to apply for a pre-disaster mitigation
loan if your business (including its affiliates) satisfies any of the
following conditions:
(a) Any of your business' principal owners is presently
incarcerated, or on probation or parole following conviction of a
serious criminal offense, or has been indicted for a felony or a crime
of moral turpitude;
(b) Your business' only interest in the business property is in the
form of a security interest, mortgage, or deed of trust;
(c) The building, which is the subject of the mitigation measure,
was newly constructed or substantially improved on or after February 9,
1989, and (without significant business justification) is located
seaward of mean high tide or entirely in or over water;
(d) Your business is an agricultural enterprise. Agricultural
enterprise means a business primarily engaged (see Sec. 121.107) in the
production of food and fiber, ranching and raising of livestock,
aquaculture and all other farming and agriculture-related industries.
Sometimes a business is engaged in both agricultural and non-
agricultural business activities. If the primary business activity of
your business is not an agricultural enterprise, it may apply for a
pre-disaster mitigation loan, but loan proceeds may not be used,
directly or indirectly, for the benefit of the agricultural
enterprises;
(e) Your business is engaged in any illegal activity;
(f) Your business is a government owned entity (except for a
business owned or controlled by a Native American tribe);
(g) 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;
(h) Your business engages in lending, multi-level sales
distribution, speculation, or investment (except for real estate
investment with property held for commercial rental);
(i) Your business is a non-profit or charitable concern;
(j) Your business is a consumer or marketing cooperative;
(k) Your business derives more than one-third of its gross annual
revenue from legal gambling activities;
(l) Your business is a loan packager that earns more than one-third
of its gross annual revenue from packaging SBA loans;
(m) Your business principally engages in teaching, instructing,
counseling, or indoctrinating religion or religious beliefs, whether in
a religious or secular setting; or
(n) Your business is primarily engaged in political or lobbying
activities.
Sec. 123.405 How much can your business borrow with a pre-disaster
mitigation loan?
Your business, together with its affiliates, may borrow up to
$50,000 each fiscal year. This loan amount may be used to fund only
those projects that were a part of your business' approved loan
request. SBA will consider mitigation measures costing more than
$50,000 per year if your business can identify, as a part of its Pre-
Disaster Mitigation Small Business Loan Application, sources that will
fund the cost above $50,000.
Sec. 123.406 What is the interest rate on a pre-disaster mitigation
loan?
The interest rate on a pre-disaster mitigation loan will be fixed
at 4 percent per annum or less. The exact interest rate will be stated
in the Federal Register notice announcing each filing period (see
Sec. 123.407).
Sec. 123.407 When does your business apply for a pre-disaster
mitigation loan and where does your business get an application?
At the beginning of each of 5 fiscal years (October through
September) commencing in fiscal year 2000, SBA will publish a notice in
the Federal Register announcing the availability of pre-disaster
mitigation loans. The notice will designate a 30-day application filing
period with a specific opening date and filing deadline, as well as the
locations for obtaining and filing loan applications. In addition to
the Federal Register, SBA will use FEMA, and will issue press releases
to the local media to inform potential loan applicants where to obtain
loan applications. SBA will not accept any applications after the
filing deadline; however, SBA may announce additional application
periods each year depending on the availability of program funds.
Sec. 123.408 How does your business apply for a pre-disaster
mitigation loan?
To apply for a pre-disaster mitigation loan your business must
submit a complete Pre-Disaster Mitigation Small Business Loan
Application (application) within the announced filing period. The
complete application serves as your business' loan request. A complete
application supplies all of the filing requirements specified on the
application form including a written statement from the local Project
Impact coordinator confirming:
(a) The business that is the subject of the mitigation measure is
located within the Project Impact community, and
(b) The mitigation measure is in accordance with the specific
priorities and goals of the local Project Impact community in which the
business is located.
Sec. 123.409 Which pre-disaster mitigation loan requests will SBA
consider for funding?
SBA will consider a loan request for funding if, after reviewing a
complete application, SBA determines that it meets the following
selection criteria:
(a) Your business satisfies the requirements of Secs. 123.401,
123.402 and 123.403,
(b) None of the conditions specified in Sec. 123.404 apply to your
business, its affiliates, or principal owners,
[[Page 37311]]
(c) Your business has submitted a reasonable cost estimate for the
proposed mitigation measure and has chosen to undertake a mitigation
measure that is likely to accomplish the desired mitigation result
(SBA's determination of this point is not a guaranty that the project
will prevent damage in future disasters),
(d) Your business is credit worthy, and
(e) There is a reasonable assurance of loan repayment in accordance
with the terms of a loan agreement.
Sec. 123.410 When will SBA make funding decisions?
SBA will not make funding decisions until sixty calendar days after
the announced opening of the application filing period (as published in
the Federal Register). SBA will notify you in writing if your loan
request doesn't meet the criteria specified in Sec. 123.409.
Sec. 123.411 Which loan requests will SBA fund?
SBA will date and time stamp each application (loan request) when
we determine that it is complete. SBA will fund loan requests meeting
the selection criteria specified in Sec. 123.409 on a first come, first
served basis using this date and time stamp. SBA will fund loan
requests in this order until it allocates all program funds. SBA will
notify you in writing of its funding decision.
Sec. 123.412 What if SBA determines that your business loan request
meets the selection criteria of Sec. 123.409 but SBA is unable to fund
it because SBA has already allocated all program funds?
If SBA determines that your business' loan request meets the
selection criteria of Sec. 123.409 but we are unable to fund it because
we have already allocated all program funds, your request will be given
priority status, based on the original filing date, once more program
funds become available. However, if more than 6 months pass since SBA
determined to fund your request, SBA may request updated or additional
financial information.
Sec. 123.413 What happens if SBA declines your business' pre-disaster
mitigation loan request?
If SBA declines your business' loan request, SBA will notify your
business in writing giving specific reasons for decline. If your
business disagrees with SBA's decision, it may respond in accordance
with Sec. 123.13. If SBA reverses its decision, SBA will use the date
it accepted your business' request for reconsideration or appeal as the
basis for determining the order of funding.
Dated: May 25, 2000.
Aida Alvarez,
Administrator.
[FR Doc. 00-13812 Filed 6-13-00; 8:45 am]
BILLING CODE 8025-01-U