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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: July 11, 2000

FROM: Barry McVay, CPCM

SUBJECT: Small Business Administration; Certified Development Companies' Areas of Operations

SOURCE: Federal Register, July 11, 2000, Vol. 65, No. 133, page 42624

AGENCIES: Small Business Administration (SBA)

ACTION: Final Rule

SYNOPSIS: SBA is amending its regulations governing Certified Development Companies (CDC) Area of Operations, which is the geographic area where SBA authorizes a CDC to make loans under SBA's Development Company Loan Program ( 504 program )). This final will will permit a CDC to apply to have an area of operations that goes beyond its state of incorporation, and beyond a local economic area in an adjacent state, into a contiguous state.

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 120, Business Loans; Subpart H, Development Company Program (504).

EFFECTIVE DATE: August 10, 2000.

FOR FURTHER INFORMATION CONTACT: Gail Hepler, 202-205-6490.

SUPPLEMENTAL INFORMATION: Since the inception of the 504 program, no CDC has been certified to operate permanently in more than one state, except in a relatively few circumstances when a CDC's operations are in a Local Economic Area. The reason for this was to ensure compliance with congressional intent that CDCs be formed by local citizens whose primary purpose is to improve their community's economy.

Regulations published in 1982 permitted a CDC to operate within two states if a state line bisects a city or a CDC has obtained prior written approval to operate within a contiguous economic area that crosses a state line, but only nine CDCs out of 270 active CDCs have applied to SBA and been approved to expand their Areas of Operation across state lines. In 1996, SBA revised its regulations to permit a single exception to the "contiguous" requirement -- the revised regulations provided for statewide CDCs, which are intended to cover those counties not covered by local CDCs. However, many states do not have statewide CDCs, so many of these states have counties that are not covered by any CDC. This means that small businesses in those counties do not have access to the CDC Program.

SBA believed that it would be in the best interests of underserved communities to permit active CDCs in good standing to permanently expand their Areas of Operations beyond their state of incorporation and beyond a Local Economic Area. SBA published a proposed rule authorizing "multi-state CDCs" on November 8, 1999, and held a public meeting on January 7, 2000. Based on those comments, SBA has revised the final rule (explanations of changes between the proposed and final rules are in brackets ("[ ]")).

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

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