[Federal Register Volume 85, Number 41 (Monday, March 2, 2020)]
[Notices]
[Pages 12369-12370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03241]
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SMALL BUSINESS ADMINISTRATION
[Docket No. SBA-2020-0006]
Community Advantage Pilot Program
AGENCY: U.S. Small Business Administration.
ACTION: Notice of changes to Community Advantage Pilot Program and
request for comments.
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SUMMARY: The Community Advantage (``CA'') Pilot Program is a pilot
program to increase SBA-guaranteed loans to small businesses in
underserved areas. The Small Business Administration (``SBA'' or
``Agency'') continues to refine and improve the design of the CA Pilot
Program. To support SBA's commitment to expanding access to capital for
small businesses and entrepreneurs in underserved markets, SBA is
issuing this Notice to revise the requirements for refinancing non-SBA
guaranteed, same institution debt in certain circumstances. Further,
SBA is revising the number of loans a CA Lender must make before it can
begin processing loans under its delegated authority. Finally, SBA is
providing guidance on the expiration and process for renewal of CA
Lenders' Loan Guaranty Agreements (SBA Form 750CA).
DATES: The changes take effect March 2, 2020. The CA Pilot Program will
remain in effect until September 30, 2022.
Comment Date: Comments must be received on or before April 1, 2020.
ADDRESSES: You may submit comments, identified by SBA docket number
SBA-2020-0006, by any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov/.
Follow the instructions for submitting comments.
Mail: Daniel Upham, Chief, Microenterprise Development
Division, Office of Financial Assistance, U.S. Small Business
Administration, 409 Third Street SW, Washington, DC 20416.
Hand Delivery/Courier: Daniel Upham, Chief,
Microenterprise Development Division, 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 Daniel Upham, Chief, Microenterprise Development
Division, Office of Financial Assistance, 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: Daniel Upham, Chief, Microenterprise
Development Division, Office of Financial Assistance, U.S. Small
Business Administration, 409 Third Street SW, Washington, DC 20416,
(202) 205-7001, [email protected].
SUPPLEMENTARY INFORMATION:
1. Background
As part of its efforts to increase the number of SBA-guaranteed
7(a) loans made to small businesses in underserved markets, on February
18, 2011, SBA issued a notice and request for comments introducing the
CA Pilot Program (76 FR 9626). That notice provided an overview of the
CA Pilot Program requirements and, pursuant to the authority provided
to SBA under 13 CFR 120.3 to suspend, modify or waive certain
regulations in establishing and testing pilot loan initiatives, SBA
modified or waived as appropriate certain regulations which otherwise
apply to 7(a) loans for the CA Pilot Program.
Subsequent notices have made changes to the CA Pilot Program to
improve the program experience for participants, improve their ability
to deliver capital to underserved markets, and appropriately manage
risk to the Agency. These notices were issued on the following dates:
September 12, 2011 (76 FR 56262), February 8, 2012 (77 FR 6619),
November 9, 2012 (77 FR 67433), December 28, 2015 (80 FR 80872), and
September 12, 2018 (83 FR 46237). In the notice published September 12,
2018 (the ``September 2018 Notice''), SBA extended the pilot program to
September 30, 2022, placed a moratorium on the acceptance of
applications for new Community Advantage Lenders (``CA Lenders''),
modified the requirements for refinancing non-SBA guaranteed, same
institution debt, and revised other program requirements. SBA is
issuing this Notice to further revise program requirements as described
more fully below.
2. Comments
Although the changes are effective March 2, 2020, comments are
solicited from interested members of the public on all aspects of the
CA Pilot Program. Comments must be submitted on or before the deadline
for comments listed in the DATES section. SBA will consider these
comments and the need for making any revisions as a result of these
comments.
3. Changes to the Community Advantage Pilot Program
(a) Non-SBA Guaranteed, Same Institution Debt Refinancing Requirements
Based on comments received in response to the September 2018
Notice, SBA is modifying the requirements for refinancing non-SBA
guaranteed, same institution debt. SBA has learned that the applicants
for refinancing are often small businesses that, for one reason or
another, have obtained financing with terms that are onerous and
unsustainable for the applicant, such as loans with high compound
interest rates, draw fees, late fees, and/or substantial prepayment
penalties. When a CA Lender receives such an application for
refinancing, the CA Lender may opt to make an interim, non-SBA
guaranteed loan to immediately restructure the financing on more
reasonable terms, in anticipation of providing a permanent solution.
SBA recognizes the importance of improving cash flow to a small
business as soon as possible with a loan on more reasonable terms, and
of providing a small business applicant with the additional time and
technical assistance it may need to complete a successful SBA-
guaranteed loan application. Therefore, SBA is modifying the
restrictions on refinancing non-SBA guaranteed, same institution debt
to permit the CA Lender to pay off certain interim loans with an SBA-
guaranteed CA loan when beneficial to the small business applicant
under certain circumstances. (It is important to note, however, that
extension of an interim loan by a CA Lender is made entirely at the CA
Lender's risk as there is no assurance that the interim loan will be
eligible to be refinanced with a CA loan.)
In order to refinance its own interim, non-SBA guaranteed same
institution loan with a CA loan, the CA Lender must comply with all of
the following:
i. The sole purpose of the interim loan must have been to refinance
debt that was on onerous terms (e.g., the refinancing will improve the
Applicant's cash flow by at least 15%), including necessary out-of-
pocket costs.
ii. The Annual Percentage Rate (``APR'') on the interim loan must
not
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exceed the maximum interest rate allowable under the CA Pilot Program.
iii. The interim loan must not have been made more than 6 months
prior to the submission in E-TRAN of the SBA-guaranteed CA loan
application.
iv. The CA Lender must provide a transcript showing the due dates
and when payments were received for the entire term of the interim
loan. If there are any late payments and/or late charges on the interim
loan, the CA Lender must explain in its credit memorandum the late
payments and late charges and substantiate how the CA Lender has
determined that SBA will not be in a position to sustain a loss from
refinancing the interim loan.
v. The CA Lender may not charge any fees on the interim loan except
for necessary out-of-pocket costs associated with closing the loan,
such as filing or recording fees. There must be no prepayment penalty
or other charge for prepayment of the interim loan.
vi. The CA loan that refinances the interim loan must be submitted
to SBA for non-delegated processing and may not be approved under a CA
Lender's delegated authority.
vii. The CA Lender must address in its credit memorandum how the
original debt meets the requirements set forth in SOP 50 10 for debt
refinancing (currently, Subpart B, Chapter 2, Paragraph V.E.).
(b) Delegated Authority
Currently, a CA Lender that is determined to be eligible for
delegated authority may not process loans using its delegated authority
until (i) it closes and makes an initial disbursement on at least seven
non-delegated CA loans, and (ii) the Office of Credit Risk Management
(``OCRM'') determines, in consultation with the Loan Guaranty
Processing Center (``LGPC''), that it has satisfactory knowledge of SBA
Loan Program Requirements. SBA is increasing the number of CA loans
that must be initially disbursed before a CA Lender may receive
approval to process applications under delegated authority. Effective
March 2, 2020, the number of loans is increased to ten.
(c) Loan Guaranty Agreement (SBA Form 750CA) Expiration and Renewal
On September 12, 2018, SBA extended the Community Advantage Pilot
Program from March 31, 2020, to September 30, 2022. Currently, most CA
Lenders have a Loan Guaranty Agreement (SBA Form 750CA) that expires on
March 31, 2020. As set forth in the CA Participant Guide, OCRM will
conduct a review of each CA Lender prior to March 31, 2020. The review
will include, but not be limited to, an assessment of the CA Lender's
compliance with SBA Loan Program Requirements, including the
requirement to make 60 percent of its loans to small businesses in the
CA underserved markets, satisfactory SBA performance as determined by
SBA in its discretion, and other risk-related criteria. Based on the
results of a CA Lender's review, OCRM may: (1) Renew the CA Lender's
SBA Form 750CA until the expiration date of the pilot program
(September 30, 2022); (2) renew the CA Lender's SBA Form 750CA for a
shorter period; or (3) not renew the CA Lender's SBA Form 750CA beyond
March 31, 2020. In the latter two cases, OCRM will provide an
explanation for the shortened renewal or non-renewal, as appropriate.
(d) Limited Moratorium Exception
As stated in the September 2018 Notice, SBA believes there are a
sufficient number of CA Lenders for SBA to perform a proper evaluation
of the pilot program. In order to maintain a sufficient number of CA
Lenders, SBA will accept new applications from qualified eligible
entities to replace CA Lenders that voluntarily withdraw from the
program, are not renewed, or are otherwise removed from the pilot
program. SBA will provide further information on this process after
March 31, 2020, when it expects to know the number of CA Lenders that
will not be continuing in the pilot program. In accordance with the
September 2018 Notice, SBA is not increasing the total number of CA
Lenders.
4. General Information
The changes in this Notice are limited to the CA Pilot Program
only. All other SBA Loan Program Requirements and regulatory waivers or
modifications related to the CA Pilot Program remain unchanged.
SBA has provided more detailed guidance in the form of a
Participant Guide, which will be updated to reflect these changes and
will be available on SBA's website at http://www.sba.gov. SBA may
provide additional guidance, through SBA notices, which may also be
published on SBA's website at http://www.sba.gov/category/lender-navigation/forms-notices-sops/notices. Questions regarding the CA Pilot
Program may be directed to the Lender Relations Specialist in the local
SBA district office. The local SBA district office may be found at
http://www.sba.gov/about-offices-list/2.
Authority: 15 U.S.C. 636(a)(25) and 13 CFR 120.3.
Dated: February 11, 2020.
Jovita Carranza,
Administrator.
[FR Doc. 2020-03241 Filed 2-28-20; 8:45 am]
BILLING CODE P