[Federal Register Volume 85, Number 149 (Monday, August 3, 2020)]
[Notices]
[Pages 46775-46776]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16792]
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SMALL BUSINESS ADMINISTRATION
504 Debt Refinancing Without Expansion--Borrower's Contribution
for Projects Involving Limited or Single Purpose Buildings During
Recession
AGENCY: U.S. Small Business Administration.
ACTION: Notice.
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SUMMARY: The U.S. Small Business Administration (``SBA'') is announcing
that, due to an economic recession as determined by the National Bureau
of Economic Research, Borrowers in the 504 Loan Program may contribute
not less than 10%, instead of not less than 15%, to Projects involving
limited or special purpose buildings or structures when refinancing
debt without expansion. The lower required contribution will be in
effect until the first day of the calendar quarter following the end of
the economic recession as determined by the National Bureau of Economic
Research or its equivalent.
DATES: The lower required contribution will apply to applications
submitted on or after August 3, 2020.
FOR FURTHER INFORMATION CONTACT: Linda Reilly, Chief, 504 Loan
Division, (202) 205-9949, [email protected].
SUPPLEMENTARY INFORMATION: The 504 Loan Program is an SBA business loan
program authorized under title V of the Small Business Investment Act
of 1958, 15 U.S.C. 695 et seq. 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, to promote the
creation or retention of jobs and local economic development. Under the
504 Loan Program, loans are provided to small businesses 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'') is financed with:
A loan obtained from a private sector lender with a senior lien for at
least 50% of the project cost (the ``Third Party Loan''); a loan
obtained through a CDC (the ``504 Loan'') with a junior lien covering
up to 40% of the total cost (funded through a 100% SBA-guaranteed
debenture sold in private pooling transactions); and a contribution
from the Borrower of at least 10% equity. However, for 504 Projects
that involve limited or special purpose buildings or structures, the
Borrower is required to contribute at least 15% equity to the Project.
In accordance with 13 CFR 120.882(g), a Project in the 504 Loan
Program may also be used to refinance debt where there is no expansion
of the small business concern (``Refinancing Without Expansion
Project''). Generally, if the Refinancing Without Expansion Project
involves a limited or single purpose building or structure, the
Borrower must contribute not less than 15% (excluding administrative
costs) of the Project's costs, unless SBA determines, in its
discretion, and publishes in the Federal Register that, due to an
economic recession as determined by the National Bureau of Economic
Research or its equivalent, Borrowers may contribute not less than 10%
of the Project's costs during the recession. See 13 CFR 120.882(g)(5).
[[Page 46776]]
On June 8, 2020, the National Bureau of Economic Research published
a report by its Business Cycle Dating Committee, https://www.nber.org/cycles/june2020.html, in which it determined that a peak in monthly
economic activity occurred in the U.S. economy in February 2020, and
that this peak marked the end of the expansion that began in June 2009
and the beginning of a recession. The report noted that the usual
definition of a recession involves a decline in economic activity that
lasts more than a few months but recognized that the pandemic and the
public health response have resulted in a downturn with different
characteristics and dynamics than prior recessions. The report
concluded that ``the unprecedented magnitude of the decline in
employment and production, and its broad reach across the entire
economy, warrants the designation of this episode as a recession, even
if it turns out to be briefer than earlier contractions.''
Based on the National Bureau of Economic Research's determination,
SBA is announcing in accordance with 13 CFR 120.882(g)(5) that,
beginning with applications submitted on or after publication of this
Notice, Borrowers may contribute not less than 10% of the costs for
Refinancing Without Expansion Projects involving limited or special
purpose buildings or structures. This lower percentage for the
Borrower's contribution will remain in effect until the first day of
the calendar quarter following the end of the economic recession as
determined by the National Bureau of Economic Research or its
equivalent. SBA will publish a notice in the Federal Register
announcing the date on which the requirement of the lower Borrower
contribution ended.
Authority: 15 U.S.C. 696; 13 CFR 120.882.
Jovita Carranza,
Administrator.
[FR Doc. 2020-16792 Filed 7-31-20; 8:45 am]
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