Small Business Lending Company Application Process, 65174-65179 [2024-17644]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 89, Number 154 (Friday, August 9, 2024)]
[Rules and Regulations]
[Pages 65174-65179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17644]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

RIN 3245-AH92


Small Business Lending Company Application Process

AGENCY: U.S. Small Business Administration.

ACTION: Notification.

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SUMMARY: The purpose of this notification is to announce that the U.S. 
Small Business Administration's (SBA) Office of Capital Access (OCA) is 
opening the application period for new Small Business Lending Companies 
(SBLC) licenses from September 2, 2024, to October 15, 2024, and share 
the process by which interested entities may apply. SBA is similarly 
opening the application period for Community Advantage SBLCs (CA SBLCs) 
from September 2, 2024, to December 20, 2024, and will be reviewing and 
decisioning CA SBLC licenses on a rolling basis.

DATES: 
    Applicability date: This notification is applicable beginning 
August 1, 2024. SBA will accept applications for:

    --New SBLC licenses from September 2, 2024-October 15, 2024.
    --New CA SBLC licenses from September 2, 2024-December 20, 2024.

    Comment date: Comments must be received on or before September 9, 
2024.

ADDRESSES: You may submit comments, identified by SBA docket number 
SBA-2024-0011, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov/. 
Follow the instructions for submitting comments.
     Mail: Jihoon Kim, Office of Financial Program Operations, 
U.S. Small Business Administration, 409 Third Street SW, Washington, DC 
20416.
     Hand Delivery/Courier: Darrel Eddingfield, Office of 
Financial Assistance, U.S. Small Business Administration, 409 Third 
Street SW, 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 Jihoon Kim, Office of Financial Program 
Operations, U.S. Small Business Administration, 409 Third Street SW, 
Washington, DC 20416; or send an email to [email protected]. Highlight 
the information that you consider to be CBI and explain why you believe 
SBA should hold this information as confidential. SBA will review the 
information and make the final determination as to whether it will 
publish the information.

FOR FURTHER INFORMATION CONTACT: Jihoon Kim, Director, Office of 
Financial Program Operations (OFPO), Office of Capital Access, Small 
Business Administration, at 202-205-6024 or [email protected]. The 
phone number above may also be reached by individuals who are deaf or 
hard of hearing, or who have speech disabilities, through the Federal 
Communications Commission's TTY-Based Telecommunications Relay Service 
teletype service at 711.

SUPPLEMENTARY INFORMATION:

I. Background Information

    Section 7(a)(17) of the Small Business Act states that SBA shall 
authorize lending institutions and other entities, in addition to 
banks, to make 7(a) loans. To this end, SBA has authorized Small 
Business Lending Companies (SBLCs) as defined in 13 CFR 120.10 to 
participate in the 7(a) Loan Program. On April 12, 2023, SBA published 
the Final Rule on Small Business Lending Company (SBLC) Moratorium 
Rescission and Removal of the Requirement for a Loan Authorization (88 
FR 21890, effective May 12, 2023). Through that rule, SBA lifted the 
self-imposed moratorium on licensing new SBLCs and established the plan 
to approve three SBLCs in the first year following implementation. An 
SBLC, as defined in 13 CFR 120.10, is a non-depository lending 
institution authorized by SBA to make loans pursuant to section 7(a) of 
the Small Business Act and loans to Intermediaries in SBA's Microloan 
program. An SBLC is:
     Supervised and examined solely by SBA at the federal 
level;
     Subject to additional SBA Loan Program Requirements, as 
defined in 13 CFR 120.10, including but not limited to regulations 
specific to SBLCs regarding formation, capitalization, and enforcement 
actions; and
     Subject to all other 7(a) Loan Program Requirements 
specific to origination, servicing, and liquidation.

[[Page 65175]]

    This SBLC moratorium was put in place in 1982, prior to access to 
modern digital tools that enhance oversight and mitigate risk. For 42 
years, SBA has overseen the application and approval process 60 times 
for the transfer of the existing SBLC licenses by determining the 
capability and experience of the acquiring entity's leadership; the 
financial capacity to make, service, and liquidate loans; and the 
safety and soundness of its portfolio. This ensures compliance with 
SBA's regulatory requirements and origination of loans based on 
standards consistent with similarly sized commercial loans made by 
other lenders.
    As stated above, the purpose of this notification is to announce 
that SBA's Office of Capital Access is opening the application period 
for new SBLC and CA SBLC licenses. SBA introduced the CA SBLC license 
to meet the credit, management, and technical assistance needs of small 
businesses in underserved markets. CA SBLC licenses provide mission-
oriented lenders, primarily nonprofit financial intermediaries focused 
on economic development, access to 7(a) loans. CA SBLC's goals are to:
     Increase access to credit for small businesses located in 
underserved markets;
     Expand points of access to the SBA 7(a) loan program by 
allowing non-traditional, mission-oriented lenders to participate;
     Provide Management and Technical Assistance (M&TA) to 
small businesses as needed; and
     Manage portfolio risk.

II. New Licenses Awarded

    SBA will award up to three new SBLC licenses and an indefinite 
number of new CA SBLC licenses. SBA may award new SBLC and CA SBLC 
licenses for a period of 1 year after the application period ends. SBA 
reserves the option to request updated information. SBLC licensees may 
make loans nationwide up to $5 million per borrower. SBA will limit CA 
SBLCs to certain geographic areas and loan amounts. SBA will also 
require CA SBLCs to make at least 60 percent of their loans to eligible 
small businesses in underserved markets.

III. SBLC Requirements

    SBLCs must comply with SBA's requirements for SBA Lenders, SBA 
Supervised Lenders, and the additional requirements presented in 13 CFR 
part 120, subpart D, Sec. Sec.  120.470 through 490 specifically for 
SBLCs.
    SBLCs are subject to the requirements in SOP 50 56 1, Lender 
Participation Requirements, Section A, 7(a) Lender Participation, 
Chapters 1 and 2., and once tentatively approved, must fulfill SBLC 
requirements, including:
    1. Submit to the D/OCRM via [email protected] for review their 
policies for the following which must be acceptable to SBA in its 
discretion:
    a. Policies that demonstrates compliance with title 13 of the CFR 
and SBA's Standard Operating Procedures (SOPs) for origination, 
servicing, and liquidation of 7(a) loans, including but not limited to 
policies on credit underwriting, hazard and other insurances (e.g., 
product liability, dram shop/host liquor liability, disability, 
workers' compensation, malpractice, etc.), flood insurance, life 
insurance, equity, equity injection, verification of equity injection, 
collateral, owner/guarantor analysis (including the SBLC's policies on 
requiring owner financial statements), how the SBLC will verify an 
Applicant's financial information, and how the SBLC will document the 
refinancing of any debts.
    b. Fees and interest rates, including frequency of interest rate 
adjustments, the SBLC charges to its Applicants/Borrowers.
    c. Contents and maintenance of a complete loan file.
    d. Closing documentation, including how the SBLC documents 
disbursements and verification of equity injection.
    e. Borrower's access to funds.
    f. For SBA Express, Export Express, CAPLines, and EWCP programs, 
the SBLC's policies demonstrating compliance with the additional 
program-specific requirements stated in SOP 50 56 1, Section A, Chapter 
2, Paragraph A.f.-h.
    2. Submit to the D/OCRM via [email protected] for review and 
approval annual validation, with supporting documentation and 
methodologies demonstrating that any scoring model used by the SBLC is 
predictive of loan performance.
    3. Each SBLC's board of directors must adopt and fully implement an 
internal control policy that provides adequate direction to the 
institution for effective control over and accountability for 
operations, programs, and resources. The board-adopted internal control 
policy must, at a minimum, comply with 13 CFR 120.460. For example:
    a. The internal control policy implemented must ensure satisfactory 
monitoring and management of the SBA loan portfolio, including but not 
limited to, providing for a periodic loan review function to be 
performed at least annually by a person who is not directly or 
indirectly responsible for loan making or by outside contractors.
    b. It must include a list of monthly reports provided by the SBLC's 
management for Board review to support adequate Board oversight.
    c. It must provide for internal controls for loan making, servicing 
and liquidation.
    d. It must provide for a risk rating system to risk classify SBA 
loan assets satisfactory to SBA.
    e. Internal control policies and procedures must include provisions 
to ensure compliance with SBA's Loan Program Requirements on 
eligibility.
    f. Internal control policies and procedures must include provisions 
to ensure the SBLC exercises due diligence and prudent oversight of its 
third party vendors, including Lender Service Providers (LSP) and other 
loan Agents. Such policies and procedures should include, but not be 
limited to, monitoring performance of loans referred by an Agent or 
where an Agent provided assistance.
    g. SBLCs must provide documentation demonstrating that the internal 
control policies and procedures are fully implemented and followed.
    4. SBLCs must adhere to their internal policies and procedures for 
originating, closing, servicing, and, when necessary, liquidating SBA 
loans. When SBA procedures require Lenders to follow their own policies 
and procedures on their similarly sized, non-SBA guaranteed loans, 
SBLCs must follow the written policies and procedures that have been 
reviewed by SBA.
    4. SBLCs may not lend to an Applicant that has received assistance 
from an affiliated Small Business Investment Company (SBIC). (13 CFR 
120.476)
    5. Minimum capital requirements for SBLCs: Beginning on January 4, 
2024, each SBLC that makes or acquires a 7(a) loan must maintain, at a 
minimum, unencumbered paid-in capital and paid-in surplus of at least 
$5,000,000, or ten percent of the aggregate of its share of all 
outstanding loans, whichever is greater. Any SBLC approved on or after 
January 4, 2021, including in the event of a change of ownership or 
control, must maintain the minimum capital requirement set forth in 
subparagraph (a) above. Unless subject to subparagraph (a) or (b) 
above, an SBLC must comply with the minimum capital requirements that 
were in effect on January 3, 2021.

IV. CA SBLC Requirements

    CA SBLCs must comply with SBA's requirements for SBA Lenders, SBA 
Supervised Lenders, and the additional requirements presented in 13 CFR 
part

[[Page 65176]]

120, subpart D, Sec. Sec.  120.470 through 120.490 specifically for CA 
SBLCs.
    CA SBLCs are subject to the requirements in SOP 50 56 1, Lender 
Participation Requirements, Section A, 7(a) Lender Participation 
Requirements, Chapters 1 and 2, and once approved, must fulfill 
requirements for SBLCs stated above and the following conditions:
    1. The CA SBLC must be a nonprofit lending institution.
    2. The CA SBLC must maintain the appropriate bond coverage levels 
for CA SBLCs, as determined by the SBA Administrator, published in Loan 
Program Requirements.
    3. The CA SBLC must maintain a minimum amount of capital as 
determined at the discretion of the Administrator.
    4. The CA SBLC shall maintain a loan loss reserve of 5 percent of 
the outstanding amount of the unguaranteed portion of the loan 
portfolio of the CA SBLC under the program for the first five years in 
the program and shall maintain a loan loss reserve equal to the average 
repurchase rate of the CA SBLC over the preceding 36-month period 
thereafter.

V. SBLC Application

    The entity applying for a new SBLC license must submit an executed 
electronic scanned copy (in pdf format) to [email protected] addressing 
each of the elements set forth below (``SBLC Application''). The SBLC 
application must be complete and organized in tabular format, and the 
information submitted must be sufficient to enable SBA to evaluate its 
application against the evaluation criteria. The application must 
include:
    1. The Legal name, address, telephone, and email address of the 
proposed SBLC.
    2. Identification of the form of organization of the proposed SBLC 
along with file-stamped copies of the concern's certificate of 
incorporation, certificate of formation or certificate of limited 
partnership (as applicable), and a copy of the concern's corporate 
bylaws, limited liability company operating agreement, or limited 
partnership agreement (as applicable).
    3. Identification of the proposed SBLC's capitalization including 
the form of ownership, the identification of all classes of equity 
capital and proposed funding amounts, rights and preferences accorded 
to each class of stock or members interest (including voting rights, 
redemption rights, and rights of convertibility) and conditions for 
transfer, sale, or assignment of these interests.
    4. The proposed SBLC's geographic area of operation.
    5. Identification of all officers, directors, managing partners, 
managing members, Key Employee(s) of the proposed SBLC, which includes 
senior managers, members of loan committees, and individuals who have a 
meaningful participation in the direction of the operations, policies, 
or financial decisions of the proposed SBLC, and all other individuals 
or entities that propose to hold an equity interest of at least ten 
percent of the economic interest in any class of stock or ownership 
interest in the proposed SBLC (such identification should include a 
discussion of any prior SBA experience).
    a. An organization chart showing the relationship of the proposed 
SBLC with all related Associates (see 13 CFR 120.10, Definitions) and 
affiliates within the organization.
    b. All individuals or entities identified in this paragraph must 
submit an executed SBA Form 1081 and either a Form FD-258 (fingerprint 
card) or Electronic Fingerprint Submission. SBA Form 1081 and the Form 
FD-258 or Electronic Fingerprint Submission must be signed and dated 
within 90 days of submission to SBA.
    6. Proof of fidelity insurance coverage as detailed in 13 CFR 
120.470(e).
    7. A comprehensive business plan that details:
    a. The nature of proposed operations, including the organizational 
units involved in sourcing, evaluating, underwriting, closing, 
disbursing servicing, and liquidating small business loans in the 
organization;
    b. The identification of all sources of capital used to finance 
lending operations;
    c. An operations plan detailing the nature of the Lender's proposed 
loan activity, the volume of activity projected over the first 3 years 
as an SBA Lender, projected balance sheets, income statements and 
statement of cash flows of the Lender, with alternative profit and loss 
scenarios based on run rates equivalent to 70 percent and 50 percent of 
projected loan activity, the type and projected amount of financing 
needed to support its lending plan, along with a discussion of Lender's 
proposed wind-down plan in the event the Lender decides to leave the 
program;
    d. A detailed analysis of the Lender's projected secondary market 
activities during the first 3 years of operation, including a 
sensitivity analysis of the effect any changes in premium from the sale 
of the guaranteed portion of 7(a) loans in SBA's secondary market may 
have on the Lender's prospective earnings. The analysis must also 
include a description of the Lender's plans (if any) to securitize or 
sell participations in the unguaranteed portion of 7(a) loans; and
    e. If the Lender intends to acquire any 7(a) loans, a written plan 
detailing the extent of this acquisition activity in its operating 
plan, and how the Lender will manage the transition of the 7(a) loan 
portfolio.
    8. All documents associated with any type of external financing 
expected to be undertaken by the proposed SBLC.
    9. A written statement from an authorized official of the proposed 
SBLC certifying that the SBLC will not be primarily engaged in 
financing the operations of an Affiliate as defined in 13 CFR 121.103.
    10. The most recent audited financial statements of the proposed 
SBLC if it has been in operation for more than 1 year, or the audited 
financial statements of the proposed SBLC's parent company.
    11. A certified copy of a Board, limited partners, or members 
resolution specifying the individual(s) or official(s) granted the 
authority by the organization to submit this SBLC application.
    12. A certification by the proposed SBLC that it is in full 
compliance with all Federal, State, and local laws.
    13. A written legal opinion of independent counsel (``Independent 
Counsel'' is counsel that is not an Associate of the lender), 
satisfactory to SBA that addresses whether the proposed SBLC:
    a. Is duly formed, organized, and validly existing in good standing 
under the laws of the State of its organization, and is in full 
compliance with all Federal, State, and local laws in connection with 
the formation and organization of the proposed SBLC; and
    b. Has the power, legal right, and authority to enter into the sale 
transaction.
    14. A written statement from an authorized official of the proposed 
SBLC that the entity intends to operate as an SBA Lender for a period 
of not less than three years and that the licensee's significant 
deviation from the 3-year business plan, as described in #7 above, may 
be subject to corrective action.

VI. SBLC Evaluation Process

    SBA reserves the right to deny any entity applying for an SBLC 
license, in its sole discretion. In addition to SBA's evaluation of the 
elements required in the SBLC Application, SBA may consider additional 
factors in its

[[Page 65177]]

evaluation. These factors include, but are not limited to:
     The lending policies of the proposed SBLC and their 
alignment with SBA's mission;
     Historical performance measures (such as default, purchase 
and loss rate);
     Whether the applicant entity or any officers, directors, 
managing partners, managing members, Key Employee(s) of the proposed 
SBLC, which includes senior managers, members of loan committees, and 
individuals who have a meaningful participation in the direction of the 
operations, policies, or financial decisions of the proposed SBLC), or 
other individuals or entities that propose to hold an equity interest 
of at least ten percent of the economic interest in any class of stock 
or ownership interest in the proposed SBLC is subject to any legal 
proceedings, enforcement action, order or agreement with a regulator or 
the presence of other related concerns;
     Other performance data associated with the proposed SBLC, 
its parent company, or its senior management team, along with other 
relevant information;
     Ability to address gaps in small business lending, 
especially those not served by the existing 7(a) Lender population, 
including: small-dollar lending, loans to underserved populations, and 
loans to support small businesses' efforts to reduce climate change 
and/or to help small businesses through climate change. Applicants may 
present potential market gaps and address their plan and capability to 
address them;
     Affiliation with lenders or lender service providers 
previously sanctioned by SBA; and
     The ability to sustain significant SBA 7(a) lending 
activities for at least three years.
    In the review process, SBA will not consider the timing of 
application submission as long as a substantially complete application 
is submitted within an open application period.
    Once received, the Director, Office of Financial Program Operations 
(D/OFPO), in consultation with the Director, Office of Credit Risk 
Management (D/OCRM), Director, Office of Financial Assistance (D/OFA), 
Director, Office of Performance and System Management (D/OPSM), and the 
Deputy Associate Administrator of the Office of Capital Access (DAA/
OCA) or designee, makes the final determination on the application.
    SBA will provide written notification to all applicants whether 
they have been approved. SBA reserves the right to perform additional 
due diligence of a license awardee prior to a final decision.

VII. SBLC Timeline

    The SBLC application period is open as of Monday, September 2, 
2024, and SBA will continue accepting applications through 11:59 p.m. 
Eastern time on Tuesday, October 15, 2024. SBA will close the 
application period, review and process all applications in accordance 
with the instructions provided above, and award up to three SBLC 
licenses. SBA anticipates issuing new SBLC licenses in late 2024. SBA 
may issue licenses at a future date to applicants participating in this 
open period.

VIII. CA SBLC Application

    The entity applying for a new CA SBLC license must submit an 
executed electronic scanned copy (in pdf format) to [email protected] 
addressing each of the elements set forth below (``CA SBLC 
Application''). The CA SBLC Application must be complete and organized 
in tabular format. The application must include:
    1. The Legal name, address, telephone, and email address of the 
proposed CA SBLC.
    2. The following information:
    a. A copy of the applicant's IRS Tax Exempt certification and 
evidence of continued non-profit status (in compliance with IRS Form 
990 requirements, if applicable).
    b. A copy of a Certificate of Good Standing from the Secretary of 
State from the State where the lender is organized.
    c. An opinion of independent counsel that the lender is (1) duly 
formed, organized and validly existing and in good standing under the 
laws of the state of organization, (2) chartered or registered to 
conduct business in the lender's proposed operating area, and (3) in 
compliance with applicable local, State and Federal laws in connection 
with the formation and organization of the lender. ``Independent 
Counsel'' is counsel that is not an ``Associate of the lender'' as 
defined in 13 CFR 120.10.
    d. A list of officers and directors. For each individual listed, 
include a resume and SBA Form 1081, Statement of Personal History, 
signed and dated within 90 days of submission to SBA. Pursuant to 
Procedural Notice 5000-856893 any officer or director who answers 
``yes'' to question numbers 10a, 10b, 10c, 11a, or 11b on the form must 
also submit an explanation and fingerprint cards.
    e. A list of key personnel (current and proposed) who will be 
involved in loan packaging, processing and underwriting, closing, 
disbursing, servicing and liquidating the lender's 7(a) loans. For each 
key individual listed, include a resume and SBA Form 1081 signed and 
dated within 90 days of submission to SBA. Pursuant to Procedural 
Notice 5000-856893 any key employee who answers ``yes'' to question 
numbers 10a, 10b, 10c, 11a, or 11b on the form must also submit an 
explanation and fingerprint card. If any of these services are 
contracted out, that should be noted in the applicant's business plan 
explaining what those services are and how the CASBLC Applicant 
exercises control over the services provided. A copy of the contract 
should also accompany the application.
    f. A certified copy of a Resolution of the Board of Directors 
authorizing submission of the application.
    g. A copy of the most recent certification from the U.S. Treasury 
Department or CDFI Fund (if applicable).
    h. A business plan addressing the applicant's small business 
lending activities and proposed operations. The plan should include, at 
a minimum:
    i. An organizational chart with narrative description of 
organizational units. The organizational chart must also present and 
describe affiliated entities and the relationship between them.
    ii. A narrative description of proposed operations including the 
internal organizational units involved in sourcing, evaluating and 
underwriting, closing, disbursing, servicing and liquidating SBA 7(a) 
loans.
    iii. Volume projections for planned CASBLC lending activity for the 
first three years of participation.
    iv. Projected balance sheet, income statement and statements of 
cash flows for two years, along with the related interest rate, 
default, and prepayment assumptions. The plan projections should be 
assembled under three different operating scenarios--normalized 
activity, activity assuming a 30 percent reduction in projected 
lending, and activity assuming a 50 percent reduction in projected 
lending. If applicable, the projections should also address the planned 
level and type of secondary market activity.
    v. Description of available M&TA or the procedure for referrals to 
outside assistance; a plan for identifying appropriate assistance for 
each borrower; a description of how the Lender will track the type of 
M&TA recommended for each borrower at the time the loan was made; and 
identification of M&TA services actually provided.

[[Page 65178]]

    vi. Description of lending activities, particularly in the area of 
small business lending, including data on the applicant's existing 
small business loan portfolio, such as number of loans made, 
distribution of size and age of loans made, use of proceeds, type of 
loans made (secured or unsecured, revolving, term, etc.). Small 
business lending may have been done by a related organizational entity 
such as its parent or an affiliate. The Applicant must demonstrate that 
it has at least 20 similarly sized commercial or business loans (either 
guaranteed or non-guaranteed) in its portfolio. (If the lender plans to 
continue to work with the related organizational entity if approved as 
a CA Lender, an LSP agreement may be required. See SOP 50 10 for 
further guidance on LSP agreements.)
    vii. Description and data on the applicant's client demographics 
and current and/or planned service area including the CA underserved 
markets in that area, the small business community and its financing 
needs, and the relevant economic, unemployment and poverty 
characteristics for the area.
    i. Copies of the applicant's year-end audited financial statements 
for the last two years. If the applicant has no prior audited financial 
statements, it may submit consolidated financial statements that have 
been certified as ``true and correct'' by Lender's senior financial 
officer for consideration. (CASBLC licensees are required to comply 
with 13 CFR 120.463, SBA's regulatory accounting requirements for SBA 
Supervised Lenders)
    j. Interim financial statements dated within 90 days of the 
application, covering the period from the last audited statement to the 
end of the most recent quarter.
    k. A schedule of funding sources and funds received and available 
for the two year period covered by the audited financial statements.
    l. Current delinquency, default and loss rates for the applicant's 
entire small business loan portfolio for the prior two fiscal years in 
consolidated format. Loan performance data is also acceptable for 
consideration from the applicant's parent or its affiliates to 
substantiate a sufficient history of similar small business lending 
experience in the organization.
    m. A description of existing loan loss reserve methodology, 
including any risk assessments or classifications. This should include 
a schedule of loan loss reserve components with calculations for the 
previous eight quarters, and a description of the loan loss reserve 
allocations for all loan programs in which the applicant currently 
participates.
    n. A copy of lending policies and procedures governing business 
loan origination, closing, servicing and liquidation.
    o. Any other information the lender considers relevant for SBA to 
consider in evaluating the application. To the degree an applicant has 
provided equivalent information on or as part of an application or for 
continued participation in the CDC, Microloan, ILP or CDFI programs, 
that information may be substituted provided it meets the intent of the 
requirement. SBA may follow up if additional information is needed.
    3. Certifications
    a. The applicant must certify that it has provided filed articles 
of incorporation and by-laws to either the SBA or the CDFI Fund in 
connection with its participation in the 504, Microloan, ILP, and/or 
CDFI programs, and that those organizing documents have not materially 
changed. If material changes have occurred, a copy of the current 
articles of incorporation and/or by-laws must be included with the 
application.
    b. The applicant must either certify that it is not subject to 
regulation by a state regulator or, if the applicant is subject to 
state regulation, it must demonstrate that it is in good standing with 
its state regulator. The lender's written request to participate must 
include a written statement that to the best of its knowledge, the 
lender has satisfactory: (i) financial condition (e.g., capital and 
liquidity); (ii) small business credit administration policies, 
procedures, and practices that it continues to adhere to in its 
operations; and (iii) small business servicing policies, procedures, 
and practices that it continues to adhere to in its operations. When 
reviewing good standing, SBA will look to see that a lender does not 
have significant deficiencies or weaknesses in these areas. 
``Significance'' may be evidenced by the number or seriousness of the 
deficiencies, as determined by SBA in its discretion. SBA will verify 
any good standing statement where possible with public (e.g., Cease and 
Desist Orders and Call Reports) and/or non-public information from the 
lender's primary and/or other regulators. Additionally, the following 
information must be included:
     A copy of the State statute and/or regulations governing 
the applicant's operations;
     A copy of the latest examination report of the applicant 
by the State financial regulator, as authorized; and
     A description of the State prescribed capital requirements 
and a certification that the applicant meets these established 
requirements.

IX. CA SBLC Evaluation Process

    SBA reserves the right to deny any entity applying for a CA SBLC 
license, in its sole discretion. In addition to SBA's evaluation of the 
elements required in the CA SBLC Application, SBA may consider 
additional factors in its evaluation. These factors include:
     The lending policies of the proposed CA SBLC and their 
alignment with SBA's mission;
     Historical performance measures (such as default, purchase 
and loss rate);
     Whether the applicant is subject to any legal proceedings, 
enforcement action, order or agreement with a regulator or the presence 
of other related concerns;
     Other performance data associated with the acquiring 
concern or its senior management team, along with other relevant 
information;
     Affiliation with lenders or lender service providers 
previously sanctioned by SBA; and
     Ability to address gaps in small business lending, 
especially those not served by the existing 7(a) Lender population, 
including small-dollar lending, loans to underserved populations, and 
loans to support small businesses through climate change. Applicants 
may present potential market gaps and address their plan and capability 
to address them.
    In the review process SBA will not consider the timing of the 
application submission, so long as the application is submitted within 
the application period. The Director, Office of Credit Risk Management 
(D/OCRM) makes the final determination on the application.
    SBA will provide written notification to all applicants whether 
they have been approved. Approval of a CA SBLC license awardee will be 
conditioned on completion of training on CA SBLC Loan Program 
Requirements.

X. CA SBLC Timeline

    The CA SBLC application period is open as of Monday, September 2, 
2024, and SBA will continue accepting applications through 11:59 p.m. 
Eastern time on Friday, December 20, 2024. During the application 
period, SBA will review applications on a rolling basis and approve 
based on each applicant's merit and readiness to become a CA-SBLC. SBA 
has discretion to eliminate any application that is incomplete or

[[Page 65179]]

inconsistent with the application instructions.

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2024-17644 Filed 8-8-24; 8:45 am]
BILLING CODE 8026-09-P