ALP Express Pilot to Permanent Status, 84831-84836 [2024-24753]
Download as PDF
<![CDATA[
Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Proposed Rules
§ 927.236
Fresh pear assessment rate.
Erin Morris,
Associate Administrator, Agricultural
Marketing Service.
[FR Doc. 2024–24773 Filed 10–23–24; 8:45 am]
BILLING CODE P
SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
RIN 3245–AI21
ALP Express Pilot to Permanent Status
U.S. Small Business
Administration.
ACTION: Notice of proposed rulemaking.
AGENCY:
The U.S. Small Business
Administration (‘‘SBA’’ or Agency) is
proposing to make permanent the
increased delegated authorities made
available under the ALP Express Pilot
for Certified Development Companies
(‘‘CDCs’’) approved for the Accredited
Lenders Program (‘‘ALP’’). These
increased delegated authorities for 504
loans of $500,000 or less (‘‘ALP Express
authority’’) were authorized under the
Economic Aid to Hard-hit Small
Businesses, Nonprofits, and Venues Act
(Economic Aid Act or EAA). When
these increased delegated authorities
expired on September 30, 2023, SBA
implemented the ALP Express Pilot in
October 2023 to allow SBA to further
evaluate the improved customer service
levels for SBA Borrowers and the use of
these increased delegated authorities by
ALP CDCs. The ALP Express Pilot
expires on September 30, 2025. SBA is
proposing rules to make the pilot
permanent and is seeking public
comment to help the Agency identify
which parts of the pilot have been
successful and which may need further
modification. SBA notified Congress of
the pilot prior to OMB approval and
notified Congress of the intent to
convert the pilot to become a permanent
part of the 504 Loan Program in
September 2024.
lotter on DSK11XQN23PROD with PROPOSALS1
SUMMARY:
VerDate Sep<11>2014
16:25 Oct 23, 2024
Jkt 265001
SBA must receive comments on
this proposed rule on or before
November 25, 2024.
ADDRESSES: You may submit comments,
identified by SBA docket number
Docket No. SBA–2023–0012, by any of
the following methods:
• Federal eRulemaking Portal:
https://www.regulations.gov/. Follow
the instructions for submitting
comments.
• Mail: Gregorius Suryadi, Office of
Financial Assistance, U.S. Small
Business Administration, 409 Third
Street SW, Suite 8300, Washington, DC
20416.
• Hand Delivery/Courier: Gregorius
Suryadi, 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 Gregorius Suryadi, Office
of Financial Assistance, U.S. Small
Business Administration, 409 Third
Street SW, Suite 8300, Washington, DC
20416; or send an email to
gregorius.suryadi@sba.gov. 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:
Gregorius Suryadi, Office of Financial
Assistance, U.S. Small Business
Administration at (202) 205–6806 or
gregorius.suryadi@sba.gov. 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 TTYBased Telecommunications Relay
Service teletype service at 711.
SUPPLEMENTARY INFORMATION:
DATES:
On and after July 1, 2024, the
following base rates of assessment for
fresh pears are established for the Fresh
Pear Committee:
(a) $0.516 per 44-pound net weight
standard box or container equivalent for
any or all varieties or subvarieties of
fresh pears classified as ‘‘summer/fall’’;
(b) $0.516 per 44-pound net weight
standard box or container equivalent for
any or all varieties or subvarieties of
fresh pears classified as ‘‘winter’’; and
*
*
*
*
*
1. Background Information
The 504 Loan Program is an SBA
financing program authorized under
title V of the Small Business Investment
Act of 1958, as amended, 15 U.S.C. 695
et seq (‘‘Small Business Investment
Act’’). The core mission of the 504 Loan
Program is to provide long-term
financing to small businesses for the
purchase or improvement of land,
buildings, and major equipment, and to
facilitate the creation or retention of jobs
and local economic development. Under
the 504 Loan Program, loans are made
PO 00000
Frm 00004
Fmt 4702
Sfmt 4702
84831
to small business applicants by Certified
Development Companies (‘‘CDCs’’),
which are certified and regulated by
SBA to promote economic development
within their community. In general, a
project in the 504 Loan Program (a ‘‘504
Project’’) includes: a loan obtained from
a private sector lender with a senior lien
covering at least 50 percent of the
project cost; a loan obtained from a CDC
(a ‘‘504 Loan’’) with a junior lien
covering up to 40 percent of the total
cost (backed by a 100 percent SBA
guaranteed debenture); and a
contribution from the Borrower of at
least ten percent equity.
There are three types of CDCs that
participate in the 504 Loan Program.
This document relates to the temporary
increased delegated authority that was
granted, in accordance with section
328(b) of the Economic Aid Act
(‘‘EAA’’), to CDCs that are approved by
SBA to participate in the Accredited
Lenders Program (hereafter ‘‘ALP
CDCs’’), which is authorized under
section 507(a) of the Small Business
Investment Act. Under section 507(c) of
the Small Business Investment Act, SBA
is authorized to develop an expedited
procedure for processing a loan
application or servicing action
submitted by ALP CDCs. [15 U.S.C.
697d.]
Prior to the Economic Aid Act, ALP
CDCs were required to obtain SBA’s
approval on both the loan’s eligibility
and creditworthiness determinations. In
addition, ALP CDCs only had delegated
authority to make certain ‘‘No Adverse
Change’’ certifications prior to loan
closing without SBA’s review and
approval and were only authorized to
close 504 loans under the expedited
loan closing procedures applicable to a
Priority CDC. Further, ALP CDCs were
required to obtain SBA’s approval for
most servicing actions. Section 328(b) of
the EAA temporarily provided ALP
CDCs increased delegated authority to
‘‘approve, authorize, close and service
covered loans,’’ for loans of not more
than $500,000 and that are not made to
a borrower in an industry with a high
rate of default as defined by SBA
(hereafter referred to as ‘‘ALP Express
Loans’’). SBA implemented these
increased delegated authorities with the
publication of an interim final rule on
June 27, 2022. (87 FR 37979). Pursuant
to the EAA, these delegated authorities
were to expire on September 30, 2023.
In order to evaluate the use of these
increased delegated authorities by ALP
CDCs and to identify opportunities for
further modification, SBA developed
the ALP Express Pilot program to
provide these increased delegated
authorities through September 30, 2025
E:\FR\FM\24OCP1.SGM
24OCP1
84832
Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Proposed Rules
to ALP CDCs (hereafter referred to as
‘‘ALP Express Pilot Loans’’). The ALP
Express Pilot’s delegated authorities in
effect represented a continuation of the
ALP Express authority provided by the
Economic Aid Act. (88 FR 69529
(October 6, 2023)). When ALP Express
delegated authorities become
permanent, SBA is not including the
prohibition found in section 328(b) of
the EAA against making loans with ALP
Express authority to a borrower in an
industry with a high rate of default
because this mandatory requirement
sunset with the EAA expiration date. A
subsequent review of the 504 portfolio
in June 2024 also found that no ALP
Express Pilot program loans or covered
loans made pursuant to Section 328(b)
of the EAA were in default or
liquidation as of June 30, 2024.
Pursuant to its authority set forth in
Section 507(c) of the Small Business
Investment Act (15 U.S.C. 697d(c)),
which authorizes SBA to develop
expedited procedures for processing a
loan application or servicing action
submitted by ALP CDCs, SBA proposes
to make permanent the increased
delegated authorities available under
the ALP Express Pilot. The Agency
requests comments on all aspects of
regulatory revisions in this proposed
rule.
2. Evaluation Criteria for ALP Express
Pilot
SBA typically initiates a pilot loan
program to test an innovative approach
to enhance or streamline assistance to
small businesses, or a subset of small
businesses, and/or lower taxpayer cost
or risk. Pilot loan program evaluations
assess how well a program is achieving
its objectives and other aspects of
performance in the context in which the
program operates. Our ongoing
evaluations of the 504 program and
delegations authorized will give the
SBA the opportunity to refine the design
of the program and assist in determining
whether the program operations have
resulted in the desired benefits for
participants.
By documenting on SBA Form 1244
whether the ALP CDC is using its ALP
Express authority when submitting an
application for an ALP Express Pilot
Loan, SBA was able to track ALP CDCs’
use of this increased delegated
authority. In addition to the program
changes introduced through the ALP
Express Pilot, on May 11, 2023, SBA
instituted an E-Tran risk mitigation
technology compliance check on all 504
loans, including those with ALP Express
authority, and streamlined the
affiliation policy guidance that reduced
the amount of paperwork required for
submitting loan packages. The ALP
Express ‘‘covered loans’’ had performed
well prior to this quality control
upgrade and continue to perform well
with this enhanced fraud risk
management systems upgrade in place.
The processing time for ALP Express
loans was reduced significantly from an
average of 5 days to 2.3 days (one loan
processed in 3 hours). The quality of the
ALP Express Pilot 504 loans have been
reviewed by the SBA Office of Credit
Risk Management (OCRM) and present
low risk to the 504 portfolio. The E-Tran
risk mitigation protocols consists of
background checks on 504 borrowers,
checks of USCIS verifications,
confirmation of the identity of the
borrower using their social security
number or tax identification number
and verification by checking
government databases if the applicant
has prior loss on government debt. This
enhancement streamlines the
application process requirements for the
CDCs and provides government
resources to assist in detecting and
preventing fraud for 504 applicants.
SBA reviewed the following data
related to ALP CDCs and their use of
ALP Express authority under the
Economic Aid Act and used the same
evaluation criteria for the ALP Express
Pilot:
A. Did the number and percentage of
504 loans in the portfolio under
$500,000 increase as a result of the
availability of ALP Express authority? It
is hard to evaluate the success of ALP
Express based solely on the increased
number of 504 loans during this period,
as there were other factors that
influenced demand. During the
pandemic, SBA experienced a surge of
504 loan activity in part due to Section
1112 of the CARES Act, which
authorized SBA to make the loan
payments on SBA loans for SBA
borrowers for six months (or more, in
some cases). For a more accurate
comparison, loan activity prior to this
surge period was also considered.
Therefore, SBA analyzed recent and prepandemic activity levels, as shown in
table 1.
TABLE 1—PORTFOLIO TRENDS FOR 504 LOANS UNDER $500,000
[FY 19 to FY 24]
Non-ALP Express loans
ALP Express loans
Fiscal Yr.
No.
2019
2020
2021
2022
2023
2024
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
.................................................................................
2,983
3,426
4,471
3,414
1,113
908
% Ch
No.
% Ch
....................
15
31
¥24
¥67
¥18
....................
....................
....................
162
1,060
772
....................
....................
....................
....................
554
¥27
Total 504 loans under
$500,000
No.
2,983
3,426
4,471
3,576
2,173
1,680
% Ch
....................
15
31
¥20
¥39
¥23
lotter on DSK11XQN23PROD with PROPOSALS1
* Note: ALP Express Loans were made available in June 2022.
Table 1 provides 504 Loan Program
activities for loans of $500,000 or less.
In FY 2019, SBA approved 2,983 nonALP Express loans, and in FY 2020,
SBA approved 3,426 loans, an increase
of 15 percent from FY 2019. In FY 2021,
SBA approved 4,471 loans, an increase
of 31 percent from FY 2020. In FY 2020,
SBA approved 3,414 loans, a decrease of
24 percent from FY 2020. In FY 2023,
VerDate Sep<11>2014
16:25 Oct 23, 2024
Jkt 265001
SBA approved 1,113 loans, a decrease of
67 percent from FY 2022. For FY 2024
starting from October 1, 2024 until June
30, 2024, when this NPRM was drafted,
SBA approved 908 loans.
While the Economic Aid Act
authorized these increased delegated
authorities, SBA did not implement
ALP Express until June 27, 2022. From
June 27, 2022 to September 20, 2022,
PO 00000
Frm 00005
Fmt 4702
Sfmt 4702
SBA approved 162 ALP Express loans
for a combined total of 3,576 loans of
504 loans of $500,000 or less. In FY
2023, SBA approved 1,060 ALP Express
loans, and at the same time the number
of approved non-ALP Express loan of
$500,000 or less was 1,113 for a
combined total of 2,173 of 504 loans for
$500,000 or less. Finally, for FY 2024
from October 1, 2024 to June 30, 2024,
E:\FR\FM\24OCP1.SGM
24OCP1
lotter on DSK11XQN23PROD with PROPOSALS1
Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Proposed Rules
SBA approved a total of 908 non-ALP
Express loans of $500,000 or less, while
approving 772 ALP Express loans,
during the same time period, for a
combined total of approved 504 loans of
$500,000 or less of 1,680. Even though
the total number of non-ALP Express
decreased in FY 2023 and in the first
three quarters of FY 2024, the total
approved ALP Express loans were
almost the same number as the
approved non-ALP Express loan.
B. How do the default rates of ALP
Express loans compare with similarly
sized loans not processed and serviced
using this authority? Since the
implementation of the ALP Express
Pilot program (June 27, 2022) through
the end of June 2024, SBA has approved
1,994 ALP Express Pilot loans for a total
dollar amount of $579,958,000 with no
defaults reported. At the same time,
SBA approved 4,581 non-ALP Express
loans for a total dollar amount of
$1,391,408,000 with no defaults
reported.
C. Did ALP Express loan approvals
and servicing turn times improve,
resulting in enhanced customer service?
Currently the average approval
processing time of ALP Express loans is
2.3 business days, one day less than
regular 504 loan applications. The
fastest approval processing time
recorded during the ALP Express Pilot
program has been three hours. The
average processing time is calculated
based on loan volume and the number
of loan officers available at the SBA loan
center processing 504 loans at the time
of application. This is compared to the
standard five business days processing
time for 504 new loan applications at
the SBA loan processing center, which
during pandemic had increased up to 10
business days due to the 504 loan
volume surge and the Section 1112
payment impact.
SBA issued an interim final rule to
implement the ALP Express temporary
delegated authority authorized under
the Economic Aid Act with an effective
date of June 27, 2022. (87 FR 37979).
Between June 27, 2022, and September
30, 2022 (the end of FY 2022), SBA
approved 162 ALP Express Pilot loans
for a total loan amount of $49,543,000.
In FY 2023, SBA approved 1,060 ALP
Express Pilot loans for a total loan
amount of $306,236,000. In FY 2024,
from October 1, 2024 to June 30, 2024,
SBA has approved 772 ALP Express
loans for a total dollar amount of
$224,179,000.
In comparison, in FY 2022 SBA
approved 3,414 non-ALP Express loans
of $500,000 or less and 162 ALP Express
Pilot loans for a period of June 27, 2022
to September 30, 2022, for a combined
VerDate Sep<11>2014
16:25 Oct 23, 2024
Jkt 265001
total of 3,576 loans of $500,000 or less.
In FY 2023 SBA approved 1,113 nonALP-Express loans and 1,060 ALP
Express Pilot loans, for a combined total
of 2,173 loans. This was due to a return
to pre-pandemic lending levels before
the surge created by the availability of
Section 1112 funding. Even though the
total combined approved loans
decreased by 39 percent due to COVID–
19, the ALP Express Pilot loans
contributed almost half of the total
combined approved 504 loans under
$500,000. Finally, for FY 2024 (October
1, 2023, to June 30, 2024), SBA
approved 908 non-ALP Express loans of
$500,000 or less and 728 ALP Express
Pilot loans for a combined of 1,636
loans with a total loan amount of
$224,179,000.
Therefore, SBA has used the standard
five Government Accountability Office
evaluation methodologies for evaluating
a pilot beyond the Federal Register
notice stated objectives in the pilot
notice and added additional an
explanation: (1) The measurable
objectives achieved through the pilot
were demonstrated by increased ALP
processing of loans under $500,000 and
additional CDCs that applied to become
ALP CDCs under the pilot; (2) The data
SBA collected and analyzed was based
on actual 504 loan portfolio
performance; (3) SBA evaluated
acceptable costs of the pilot and
reviewed potential losses and obtain
cost savings due to staff time not
required to review credit decisions or
process certain servicing actions with
no increase of costs to SBA; (4) due to
the limited universe of CDCs and the
self-selection opt in process, SBA
considers there were sufficient numbers
and types of lenders using the pilot; (5)
the factors evidencing a continuing need
for the pilot included public support
from the CDCs and their trade
association and approval to continue to
the pilot by the SBA Administrator; and
(6) time frames for completion which
necessitate this NPRM to convert the
pilot to permanent status or the
delegated authorities of the ALP Express
Pilot will expire on September 30, 2025.
By beginning the NPRM process in
November 2024, this should allow the
full clearance process by SBA and OMB
and the public comment period and
comment disposition to move to the
final rule making and publication stage
before the September 30, 2025,
deadline.
CDC’s Authorities
Under the ALP Express Pilot, SBA
delegated to ALP CDCs the authority to
make the final decision with respect to
the applicant’s creditworthiness on ALP
PO 00000
Frm 00006
Fmt 4702
Sfmt 4702
84833
Express Pilot Loans. SBA continued to
be responsible for reviewing each 504
loan to ensure that it meets all loan
program requirements for program
eligibility, and the risk management ETran enhancement provided a tool to
assist with fraud detection and
prevention. SBA proposes to make these
increased authorities permanent for
loans that meet ALP Express eligibility
criteria. SBA is not proposing any
additional changes to current ALP
Express underwriting, servicing or
closing authorities as established by the
ALP Express Pilot Program. SBA’s
Office of General Counsel and the Office
of Credit Risk Management noted the
top five lender oversight findings of the
closed ALP Express loans were minor
and resolved promptly. Based on the
excellent performance of this cohort of
the 504 loans portfolio, there has been
low risk to the national portfolio, due to
the implementation of the ALP Express
Pilot. ALP CDCs appear to have used
their delegated authority as prudent
lenders. Of all ALP Express approved
loans since inception of the pilot
through June 30, 2024, none are in
default or in liquidation.
SBA also delegated to ALP CDCs the
authority to approve certain servicing
actions after closing on ALP Express
Pilot Loans (though ALP CDCs were still
required to notify the appropriate SBA
servicing center of their approval of any
servicing action on ALP Express Pilot
Loans). Finally, SBA delegated to ALP
CDCs the responsibility to undertake all
actions necessary to close the ALP
Express Pilot Loan and Debenture in
accordance with the expedited loan
closing procedures applicable to a
Priority CDC and with 13 CFR 120.960.
SBA is proposing to make these
increased authorities permanent for
loans that meet ALP Express eligibility
criteria. CDCs use these delegated
authorities to approve certain servicing
actions after closing. SBA has not found
issues with the ALP Express loan cohort
performance or risk that have become a
concern and prompted SBA to
reconsider the increased delegated
authorities.
In their own discretion, ALP CDCs
may decide not to exercise their
delegated authority with respect to an
ALP Express Pilot Loan and may instead
submit the loan to SBA under
nondelegated procedures. ALP CDCs
may not use their ALP Express authority
to service a loan that was approved
under non-delegated authority that
could have been made as an ALP
Express Pilot Loan. In addition, PCLP
CDCs may decide to process an ALP
Express Pilot Loan under their status as
an ALP CDC instead of as a PCLP CDC,
E:\FR\FM\24OCP1.SGM
24OCP1
84834
Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Proposed Rules
thereby not requiring the CDC to comply
with Loan Loss Reserve Fund
requirements for that loan. SBA is
proposing to make these increased
authorities permanent for loans that
meet ALP Express eligibility
requirements and the Loan Loss Reserve
Fund requirements for PCLP CDCs that
process ALP Express Loan under their
status as an ALP CDC instead of as a
PCLP CDC.
In making, closing, servicing, or
liquidating an ALP Express Pilot Loan,
CDCs were required to follow all Loan
Program Requirements under the 504
Loan Program. This included the loan
closing and disbursement procedures in
SOP 50 10 7.1 and the servicing and
liquidation requirements in 13 CFR
120.535, 120.536, 120.540, 120.842 and
120.960, as well as SOP 50 55. SBA does
not propose any changes to these
responsibilities in making the increased
authorities available to ALP CDCs under
the ALP Express Pilot delegations of
authority permanent.
For further guidance on ALP Express
authority, SBA published the ALP
Express Pilot Program Guide. This guide
will continue in use until SOP 50 55 is
amended after this pilot is converted to
a permanent program.
lotter on DSK11XQN23PROD with PROPOSALS1
Application and Reporting
Requirements
CDCs are required to use the
application forms for current 504 loan
processing and execute an SBA Terms
and Conditions document for each 504
loan, including ALP Express Pilot loans,
as set forth in SOP 50 10 7.1.
By documenting on SBA Form 1244
whether the ALP CDC is using its ALP
Express authority when submitting an
application for an ALP Express Pilot
Loan, SBA was able to track ALP CDCs’
use of this increased delegated
authority. CDCs were also required to
comply with the reporting requirements
in 13 CFR 120.830. SBA does not
propose any changes to these
responsibilities in making the increased
authorities available to ALP CDCs under
the ALP Express Pilot Program
permanent.
Lender Oversight
ALP CDC oversight procedures shall
continue to follow the requirements set
forth in 13 CFR part 120, subpart I and
SOPs 50 53 (Lender Supervision and
Enforcement) and SOP 51 00 (On-Site
Lender Reviews and Examinations). The
SOPs can be found on the SBA website.
ALP CDCs will be monitored both for
performance and other risk
characteristics as well as for compliance
with the requirements of the ALP
Express Pilot Program. The ALP CDC
VerDate Sep<11>2014
16:25 Oct 23, 2024
Jkt 265001
must maintain compliance with the
requirement that it only makes ALP
Express Pilot Loans in an amount of
$500,000 or less, along with all other
loan program requirements. ALP CDCs
also will be subject to 13 CFR 120.1400
through 120.1600 and the provisions of
SOP 50 53 concerning supervision and
enforcement. SBA does not propose any
changes to these responsibilities in
making the increased authorities
available to ALP CDCs under the ALP
Express Pilot delegations of authority
permanent.
Compliance With Executive Orders
12866, 12988, 13132, 13563, and 14904,
the Congressional Review Act, (5 U.S.C.
801–808), Paperwork Reduction Act (44
U.S.C., Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601–612)
Executive Orders 12866 and 13563
Executive Order 12866, ‘‘Regulatory
Planning and Review,’’ directs agencies
to assess all costs and benefits of
available regulatory alternatives and, if
regulation is necessary, to select
regulatory approaches that maximize
net benefits (including potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity). Executive Order 13563,
‘‘Improving Regulation and Regulatory
Review,’’ emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. Executive
Order 14094, ‘‘Modernizing Regulatory
Review,’’ amends section 3(f) of
Executive Order 12866 and supplements
and reaffirms the principles, structures
and definitions governing contemporary
regulatory review established in
Executive Order 12866 and Executive
Order 13563. The OMB Office of
Information and Regulatory Affairs has
determined that this rulemaking is not
a significant regulatory action. SBA has
drafted a cost-benefit analysis for the
public’s information in the next section.
result of proceeding under the
emergency provision at Executive Order
12866, section 6(a)(3)(D), based on the
need to move expeditiously to mitigate
the COVID–19 pandemic, SBA was able
to reduce the processing and approval
time of loan applications that were
favorable to small businesses that need
immediate financial assistance from the
government. The ALP Express Pilot
delegated authority has proven that ALP
CDCs are able to process, approve, and
service ALP Express Pilot loans within
the guidelines issued by the SBA. SBA
hopes to make these reductions
permanent. Accordingly, the proposed
change will reduce regulatory burdens,
reduce the number of hours spent
processing an application to deliver a
loan for both SBA and lenders and
increase access to capital for small
businesses.
B. Benefits and Costs of the Rulemaking
What are the potential benefits and costs
of this Regulatory Action?
SBA anticipates that implementing
the ALP Express Loan authority and
providing ALP CDCs with greater
authority to approve and service loans
will reduce processing time and
therefore benefit small businesses, their
employees, and the communities they
serve.
As a result of the temporary 504
Express Loan Authority (ALP Express
Pilot) SBA provides to ALP CDCs, the
processing time and approval of loans
for $500,000 or less has an average of
2.3 business days whereas the
processing time of regular 504 loans
non-delegated authority has an average
of 5 days. Therefore, small businesses
will have access to capital to start, grow,
and sustain their businesses in
reasonable time. SBA does not
anticipate additional costs or impact on
the subsidy to operate ALP Express
loan.
A. Cost-Benefit Analysis
C. What alternatives have been
considered?
Is there a need for the Regulatory
Action?
Access to capital is one of the primary
challenges for small business to start,
grow and sustain their business. SBA
504 loan programs serve an important
role in business lending for small
businesses that do not have credit
available elsewhere from conventional
sources on reasonable terms. The
Agency believes that a streamlined
process for small dollar loans
particularly for loans of $500,000 or less
will facilitate increased participation by
small business owners, especially those
in underrepresented communities. As a
SBA could allow the pilot to expire
and resume the ALP authority
delegation limited under the 504
program requirements prior to the
implementation of the Economic Aid
Act. Due to the efficiency gains under
the ALP Express pilot, SBA considered
it more prudent to retain these delegated
authorities to reduce regulatory burdens
for CDCs with ALP approved status and
responsibly streamline the processing,
approval and closings of 504 loan
application under $500,000 without
substantially increasing the risk of
waste, fraud, or abuse of the programs,
or threatening the integrity of the
PO 00000
Frm 00007
Fmt 4702
Sfmt 4702
E:\FR\FM\24OCP1.SGM
24OCP1
Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Proposed Rules
business loan programs or taxpayer
dollars.
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 would not have
preemptive effect or retroactive effect.
Executive Order 13175
This proposed rule would not have
Tribal implications under Executive
Order 13175, Consultation and
Coordination with Indian Tribal
Governments, because it would not have
a substantial direct effect 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.
lotter on DSK11XQN23PROD with PROPOSALS1
Executive Order 13132
This rulemaking would not have
federalism implications as defined in
Executive Order 13132, Federalism. It
would not have substantial direct effects
on the States, on the relationship
between the National Government and
the States, or on the distribution of
power and responsibilities among the
various levels of government, as
specified in the Executive order. As
such it does not warrant the preparation
of a Federalism Assessment.
Paperwork Reduction Act, 44 U.S.C.,
Ch. 35
This rulemaking does not impose
additional reporting or recordkeeping
requirements under the Paperwork
Reduction Act, 44 U.S.C. chapter 35. In
order to implement the Economic Aid
Act, SBA determined that it was
necessary to temporarily modify SBA
Form 1244, which was approved on
November 22, 2022, under OMB Control
Number 3245–0071, Application for
Section 504 Loans, to conform the
application with the revised
requirements for ALP Express Loan
authority. The changes did not add any
new burdens for the respondents. SBA
made the following technical
corrections and clarifying changes to
SBA Form 1244: (1) revised question
number 4 on page 2 to include the
updated language of Criminal Justice
Rule; (2) added paragraph on page 4
authorizing the SBA to release
information regarding existing SBA loan
to Lender/CDC; (3) revised the
instructions on page 5 (Purpose of the
Form) to clarify that CDCs with ALP
Express Loan authority must use the
form; (4) added a new ALP Express
VerDate Sep<11>2014
16:25 Oct 23, 2024
Jkt 265001
checkbox to page 8 in the Submission
Method field; (5) added additional row
to the project table on page 9 for Other
Secured Debt to be Refinanced; and (6)
updated the instructions on pages 11
and 12 (Required Exhibits) to identify
which exhibits must be completed and
uploaded in SBA’s E-Tran system for
ALP Express Loans and which exhibits
non-ASM CDCs must complete and
upload into E-Tran. SBA obtained
emergency approval from OMB for the
revised information collection. No
additional modifications to SBA Form
1244 were necessary for the ALP
Express Pilot, and no additional
modifications to SBA Form 1244 will be
necessary for purposes of making the
ALP Express increased authorities
permanent through this rulemaking.
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
businesses, small organizations, and
small governmental jurisdictions.
Pursuant to the RFA, when an agency
issues a proposed rulemaking, it must
prepare and make available for public
comment an initial regulatory flexibility
analysis to address the impact of the
rule on small entities. However, section
605 of 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 economic
impact on a substantial number of small
entities. The rulemaking will impact 85
ALP CDCs; however, SBA believes the
impact will be positive and beneficial to
all ALP CDCs. This rulemaking makes
permanent the temporary increased
delegated authorities available under
the ALP Express Pilot program. This
will improve the approval time of 504
loan applications for loans in an amount
of $500,000 or less.
For the three-year period between FY
2022 (June 27, 2022) to FY 2024 (June
30, 2024) SBA approved 4,581 non-ALP
Express loans of $500,000 or less, for a
total dollar amount of $1,391,408,000.
In the same time period SBA approved
1,994 ALP Express loans for a total
dollar amount of $579,958,000. The
total combined approved loans for 504
loan of less than $500,000 over the same
three-year period is 6,575 loans for a
total of $1,971,366,000.
Based on the actual loans approved in
the three-year period since ALP Express
Pilot program implementation, ALP
CDCs have demonstrated success in
processing and servicing loans for less
than $500,000 less through the ALP
Express program using their ALP
PO 00000
Frm 00008
Fmt 4702
Sfmt 4702
84835
delegated authority. In addition, since
ALP Express implementation, there
have been no instances of ALP Express
in default or in liquidation. SBA
estimates the burden for completing
SBA Form 1244, ‘‘Application For
Section 504 Loans’’, including time for
reviewing instructions, gathering data
and documentation needed, and
completing and reviewing the form, is
2.5 hours. SBA will not need to change
SBA Form 1244 as a result of the
proposed rulemaking of ALP Express as
permanent program. SBA anticipates the
proposed rule will increase CDCs
participation in making loans of
$500,000 or less and increase the
number of approved 504 program loans
as a whole. The ALP Express pilot
added no additional cost burdens to
SBA, CDCs, or small business
borrowers. There were minimal changes
to forms and SBA used existing staff to
implement the pilot. The zero default
and liquidation rates of the ALP Express
pilot portfolio cohort document no
potential impact to SBA subsidy.
Based on the foregoing, the
Administrator of the SBA hereby
certifies that this rulemaking will not
have a significant economic impact on
most small businesses. The SBA invites
comments from the public on this
certification.
List of Subjects in 13 CFR Part 120
Accredited Lender Program, Certified
development companies, Community
development, Debentures, Loan
programs—business, Small businesses.
For the reasons discussed in the
preamble, the Small Business
Administration proposes to amend 13
CFR part 120 as follows:
PART 120—BUSINESS LOANS
1. The authority citation for 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), 650,
687(f), 696(3) and (7), and 697(a) and (e); sec.
521, Pub. L. 114–113, 129 Stat. 2242; sec.
328(a), Pub. L. 116–260, 134 Stat. 1182.
2. Amend § 120.842 by revising
paragraph (a) and removing paragraph
(d) to read as follows:
■
§ 120.842
ALP Express Loans.
(a) Definition. For the purposes of this
section, an ALP Express loan means a
504 loan in an amount that is not more
than $500,000 and which is
underwritten, approved, closed and
E:\FR\FM\24OCP1.SGM
24OCP1
84836
Federal Register / Vol. 89, No. 206 / Thursday, October 24, 2024 / Proposed Rules
serviced using the authorities set forth
in this section.
*
*
*
*
*
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2024–24753 Filed 10–23–24; 8:45 am]
BILLING CODE 8026–09–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2024–2411; Project
Identifier MCAI–2023–00874–R]
RIN 2120–AA64
Airworthiness Directives; Airbus
Helicopters
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
The FAA proposes to adopt a
new airworthiness directive (AD) for all
Airbus Helicopters Model SA330J
helicopters. This proposed AD was
prompted by a determination that new
or more restrictive airworthiness
limitations are necessary. This proposed
AD would require revising the existing
maintenance records by incorporating
new or more restrictive airworthiness
limitations, as specified in a European
Union Aviation Safety Agency (EASA)
AD, which is proposed for incorporation
by reference. The FAA is proposing this
AD to address the unsafe condition on
these products.
DATES: The FAA must receive comments
on this NPRM by December 9, 2024.
ADDRESSES: You may send comments,
using the procedures found in 14 CFR
11.43 and 11.45, by any of the following
methods:
• Federal eRulemaking Portal: Go to
regulations.gov. Follow the instructions
for submitting comments.
• Fax: (202) 493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
• Hand Delivery: Deliver to Mail
address above between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
AD Docket: You may examine the AD
docket at regulations.gov under Docket
No. FAA–2024–2411; or in person at
Docket Operations between 9 a.m. and
5 p.m., Monday through Friday, except
Federal holidays. The AD docket
lotter on DSK11XQN23PROD with PROPOSALS1
SUMMARY:
VerDate Sep<11>2014
16:25 Oct 23, 2024
Jkt 265001
contains this NPRM, the EASA AD, any
comments received, and other
information. The street address for
Docket Operations is listed above.
Material Incorporated by Reference:
• For EASA material identified in this
proposed AD, contact EASA, KonradAdenauer-Ufer 3, 50668 Cologne,
Germany; phone: +49 221 8999 000;
email: ADs@easa.europa.eu; website:
easa.europa.eu. You may find the EASA
material on the EASA website at
ad.easa.europa.eu.
• You may view this material at the
FAA, Office of the Regional Counsel,
Southwest Region, 10101 Hillwood
Parkway, Room 6N–321, Fort Worth, TX
76177. For information on the
availability of this material at the FAA,
call (817) 222–5110. The EASA material
is also available at regulations.gov under
Docket No. FAA–2024–2411.
Other Related Material: For Airbus
material identified in this proposed AD,
contact Airbus Helicopters, 2701 North
Forum Drive, Grand Prairie, TX 75052;
phone: (972) 641–0000 or (800) 232–
0323; fax: (972) 641–3775; website:
airbus.com/en/products-services/
helicopters/hcare-services/airbusworld.
FOR FURTHER INFORMATION CONTACT:
Adam Hein, Aviation Safety Engineer,
FAA, 1600 Stewart Avenue, Suite 410,
Westbury, NY 11590; phone: (316) 946–
4116; email: Adam.Hein@faa.gov.
SUPPLEMENTARY INFORMATION:
Comments Invited
The FAA invites you to send any
written relevant data, views, or
arguments about this proposal. Send
your comments to an address listed
under ADDRESSES. Include ‘‘Docket No.
FAA–2024–2411; Project Identifier
MCAI–2023–00874–R’’ at the beginning
of your comments. The most helpful
comments reference a specific portion of
the proposal, explain the reason for any
recommended change, and include
supporting data. The FAA will consider
all comments received by the closing
date and may amend this proposal
because of those comments.
Except for Confidential Business
Information (CBI) as described in the
following paragraph, and other
information as described in 14 CFR
11.35, the FAA will post all comments
received, without change, to
regulations.gov, including any personal
information you provide. The agency
will also post a report summarizing each
substantive verbal contact received
about this NPRM.
Confidential Business Information
CBI is commercial or financial
information that is both customarily and
PO 00000
Frm 00009
Fmt 4702
Sfmt 4702
actually treated as private by its owner.
Under the Freedom of Information Act
(FOIA) (5 U.S.C. 552), CBI is exempt
from public disclosure. If your
comments responsive to this NPRM
contain commercial or financial
information that is customarily treated
as private, that you actually treat as
private, and that is relevant or
responsive to this NPRM, it is important
that you clearly designate the submitted
comments as CBI. Please mark each
page of your submission containing CBI
as ‘‘PROPIN.’’ The FAA will treat such
marked submissions as confidential
under the FOIA, and they will not be
placed in the public docket of this
NPRM. Submissions containing CBI
should be sent to Adam Hein, Aviation
Safety Engineer, FAA, 1600 Stewart
Avenue, Suite 410, Westbury, NY
11590; phone: (316) 946–4116; email:
Adam.Hein@faa.gov. Any commentary
that the FAA receives which is not
specifically designated as CBI will be
placed in the public docket for this
rulemaking.
Background
EASA, which is the Technical Agent
for the Member States of the European
Union, has issued EASA AD 2023–0146,
dated July 14, 2023 (EASA AD 2023–
0146), to correct an unsafe condition on
Airbus Helicopters Model SA 330 J
helicopters. EASA advises that
airworthiness limitations and
certification maintenance instructions
are identified as mandatory for
continued airworthiness and that
Revision 7 of SA 330 J Maintenance
Program—PUMA 330 J Airworthiness
Limitations 5.99, Edition 2, date code
06–22, has been issued to specify all
service life limits and maintenance tasks
for SA 330 J helicopters and separate the
airworthiness limitations from the
Master Servicing Recommendations
Manual (P.R.E.). According to EASA,
failure to accomplish these instructions
could result in an unsafe condition. You
may examine EASA AD 2023–0146 in
the AD docket at regulations.gov under
Docket No. FAA–2024–2411.
Material Incorporated by Reference
Under 1 CFR Part 51
The FAA reviewed EASA AD 2023–
0146, which requires replacing
components before exceeding their life
limits and accomplishing maintenance
tasks within thresholds and intervals
specified in the ALS as defined within.
Depending on the results of the
maintenance tasks, EASA AD 2023–
0146 requires accomplishing corrective
action(s) or contacting AH [Airbus
Helicopters] for approved instructions
and accomplishing those instructions.
E:\FR\FM\24OCP1.SGM
24OCP1
]]>Agencies
[Federal Register Volume 89, Number 206 (Thursday, October 24, 2024)]
[Proposed Rules]
[Pages 84831-84836]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24753]
=======================================================================
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
RIN 3245-AI21
ALP Express Pilot to Permanent Status
AGENCY: U.S. Small Business Administration.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The U.S. Small Business Administration (``SBA'' or Agency) is
proposing to make permanent the increased delegated authorities made
available under the ALP Express Pilot for Certified Development
Companies (``CDCs'') approved for the Accredited Lenders Program
(``ALP''). These increased delegated authorities for 504 loans of
$500,000 or less (``ALP Express authority'') were authorized under the
Economic Aid to Hard-hit Small Businesses, Nonprofits, and Venues Act
(Economic Aid Act or EAA). When these increased delegated authorities
expired on September 30, 2023, SBA implemented the ALP Express Pilot in
October 2023 to allow SBA to further evaluate the improved customer
service levels for SBA Borrowers and the use of these increased
delegated authorities by ALP CDCs. The ALP Express Pilot expires on
September 30, 2025. SBA is proposing rules to make the pilot permanent
and is seeking public comment to help the Agency identify which parts
of the pilot have been successful and which may need further
modification. SBA notified Congress of the pilot prior to OMB approval
and notified Congress of the intent to convert the pilot to become a
permanent part of the 504 Loan Program in September 2024.
DATES: SBA must receive comments on this proposed rule on or before
November 25, 2024.
ADDRESSES: You may submit comments, identified by SBA docket number
Docket No. SBA-2023-0012, by any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov/.
Follow the instructions for submitting comments.
Mail: Gregorius Suryadi, Office of Financial Assistance,
U.S. Small Business Administration, 409 Third Street SW, Suite 8300,
Washington, DC 20416.
Hand Delivery/Courier: Gregorius Suryadi, 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 Gregorius Suryadi, Office of Financial
Assistance, U.S. Small Business Administration, 409 Third Street SW,
Suite 8300, 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: Gregorius Suryadi, Office of Financial
Assistance, U.S. Small Business Administration at (202) 205-6806 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:
1. Background Information
The 504 Loan Program is an SBA financing program authorized under
title V of the Small Business Investment Act of 1958, as amended, 15
U.S.C. 695 et seq (``Small Business Investment Act''). The core mission
of the 504 Loan Program is to provide long-term financing to small
businesses for the purchase or improvement of land, buildings, and
major equipment, and to facilitate the creation or retention of jobs
and local economic development. Under the 504 Loan Program, loans are
made to small business applicants by Certified Development Companies
(``CDCs''), which are certified and regulated by SBA to promote
economic development within their community. In general, a project in
the 504 Loan Program (a ``504 Project'') includes: a loan obtained from
a private sector lender with a senior lien covering at least 50 percent
of the project cost; a loan obtained from a CDC (a ``504 Loan'') with a
junior lien covering up to 40 percent of the total cost (backed by a
100 percent SBA guaranteed debenture); and a contribution from the
Borrower of at least ten percent equity.
There are three types of CDCs that participate in the 504 Loan
Program. This document relates to the temporary increased delegated
authority that was granted, in accordance with section 328(b) of the
Economic Aid Act (``EAA''), to CDCs that are approved by SBA to
participate in the Accredited Lenders Program (hereafter ``ALP CDCs''),
which is authorized under section 507(a) of the Small Business
Investment Act. Under section 507(c) of the Small Business Investment
Act, SBA is authorized to develop an expedited procedure for processing
a loan application or servicing action submitted by ALP CDCs. [15
U.S.C. 697d.]
Prior to the Economic Aid Act, ALP CDCs were required to obtain
SBA's approval on both the loan's eligibility and creditworthiness
determinations. In addition, ALP CDCs only had delegated authority to
make certain ``No Adverse Change'' certifications prior to loan closing
without SBA's review and approval and were only authorized to close 504
loans under the expedited loan closing procedures applicable to a
Priority CDC. Further, ALP CDCs were required to obtain SBA's approval
for most servicing actions. Section 328(b) of the EAA temporarily
provided ALP CDCs increased delegated authority to ``approve,
authorize, close and service covered loans,'' for loans of not more
than $500,000 and that are not made to a borrower in an industry with a
high rate of default as defined by SBA (hereafter referred to as ``ALP
Express Loans''). SBA implemented these increased delegated authorities
with the publication of an interim final rule on June 27, 2022. (87 FR
37979). Pursuant to the EAA, these delegated authorities were to expire
on September 30, 2023.
In order to evaluate the use of these increased delegated
authorities by ALP CDCs and to identify opportunities for further
modification, SBA developed the ALP Express Pilot program to provide
these increased delegated authorities through September 30, 2025
[[Page 84832]]
to ALP CDCs (hereafter referred to as ``ALP Express Pilot Loans''). The
ALP Express Pilot's delegated authorities in effect represented a
continuation of the ALP Express authority provided by the Economic Aid
Act. (88 FR 69529 (October 6, 2023)). When ALP Express delegated
authorities become permanent, SBA is not including the prohibition
found in section 328(b) of the EAA against making loans with ALP
Express authority to a borrower in an industry with a high rate of
default because this mandatory requirement sunset with the EAA
expiration date. A subsequent review of the 504 portfolio in June 2024
also found that no ALP Express Pilot program loans or covered loans
made pursuant to Section 328(b) of the EAA were in default or
liquidation as of June 30, 2024.
Pursuant to its authority set forth in Section 507(c) of the Small
Business Investment Act (15 U.S.C. 697d(c)), which authorizes SBA to
develop expedited procedures for processing a loan application or
servicing action submitted by ALP CDCs, SBA proposes to make permanent
the increased delegated authorities available under the ALP Express
Pilot. The Agency requests comments on all aspects of regulatory
revisions in this proposed rule.
2. Evaluation Criteria for ALP Express Pilot
SBA typically initiates a pilot loan program to test an innovative
approach to enhance or streamline assistance to small businesses, or a
subset of small businesses, and/or lower taxpayer cost or risk. Pilot
loan program evaluations assess how well a program is achieving its
objectives and other aspects of performance in the context in which the
program operates. Our ongoing evaluations of the 504 program and
delegations authorized will give the SBA the opportunity to refine the
design of the program and assist in determining whether the program
operations have resulted in the desired benefits for participants.
By documenting on SBA Form 1244 whether the ALP CDC is using its
ALP Express authority when submitting an application for an ALP Express
Pilot Loan, SBA was able to track ALP CDCs' use of this increased
delegated authority. In addition to the program changes introduced
through the ALP Express Pilot, on May 11, 2023, SBA instituted an E-
Tran risk mitigation technology compliance check on all 504 loans,
including those with ALP Express authority, and streamlined the
affiliation policy guidance that reduced the amount of paperwork
required for submitting loan packages. The ALP Express ``covered
loans'' had performed well prior to this quality control upgrade and
continue to perform well with this enhanced fraud risk management
systems upgrade in place. The processing time for ALP Express loans was
reduced significantly from an average of 5 days to 2.3 days (one loan
processed in 3 hours). The quality of the ALP Express Pilot 504 loans
have been reviewed by the SBA Office of Credit Risk Management (OCRM)
and present low risk to the 504 portfolio. The E-Tran risk mitigation
protocols consists of background checks on 504 borrowers, checks of
USCIS verifications, confirmation of the identity of the borrower using
their social security number or tax identification number and
verification by checking government databases if the applicant has
prior loss on government debt. This enhancement streamlines the
application process requirements for the CDCs and provides government
resources to assist in detecting and preventing fraud for 504
applicants.
SBA reviewed the following data related to ALP CDCs and their use
of ALP Express authority under the Economic Aid Act and used the same
evaluation criteria for the ALP Express Pilot:
A. Did the number and percentage of 504 loans in the portfolio
under $500,000 increase as a result of the availability of ALP Express
authority? It is hard to evaluate the success of ALP Express based
solely on the increased number of 504 loans during this period, as
there were other factors that influenced demand. During the pandemic,
SBA experienced a surge of 504 loan activity in part due to Section
1112 of the CARES Act, which authorized SBA to make the loan payments
on SBA loans for SBA borrowers for six months (or more, in some cases).
For a more accurate comparison, loan activity prior to this surge
period was also considered. Therefore, SBA analyzed recent and pre-
pandemic activity levels, as shown in table 1.
Table 1--Portfolio Trends for 504 Loans Under $500,000
[FY 19 to FY 24]
----------------------------------------------------------------------------------------------------------------
Non-ALP Express loans ALP Express loans Total 504 loans under
---------------------------------------------------- $500,000
Fiscal Yr. -------------------------
No. % Ch No. % Ch No. % Ch
----------------------------------------------------------------------------------------------------------------
2019.............................. 2,983 ........... ........... ........... 2,983 ...........
2020.............................. 3,426 15 ........... ........... 3,426 15
2021.............................. 4,471 31 ........... ........... 4,471 31
2022.............................. 3,414 -24 162 ........... 3,576 -20
2023.............................. 1,113 -67 1,060 554 2,173 -39
2024.............................. 908 -18 772 -27 1,680 -23
----------------------------------------------------------------------------------------------------------------
* Note: ALP Express Loans were made available in June 2022.
Table 1 provides 504 Loan Program activities for loans of $500,000
or less. In FY 2019, SBA approved 2,983 non-ALP Express loans, and in
FY 2020, SBA approved 3,426 loans, an increase of 15 percent from FY
2019. In FY 2021, SBA approved 4,471 loans, an increase of 31 percent
from FY 2020. In FY 2020, SBA approved 3,414 loans, a decrease of 24
percent from FY 2020. In FY 2023, SBA approved 1,113 loans, a decrease
of 67 percent from FY 2022. For FY 2024 starting from October 1, 2024
until June 30, 2024, when this NPRM was drafted, SBA approved 908
loans.
While the Economic Aid Act authorized these increased delegated
authorities, SBA did not implement ALP Express until June 27, 2022.
From June 27, 2022 to September 20, 2022, SBA approved 162 ALP Express
loans for a combined total of 3,576 loans of 504 loans of $500,000 or
less. In FY 2023, SBA approved 1,060 ALP Express loans, and at the same
time the number of approved non-ALP Express loan of $500,000 or less
was 1,113 for a combined total of 2,173 of 504 loans for $500,000 or
less. Finally, for FY 2024 from October 1, 2024 to June 30, 2024,
[[Page 84833]]
SBA approved a total of 908 non-ALP Express loans of $500,000 or less,
while approving 772 ALP Express loans, during the same time period, for
a combined total of approved 504 loans of $500,000 or less of 1,680.
Even though the total number of non-ALP Express decreased in FY 2023
and in the first three quarters of FY 2024, the total approved ALP
Express loans were almost the same number as the approved non-ALP
Express loan.
B. How do the default rates of ALP Express loans compare with
similarly sized loans not processed and serviced using this authority?
Since the implementation of the ALP Express Pilot program (June 27,
2022) through the end of June 2024, SBA has approved 1,994 ALP Express
Pilot loans for a total dollar amount of $579,958,000 with no defaults
reported. At the same time, SBA approved 4,581 non-ALP Express loans
for a total dollar amount of $1,391,408,000 with no defaults reported.
C. Did ALP Express loan approvals and servicing turn times improve,
resulting in enhanced customer service? Currently the average approval
processing time of ALP Express loans is 2.3 business days, one day less
than regular 504 loan applications. The fastest approval processing
time recorded during the ALP Express Pilot program has been three
hours. The average processing time is calculated based on loan volume
and the number of loan officers available at the SBA loan center
processing 504 loans at the time of application. This is compared to
the standard five business days processing time for 504 new loan
applications at the SBA loan processing center, which during pandemic
had increased up to 10 business days due to the 504 loan volume surge
and the Section 1112 payment impact.
SBA issued an interim final rule to implement the ALP Express
temporary delegated authority authorized under the Economic Aid Act
with an effective date of June 27, 2022. (87 FR 37979). Between June
27, 2022, and September 30, 2022 (the end of FY 2022), SBA approved 162
ALP Express Pilot loans for a total loan amount of $49,543,000. In FY
2023, SBA approved 1,060 ALP Express Pilot loans for a total loan
amount of $306,236,000. In FY 2024, from October 1, 2024 to June 30,
2024, SBA has approved 772 ALP Express loans for a total dollar amount
of $224,179,000.
In comparison, in FY 2022 SBA approved 3,414 non-ALP Express loans
of $500,000 or less and 162 ALP Express Pilot loans for a period of
June 27, 2022 to September 30, 2022, for a combined total of 3,576
loans of $500,000 or less. In FY 2023 SBA approved 1,113 non-ALP-
Express loans and 1,060 ALP Express Pilot loans, for a combined total
of 2,173 loans. This was due to a return to pre-pandemic lending levels
before the surge created by the availability of Section 1112 funding.
Even though the total combined approved loans decreased by 39 percent
due to COVID-19, the ALP Express Pilot loans contributed almost half of
the total combined approved 504 loans under $500,000. Finally, for FY
2024 (October 1, 2023, to June 30, 2024), SBA approved 908 non-ALP
Express loans of $500,000 or less and 728 ALP Express Pilot loans for a
combined of 1,636 loans with a total loan amount of $224,179,000.
Therefore, SBA has used the standard five Government Accountability
Office evaluation methodologies for evaluating a pilot beyond the
Federal Register notice stated objectives in the pilot notice and added
additional an explanation: (1) The measurable objectives achieved
through the pilot were demonstrated by increased ALP processing of
loans under $500,000 and additional CDCs that applied to become ALP
CDCs under the pilot; (2) The data SBA collected and analyzed was based
on actual 504 loan portfolio performance; (3) SBA evaluated acceptable
costs of the pilot and reviewed potential losses and obtain cost
savings due to staff time not required to review credit decisions or
process certain servicing actions with no increase of costs to SBA; (4)
due to the limited universe of CDCs and the self-selection opt in
process, SBA considers there were sufficient numbers and types of
lenders using the pilot; (5) the factors evidencing a continuing need
for the pilot included public support from the CDCs and their trade
association and approval to continue to the pilot by the SBA
Administrator; and (6) time frames for completion which necessitate
this NPRM to convert the pilot to permanent status or the delegated
authorities of the ALP Express Pilot will expire on September 30, 2025.
By beginning the NPRM process in November 2024, this should allow the
full clearance process by SBA and OMB and the public comment period and
comment disposition to move to the final rule making and publication
stage before the September 30, 2025, deadline.
CDC's Authorities
Under the ALP Express Pilot, SBA delegated to ALP CDCs the
authority to make the final decision with respect to the applicant's
creditworthiness on ALP Express Pilot Loans. SBA continued to be
responsible for reviewing each 504 loan to ensure that it meets all
loan program requirements for program eligibility, and the risk
management E-Tran enhancement provided a tool to assist with fraud
detection and prevention. SBA proposes to make these increased
authorities permanent for loans that meet ALP Express eligibility
criteria. SBA is not proposing any additional changes to current ALP
Express underwriting, servicing or closing authorities as established
by the ALP Express Pilot Program. SBA's Office of General Counsel and
the Office of Credit Risk Management noted the top five lender
oversight findings of the closed ALP Express loans were minor and
resolved promptly. Based on the excellent performance of this cohort of
the 504 loans portfolio, there has been low risk to the national
portfolio, due to the implementation of the ALP Express Pilot. ALP CDCs
appear to have used their delegated authority as prudent lenders. Of
all ALP Express approved loans since inception of the pilot through
June 30, 2024, none are in default or in liquidation.
SBA also delegated to ALP CDCs the authority to approve certain
servicing actions after closing on ALP Express Pilot Loans (though ALP
CDCs were still required to notify the appropriate SBA servicing center
of their approval of any servicing action on ALP Express Pilot Loans).
Finally, SBA delegated to ALP CDCs the responsibility to undertake all
actions necessary to close the ALP Express Pilot Loan and Debenture in
accordance with the expedited loan closing procedures applicable to a
Priority CDC and with 13 CFR 120.960. SBA is proposing to make these
increased authorities permanent for loans that meet ALP Express
eligibility criteria. CDCs use these delegated authorities to approve
certain servicing actions after closing. SBA has not found issues with
the ALP Express loan cohort performance or risk that have become a
concern and prompted SBA to reconsider the increased delegated
authorities.
In their own discretion, ALP CDCs may decide not to exercise their
delegated authority with respect to an ALP Express Pilot Loan and may
instead submit the loan to SBA under nondelegated procedures. ALP CDCs
may not use their ALP Express authority to service a loan that was
approved under non-delegated authority that could have been made as an
ALP Express Pilot Loan. In addition, PCLP CDCs may decide to process an
ALP Express Pilot Loan under their status as an ALP CDC instead of as a
PCLP CDC,
[[Page 84834]]
thereby not requiring the CDC to comply with Loan Loss Reserve Fund
requirements for that loan. SBA is proposing to make these increased
authorities permanent for loans that meet ALP Express eligibility
requirements and the Loan Loss Reserve Fund requirements for PCLP CDCs
that process ALP Express Loan under their status as an ALP CDC instead
of as a PCLP CDC.
In making, closing, servicing, or liquidating an ALP Express Pilot
Loan, CDCs were required to follow all Loan Program Requirements under
the 504 Loan Program. This included the loan closing and disbursement
procedures in SOP 50 10 7.1 and the servicing and liquidation
requirements in 13 CFR 120.535, 120.536, 120.540, 120.842 and 120.960,
as well as SOP 50 55. SBA does not propose any changes to these
responsibilities in making the increased authorities available to ALP
CDCs under the ALP Express Pilot delegations of authority permanent.
For further guidance on ALP Express authority, SBA published the
ALP Express Pilot Program Guide. This guide will continue in use until
SOP 50 55 is amended after this pilot is converted to a permanent
program.
Application and Reporting Requirements
CDCs are required to use the application forms for current 504 loan
processing and execute an SBA Terms and Conditions document for each
504 loan, including ALP Express Pilot loans, as set forth in SOP 50 10
7.1.
By documenting on SBA Form 1244 whether the ALP CDC is using its
ALP Express authority when submitting an application for an ALP Express
Pilot Loan, SBA was able to track ALP CDCs' use of this increased
delegated authority. CDCs were also required to comply with the
reporting requirements in 13 CFR 120.830. SBA does not propose any
changes to these responsibilities in making the increased authorities
available to ALP CDCs under the ALP Express Pilot Program permanent.
Lender Oversight
ALP CDC oversight procedures shall continue to follow the
requirements set forth in 13 CFR part 120, subpart I and SOPs 50 53
(Lender Supervision and Enforcement) and SOP 51 00 (On-Site Lender
Reviews and Examinations). The SOPs can be found on the SBA website.
ALP CDCs will be monitored both for performance and other risk
characteristics as well as for compliance with the requirements of the
ALP Express Pilot Program. The ALP CDC must maintain compliance with
the requirement that it only makes ALP Express Pilot Loans in an amount
of $500,000 or less, along with all other loan program requirements.
ALP CDCs also will be subject to 13 CFR 120.1400 through 120.1600 and
the provisions of SOP 50 53 concerning supervision and enforcement. SBA
does not propose any changes to these responsibilities in making the
increased authorities available to ALP CDCs under the ALP Express Pilot
delegations of authority permanent.
Compliance With Executive Orders 12866, 12988, 13132, 13563, and 14904,
the Congressional Review Act, (5 U.S.C. 801-808), Paperwork Reduction
Act (44 U.S.C., Ch. 35), and the Regulatory Flexibility Act (5 U.S.C.
601-612)
Executive Orders 12866 and 13563
Executive Order 12866, ``Regulatory Planning and Review,'' directs
agencies to assess all costs and benefits of available regulatory
alternatives and, if regulation is necessary, to select regulatory
approaches that maximize net benefits (including potential economic,
environmental, public health and safety effects, distributive impacts,
and equity). Executive Order 13563, ``Improving Regulation and
Regulatory Review,'' emphasizes the importance of quantifying both
costs and benefits, of reducing costs, of harmonizing rules, and of
promoting flexibility. Executive Order 14094, ``Modernizing Regulatory
Review,'' amends section 3(f) of Executive Order 12866 and supplements
and reaffirms the principles, structures and definitions governing
contemporary regulatory review established in Executive Order 12866 and
Executive Order 13563. The OMB Office of Information and Regulatory
Affairs has determined that this rulemaking is not a significant
regulatory action. SBA has drafted a cost-benefit analysis for the
public's information in the next section.
A. Cost-Benefit Analysis
Is there a need for the Regulatory Action?
Access to capital is one of the primary challenges for small
business to start, grow and sustain their business. SBA 504 loan
programs serve an important role in business lending for small
businesses that do not have credit available elsewhere from
conventional sources on reasonable terms. The Agency believes that a
streamlined process for small dollar loans particularly for loans of
$500,000 or less will facilitate increased participation by small
business owners, especially those in underrepresented communities. As a
result of proceeding under the emergency provision at Executive Order
12866, section 6(a)(3)(D), based on the need to move expeditiously to
mitigate the COVID-19 pandemic, SBA was able to reduce the processing
and approval time of loan applications that were favorable to small
businesses that need immediate financial assistance from the
government. The ALP Express Pilot delegated authority has proven that
ALP CDCs are able to process, approve, and service ALP Express Pilot
loans within the guidelines issued by the SBA. SBA hopes to make these
reductions permanent. Accordingly, the proposed change will reduce
regulatory burdens, reduce the number of hours spent processing an
application to deliver a loan for both SBA and lenders and increase
access to capital for small businesses.
B. Benefits and Costs of the Rulemaking
What are the potential benefits and costs of this Regulatory Action?
SBA anticipates that implementing the ALP Express Loan authority
and providing ALP CDCs with greater authority to approve and service
loans will reduce processing time and therefore benefit small
businesses, their employees, and the communities they serve.
As a result of the temporary 504 Express Loan Authority (ALP
Express Pilot) SBA provides to ALP CDCs, the processing time and
approval of loans for $500,000 or less has an average of 2.3 business
days whereas the processing time of regular 504 loans non-delegated
authority has an average of 5 days. Therefore, small businesses will
have access to capital to start, grow, and sustain their businesses in
reasonable time. SBA does not anticipate additional costs or impact on
the subsidy to operate ALP Express loan.
C. What alternatives have been considered?
SBA could allow the pilot to expire and resume the ALP authority
delegation limited under the 504 program requirements prior to the
implementation of the Economic Aid Act. Due to the efficiency gains
under the ALP Express pilot, SBA considered it more prudent to retain
these delegated authorities to reduce regulatory burdens for CDCs with
ALP approved status and responsibly streamline the processing, approval
and closings of 504 loan application under $500,000 without
substantially increasing the risk of waste, fraud, or abuse of the
programs, or threatening the integrity of the
[[Page 84835]]
business loan programs or taxpayer dollars.
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 would
not have preemptive effect or retroactive effect.
Executive Order 13175
This proposed rule would not have Tribal implications under
Executive Order 13175, Consultation and Coordination with Indian Tribal
Governments, because it would not have a substantial direct effect 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.
Executive Order 13132
This rulemaking would not have federalism implications as defined
in Executive Order 13132, Federalism. It would not have substantial
direct effects on the States, on the relationship between the National
Government and the States, or on the distribution of power and
responsibilities among the various levels of government, as specified
in the Executive order. As such it does not warrant the preparation of
a Federalism Assessment.
Paperwork Reduction Act, 44 U.S.C., Ch. 35
This rulemaking does not impose additional reporting or
recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C.
chapter 35. In order to implement the Economic Aid Act, SBA determined
that it was necessary to temporarily modify SBA Form 1244, which was
approved on November 22, 2022, under OMB Control Number 3245-0071,
Application for Section 504 Loans, to conform the application with the
revised requirements for ALP Express Loan authority. The changes did
not add any new burdens for the respondents. SBA made the following
technical corrections and clarifying changes to SBA Form 1244: (1)
revised question number 4 on page 2 to include the updated language of
Criminal Justice Rule; (2) added paragraph on page 4 authorizing the
SBA to release information regarding existing SBA loan to Lender/CDC;
(3) revised the instructions on page 5 (Purpose of the Form) to clarify
that CDCs with ALP Express Loan authority must use the form; (4) added
a new ALP Express checkbox to page 8 in the Submission Method field;
(5) added additional row to the project table on page 9 for Other
Secured Debt to be Refinanced; and (6) updated the instructions on
pages 11 and 12 (Required Exhibits) to identify which exhibits must be
completed and uploaded in SBA's E-Tran system for ALP Express Loans and
which exhibits non-ASM CDCs must complete and upload into E-Tran. SBA
obtained emergency approval from OMB for the revised information
collection. No additional modifications to SBA Form 1244 were necessary
for the ALP Express Pilot, and no additional modifications to SBA Form
1244 will be necessary for purposes of making the ALP Express increased
authorities permanent through this rulemaking.
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 businesses, small organizations, and small governmental
jurisdictions. Pursuant to the RFA, when an agency issues a proposed
rulemaking, it must prepare and make available for public comment an
initial regulatory flexibility analysis to address the impact of the
rule on small entities. However, section 605 of 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 economic impact on a
substantial number of small entities. The rulemaking will impact 85 ALP
CDCs; however, SBA believes the impact will be positive and beneficial
to all ALP CDCs. This rulemaking makes permanent the temporary
increased delegated authorities available under the ALP Express Pilot
program. This will improve the approval time of 504 loan applications
for loans in an amount of $500,000 or less.
For the three-year period between FY 2022 (June 27, 2022) to FY
2024 (June 30, 2024) SBA approved 4,581 non-ALP Express loans of
$500,000 or less, for a total dollar amount of $1,391,408,000. In the
same time period SBA approved 1,994 ALP Express loans for a total
dollar amount of $579,958,000. The total combined approved loans for
504 loan of less than $500,000 over the same three-year period is 6,575
loans for a total of $1,971,366,000.
Based on the actual loans approved in the three-year period since
ALP Express Pilot program implementation, ALP CDCs have demonstrated
success in processing and servicing loans for less than $500,000 less
through the ALP Express program using their ALP delegated authority. In
addition, since ALP Express implementation, there have been no
instances of ALP Express in default or in liquidation. SBA estimates
the burden for completing SBA Form 1244, ``Application For Section 504
Loans'', including time for reviewing instructions, gathering data and
documentation needed, and completing and reviewing the form, is 2.5
hours. SBA will not need to change SBA Form 1244 as a result of the
proposed rulemaking of ALP Express as permanent program. SBA
anticipates the proposed rule will increase CDCs participation in
making loans of $500,000 or less and increase the number of approved
504 program loans as a whole. The ALP Express pilot added no additional
cost burdens to SBA, CDCs, or small business borrowers. There were
minimal changes to forms and SBA used existing staff to implement the
pilot. The zero default and liquidation rates of the ALP Express pilot
portfolio cohort document no potential impact to SBA subsidy.
Based on the foregoing, the Administrator of the SBA hereby
certifies that this rulemaking will not have a significant economic
impact on most small businesses. The SBA invites comments from the
public on this certification.
List of Subjects in 13 CFR Part 120
Accredited Lender Program, Certified development companies,
Community development, Debentures, Loan programs--business, Small
businesses.
For the reasons discussed in the preamble, the Small Business
Administration proposes to amend 13 CFR part 120 as follows:
PART 120--BUSINESS LOANS
0
1. The authority citation for 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), 650, 687(f), 696(3) and (7), and 697(a) and
(e); sec. 521, Pub. L. 114-113, 129 Stat. 2242; sec. 328(a), Pub. L.
116-260, 134 Stat. 1182.
0
2. Amend Sec. 120.842 by revising paragraph (a) and removing paragraph
(d) to read as follows:
Sec. 120.842 ALP Express Loans.
(a) Definition. For the purposes of this section, an ALP Express
loan means a 504 loan in an amount that is not more than $500,000 and
which is underwritten, approved, closed and
[[Page 84836]]
serviced using the authorities set forth in this section.
* * * * *
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2024-24753 Filed 10-23-24; 8:45 am]
BILLING CODE 8026-09-P
