504 Debt Refinancing Without Expansion-Borrower's Contribution for Projects Involving Limited or Single Purpose Buildings During Recession

Published date03 August 2020
Citation85 FR 46775
Record Number2020-16792
SectionNotices
CourtSmall Business Administration
Federal Register, Volume 85 Issue 149 (Monday, August 3, 2020)
[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]
                BILLING CODE P
                

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