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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: June 14, 2000

FROM: Barry McVay, CPCM

SUBJECT: Small Business Administration; Pre-Disaster Mitigation Loans

SOURCE: Federal Register, June 14, 2000, Vol. 65, No. 115, page 37308

AGENCIES: Small Business Administration (SBA)

ACTION: Proposed Rule

SYNOPSIS: SBA is proposing to amend its regulations to clarify the application and loan approval processes for the Pre-Disaster Mitigation Loan Program, which is a pilot program that allows SBA to make low interest, fixed rate loans to small businesses to implement mitigation measures to protect their property from disaster related damage.

EDITOR'S NOTE: The SBA's regulations being amended are in Title 13 of the Code of Federal Regulations (CFR), Business and Credit Administration; Chapter 1, Small Business Administration; Part 123, Disaster Loan Program.

DATES: Submit comments on or before July 14, 2000.

ADDRESSES: Send comments 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.

SUPPLEMENTAL INFORMATION: The Pre-Disaster Mitigation Loan Program is a pilot program authorized by Congress for five fiscal years, from Fiscal Years 2000 through 2004, at $15 million a year. The program allows SBA to make low interest (4% or less) fixed rate loans of no more than $50,000 per year to small businesses to implement mitigation measures (such as retaining walls, sea walls, grading, and relocating utilities) that will protect the small business from disaster related damage. The program was developed in support of Project Impact, a formal mitigation program established by the Federal Emergency Management Agency (FEMA).

The SBA originally implemented this program by publishing rules on September 3, 1999, effective October 1, 1999 (the beginning of FY 2000). The regulations were under 13 CFR Part 123 as Sections 123.400 through 123.407.

The regulations explained the program well enough, but the application process was unclear. This proposed rule seeks to clarify the application process and consolidate the program's regulations. Among the major changes proposed to SBA's regulations are the following:

EDITOR'S NOTE: This program is so typical of Congress: it authorizes a program so it looks like Congress is really concerned and really trying to do something, but the program actually accomplishes little! Even the SBA admits that this entire program is "much ado about nothing"! SBA says in the introduction to the rule, "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."

And how many small businesses in need of this program peruse the Federal Register? Both the current Section 123.406 and the proposed Section 123.407 state that "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." Oh, sure, SBA says it will "use FEMA and the local media to inform potential loan applicants", but how effective will that be? Who do you think is going to find out about the application period and get the loans?

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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