Rural Microentrepreneur Assistance Program, 26348-26365 [2021-10146]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Business-Cooperative Service

[Federal Register Volume 86, Number 92 (Friday, May 14, 2021)]
[Rules and Regulations]
[Pages 26348-26365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10146]


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DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

7 CFR Part 4280

[Docket No. RBS-20-BUSINESS-0044]
RIN 0570-AB02


Rural Microentrepreneur Assistance Program

AGENCY: Rural Business-Cooperative Service, USDA,

ACTION: Final rule; request for comments.

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SUMMARY: The Rural Business-Cooperative Service (RBCS or the Agency), a 
Rural Development (RD) agency of the United States Department of 
Agriculture (USDA or the Department), is issuing a final rule with 
comment for the Rural Microentrepreneur Assistance Program (RMAP or the 
Program). This final rule modifies the interim rule published in the 
Federal Register on May 28, 2010, as amended by the correcting 
amendments published in the Federal Register on July 19, 2010, and 
incorporates amendments to the Consolidated Farm and Rural Development 
Act (ConAct) made by the Agriculture Improvement Act of 2018 (2018 Farm 
Bill). The Agency is implementing other changes to make the Program run 
more efficiently, be more user-friendly and be more consistent with 
other RBCS programs.

DATES: 
    Effective date: This final rule is effective May 14, 2021.
    Comment date: Comments due on or before July 13, 2021.

ADDRESSES: You may submit comments, identified by docket number RBS-20-
BUSINESS-0044 and Regulatory Information Number (RIN) number 0570-AB02 
through https://www.regulations.gov.
    Instructions: All submissions received must include the Agency name 
and docket number or RIN for this rulemaking. All comments received 
will be posted without change to https://www.regulations.gov, including 
any personal information provided.
    Docket: For access to the docket to read background documents or 
comments received, go to https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For general inquiries, contact David 
Chestnut, Program Management Division, U.S. Department of Agriculture, 
1400 Independence Avenue SW, Washington, DC 20250-3201;

[[Page 26349]]

telephone: (202) 692-5233; email: [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Rural Development is a mission area within USDA comprising the 
Rural Utilities Service, Rural Housing Service, and Rural Business-
Cooperative Service. Rural Development's mission is to increase 
economic opportunity and improve the quality of life for all rural 
Americans. Rural Development meets its mission by providing loans, loan 
guarantees, grants and technical assistance through more than 40 
programs aimed at creating and improving housing, business, and 
infrastructure throughout rural America. The Rural Microentrepreneur 
Assistance Program, administered by the Rural Business-Cooperative 
Service, was authorized by Section 379E of the Consolidated Farm and 
Rural Development Act (ConAct). The ConAct established the RMAP to 
provide loans and grants to support microentrepreneurs in the 
development and ongoing success of rural microenterprises. The loans 
establish or augment a rural microentrepreneur revolving loan fund and 
the grants provide technical assistance and training to 
microenterprises.

II. Discussion of Public Comments From Interim Rule

    On May 28, 2010, the Agency published an interim rule with comments 
in the Federal Register (75 FR 30114) implementing RMAP. The interim 
rule was amended by the correcting amendments published in the Federal 
Register on July 19, 2010 (75 FR 41695). Twenty-nine combined comments 
were received from one industry respondent, five sponsoring 
organizations and one individual. The Agency reviewed and considered 
all comments that were received. The following discusses each comment 
and the Agency's response:
    Comment: The Loan Loss Reserve Fund (LLRF) usage and replenishment 
is too restrictive and a more workable approach is to utilize the 
Intermediary Relending Program (IRP) regulation 7 CFR 4274-D.
    Agency response: The Agency agreed, and the regulation has been 
revised to be more in line with the Intermediary Relending Program 
(IRP).
    Comment: Having a hard deadline of 90 days to close the loans was 
too difficult to meet in some cases.
    Agency response: The Agency agreed, and the language was changed to 
permit the Agency, with justification and at its sole discretion, to 
extend the closing date deadline when circumstances warrant.
    Comment: Concern was expressed for only being able to draw down 
funds to make loans every quarter as being unworkable. The 30-day micro 
borrower loan closing should be eliminated.
    Agency response: The Agency agreed, and language was changed from 
`must' to `should' for the draw of funds which will allow the drawdown 
of funds as needed. The Agency disagrees with a change to the 
microborrower 30-day loan closing requirements as a Microenterprise 
Development Organization's (MDO) should only draw down funds for an 
identified project. This prevents an MDO from paying interest on unused 
funds in their account that are not generating revenue for the program 
loan repayment.
    Comment: The Agency should make it clear that one of the Agency's 
remedies for loan default was to withhold all mandatory grant payments 
until the microlender comes back into compliance.
    Agency response: The Agency agreed, and the information has been 
delineated in the loan servicing section.
    Comment: Making the Agency responsible to approve all key personnel 
changes is intrusive. The Legislative Affairs notification is set forth 
in another Rural Development regulation and is not needed here.
    Agency response: The Agency agreed but will still require 
notification of significant personnel changes as such changes may 
impact the MDO's ability to manage a revolving loan fund. The 
Legislative Notification has been removed from Section 4280.313.
    Comment: The technical assistance only grant portion of the 
regulation is not authorized by the Farm Bill, but rather technical 
assistance training grants are authorized by the Farm Bill. 
Additionally, the current regulation ignores the training aspect of the 
law.
    Agency response: The technical assistance only grant provisions are 
in the authorizing statute and were not eliminated in the 2018 Farm 
Bill language. Agency agreed with the training provisions comment and 
the regulation has been changed in Section 4280.313 to reflect that 
these grants should be for training type technical assistance to active 
and potential mircoborrowers as well as any microlenders who may wish 
to strengthen their technical skills through training.
    Comment: Most commenters included comments on scoring: abandon the 
dual application system, scoring is subjective, scoring is overly 
complex, TA grant scoring does not reflect operating realities, scoring 
disfavors microlenders who specialize in servicing traditionally 
underserved populations, disfavors smaller MDOs who need to use the 
legally allowed 10 percent for administrative expenses, scoring uses 
vague definitions of current and delinquent borrowers, disfavors non-
rural MDOs, and disfavors MDOs who provide training versus those MDOs 
who only make loans.
    Agency response: The Agency considered each of the comments and 
reviewed the scoring system for possible revisions. Changes are 
described in Section III below.
    Comment: Several comments were made concerning application 
processing. One of the commenters stated that a Loan Fund Work Plan or 
Scope of Work should be required of all applicants, and that some forms 
listed for the applicant to complete were internal forms and should be 
deleted.
    Agency response: The Agency agreed, and the regulation has been 
revised to require a work plan from all applicants (Sec.  
4280.316(c)(1)) and internal forms have been removed from the 
applicant's requirements.
    Comment: One group of commenters cited several existing laws which 
define significant outmigration as a locality which has a loss of 10 
percent or more in population in the past 20 years.
    Agency response: The Agency agreed, and the definition was changed 
to conform with the definition used by the Economic Research Service.
    Comment: The definition of full-time equivalent does not agree with 
other Rural Development definitions.
    Agency response: The Agency agreed, and the definition was revised 
to be similar to other Agency regulations.
    Comment: The definition of delinquency should be redefined to the 
dollars and number of loans behind more than 30 days in any one-year 
period.
    Agency response: The Agency agreed in principle and included in the 
definition that the year be the federal fiscal year. Delinquency 
parameters were added to Sec.  4280.311(e)(4) to better define 
satisfactory performance.
    Comment: Non-profit organizations cannot have citizenship and the 
wording should be changed to state organized under the laws of the 
state.
    Agency response: The Agency agrees that non-profit entities have no 
ownership but retain its requirement that non-profit entities must be 
controlled by a majority of US citizens. The provisions for state 
organization of a non-profit remains in Sec.  4280.310(a)(2) and a 
tribal provision is now included in that section as well.

[[Page 26350]]

    Comment: The limited 20-year loan term should include a restructure 
provision that would permit extending beyond the initial 20-year limit. 
The deferral period should be 3 years and annual payments rather than 
monthly be utilized.
    Agency response: The Agency retains its monthly loan payment 
requirement as a change to annual payments would reduce the amount of 
program funding available. The 20-year loan limitation and the 2-year 
deferral period are statutory requirements and cannot be changed.
    Comment: USDA should use its current Intermediary Relending Program 
and Rural Business Enterprise Grant regulations which have been very 
successful to manage technical assistance grants and the Intermediary 
relending of monies through a revolving fund for many years now.
    Agency's response: The RMAP program does utilize the technical 
assistance models utilized by other programs and requires MDO reporting 
to ensure that the program requirements are being met.
    Comment: USDA is placing too much funding in the loan portion of 
the RMAP and insufficient funding for the grant portion of the program 
to ensure its success.
    Agency's response: The Agency did not agree with this comment. The 
Agency takes into account, on a year to year basis, the needs of the 
stakeholders of the RMAP program based on funds available for that 
fiscal year.
    Comment: USDA should relinquish its first lien position on all 
funds in the Rural Microentrepreneur Revolving Fund (RMRF) except those 
derived from the Rural Microenterprise loan itself.
    Agency response: The Agency did not agree with this comment. The 
Agency must adhere to prudent lending practices which would require a 
first lien position on all assets in the revolving loan fund. An MDO is 
prohibited from co-mingling other entity funds with funds on deposit in 
its RMAP revolving loan account (Sec.  4280.311(e)(1)).
    Comment: It was Congress' intent to permit the 5 percent LLRF 
funding requirement to be met using loan funds.
    Agency response: Agency disagreed. The LLRF is intended to protect 
the Microenterprise Development Organization's (MDO) fund by 
maintaining the value of the fund as required by the servicing 
regulation, 7 CFR. Part 1951 (Subpart R). If loan funds were used to 
capitalize the LLRF, and consequently were distributed to cover losses 
(either by loan payments to the Agency or to cover liquidation costs of 
the microloan), the longevity of the fund might be in question. This 
stress would be enhanced if multiple loans required liquidation before 
the interest earned could rebuild the LLRF.
    Comment: The 2 percent interest rate was double the 1 percent 
minimum rate set by Congress.
    Agency response: The Agency disagreed. The current cost to maintain 
the program requires an interest rate of 2 percent. Microlenders in the 
Program for more than 5 years have the opportunity to borrow Agency 
funds at 1 percent when making an application for additional loan 
funds. (Section 4280.311(e)(4)) It is the Agency's position that the 
interest rate (cost of funds to the MDO) should be incorporated into 
the structure of their microloans.
    Comment: The loan making process is too restrictive for a microloan 
program.
    Agency response: The loan application process is used to ensure 
that program funds are awarded to entities with experience in managing 
revolving loan funds and technical assistance programs.
    Comment: The $2.5 million MDO debt limitation was arbitrary, not in 
the law, and may unduly restrict an MDO's ability to meet demand.
    Agency response: The Agency disagrees that the limit restricts an 
MDO's ability to make microloans. The $50,000 limitation to one 
microborrower would allow an MDO to have 50 or more loans outstanding 
at any time. MDOs with significant loan activity are also eligible to 
apply for IRP program awards for their revolving loan funds.
    Comment: All the mandatory grants should be funded at the 
authorized 25 percent of the loan balances.
    Agency response: The 2018 Farm Bill amended Section 379E of the Con 
Act to require that grant amounts to MDOs be in an amount equal to not 
less than 20 percent and not more than 25 percent of the total 
outstanding balance of microloans made by MDOs.
    Comment: The current methodology of calculating the annual MDO 
grant based on the amount of outstanding loan balances is inadequate.
    Agency response: The Agency disagrees with this comment as 
technical assistance funds are to be used for existing and potential 
microborrowers and offers no alternative methodology to determining the 
amount of technical assistance provided.
    Comment: The Agency should accept collaborative applications 
stating that MDOs often partner to leverage areas of expertise, expand 
service areas, and lower costs.
    Agency response: The Agency understands that entities will use 
collaborative resources to administer their programs and does allow for 
such in the applicant's scope of work and program management, including 
microborrower application reviews.
    Comment: There are many reasons for communities to be considered 
underserved including but not limited to loss of major employer, 
natural disasters, chronic low income, and they suggested that the TA 
training grants be targeted to underserved communities.
    Agency response: The Agency agrees that there are many reasons for 
a community to be considered underserved and elected not to define or 
limit the requirements for an underserved community as this is best 
applied by local knowledge.
    Comment: The definition of microentrepreneur needs to be clarified 
to include the number of employees, ability to obtain conventional 
financing, and the maximum dollars needed for the project.
    Agency response: An eligible microentrepreneur must meet the 
definition of a microenterprise, which is defined as an entity with 10 
or fewer employees. The definition of microenterprise provides that 
business types may also include agricultural producers provided they 
meet the stipulations in this definition. The microentrepreneur is 
subject to a credit elsewhere test in Section 4280.322(d). The maximum 
loan amount for a project is the lesser of $50,000 or 75 percent of the 
project cost as stated in the regulation.
    Comment: Several comments on the cost structure of projects. One 
commenter suggested utilizing the IRP regulation; two groups suggested 
that a microborrower's equity in its business be allowed to be 
considered for the 25 percent non-federal portion of the project. And, 
finally two groups of commenters point out that the 75 percent federal 
fund limitations do not apply to a micro borrower's project.
    Agency Response: The Agency did not agree. The 25 percent non-
federal funds requirement is to meet project equity and also for 
program leverage to protect the MDO from credit losses. This generally 
cannot be met by allowing only balance sheet equity.
    Comment: The value of matching funds serves no purpose.
    Agency response: The Agency did not agree as program leverage is 
used as a credit enhancement to the microborrower's project costs and 
protects the MDO from increased credit losses.

[[Page 26351]]

    Comment: Priority designations for race and ethnicity within 
populations is discriminatory.
    Agency response: The Agency does not agree with the comment as 
there is not a priority designation based on race and ethnicity and the 
application scoring criteria is based on the diversity of the MDO's 
loan portfolio matching the diversity of their program service area. 
The race and ethnicity criteria is often used in the determination of 
an underserved community and such information is also obtained 
voluntarily from applicants for compliance with Federal civil rights 
requirements.
    The Agency has carefully reviewed the above comments and is 
modifying the regulation based on an analysis of responsive comments 
received, program delivery experience, and changes required by Section 
379E of the 2018 Farm Bill.
    The modifications to the Program's regulations will allow the 
Agency to implement the requirements of the 2018 Farm Bill, address 
comments received after publication of the interim regulation in 2010 
and implement the final regulation.

III. Summary of Changes to the Rule

    This section presents the major changes to the existing RMAP 
interim rule.
    The authority citation was updated from 7 U.S.C. 1989(a), 7 U.S.C. 
2009s to accurately read as 7 U.S.C. 1989(a), 7 U.S.C. 2008s.
    The definitions of ``close relative'', ``Indian tribe'' and ``rural 
or rural area'' were modified to match the definitions in other RD 
programs. These changes will provide consistency across RD programs as 
well as clarify the definitions for applicants.
    The definitions of ``loan loss reserve fund (LLRF)'' and ``rural 
microloan revolving fund (RMRF)'' were modified to remove the 
requirement for the deposit accounts to be interest-bearing. 
Microenterprise Development Organizations have found it difficult to 
obtain interest-bearing accounts and when they are available, the 
monthly bank fees often exceed the interest earned.
    At Sec.  4280.310, ``Program requirements for MDOs,'' a requirement 
for all applicants to be registered in the System for Awards Management 
(SAM) prior to submitting an application was added. This requirement 
was added as a result of the Office of Management and Budget's 
publication of revisions to OMB Guidance for Grants and Agreements (2 
CFR part 200) at 85 FR 49506, on August 13, 2020.
    At Sec.  4280.310(c), the minimum score required to be considered 
eligible to participate in the program was reduced from 70 to 60 
points. The Agency's experience shows that 70 points was too 
restrictive and eliminated many small, rural MDOs from the program.
    Section 4280.311(e) was revised to more closely align with the 
application and servicing process flows.
    Clarification was provided, at Sec.  4280.311(e)(3), that, in the 
event that the repayment terms of a loan are modified by the Agency, 
the term of the loan may not exceed a 20-year period from the loan 
origination date.
    As a satisfactory participation designation impacts lending 
practices of the MDO after the first five years of participation in the 
program, additional information was added to Sec.  4280.311(e)(4) to 
expand and clarify the performance metrics that must be met to be 
considered in ``satisfactory participation'' for the program.
    Provisions were added to Sec.  4280.311(e)(10) to allow for a 
greater than 25 percent disbursement of loan proceeds at closing to the 
extent that there are commitments to fund projects within 60 days of 
loan closing. This provision allows MDOs to promote their programs and 
provide funds needed by the small business community.
    The frequency of fund distribution was changed at Sec.  
4280.311(e)(11) from ``not more often than quarterly'' to ``should be 
not more often than quarterly'' to allow some flexibility to the MDOs 
to request funds to more readily meet the needs of their customers.
    At Sec.  4280.311(e)(14), the Agency strengthened the penalties for 
using revolving microloan revolving funds for other than approved 
purposes to include default due to non-performance rather than just 
restricting access to future withdrawals. This provides the Agency with 
an additional option in the event of egregious or multiple instances of 
improper use of loan funds.
    In order to meet the requirements of the 2018 Farm Bill, Sec.  
4280.313(a) was modified to allow for microlenders to receive up to 25 
percent of their new loan amount as a technical assistance grant. 
Currently, the amount is limited to 25 percent of the first $400,000 of 
loans, then 5 percent of any amount over $400,000. The change will 
potentially increase the amount of technical assistance available to 
microborrowers.
    The Agency clarified the annual grant process at Sec.  
4280.313(a)(1). The additional language provides information to 
applicants and grantees regarding grant awards, that are non-
competitive and based on the microlender's loan balance as of June 30th 
of each year, as well as replenishment levels and the process used to 
distribute funds if full replenishment is not possible within available 
grant funds. This clarification provides details needed by grantees for 
planning and budgeting purposes.
    Applicants are reminded at Sec.  4280.315(a) to provide the 
documentation listed for a complete application and scoring purposes. 
Some applicants were confused as to what constituted a complete 
application. The Agency believes this reminder will reduce that 
confusion.
    The scoring criteria at Sec.  4280.316 was modified to clarify 
requirements for applicants and emphasize Agency priorities for the 
overall delivery of the program. While there are numerous changes, the 
total score possible has not changed. These changes include:
     Replacing ``within'' with ``between'' at Sec.  
4280.316.(b)(3)(iii)(A) and (B) to more accurately state that the 
calculated ratio must be within the intervals of the listed ratio in 
each priority level.
     Increased points from 1 to 2 for applicants that provide 
success stories to demonstrate the effect of technical assistance on 
their clients at Sec.  4280.316(b)(4)(ii). This change allows the 
Agency to further prioritize this action.
     Removed Sec.  4280.316(b)(4)(iv) ``Applicants that present 
their narrative clearly and concisely (five pages or less) and at a 
level expected by trainers and teachers will be awarded 1 point.'' This 
paragraph was removed as the Agency determined that it was vague and 
too subjective.
     At Sec.  4280.316(b)(5)(iii), Sec.  4280.316(c)(8)(iii) 
and Sec.  4280.316(d)(4)(iii) the Agency removed, ``up to and including 
10 percent''. This change made the criteria, ``8 percent or greater, 0 
points will be awarded''. The Agency prioritizes maximizing the amount 
of actual technical assistance provided. This change serves to meet the 
goal of reducing the amount of grant funds that will be used for 
administrative expenses.
     Changed Sec.  4280.316(c)(5) to remove subjective scoring 
for references and recommendations from other entities, to awarding one 
point for each support letter received from potential program 
beneficiaries or a local organization. The maximum points for this 
section is unchanged at five points.
     Merged the previous Sec.  4280.316(d)(1)(i) and (ii) into 
one item at Sec.  4280.316(d)(1)(i). The previous Sec.  
4280.316(d)(1)(i) was a data collection

[[Page 26352]]

request that was needed to support subsequent paragraphs and not a 
scoring priority in and of itself.
     Changed Sec.  4280.316(d)(2)(iii) from subjective scoring 
of client evaluations to awarding 3 points if the Applicant conducts 
client evaluations. A scoring method for the evaluations is included 
with an additional 2 points awarded if the evaluation average is above 
3.0 on a 5-point scale. The maximum total of 5 points for the criterion 
is unchanged.
     Changed Sec.  4280.316(d)(4)(i) from ``less than 5 
percent'' to ``up to and less than 5.0 percent'' so that 5.0 percent is 
included in this scoring criterion. Paragraph (ii) was changed to 
``more than 5.0 percent but less than 8 percent'' from ``between 5 
percent and 8 percent, . . .'' so that 5.0 percent is not included in 
this score and lastly Sec.  4280.316(d)(4)(iii) was changed from 
``Between 8 percent up to and including 10 percent'' to ``8 percent or 
greater'' so that all percentages greater than 8 are included.
     At Sec.  4280.316(e)(3) information was added to provide 
information to applicants on how the Agency will handle unsuccessful 
applications under this section.
    Application submission information at Sec.  4280.317(a)(1) was 
updated to remove the requirement for the application package to be 
submitted in a three-ring binder.
    Section 4280.317(a)(2) was modified to provide clarity to 
applicants on application submission and acceptance and funding cycles.
    The Agency added clarifying language at Sec.  4280.322(a) 
emphasizing that the total outstanding loan balance to any one 
microborrower may not exceed $50,000. The language was added as 
previous language limited individual loans to $50,000 not the total 
loans outstanding.
    To comply with the provisions of Executive Order 13559 (Fundamental 
Principles and Policymaking Criteria for Partnerships With Faith-Based 
and Other Neighborhood Organizations), the Agency has added ``Loans 
supporting explicitly religious activities, such as worship, religious 
instruction or proselytization'' as an ineligible project type at Sec.  
4280.323(k). This addition provides additional guidance to applicants 
on activities that cannot be supported with Agency grant funds.

IV. Executive Orders/Acts

Executive Order 12866, Regulatory Impact Analysis

    This rule has been determined to be not significant for purposes of 
Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget.

Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as not a major rule, as defined by 5 U.S.C. 804(2).

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) number assigned 
to the Rural Microentrepreneur Assistance Program is 10.870. All active 
CFDA programs and the CFDA Catalog can be found at the following 
website: https://beta.sam.gov/. The Government Printing Office (GPO) 
prints and sells the CFDA to interested buyers. For information about 
purchasing the Catalog of Federal Domestic Assistance from GPO, call 
the Superintendent of Documents at 202-512-1800 or toll free at 866-
512-1800, or access GPO's on-line bookstore.

Executive Order 12372, Intergovernmental Review of Federal Programs

    This program is subject to Executive Order 12372, which requires 
intergovernmental consultation with State and local officials. 
Intergovernmental consultation will occur for the assistance to MDOs in 
accordance with the process and procedures outlined in 2 CFR part 415, 
subpart C. Assistance to rural microenterprises will not require 
intergovernmental review.
    Rural Development will conduct intergovernmental consultation using 
RD Instruction 1970-I ``Intergovernmental Review,'' available in any 
Rural Development office, on the internet at https://www.rd.usda.gov/sites/default/files/1970i.pdf and in 2 CFR part 415, subpart C. Note 
that not all States have chosen to participate in the intergovernmental 
review process. A list of participating States is available at the 
following website: https://www.whitehouse.gov/omb/management/office-federal-financial-management/.

Executive Order 12988, Civil Justice Reform

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The Agency has determined that this rule meets 
the applicable standards provided in section 3 of the Executive Order. 
In addition, all State and local laws and regulations that are in 
conflict with this rule will be preempted. No retroactive effect will 
be given to this rule, and, in accordance with Sec. 212(e) of the 
Department of Agriculture Reorganization Act of 1994 (7 U.S.C. Sec. 
6912(e)), administrative appeal procedures, if any, must be exhausted 
before an action against the Department or its agencies may be 
initiated.

Information Collection and Recordkeeping Requirements

    This rule contains no new reporting or recordkeeping burdens under 
OMB control number 0570-0062 that would require approval under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

National Environmental Policy Act

    In accordance with the National Environmental Policy Act of 1969, 
Public Law 91-190, this final rule has been reviewed in accordance with 
7 CFR part 1970 (``Environmental Policies and Procedures''). The Agency 
has determined that (i) this action meets the criteria established in 7 
CFR 1970.53(f); (ii) no extraordinary circumstances exist; and (iii) 
the action is not ``connected'' to other actions with potentially 
significant impacts, is not considered a ``cumulative action'' and is 
not precluded by 40 CFR 1506.1. Therefore, the Agency has determined 
that the action does not have a significant effect on the human 
environment, and therefore neither an Environmental Assessment nor an 
Environmental Impact Statement is required.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-602) generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act (``APA'') or any other statute. The APA 
exempts from notice and comment requirements rules ``relating to agency 
management or personnel or to public property, loans, grants, benefits, 
or contracts'' (5 U.S.C. 553(a)(2)), so therefore an analysis has not 
been prepared for this rule.

Unfunded Mandates Reform Act

    This final rule contains no federal mandates (under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995) for 
state, local, and tribal governments or the private sector. Therefore, 
this rule is not subject to the requirements of Sec.  202 and 205 of 
the Unfunded Mandates Reform Act of 1995.

Executive Order 13132--Federalism

    The policies contained in this rule do not have any substantial 
direct effect on

[[Page 26353]]

states, on the relationship between the National Government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. Nor does this rule impose substantial 
direct compliance costs on state and local governments. Therefore, 
consultation with the states is not required.

Executive Order 13175--Consultation and Coordination With Indian Tribal 
Governments

    This executive order imposes requirements on the Agency in the 
development of regulatory policies that have tribal implications or 
preempt tribal laws. The Agency has determined that the rule does not 
have a substantial direct effect on one or more Indian tribe(s) or on 
either the relationship or the distribution of powers and 
responsibilities between the Federal Government and Indian tribes. 
Thus, this rule is not subject to the requirements of Executive Order 
13175. If tribal leaders are interested in consulting with RBCS on this 
rule, they are encouraged to contact USDA's Office of Tribal Relations 
or RD's Native American Coordinator at: [email protected] to request such a 
consultation.

E-Government Act Compliance

    Rural Development is committed to the E-Government Act of 2002, 
which generally requires government agencies to provide the public the 
option of submitting information or transacting business electronically 
to the maximum extent possible.

Civil Rights Impact Analysis

    Rural Development, a mission area for which RBCS is an agency, has 
reviewed this rule in accordance with USDA Departmental Regulation 
4300-4, Civil Rights Impact Analysis,'' to identify any major civil 
rights impacts the rule might have on program participants on the basis 
of age, race, color, national origin, sex or disability. Based on the 
analysis of the final rule, available data (including anecdotal), 
program purpose, application submission and eligibility criteria, 
issuance of this Final Rule is not likely to adversely or 
disproportionately impact very low, low and moderate-income 
populations, minority populations, women, Indian tribes or persons with 
disabilities, by virtue of their race, color, national origin, sex, 
age, disability, or marital or familiar status.

USDA Non-Discrimination Policy

    In accordance with Federal civil rights law and the Department's 
civil rights regulations and policies, the USDA, its Agencies, offices, 
and employees, and institutions participating in or administering USDA 
programs are prohibited from discriminating based on race, color, 
national origin, religion, sex, gender identity (including gender 
expression), sexual orientation, disability, age, marital status, 
family/parental status, income derived from a public assistance 
program, political beliefs, or reprisal or retaliation for prior civil 
rights activity, in any program or activity conducted or funded by USDA 
(not all bases apply to all programs). Remedies and complaint filing 
deadlines vary by program or incident.
    Persons with disabilities who require alternative means of 
communication for program information (e.g., Braille, large print, 
audiotape, American Sign Language, etc.) should contact the Agency or 
USDA's TARGET Center at (202) 720-2600 (voice and TTY) or contact USDA 
through the Federal Relay Service at (800) 877-8339. Additionally, 
program information may be made available in languages other than 
English.
    To file a program discrimination complaint, complete the USDA 
Program Discrimination Complaint Form, AD-3027, found online at https://www.usda.gov/oascr/how-to-file-a-program-discrimination-complaint and 
at any USDA office or write a letter addressed to USDA and provide in 
the letter all of the information requested in the form. To request a 
copy of the complaint form, call (866) 632-9992. Submit your completed 
form or letter to USDA by: (1) Mail: U.S. Department of Agriculture, 
Office of Adjudication, 1400 Independence Avenue SW, Washington, DC 
20250-9410; (2) fax: (202) 690-7442; or (3) email: [email protected].
    USDA is an equal opportunity provider, employer, and lender.

List of Subjects in 7 CFR Part 4280

    Business and industry, Energy, Grant programs-business, Loan 
programs-business, Rural areas.
    Accordingly, for the reasons discussed in the preamble, the Agency 
amends 7 CFR part 4280 as follows:

PART 4280--LOANS AND GRANTS

0
1. The authority citation for part 4280 is revised to read as follows:

    Authority: 7 U.S.C. 1989(a), 7 U.S.C. 2008s


0
2. Revise subpart D to read as follows:

Subpart D--Rural Microentrepreneur Assistance Program

Sec.
4280.301 Purpose and scope.
4280.302 Definitions and abbreviations.
4280.303 Exception authority.
4280.304 Review or appeal rights and administrative concerns.
4280.305 Nondiscrimination and compliance with other Federal laws.
4280.306 Forms, regulations, and instructions.
4280.307-4280.309 [Reserved]
4280.310 Program requirements for MDOs.
4280.311 Loan provisions for Agency loans to microlenders.
4280.312 Loan approval and closing.
4280.313 Grant provisions.
4280.314 [Reserved]
4280.315 MDO application and submission information.
4280.316 Application scoring.
4280.317 Selection of applications for funding.
4280.318-4280.319 [Reserved]
4280.320 Grant administration.
4280.321 Grant and loan servicing.
4280.322 Loans from the microlenders to the microentrepreneurs.
4280.323 Ineligible microloan purposes and uses.
4280.324-4280.399 [Reserved]
4280.400 OMB control number.

Subpart D--Rural Microentrepreneur Assistance Program


Sec.  4280.301  Purpose and scope.

    (a) This subpart contains the policies and procedures by which the 
Agency will administer the Rural Microentrepreneur Assistance Program 
(RMAP). The purpose of the Program is to support the development and 
ongoing success of rural microentrepreneurs and microenterprises. To 
accomplish this purpose, the Program will make direct loans and provide 
grants to selected Microenterprise Development Organizations. Selected 
Microenterprise Development Organization will use the funds to:
    (1) Provide microloans to rural microentrepreneurs and 
microenterprises;
    (2) Provide business-based training and technical assistance to 
rural microborrowers and potential microborrowers as an essential part 
of the microlending process;
    (3) Perform other such activities as deemed appropriate by the 
Secretary to ensure the development and ongoing success of rural 
microenterprises.
    (b) The Agency will make direct loans to microlenders for the 
purpose of providing fixed interest rate microloans to rural 
microentrepreneurs for business startup and for growing 
microenterprises in compliance with Sec. Sec.  4280.311 and 4280.312. 
Eligible microlenders will also be eligible to receive microlender 
technical assistance grants to provide technical assistance and 
training to microenterprises that

[[Page 26354]]

have received or are seeking a microloan under this program in 
compliance with Sec.  4280.313.
    (c) To allow for extended opportunities for technical assistance 
and training, the Agency will make technical assistance-only grants to 
Microenterprise Development Organizations that have sources of funding 
other than program funds for making or facilitating microloans.


Sec.  4280.302  Definitions and abbreviations.

    (a) General definitions. The following definitions apply to the 
terms used in this subpart.
    Administrative expenses. Those expenses incurred by a 
Microenterprise Development Organization for the operation of services 
under this program. Not more than 10 percent of technical assistance 
grant funds may be used for such expenses.
    Agency. USDA Rural Development, Rural Business-Cooperative Service 
or its successor organization.
    Agricultural production. The cultivation, growing, or harvesting of 
plants and crops (including farming), breeding, raising, feeding, or 
housing of livestock (including ranching).
    Applicant. The legal entity, also referred to as a Microenterprise 
Development Organization, submitting an application to participate in 
the program.
    Application. The required forms and documentation submitted by a 
Microenterprise Development Organization for acceptance into the 
program.
    Award. The written documentation, executed by the Agency after the 
application is approved, containing the terms and conditions for 
provision of financial assistance to the applicant. Financial 
assistance may constitute a loan or a grant, or both.
    Business incubator. An organization that provides temporary 
premises at below market rates, technical assistance in developing 
business or marketing plans, technical services, use of equipment, or 
other facilities or services to rural microentrepreneurs and 
microenterprises starting or growing a business. The business incubator 
may also provide access to capital through direct loans or referrals to 
loan programs.
    Close relative. Individuals who live in the same household or who 
are closely related by blood, marriage, or adoption, such as a spouse, 
domestic partner, parent, child, sibling, aunt, uncle, grandparent, 
grandchild, niece, nephew, or first cousin.
    Default. The condition that exists when a borrower is not in 
compliance with the promissory note, the loan and/or grant agreement, 
or other related documents evidencing the loan from the Agency or the 
Microenterprise Development Organization.
    Delinquency. Failure by a Microenterprise Development Organization 
or microborrower to make a scheduled loan payment by the due date or 
within any grace period as stipulated in the promissory note and loan 
agreement.
    Eligible project cost. The total cost of a microborrower's project 
for which a microloan is being sought from a microlender, less any 
costs identified as ineligible in Sec.  4280.323.
    Facilitation of access to capital. For purposes of this program, 
facilitation of access to capital means assisting a client of the 
technical assistance only grantee in obtaining a microloan, whether or 
not the microloan is wholly or partially capitalized by funds provided 
under this program.
    Federal fiscal year (FY). The 12-month period beginning October 1 
of any given year and ending on September 30 of the following year.
    Full-time equivalent employee (FTE). The Agency uses the Bureau of 
Labor Statistics definition of full-time jobs as its standard 
definition. For purposes of this program, a full-time job is a job that 
has at least 35 hours in a work week. As such, one full-time job with 
at least 35 hours in a work week equals one FTE; two part-time jobs 
with combined hours of at least 35 hours in a work week equals one FTE, 
and three seasonal jobs equals one FTE. If an FTE calculation results 
in a fraction, it should be rounded up to the next whole number.
    Indian tribe. Means the term as defined in 25 U.S.C. 5304(e).
    Loan loss reserve fund (LLRF). A deposit account that each 
microlender must establish and maintain in an amount equal to not less 
than 5 percent of the total amount owed by the microlender under this 
program to the Agency. This account can be used to pay any shortage in 
the rural microloan revolving fund caused by delinquencies or losses on 
microloans.
    Microborrower. A microentrepreneur or microenterprise that has 
received loans or financial assistance from a microlender under this 
program in an amount of $50,000 or less.
    Microenterprise. Microenterprise means:
    (i) A sole proprietorship located in a rural area, as defined; or
    (ii) A business entity located in a rural area, as defined, with 
not more than 10 full-time-equivalent employees. Such businesses may 
include any type of legal business that meets local standards of 
decency, though certain business types may be ineligible as defined in 
Sec.  4280.323 Business types may also include agricultural producers 
provided they meet the stipulations in this definition.
    Microenterprise development organization (MDO). A domestic 
organization that is a non-profit entity; an Indian tribe; or a public 
institution of higher education with loan or assistance programs for 
the benefit of rural microentrepreneurs and microenterprises. An MDO 
will:
    (i) Provide training and technical assistance;
    (ii) Make microloans or facilitate access to capital or other 
related services; and
    (iii) Have a demonstrated record of delivering services to rural 
microentrepreneurs, or an effective plan to develop a program to 
deliver services to rural microentrepreneurs.
    Microentrepreneur. An owner and operator, or prospective owner and 
operator, of a rural microenterprise who is unable to obtain sufficient 
training, technical assistance, or credit other than under this 
section. All microentrepreneurs assisted under this regulation must be 
located in rural areas.
    Microlender. An MDO that has been approved by the Agency for 
participation under this subpart to make microloans and provide an 
integrated program of training and technical assistance to its 
microborrowers and prospective microborrowers.
    Microloan. A business loan of not more than $50,000 for eligible 
purposes to a microborrower with a fixed interest rate and a term not 
to exceed 10 years.
    Military personnel. Individuals, regardless of rank or grade, 
currently in active United States military service with less than 6 
months remaining in their active duty service requirement.
    Nonprofit entity. An entity chartered as a nonprofit entity under 
State or Tribal Law.
    Program. The Rural Microentrepreneur Assistance Program (RMAP).
    Rural Microloan Revolving Fund (RMRF). An exclusive account on 
which the Agency will hold a first lien and from which microloans will 
be made by the MDO. All payments from microborrowers and reimbursements 
from the LLRF will be deposited into the RMRF account. Loan payments 
will be made to the Agency by the microlender from the RMRF.
    Rural or rural area. Any area of a State not in a city or town, 
that has a population of more than 50,000 inhabitants, and which 
excludes certain

[[Page 26355]]

populations pursuant to 7 U.S.C. 1991(a)(13)(H), according to the 
latest decennial census of the United States and not in the urbanized 
area contiguous and adjacent to a city or town that has a population of 
more than 50,000 inhabitants. In making this determination, the Agency 
will use the latest decennial census of the United States. The 
following exclusions apply:
    (i) Any area in the urbanized area contiguous and adjacent to a 
city or town that has a population of more than 50,000 inhabitants that 
is attached to the urbanized area of a city or town with more than 
50,000 inhabitants by a contiguous area of urbanized census blocks that 
is not more than two census blocks wide. Applicants from such an area 
should work with their Rural Development State Office to request a 
determination of whether their project is located in a rural area under 
this provision.
    (ii) For the Commonwealth of Puerto Rico, the island is considered 
Rural and eligible except for the San Juan Census Designated Place 
(CDP) and any other CDP with greater than 50,000 inhabitants. Areas 
within CDPs with greater than 50,000 inhabitants, other than the San 
Juan CDP, may be determined to be rural if they are ``not urban in 
character.''
    (iii) For the State of Hawaii, all areas within the State are 
considered rural and eligible except for the Honolulu CDP within the 
County of Honolulu and any other CDP with greater than 50,000 
inhabitants. Areas within CDPs with greater than 50,000 inhabitants, 
other than the Honolulu CDP, may be determined to be rural if they are 
``not urban in character.''
    (iv) For the purpose of defining a rural area in the Republic of 
Palau, the Federated States of Micronesia, and the Republic of the 
Marshall Islands, the Agency shall determine what constitutes rural and 
rural area based on available population data.
    State. Any of the 50 States of the United States, the Commonwealth 
of Puerto Rico, the District of Columbia, the U.S. Virgin Islands, 
Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, 
the Republic of Palau, the Federated States of Micronesia, and the 
Republic of the Marshall Islands.
    Technical assistance (TA) and training. A function performed for 
the benefit of a private business enterprise or a community which is a 
problem-solving activity such as market research, product and/or 
service improvement, feasibility study, worker training programs, etc., 
to assist in the economic development of a rural area.
    Technical assistance grant. A grant from the Agency, the funds of 
which are used to provide TA and training.
    (b) Abbreviations. The following abbreviations apply to the terms 
used in this subpart.
    FTE--Full-time employee.
    FY--Fiscal year.
    LLRF--Loan loss reserve fund.
    MDO--Microenterprise Development Organization.
    RMAP--Rural Microentrepreneur Assistance Program.
    RMRF--Rural microloan revolving fund.
    TA--Technical assistance.


Sec.  4280.303  Exception authority.

    The Administrator may make limited exceptions to the requirements 
or provisions of this subpart. Such exceptions must be in the best 
financial interest of the Federal government and may not conflict with 
applicable law. No exceptions may be made regarding applicant 
eligibility, project eligibility, or the rural area definition. In 
addition, exceptions may not be made:
    (a) To accept an applicant into the program that would not normally 
be accepted under the eligibility criteria; or
    (b) To fund an interested party or applicant that has not 
successfully competed for funding in accordance with this subpart.


Sec.  4280.304  Review or appeal rights and administrative concerns.

    (a) Review or appeal rights. An applicant MDO, a microlender, or 
grantee MDO may seek a review of an adverse Agency decision under this 
subpart from the appropriate Agency official that oversees the program 
in question, and/or appeal the Agency decision to the National Appeals 
Division in accordance with 7 CFR part 11.
    (b) Administrative concerns. Any questions or concerns regarding 
the administration of the program, including any action of the 
microlender, may be sent to: USDA Rural Development, Rural Business-
Cooperative Service, Program Management Division at 1400 Independence 
Avenue SW, Room 5160-S, Mail Stop 3226, Washington, DC 20250-3226 or 
its successor agency, or the local USDA Rural Development office.


Sec.  4280.305  Nondiscrimination and compliance with other Federal 
laws.

    (a) Any entity receiving funds under this subpart must comply with 
other applicable Federal laws, including the Equal Employment 
Opportunities Act of 1972, the Americans with Disabilities Act, the 
Equal Credit Opportunity Act, the Civil Rights Act of 1964, Section 504 
of the Rehabilitation Act of 1973, the Age Discrimination Act of 1975, 
and 7 CFR part 1901, subpart E.
    (b) The U.S. Department of Agriculture (USDA) prohibits 
discrimination in all its programs and activities on the basis of race, 
color, national origin, age, disability, and where applicable, sex, 
marital status, familial status, parental status, religion, sexual 
orientation, genetic information, political beliefs, reprisal, or 
because all or part of an individual's income is derived from any 
public assistance program. (Not all prohibited bases apply to all 
programs.) Persons with disabilities who require alternative means for 
communication of program information (Braille, large print, audiotape, 
etc.) should contact USDA's TARGET Center at (202) 720-2600 (voice and 
TDD). Any applicant that believes it has been discriminated against as 
a result of applying for funds under this program should contact: USDA, 
Director, Office of Adjudication, 1400 Independence Avenue SW, 
Washington, DC 20250-9410, or call (866) 632-9992 (toll free) or (202) 
401-0216 (TDD) for information and instructions regarding the filing of 
a Civil Rights complaint. USDA is an equal opportunity provider, 
employer, and lender.
    (c) A pre-award compliance review will take place at the time of 
application when the applicant completes or provides the Agency with 
sufficient demographic information to complete Form RD 400-8, 
``Compliance Review''. Post-award compliance reviews will take place 
once every three years after the beginning of participation in the 
program and until such time as a microlender leaves the program.


Sec.  4280.306  Forms, regulations, and instructions.

    Copies of all forms, regulations, and instructions referenced in 
this subpart are available in any Agency office, the Agency's website 
at: https://www.rd.usda.gov/page/regulations-and-guidance/ and for 
grants on the internet at www.grants.gov.


Sec.  Sec.  4280.307-4280.309  [Reserved]


Sec.  4280.310  Program requirements for MDOs.

    (a) Eligibility requirements for applicant MDOs. To be eligible for 
a direct loan or grant award under this subpart, an applicant must meet 
each of the criteria set forth in paragraphs (a)(1) through (4) of this 
section, as applicable.

[[Page 26356]]

    (1) Type of applicant. The applicant must meet the definition of an 
MDO as provided in Sec.  4280.302.
    (2) Citizenship. Non-profit entities, to be eligible to apply for 
status as an MDO, must be at least 51 percent controlled by persons who 
are either:
    (i) Citizens of the United States, the Republic of Palau, the 
Federated States of Micronesia, the Republic of the Marshall Islands, 
American Samoa, or the Commonwealth of Puerto Rico; or
    (ii) Legally admitted permanent residents residing in the United 
States.
    (3) Legal authority and responsibility. The applicant must have the 
legal authority necessary to carry out the purpose of the award.
    (4) Other eligibility requirements. The applicant must also provide 
evidence that it:
    (i) Has demonstrated experience in the management of a revolving 
loan fund; or
    (ii) Certifies that it, or its employees, have received education 
and training from a qualified microenterprise development training 
entity so that the applicant has the capacity to manage such a 
revolving loan fund;
    (iii) Is actively and successfully participating as an intermediary 
lender in good standing under similar loan programs; and
    (iv) Provides an attorney's opinion regarding the potential 
microlender's legal status and its ability to enter into program 
transactions at the time of initial entry into the program. Subsequent 
to acceptance into the program, an attorney's opinion will not be 
required unless the Agency determines significant changes to the 
microlender have occurred.
    (b) System for Awards Management. All applicants must be registered 
in the System for Awards Management (SAM) prior to submitting an 
application, unless determined exempt under 2 CFR 25.110. Loan and 
grant recipients must maintain an active SAM registration with current 
information at all times during which it has an active Federal award or 
an application under consideration by the Agency. The applicant must 
ensure that the information in the database is current, accurate, and 
complete. Applicants must ensure that they complete the Financial 
Assistance General Certifications and Representations in SAM.
    (c) Minimum score. Once deemed eligible, an entity will be 
evaluated based on the scoring criteria in Sec.  4280.316 for adequate 
qualification to participate in the program. Eligible MDOs must score a 
minimum of sixty (60) points in order to be considered to receive an 
award under this subpart.
    (d) Ineligible applicants. An applicant will be considered 
ineligible if it:
    (1) Does not meet the definition of an MDO as provided in Sec.  
4280.302;
    (2) Is debarred, suspended or otherwise excluded from, or 
ineligible for, participation in Federal assistance programs; or
    (3) Has an outstanding judgment against it, obtained by the United 
States in a Federal Court (other than U.S. Tax Court).
    (e) Delinquencies. No applicant will be eligible to receive a loan 
if it is delinquent on a Federal debt.
    (f) Application eligibility and qualification. An application will 
only be considered eligible for funding if it is submitted by an 
eligible MDO. The applicant will qualify for funding based on the 
results of review, scoring, and other procedures as indicated in this 
subpart, and the applicant will further:
    (1) Establish an RMRF, or add capital to an RMRF originally 
capitalized under this program, and establish or continue a training 
and TA program for its microborrowers and prospective microborrowers; 
or
    (2) Fund a TA-only grant program to provide services to rural 
microentrepreneurs and microenterprises.
    (g) Business incubators. Because the purpose of a business 
incubator is to provide business-based TA and an environment in which 
micro-level, very small, and small businesses may thrive, a microlender 
that meets all other eligibility requirements and owns and operates a 
small business incubator will be considered eligible to apply. In 
addition, a business incubator selected to participate as a microlender 
may use RMAP funds to lend to an eligible microenterprise tenant, 
without creating a conflict of interest under Sec.  4280.323(c).


Sec.  4280.311  Loan provisions for Agency loans to microlenders.

    (a) Purpose of the loan. Loans will be made to eligible and 
qualified microlenders to capitalize RMRFs that it will administer by 
making and servicing microloans in one or more rural areas.
    (b) Eligible activities. Microlenders may make microloans for 
qualified business activities and use Agency loan funds only as 
provided in Sec.  4280.322.
    (c) Ineligible activities. Microlenders may not use RMRF funds for 
administrative costs or expenses and may not make microloans under this 
program for ineligible businesses or purposes as specified in Sec.  
4280.323.
    (d) Cost share. The Federal share of the eligible project cost of a 
microborrower's project funded under this section shall not exceed 75 
percent. The cost share requirement shall be met by the microlender 
using either of the options identified in paragraphs (d)(1) and (2) of 
this section in establishing an RMRF. A microlender may establish 
multiple RMRFs utilizing either option. Whichever option is selected 
for an RMRF, it must apply to the entire RMRF and all microloans made 
with funds from that RMRF.
    (1) Microborrower project level option. The loan covenants between 
the Agency and the microlender and the microlender's lending policies 
and procedures shall limit the microlender's loan to the microborrower 
to no more than 75 percent of the eligible project costs and require 
that the microborrower obtain the remaining 25 percent of the eligible 
project cost from non-Federal sources. The non-Federal share of the 
eligible project cost of the project may be provided in cash (including 
through fees, grants, and gifts) or in the form of in-kind 
contributions.
    (2) RMRF level option. The microlender shall capitalize the RMRF at 
no more than 75 percent Agency loan funds and not less than 25 percent 
non-Federal funds, thereby allowing the microlender to finance 100 
percent of the microborrower's eligible project costs. All contributed 
funds shall be maintained in the RMRF.
    (e) Loan terms and conditions for microlenders. Program loans will 
be made to microlenders under the following terms and conditions:
    (1) Funds received from the Agency and any non-Federal share will 
be deposited into an account that will be the RMRF account and shall 
not be mingled with other MDO funds. The Agency will hold first lien 
position on the RMRF account, the LLRF account, and all notes 
receivable from microloans using Agency funds.
    (2) The RMRF account will be used to make fixed-rate microloans, 
accept repayments from microborrowers and reimbursements from the LLRF, 
to repay the Agency loan and, with the advance written approval of the 
Agency, to supplement the LLRF with interest or fee earnings from the 
RMRF.
    (3) The term of an Agency loan made to a microlender will be 20 
years. If requested by the applicant MDO, a shorter term may be agreed 
upon by the microlender and the Agency. If a repayment workout is 
required after loan closing, the term of the loan may not exceed a 20-
year period from the loan origination date.
    (4) Each RMAP loan made to a microlender during its first five 
years of

[[Page 26357]]

participation in the program will bear an interest rate of 2 percent 
for the life of the loan. After the fifth year of an MDO's continuous 
and satisfactory participation in the program, each new loan made to 
the microlender will bear interest at a rate of 1 percent. The interest 
rate on previous loans will remain unchanged. Satisfactory 
participation requires a loan default rate of 5 percent or less, a 
pattern of delinquencies of 10 percent or less in the MDO's RMRF 
account(s), and timely submission of reports to the Agency as required 
by Sec.  4280.311(h).
    (5) Each loan made to a microlender will automatically receive a 2-
year deferral during which time no repayment to the Agency will be 
required. The deferral period will begin on the day the Agency's loan 
to the microlender is closed. During the initial 2-year deferral 
period, each loan to a microlender will accrue interest only on funds 
disbursed by the Agency. Interest accrued during the 2-year deferral 
period will be capitalized to the loan's principal balance during the 
24th month of the loan unless the microlender chooses to make a 
voluntary payment of the accrued interest. The required monthly 
payments to amortize the loan after the 2-year deferral period will be 
based on the full loan amount plus capitalized interest, not just the 
amount disbursed to the microlender, even in cases where the Agency's 
loan has not been fully advanced to the microlender.
    (6) Except in the case of liquidation or early repayment, loans to 
microlenders must fully amortize over the life of the loan. The first 
payment will be due to the Agency on the last day of the 24th month of 
the life of the loan.
    (7) The microlender is responsible for full repayment of its loan 
to the Agency regardless of the performance of its microloan portfolio. 
Partial or full repayment of debt to the Agency under the program may 
be made at any time, including during the deferral period, without any 
pre-payment penalties being assessed.
    (8) The Agency may call the entire loan due and payable prior to 
the end of the full term due to any non-performance, delinquency, or 
default on the loan.
    (9) The loan closing between the microlender and the Agency should 
take place within 90 days from the execution of Form RD 1940-1, 
``Request for Obligation of Funds.'' Microlenders that are unable to 
close the loan within 90 days of obligation must provide justification 
for the delay or loan funds will be forfeited through a de-obligation 
of funds.
    (10) Microlenders will be eligible to receive a disbursement of up 
to 25 percent of the total loan amount at the time of loan closing. 
Funds disbursed at loan closing exceeding 25 percent of the loan amount 
will only be made if and to the extent that the MDO has made a funding 
commitment to an eligible microborrower that will be closed within 60 
days from the Agency loan date. Interest will accrue on all funds 
disbursed to the microlender beginning on the date of disbursement.
    (11) Microlenders may request in writing and receive additional 
loan disbursements until the full amount of the loan to the microlender 
is disbursed, or until the end of the 36th month of the loan, whichever 
occurs first. Letters of request for disbursement should be made not 
more often than quarterly and must be accompanied by a description of 
the microlender's anticipated need. Such description will indicate the 
amount and number of microloans anticipated to be made with the loan 
disbursement.
    (12) Funds not disbursed to the microlender by the end of the 36th 
month of the loan from the Agency will be de-obligated and no longer 
available for disbursement to the MDO. In such cases where loan funds 
are deobligated, the Agency will establish a revised payment schedule 
to fully amortize the loan balance by its maturity date.
    (13) In the event a microlender fails to meet its payment or 
reporting obligations to the Agency, the Agency may pursue any 
combination of the following:
    (i) Take possession of the RMRF and/or any microloans outstanding, 
and/or the LLRF;
    (ii) Call the loan due and payable in full; and/or
    (iii) Enter into a workout agreement acceptable to the Agency, 
which may or may not include transfer or sale of the portfolio to 
another microlender (whether or not funded under the program) deemed 
acceptable to the Agency.
    (14) If a microlender makes a withdrawal from the RMRF for any 
purpose other than to make a microloan, repay the Agency, or, with 
advance written approval, transfer an appropriate amount of non-Federal 
funds to the LLRF, the Agency may take actions including the 
restriction of further access to withdrawals from the account by the 
microlender or declaring the loan in default due to improper use of 
loan funds.
    (f) Loan funding limitations--(1) Minimum and maximum loan amounts. 
The minimum loan amount that a microlender may borrow under this 
program will be $50,000. The maximum amount any microlender may borrow 
on a single loan under this program, or in any given Federal FY, will 
be $500,000. In no case will the aggregate outstanding balance owed to 
the program by any single microlender exceed $2,500,000.
    (2) Use of funds. Agency loan funds must be used only to establish 
or recapitalize an existing Agency funded RMRF account out of which 
microloans will be made, into which microloan payments will be 
deposited, and from which repayments to the Agency will be made.
    (g) Loan loss reserve fund (LLRF). Each microlender that receives 
one or more loans under the program will be required to establish an 
LLRF account.
    (1) Purpose. The purpose of the LLRF is to protect the microlender 
and the Agency against losses that may occur as the result of the 
failure of one or more microborrowers to repay their loans on a timely 
basis.
    (2) Capitalization and maintenance. The LLRF is subject to each of 
the following conditions:
    (i) The microlender must maintain the LLRF at a minimum of 5 
percent of the total amount owed by the microlender under the program 
to the Agency. If the LLRF falls below the required amount, the 
microlender will have 30 days to replenish the LLRF. The Agency will 
hold a security interest in the account and all funds therein until the 
MDO has repaid its debt to the Agency under this program.
    (ii) No Agency loan funds may be used to capitalize the LLRF.
    (iii) The LLRF must be held in a Federally insured deposit account 
separate and distinct from any other fund owned by the microlender.
    (iv) The LLRF must remain open, appropriately capitalized, and 
active until such time as any loans owed to the Agency by the 
microlender under the program related to such LLRF are paid in full.
    (3) Use of LLRF. The LLRF must be used only to:
    (i) Recapitalize the RMRF in the event of the loss and write-off of 
a microloan;
    (ii) Accept Non-Federal deposits as required for maintenance of the 
fund at a level equal to 5 percent or more of the amount owed to the 
Agency by the microlender under the program; and
    (iii) Prepay or repay the Agency program loan.
    (4) LLRF funded at time of closing. The LLRF account must be 
established by the microlender prior to the closing of the loan from 
the Agency. At the time of initial loan closing, sources of funding for 
the LLRF must be identified by the microlender and funds equal to

[[Page 26358]]

5 percent of the initial loan disbursement, if made at loan closing, 
must be made to the LLRF by the microlender. The amount in the LLRF can 
be built over time and must be maintained in an amount greater than or 
equal to 5 percent of the amount owed to the Agency by the microlender 
under the program. After the first disbursement is made to a 
microlender, further disbursements will only be made if the LLRF is 
funded at the appropriate amount. After the initial loan is made to a 
microlender, subsequent loan closings may require a deposit of 
additional funds to the LLRF to maintain an amount equal to 5 percent 
of the total loan balance owed to the Agency under the program. Federal 
funds, except where specifically permitted by other laws, may not be 
used to fund the LLRF.
    (5) Additional LLRF funding. In the event of exhibited weaknesses, 
such as losses that are greater than 5 percent of the microloan 
portfolio or a microborrower delinquency rate in excess of 10 percent, 
the Agency may require the microlender to deposit additional funds into 
the LLRF; however, the Agency may never require an LLRF balance of more 
than 10 percent of the total amount owed to the Agency by the 
microlender.
    (h) Recordkeeping, reporting, and oversight. Microlenders must 
maintain all records applicable to the program and make them available 
to the Agency upon request. Microlenders must submit quarterly reports 
as specified in paragraphs (h)(1) through (4) of this section. 
Portfolio reporting requirements must be met via the electronic 
reporting system. Other reports, such as narrative information, may be 
submitted as hard copy in the event the microlender or grantee does not 
have the capability to submit or accept such reports electronically.
    (1) Periodic reports. On a quarterly basis, within 30 days of the 
end of each Federal FY calendar quarter, each microlender that has an 
outstanding loan under this section must provide to the Agency:
    (i) An Agency-approved form containing such information as the 
Agency may require, and in accordance with OMB circulars and guidance, 
to ensure that funds provided are being used for the purposes for which 
the loan to the microlender was made;
    (ii) Listing of each microborrower under this program, their loan 
balance and payment status; and
    (iii) A discussion reconciling the microlender's actual results for 
the period against its goals, milestones, and objectives as provided in 
the application package.
    (2) Minimum retention. Microlenders must provide evidence in their 
quarterly reports that the sum of the unexpended amount in the RMRF, 
plus the amount in the LLRF, plus debt owed by the microborrowers is 
equal to a minimum of 105 percent of the amount owed by the microlender 
to the Agency, unless the Agency has established a higher LLRF reserve 
requirement for a specific microlender.
    (3) Combining accounts and reports. If a microlender has more than 
one loan from the Agency, a separate report must be made for each loan 
except when RMRF accounts have been combined. A microlender may combine 
RMRF accounts only when the Agency approves the combining of accounts 
and reports in writing before such accounts are combined and reports 
are submitted, and:
    (i) The underlying loans have the same rates, terms and conditions, 
including the method of determining matching funds for a 
microborrower's project; and
    (ii) The combined report allows the Agency to effectively 
administer the program, including providing the same level of 
transparency and information for each loan as if separate RMRF and LLRF 
reports had been prepared.
    (4) Delinquency. In the event that a microlender has delinquent 
loans in its RMAP portfolio, quarterly reports will include narrative 
explanation of the steps being taken to cure the delinquency.
    (5) Other reports. Other reports may be required by the Agency from 
time to time in the event of poor performance, one or more work-out 
agreements, or other such occurrences that require more than the usual 
set of program servicing.
    (6) Access to microlender's records. Upon request by the Agency, 
the microlender will permit representatives of the Agency to inspect 
and make copies of any records pertaining to operation and 
administration of the program. Such inspection and copying may be made 
during regular office hours of the microlender or at any other time 
agreed upon between the microlender and the Agency.
    (7) Changes in key personnel. Before any additions or changes are 
made to key personnel, the microlender must notify, and the Agency must 
approve, such changes. Such approval shall not be unreasonably withheld 
by the Agency.


Sec.  4280.312  Loan approval and closing.

    (a) Loan approval and obligating funds. The loan will be considered 
approved on the date the signed copy of Form RD 1940-1, ``Request for 
Obligation of Funds,'' is executed by the Agency. Form RD 1940-1 
authorizes funds to be obligated and may be executed by the Agency 
after the microlender has signed the document, provided that the 
microlender has the legal authority to contract for a loan and to enter 
into required agreements, including an Agency-approved loan agreement, 
and meets all program loan requirements.
    (b) Letter of conditions. Upon reviewing the conditions and 
requirements in the letter of conditions, the applicant must complete, 
sign, and return Form RD 1942-46, ``Letter of Intent to Meet 
Conditions,'' to the Agency; or if certain conditions cannot be met, 
the applicant may propose alternate conditions. The Agency will review 
any requests for changes to the letter of conditions and may approve 
only minor changes that do not materially affect the microlender and 
remain within the program requirements. Changes in legal entities prior 
to loan closing will not be approved.
    (c) Loan closing. (1) Prior to loan closing, microlenders must 
provide evidence that the RMRF and LLRF bank accounts have been set up 
and the LLRF has been or will be funded as described in Sec.  
4280.311(g)(4). Such evidence shall consist of:
    (i) A pre-authorized debit form allowing the Agency to withdraw 
payments from the RMRF account, and in the event of a repayment 
workout, from the LLRF account;
    (ii) An Agency-approved automatic deposit authorization form, from 
the depository institution providing the Agency with the RMRF account 
number, into which funds may be deposited at time of disbursement to 
the microlender;
    (iii) A statement from the depository institution as to the amount 
of cash in the LLRF account;
    (iv) An Agency-approved promissory note and a loan agreement for 
each loan to the MDO must be executed at loan closing. The loan 
agreement will be prepared by the Agency using Form RD 4274-4, 
``Intermediary Relending Program/Rural Microentrepreneur Assistance 
Program Loan Agreement,'' and reviewed by the MDO prior to loan 
closing; and
    (v) An appropriate security agreement on the LLRF and RMRF accounts 
must be executed at loan closing.
    (2) At loan closing, the microlender must certify that:
    (i) All requirements of the letter of conditions have been met; and

[[Page 26359]]

    (ii) There has been no material adverse change in the microlender, 
its key personnel, or its financial condition since the issuance of the 
letter of conditions. If one or more adverse changes have occurred, the 
microlender must explain the changes and the Agency must determine that 
the microlender remains eligible and qualified to participate as an 
MDO.
    (3) The microlender will provide sufficient evidence that no 
lawsuits or other legal issues are pending or threatened that would 
adversely affect the security of the microlender when Agency security 
instruments are filed.


Sec.  4280.313  Grant provisions.

    Grants offered under this program will be made to eligible MDOs in 
such amounts and requirements for microlenders with a loan(s) from the 
Agency, and for MDOs that seek only a TA grant from the Agency. 
Competition for these funds will occur as a part of the application and 
qualification process of becoming a microlender or grant recipient. No 
entity will receive grant funding as both a microlender and a TA-only 
provider. RMAP microlenders are not eligible for TA-only grant funding 
and an MDO receiving TA-only grant funding is not eligible for 
microlender grant funding. Failure to meet scoring benchmarks will 
preclude an applicant from receiving loan and/or grant dollars. Once an 
MDO is participating as a microlender, TA grant funds will be made 
available annually based on the MDO's lending balances and the 
availability of funds.
    (a) Microlender grants. The Agency shall make microlender TA grants 
to microlenders to assist them in providing marketing, management, and 
other TA to rural microentrepreneurs and microenterprises that have 
received or are seeking one or more microloans from the microlender. 
The capacity of a microlender to provide an integrated program of 
microlending and TA will be evaluated during the scoring process with 
their loan application and then annually in determining the amount of 
annual grant funds. An eligible MDO selected to be a microlender will 
be eligible to receive a microlending TA grant if it receives funding 
to provide microloans under this program. Microlender applicants for 
loan funding to establish or replenish a revolving loan fund originally 
capitalized under this program, may simultaneously apply for TA grant 
funds in an amount not to exceed 25 percent of the requested loan 
amount.
    (1) Technical assistance grants to microlenders will be awarded 
annually on a non-competitive basis in an amount based on the MDO's 
outstanding loan balance as of June 30, subject to satisfactory program 
performance of the microlender and the availability of funds. 
Satisfactory performance includes the timely payment of program loan(s) 
and the submission of periodic reports to the Agency. Annual TA grants 
to a microlender, subject to the availability of funds, will be made in 
an amount to replenish the microlender's TA fund to an amount equal to 
20 percent of the outstanding principal balance of loans made by the 
microlender to ultimate recipients unless otherwise published in an 
annual program funding notice. If available grant funds are not 
sufficient to fully replenish each microlender's TA funds to 20 percent 
of their outstanding loan balance, the available funds will be 
distributed proportionately based on the percentage of available funds 
to the total amount of annual TA grant funds requested.
    (2) Any grant dollars obligated but not spent by the microlender 
from their initial or subsequent grants will be subtracted from the 
subsequent year's grant eligibility calculation to ensure that 
obligations cover only microloans made and active and that the MDO's 
total grant funds available for TA do not exceed the established 20 
percent threshold.
    (3) The microlender will agree to use TA grant funds exclusively 
for providing TA assistance and training to eligible microentrepreneurs 
and microenterprises, with the exception that up to 10 percent of the 
grant funds may be used to cover the microlender's administrative 
expenses. Grant funds may not be used to make loan payments.
    (b) Technical assistance only grants. Grants will be competitively 
made to MDOs for the purpose of providing TA and training to 
prospective microborrowers. Technical assistance-only grants will be 
provided to eligible MDOs that seek to provide business-based TA and 
training to eligible microentrepreneurs and microenterprises, but do 
not seek funding as a microlender for an RMRF.
    (1) The amount of a TA-only grant under this program will not 
exceed 10 percent of the amount of authorized appropriations available 
in any Federal FY for TA-only grants.
    (2) Technical assistance only grants will have a grant term not to 
exceed 12 months from the date the grant agreement is signed.
    (3) Technical assistance only grantees will be required to:
    (i) Refer clients to internal or external non-program funded 
lenders for loans of $50,000 or less, and
    (ii) Collect data regarding such clients. Technical assistance-only 
grantees will be considered successful if a minimum of 1-in-5 TA 
clients are referred for a microloan and are operating a business 
within 18 months of receiving TA from the MDO.
    (c) Matching requirement. The MDO is required to provide a match of 
not less than 15 percent of the total amount of the grant in the form 
of matching funds, indirect costs, or in-kind goods or services. Unless 
specifically permitted by laws other than the statute authorizing RMAP, 
matching contributions must be made up of non-Federal funds.
    (d) Administrative expenses. Not more than 10 percent of a grant 
received by an MDO for a Federal FY may be used to pay administrative 
expenses. Microlenders must annually submit a budget of proposed 
administrative expenses for Agency approval. The Agency has the right 
to deny the requested amount, even if it is at 10 percent or less, and 
to fund administrative expenses at a lower level.
    (1) Administrative expenses should be kept to a minimum. As such, 
the applicant MDO is required in the application materials to provide 
an administrative budget plan indicating the amount of funding it will 
need for administrative purposes. Applicants will be scored 
accordingly, with those using less than 10 percent of the grant funds 
for administrative purposes being scored higher than those using 10 
percent of the grant funds for administrative purposes.
    (2) While operating the program, the selected grantee will be 
expected to adhere to the estimates it provides in its application and 
annual budget. If for any reason the MDO cannot meet those 
expectations, it must contact the Agency in writing with justification 
to request a budget adjustment. Budget adjustments will be considered 
only if the adjustment result for administrative expenses is within the 
10 percent limitation.
    (3) Microlenders that exceed 10 percent for administrative expenses 
will be considered in performance default and may be subject to Agency 
actions including the forfeiting of funds.
    (e) Ineligible grant purposes. Grant funds, matching funds, 
indirect costs, and in-kind goods and services may not be used for:
    (1) Grant application preparation costs;
    (2) Costs incurred prior to the obligation date of the grant;
    (3) Capital improvements;
    (4) Political or lobbying activities;
    (5) Assistance to any ineligible entity;

[[Page 26360]]

    (6) Payment of any judgment or debt owed; or
    (7) Payment of any loan.
    (f) Facilitation of access to capital. Technical assistance-only 
grantees will be expected to provide training and TA services to the 
extent that access to capital for eligible microentrepreneurs and 
microenterprises is facilitated by referral to either an internal or 
external non-program loan fund so that these clients may take advantage 
of available financing programs.
    (g) Grant agreement. For any grant to an MDO or microlender, the 
Agency will notify the approved applicant in writing, using an Agency-
approved grant agreement, setting out the conditions under which the 
grant will be made. The form will include those matters necessary to 
ensure that the proposed grant is completed in accordance with the 
proposed project, that grant funds are expended for authorized 
purposes, and that the applicable requirements prescribed in the 
relevant Agency regulations are complied with.


Sec.  4280.314  [Reserved]


Sec.  4280.315  MDO application and submission information.

    (a) Initial and subsequent applications. Applications shall be 
submitted in accordance with the provisions of this subpart unless 
adjusted by the Agency in an annual Federal Register document. The 
information required in Sec. Sec.  4280.315 and 4280.316 is necessary 
for an application to be considered complete. Only those applicants 
that meet the basic eligibility requirements in Sec.  4280.310 will 
have their applications fully scored and considered for participation 
in the program under this section. When preparing applications, 
applicants are strongly encouraged to review the application 
requirements and scoring criteria in Sec.  4280.316 and provide 
documentation that will support a competitive score.
    (b) Content and form of submission. All applicants must provide the 
information specified in paragraph (c) of this section. Additional 
application information is required in paragraph (d) of this section 
depending on the type of application being submitted.
    (c) Application information for all applicants. All applicants must 
provide the following information and forms fully completed and with 
all attachments:
    (1) Standard Form-424, ``Application for Federal Assistance'' for 
grants.
    (2) Standard Form-424A, ``Budget Information--Non-Construction 
Programs.''
    (3) For entities applying for program loan funds to become an RMAP 
microlender only, Form RD 1910-11, ``Certification of No Federal 
Debt.''
    (4) Form RD 400-8, ``Compliance Review'' or sufficient demographic 
information for Agency completion of Form RD 400-8.
    (5) Demonstration that the applicant is eligible to apply to 
participate in the program by submission of documentation as follows:
    (i) If a nonprofit entity, evidence that the applicant organization 
meets the citizenship requirements and a copy of the applicant's bylaws 
and articles of incorporation, which include evidence that the 
applicant is legally considered a non-profit organization;
    (ii) If an Indian tribe, evidence that the applicant is a federally 
recognized Indian tribe, and that the Indian tribe neither operates nor 
is currently served by an existing MDO;
    (iii) If a public institution of higher education, evidence that 
the applicant is a public institution of higher education; and
    (iv) For nonprofit applicants only, a Certificate of Good Standing, 
not more than six (6) months old, from the Office of the Secretary of 
State in the State, or tribal equivalent, in which the applicant is 
located. If the applicant has offices in more than one state, then the 
state in which the applicant is organized and licensed will be 
considered the home location.
    (6) Certification by the applicant that it cannot obtain sufficient 
credit elsewhere to fund the activities called for under the program 
with similar rates and terms.
    (d) Type of application specific information. In addition to the 
information required under paragraph (c) of this section, the following 
information is also required, as applicable:
    (1) An applicant with more than 3 years of experience as an MDO 
outside of the program seeking to participate as an RMAP microlender 
must provide sufficient documentation to validate its years of 
experience.
    (2) An applicant with 3 years or less experience as an MDO outside 
of the program seeking to participate as an RMAP microlender must 
provide the additional information specified in Sec.  4280.316(c).
    (3) An applicant seeking status as a microlender must identify in 
its application which cost-share option(s) the applicant will utilize, 
as described in Sec.  4280.311(d), to meet the Federal cost-share 
requirement. If the applicant will utilize the RMRF-level option, the 
applicant shall identify the amount(s) and source(s) of the non-Federal 
share.
    (4) An applicant seeking TA-only grant funds must provide the 
additional information specified in Sec.  4280.316(d).
    (e) Application limits. Microenterprise Development Organizations 
may only submit and have pending for consideration one application at 
any given time, which is for either microlender funds or TA-only funds.
    (f) Completed applications. Applications that fulfill the 
requirements specified in paragraphs (a) through (e) of this section 
will be fully reviewed, scored, and ranked by the Agency in accordance 
with the provisions of Sec.  4280.316.


Sec.  4280.316  Application scoring.

    Applications will be scored based on the criteria specified in this 
section using only the information submitted in the application. The 
total available points per application are 100 as shown in paragraphs 
(a) through (e) of this section. Awards will be based on the points 
ranking, with the highest scoring applications being funded first from 
the available funding.
    (a) Application requirements for all applicants. All applicants 
must submit the eligibility and application information described in 
Sec.  4280.315. The maximum points available in this part of the 
application are 45. In addition to the eligibility information, all 
applicants will submit:
    (1) An organizational chart clearly showing the positions and 
naming the individuals in those positions. Of particular interest to 
the Agency are management positions and those positions essential to 
the operation of microlending and TA programming. Up to 5 points will 
be awarded based on the completeness of the organizational chart and 
management experience.
    (2) Resumes for each of the individuals shown on the organizational 
chart and indicated as key to the operation of the activities to be 
funded under the program. There should be a corresponding resume for 
each of the key individuals noted and named on the organizational 
chart. Points will be awarded based on the quality of the resumes and 
on the ability of the key personnel to administer the program. Up to 5 
points will be awarded.
    (3) A succession plan to be followed in the event of the departure 
of personnel key to the operation of the applicant's RMAP activities. 
Up to 5 points will be awarded.
    (4) Information indicating an understanding of microenterprise 
development concepts. Provide those

[[Page 26361]]

parts of your policy and procedures manual that deal with the provision 
of loans, management of loan funds, and provision of TA. Up to 5 points 
will be awarded.
    (5) The applicant's most recent, and two-year's previous, financial 
statements. Points will be awarded based on the demonstrated ability of 
the applicant to maintain or grow its fund balance, its ability to 
manage one or more federal programs, and its capacity to manage 
multiple funding sources, including restricted and non-restricted 
funding sources, income, earnings, and expenditures. Up to 10 points 
will be awarded.
    (6) A copy of the applicant's organizational mission statement. The 
mission statement will be rated based on its relative connectivity to 
microenterprise development and general economic development and may or 
may not be a part of a larger statement. Up to 5 points will be 
awarded.
    (7) Information regarding the geographic service area to be served, 
which must be rural as defined, and include the number of counties or 
other jurisdictions to be served. Note that the applicant will not be 
scored on the size of the service area, but on its ability to fully 
cover the service area as described. Up to 10 points will be awarded.
    (b) Program loan application requirements for MDOs seeking to 
participate as RMAP microlenders with more than 3 years of experience. 
In addition to the information required under paragraph (a) of this 
section, applicants with more than three (3) years of experience as a 
microlender, including non-RMAP microloans, must also provide the 
information specified in paragraphs (b)(1) through (5) of this section. 
The total number of points available under this section (in addition to 
the up to 45 points available in paragraph (a) of this section) is 55.
    (1) History of provision of microloans. The applicant must provide 
data regarding its history of making microloans for the three years 
previous to this application by answering the questions in paragraphs 
(b)(1)(i) through (v) of this section. This information should be 
provided clearly and concisely in numerical format as the data will be 
used to calculate points as noted. Up to a maximum of 20 points may be 
awarded under this criterion.
    (i) Number and amount of microloans made during each of the three 
previous years.
    (ii) Number and amount of microloans made in rural areas, as 
defined, in each of the three years prior to the year in which the 
application is submitted. If the history of providing microloans in 
rural areas shows at least one loan made in:
    (A) Three or more consecutive years immediately prior to the 
application, 5 points will be awarded;
    (B) At least two of the years but not more than the three 
consecutive years immediately prior to this application, 3 points will 
be awarded;
    (C) At least 6 months, but not more than one year immediately prior 
to this application, 1 point will be awarded.
    (iii) Calculate and enter the total number of microloans made in 
rural areas as a percentage of the total number of all microloans made 
for each of the past three years. If the percentage of the total number 
of microloans made in rural areas is:
    (A) 75 percent or more, 5 points will be awarded;
    (B) At least 50 percent but less than 75 percent, 3 points will be 
awarded;
    (C) At least 25 percent but less than 50 percent, 1 point will be 
awarded.
    (iv) Enter the dollar amount of microloans made in rural areas as a 
percentage of the dollar amount of the total portfolio (rural and non-
rural) of microloans made for each of the previous three years. If the 
percentage of the dollar amount of the microloans made in rural areas 
is:
    (A) 75 percent or more of the total amount, 5 points will be 
awarded;
    (B) At least 50 percent but less than 75 percent, 3 points will be 
awarded;
    (C) At least 25 percent but less than 50 percent, 1 point will be 
awarded.
    (v) Each applicant shall compare the diversity of its entire 
microloan portfolio to the demographic makeup of its service area (as 
determined by the latest applicable decennial census for the state) 
based on the number of microloans made during the three years preceding 
the subject application. Demographic groups shall include gender, 
racial and ethnic minority status, and disability (as defined in the 
Americans with Disabilities Act). Points will be awarded on the basis 
of how close the MDO's microloan portfolio matches the demographic 
makeup of its service area. A maximum of 5 points will be awarded.
    (A) If at least one loan has been made to each of the three 
demographic groups and if the percentage of loans made to each 
demographic group is 5 percent or less of their demographic makeup, 5 
points will be awarded.
    (B) If at least one loan has been made to each demographic group 
and if the percentage of loans made to each demographic group is each 
between 5 to 10 percent or less of the demographic makeup, 3 points 
will be awarded.
    (C) If at least one loan has been made to each demographic group 
and if the percentage of loans made to one or more of the demographic 
groups is greater than 10 percent of the demographic makeup, 1 point 
will be awarded.
    (D) If no loans have been made to two or more demographic groups, 
no points will be awarded.
    (2) Portfolio management. The applicant's ability to manage its 
portfolio will be determined based on the data provided in response to 
paragraphs (b)(2)(i) and (ii) of this section and scored accordingly. 
The maximum number of points under this criterion is 10.
    (i) Enter the total number of the applicant's microloans paying on 
time for the three previous years. If the total number of microloans 
paying on time at the end of each year over the prior three years is:
    (A) 95 percent or more, 5 points will be awarded;
    (B) At least 85 percent but less than 95 percent, 3 points will be 
awarded;
    (C) Less than 85 percent, 0 points will be awarded.
    (ii) Enter the total number of microloans currently 30 to 90 days 
in arrears, or that have been written off over the three previous 
years. If the total number of these microloans is:
    (A) 5 percent or less of the total portfolio, 5 points will be 
awarded;
    (B) More than 5 percent, 0 points will be awarded.
    (3) History of provision of technical assistance. The Applicant's 
history of provision of TA to microentrepreneurs and microenterprises, 
and its ability to reach diverse communities, will be scored based on 
the data specified in paragraphs (b)(3)(i) through (iii) of this 
section. Applicants may use a chart to provide this information as they 
deem appropriate. The maximum number of points under this criterion is 
15.
    (i) Provide the total number of rural and non-rural 
microentrepreneurs and microenterprises that received both microloans 
and TA services for each of the previous three years. Of this total 
number, provide the percentage of rural microentrepreneurs and rural 
microenterprises that received both microloans and TA services for each 
of the previous three years. If the provision of both microloans and TA 
services to rural microentrepreneurs and rural microenterprises is 
demonstrated at a rate of:
    (A) 75 percent or more, 5 points will be awarded;
    (B) At least 50 percent but less than 75 percent, 3 points will be 
awarded;
    (C) At least 25 percent but less than 50 percent, 1 point will be 
awarded.

[[Page 26362]]

    (ii) Provide the percentage of the total number of rural 
microentrepreneurs and rural microenterprises by racial and ethnic 
minority, disabled, and/or gender that received both microloans and TA 
services for each of the previous three years. If the demonstrated 
provision of microloans and TA services to these rural 
microentrepreneurs and rural microenterprises is at a rate of:
    (A) 75 percent or more, 5 points will be awarded;
    (B) At least 50 percent but less than 75 percent, 3 points will be 
awarded;
    (C) At least 25 percent but less than 50 percent, 1 point will be 
awarded.
    (iii) Provide the ratio of TA clients that also received 
microloans, rounding to the nearest whole number, during each of the 
previous three years. If the ratio of clients receiving TA services to 
clients receiving microloans is:
    (A) Between 1:1 and 1:5, 5 points will be awarded.
    (B) Between 1:6 and 1:8, 3 points will be awarded.
    (C) A ratio of either 1:9 or 1:10, 1 point will be awarded.
    (4) Ability to provide technical assistance. In addition to 
providing a statistical history of their provision of TA to 
microentrepreneurs, microenterprises, and microborrowers, applicants 
must provide a narrative of not more than five pages describing the 
teaching and training methods used by the applicant organization to 
provide such TA and discussing the outcomes of their endeavors. 
Technical assistance is defined in Sec.  4280.302. The narrative will 
be scored as specified in paragraphs (b)(4)(i) through (iii) of this 
section. Points may be awarded for each of the categories. The maximum 
number of points under this criterion is 5.
    (i) Applicants that have used more than one method of training and 
TA (e.g., classroom training, peer-to-peer discussion groups, 
individual assistance, distance learning) will be awarded 2 points.
    (ii) Applicants that provide success stories to demonstrate the 
effects of TA on their clients will be awarded 2 points.
    (iii) Applicants that provide evidence that they require 
evaluations by the clients of their training programs and indicate that 
the average level of evaluation scores is ``good'' or higher will be 
awarded 1 point.
    (5) Proposed administrative expenses to be spent from TA grant 
funds. The maximum number of points under this criterion is 5. If the 
percentage of grant funds to be used for administrative purposes is:
    (i) Less than 5 percent of the TA grant funds, 5 points will be 
awarded;
    (ii) Equal to 5 percent but less than 8 percent, 3 points will be 
awarded;
    (iii) Equal to 8 percent or greater, 0 points will be awarded.
    (c) Application requirements for MDOs seeking to participate as 
RMAP microlenders with 3 years or less experience. In addition to the 
information required under paragraph (a) of this section, an applicant 
MDO with 3 years or less experience that is applying to be a 
microlender must submit the information specified in paragraphs (c)(1) 
through (8) of this section. The total number of points available under 
this paragraph, in addition to the maximum of 45 points available in 
paragraph (a) of this section, is 55, for a total of 100.
    (1) The applicant must provide a narrative work plan that clearly 
indicates its intention for the use of loan and grant funds. Provide 
goals and milestones for planned microlending and TA activities. In 
relation to the information requested in paragraph (a) of this section, 
the applicant must describe how it will incorporate its mission 
statement, utilize its employees, and maximize its human and capital 
assets to meet the goals of this program. The applicant must provide 
its strategic plan and organizational development goals and clearly 
indicate its lending goals for the five years after the date of 
application. The narrative work plan should be not more than five pages 
in length. Up to a maximum of 10 points will be awarded.
    (2) The applicant will provide the date that it began business as 
an MDO or other provider of business education and/or facilitator of 
capital. This date will reflect when the applicant became licensed to 
do business by the Secretary of State, or tribal equivalent, in which 
it is registered and engaged regularly paid staff to conduct business 
on a daily basis. If the applicant has been in business for:
    (i) More than 2 years but less than 3 years, 5 points will be 
awarded;
    (ii) At least 1 year, but not more than 2 years, 3 points will be 
awarded;
    (iii) At least 6 months, but not more than 1 year, 1 point will be 
awarded;
    (iv) Less than 6 months, or more than 3 full years, 0 points will 
be awarded. (If more than 3 full years, the applicant must apply under 
the provisions for MDOs with more than 3 years of experience as 
specified in paragraph (b) of this section.)
    (3) The applicant must describe in detail any microenterprise 
development training received by it as a whole, or its employees as 
individuals, to date. The narrative may refer reviewers to already 
submitted resumes to save space. The training received will be rated on 
its topical variety, the quality of the description, and its relevance 
to the organization's strategic plan. The applicant should not submit 
training brochures or conference announcements. Up to a maximum of 10 
points will be awarded.
    (4) The applicant must indicate its current number of employees, 
those that concentrate on rural microentrepreneurial development, and 
the current average caseload for each. Indicate how the caseload ratio 
does or does not optimize the applicant's ability to perform the 
services described in the work plan. Discuss how Agency grant funds 
will be used to assist with TA program delivery and how funding of the 
program loan application will affect the portfolio. Up to 5 points will 
be awarded.
    (5) Applicants may submit a maximum of five (5) letters of support 
with one point awarded for each letter. Support letters should be 
signed and dated and come from potential beneficiaries and other local 
organizations. Letters received from Congressional members and 
technical assistance providers will not be included in the count of 
support letters received. Additionally, identical form letters signed 
by multiple potential beneficiaries and/or local organizations will not 
be included in the count of support letters received. The applicant 
must indicate any training organizations with which it has a working 
relationship. Provide contact information for references regarding the 
applicant's capacity to perform the work in the plan provided. Up to a 
maximum of five (5) points will be awarded.
    (6) Describe any plans for continuing training relationship(s), 
including ongoing or future training plans and goals, and the timeline 
for the same. Up to 5 points will be awarded.
    (7) The applicant will describe its internal benchmarking system 
for determining client success, reporting on client success, and 
following client success for up to 5 years after completion of a 
training relationship. Up to 10 points will be awarded.
    (8) The applicant will identify its proposed administrative 
expenses to be spent from TA grant funds. The maximum total number of 
points under this criterion is 5. If the percentage of grant funds to 
be used for administrative purposes is:
    (i) Less than or equal to 5 percent of the TA grant funds, 5 points 
will be awarded;
    (ii) More than 5 percent but less than 8 percent, 3 points will be 
awarded;

[[Page 26363]]

    (iii) Equal to 8 percent or greater, 0 points will be awarded.
    (d) Application requirements for MDOs seeking TA-only grants. 
Technical assistance-only grants may be provided to MDOs that are not 
RMAP microlenders seeking to provide training and technical assistance 
to rural microentrepreneurs and rural microenterprises. An applicant 
seeking a TA-only grant must submit the information specified in 
paragraphs (d)(1) through (4) of this section. The total number of 
points available under this section, in addition to the 45 points 
available in paragraph (a) of this section, is 55, for a total of 100 
points.
    (1) History of provision of TA. Each applicant's history of 
provision of TA to microentrepreneurs and microenterprises, and its 
ability to reach diverse communities, will be scored based on the data 
specified in paragraphs (d)(1)(i) through (iii) of this section. The 
maximum number of points under this criterion is 20.
    (i) Provide the total number of rural and non-rural 
microentrepreneurs and microenterprises that received both TA services 
and resultant microloans for each of the previous three years. Of this 
total number, provide the percentage of rural microentrepreneurs and 
rural microenterprises that received both TA services and resultant 
microloans for each of the previous three years. If the provision of 
both TA services and resultant microloans to rural microentrepreneurs 
and rural microenterprises is demonstrated at a rate of:
    (A) 75 percent or more, 5 points will be awarded;
    (B) At least 50 percent but less than 75 percent, 3 points will be 
awarded;
    (C) At least 25 percent but less than 50 percent, 1 point will be 
awarded.
    (ii) Provide the percentage of the total number of rural 
microentrepreneurs by racial and ethnic minority, disabled, and/or 
gender that received both microloans and TA services for each of the 
previous three years. If the demonstrated provision of TA and resultant 
microloans to these rural microentrepreneurs when compared to the total 
number of microentrepreneurs assisted, is at a rate of:
    (A) 75 percent or more, 10 points will be awarded;
    (B) At least 50 percent but less than 75 percent, 7 points will be 
awarded;
    (C) At least 25 percent but less than 50 percent, 5 points will be 
awarded.
    (iii) Provide the ratio of TA clients that also received microloans 
during each of the last three years, rounded to the nearest whole 
number. If the ratio of clients receiving TA to clients receiving 
microloans is:
    (A) Between 1:1 and 1:5, 5 points will be awarded.
    (B) Between 1:6 and 1:8, 3 points will be awarded.
    (C) Either 1:9 or 1:10, 1 point will be awarded.
    (2) Ability to provide TA. In addition to providing a statistical 
history of their provision of TA to microentrepreneurs, 
microenterprises, and microborrowers, applicants must provide a 
narrative of not more than five pages describing the teaching and 
training method(s) used by the applicant organization to provide TA and 
discussing the outcomes of their endeavors. The narrative will be 
scored as specified in paragraphs (d)(2)(i) through (iv) of this 
section. The maximum number of points under this criterion is 20.
    (i) Applicants that have used more than one method of training and 
TA (e.g., classroom training, peer-to-peer discussion groups, 
individual assistance, and distance learning) will be awarded 5 points.
    (ii) Applicants that provide success stories to demonstrate the 
effects of TA on their clients will be awarded points under either of 
the following paragraphs, but not both:
    (A) News stories that highlight businesses made successful as a 
result of the applicant's TA; 5 points will be awarded.
    (B) Internal stories that highlight businesses made successful as a 
result of TA, 3 points.
    (iii) Applicants that provide evidence that they require 
evaluations by the clients of their training programs will be awarded 3 
points. Applicants will provide the total number of evaluations 
received and the average score from the evaluations received. An 
additional two points will be awarded if the total evaluation scores 
are above an average of 3.0 on a five-point scale, with points 
determined by the client ratings on a declining scale as follows:
    (A) Extremely Satisfied, 5 points.
    (B) Satisfied, 4 points.
    (C) Average, 3 points.
    (D) Dissatisfied, 2 points.
    (E) Very Unsatisfied, 1 point.
    (iv) Applicants that present well-written narrative information 
regarding their programs and services to be delivered and their 
outreach efforts within the service area that is clearly and concisely 
written and is five pages or less will be awarded up to a maximum of 5 
points.
    (3) Technical assistance plan. Submit a concise plan for the 
provision of TA explaining how the funds will benefit the current 
program and how it will allow the applicant to expand its non-program 
microlending activities. Up to 10 points will be awarded.
    (4) Proposed administrative expenses to be spent from TA grant 
funds. The maximum number of points under this criterion is 5. If the 
percentage of grant funds to be used for administrative purposes is:
    (i) Less than or equal to 5 percent of the TA grant funds, 5 points 
will be awarded;
    (ii) More than 5 percent but less than 8 percent, 3 points will be 
awarded;
    (iii) Equal to 8 percent or greater, 0 points will be awarded.
    (e) Re-application requirements for participating microlenders with 
more than 5 years of experience as a microlender under this program. 
(1) Microlender applicants with more than 5 years of experience as an 
MDO under this program may choose to submit a shortened loan/grant 
application that includes the following:
    (i) A letter of request for funding stating the amount of loan and/
or grant funds being requested;
    (ii) An indication of the loan and/or grant amounts being requested 
accompanied by a completed Form SF 424 and any pertinent attachments;
    (iii) An indication of the number and percent of the MDO's 
microentrepreneurs and microenterprises remaining in business for two 
years or more after microloan disbursement from program funds; and
    (iv) A recent resolution of the applicant's Board of Directors 
approving the application for debt.
    (2) The Agency, using this request and data available in the 
reports submitted under previous funding(s), will review the overall 
program performance of the applicant over the life of its participation 
in the program to determine its continued qualification for subsequent 
funds. Requirements include:
    (i) A loan default rate of 5 percent or less;
    (ii) A pattern of delinquencies during the period of participation 
in this program of 10 percent or less;
    (iii) A pattern of use of TA dollars that indicates at least one in 
ten TA clients receive a microloan;
    (iv) A statement discussing the need for more funding, accompanied 
by account documentation showing the amounts in each of the RMRF and 
LLRF accounts established to date; and
    (v) A pattern of compliance with program reporting requirements.
    (3) Shortened applications under this section will be rated on a 
pass or fail basis. Passing applications will be assigned a score of 90 
points and will

[[Page 26364]]

be ranked accordingly in the quarterly competitions. Failing 
applications under this section will be scored 0 and experienced MDOs 
may be required to complete the application requirements of paragraph 
(b) of this section.


Sec.  4280.317  Selection of applications for funding.

    All eligible applications received will be scored using the scoring 
criteria specified in Sec.  4280.316 and funded in descending order 
from the highest total score to applications receiving 60 points, 
subject to the authorization of appropriations for the Federal FY. If 
two or more applications have the same score and available funds cannot 
fund the individual projects, the Administrator may prioritize such 
applications to help the program achieve overall geographic diversity.
    (a) Timing and submission of applications. (1) All applications 
must be submitted as a complete application in one package of 
materials. Packages must be in the order of appearance in Sec.  
4280.315. Applications that are disorganized or otherwise not ready for 
evaluation will be returned to the applicant and not considered for 
funding.
    (2) Applications will be accepted on a continuing basis at any 
Rural Development State Office and will compete nationally for 
available funds on a quarterly basis using Federal fiscal quarters.
    (3) Applications received will be reviewed, scored, and ranked 
quarterly. Unless withdrawn by the applicant, the Agency will retain 
unsuccessful applications that score 60 points or more for 
consideration in subsequent reviews, through a total of four quarterly 
reviews. Applications unsuccessful after competing for funds in four 
quarters will be returned to the applicant.
    (b) Availability of funds. If an Application is received, scored, 
and ranked, but insufficient funds remain to fully fund the project, 
the Agency may elect to fund an Application requesting a smaller amount 
that has a lower score. Before this occurs, the Agency, as applicable, 
will provide the higher scoring applicant the opportunity to reduce the 
amount of its request to the amount of funds available. If the 
applicant agrees to lower its request, it must certify that the 
purposes of the project can be met, and the project is financially 
feasible at the lower amount.
    (c) Applicant notification. The Agency will notify applicants 
regarding their selection or non-selection, provide appeal rights of 
unsuccessful applicants, and provide closing procedures for the loan 
and/or grant awardees.
    (d) Closing. Awardees unable to complete closing for an approved 
obligation within 90 days or an extended date approved by the Agency 
will forfeit their funding award in accordance with Sec.  
4280.311(e)(9).


Sec.  Sec.  4280.318-4280.319  [Reserved]


Sec.  4280.320  Grant administration.

    (a) Oversight. Any MDO receiving a grant under this program is 
subject to Agency oversight, with site visits and inspection of records 
occurring at the discretion of the Agency. In addition, MDOs receiving 
a grant under this subpart must submit reports, as specified in 
paragraphs (a)(1) through (3) of this section.
    (1) On a quarterly basis, within 30 days after the end of each 
Federal fiscal quarter, the microlender will provide to the Agency an 
Agency-approved quarterly report containing such information as the 
Agency may require to ensure that funds provided are being used for the 
purposes for which the grant was made, including:
    (i) Narrative reporting information as required by Office of 
Management and Budget (OMB) circulars and successor regulations. This 
narrative will include information on the MDO's TA, training, and/or 
enhancement activity, and grant expenses, milestones met, or unmet, 
explanation of difficulties, observations and other such information;
    (ii) If requesting grant funds at the time of reporting, an 
executed SF-270 form and a brief description of the proposed activity-
based expenditures are required.
    (2) If a microlender has more than one grant from the Agency, a 
separate report must be made for each grant.
    (3) Other reports may be required by the Agency from time to time 
in the event of poor performance or other such occurrences that require 
more than the usual set of reporting information.
    (b) Payments. The Agency will make grant payments not more often 
than quarterly. The first grant payment may be made in advance and will 
equal no more than one fourth of the grant award. Other payment 
requests must be submitted on Standard Form 270 and will only be paid 
if the MDO's reports are up to date and approved.


Sec.  4280.321  Grant and loan servicing.

    In addition to the ongoing oversight of the participating MDOs, all 
grants will be serviced in accordance with applicable regulations, 
including 7 CFR part 1951, subparts E and O, 7 CFR part 3, and the 
Office of Management and Budget (OMB) regulations including, but not 
limited to, 2 CFR parts 200, 215, 220, 230, and OMB Circulars A-110 and 
A-133. Loans to microlenders will be serviced in accordance with 7 CFR 
part 1951, subparts E, O, and R, and OMB Circular A-129.


Sec.  4280.322  Loans from the microlenders to microentrepreneurs.

    The primary purpose of making a program loan to a microlender is to 
enable that microlender to make microloans to rural microenterprises 
and microentrepreneurs. It is the responsibility of each microlender to 
make microloans in such a fashion that the terms and conditions of the 
microloan will support microborrower success while enabling the 
microlender to repay its loan from the Agency. It is the responsibility 
of each microborrower to repay the microlender in accordance with the 
terms and conditions agreed to with the microlender. The microlender is 
responsible for full repayment to the Agency of its loan regardless of 
the performance of its microloan portfolio.
    (a) Maximum microloan amount. The maximum amount of a microloan 
made under this program will be $50,000. The total outstanding balance 
of microloans to any microborrower may not exceed $50,000.
    (b) Microloan terms and conditions. The terms and conditions for 
microloans made by microlenders will be negotiated between the 
prospective microborrower and the microlender, with the following 
limitations:
    (1) No microloan may have a term of more than 10 years;
    (2) The interest rate charged to the microborrower will be 
established at or before the microloan closing and at such a rate that 
the microloan is affordable to the microborrower and provides a 
reasonable margin of earnings to the microlender.
    (c) Microloan insurance requirements. The microlender has full 
discretion to require reasonable hazard, key person, and other 
insurance coverage from the microborrower as part of the loan 
transaction.
    (d) Credit elsewhere test. Microborrowers will be subject to a 
``credit elsewhere'' test so that the microlender will make loans only 
to those borrowers that cannot obtain business funding of $50,000 or 
less at affordable rates and on acceptable repayment terms. Each 
microborrower file must contain evidence that the microborrower has 
sought credit elsewhere or that the rates and terms available within 
the community at the time were outside the range of the microborrower's 
affordability. Evidence may include a comparison of rates, loan

[[Page 26365]]

limitations, terms, or other requirements from other funding sources. 
Denial letters from other lenders are not required.
    (e) Fair credit requirements. To ensure fairness, microlenders must 
publicize their rates and terms on a regular basis. Microlenders are 
also subject to Fair Credit lending practices and Federal 
nondiscrimination requirements as stated in Sec.  4280.305.
    (f) Eligible microloan purposes. Agency loan funds may be used to 
make microloans as defined in Sec.  4280.302 for any legal business 
purpose not identified in Sec.  4280.323 as an ineligible purpose. 
Microlenders may make microloans for qualified business activities and 
expenses including, but not limited to:
    (1) Working capital;
    (2) The purchase of furniture, fixtures, supplies, inventory or 
equipment;
    (3) Debt refinancing;
    (4) Business acquisitions; and
    (5) The purchase or lease of real estate that is already improved 
and will be used for the location of the subject business only, 
provided no demolition or construction will be accomplished with 
program funds. Neither interior decorating, nor the affixing of chattel 
to walls, floors, or ceilings are considered to be demolition or 
construction.
    (g) Military personnel. Military personnel who are or seek to be a 
microentrepreneur and are on active duty with six months or less 
remaining in their active duty status may receive a microloan and/or TA 
and training if they are otherwise qualified to participate in the 
program.


Sec.  4280.323  Ineligible microloan purposes and uses.

    Agency loan funds will not be used for the payment of microlender 
administrative costs or expenses and microlenders may not make 
microloans under the program for any of the purposes and uses 
identified as ineligible in paragraphs (a) through (n) of this section.
    (a) Construction costs including property demolition, renovation, 
elimination of walls, or property additions.
    (b) The financing of timeshares, apartments, duplexes, or other 
residential housing.
    (c) Assistance that will cause a conflict of interest or the 
appearance of a conflict of interest including but not limited to:
    (1) Financial assistance to principals, directors, officers, or 
employees of the microlender, or their close relatives, as defined; or
    (2) Financial assistance to any entity which would appear to 
benefit the microlender or its principals, directors, or employees, or 
their close relatives, as defined, in any way other than the normal 
repayment of debt.
    (d) Distribution or payment to a microborrower when such will use 
any portion of the microloan for other than business purposes.
    (e) Microloans to a charitable institution not gaining sufficient 
revenue from business sales or services to support the operation and 
repay the microloan.
    (f) Microloans to a fraternal organization.
    (g) Any microloan to an applicant that has an RMAP-funded microloan 
application pending with another microlender or that has an RMAP-funded 
microloan outstanding with another microlender that would cause the 
applicant to owe a combined amount of more than $50,000 to one or more 
microlenders under the program.
    (h) Assistance to USDA Rural Development employees, or their close 
relatives, as defined.
    (i) Microloans for any illegal activity.
    (j) Any project that is in violation of either a Federal, State, or 
local environmental protection law, regulation, or enforceable land use 
restriction unless the microloan will result in curing or removing the 
violation.
    (k) Loans supporting explicitly religious activities, such as 
worship, religious instruction or proselytization.
    (l) Golf courses, race tracks, or gambling facilities.
    (m) Funding of any political or lobbying activities.
    (n) Lines of credit.


Sec.  Sec.  4280.324-4280.399  [Reserved]


Sec.  4280.400  OMB control number.

    The information collection requirements contained in this subpart 
have been approved by the Office of Management and Budget (OMB) and 
have been assigned OMB control number 0570-0062. A person is not 
required to respond to this collection of information unless it 
displays a currently valid OMB control number.

Mark Brodziski,
Acting Administrator, Rural Business-Cooperative Service.
[FR Doc. 2021-10146 Filed 5-13-21; 8:45 am]
BILLING CODE 3410-XY-P