Disaster Loan Program Changes, 50214-50219 [2021-19232]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 86, Number 171 (Wednesday, September 8, 2021)]
[Rules and Regulations]
[Pages 50214-50219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19232]


=======================================================================
-----------------------------------------------------------------------

SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121 and 123

[Docket Number SBA-2021-0016]
RIN 3245-AH80


Disaster Loan Program Changes

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

ACTION: Interim final rule.

-----------------------------------------------------------------------

SUMMARY: This interim final rule implements changes to the Disaster 
Loan Program regulations. For applications for COVID-19 Economic Injury 
Disaster (COVID EIDL) loans, in this rule SBA is changing the 
definition of affiliation, the eligible uses of loan proceeds, and 
application of the size standard to certain hard-hit eligible entities, 
and is establishing a maximum loan limit for borrowers in a single 
corporate group. In addition, for all disaster assistance programs, in 
this rule, SBA is changing which SBA official may make the decision on 
the appeal of an application that has been declined for a second time.

DATES: 
    Effective date: The provisions of this interim final rule are 
effective September 8, 2021.
    Applicability dates: The change to the regulation at 13 CFR 123.13 
applies to applications submitted under all of SBA's Disaster Loan 
Programs on or after September 8, 2021. The changes to the regulation 
at 13 CFR 123.303 apply to COVID EIDL loan proceeds available on or 
after September 8, 2021, without regard to the date such proceeds were 
received from SBA. The other changes in this interim final rule apply 
to applications submitted under the COVID EIDL Program on or after 
September 8, 2021, through December 31, 2021, or until funds available 
for this purpose are exhausted, whichever is earlier. Additionally, 
with the exception of the regulation at 123.304, this interim final 
rule applies to original applications under the COVID EIDL Program that 
are submitted before but approved on or after September 8, 2021.
    Comment date: Comments must be received on or before October 8, 
2021.

ADDRESSES: You may submit comments, identified by number SBA-2021-0016 
through the Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
    SBA will post all comments on www.regulations.gov. If you wish to 
submit confidential business information (CBI) as defined in the User 
Notice at www.regulations.gov, please send an email to 
[email protected]. All other comments must be submitted through the 
Federal eRulemaking Portal described above. 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: An SBA Disaster Customer Service 
Representative at (800) 659-2955 (individuals who are deaf or hard of 
hearing may call (800) 877-8339), or a local SBA Field Office; the list 
of SBA field offices can be found at https://www.sba.gov/tools/local-assistance/districtoffices.

SUPPLEMENTARY INFORMATION:

I. Background Information

    Section 7(b)(2) of the Small Business Act authorizes SBA to make 
EIDL loans to eligible small businesses and nonprofit organizations 
located in a disaster area. 15 U.S.C. 636(b)(2). On March 6, 2020, 
Congress deemed COVID-19 to be a disaster in Title II of the 
Coronavirus Preparedness and Response Supplemental Appropriations Act 
of 2020, Public Law 116-123, 134 Stat. 146, 147, allowing SBA to 
declare disasters and make EIDL loans available to small businesses and 
nonprofit organizations suffering substantial economic injury as a 
result of the COVID-19 pandemic. The Coronavirus

[[Page 50215]]

Aid, Relief, and Economic Security Act (CARES Act) Public Law 116-136, 
expanded eligibility and waived certain rules and requirements for 
COVID EIDL loans. Section 1110 of the CARES Act permitted SBA to waive 
rules related to personal guaranties on COVID EIDL loans of not more 
than $200,000 and the requirement that an applicant be unable to obtain 
credit elsewhere. Section 1110 also provided SBA with the authority to 
approve an applicant based solely on the credit score of the applicant 
or use alternative appropriate methods to determine an applicant's 
ability to repay. On April 24, 2020, the Paycheck Protection Program 
and Health Care Enhancement Act (PPP Enhancement Act) Public Law 116-
139, provided additional funding for SBA to make EIDL loans and further 
expanded EIDL eligibility to include agricultural enterprises with not 
more than 500 employees, which are typically not eligible for SBA 
disaster assistance. Prior to the enactment of the PPP Enhancement Act, 
SBA had an existing $1.1 billion in credit subsidy funding, which it 
used to support between $7 billion and $8 billion in EIDL loans to 
businesses affected by the COVID-19 pandemic. The PPP Enhancement Act 
provided an additional $50 billion in loan credit subsidy to SBA. See 
15 U.S.C. 636(b) and 13 CFR 123.300(c). On December 27, 2020, the 
Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act 
(Economic Aid Act), Public Law 116-260, was enacted as part of the 
Consolidated Appropriations Act, 2021. Section 332 of the Economic Aid 
Act extended the authority to make COVID EIDL loans through December 
31, 2021, and further modified the terms under which SBA approves COVID 
EIDL loans, and Section 331 provided SBA authority to make targeted 
EIDL advances. On March 11, 2021, the American Rescue Plan Act (ARPA), 
Public Law 117-2, was enacted, establishing the Restaurant 
Revitalization Fund (RRF) through Section 5003 to provide assistance to 
restaurants, beverage alcohol producers, and other entities, and 
providing authority to provide supplemental Targeted Advances.
    In light of the COVID-19 emergency, many small businesses 
nationwide have experienced economic hardship as a direct result of the 
Federal, State, and local public health measures that have been taken 
to minimize the public's exposure to the virus. These measures, some of 
which were government-mandated, were implemented across the country. In 
addition, based on the advice of public health officials, other 
measures, such as keeping a safe distance from others or stay-at-home 
orders, were implemented, resulting in a dramatic decrease in economic 
activity as the public avoided malls, retail stores, and other 
businesses. On March 16, 2021, the SBA announced that it would extend 
deferment periods for all disaster loans, including COVID EIDL loans, 
until 2022. COVID EIDL loans made in calendar year 2020 will have the 
first payment due date extended from 12 months to 24 months from the 
date of the note. COVID EIDL loans made in calendar year 2021 will have 
the first payment due date extended from 12 months to 18 months from 
the date of the note. On March 24, 2021, the SBA announced that it 
would increase the maximum amount that can be borrowed under the COVID 
EIDL program from $150,000 (6 months of economic injury) to $500,000 
(24 months of economic injury).

II. Comments and Immediate Effective Date

    This interim final rule is being issued without advance notice and 
public comment. SBA has determined that there is good cause for 
dispensing with advance public notice and comment on the ground that it 
would be ``impracticable'' and ``contrary to the public interest.'' 5 
U.S.C. 553(b)(3)(B).
    The intent of the statutory COVID financial assistance programs, 
including the COVID EIDL program, is that SBA provide relief to 
America's small businesses expeditiously. This intent, along with the 
continuing decrease in economic activity in key economic sectors as 
compared to 2019 and the reimposition of mask requirements and other 
public-health measures throughout the country because of the variants 
(including Delta) of COVID-19, provides good cause for SBA to dispense 
with advance notice and comment rulemaking, which would take months. 
Given that this rule is issuing in August, new changes could not go 
into effect until November, leaving just a few weeks to implement the 
new program and take applications before funding expires. This 
shortened program timeframe would be problematic because SBA believes, 
with basis, there is a tremendous demand and need for this program. 
Other SBA COVID relief programs have recently ended or have exhausted 
their funding (including the Paycheck Protection Program and the 
Restaurant Revitalization Fund), yet businesses and nonprofit 
organizations are still in need of support. As evidence of unmet need, 
the Restaurant Revitalization Fund received $28.6 billion in 
appropriations to provide assistance to the restaurant industry, but 
within 21 days, SBA received 278,304 applications seeking assistance in 
amounts totaling more than $72 billion, nearly three times the amount 
appropriated. Funding was quickly exhausted, leaving 177,300 businesses 
without assistance. Further, with the end of the Paycheck Protection 
Program, businesses and nonprofit organizations that are still 
struggling will turn to the COVID EIDL program for long-term recovery. 
Thus, the COVID EIDL program is more critical now than it was before, 
because of the lack of resources available through these other programs 
and because of the continuing economic instability. Issuing this rule 
without advance notice and comment will give small businesses, 
nonprofit organizations, qualified agricultural businesses, and 
independent contractors affected by this interim final rule the maximum 
amount of time to apply for COVID EIDL loans, and will give SBA the 
maximum amount of time to process applications before the program ends 
in less than five months--on December 31, 2021. In addition, 13 CFR 
123.1 reserves to SBA authority to revise disaster regulations without 
advance notice, by publishing interim emergency regulations in the 
Federal Register.
    Finally, given the short duration of this program and the unmet 
need for immediate assistance in key economic sectors, SBA has 
determined that it is impractical and not in the public interest to 
provide a delayed effective date. 5 U.S.C. 553(d). Limiting the 
availability of this program to a few weeks, given the needs, would 
result in significant avoidable economic losses--precisely the result 
that Congress was trying to avoid in passing and amending the COVID 
EIDL program. Therefore, SBA is of the view that delaying issuance to 
conduct notice and comment procedures would effectively void the 
effectiveness of these reforms to the COVID EIDL program, with 
significant harms resulting. Although this interim final rule is 
effective immediately, comments are solicited from interested members 
of the public on all aspects of the interim final rule. SBA will 
consider these comments and the need for making any revisions as a 
result of these comments.

III. Disaster Loan Program Changes

1. Definition of Affiliation for COVID EIDL Loans

    Based on continuing confusion and burdensome analyses required by 
applicants and SBA, to simplify the program requirements of COVID EIDL 
such that applicants can more easily

[[Page 50216]]

complete the affiliation analysis and to expand the number of entities 
that will be eligible for COVID EIDL loans, SBA will align the 
definition of affiliation for COVID EIDL with the definition of 
``affiliated business'' set forth in section 5003 of the ARPA for the 
Restaurant Revitalization Fund (RRF). Like the RRF program, COVID EIDL 
is a program where an applicant applies directly to SBA, without an 
intermediary lender to explain program rules and ensure compliance. In 
SBA's regular Business Loan Programs, the applicant relies on the 
lender intermediary to correctly interpret and apply the affiliation 
rules at 13 CFR 121.301, which require an applicant to consider 
affiliation based on ownership, stock options, convertible securities, 
agreements to merge, management, identity of interest, and franchise 
and license agreements. Congress mandated more simple affiliation rules 
in ARPA for RRF. Given the lack of intermediaries in the COVID EIDL 
program, SBA has determined that it is appropriate to use the same 
affiliation rules that Congress mandated for RRF.
    Therefore, SBA is revising 13 CFR 121.301, ``What size standards 
and affiliation principles are applicable to financial assistance 
programs?'', to add a new paragraph (g) to state that for COVID EIDL 
loans, an affiliated business or affiliate is ``a business in which an 
eligible entity has an equity interest or right to profit distributions 
of not less than 50 percent, or in which an eligible entity has the 
contractual authority to control the direction of the business, 
provided that such affiliation shall be determined as of any 
arrangements or agreements in existence as of January 31, 2020.'' The 
new paragraph (g) also will include a cross reference to the exceptions 
to affiliation set forth in 13 CFR 121.103(b), which continue to apply 
to COVID EIDL loans.
    In addition to simplifying the program requirements for COVID EIDL 
loans, this change will streamline the application process for SBA and 
facilitate the review of such applications prior to the deadline of 
December 31, 2021. This streamlining will expand the flow of funds to 
businesses and nonprofit organizations that still need relief from the 
COVID-19 pandemic.

2. Second Decline of Loan Application

    The regulation at 13 CFR 123.13, ``What happens if my loan 
application is denied?'', requires that applicants appeal a second 
decline of a loan application directly to the Director, Disaster 
Assistance Processing and Disbursement Center (DAPDC). To enable timely 
consideration of appeals, SBA is changing the appeals process to allow 
the Director, DAPDC, or the Director's designee(s), to make the 
decision on appeals for all Disaster Loan Program loans. In addition, 
SBA is revising the regulation to clarify that the Administrator, 
solely within the Administrator's discretion, has the authority to 
review the matter and make the final decision.
    Therefore, SBA is revising the regulation at 13 CFR 123.13, 
paragraphs (e) and (f), to state that, if SBA declines an application a 
second time, the Director, DAPDC, or the Director's designee(s), will 
make the decision. Further, SBA is revising the regulation to state 
that the Administrator, solely within the Administrator's discretion, 
may choose to review the matter and make the final decision. Such 
discretionary authority of the Administrator does not create additional 
rights of appeal on the part of an applicant not otherwise specified in 
SBA regulations. The changes to this regulation apply to all SBA 
Disaster Loan Programs.

3. Eligible Entities for COVID EIDL Loans

    The Administrator has determined that, due to the extended duration 
and scope of the COVID-19 pandemic, as well as due to mandatory 
Federal, state, and local shut down and social distancing orders, 
businesses in certain sectors of the North American Industry 
Classification System (NAICS) continue to suffer from significant 
economic hardship. Specifically, the NAICS sectors and subsectors 
identified in Section 1112 of the CARES Act, as amended by section 325 
of the Economic Aid Act, continue to need substantial help. These 
include Sector 61, Educational Services; Sector 71, Arts, Entertainment 
and Recreation; Sector 72, Accommodation and Food Services; Subsector 
213, Support Activities for Mining; Subsector 315, Apparel 
Manufacturing; Subsector 448, Clothing and Clothing Accessories Stores; 
Subsector 451, Sporting Good, Hobby, Book, and Music Stores; Subsector 
481, Air Transportation; Subsector 485, Transit and Ground Passenger 
Transportation; Subsector 487, Scenic and Sightseeing Transportation; 
Subsector 511, Publishing Industries (except internet); Subsector 512, 
Motion Picture and Sound Recording Industries; Subsector 515, 
Broadcasting (except internet); Subsector 532, Rental and Leasing 
Services; and Subsector 812, Personal and Laundry Services.
    Additionally, certain industries were identified in Section 
5003(a)(4) of the ARPA for additional assistance but may not have 
received funding due to program deadlines or the exhaustion of funds. 
As stated previously, the Restaurant Revitalization Fund (RRF) was 
unable to provide help to all eligible applicants due to a lack of 
funding, and many small businesses in that industry continue to suffer 
economic hardships caused by the pandemic. Most businesses eligible for 
RRF are in NAICS sector 72, Accommodation and Food Services; however, 
beverage manufacturers in NAICS Industry Group 3121, such as breweries, 
wineries, and distilleries were also eligible for RRF funding. Based on 
publicly available industry research and input from industry trade 
groups, SBA believes these beverage manufacturers continue to require 
additional help.
    Under Section 1110 of the CARES Act, COVID EIDL loans are available 
to ``small business concerns, private nonprofit organizations, and 
small agricultural cooperatives,'' as defined in SBA's size standards 
in 13 CFR 121.201, or businesses that have 500 or fewer employees. To 
provide assistance to a greater number of businesses in the hard-hit 
industries described above, SBA is defining ``small business concern'' 
for purposes of the COVID EIDL program to extend eligibility to 
businesses in those industries that have 500 or fewer employees per 
physical location. SBA is revising 13 CFR 123.300, ``Is my business 
eligible to apply for an economic injury disaster loan?'', by adding a 
new paragraph (e) to state that certain hard-hit businesses identified 
by specific NAICS classifications will be able to qualify as eligible 
small business concerns for COVID EIDL loans based on the number of 
employees per physical location. Consistent with the standard in RRF, 
businesses using the per-physical location eligibility standard must, 
together with affiliates, have no more than 20 locations.
    This rule merely provides an added basis of eligibility for COVID 
EIDL assistance. It does not make any entity that is eligible for COVID 
EIDL assistance on another basis ineligible for such assistance. For 
example, a business that has more than 20 business locations, but has 
fewer than 500 employees in the aggregate of all of its business 
locations is currently eligible for COVID EIDL loans because it meets 
the 500-employee size standard. Although this rule allows a business 
concern to be eligible for COVID EIDL assistance if it employs not more 
than 500 employees per physical location as long as it (together with 
its affiliates) has

[[Page 50217]]

no more than 20 locations, that provision does not change the current 
eligibility of a business concern that meets the general 500-employee 
size standard. For example, a business with 25 locations and 15 
employees per location would not be ineligible, because the total 
number of employees is 375.
    This rule also does not change the applicable size standards. The 
size standard itself remains at 500 employees (together with 
affiliates), as authorized by Section 1110(a)(2) of the CARES Act, or 
the size standard established in 13 CFR 121.201. Instead, the rule 
changes how the agency defines the term ``business concern'' for 
purposes of COVID EIDL assistance. The Small Business Act provides SBA 
with broad authority to define a ``small business concern.'' 15 U.S.C. 
632(a)(2). By regulation, SBA generally defines a concern to be a 
business entity, although there are exceptions. 13 CFR 121.105. SBA 
applies its size standards to determine whether a concern is a small 
business eligible for SBA assistance, and, because of the general 
definition, the size standards generally apply at the entity level. In 
this interim final rule, based on how SBA applied the PPP's size 
standard at the per-physical location level for NAICS sector-72 
businesses and other industries, SBA is adopting a program-specific 
definition of ``business concern'' as covering each individual physical 
location for industries in certain hard-hit economic sectors. As such, 
SBA will apply the program's size standards at the physical-location 
level for the identified industries. This does not change the size 
standards that apply to the COVID EIDL loan program. Instead, this 
program-specific provision changes the level at which the size standard 
applies--for businesses in certain sectors--i.e., to each physical 
location, rather than to each entity in the aggregate.

4. COVID EIDL Uses of Proceeds

    Currently, the EIDL program only permits loan proceeds to be used 
for working capital necessary to carry the business until resumption of 
normal operations and for expenditures necessary to alleviate the 
specific economic injury and does not permit payments on Federal debt 
or prepayment of non-Federal existing debt even if the debt has a 
balloon payment due. Prior to the pandemic, businesses, in the ordinary 
course of their operations, managed debt payments through cash flows of 
the business. Due to mandatory COVID-19 closures, some businesses did 
not have sufficient cash flow to service debt obligations. Despite 
several short-term emergency programs in the CARES Act and other 
statutes, many small businesses have not been able to return to normal 
operations, and now struggle with deferred debt, past due payments, and 
insufficient cash flow. With the expectation that the pandemic would 
not last for the duration that it has, many businesses took on short-
term debt, often with unfavorable repayment terms, or negotiated 
deferments in debt payments in order to avoid default. In order to 
maximize relief from the debt burden businesses and nonprofit 
organizations have accrued, SBA is expanding COVID EIDL eligible uses 
of proceeds to include payments on all forms of business debt, 
including loans owned by a Federal agency (including SBA) or a Small 
Business Investment Company (SBIC) licensed under the Small Business 
Investment Act. COVID EIDL loan proceeds may be used to make debt 
payments including monthly payments, deferred interest, and pre-payment 
of business debt, except that pre-payments will not be permitted on any 
debt owned by a Federal agency (including SBA) or an SBIC. COVID EIDL 
loan proceeds may be used to pay debt incurred both before and after 
submitting the COVID EIDL loan application.
    Therefore, SBA is revising the regulation at 13 CFR 123.303, ``How 
can my business spend my economic injury disaster loan?'', to permit 
COVID EIDL working capital loan proceeds to be used to pay any type of 
business debt, including loans owned by a Federal agency (including 
SBA) or an SBIC. SBA also is revising the regulation to clarify that 
COVID EIDL loan proceeds may be used to make debt payments including 
monthly payments, payments of deferred interest, and pre-payments, 
except that pre-payments will not be permitted on debt that is owned by 
a Federal agency (including SBA) or an SBIC.

5. Limits of COVID EIDL Loans to a Single Corporate Group

    SBA is adding a new regulation to state that entities that are part 
of a single corporate group shall in no event receive more than 
$10,000,000 of COVID EIDL loans in the aggregate. For purposes of this 
limit, entities are part of a single corporate group if they are 
majority owned, directly or indirectly, by a common parent. Businesses 
are subject to this limitation even if the businesses are in certain 
hard-hit sectors and able to use the per-physical location application 
of the size standard as set forth in 13 CFR 123.300(e)(5).
    Given the changes in the COVID EIDL maximum loan amount, 
eligibility, and increased outreach to industries that have been 
particularly hard hit by the pandemic (for example, restaurants, 
hotels, gyms, travel and tourism), SBA expects an increase in the 
number of applications submitted and average loan size. The 
Administrator determined that limiting the amount of COVID EIDL loans 
that a single corporate group may receive will promote the availability 
of COVID EIDL loans to the largest possible number of borrowers. The 
Administrator has concluded that a limitation of $10,000,000 strikes an 
appropriate balance between broad availability of COVID EIDL loans and 
program resource constraints. SBA's affiliation rules, which relate to 
an applicant's eligibility for COVID EIDL loans, continue to apply 
independent of this limitation.

6. Additional Information

    SBA may provide further information through guidance that will be 
posted on SBA's website at www.sba.gov, if needed. Questions may be 
directed to an SBA Disaster Customer Service Representative at 1-800-
659-2955 (individuals who are deaf or hard of hearing may call 1-800-
877-8339), or a local SBA Field Office; the list of local SBA Field 
Offices may be found at https://www.sba.gov/tools/local-assistance/districtoffices.
Compliance With Executive Orders, the Congressional Review Act, 
Paperwork Reduction Act, and the Regulatory Flexibility Act
Executive Orders 12866 and 13563
    OMB's Office of Information and Regulatory Affairs (OIRA) has 
determined that this interim final rule is economically significant for 
the 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 economic hardships and conditions arising from the COVID-19 
emergency.
    This rule is necessary to provide economic relief to small 
businesses and private nonprofit organizations nationwide adversely 
impacted by COVID-19. As evidence of unmet need, the Restaurant 
Revitalization Fund (RRF) received $28.6 billion in appropriations and 
in 21 days, received 278,304 RRF applications totaling more than $72 
billion, which resulted in 177,300 businesses without assistance. 
Further, with the end of the Paycheck Protection Program (PPP), 
businesses

[[Page 50218]]

and nonprofit organizations that are still struggling will turn to the 
COVID EIDL program for long-term recovery. For these reasons, SBA 
anticipates that this rule will result in substantial benefits to small 
businesses, nonprofit organizations, their employees, and the 
communities they serve.
Executive Order 12988
    SBA has drafted this rule, to the extent practicable, in accordance 
with the standards set forth in section 3(a) and 3(b)(2) of Executive 
Order 12988, to minimize litigation, eliminate ambiguity, and reduce 
burden. The rule has no preemptive or retroactive effect.
Executive Order 13132
    SBA has determined that this rule 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 layers of government. Therefore, SBA 
has determined that this rule has no federalism implications warranting 
preparation of a federalism assessment.
Congressional Review Act
    OIRA has determined that this is a major rule for purposes of 
subtitle E of the Small Business Regulatory Enforcement and Fairness 
Act of 1996 (also known as the Congressional Review Act or CRA), 5 
U.S.C. 804(2) et seq. Under the CRA, a major rule takes effect 60 days 
after the rule is published in the Federal Register. 5 U.S.C. 
801(a)(3).
    Notwithstanding this requirement, the CRA allows agencies to 
dispense with the requirements of section 801 when the agency for good 
cause finds that such procedure would be ``impracticable, unnecessary, 
or contrary to the public interest,'' and provides that the rule shall 
take effect at such time as the Federal agency promulgating the rule 
determines. 5 U.S.C. 808(2). Pursuant to section 808(2), SBA for good 
cause finds that a 60-day delay to provide public notice would be 
impracticable, unnecessary, and contrary to the public interest. 
Likewise, for the same reasons, SBA for good cause finds that there are 
grounds to waive the 30-day effective date delay under the 
Administrative Procedure Act. 5 U.S.C. 553(d)(3).
    Other SBA COVID-19 relief programs have recently ended or exhausted 
the funding provided for the program (including PPP and RRF), yet 
businesses and nonprofit organizations are still in need of support. 
The COVID EIDL program is more critical now than it was before because 
of the lack of these other resources and the continuing economic 
instability. An immediate effective date will give small businesses, 
nonprofit organizations, qualified agricultural businesses, and 
independent contractors affected by this interim final rule the maximum 
amount of time to apply for loans and SBA the maximum amount of time to 
process applications before the program ends on December 31, 2021. 
Given the short duration of this program, SBA has determined that it is 
impractical and not in the public interest to provide a delayed 
effective date.
Paperwork Reduction Act, 44 U.S.C. Chapter 35
    SBA has determined that this rule will require revisions to the 
COVID-19 Economic Injury Disaster Loan Application information 
collection (OMB Control Number 3245-0406). The application form will be 
revised to require the disclosure of the NAICS code for the applicant 
in order to determine the size of the applicant on a per-physical 
location basis and to add an option to identify the eligible entity as 
a business that is assigned a NAICS code beginning with 61, 71, 72, 
213, 3121, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812, 
employs not more than 500 employees per physical location, and together 
with affiliates has no more than 20 locations. In addition, to simplify 
and streamline the process for applicants, SBA has consolidated Forms 
3501 (COVID-19 Economic Injury Disaster Loan Application), 3502 
(Economic Injury Disaster Loan Supporting Information), and 3503 (Self-
Certification for Verification of Eligible Entity for Economic Injury 
Disaster Loan) into one form. This will reduce the burden on applicants 
as they will only need to enter certain information once. SBA also 
added questions related to entity type and types of business activity 
to assist borrowers in making the eligibility certification. Further, 
SBA revised the questions related to the calculation of economic injury 
for clarity and to aid in automating the review process. Finally, SBA 
made additional technical edits to the form for clarity. SBA has 
obtained emergency approval of the revisions, including waiver of 
public comment notices. The collection is approved for use until 
February 28, 2022. SBA will take the necessary steps to solicit 
comments and revise the information collection, if necessary, before 
approval expires.
Regulatory Flexibility Act (RFA)
    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, generally 
requires that when an agency issues a proposed rule, or a final rule 
pursuant to section 553(b) of the Administrative Procedure Act or 
another law, the agency must prepare a regulatory flexibility analysis 
that meets the requirements of the RFA and publish such analysis in the 
Federal Register. 5 U.S.C. 603, 604.
    Rules that are exempt from notice and comment are also exempt from 
the RFA requirements, including conducting a regulatory flexibility 
analysis, such as when, among other exceptions, the agency for good 
cause finds that notice and public procedure are impracticable, 
unnecessary, or contrary to the public interest. SBA Office of Advocacy 
Guide: How To Comply with the Regulatory Flexibility Act, Ch.1. p.9. 
Since this rule is exempt from notice and comment, SBA is not required 
to conduct a regulatory flexibility analysis.

List of Subjects

13 CFR Part 121

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

13 CFR Part 123

    Loan Program--disaster loan program.

    For the reasons stated in the preamble, SBA amends 13 CFR parts 121 
and 123 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for 13 CFR part 121 continues to read as 
follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, and 
694a(9); Pub. L. 116-136, Section 1114.


0
2. Amend Sec.  121.301 by adding paragraph (g) to read as follows:


Sec.  121.301   What size standards and affiliation principles are 
applicable to financial assistance programs?

* * * * *
    (g) For COVID-19 Economic Injury Disaster (COVID EIDL) loans, an 
``affiliated business'' or ``affiliate'' is a business in which an 
eligible entity has an equity interest or right to profit distributions 
of not less than 50 percent, or in which an eligible entity has the 
contractual authority to control the direction of the business, 
provided that such affiliation shall be determined as of any 
arrangements or agreements in existence as of January 31, 2020. For 
exceptions to affiliation, see Sec.  121.103(b).

[[Page 50219]]

PART 123--DISASTER LOAN PROGRAM

0
3. The authority citation for 13 CFR part 123 is revised to read as 
follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 636(d), and 657n; 
Section 1110, Pub. L. 116-136, 134 Stat. 281; and Section 331, Pub. 
L. 116-260, 134 Stat. 1182.


0
4. Amend Sec.  123.13 by revising the first sentence of paragraph (e) 
and paragraph (f) to read as follows:


Sec.  123.13   What happens if my loan application is denied?

* * * * *
    (e) If SBA declines your application a second time, you have the 
right to appeal in writing to the Director, Disaster Assistance 
Processing and Disbursement Center (DAPDC) or the Director's 
designee(s). * * *
    (f) The decision of the Director, DAPDC or the Director's 
designee(s), is final unless:
    (1) The Director, DAPDC or the Director's designee(s), does not 
have the authority to approve the requested loan;
    (2) The Director, DAPDC or the Director's designee(s), refers the 
matter to the SBA Associate Administrator for Disaster Assistance (AA/
DA);
    (3) The AA/DA, upon a showing of special circumstances, requests 
that the Director, DAPDC or the Director's designee(s), forward the 
matter to him or her for final consideration; or
    (4) The SBA Administrator, solely within the Administrator's 
discretion, chooses to review the matter and make the final decision. 
Such discretionary authority of the Administrator does not create 
additional rights of appeal on the part of an applicant not otherwise 
specified in SBA regulations.
* * * * *

0
5. Amend Sec.  123.300 by adding paragraph (e) to read as follows:


Sec.  123.300   Is my business eligible to apply for an economic injury 
disaster loan?

* * * * *
    (e) COVID-19 Economic Injury Disaster (COVID EIDL) loans are 
available if, as of the date of application, you:
    (1) Are a business, including an agricultural cooperative, 
aquaculture enterprise, nursery, or producer cooperative (but excluding 
all other agricultural enterprises), that is small under SBA Size 
Standards (as defined in part 121 of this chapter);
    (2) Are an individual who operates under a sole proprietorship, 
with or without employees, or as an independent contractor;
    (3) Are a private non-profit organization that is a non-
governmental agency or entity that currently has an effective ruling 
letter from the Internal Revenue Service (IRS) granting tax exemption 
under sections 501(c), (d), or (e) of the Internal Revenue Code of 
1954, or satisfactory evidence from the State that the non-revenue-
producing organization or entity is a non-profit one organized or doing 
business under State law, or a faith-based organization;
    (4) Are a business, cooperative, agricultural enterprise, Employee 
Stock Ownership Plan (as defined in 15 U.S.C. 632), or tribal small 
business concern (as described in 15 U.S.C. 657a(b)(2)(C)), with not 
more than 500 employees; or
    (5) Are a business that is assigned a North American Industry 
Classification System (NAICS) code beginning with 61, 71, 72, 213, 
3121, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812, employs 
not more than 500 employees per physical location, and together with 
affiliates has no more than 20 locations.

0
6. Amend Sec.  123.303 by adding a sentence to the end of paragraph (a) 
and revising paragraph (b)(2) to read as follows:


Sec.  123.303   How can my business spend my economic injury disaster 
loan?

    (a) * * * COVID EIDL loan proceeds also may be used to make debt 
payments including monthly payments, payment of deferred interest, and 
pre-payments on any business debts, except pre-payments are not 
permitted on any loans owned by a Federal agency (including SBA) or a 
Small Business Investment Company licensed under the Small Business 
Investment Act.
    (b) * * *
    (2) Except for COVID EIDL loan proceeds, make payments on loans 
owned by a Federal agency (including SBA) or a Small Business 
Investment Company licensed under the Small Business Investment Act;
* * * * *

0
7. Add Sec.  123.304 to read as follows:


Sec.  123.304   Is there a limit on the maximum loan amount to a single 
corporate group for COVID EIDL Loans?

    Entities that are part of a single corporate group shall in no 
event receive more than $10,000,000 of COVID EIDL loans in the 
aggregate. For purposes of this limit, entities are part of a single 
corporate group if they are majority owned, directly or indirectly, by 
a common parent.

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2021-19232 Filed 9-7-21; 8:45 am]
BILLING CODE 8026-03-P