Guaranteed Loanmaking and Servicing Regulations, 82225-82230 [2023-25908]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Business-Cooperative Service

[Federal Register Volume 88, Number 225 (Friday, November 24, 2023)]
[Rules and Regulations]
[Pages 82225-82230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25908]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 88, No. 225 / Friday, November 24, 2023 / 
Rules and Regulations

[[Page 82225]]



DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

7 CFR Part 4279

[Docket No. RBS-20-BUSINESS-0016]
RIN 0570-AB07


Guaranteed Loanmaking and Servicing Regulations

AGENCY: Rural Business-Cooperative Service, USDA.

ACTION: Final rule.

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

SUMMARY: The Rural Business-Cooperative Service (RB-CS) (Agency), a 
Rural Development (RD) agency of the United States Department of 
Agriculture (USDA), is issuing a final rule to amend the interim rule 
published on May 22, 2020. The interim rule amended the Business and 
Industry (B&I) Guaranteed Loan Program to allow flexibility to obligate 
Federal funds for guaranteed loans pursuant to the Coronavirus Aid, 
Relief, and Economic Security Act (CARES Act) in response to the 
national COVID-19 Public Health Emergency. This final rule addresses 
public comments received on the interim rule and makes clarifying 
modifications identified by commenters and the Agency.

DATES: 
    Effective date: November 24, 2023.
    Applicability dates: This final rule applies to applications 
submitted under the B&I CARES Act Guaranteed Loan Program from May 22, 
2020, and received no later than 11:59 p.m. Eastern Time on September 
15, 2021, or until Program funding expired on September 30, 2021.

FOR FURTHER INFORMATION CONTACT: Mark Brodziski, Deputy Administrator, 
Rural Business and Cooperative Service, Rural Development, U.S. 
Department of Agriculture, 1400 Independence Avenue SW, Stop 
Washington, DC 20250-3221; email: [email protected]; telephone 
(202) 205-0903.

SUPPLEMENTARY INFORMATION:

I. Background Information

    The RD is a mission area within the USDA that is comprised of the 
RB-CS, the Rural Housing Service (RHS), and the Rural Utilities Service 
(RUS). Its mission is to increase economic opportunity and improve the 
quality of life in rural communities by providing the leadership, 
infrastructure, access to capital, and technical support that enables 
rural communities to prosper. To achieve its mission, the RD provides 
financial support through more than 40 programs including direct loans, 
grants, loan guarantees, and technical assistance to help improve the 
quality of life and provide the foundation for economic development in 
rural areas.
    The B&I Guaranteed Loan Program was authorized under Section 310B 
of the Consolidated Farm and Rural Development Act of 1972, as amended 
by subsequent Farm Bills, with the aim to revitalize and develop rural 
areas and to help foster a balance between rural and urban America. The 
loans are made by private lenders to rural businesses for the purposes 
of creating new businesses, expanding existing businesses, and for 
other purposes of creating employment opportunities in rural America. 
Businesses located in rural areas are eligible for this program. Rural 
areas, as defined at 7 CFR 4279.108(c), are any area of a State other 
than a city or town that has a population of greater than 50,000 
inhabitants and any urbanized area contiguous and adjacent to such a 
city or town. The types of borrowers that are served by the B&I 
Guaranteed Loan Program are cooperative organizations, corporations, 
partnerships, or other legal entities organized and operated on a 
profit or nonprofit basis; Indian Tribes on a Federal or State 
reservation or other federally recognized Tribal group; public bodies; 
or individuals, provided the borrower is engaged in, or proposing to 
engage in, a business. Loans can be made for a variety of purposes, 
including business acquisition, expansion, or improvement; purchase of 
real estate, machinery and equipment, or supplies; limited debt 
refinancing; and working capital. The rate and term of the loan is 
negotiated between the business and the lender.
    On March 13, 2020, the ongoing Coronavirus Disease 2019 (COVID-19) 
pandemic was declared of sufficient severity and magnitude to warrant 
an emergency declaration for all States, territories, and the District 
of Columbia. With the COVID-19 Public Health Emergency, many businesses 
nationwide began experiencing economic hardship as a direct result of 
the Federal, State, and local public health measures that were being 
taken to minimize the public's exposure to the virus. These measures, 
as well as advice to physically social distance from other people and 
to stay at home or ``shelter in place,'' resulted in a dramatic 
negative impact on the livelihood of many Americans and, in turn, 
negatively impacted the national economy.
    In order to provide critical financial relief to American families, 
on March 27, 2020, the President signed the Coronavirus Aid, Relief, 
and Economic Security Act (the CARES Act or the Act) (Pub. L. 116-136) 
to provide emergency assistance and health care response for 
individuals, families, and businesses affected by the coronavirus 
pandemic.

II. Purpose of This Regulatory Action

    This final rule updates the B&I CARES Act Program Loans, as 
implemented in 7 CFR part 4279--Guaranteed Loan Making and 7 CFR part 
4287--Servicing and as published in the Federal Register on May 22, 
2020, as an interim rule.
    RBCS received funding and authority through Division B, Title I of 
the CARES Act to provide additional funds for use under the B&I 
Guaranteed Loan Program to prevent, prepare for, and respond to the 
effects of the COVID-19 pandemic. The regulatory impact analysis for 
the interim rule documents the anticipated costs and benefits of the 
program against the benchmark of no rule (i.e., absent the interim 
final rule). In summary, the baseline of the cost benefit analysis for 
the interim final rule was mostly qualitative using existing 
information the Agency had from the B&I Guaranteed Loan Program and 
anticipated results of the provisions in the interim rule that allowed 
the flexibility to obligate Federal funds for guaranteed loans pursuant 
to the CARES Act in response to the nation COVID-19 Public Health 
Emergency. As a result of these considerations and the funding purposes 
outlined in the CARES Act, the Agency decided to offer the

[[Page 82226]]

following--using the interim rule--under the B&I CARES Act Program: (1) 
90-percent guarantees to all B&I CARES Act funded loans, (2) 2-percent 
guarantee fee; (3) acceptance of appraisals completed within 2 years of 
the date of the application; (4) no discounting of collateral for 
working capital loans; and (5) extension of the maximum term for 
working capital loans to 10 years. The regulatory impact analysis 
associated with the interim final rule can be viewed at 
www.regulations.gov under Docket No. RBS-20-BUSINESS-0016.
    The economic impacts of the final rule are minimal or de minimus 
when set against the benchmark for the interim final rule. The CARES 
Act provided $20,500,000 in budgetary authority, which RD anticipated 
would support an allocation of approximately $951,000,000 in loan 
guarantees, which supported approximately $811,645,477 in loan 
guarantees. Applications for B&I CARES Act funds expired at the end of 
fiscal year 2021 as all available funds were exhausted. Though RD staff 
have successfully implemented the regulatory requirements, they have 
determined through their continuous interaction with stakeholders that 
changes to the interim rule are needed to clarify eligible uses of 
funds and to further improve program delivery. Eligible uses of funds 
include the ability of borrowers to address financial needs related to 
COVID-19 in addition to loss of income, related challenges directly 
related to COVID-19, and challenges businesses faced in order to return 
to normal operations, not just losses incurred as a result of COVID-19. 
This final rule provides clarification of the Agency's position on the 
eligible use of funds for auditing purposes and future servicing 
actions including loss payments to lenders. Additionally, the Agency 
will be able to reference this final rule should the B&I program be 
utilized again to directly respond to and alleviate the issues 
resulting from another National Public Health Emergency.

III. Summary of Comments and Responses

    On May 22, 2020 (85 FR 31035), the Agency published an interim rule 
to supplement the current B&I Guaranteed Loan Program, as implemented 
in 7 CFR part 4279, Guaranteed Loan Making, and 7 CFR part 4287, 
Servicing, with the new B&I CARES Act Guaranteed Loan Program (B&I 
CARES Act Program). The Agency received the following comments from one 
commenter:
    Comment: The commenter suggested that from experience, the Agency 
understands that some companies need to expand production due to the 
pandemic such as Personal Protective Equipment (PPE) and sanitary 
products, while others need to provide PPE inventory to staff and 
protective materials for retail clients, which creates a need for 
financial assistance for items that also meet the impact of the crisis.
    Agency Response: The Agency agrees with the commenter and clarifies 
in 7 CFR 4279.190(c)(1) that the borrower may use the program for 
financial needs related to the COVID-19 Public Health Emergency in 
general and not just to address the loss of income and to provide funds 
for operating overhead expenses in response to the epidemic.
    Comment: One commenter stated that there appeared to be 
contradictory information in the interim regulation between the 
``Preamble'' and the ``Eligible Use of Funds'' sections. The commenter 
indicated that the Preamble suggests that the B&I CARES Act Program 
guaranteed loan funds may be used by rural businesses that require 
additional working capital to sustain and ramp up business operations 
once the emergency is resolved. However, the commenter asserted that 
the ``Eligible Use of Funds'' section states that B&I CARES Act Program 
Loans should not exceed the amount needed to overcome the financial 
distress caused by the COVID-19 Public Health Emergency. The commenter 
further specified that there appears to be a discrepancy between 
intent, which includes ramping up business operations, and the actual 
regulation which appears to only address a shortfall in operating 
capital.
    Agency Response: The Agency concurs with the concern raised by the 
commenter and revises 7 CFR 4279.190(c)(1) to include language to 
address the discrepancy and clarify the intent of the program.
    Comment: One commenter expressed a concern that the B&I CARES Act 
program could be interpreted to be for the primary purpose of covering 
operating losses only, rather than for working capital in totality, and 
further encourages the Agency to recognize that a business may have 
needs now that were not present pre-Coronavirus, and the business may 
need more working capital than before the pandemic.
    Agency Response: The Agency concurs with this concern raised by the 
commenter and revises 7 CFR 4279.190(c)(3)(viii) by adding language to 
the eligible purposes to include additional expenses due to challenges 
directly related to the national COVID-19 Public Health Emergency.
    Comment: One commenter commented that the Agency should understand 
the ever-changing environment that businesses face and allow the B&I 
CARES Act Program to provide working capital to get the business back 
on a strong footing.
    Agency Response: The Agency concurs with this statement and revises 
7 CFR 4279.190(d)(2) to clarify the intent of the program and the 
ability to ``address challenges'' caused by the COVID-19 Public Health 
Emergency.

IV. Summary of Changes

    The following is a summary list of changes to the B&I CARES Act 
Program (7 CFR 4279.190) as a result of public comments:

    1. Add language in the introductory text of Sec.  4279.190(a) to 
clarify that a loan is limited to the amount necessary to address a 
borrower's financial needs related to the COVID-19 Public Health 
Emergency.
    2. In Sec.  4279.190(c)(1) and (2), add language that refers to 
the challenges faced by borrowers due to the COVID-19 Public Health 
Emergency in order to clarify the use of the B&I CARES Act Program 
Loans.
    3. In Sec.  4279.190(c)(3)(i), (iv), and (viii), clarify that 
the eligible use of loan funds for borrowers for challenges directly 
related to the National COVID-19 Public Health Emergency includes 
the owner's wages and salaries if these costs were verifiable and 
constitute historical working capital costs.
    4. In Sec.  4279.190(d)(1), (2), and (3), include language 
clarifying minimum loan amount threshold, inventory and production 
costs, and the maximum loan amount.
    The following is a summary list of the technical corrections and 
clarifications to the B&I CARES Act Program (7 CFR 4279.190):
    5. Correct the authority citation for 7 CFR part 4279 by adding 
7 U.S.C. 1932(a), which includes 7 CFR 4287, Servicing for the B&I 
Program.
    6. In Sec.  4279.190(c)(5), specify that the Agency should 
verify ineligibility for Farm Service Agency (FSA) loan programs, 
and clarify that agricultural producers must be located in a rural 
area as defined in 7 CFR 4279.108(c) unless they meet the food 
processing provisions under 7 CFR 4279.113(y). The interim rule only 
allowed for eligibility for B&I CARES Act Program Loans if the loan 
amount exceeded the FSA size limit or the applicant was otherwise 
ineligible for FSA programs.
    7. In Sec.  4279.190(h), add language to clarify loan terms and 
provisions.
    8. In Sec.  4279.190(k)(1) and (3), add language that was 
originally omitted from the interim rule regarding ``tangible 
balance sheet equity.''
    9. In Sec.  4279.190(k)(2), add clarifying language regarding 
borrower equity allowing additional sources of matching funds, which 
was inadvertently omitted from the interim rule.
    10. In Sec.  4279.190(m), add introductory language to clarify 
the application information and priority scoring process.
    11. In Sec.  4279.190(m)(4)), add language to clarify the use of 
a borrowers' application request for the B&I CARES Act loan process.

[[Page 82227]]

Executive Order 12866, Regulatory Planning and Review

    This final rule has been reviewed by the Office of Management and 
Budget under Executive Order 12866 and determined to be significant for 
the purposes of Executive Order 12866. The Executive Order defines a 
section 3(f)(1) ``significant regulatory action'' as one that is likely 
to result in a rule that may (1) have an annual effect on the economy 
of $200 million or more or adversely affect, in a material way, the 
economy, a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or Tribal 
governments or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this E.O. This final rule was determined to be significant because the 
changes to the B&I Guaranteed Loan Program regulations are estimated to 
have an impact on the economy of more than $200 million.

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

Executive Order 12372, Intergovernmental Review

    B&I guaranteed loans are subject to the Provisions of Executive 
Order 12372, which require intergovernmental consultation with State 
and local officials. The Agency will conduct intergovernmental 
consultation in accordance with 2 CFR part 415, subpart C.

Executive Order 13132, Federalism

    The policies contained in this final rule do not have any 
substantial direct effect on 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 
final rule impose substantial direct compliance costs on State and 
local governments. Therefore, the Agency has determined that 
consultation with the States is not required.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This final rule has been reviewed in accordance with the 
requirements of Executive Order 13175, ``Consultation and Coordination 
with Indian Tribal Governments.'' Executive Order 13175 requires 
Federal agencies to consult and coordinate with Tribes on a government-
to-government basis on policies that have Tribal implications, 
including regulations, legislative comments or proposed legislation, 
and other policy statements or actions that have substantial direct 
effects on one or more Indian Tribes, on the relationship between the 
Federal Government and Indian Tribes or on the distribution of power 
and responsibilities between the Federal Government and Indian Tribes. 
Rural Development has assessed the impact of this final rule on Indian 
Tribes and determined that this final rule does not, to our knowledge, 
have Tribal implications that require Tribal consultation under E.O. 
13175. If a Tribe would like to engage in consultation with Rural 
Development on this rule, please contact Rural Development's Tribal 
Coordinator at (720) 544-2911 or [email protected].

Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act (RFA) generally requires that when 
an agency issues a proposed rule, or a final rule pursuant to section 
553(b) of the APA 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 in accordance with 5 U.S.C. 603 
and 604. Specifically, the RFA normally requires agencies to describe 
the impact of a rulemaking on small entities by providing a regulatory 
impact analysis. Such analysis must address the consideration of 
regulatory options that would lessen the economic effect of the rule on 
small entities. The RFA defines a ``small entity'' as (1) a proprietary 
firm meeting the size standards of the SBA; (2) a nonprofit 
organization that is not dominant in its field; or (3) a small 
government jurisdiction with a population of less than 50,000. Except 
for such small government jurisdictions as defined in 5 U.S.C. 601 (5), 
neither State nor local governments are considered small entities. 
Similarly, for purposes of the RFA, individual persons are not small 
entities. As outlined in 5 U.S.C. 605(b), the requirement to conduct a 
regulatory impact analysis does not apply if the head of the agency 
``certifies that the rule will not, if promulgated, have a significant 
economic impact on a substantial number of small entities.'' In 
addition, 5 U.S.C. 604(a) and 608(b) specifies that the agency must, 
however, publish the certification in the Federal Register at the time 
of publication of the rule, ``along with a statement providing the 
factual basis for such certification.'' If the agency head has not 
waived the requirements for a regulatory flexibility analysis in 
accordance with the RFA waiver provision, and no other RFA exception 
applies, the agency must prepare the regulatory flexibility analysis 
and publish it in the Federal Register at the time of promulgation or, 
if the rule is promulgated in response to an emergency that makes 
timely compliance impracticable, within 180 days of publication of the 
final rule. Rules that are exempt from notice and comment are also 
exempt from the RFA requirements, including conducting a regulatory 
flexibility analysis, when among other things, the agency for good 
cause finds that notice and public procedure are impracticable, 
unnecessary, or contrary to the public interest. Accordingly, as 
authorized by sections 553(b)(3)(B) and 553(d) of the APA, as well as 
supported in the Federal agency source book published by the Small 
Business Administration's Office of Advocacy, ``A Guide to for 
Government Agencies, How to Comply with the Regulatory Flexibility,'' 
Ch. 1, p. 9., the Agency is not required to conduct a regulatory 
flexibility analysis.

Information Collection and Recordkeeping Requirements

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
chapter 35), the information collection activities associated with this 
final rule are approved under OMB Control Number 0570-0069 and this 
final rule contains no new reporting or recordkeeping burdens.

E-Government Act Compliance

    The RB-CS is committed to the E-Government Act, which requires 
Government agencies in general to provide the public the option of 
submitting information or transacting business electronically to the 
maximum extent possible.

[[Page 82228]]

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 (1) this action meets the criteria established in 7 
CFR 1970.53(f); (2) no extraordinary circumstances exist; and (3) 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.

Assistance Listing

    The program described by this final rule is listed in the 
Assistance Listings (AL), (formerly Catalog of Federal Domestic 
Assistance (CFDA)), under number 10.766--Business and Industry 
Guaranteed Loan Program.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effect of their regulatory actions on State, local, and Tribal 
governments, and the private sector. Under section 202 of the UMRA, the 
Agency generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or Tribal 
governments, in the aggregate, or to the private sector, of $100 
million, or more, in any one year. When such a statement is needed for 
a rule, section 205 of the UMRA generally requires the Agency to 
identify and consider a reasonable number of regulatory alternatives 
and adopt the least costly, most cost-effective, or least burdensome 
alternative that achieves the objectives of the rule. This final rule 
contains no Federal mandates (under the regulatory provisions of Title 
II of the UMRA) for State, local, and Tribal governments, or the 
private sector. Therefore, this final rule is not subject to the 
requirements of sections 202 and 205 of the UMRA.

Civil Rights Impact Analysis

    Rural Development has reviewed this final rule in accordance with 
USDA Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify 
any major civil rights impacts this final rule might have on program 
participants on the basis of age, race, color, national origin, sex, or 
disability. After review and analysis of the final rule and available 
data, it has been determined that based on the analysis of the program 
purpose, application submission and eligibility criteria, issuance of 
this final rule will not likely adversely or disproportionately impact 
very low, low, and moderate-income populations, minority populations, 
women, Indian Tribes, or persons with disability, by virtue of their 
race, color, national origin, sex, age, disability, or marital or 
familial status.

USDA Non-Discrimination Statement

    In accordance with Federal civil rights laws and USDA civil rights 
regulations and policies, the USDA, its Mission Areas, agencies, staff 
offices, 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.
    Program information may be made available in languages other than 
English. Persons with disabilities who require alternative means of 
communication to obtain program information (e.g., Braille, large 
print, audiotape, American Sign Language) should contact the 
responsible Mission Area, agency, or staff office; or 711 Relay 
service.
    To file a program discrimination complaint, a complainant should 
complete a Form AD-3027, USDA Program Discrimination Complaint Form, 
which can be obtained online at https://www.usda.gov/sites/default/files/documents/ad-3027.pdf from any USDA office, by calling (866) 632-
9992, or by writing a letter addressed to USDA. The letter must contain 
the complainant's name, address, telephone number, and a written 
description of the alleged discriminatory action in sufficient detail 
to inform the Assistant Secretary for Civil Rights (ASCR) about the 
nature and date of an alleged civil rights violation. The completed AD-
3027 form or letter must be submitted to USDA by:
    (1) Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 
20250-9410; or
    (2) Fax: (833) 256-1665 or (202) 690-7442; or
    (3) Email: [email protected].
    USDA is an equal opportunity provider, employer, and lender.

List of Subjects for 7 CFR Parts 4279

    Loan programs-business, Reporting and recordkeeping requirements, 
Rural areas.

    Accordingly, for reasons set forth in the preamble, 7 CFR part 4279 
is amended as set forth below:

PART 4279--GUARANTEED LOANMAKING

0
1. The authority citation for part 4279 is revised to read as follows:

    Authority:  5 U.S.C. 301; 7 U.S.C. 1989: 7 U.S.C. 1932(a); and 
Public Law 116-136, Division B, Title I.

Subpart B--Business and Industry Loans

0
2. Amend Sec.  4279.190 by:
0
a. Revising and republishing paragraph (a);
0
b. Revising and republishing paragraphs (c)(1), (2), (3), and (5);
0
c. Revising and republishing paragraphs (d)(1), (2), and (3);
0
d. Revising and republishing paragraph (h);
0
e. Revising and republishing paragraphs (k)(1), (2), and (3);
0
f. Adding introductory text to paragraph (m); and
0
g. Revising paragraph (m)(4).
    The revisions, republications, and addition read as follows:


Sec.  4279.190  Business and Industry national COVID-19 Public Health 
Emergency Loans.

    (a) Introduction. This section contains regulations for the 
Business and Industry National COVID-19 Public Health Emergency loan 
program (B&I CARES Act Program Loans). The purpose of the program is to 
provide loan guarantees under the authority of the Coronavirus Aid, 
Relief, and Economic Security Act (CARES Act) (Pub. L. 116-136). These 
B&I CARES Act Program Loans cover costs to prevent, prepare for, and 
respond to the coronavirus limited to the amount necessary to address 
the borrower's financial needs related to the COVID-19 Public Health 
Emergency. Consistent with the purposes of the CARES Act, the Agency 
has determined that the most effective use of these program funds is to 
support the cost of guaranteed loans to rural businesses to respond to 
the coronavirus. No B&I CARES Act Program Loan guarantee will be

[[Page 82229]]

approved after September 30, 2021. All provisions of subparts A and B 
of this part and subpart B of part 4287 of this chapter apply to B&I 
CARES Act Program Loans, except as provided in this section. All forms 
used in connection with a B&I CARES Act Program Loan will be those used 
with other Business and Industry (B&I) loans, except as provided in 
this section.
* * * * *
    (c) * * *
    (1) Purpose. The purpose of any B&I CARES Act Program Loan must be 
to cover costs to prevent, prepare for, and respond to the coronavirus 
pandemic, limited to the amount necessary to address the borrower's 
financial needs related to the COVID-19 Public Health Emergency, in 
accordance with paragraph (a) of this section. B&I CARES Act Program 
Loans should not exceed the amount needed to overcome the financial 
distress or related challenges caused by the COVID-19 Public Health 
Emergency.
    (2) Use of loan proceeds. Notwithstanding the provisions of Sec.  
4279.113, B&I CARES Act Program guaranteed loans will be limited to 
loans for working capital loan purposes in accordance with paragraph 
(c)(3) of this section. Loan proceeds may be used only to support 
facilities and business operations in rural areas and the Borrower must 
have been in operation on February 15, 2020. Loan proceeds must be 
disbursed through multiple draws on an as-needed monthly basis. Loan 
proceeds issued in full at loan closing must be evidenced by documented 
need provided by the lender and with concurrence of the Agency.
    (3) Eligible working capital uses. Eligible working capital uses of 
B&I CARES Act Program Loan funds are limited to:
    (i) Wages, salaries, sales commissions to employees, group 
healthcare benefits, and other employee benefits; owner's wages and 
salaries may be considered if these costs are verifiable and constitute 
historical working capital costs;
    (ii) Administrative expenses and administrative service contracts;
    (iii) Property insurance, hazard insurance, and other business 
insurance;
    (iv) Principal and interest payments on outstanding debt excluding 
owner/stockholder debt and related-party debts; payments may include 
existing Business & Industry loan payments to bring loans current as 
loan payments to a creditor are a working capital expense;
    (v) Rent, payments on leases, and routine maintenance;
    (vi) Utilities;
    (vii) Inventory, feed, seed, fertilizer and chemicals, livestock 
(excluding livestock for breeding) and supplies;
    (viii) Marketing, shipping, and other expenses incurred through 
normal business operations or such additional expenses due to 
challenges directly related to the national COVID-19 Public Health 
Emergency;
    (ix) Taxes; and
    (x) Loan costs and essential loan-related expenses.
* * * * *
    (5) Agricultural production. The provisions of Sec.  4279.113(q) do 
not apply to B&I CARES Act Program Loans. Loans for working capital to 
support agricultural production, including independent agricultural 
production, is an eligible use of funds when the applicant's loan 
request exceeds the maximum loan available through FSA guaranteed loan 
programs or the applicant's request is otherwise ineligible for FSA 
loans. The Agency should verify ineligibility for FSA loan programs. 
Agricultural producers must be located in a rural area as defined in 7 
CFR 4279.108(c) unless they meet the requirements provided for under 7 
CFR 4279.113(y).
    (d) * * *
    (1) The provisions of Sec.  4279.119(a) do not apply to B&I CARES 
Act Program Loans. The total amount of B&I and B&I CARES Act Program 
Loans to one borrower (including the guaranteed and unguaranteed 
portions, the outstanding principal and interest balance of any 
existing B&I guaranteed loans, and the new loan request) cannot exceed 
$25 million. There is no minimum threshold for B&I CARES Act Program 
loans.
    (2) The amount of the B&I CARES Act Program Loan shall be based on 
a cash flow analysis and must not be greater than the amount needed to 
address challenges caused by the COVID-19 emergency, including those 
related to inventory and production costs, so that the business is 
reestablished on a successful basis. Losses and business operating 
expenses that were adequately paid by insurance or by loans or grants 
from other sources will not be covered by B&I CARES Act Program Loans. 
The B&I CARES Act Program Loans may be used to supplement insurance 
payments or assistance from other sources when the insurance coverage 
or other assistance is insufficient. The amount of the B&I CARES Act 
Program loan will be reduced by any SBA Paycheck Protection Program 
(PPP) loans received by the borrower.
    (3) The maximum loan amount of the B&I CARES Act Program Loan for 
working capital purposes may not exceed 12 times the borrower's total 
average monthly costs of eligible working capital loan purposes less 
the total amount of covered loans received under the provisions of 
sections 1102 and 1110(a)(2) of the CARES Act and other Federal 
emergency assistance received. Annual tax returns may be utilized to 
calculate the maximum loan amount under the B&I CARES Act Program. It 
is the Agency's preference to review the last three full years of 
operations to calculate average working capital expenses for the 
borrower. If three years of financial information is not available, 
then actual working capital expenses for the business duration may be 
evaluated. Borrowers, who have not been in operation for a full year 
may estimate an average monthly cost of eligible working capital based 
on available historical months as long as they were in operation as of 
February 15, 2020.
* * * * *
    (h) Loan terms. Notwithstanding the provisions of Sec.  4279.126, 
the maximum allowable repayment term of loans for working capital 
purposes is 10 years. Loan repayment may defer principal payments or 
principal and interest payments for a period up to 12 months from loan 
closing and may extend deferral of principal payments up to a total of 
three years with a maximum repayment term of 10 years from the date of 
loan closing. B&I CARES Act Program Loans must be paid in full since 
the B&I CARES Act Program provides no loan forgiveness.
* * * * *
    (k) * * *
    (1) A minimum of 10 percent balance sheet equity or tangible 
balance sheet equity (including subordinated debt when subject to a 
standstill agreement); or a maximum debt-to-balance sheet equity ratio 
of 9 to 1.
    (2) A Borrower investment of equity or other funds into the project 
equal to 10 percent or more of total eligible project costs, (such 
investment may include grants or subordinated debt when subject to a 
standstill agreement). Additional sources of matching funds may be 
derived from other loan funds; however, such funds must be in the form 
of cash. In-kind contributions are not eligible to meet equity 
requirements; or
    (3) The balance sheet equity or tangible balance sheet equity 
includes owner-contributed capital of 10 percent or more of total fixed 
assets (net total fixed assets plus depreciation).
* * * * *

[[Page 82230]]

    (m) * * * Applications are to be received and processed in the 
State Office in the State where the business is located. Funds will be 
maintained in a National Office Reserve account. The Agency will 
consider applications in the order they are received by the Agency on a 
first come, first served basis. Priority scoring will not be needed 
initially, however towards the end of the funding period the Agency 
will need to assign priority points for the limited remaining funds and 
for this purpose the Agency will score and compare an application to 
other pending applications that are competing for funding in accordance 
with 7 CFR 4279.166.
* * * * *
    (4) A lender or borrower may combine applications for a B&I CARES 
Act Program loan for working capital with an application for B&I 
appropriated fiscal year funds. State Offices are allowed to use the 
same lender's analysis for each request. The existing Conditional 
Commitment template can be used for B&I CARES Act Program loans and 
deletion of certain provisions that do not impact the borrower or 
credit quality can be removed. Business Program Directors are 
encouraged to contact the National Office Program Processing Division 
with any questions regarding borrower eligibility, use of B&I loan 
proceeds, calculations of the loan amount or borrower equity, and any 
other questions related to a specific project. The provisions of this 
section do not apply to applications for B&I appropriated fiscal year 
funds.

Karama Neal,
Administrator, Rural Business-Cooperative Service.
[FR Doc. 2023-25908 Filed 11-22-23; 8:45 am]
BILLING CODE 3410-XY-P