Small Business Size Standards; Alternative Size Standard for 7(a), 504, and Disaster Loan Programs, 12506-12508 [2018-05787]
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Federal Register / Vol. 83, No. 56 / Thursday, March 22, 2018 / Proposed Rules
2010 (Act) required the Bureau to
prescribe rules establishing such
procedures as may be necessary to carry
out hearings and adjudications
conducted pursuant to 12 U.S.C. 5563.
12 U.S.C. 5563(e). On July 28, 2011, the
Bureau published an interim final rule
seeking comment and prescribing rules
establishing such hearings and
procedures, with the exception of rules
relating to the issuance of a temporary
cease-and-desist order (TCDO) pursuant
to section 1053(c) of the Act. 76 FR
45338 (July 28, 2011). The Bureau
responded to comments received and
published a final rule on June 29, 2012.
77 FR 39058 (June 29, 2012). This rule
was codified at 12 CFR part 1081,
subparts A–D. The Bureau published an
interim final rule seeking comment and
prescribing rules on TCDOs on
September 26, 2013. 78 FR 59163 (Sept.
26, 2013). The Bureau received a single
comment on this rule. Following
consideration of the comment, the
Bureau adopted the interim final rule
without change on June 18, 2014. 79 FR
34622 (June 18, 2014). This rule was
codified at 12 CFR part 1081, subpart E.
Collectively, the rules codified at 12
CFR part 1081 are titled ‘‘Rules of
Practice for Adjudication Proceedings’’
(Rules). The Bureau issued a Request for
Information (RFI) related to the Rules on
February 5, 2018, 83 FR 5055, and now
extends the period for comments
responding to that RFI.
Authority: 12 U.S.C. 5511(c).
Dated: March 16, 2018.
Mick Mulvaney,
Acting Director, Bureau of Consumer
Financial Protection.
[FR Doc. 2018–05780 Filed 3–21–18; 8:45 am]
BILLING CODE 4810–AM–P
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245–AG16
Small Business Size Standards;
Alternative Size Standard for 7(a), 504,
and Disaster Loan Programs
U.S. Small Business
Administration.
ACTION: Advance notice of proposed
rulemaking.
daltland on DSKBBV9HB2PROD with PROPOSALS
AGENCY:
SBA is seeking public input
to assist in establishing a permanent
alternative size standard for its 7(a) and
504 Loan Programs. SBA also invites
suggestions on sources of relevant data
and information that SBA should
evaluate in developing a permanent
alternative size standard and assessing
SUMMARY:
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18:44 Mar 21, 2018
Jkt 244001
its impact. Finally, SBA also seeks input
from interested parties on a potential
proposal to apply the permanent
alternative size standard as an
alternative to using industry based size
standards for small business applicants
under its Economic Injury Disaster Loan
(‘‘EIDL’’) Program.
DATES: SBA must receive comments to
this ANPRM on or before May 21, 2018.
ADDRESSES: You may submit comments,
identified by RIN 3245–AG16 by one of
the following methods: (1) Federal
eRulemaking Portal:
www.regulations.gov, following the
instructions for submitting comments;
or (2) Mail/Hand Delivery/Courier:
Khem R. Sharma, Ph.D., Chief, Office of
Size Standards, 409 Third Street SW,
Mail Code 6530, Washington, DC 20416.
SBA will post all comments to this
ANPRM on www.regulations.gov. If you
wish to submit confidential business
information (CBI) as defined in the User
Notice at www.regulations.gov, you
must submit such information either by
mail to the U.S. Small Business
Administration, Khem R. Sharma, Ph.D.,
Chief, Office of Size Standards, 409
Third Street SW, Mail Code 6530,
Washington, DC 20416, or by email to
sizestandards@sba.gov. Highlight the
information that you consider to be CBI
and explain why you believe SBA
should hold this information as
confidential. SBA will review your
information and determine whether it
will make the information public.
Requests to redact or remove posted
comments cannot be honored and the
request to redact/remove posted
comments will be posted as a new
comment.
FOR FURTHER INFORMATION CONTACT:
Khem R. Sharma, Office of Size
Standards, by phone at (202) 205–7189
or by email at sizestandards@sba.gov.
SUPPLEMENTARY INFORMATION: SBA
establishes small business size
definitions, commonly known as ‘‘size
standards,’’ for private sector industries
in the United States to determine
eligibility for Federal small business
assistance programs, including the
SBA’s 7(a) and 504 Loan Programs
(‘‘Business Loan Programs’’). These size
standards are established by 6-digit
North American Industry Classification
System (NAICS) industry, typically
based either on average annual receipts
or on average number of employees.
SBA uses financial assets and refining
capacity to measure the size of a few
specialized industries. See, 13 CFR part
121, Small Business Size Regulations.
On September 27, 2010, the Small
Business Jobs Act of 2010 (‘‘Jobs Act’’)
was enacted (Pub. L. 111–240). Section
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Sfmt 4702
1116 of the Jobs Act added a new
Section 3(a)(5) to the Small Business
Act that directed SBA to establish an
alternative size standard using
maximum tangible net worth and
average net income for applicants of the
SBA’s Business Loan Programs. The
Jobs Act also established for applicants
for the SBA’s Business Loan Programs a
temporary alternative size standard of
not more than $15 million in tangible
net worth and of not more than $5
million in the average net income after
Federal income taxes (excluding any
carry-over losses) of the applicant for
the 2 full fiscal years before the date of
the application (referred to as ‘‘Interim
Rule’’), and it provided that this
temporary statutory alternative size
standard would remain in effect until
such time as SBA established a new
alternative size standard for the
Business Loan Programs through
rulemaking. 15 U.S.C. 632(a)(5). Prior to
that, SBA had a lower permanent
regulatory alternative size standard that
applied to the 504 Loan Program, and
temporarily applied, for the period
beginning on May 5, 2009 and ending
on September 30, 2010, to the 7(a) Loan
Program. 13 CFR 120.301(b)(2).
On September 29, 2010, SBA issued
Information Notice 5000–1175
(available at https://www.sba.gov/sites/
default/files/files/bank_5000-1175_
0.pdf) providing that, effective
September 27, 2010, the new statutory
temporary alternative size standard
applied to its Business Loan Programs,
thereby replacing and superseding the
lower existing alternative size standard
of $8.5 million in tangible net worth and
$3 million in average net income, set
forth in 13 CFR 121.301(b)(2). The
Information Notice further stated that
the new statutory alternative size
standard would remain in effect until
such time as SBA established a
permanent alternative size standard for
the Business Loan Programs through
rulemaking. The Information Notice also
stated that SBA’s disaster loan program,
surety bond guarantee program, small
business investment company program,
and small business development and
contracting programs, as well as other
federal programs utilizing SBA’s
industry based size standards were not
affected by the temporary statutory
alternative size standard, and the
current standards for those programs in
13 CFR part 121 remained in effect.
Because of the difficulty of obtaining
relevant data, SBA has not yet
established a new permanent tangible
net worth and net income based
alternative size standard for its Business
Loan Programs, so the Agency continues
to use the temporary statutory
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daltland on DSKBBV9HB2PROD with PROPOSALS
Federal Register / Vol. 83, No. 56 / Thursday, March 22, 2018 / Proposed Rules
alternative size standard (referred to in
the Jobs Act as the ‘‘Interim Rule’’) to
determine eligibility for a small
business concern under SBA’s Business
Loan Programs, in addition to using the
industry based size standards. Under
the Interim Rule, a Business Loan
Program applicant is eligible either
under its industry based size standard
or if it meets the temporary statutory
alternative size standard of $15 million
in tangible net worth and $5 million in
average net income.
SBA is statutorily authorized to
provide access to capital to small
businesses that do not have credit
available elsewhere from non-Federal
sources on reasonable terms and
conditions. Aiming to expand credit
opportunities for small businesses
under the distressed credit conditions in
the aftermath of the 2007–2009 Great
Recession, Congress, through the Jobs
Act, temporarily increased by statute the
level of the existing regulatory
alternative size standard for the
Business Loan Programs by raising the
maximum thresholds of tangible net
worth from $8.5 million to $15 million
and of average net income from $3
million to $5 million, and it provided
that the temporary statutory alternative
size standard would remain in effect for
the Business Loan Programs until such
time as SBA established a new
permanent alternative size standard.
A review of SBA’s internal data on its
Business Loan Programs shows that the
temporary statutory alternative size
standard may have enabled some small
businesses that were not otherwise
eligible under their industry based size
standards to receive 7(a) or 504 Loans
(‘‘Business Loans’’). However, SBA’s
internal data systems for its Business
Loan Programs lack the necessary
detailed electronic data that would
allow for an assessment of the exact
impact of the Interim Rule on small
business loan applicants. Since the
Agency’s electronic systems only
include data regarding the number of
employees and the NAICS industry for
loan applicants, but not data regarding
average annual receipts, tangible net
worth or average net income, SBA is not
easily able to calculate the exact number
of businesses that qualified under the
temporary statutory alternative size
standard that otherwise could not have
qualified under their industry based size
standards. Similarly, due to electronic
data limitations, SBA cannot easily
identify industries or industry sectors in
which the temporary statutory
alternative size standard helped small
businesses the most or the least in
accessing SBA Business Loans.
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18:44 Mar 21, 2018
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Again, due to the lack of relevant
electronic data, SBA is also not in a
position to determine whether the
Interim Rule is appropriate under the
current economic environment or needs
to be modified when SBA establishes a
permanent alternative size standard.
In an effort to establish a permanent
alternative size standard for its Business
Loan Programs as mandated by the Jobs
Act, SBA has taken steps to gather the
information and data necessary to
develop an analysis to support the
creation of a new permanent alternative
size standard based on tangible net
worth and average net income.
However, the Economic Census data
that SBA examines to establish the
industry based size standards does not
contain information on tangible net
worth or average net income by
industry. Furthermore, while SBA
collects and maintains limited relevant
electronic data on applicants for its
Business Loan Programs (such as the
number of employees for each loan
recipient, but not average annual
receipts, tangible net worth, or average
net income), SBA’s electronic internal
data does not show whether an
applicant for its Business Loan
Programs was determined to be eligible
under its industry based size standard
or under the alternative size standard.
Similarly, the electronic data does not
include information on the numbers or
amounts of loan approvals that were
issued under the industry based size
standard or under the temporary
statutory alternative size standard.
As such, the only electronic data on
size for small business applicants
approved for loans through the SBA’s
Business Loan Programs available for
review are the number of employees and
the NAICS industry. In an effort to
estimate the percentage of loans that
were approved under the temporary
statutory alternative size standard, SBA
examined its electronic internal data on
its Business Loan Programs for the three
most recent fiscal years (FY 2015
through FY 2017). For this analysis,
SBA converted industry based receiptsbased size standards to the equivalent
number of employees using the receiptsto-employees ratios from the special
tabulations of the 2012 Economic
Census (https://www.census.gov/econ/
census/). If the data showed that the
number of employees of a loan recipient
exceeded its industry based employee
size standard (or employee equivalents
in the case of receipts-based size
standards), SBA deemed for the
purposes of this analysis that the loan
was approved under the temporary
statutory alternative size standard.
Conversely, if the loan recipient’s
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12507
number of employees was equal to or
less than the industry based size
standard, it was deemed for the
purposes of this analysis that the loan
could have been approved under the
industry based size standard.
Based on the results obtained from
this analysis, SBA estimates that about
1.3% of the 207,161 total loan approvals
issued during FY 2015–2017 went to
firms that exceeded their industry based
size standard, thereby implying that
these firms were most likely qualified
only under the temporary statutory
alternative size standard. SBA estimates
the total value of these loans to be $3.1
billion, or 3.6% of $86.9 billion in total
loans approved during that period. Such
a small percentage of loan approvals
issued to firms that exceeded their
industry size standard (1.3%) suggests
that a vast majority of small businesses
receiving loans through SBA’s Business
Loan Programs would have qualified
under their industry based size
standards and would not be impacted
significantly by a modification, if any, to
the Interim Rule.
Although useful, the analyzed data is
selective in that it includes only those
firms that were approved for and
received an SBA Business Loan, but not
those that applied and were not
approved nor those interested in
applying in the future. This data does
not allow SBA to accurately determine
the broader impact of a change to the
Interim Rule, nor does it provide the
Agency with a robust source of
information from which a new
permanent alternative size standard can
be developed. Furthermore, while SBA
has approximated the percentage of all
loan approvals issued to small
businesses that qualified only under the
Interim Rule, it is not possible to
determine the precise impact because
the available electronic data lacks
tangible net worth and average net
income data for the impacted
population of small businesses. Data on
tangible net worth and average net
income for the impacted businesses, if
available from other sources, may reveal
additional insights into the results of
SBA’s analysis of FY 2015–2017 loan
data.
Additionally, SBA is statutorily
authorized to make direct loans under
the EIDL Program to small businesses
that do not have credit available
elsewhere and that have suffered a
substantial economic injury as a result
of a disaster. 15 U.S.C. 636(b)(2).
Historically, the size standards
applicable to small business concerns
that apply for loans under the EIDL
Program have been the same industry
based size standards applicable to small
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22MRP1
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Federal Register / Vol. 83, No. 56 / Thursday, March 22, 2018 / Proposed Rules
daltland on DSKBBV9HB2PROD with PROPOSALS
business applicants for the Business
Loan Programs. See, 13 CFR 123.300(b).
Although the temporary statutory
alternative size standard established by
the Jobs Act does not apply to the EIDL
Program, SBA is considering applying
the new permanent alternative size
standard established for the Business
Loan Programs to the EIDL Program as
an alternative to industry based size
standards.
Request for Comments
Against the above backdrop, in this
ANPRM, SBA seeks comment on the
following issues.
1. SBA seeks comment on whether or
not the level of the temporary statutory
alternative size standard under the
Interim Rule (i.e., $15 million in
tangible net worth and $5 million in
average net income) is appropriate
under the current credit environment
and as a new permanent alternative size
standard. Commenters in support of the
level in the Interim Rule should provide
justification, along with supporting data
and analysis to support their position.
Similarly, commenters who believe the
level established in the Interim Rule is
not appropriate as a permanent
alternative size standard should suggest,
along with supporting data and analysis,
a different alternative size standard
which they believe would be more
appropriate. The suggested alternative
size standard must be based on tangible
net worth and average net income as
required by section 3(a)(5) of the Small
Business Act. 15 U.S.C. 632(a)(5).
2. SBA seeks comment on the impact
of using an alternative size standard on
small businesses seeking loans through
its Business Loan Programs.
Specifically, SBA welcomes information
on industries/sectors where small
businesses benefit the most or do not
benefit at all from the use of an
alternative size standard. Similarly, SBA
is also looking for data on the number
of businesses approved for SBA’s
Business Loans under the temporary
statutory alternative size standard that
otherwise could not have been approved
under their industry based size
standards.
3. SBA invites suggestions on sources
of relevant data and information,
especially tangible net worth and
average net income of applicants to
SBA’s Business Loan Programs, that
SBA can evaluate to assess the impact
of the Interim Rule on small businesses
and use in developing a new permanent
alternative size standard and in
estimating the impact of the new
permanent alternative size standard.
4. SBA invites comments from
interested parties on the proposal to
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18:44 Mar 21, 2018
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apply the same new permanent
alternative size standard established for
the Business Loan Programs to the EIDL
Program as an alternative to industry
based size standards.
5. SBA also seeks comment on how
the Interim Rule has affected the
processes used by lenders participating
in the Business Loan Programs and what
effects a permanent alternative size
standard would have on application
processes and processing times.
6. SBA invites comment on the effects
of the Interim Rule on conventional
small business lending. Specifically,
SBA welcomes input on whether, and to
what extent, if any, SBA Business Loans
approved under the Interim Rule have
substituted for or displaced directly or
indirectly conventional small business
lending, or whether such SBA Business
Loans played more of a supplementary
role in conventional small business
lending activity.
Dated: March 14, 2018.
Linda E. McMahon,
Administrator.
[FR Doc. 2018–05787 Filed 3–21–18; 8:45 am]
BILLING CODE 8025–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2018–0166; Product
Identifier 2017–NM–169–AD]
RIN 2120–AA64
Airworthiness Directives; ATR–GIE
´
Avions de Transport Regional
Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
We propose to adopt a new
airworthiness directive (AD) for all
´
ATR–GIE Avions de Transport Regional
Model ATR72 airplanes. This proposed
AD was prompted by a determination
that more restrictive maintenance
instructions and airworthiness
limitations are necessary. This proposed
AD would require revising the
maintenance or inspection program, as
applicable, to incorporate new or
revised maintenance instructions and
airworthiness limitations. We are
proposing this AD to address the unsafe
condition on these products.
DATES: We must receive comments on
this proposed AD by May 7, 2018.
ADDRESSES: You may send comments,
using the procedures found in 14 CFR
SUMMARY:
PO 00000
Frm 00005
Fmt 4702
Sfmt 4702
11.43 and 11.45, by any of the following
methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
instructions for submitting comments.
• Fax: 202–493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
• Hand Delivery: Deliver to Mail
address above between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
For service information identified in
this NPRM, contact ATR–GIE Avions de
´
´
Transport Regional, 1, Allee Pierre
Nadot, 31712 Blagnac Cedex, France;
telephone +33 (0) 5 62 21 62 21; fax +33
(0) 5 62 21 67 18; email
continued.airworthiness@atraircraft.com. You may view this service
information at the FAA, Transport
Standards Branch, 2200 South 216th
Street, Des Moines, WA. For
information on the availability of this
material at the FAA, call 206–231–3195.
Examining the AD Docket
You may examine the AD docket on
the internet at https://
www.regulations.gov by searching for
and locating Docket No. FAA–2018–
0166; or in person at the Docket
Management Facility between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays. The AD docket
contains this NPRM, the regulatory
evaluation, any comments received, and
other information. The street address for
the Docket Operations office (telephone
800–647–5527) is in the ADDRESSES
section. Comments will be available in
the AD docket shortly after receipt.
FOR FURTHER INFORMATION CONTACT:
Shahram Daneshmandi, Aerospace
Engineer, International Section,
Transport Standards Branch, FAA, 2200
South 216th Street, Des Moines, WA
98198; telephone and fax 206–231–
3220.
SUPPLEMENTARY INFORMATION:
Comments Invited
We invite you to send any written
relevant data, views, or arguments about
this proposal. Send your comments to
an address listed under the ADDRESSES
section. Include ‘‘Docket No. FAA–
2018–0166; Product Identifier 2017–
NM–169–AD’’ at the beginning of your
comments. We specifically invite
comments on the overall regulatory,
economic, environmental, and energy
aspects of this NPRM. We will consider
all comments received by the closing
date and may amend this NPRM based
on those comments.
E:\FR\FM\22MRP1.SGM
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]]>Agencies
[Federal Register Volume 83, Number 56 (Thursday, March 22, 2018)]
[Proposed Rules]
[Pages 12506-12508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05787]
=======================================================================
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
RIN 3245-AG16
Small Business Size Standards; Alternative Size Standard for
7(a), 504, and Disaster Loan Programs
AGENCY: U.S. Small Business Administration.
ACTION: Advance notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: SBA is seeking public input to assist in establishing a
permanent alternative size standard for its 7(a) and 504 Loan Programs.
SBA also invites suggestions on sources of relevant data and
information that SBA should evaluate in developing a permanent
alternative size standard and assessing its impact. Finally, SBA also
seeks input from interested parties on a potential proposal to apply
the permanent alternative size standard as an alternative to using
industry based size standards for small business applicants under its
Economic Injury Disaster Loan (``EIDL'') Program.
DATES: SBA must receive comments to this ANPRM on or before May 21,
2018.
ADDRESSES: You may submit comments, identified by RIN 3245-AG16 by one
of the following methods: (1) Federal eRulemaking Portal:
www.regulations.gov, following the instructions for submitting
comments; or (2) Mail/Hand Delivery/Courier: Khem R. Sharma, Ph.D.,
Chief, Office of Size Standards, 409 Third Street SW, Mail Code 6530,
Washington, DC 20416.
SBA will post all comments to this ANPRM on www.regulations.gov. If
you wish to submit confidential business information (CBI) as defined
in the User Notice at www.regulations.gov, you must submit such
information either by mail to the U.S. Small Business Administration,
Khem R. Sharma, Ph.D., Chief, Office of Size Standards, 409 Third
Street SW, Mail Code 6530, Washington, DC 20416, or by email to
[email protected]. Highlight the information that you consider to
be CBI and explain why you believe SBA should hold this information as
confidential. SBA will review your information and determine whether it
will make the information public. Requests to redact or remove posted
comments cannot be honored and the request to redact/remove posted
comments will be posted as a new comment.
FOR FURTHER INFORMATION CONTACT: Khem R. Sharma, Office of Size
Standards, by phone at (202) 205-7189 or by email at
[email protected].
SUPPLEMENTARY INFORMATION: SBA establishes small business size
definitions, commonly known as ``size standards,'' for private sector
industries in the United States to determine eligibility for Federal
small business assistance programs, including the SBA's 7(a) and 504
Loan Programs (``Business Loan Programs''). These size standards are
established by 6-digit North American Industry Classification System
(NAICS) industry, typically based either on average annual receipts or
on average number of employees. SBA uses financial assets and refining
capacity to measure the size of a few specialized industries. See, 13
CFR part 121, Small Business Size Regulations.
On September 27, 2010, the Small Business Jobs Act of 2010 (``Jobs
Act'') was enacted (Pub. L. 111-240). Section 1116 of the Jobs Act
added a new Section 3(a)(5) to the Small Business Act that directed SBA
to establish an alternative size standard using maximum tangible net
worth and average net income for applicants of the SBA's Business Loan
Programs. The Jobs Act also established for applicants for the SBA's
Business Loan Programs a temporary alternative size standard of not
more than $15 million in tangible net worth and of not more than $5
million in the average net income after Federal income taxes (excluding
any carry-over losses) of the applicant for the 2 full fiscal years
before the date of the application (referred to as ``Interim Rule''),
and it provided that this temporary statutory alternative size standard
would remain in effect until such time as SBA established a new
alternative size standard for the Business Loan Programs through
rulemaking. 15 U.S.C. 632(a)(5). Prior to that, SBA had a lower
permanent regulatory alternative size standard that applied to the 504
Loan Program, and temporarily applied, for the period beginning on May
5, 2009 and ending on September 30, 2010, to the 7(a) Loan Program. 13
CFR 120.301(b)(2).
On September 29, 2010, SBA issued Information Notice 5000-1175
(available at https://www.sba.gov/sites/default/files/files/bank_5000-1175_0.pdf) providing that, effective September 27, 2010, the new
statutory temporary alternative size standard applied to its Business
Loan Programs, thereby replacing and superseding the lower existing
alternative size standard of $8.5 million in tangible net worth and $3
million in average net income, set forth in 13 CFR 121.301(b)(2). The
Information Notice further stated that the new statutory alternative
size standard would remain in effect until such time as SBA established
a permanent alternative size standard for the Business Loan Programs
through rulemaking. The Information Notice also stated that SBA's
disaster loan program, surety bond guarantee program, small business
investment company program, and small business development and
contracting programs, as well as other federal programs utilizing SBA's
industry based size standards were not affected by the temporary
statutory alternative size standard, and the current standards for
those programs in 13 CFR part 121 remained in effect.
Because of the difficulty of obtaining relevant data, SBA has not
yet established a new permanent tangible net worth and net income based
alternative size standard for its Business Loan Programs, so the Agency
continues to use the temporary statutory
[[Page 12507]]
alternative size standard (referred to in the Jobs Act as the ``Interim
Rule'') to determine eligibility for a small business concern under
SBA's Business Loan Programs, in addition to using the industry based
size standards. Under the Interim Rule, a Business Loan Program
applicant is eligible either under its industry based size standard or
if it meets the temporary statutory alternative size standard of $15
million in tangible net worth and $5 million in average net income.
SBA is statutorily authorized to provide access to capital to small
businesses that do not have credit available elsewhere from non-Federal
sources on reasonable terms and conditions. Aiming to expand credit
opportunities for small businesses under the distressed credit
conditions in the aftermath of the 2007-2009 Great Recession, Congress,
through the Jobs Act, temporarily increased by statute the level of the
existing regulatory alternative size standard for the Business Loan
Programs by raising the maximum thresholds of tangible net worth from
$8.5 million to $15 million and of average net income from $3 million
to $5 million, and it provided that the temporary statutory alternative
size standard would remain in effect for the Business Loan Programs
until such time as SBA established a new permanent alternative size
standard.
A review of SBA's internal data on its Business Loan Programs shows
that the temporary statutory alternative size standard may have enabled
some small businesses that were not otherwise eligible under their
industry based size standards to receive 7(a) or 504 Loans (``Business
Loans''). However, SBA's internal data systems for its Business Loan
Programs lack the necessary detailed electronic data that would allow
for an assessment of the exact impact of the Interim Rule on small
business loan applicants. Since the Agency's electronic systems only
include data regarding the number of employees and the NAICS industry
for loan applicants, but not data regarding average annual receipts,
tangible net worth or average net income, SBA is not easily able to
calculate the exact number of businesses that qualified under the
temporary statutory alternative size standard that otherwise could not
have qualified under their industry based size standards. Similarly,
due to electronic data limitations, SBA cannot easily identify
industries or industry sectors in which the temporary statutory
alternative size standard helped small businesses the most or the least
in accessing SBA Business Loans.
Again, due to the lack of relevant electronic data, SBA is also not
in a position to determine whether the Interim Rule is appropriate
under the current economic environment or needs to be modified when SBA
establishes a permanent alternative size standard.
In an effort to establish a permanent alternative size standard for
its Business Loan Programs as mandated by the Jobs Act, SBA has taken
steps to gather the information and data necessary to develop an
analysis to support the creation of a new permanent alternative size
standard based on tangible net worth and average net income. However,
the Economic Census data that SBA examines to establish the industry
based size standards does not contain information on tangible net worth
or average net income by industry. Furthermore, while SBA collects and
maintains limited relevant electronic data on applicants for its
Business Loan Programs (such as the number of employees for each loan
recipient, but not average annual receipts, tangible net worth, or
average net income), SBA's electronic internal data does not show
whether an applicant for its Business Loan Programs was determined to
be eligible under its industry based size standard or under the
alternative size standard. Similarly, the electronic data does not
include information on the numbers or amounts of loan approvals that
were issued under the industry based size standard or under the
temporary statutory alternative size standard.
As such, the only electronic data on size for small business
applicants approved for loans through the SBA's Business Loan Programs
available for review are the number of employees and the NAICS
industry. In an effort to estimate the percentage of loans that were
approved under the temporary statutory alternative size standard, SBA
examined its electronic internal data on its Business Loan Programs for
the three most recent fiscal years (FY 2015 through FY 2017). For this
analysis, SBA converted industry based receipts-based size standards to
the equivalent number of employees using the receipts-to-employees
ratios from the special tabulations of the 2012 Economic Census (https://www.census.gov/econ/census/). If the data showed that the number of
employees of a loan recipient exceeded its industry based employee size
standard (or employee equivalents in the case of receipts-based size
standards), SBA deemed for the purposes of this analysis that the loan
was approved under the temporary statutory alternative size standard.
Conversely, if the loan recipient's number of employees was equal to or
less than the industry based size standard, it was deemed for the
purposes of this analysis that the loan could have been approved under
the industry based size standard.
Based on the results obtained from this analysis, SBA estimates
that about 1.3% of the 207,161 total loan approvals issued during FY
2015-2017 went to firms that exceeded their industry based size
standard, thereby implying that these firms were most likely qualified
only under the temporary statutory alternative size standard. SBA
estimates the total value of these loans to be $3.1 billion, or 3.6% of
$86.9 billion in total loans approved during that period. Such a small
percentage of loan approvals issued to firms that exceeded their
industry size standard (1.3%) suggests that a vast majority of small
businesses receiving loans through SBA's Business Loan Programs would
have qualified under their industry based size standards and would not
be impacted significantly by a modification, if any, to the Interim
Rule.
Although useful, the analyzed data is selective in that it includes
only those firms that were approved for and received an SBA Business
Loan, but not those that applied and were not approved nor those
interested in applying in the future. This data does not allow SBA to
accurately determine the broader impact of a change to the Interim
Rule, nor does it provide the Agency with a robust source of
information from which a new permanent alternative size standard can be
developed. Furthermore, while SBA has approximated the percentage of
all loan approvals issued to small businesses that qualified only under
the Interim Rule, it is not possible to determine the precise impact
because the available electronic data lacks tangible net worth and
average net income data for the impacted population of small
businesses. Data on tangible net worth and average net income for the
impacted businesses, if available from other sources, may reveal
additional insights into the results of SBA's analysis of FY 2015-2017
loan data.
Additionally, SBA is statutorily authorized to make direct loans
under the EIDL Program to small businesses that do not have credit
available elsewhere and that have suffered a substantial economic
injury as a result of a disaster. 15 U.S.C. 636(b)(2). Historically,
the size standards applicable to small business concerns that apply for
loans under the EIDL Program have been the same industry based size
standards applicable to small
[[Page 12508]]
business applicants for the Business Loan Programs. See, 13 CFR
123.300(b). Although the temporary statutory alternative size standard
established by the Jobs Act does not apply to the EIDL Program, SBA is
considering applying the new permanent alternative size standard
established for the Business Loan Programs to the EIDL Program as an
alternative to industry based size standards.
Request for Comments
Against the above backdrop, in this ANPRM, SBA seeks comment on the
following issues.
1. SBA seeks comment on whether or not the level of the temporary
statutory alternative size standard under the Interim Rule (i.e., $15
million in tangible net worth and $5 million in average net income) is
appropriate under the current credit environment and as a new permanent
alternative size standard. Commenters in support of the level in the
Interim Rule should provide justification, along with supporting data
and analysis to support their position. Similarly, commenters who
believe the level established in the Interim Rule is not appropriate as
a permanent alternative size standard should suggest, along with
supporting data and analysis, a different alternative size standard
which they believe would be more appropriate. The suggested alternative
size standard must be based on tangible net worth and average net
income as required by section 3(a)(5) of the Small Business Act. 15
U.S.C. 632(a)(5).
2. SBA seeks comment on the impact of using an alternative size
standard on small businesses seeking loans through its Business Loan
Programs. Specifically, SBA welcomes information on industries/sectors
where small businesses benefit the most or do not benefit at all from
the use of an alternative size standard. Similarly, SBA is also looking
for data on the number of businesses approved for SBA's Business Loans
under the temporary statutory alternative size standard that otherwise
could not have been approved under their industry based size standards.
3. SBA invites suggestions on sources of relevant data and
information, especially tangible net worth and average net income of
applicants to SBA's Business Loan Programs, that SBA can evaluate to
assess the impact of the Interim Rule on small businesses and use in
developing a new permanent alternative size standard and in estimating
the impact of the new permanent alternative size standard.
4. SBA invites comments from interested parties on the proposal to
apply the same new permanent alternative size standard established for
the Business Loan Programs to the EIDL Program as an alternative to
industry based size standards.
5. SBA also seeks comment on how the Interim Rule has affected the
processes used by lenders participating in the Business Loan Programs
and what effects a permanent alternative size standard would have on
application processes and processing times.
6. SBA invites comment on the effects of the Interim Rule on
conventional small business lending. Specifically, SBA welcomes input
on whether, and to what extent, if any, SBA Business Loans approved
under the Interim Rule have substituted for or displaced directly or
indirectly conventional small business lending, or whether such SBA
Business Loans played more of a supplementary role in conventional
small business lending activity.
Dated: March 14, 2018.
Linda E. McMahon,
Administrator.
[FR Doc. 2018-05787 Filed 3-21-18; 8:45 am]
BILLING CODE 8025-01-P
