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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: May 29, 2001

SUBJECT: Small Business Administration; Program for Investment in Microentrepreneurs Act

SOURCE: Federal Register, May 29, 2001, Vol. 66, No. 103, page 29010

AGENCIES: Small Business Administration (SBA)

ACTION: Final Rule

SYNOPSIS: SBA is adding new regulations to implement the Program for Investment in Microentrepreneurs (PRIME) Act which was created November 12, 1999, with the enactment of Title VII of the Gramm-Leach-Bliley Act (Public Law 106-102). The program is intended to provide training and technical assistance to disadvantaged microentrepreneurs through grants to qualified Microenterprise Development Organizations (MDOs).

EDITOR'S NOTE: For more on the proposed rule, see the October 10, 2000, FEDERAL CONTRACTS DISPATCH "Small Business Administration; Program for Investment in Microentrepreneurs Act."

EFFECTIVE DATE: June 28, 2001.

FOR FURTHER INFORMATION CONTACT: Jody Raskind, Chief, Microenterprise Development Branch, 202-205-6497.

SUPPLEMENTAL INFORMATION: With the enactment of the PRIME Act, Congress recognized that many disadvantaged microentrepreneurs (low and very-low income businesses with fewer than five employees, including the owner) need training and technical assistance to start, operate, strengthen, or expand their businesses. The PRIME Act intends to achieve this with the award of PRIME grants to qualified MDOs to help them meet the training and technical assistance needs for disadvantaged microentrepreneurs, which will encourage entrepreneurship and capital formation at the community level.

To implement the provisions of the PRIME Act, SBA published on October 10, 2000, a proposed rule to amend Title 13 of the Code of Federal Regulations (CFR) by adding Part 119, Program for Investment in Microentrepreneurs ("PRIME" or "the Act"). SBA received 13 comments, and SBA has made several changes to the final version of the rule.

The following are the main provisions of Part 119 (major changes are explained in "EDITOR'S NOTES"):

• Section 119.1, What is the Program for Investment in Microentrepreneurs ("PRIME" or "the Act")?, states that the PRIME Act authorizes grants to MDOs to "fund training and technical assistance for disadvantaged entrepreneurs [referred to as a "Technical Assistance Grant" in Section 119.4, What services or activities may PRIME grant funds be used for?], build these organizations' own capacity to give training and technical assistance ["Capacity Building Grant"], fund research and development of 'best practices' in microenterprise development and technical assistance programs for disadvantaged microentrepreneurs ["Research and Development Grant"], and to fund other undertakings the [SBA] Administrator or designee deems consistent with these purposes ["Discretionary Grant"]."
  
  
• Section 119.2, Definitions, provides the following definitions:
  
  
  • "Low-income person" is a person with "an income, adjusted for family size, of not more than: (1) for metropolitan areas, 80% of the median income; and (2) for non-metropolitan areas, the greater of (i) 80% of the area median income; or (ii) 80% of the statewide non-metropolitan area median income."
    
    
  • "Microenterprise" means "a sole proprietorship, partnership or corporation that: (1) has fewer than 5 employees, including the owner; and (2) generally lacks access to conventional loans, equity, or other banking services."
    
    
  • "Microenterprise development organization" means "a nonprofit entity, or a program administered by such an entity, including community development corporations or other nonprofit development organizations and social service organizations, that provides services to disadvantaged microentrepreneurs."
    
    
  • "Very low income person" means a person with "an income adjusted for family size of not more than 150% of the poverty line..."
  
  
• Section 119.5, How are PRIME grant awards allocated?, states that "Not less than 50% of the number of grant awards made under this part will be awarded to qualified organizations benefiting very low-income persons, including those residing on Indian reservations." It goes on to allocate the funding as follows: "(1) a minimum of 75% for Technical Assistance Grants; (2) a minimum of 15% for Capacity Building Grants; and (3) the remaining 10% or less may be allocated by SBA, in its sole discretion to be used for (i) Research and Development Grants; or (ii) Discretionary Grants."
  
  
• Section 119.6, What are the minimum and maximum amounts for an award?, states that "the minimum grant award for Technical Assistance and Capacity Building Grants will be $50,000 during the first year of the award...there is no minimum grant award for Research and Development or Discretionary Grants. The maximum amount that an individual grant recipient may receive in any fiscal year from a single award or multiple awards...may not exceed $250,000 or 10% of the total grant funds available for award in that fiscal year, whichever is less." (EDITOR'S NOTE: The words "during the first year of the award" have been added to the final rule.)
  
  
• Section 119.7, How long and in what amounts will grant funding be available to a single grantee?, states that funding will be available for one year plus four option years, but that for "Technical Assistance and Capacity Building Grants...funding for any option year(s) must not no more than 67 percent of the initial grant amount," and for "Research and Development and Discretionary Grants...funding for any option year(s) will be approved at the discretion of the SBA." (EDITOR'S NOTE: The proposed rule stated that "funding for any option years will be in declining amounts as follows: (1) 80% of initial grant amount in first option year; (2) 60% of initial grant amount in second option year; (3) 40% of initial grant amount in third option year; and (4) 20% of initial grant amount in fourth option year.") In addition, in the final year of a project, a grantee may request a one-time extension for up to 12 months. (EDITOR'S NOTE: This one-time extension is added to the final rule.)
  
  
• Section 119.8, Are there matching requirements for grantees?, requires applicants and grantees to "match federal assistance with funds from sources other than the federal government in an amount not less than 50% of the grant amount awarded each year." However, "for an applicant or grantee with severe constraints on available sources of matching funds, the Administrator or designee may reduce or eliminate the matching requirements."
  
  
• Section 119.9, How will a qualified organization apply for PRIME grant awards?, states that "SBA will issue Program Announcements specifying the terms, conditions, and evaluation criteria for each potential set of awards. Program Announcements will summarize the purpose of the available funds; will advise potential applicants regarding how to obtain an application packet; and will provide summary information regarding deadlines and other requirements."
  
  
• Section 119.10, Will SBA give preferential consideration to other SBA program participants?, states that SBA will not prefer Microloan Program participants (Section 7(m)) over non-participants or former participants in that program.
  
  
• Section 119.12, What criteria will SBA use to evaluate applications for funding under the PRIME program?, states that "SBA will give special consideration to organizations located in and serving areas of, or with a history of successful outreach to, low-income and very low-income persons..."

The rest of Part 119 addresses the making of subgrants, limitations on the use of program income, carryover procedures from one fiscal year to the next of unexpended federal funds, SBA reporting and record keeping requirements, SBA oversight functions, restrictions against lobbying, fundraising costs, and conflict of interests.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

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