Debt Refinancing in the 504 Loan Program, 40775-40779 [2021-15975]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 86, Number 143 (Thursday, July 29, 2021)]
[Rules and Regulations]
[Pages 40775-40779]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15975]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

RIN 3245-AH78


Debt Refinancing in the 504 Loan Program

AGENCY: U.S. Small Business Administration (SBA).

ACTION: Interim final rule with request for comments.

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SUMMARY: This interim final rule implements section 328 of the Economic 
Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which 
revises the requirements for refinancing debt in the 504 Loan Program, 
including: For 504 debt refinancing involving expansions, increasing 
the amount of existing indebtedness that may be refinanced; and for 504 
debt refinancing not involving expansions, removing two limitations on 
the program, reinstating an alternate job retention goal for the 
refinancing project, revising the definition of qualified debt, and 
removing the prohibition against Certified Development Companies 
(``CDCs'') participating in the Premier Certified Lenders Program using 
their delegated authority to make these loans.

DATES: Effective Date: This rule is effective July 29, 2021.
    Comment Date: Comments must be received on or before September 27, 
2021.

ADDRESSES: You may submit comments, identified by RIN 3245-AH78, 
through the Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
    SBA will post all comments on https://www.regulations.gov. If you 
wish to submit confidential business information (CBI) as defined in 
the User Notice at https://www.regulations.gov, please submit the 
information via email to [email protected]. Highlight the information 
that you consider to be CBI and explain why you believe SBA should hold 
this information as confidential. SBA will review the information and 
make the final determination whether it will publish the information.

FOR FURTHER INFORMATION CONTACT: Linda Reilly, Chief, 504 Program 
Branch, Office of Financial Assistance, Small Business Administration, 
409 3rd Street SW, Washington, DC 20416; telephone: (202) 604-5032; 
email: [email protected].

SUPPLEMENTARY INFORMATION:

I. Background Information

    The 504 Loan Program is an SBA financing program authorized under 
title V of the Small Business Investment Act of 1958, 15 U.S.C. 695 et 
seq. The core mission of the 504 Loan Program is to provide long-term 
financing to small businesses for the purchase or improvement of land, 
buildings, and major equipment, in an effort to facilitate the creation 
or retention of jobs and local economic development. Under the 504 Loan 
Program, loans are made to small business applicants by Certified 
Development Companies (``CDCs''), which are certified and regulated by 
SBA to promote economic development within their community. In general, 
a project in the 504 Loan Program (a ``504 Project'') includes: A loan 
obtained from a private sector lender with a senior lien covering at 
least 50 percent of the project cost; a loan obtained from a CDC (a 
``504 Loan'') with a junior lien covering up to 40 percent of the total 
cost (backed by a 100 percent SBA-guaranteed debenture); and a 
contribution from the Borrower of at least 10 percent equity.
    In addition, the 504 Loan Program may be used to refinance debt 
under two options authorized under section 502(7)(B) and (C) of the 
Small Business Investment Act of 1958. First, if a 504 Project involves 
the expansion of the small business, any amount of existing 
indebtedness that does not exceed 50 percent of the project cost of the 
expansion may be refinanced and added to the project's cost (Debt 
Refinancing with Expansion) under the conditions set forth in section 
502(7)(B) and the implementing regulations. See 13 CFR 120.882(e) and 
(f). Second, debt refinancing is available for a 504 Project that does 
not involve the expansion of the small business under the requirements 
set forth in section 502(7)(C) and 13 CFR 120.882(g) (Debt Refinancing 
without Expansion).
    Section 328(a) of the Economic Aid to Hard-Hit Small Businesses, 
Nonprofits, and Venues Act (Economic Aid Act),

[[Page 40776]]

enacted December 27, 2020, Public Law 116-260, revises the conditions 
and requirements for refinancing debt in the 504 Loan Program as 
follows:
    (1) With respect to Debt Refinancing with Expansion, 13 CFR 
120.882(e), the Economic Aid Act increases the amount of existing 
indebtedness that may be refinanced as part of a 504 Project from not 
more than 50 percent of the project cost of the expansion to not more 
than 100 percent of the project cost;
    (2) With respect to Debt Refinancing without Expansion, 13 CFR 
120.882(g), the Economic Aid Act:
    (a) Eliminates the condition that this program shall only be in 
effect in any fiscal year during which the cost to the Federal 
Government of making guarantees under 13 CFR 120.882(g) and under the 
504 Loan Program is zero;
    (b) Eliminates the requirement that a CDC limit its financing under 
the 504 Loan Program so that, during any Federal fiscal year, new 
financings under 13 CFR 120.882(g) do not exceed 50% of the dollars the 
CDC loaned under the 504 Loan Program, including under 13 CFR 
120.882(g), during the previous fiscal year, unless otherwise waived;
    (c) Eliminates the prohibition against Premier Certified Lender 
Program (PCLP) CDCs using delegated authority to approve loan 
applications for Debt Refinancing without Expansion;
    (d) Reinstates an alternate job retention standard that was 
previously removed from the Debt Refinancing without Expansion Program 
by section 521 of division E of the Consolidated Appropriations Act, 
2016, Public Law 114-113, enacted on December 18, 2015;
    (e) Revises the definition of ``qualified debt'' to mean debt that 
was incurred not less than 6 months before the date of application 
instead of 2 years before the date of application;
    (f) Removes from the definition of ``qualified debt'' the condition 
that the debt not be subject to a guarantee by a Federal agency; and
    (g) Eliminates from the definition of ``qualified debt'' the 
requirement that the borrower be current on all payments for not less 
than 1 year before the date of the application for refinancing.
    As described in the section-by-section analysis below, SBA is 
issuing this interim final rule to conform the current rules to the 
requirements of the Economic Aid Act.

II. Comments and Immediate Effective Date

    This interim final rule is effective without the advance notice and 
public comment required by section 553 of the Administrative Procedure 
Act (APA), 5 U.S.C. 553(b)(3)(B), because section 303 of the Economic 
Aid Act authorizes SBA to issue regulations to implement the amendments 
described above without regard to notice requirements.
    In addition, pursuant to section 553(d)(1), this rule is exempt 
from the APA's 30-day delayed effective date requirement on the basis 
that it is a substantive rule that relieves restrictions relating to 
the debt refinancing options available to small businesses. SBA has 
also determined that, pursuant to section 553(d)(3), there is good 
cause for dispensing with the 30-day delayed effective date on the 
grounds that it would be contrary to the public interest. To meet the 
immediate debt refinancing needs of small businesses impacted by the 
COVID-19 pandemic, it is essential to be able to implement the 
statutory changes to the refinancing programs as expeditiously as 
possible.
    Although this rule is being published as an interim final rule, 
comments are solicited from interested members of the public. These 
comments must be submitted on or before the deadline for comments 
stated in this rule. SBA will consider any comments it receives and the 
need for making any amendments as a result of the comments.

III. Section-by-Section Analysis

    Section 120.882(e). This provision currently states that the amount 
of existing indebtedness that may be refinanced is limited to no more 
than 50 percent of the project cost of the expansion. Section 
328(a)(2)(A) of the Economic Aid Act amends section 502(7)(B) of the 
Small Business Investment Act to increase the percentage and, 
accordingly, SBA is revising this provision to increase the amount of 
existing indebtedness that may be refinanced to no more than 100 
percent of the project cost.
    Section 120.882(g)(3). This section currently provides that the 
approval of a Refinancing Project is subject to the requirement that 
the cost to the Federal Government of making guarantees under 13 CFR 
120.882(g) and under the 504 Loan Program is zero during the fiscal 
year in which the guarantee is made. Section 328(a)(1) of the Economic 
Aid Act repeals this statutory requirement and, therefore, SBA is 
removing this requirement.
    In its place, this provision will set forth the conditions and 
requirements that will apply to the refinancing of a loan that is 
subject to a guarantee by a Federal agency or department. As indicated 
above, the Economic Aid Act removes the prohibition against refinancing 
a loan that is subject to a guarantee by a Federal agency or 
department. Although these loans may now be refinanced in the Debt 
Refinancing without Expansion program, the rule will provide that they 
must comply with SBA's policies related to the refinancing of existing 
504 and 7(a) loans, including that:
    (1) For an existing 504 loan, either both the Third Party Loan and 
the 504 loan must be refinanced, or the Third Party Loan must have been 
paid in full; and
    (2) for an existing 7(a) loan, the CDC must verify in writing that 
the present lender is either unwilling or unable to modify the current 
payment schedule. In addition, in the case of same institution debt, if 
the Third Party Lender or the CDC affiliate as authorized under 13 CFR 
120.820 is the 7(a) lender, the loan will be eligible for 504 
refinancing only if the lender is unable to modify the terms of the 
existing loan because a secondary market investor will not agree to 
modified terms.
    In addition, the rule will require that the refinancing of any 
Federally-guaranteed loan will provide a substantial benefit to the 
borrower. ``Substantial benefit'' will mean that the portion of the new 
installment amount attributable to the debt being refinanced must be at 
least 10 percent less than the existing installment amount(s). 
Prepayment penalties, financing fees, and other financing costs must be 
added to the amount being refinanced in calculating the percentage 
reduction in the new installment payment. The portion of the new 
installment amount attributable to Eligible Business Expenses will not 
need to be included in this calculation. The rule will also allow the 
Director, Office of Financial Assistance (D/FA) or designee to approve 
an exception to the 10 percent reduction requirement for good cause, 
and will not allow PCLP CDCs to use their delegated authority to 
approve a loan requiring this exception.
    Section 120.882(g)(11). This section currently states that PCLP 
CDCs may not use delegated authority to approve refinancing under 13 
CFR 120.882(g). Section 328(a) of the Economic Aid Act removes this 
statutory prohibition and, accordingly, SBA is removing the current 
language. In its place, the rule will state that PCLP CDCs may not 
approve the refinancing of same institution debt under their delegated 
authority and must submit the loan to SBA for approval. This 
requirement is consistent with SBA's long-standing policy of 
prohibiting its participating lenders from using their delegated 
authority to approve the financing of

[[Page 40777]]

same institution debt due to the potential conflict of interest and the 
risk of the 504 loan proceeds being used to shift to SBA a potential 
loss from the existing debt.
    Section 120.882(g)(15). SBA is redesignating the current paragraph 
(g)(15), Definitions, as paragraph (g)(16), and adding a new paragraph 
(g)(15) to set forth the alternate job retention standard that is 
reinstated by section 328(a) of the Economic Aid Act. Under this 
alternate job retention standard, the Agency may provide a 504 loan in 
the amount that is not more than the product obtained by multiplying 
the number of employees of the borrower by $75,000. The Economic Aid 
Act provides that the number of employees of a borrower is equal to the 
sum of:
    (1) The number of full-time employees of the borrower on the date 
on which the borrower applies for a loan under this subparagraph; and
    (2) the product obtained by multiplying:
    (a) The number of part-time employees of the borrower on the date 
on which the borrower applies for a loan under this subparagraph, by
    (b) the quotient obtained by dividing the average number of hours 
each part-time employee of the borrower works each week by 40.
    An example of how this standard is calculated is included in the 
text of the rule.
    Section 120.882(g)(16). As stated above, SBA is redesignating the 
current paragraph (g)(15), Definitions, as paragraph (g)(16) and is 
making five changes to the definition of ``Qualified debt''. First, 
under the current language of paragraph (i), the debt must not have 
been incurred less than 2 years before the date of the application for 
refinancing. However, section 328(a) of the Economic Aid Act has 
shortened this period to 6 months before the date of the application 
for refinancing. Accordingly, SBA is revising this paragraph by 
replacing 2 years with 6 months.
    Second, paragraph (i) currently allows a loan that was refinanced 
within the 2 years before the date of application (the most recent 
loan) to be deemed incurred not less than 2 years before the date of 
the application provided that the effect of the most recent loan was to 
extend the maturity date without advancing any additional proceeds. 
With the minimum age of the qualified debt shortened from 2 years to 6 
months, SBA believes that it is no longer necessary to address this 
situation and is, therefore, removing the second and third sentences of 
paragraph (i).
    Third, paragraph (ii) currently excludes debt that is subject to a 
guarantee by a Federal agency or department. As stated above, section 
328(a) of the Economic Aid Act no longer includes this statutory 
exclusion and SBA is removing this paragraph and renumbering the 
remaining paragraphs accordingly. The conditions and requirements that 
will apply to the refinancing of a loan that is subject to a Federal 
guarantee will be set forth in paragraph (g)(3).
    Fourth, under the current paragraph (vi), the definition of 
qualified debt excludes a Third Party Loan that is part of an existing 
504 Project. However, under the new paragraph (g)(3), an existing 504 
loan may be refinanced when both the Third Party Loan and the 504 loan 
are being refinanced. Accordingly, SBA is revising this paragraph, 
which will be newly designated as paragraph (v), to incorporate this 
exception to the general prohibition against a qualified debt including 
a Third Party Loan.
    Fifth, the current paragraph (vii) reflects the statutory 
requirement that, for the debt to qualify for refinancing, the 
applicant must be current on all payments due for not less than one 
year preceding the date of application. Section 502(7)(C) of the Small 
Business Investment Act, as amended by section 328(a) of the Economic 
Aid Act, no longer includes this requirement and, accordingly, SBA is 
removing this paragraph from the regulations. In accordance with 
prudent lending standards, SBA expects CDCs to consider whether the 
applicant is current on all payments due, and the applicant's history 
of delinquency, in its credit analysis.
    Section 120.882(g)(16). The phrase ``Same institution debt'' is 
currently used in connection with the Debt Refinancing without 
Expansion program only in reference to the Third Party Loan, see Sec.  
120.882(g)(13), and, thus, the current definition of ``same institution 
debt'' references only the Third Party Lender. With the requirement in 
Sec.  120.882(g)(11) that PCLP CDCs cannot use their delegated 
authority to approve the refinancing of same institution debt in the 
Debt Refinancing without Expansion program, SBA is revising the 
definition of ``Same institution debt'' to also mean the debt of the 
CDC (or its affiliates) that is providing funds for the refinancing.

Compliance With Executive Orders 12866, 12988, 13132, and 13563, the 
Congressional Review Act (5 U.S.C. 801-808), Paperwork Reduction Act 
(44 U.S.C., Ch. 35), and the Regulatory Flexibility Act (5 U.S.C. 601-
612)

Executive Orders 12866 and 13563

    The Office of Management and Budget (OMB) has determined that this 
rule constitutes a ``significant regulatory action'' for purposes of 
Executive Orders 12866 and 13563. SBA, however, is proceeding under the 
emergency provision at Executive Order 12866, section 6(a)(3)(D), based 
on the need to move expeditiously to mitigate the current conditions 
arising from the COVID-19 pandemic.
    As shown in the table below, during the five-year period spanning 
FY 2016 and FY 2020, a total of 31,248 504 loans were approved for a 
total gross approval amount as of May 31, 2021 of $25,720,047,200. In 
addition, during this five-year period, SBA approved 202 debt refinance 
with expansion loans on average per year with an average annual dollar 
volume of $237,880,000, and approved 209 debt refinance without 
expansion loans on average per year with an average annual dollar 
volume of $203,339,000. Of the debt refinance with expansion loans, 
only 16 refinanced a debt that equaled 50 percent of the expansion 
costs; if these borrowers had been able to refinance 100 percent of the 
expansion costs instead of 50 percent, and assuming that all these 
borrowers did so, these borrowers would have been able to borrow $15 
million more over five years, or about $3 million more annually.

                                                       Table 1--504 Loan Activity FY 2016-FY 2020
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                                                                         FY 2016          FY 2017          FY 2018          FY 2019          FY 2020
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Total Number of 504 Loans..........................................            5,938            6,218            5,874            6,099            7,119
Total Dollar Volume of 504 Loans Approved..........................   $4,840,820,000   $5,111,480,700   $4,844,181,000   $5,042,010,500   $5,881,555,000
Number of 504 Debt Refi With Expansion.............................              193              219              181              181              236
Dollar Volume of 504 Debt Refi With Expansion......................     $230,987,000     $244,499,000     $215,311,000     $197,484,000     $301,159,000
Number of 504 Debt Refi Without Expansion..........................               45              266              181              166              386

[[Page 40778]]

 
Dollar Volume of 504 Debt Refi Without Expansion...................      $41,598,000     $289,491,000     $154,745,000     $156,114,000     $374,749,000
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    Data as of 5/31/2021, total dollar volume is lifetime gross 
approval amount including increases.
    This rule is necessary to implement the Economic Aid Act and 
provide economic relief to small businesses adversely impacted by 
COVID-19. SBA anticipates that the changes to the 504 debt refinancing 
programs will result in benefits to small businesses by providing 
greater flexibility to restructure debt.

Congressional Review Act

    OMB's Office of Information and Regulatory Affairs has determined 
that this rule is not a major rule under Subtitle E of the Small 
Business Regulatory Enforcement Fairness Act of 1996 (also known as the 
Congressional Review Act), 5 U.S.C. 804(2).

Executive Order 12988

    This action meets applicable standards set forth in sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have preemptive effect or retroactive effect.

Executive Order 13132

    This rule does not have Federalism implications as defined in 
Executive Order 13132. It will not have substantial direct effects on 
the 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, as specified in the Executive order. As 
such it does not warrant the preparation of a Federalism Assessment.

Paperwork Reduction Act

    In order to implement the Act, SBA has determined that it is 
necessary to modify SBA Form 1244, Application for Section 504 Loans, 
which is currently approved under OMB Control Number 3245-0071, to 
conform the form to the revised requirements for debt refinancing 
loans. The changes do not add any new burdens for the respondents, 
rather, in some instances, the revisions will result in reduced burden 
as applicants and CDCs no longer have to submit certain information.
Summary of Rule Revisions
    (a) The information collection currently requires PCLP CDCs to 
process all applications for debt refinancing without expansion through 
the Sacramento Loan Processing Center (SLPC) and not through the PCLP 
CDC's delegated authority. As discussed above, this requirement was 
removed by the Economic Aid Act and, accordingly, SBA is removing it 
from the information collection. This revision does not change the 
information the PCLP CDC is required to collect, only how the 
application is processed. In addition, consistent with the changes made 
by this rulemaking, SBA is adding two questions to clarify that, for 
debt refinancing without expansion, PCLP CDCs must process applications 
through the SLPC when the application involves the refinancing of same 
institution debt or, in cases involving the refinancing of Federally-
guaranteed debt, the CDC is requesting an exception to the requirement 
that the new installment payment be at least 10% less than the existing 
installment amount.
    (b) With respect to the question regarding whether the Applicant 
creates or retains the required number of jobs per debenture amount, an 
option has been added for the Applicant to indicate whether the project 
is eligible under the 504 debt refinance alternate job goal established 
by the Economic Aid Act.
    (c) Of the exhibits that are required, Exhibit 20 currently 
requires that, if the debt was previously refinanced within two years 
of the date of application, non-PCLP CDCs must submit with the 
application (and PCLP CDCs must retain in the loan file) copies of the 
current debt and lien instruments as well as copies of the debt and 
lien instruments for the debt that was replaced by the current debt. 
With the minimum age of the qualified debt shortened from 2 years to 6 
months by the Economic Aid Act, SBA is revising the form to remove the 
requirement that these debt and lien instruments be included as part of 
Exhibit 20.
    In addition to the changes resulting from this rule, SBA is making 
the following technical corrections and clarifying changes to Form 
1244: (1) SBA is adding two questions, consistent with the current 
regulations, to clarify when PCLP CDCs must submit applications for 
refinancing with expansion to the SLPC instead of approving the 
application under their delegated authority; (2) SBA is correcting the 
description of which exhibits are to be retained and which are to be 
submitted with the loan application; (3) SBA is adding a separate entry 
to facilitate disclosure of the use of refinancing proceeds involving 
land purchases only (the current format of ``Land/Building'' does not 
clearly indicate how information is to be reported); and (4) under the 
list of economic development objectives met by the project, SBA is 
adding references to ``base closures'' and ``minority-owned business''.
    SBA has requested emergency approval from OMB for the revised 
information collection to implement the Economic Aid Act as 
expeditiously as possible.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires 
administrative agencies to consider the effect of their actions on 
small entities, including small non-profit businesses, and small local 
governments. Pursuant to the RFA, when an agency issues a rule, the 
agency must prepare an analysis that describes whether the impact of 
the rule will have a significant economic impact on a substantial 
number of these small entities. However, the RFA requires such analysis 
only where notice and comment rulemaking is required. As discussed 
above, SBA is publishing this rule as an interim final rule without 
advance notice and public comment because section 303 of the Economic 
Aid Act authorizes SBA to issue regulations to implement the amendments 
in the Act without regard to notice requirements. This rule is, 
therefore, exempt from the RFA requirements.

List of Subjects in 13 CFR Part 120

    Loan programs-business, Small businesses, Reporting and 
recordkeeping requirements.

    For the reasons stated in the preamble, SBA amends 13 CFR part 120 
as follows:

PART 120--BUSINESS LOANS

0
1. The authority citation for 13 CFR part 120 is revised to read as 
follows:


[[Page 40779]]


    Authority:  15 U.S.C. 634(b)(6), (b)(7), (b)(14), (h), and note, 
636(a), (h), and (m), 636m, 650, 687(f), 696(3), 697, 697a, and 
697e; Public Law 111-5, 123 Stat. 115; Public Law 111-240, 124 Stat. 
2504; Public Law 116-260, 134 Stat. 1182.

0
2. Amend Sec.  120.882 as follows:
0
a. Remove the number ``50'' in paragraph (e) introductory text and add 
the number ``100'' in its place.
0
b. Revise paragraphs (g)(3) and (11);
0
c. Redesignate paragraph (g)(15) as paragraph (g)(16);
0
d. Add a new paragraph (g)(15);
0
e. In the newly redesignated paragraph (g)(16):
0
i. Remove the paragraph heading;
0
ii. In the definition for the term Qualified debt:
0
A. Redesignate paragraphs (i) through (vii) as paragraphs (A) through 
(G);
0
B. Revise newly redesignated paragraph (A);
0
C. Remove newly redesignated paragraphs (B) and (G) and further 
redesignate paragraphs (C) through (F) as paragraphs (B) through (E);
0
D. In newly redesignated paragraph (B), remove ``(iii)'', ``13 CFR 
120.131 and 13 CFR 120.870(b)'', and ``13 CFR 120.131(b)'' and add in 
their places ``(B)'', ``Sec. Sec.  120.131 and 120.870(b)'', and 
``Sec.  120.131(b)'', respectively;
0
E. Add the word ``and'' at the end of newly redesignated paragraph (D); 
and
0
F. Revise newly redesignated paragraph (E); and
0
iii. Revise the definition for the term Same institution debt.
    The revisions and addition read as follows:


Sec.  120.882  Eligible Project costs for 504 loans.

* * * * *
    (g) * * *
    (3) A loan that is subject to a guarantee by a Federal agency or 
department may be refinanced under the following conditions and 
requirements:
    (i) An existing 504 loan may be refinanced if both the Third Party 
Loan and the 504 Loan are being refinanced or the Third Party Loan has 
been paid in full.
    (ii) An existing 7(a) loan may be refinanced if the CDC verifies in 
writing that the present lender is either unwilling or unable to modify 
the current payment schedule. In the case of same institution debt, if 
the Third Party Lender or the CDC affiliate as authorized under Sec.  
120.820 is the 7(a) lender, the loan will be eligible for 504 
refinancing only if the lender is unable to modify the terms of the 
existing loan because a secondary market investor will not agree to 
modified terms.
    (iii) The refinancing will provide a substantial benefit to the 
borrower. For purposes of this paragraph (g)(3)(iii), ``substantial 
benefit'' means that the portion of the new installment amount 
attributable to the debt being refinanced must be at least 10 percent 
less than the existing installment amount(s). Prepayment penalties, 
financing fees, and other financing costs must be added to the amount 
being refinanced in calculating the percentage reduction in the new 
installment payment, but the portion of the new installment amount 
attributable to Eligible Business Expenses (as described in paragraph 
(g)(6)(ii) of this section) is not included in this calculation. 
Exceptions to the 10 percent reduction requirement may be approved by 
the Director, Office of Financial Assistance (D/FA) or designee for 
good cause. PCLP CDCs may not use their delegated authority to approve 
a loan requiring the exception in this paragraph (g)(3)(iii).
* * * * *
    (11) PCLP CDCs may not approve the refinancing of same institution 
debt under their delegated authority and must submit the application to 
SBA for approval.
* * * * *
    (15) Notwithstanding Sec.  120.860, a debt may be refinanced under 
this paragraph (g) if it does not meet the job creation or other 
economic development objectives set forth in Sec.  120.861 or Sec.  
120.862. In such case, the 504 loan may not exceed the product obtained 
by multiplying the number of employees of the Borrower by $75,000. The 
number of employees of the Borrower is equal to the sum of:
    (i) The number of full-time employees of the Borrower on the date 
of the application; and
    (ii) The product obtained by multiplying:
    (A) The number of part-time employees of the Borrower on the date 
of the application; by
    (B) The quotient obtained by dividing the average number of hours 
each part-time employee of the Borrower works each week by 40.
    Example to paragraph (g)(15): 30 full-time employees and 35 part-
time employees working 20 hours per week is calculated as follows: 30 + 
(35 x (20/40)) = 47.5. The maximum amount of the 504 loan would be 47.5 
multiplied by $75,000, or $3,562,500.
    (16) * * *
    Qualified debt * * *
    (A) That was incurred not less than 6 months before the date of the 
application for refinancing available under this paragraph (g).
* * * * *
    (E) That is not a Third Party Loan that is part of an existing 504 
Project, except as allowed under paragraph (g)(3) of this section.
* * * * *
    Same institution debt means any debt of the CDC or the Third Party 
Lender, or an affiliate of either, that is providing funds for the 
refinancing.

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2021-15975 Filed 7-28-21; 8:45 am]
BILLING CODE 8026-03-P