Microloan Program; Changes to the Microloan Program Under the Economic Aid To Hard-Hit Small Businesses, Nonprofits, and Venues Act, 35688-35690 [2024-09520]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 89, Number 86 (Thursday, May 2, 2024)]
[Rules and Regulations]
[Pages 35688-35690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-09520]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

[Docket No. SBA-2023-0010]
RIN 3245-AH83


Microloan Program; Changes to the Microloan Program Under the 
Economic Aid To Hard-Hit Small Businesses, Nonprofits, and Venues Act

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

ACTION: Direct final rule.

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SUMMARY: The U.S. Small Business Administration (SBA) is amending its 
Microloan Program regulations to reflect statutory changes to the 
Microloan Program contained in the Economic Aid to Hard-Hit Small 
Businesses, Nonprofits, and Venues Act. The changes increase the total 
amount an Intermediary may borrow under the Microloan Program per year 
and in aggregate, expand eligibility for Intermediaries to receive a 
bonus grant and add the necessary definitions, and revise the eligible 
base grant award amount for Intermediaries under certain circumstances. 
This direct final rule conforms the regulations to the Act by adopting 
the new statutory requirements without change.

DATES: This rule is effective June 17, 2024 without further action, 
unless significant adverse comment is received by June 3, 2024. If 
significant adverse comment is received, SBA will publish a timely 
withdrawal of the rule in the Federal Register.

ADDRESSES: You may submit comments, identified by docket number SBA-
2023-0010, by any of the following methods:
    (1) Federal Rulemaking Portal: https://www.regulations.gov, 
following the specific instructions for submitting comments;
    (2) Email: [email protected]; or
    (3) Mail/Hand Delivery/Courier: Daniel Upham, Chief, 
Microenterprise Development Division, 409 3rd Street SW, 8th Floor, 
Washington, DC 20416.
    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 to Daniel Upham, Chief, Microenterprise Development 
Division, 409 3rd Street SW, 8th Floor, Washington, DC 20416. Highlight 
the information that you consider to be CBI and explain why you believe 
this information should be held confidential. SBA will review the 
information and make the final determination as to whether to publish 
the information.

FOR FURTHER INFORMATION CONTACT: Daniel Upham, Microenterprise 
Development Division, (202) 205-7001 or [email protected].

SUPPLEMENTARY INFORMATION: 

A. General Information

    The U.S. Small Business Administration (SBA) is amending its 
Microloan rules to reflect statutory changes from section 329 of the 
Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act 
(Pub. L. 116-260), enacted December 27, 2020 (the Economic Aid Act). 
SBA's Microloan Program is authorized by section 7(m) of the Small 
Business Act, (15 U.S.C. 636(m)) and 13 CFR part 120, subpart G. The 
Microloan Program provides loans up to $50,000 to help small businesses 
and certain not-for-profit childcare centers start up and expand. SBA 
provides funds to specially designated intermediary lenders, which are 
nonprofit community-based organizations with experience in lending as 
well as management and technical assistance. These intermediaries 
administer the Microloan Program for eligible borrowers.
    SBA is amending Sec. Sec.  120.701, 120.706, and 120.712 to 
incorporate Microloan Program changes required by the Economic Aid Act. 
The specific regulatory changes are detailed below in the section-by-
section analysis.

B. Section-by-Section Analysis

1. Sec.  120.701 Definitions

    Section 329 of the Economic Aid Act established two new 
definitions: ``Economically Distressed Area'' and ``Rural Area.'' To 
recognize these additions, the definitions for the Microloan Program 
are revised.

2. 120.706 What are the terms and conditions of an SBA loan to an 
Intermediary?

    The Economic Aid Act permanently increased the maximum amount an 
Intermediary may borrow from SBA to $3,000,000 per year, with an 
aggregate outstanding limit of $7,000,000. The maximum amount an 
Intermediary may borrow during its first year of participation remains 
$750,000.

3. 120.712 How does an Intermediary get a grant to assist Microloan 
borrowers?

    The Economic Aid Act provides a new minimum base grant amount of 25 
percent of an Intermediary's total outstanding SBA loan balance 
applicable in fiscal years in which the amount appropriated for TA 
grants is sufficient to provide all Intermediaries with a grant equal 
to 25 percent or more of their total outstanding SBA loan balances. In 
these fiscal years, the maximum base grant amount is 30 percent of an 
Intermediary's total outstanding SBA loan balance. Intermediaries 
eligible for bonus grants may receive an additional grant for a total 
eligible maximum grant amount of 35 percent of the total outstanding 
SBA loan balance. SBA has revised paragraph (a) to reflect these 
statutory changes.
    Currently, Intermediaries that maintain a portfolio of Microloans 
averaging $10,000 or less are eligible for a bonus grant equal to 5 
percent of the Intermediary's total outstanding SBA loan balance. The 
Economic Aid Act expands eligibility for bonus grants to: (a) 
Intermediaries that provide not less than 25 percent of their 
Microloans to small businesses located in or owned by one or more 
residents of an economically distressed area and (b) Intermediaries 
with a Microloan portfolio of which at least 25 percent is serving 
rural areas. SBA has revised paragraph (c) to include these two 
additional bonus grant eligibility criteria.

C. Compliance With Executive Orders 12866, 12988, 13132, 13175, and 
13563, the Congressional Review Act (5 U.S.C. 801-808), the Paperwork 
Reduction Act (44 U.S.C., Ch. 35) and the Regulatory Flexibility Act (5 
U.S.C. 601-612)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
direct final rule does not constitute a significant regulatory action 
under Executive Order 12866.

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. The final rule will

[[Page 35689]]

have retroactive effect to the enactment date of the statutory 
amendment. These changes will become effective December 28, 2020.

Executive Order 13132

    This rule does not have federalism implications as defined in 
Executive Order 13132. The direct final rule will not have substantial 
direct effects on the States, on the relationship between the national 
government and the States, or the distribution of power and 
responsibilities among the various levels of government, as specified 
in the Executive Order. Therefore, SBA determined that this direct 
final rule has no federalism implications warranting preparation of a 
Federalism Assessment.

Executive Order 13175

    In accordance with Executive Order 13175, SBA has determined this 
rulemaking does not include policies that have Tribal implications.

Executive Order 13563

    Executive Order 13563, Improving Regulation and Regulatory Review 
(January 18, 2011), requires agencies to adopt regulations through a 
process that involves public participation, and to the extent feasible, 
base regulations on the open exchange of information and perspectives 
from affected stakeholders and the public as a whole. SBA has developed 
this rule in a manner consistent with these requirements. This direct 
final rule makes statutorily required changes.

Congressional Review Act, 5 U.S.C. 801-808

    The Office of Management and Budget has determined that this is not 
a major rule under 5 U.S.C. 804(2).

Paperwork Reduction Act (44 U.S.C. Ch. 35)

    SBA has determined that this direct final rule would not impose any 
new reporting or recordkeeping requirements.

Regulatory Flexibility Act (5 U.S.C. 601-612)

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small entities, including small businesses. According to the RFA, when 
an agency issues a rule, the agency must prepare an analysis to 
determine whether the impact of the rule will have a significant 
economic impact on a substantial number of small entities. However, the 
RFA allows an agency to certify a rule in lieu of preparing an analysis 
if the rulemaking is not expected to have a significant impact on a 
substantial number of small entities.
    This rule only makes conforming amendments to the regulations due 
to recent legislation on the Microloan Program and does not implement 
new agency policies. The amendment will affect small entities; however, 
SBA has determined that the amendment will not have a significant 
economic impact on a substantial number of such entities.

D. Justification for Direct Final Rule--Administrative Procedure Act

    In general, SBA publishes a rule for public comment before issuing 
a final rule in accordance with the Administrative Procedure Act. 5 
U.S.C. 553. The Administrative Procedure Act provides an exception to 
this standard rulemaking process, however, where an agency finds good 
cause to adopt a rule without prior public participation. 5 U.S.C. 
553(b)(3)(B). The good cause requirement is satisfied when prior public 
participation is impracticable, unnecessary, or contrary to the public 
interest.
    SBA is publishing this rule as a direct final rule because public 
participation is unnecessary. SBA believes that this rule is routine 
and non-controversial since it merely implements changes required by 
statute, and SBA anticipates no significant adverse comments to this 
rulemaking. This rule will be effective on the date shown in the DATES 
section unless SBA receives significant adverse comment on or before 
the deadline for comments. Significant adverse comments are comments 
that provide strong justifications why the rule should not be adopted 
or for changing the rule. SBA does not expect to receive any 
significant adverse comments because it is adopting statutory changes.
    If SBA receives any significant adverse comments, it will publish a 
document in the Federal Register withdrawing this rule before the 
effective date. If SBA receives no significant adverse comments, the 
rule will be effective 45 days after publication without further 
notice.

List of Subjects in 13 CFR Part 120

    Definitions, Economically distressed area, Grant, Intermediary, 
Microloan, Rural area, Terms and conditions.

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

PART 120--MICROLOAN PROGRAM

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

     Authority: 15 U.S.C. 634(b)(6), (b)(7), (b)(14), (h), and note, 
636(a), (h) and (m), and note, 636m, 650, 657t, and note, 657u, and 
note, 687(f), 696(3), and (7), and note, and 697, 697a and e, and 
note; Pub. L. 116-260, 134 Stat. 1182.

Subpart G--Microloan Program

0
2. Revise Sec.  120.701 to read as follows:


Sec.  120.701  Definitions.

    Deposit account is a demand, time, savings, passbook, or similar 
account maintained with an insured depository institution (not 
including an account evidenced by a Certificate of Deposit).
    Economically Distressed Area is a county or equivalent division of 
local government of a State in which the small business concern is 
located, in which, according to the most recent data available from the 
Bureau of the Census, Department of Commerce, not less than 40 percent 
of residents have an annual income that is at or below the poverty 
level.
    Grant is a Federal award of money, or property in lieu of money 
(including cooperative agreements) to an eligible grantee that must 
account for its use. The term does not include the provision of 
technical assistance, revenue sharing, loans, loan guarantees, interest 
subsidies, insurance, direct appropriations, or any fellowship or other 
lump sum award.
    Insured depository institution means any federally insured bank, 
savings association, or credit union.
    Intermediary is an entity participating in the Microloan Program 
which makes and services Microloans to eligible small businesses and 
which provides marketing, management, and technical assistance to its 
borrowers. It may be:
    (1) A private, nonprofit community development corporation or other 
entity;
    (2) A consortium of private, nonprofit community development 
corporations or other entities;
    (3) A quasi-governmental economic development entity, other than a 
state, county, municipal government or any agency thereof; or
    (4) An agency of or a nonprofit entity established by a Native 
American Tribal Government.
    Microloan is a short-term, fixed interest rate loan of not more 
than $50,000 made by an Intermediary to an eligible small business.
    Non-Federal sources are sources of funds other than the Federal 
Government and may include indirect costs or in-kind contributions paid 
for under non-Federal programs. Community Block Development Grants are 
considered non-Federal sources.

[[Page 35690]]

    Rural Area is any political subdivision or unincorporated area:
    (1) In a nonmetropolitan county (as defined by the Secretary of 
Agriculture) or its equivalent thereof; or
    (2) In a metropolitan county or its equivalent that has a resident 
population of less than 20,000 if the Small Business Administration has 
determined such political subdivision or area to be rural.
    Specialized Intermediary is an Intermediary which maintains a 
portfolio of Microloans averaging $10,000 or less.

0
3. Amend Sec.  120.706 by revising paragraph (a) to read as follows:


Sec.  120.706  What are the terms and conditions of an SBA loan to an 
Intermediary?

    (a) Loan amount. An Intermediary may not borrow more than $750,000 
in the first year of participation in the program, or more than 
$3,000,000 in any subsequent year. An Intermediary's obligation to SBA 
may not exceed an aggregate of $7 million, subject to statutory 
limitations on the total amount of funds available per state.
* * * * *

0
4. Amend Sec.  120.712 by revising paragraphs (a) and (c) to read as 
follows:


Sec.  120.712   How does an Intermediary get a grant to assist 
Microloan borrowers?

    (a) General. (1) Except as provided in (a)(2) of this section, an 
Intermediary is eligible to receive a base grant of not more than 25 
percent of the outstanding balance of all SBA loans to the 
Intermediary.
    (2) In fiscal years in which the amount appropriated for grants is 
sufficient to provide all Intermediaries with a base grant equal to 25 
percent or more of their total outstanding SBA loan balances, then the 
amount of base grants to eligible Intermediaries will be equal to at 
least 25 percent of the outstanding balance of all SBA loans to the 
Intermediary and not more than 30 percent of such balance.
    (3) The Intermediary must contribute, solely from non-Federal 
sources, an amount equal to 25 percent of the grant. Contributions may 
be made in cash or in kind.
* * * * *
    (c) Intermediaries eligible to receive additional bonus grant 
monies. An Intermediary may receive an additional SBA grant equal to 
five percent of the outstanding balance of all loans received from SBA 
(with no obligation to contribute additional matching funds) if the 
Intermediary:
    (1) Is a Specialized Intermediary;
    (2) Provides not less than 25 percent of its loans to small 
business concerns located in or owned by one or more residents of an 
Economically Distressed Area; or
    (3) Maintains a portfolio of Microloans of which at least 25 
percent is serving Rural Areas.
* * * * *

Isabella C. Guzman,
Administrator.
[FR Doc. 2024-09520 Filed 5-1-24; 8:45 am]
 BILLING CODE 8026-09-P