Disaster Loan Program Changes

CourtSmall Business Administration
Citation86 FR 50214
Record Number2021-19232
Publication Date08 Sep 2021
Federal Register, Volume 86 Issue 171 (Wednesday, September 8, 2021)
[Federal Register Volume 86, Number 171 (Wednesday, September 8, 2021)]
                [Rules and Regulations]
                [Pages 50214-50219]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-19232]
                =======================================================================
                -----------------------------------------------------------------------
                SMALL BUSINESS ADMINISTRATION
                13 CFR Parts 121 and 123
                [Docket Number SBA-2021-0016]
                RIN 3245-AH80
                Disaster Loan Program Changes
                AGENCY: U.S. Small Business Administration (SBA).
                ACTION: Interim final rule.
                -----------------------------------------------------------------------
                SUMMARY: This interim final rule implements changes to the Disaster
                Loan Program regulations. For applications for COVID-19 Economic Injury
                Disaster (COVID EIDL) loans, in this rule SBA is changing the
                definition of affiliation, the eligible uses of loan proceeds, and
                application of the size standard to certain hard-hit eligible entities,
                and is establishing a maximum loan limit for borrowers in a single
                corporate group. In addition, for all disaster assistance programs, in
                this rule, SBA is changing which SBA official may make the decision on
                the appeal of an application that has been declined for a second time.
                DATES:
                 Effective date: The provisions of this interim final rule are
                effective September 8, 2021.
                 Applicability dates: The change to the regulation at 13 CFR 123.13
                applies to applications submitted under all of SBA's Disaster Loan
                Programs on or after September 8, 2021. The changes to the regulation
                at 13 CFR 123.303 apply to COVID EIDL loan proceeds available on or
                after September 8, 2021, without regard to the date such proceeds were
                received from SBA. The other changes in this interim final rule apply
                to applications submitted under the COVID EIDL Program on or after
                September 8, 2021, through December 31, 2021, or until funds available
                for this purpose are exhausted, whichever is earlier. Additionally,
                with the exception of the regulation at 123.304, this interim final
                rule applies to original applications under the COVID EIDL Program that
                are submitted before but approved on or after September 8, 2021.
                 Comment date: Comments must be received on or before October 8,
                2021.
                ADDRESSES: You may submit comments, identified by number SBA-2021-0016
                through the Federal eRulemaking Portal: http://www.regulations.gov.
                Follow the instructions for submitting comments.
                 SBA will post all comments on www.regulations.gov. If you wish to
                submit confidential business information (CBI) as defined in the User
                Notice at www.regulations.gov, please send an email to
                [email protected]. All other comments must be submitted through the
                Federal eRulemaking Portal described above. 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 whether it will publish the information.
                FOR FURTHER INFORMATION CONTACT: An SBA Disaster Customer Service
                Representative at (800) 659-2955 (individuals who are deaf or hard of
                hearing may call (800) 877-8339), or a local SBA Field Office; the list
                of SBA field offices can be found at https://www.sba.gov/tools/local-assistance/districtoffices.
                SUPPLEMENTARY INFORMATION:
                I. Background Information
                 Section 7(b)(2) of the Small Business Act authorizes SBA to make
                EIDL loans to eligible small businesses and nonprofit organizations
                located in a disaster area. 15 U.S.C. 636(b)(2). On March 6, 2020,
                Congress deemed COVID-19 to be a disaster in Title II of the
                Coronavirus Preparedness and Response Supplemental Appropriations Act
                of 2020, Public Law 116-123, 134 Stat. 146, 147, allowing SBA to
                declare disasters and make EIDL loans available to small businesses and
                nonprofit organizations suffering substantial economic injury as a
                result of the COVID-19 pandemic. The Coronavirus
                [[Page 50215]]
                Aid, Relief, and Economic Security Act (CARES Act) Public Law 116-136,
                expanded eligibility and waived certain rules and requirements for
                COVID EIDL loans. Section 1110 of the CARES Act permitted SBA to waive
                rules related to personal guaranties on COVID EIDL loans of not more
                than $200,000 and the requirement that an applicant be unable to obtain
                credit elsewhere. Section 1110 also provided SBA with the authority to
                approve an applicant based solely on the credit score of the applicant
                or use alternative appropriate methods to determine an applicant's
                ability to repay. On April 24, 2020, the Paycheck Protection Program
                and Health Care Enhancement Act (PPP Enhancement Act) Public Law 116-
                139, provided additional funding for SBA to make EIDL loans and further
                expanded EIDL eligibility to include agricultural enterprises with not
                more than 500 employees, which are typically not eligible for SBA
                disaster assistance. Prior to the enactment of the PPP Enhancement Act,
                SBA had an existing $1.1 billion in credit subsidy funding, which it
                used to support between $7 billion and $8 billion in EIDL loans to
                businesses affected by the COVID-19 pandemic. The PPP Enhancement Act
                provided an additional $50 billion in loan credit subsidy to SBA. See
                15 U.S.C. 636(b) and 13 CFR 123.300(c). On December 27, 2020, the
                Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act
                (Economic Aid Act), Public Law 116-260, was enacted as part of the
                Consolidated Appropriations Act, 2021. Section 332 of the Economic Aid
                Act extended the authority to make COVID EIDL loans through December
                31, 2021, and further modified the terms under which SBA approves COVID
                EIDL loans, and Section 331 provided SBA authority to make targeted
                EIDL advances. On March 11, 2021, the American Rescue Plan Act (ARPA),
                Public Law 117-2, was enacted, establishing the Restaurant
                Revitalization Fund (RRF) through Section 5003 to provide assistance to
                restaurants, beverage alcohol producers, and other entities, and
                providing authority to provide supplemental Targeted Advances.
                 In light of the COVID-19 emergency, many small businesses
                nationwide have experienced economic hardship as a direct result of the
                Federal, State, and local public health measures that have been taken
                to minimize the public's exposure to the virus. These measures, some of
                which were government-mandated, were implemented across the country. In
                addition, based on the advice of public health officials, other
                measures, such as keeping a safe distance from others or stay-at-home
                orders, were implemented, resulting in a dramatic decrease in economic
                activity as the public avoided malls, retail stores, and other
                businesses. On March 16, 2021, the SBA announced that it would extend
                deferment periods for all disaster loans, including COVID EIDL loans,
                until 2022. COVID EIDL loans made in calendar year 2020 will have the
                first payment due date extended from 12 months to 24 months from the
                date of the note. COVID EIDL loans made in calendar year 2021 will have
                the first payment due date extended from 12 months to 18 months from
                the date of the note. On March 24, 2021, the SBA announced that it
                would increase the maximum amount that can be borrowed under the COVID
                EIDL program from $150,000 (6 months of economic injury) to $500,000
                (24 months of economic injury).
                II. Comments and Immediate Effective Date
                 This interim final rule is being issued without advance notice and
                public comment. SBA has determined that there is good cause for
                dispensing with advance public notice and comment on the ground that it
                would be ``impracticable'' and ``contrary to the public interest.'' 5
                U.S.C. 553(b)(3)(B).
                 The intent of the statutory COVID financial assistance programs,
                including the COVID EIDL program, is that SBA provide relief to
                America's small businesses expeditiously. This intent, along with the
                continuing decrease in economic activity in key economic sectors as
                compared to 2019 and the reimposition of mask requirements and other
                public-health measures throughout the country because of the variants
                (including Delta) of COVID-19, provides good cause for SBA to dispense
                with advance notice and comment rulemaking, which would take months.
                Given that this rule is issuing in August, new changes could not go
                into effect until November, leaving just a few weeks to implement the
                new program and take applications before funding expires. This
                shortened program timeframe would be problematic because SBA believes,
                with basis, there is a tremendous demand and need for this program.
                Other SBA COVID relief programs have recently ended or have exhausted
                their funding (including the Paycheck Protection Program and the
                Restaurant Revitalization Fund), yet businesses and nonprofit
                organizations are still in need of support. As evidence of unmet need,
                the Restaurant Revitalization Fund received $28.6 billion in
                appropriations to provide assistance to the restaurant industry, but
                within 21 days, SBA received 278,304 applications seeking assistance in
                amounts totaling more than $72 billion, nearly three times the amount
                appropriated. Funding was quickly exhausted, leaving 177,300 businesses
                without assistance. Further, with the end of the Paycheck Protection
                Program, businesses and nonprofit organizations that are still
                struggling will turn to the COVID EIDL program for long-term recovery.
                Thus, the COVID EIDL program is more critical now than it was before,
                because of the lack of resources available through these other programs
                and because of the continuing economic instability. Issuing this rule
                without advance notice and comment will give small businesses,
                nonprofit organizations, qualified agricultural businesses, and
                independent contractors affected by this interim final rule the maximum
                amount of time to apply for COVID EIDL loans, and will give SBA the
                maximum amount of time to process applications before the program ends
                in less than five months--on December 31, 2021. In addition, 13 CFR
                123.1 reserves to SBA authority to revise disaster regulations without
                advance notice, by publishing interim emergency regulations in the
                Federal Register.
                 Finally, given the short duration of this program and the unmet
                need for immediate assistance in key economic sectors, SBA has
                determined that it is impractical and not in the public interest to
                provide a delayed effective date. 5 U.S.C. 553(d). Limiting the
                availability of this program to a few weeks, given the needs, would
                result in significant avoidable economic losses--precisely the result
                that Congress was trying to avoid in passing and amending the COVID
                EIDL program. Therefore, SBA is of the view that delaying issuance to
                conduct notice and comment procedures would effectively void the
                effectiveness of these reforms to the COVID EIDL program, with
                significant harms resulting. Although this interim final rule is
                effective immediately, comments are solicited from interested members
                of the public on all aspects of the interim final rule. SBA will
                consider these comments and the need for making any revisions as a
                result of these comments.
                III. Disaster Loan Program Changes
                1. Definition of Affiliation for COVID EIDL Loans
                 Based on continuing confusion and burdensome analyses required by
                applicants and SBA, to simplify the program requirements of COVID EIDL
                such that applicants can more easily
                [[Page 50216]]
                complete the affiliation analysis and to expand the number of entities
                that will be eligible for COVID EIDL loans, SBA will align the
                definition of affiliation for COVID EIDL with the definition of
                ``affiliated business'' set forth in section 5003 of the ARPA for the
                Restaurant Revitalization Fund (RRF). Like the RRF program, COVID EIDL
                is a program where an applicant applies directly to SBA, without an
                intermediary lender to explain program rules and ensure compliance. In
                SBA's regular Business Loan Programs, the applicant relies on the
                lender intermediary to correctly interpret and apply the affiliation
                rules at 13 CFR 121.301, which require an applicant to consider
                affiliation based on ownership, stock options, convertible securities,
                agreements to merge, management, identity of interest, and franchise
                and license agreements. Congress mandated more simple affiliation rules
                in ARPA for RRF. Given the lack of intermediaries in the COVID EIDL
                program, SBA has determined that it is appropriate to use the same
                affiliation rules that Congress mandated for RRF.
                 Therefore, SBA is revising 13 CFR 121.301, ``What size standards
                and affiliation principles are applicable to financial assistance
                programs?'', to add a new paragraph (g) to state that for COVID EIDL
                loans, an affiliated business or affiliate is ``a business in which an
                eligible entity has an equity interest or right to profit distributions
                of not less than 50 percent, or in which an eligible entity has the
                contractual authority to control the direction of the business,
                provided that such affiliation shall be determined as of any
                arrangements or agreements in existence as of January 31, 2020.'' The
                new paragraph (g) also will include a cross reference to the exceptions
                to affiliation set forth in 13 CFR 121.103(b), which continue to apply
                to COVID EIDL loans.
                 In addition to simplifying the program requirements for COVID EIDL
                loans, this change will streamline the application process for SBA and
                facilitate the review of such applications prior to the deadline of
                December 31, 2021. This streamlining will expand the flow of funds to
                businesses and nonprofit organizations that still need relief from the
                COVID-19 pandemic.
                2. Second Decline of Loan Application
                 The regulation at 13 CFR 123.13, ``What happens if my loan
                application is denied?'', requires that applicants appeal a second
                decline of a loan application directly to the Director, Disaster
                Assistance Processing and Disbursement Center (DAPDC). To enable timely
                consideration of appeals, SBA is changing the appeals process to allow
                the Director, DAPDC, or the Director's designee(s), to make the
                decision on appeals for all Disaster Loan Program loans. In addition,
                SBA is revising the regulation to clarify that the Administrator,
                solely within the Administrator's discretion, has the authority to
                review the matter and make the final decision.
                 Therefore, SBA is revising the regulation at 13 CFR 123.13,
                paragraphs (e) and (f), to state that, if SBA declines an application a
                second time, the Director, DAPDC, or the Director's designee(s), will
                make the decision. Further, SBA is revising the regulation to state
                that the Administrator, solely within the Administrator's discretion,
                may choose to review the matter and make the final decision. Such
                discretionary authority of the Administrator does not create additional
                rights of appeal on the part of an applicant not otherwise specified in
                SBA regulations. The changes to this regulation apply to all SBA
                Disaster Loan Programs.
                3. Eligible Entities for COVID EIDL Loans
                 The Administrator has determined that, due to the extended duration
                and scope of the COVID-19 pandemic, as well as due to mandatory
                Federal, state, and local shut down and social distancing orders,
                businesses in certain sectors of the North American Industry
                Classification System (NAICS) continue to suffer from significant
                economic hardship. Specifically, the NAICS sectors and subsectors
                identified in Section 1112 of the CARES Act, as amended by section 325
                of the Economic Aid Act, continue to need substantial help. These
                include Sector 61, Educational Services; Sector 71, Arts, Entertainment
                and Recreation; Sector 72, Accommodation and Food Services; Subsector
                213, Support Activities for Mining; Subsector 315, Apparel
                Manufacturing; Subsector 448, Clothing and Clothing Accessories Stores;
                Subsector 451, Sporting Good, Hobby, Book, and Music Stores; Subsector
                481, Air Transportation; Subsector 485, Transit and Ground Passenger
                Transportation; Subsector 487, Scenic and Sightseeing Transportation;
                Subsector 511, Publishing Industries (except internet); Subsector 512,
                Motion Picture and Sound Recording Industries; Subsector 515,
                Broadcasting (except internet); Subsector 532, Rental and Leasing
                Services; and Subsector 812, Personal and Laundry Services.
                 Additionally, certain industries were identified in Section
                5003(a)(4) of the ARPA for additional assistance but may not have
                received funding due to program deadlines or the exhaustion of funds.
                As stated previously, the Restaurant Revitalization Fund (RRF) was
                unable to provide help to all eligible applicants due to a lack of
                funding, and many small businesses in that industry continue to suffer
                economic hardships caused by the pandemic. Most businesses eligible for
                RRF are in NAICS sector 72, Accommodation and Food Services; however,
                beverage manufacturers in NAICS Industry Group 3121, such as breweries,
                wineries, and distilleries were also eligible for RRF funding. Based on
                publicly available industry research and input from industry trade
                groups, SBA believes these beverage manufacturers continue to require
                additional help.
                 Under Section 1110 of the CARES Act, COVID EIDL loans are available
                to ``small business concerns, private nonprofit organizations, and
                small agricultural cooperatives,'' as defined in SBA's size standards
                in 13 CFR 121.201, or businesses that have 500 or fewer employees. To
                provide assistance to a greater number of businesses in the hard-hit
                industries described above, SBA is defining ``small business concern''
                for purposes of the COVID EIDL program to extend eligibility to
                businesses in those industries that have 500 or fewer employees per
                physical location. SBA is revising 13 CFR 123.300, ``Is my business
                eligible to apply for an economic injury disaster loan?'', by adding a
                new paragraph (e) to state that certain hard-hit businesses identified
                by specific NAICS classifications will be able to qualify as eligible
                small business concerns for COVID EIDL loans based on the number of
                employees per physical location. Consistent with the standard in RRF,
                businesses using the per-physical location eligibility standard must,
                together with affiliates, have no more than 20 locations.
                 This rule merely provides an added basis of eligibility for COVID
                EIDL assistance. It does not make any entity that is eligible for COVID
                EIDL assistance on another basis ineligible for such assistance. For
                example, a business that has more than 20 business locations, but has
                fewer than 500 employees in the aggregate of all of its business
                locations is currently eligible for COVID EIDL loans because it meets
                the 500-employee size standard. Although this rule allows a business
                concern to be eligible for COVID EIDL assistance if it employs not more
                than 500 employees per physical location as long as it (together with
                its affiliates) has
                [[Page 50217]]
                no more than 20 locations, that provision does not change the current
                eligibility of a business concern that meets the general 500-employee
                size standard. For example, a business with 25 locations and 15
                employees per location would not be ineligible, because the total
                number of employees is 375.
                 This rule also does not change the applicable size standards. The
                size standard itself remains at 500 employees (together with
                affiliates), as authorized by Section 1110(a)(2) of the CARES Act, or
                the size standard established in 13 CFR 121.201. Instead, the rule
                changes how the agency defines the term ``business concern'' for
                purposes of COVID EIDL assistance. The Small Business Act provides SBA
                with broad authority to define a ``small business concern.'' 15 U.S.C.
                632(a)(2). By regulation, SBA generally defines a concern to be a
                business entity, although there are exceptions. 13 CFR 121.105. SBA
                applies its size standards to determine whether a concern is a small
                business eligible for SBA assistance, and, because of the general
                definition, the size standards generally apply at the entity level. In
                this interim final rule, based on how SBA applied the PPP's size
                standard at the per-physical location level for NAICS sector-72
                businesses and other industries, SBA is adopting a program-specific
                definition of ``business concern'' as covering each individual physical
                location for industries in certain hard-hit economic sectors. As such,
                SBA will apply the program's size standards at the physical-location
                level for the identified industries. This does not change the size
                standards that apply to the COVID EIDL loan program. Instead, this
                program-specific provision changes the level at which the size standard
                applies--for businesses in certain sectors--i.e., to each physical
                location, rather than to each entity in the aggregate.
                4. COVID EIDL Uses of Proceeds
                 Currently, the EIDL program only permits loan proceeds to be used
                for working capital necessary to carry the business until resumption of
                normal operations and for expenditures necessary to alleviate the
                specific economic injury and does not permit payments on Federal debt
                or prepayment of non-Federal existing debt even if the debt has a
                balloon payment due. Prior to the pandemic, businesses, in the ordinary
                course of their operations, managed debt payments through cash flows of
                the business. Due to mandatory COVID-19 closures, some businesses did
                not have sufficient cash flow to service debt obligations. Despite
                several short-term emergency programs in the CARES Act and other
                statutes, many small businesses have not been able to return to normal
                operations, and now struggle with deferred debt, past due payments, and
                insufficient cash flow. With the expectation that the pandemic would
                not last for the duration that it has, many businesses took on short-
                term debt, often with unfavorable repayment terms, or negotiated
                deferments in debt payments in order to avoid default. In order to
                maximize relief from the debt burden businesses and nonprofit
                organizations have accrued, SBA is expanding COVID EIDL eligible uses
                of proceeds to include payments on all forms of business debt,
                including loans owned by a Federal agency (including SBA) or a Small
                Business Investment Company (SBIC) licensed under the Small Business
                Investment Act. COVID EIDL loan proceeds may be used to make debt
                payments including monthly payments, deferred interest, and pre-payment
                of business debt, except that pre-payments will not be permitted on any
                debt owned by a Federal agency (including SBA) or an SBIC. COVID EIDL
                loan proceeds may be used to pay debt incurred both before and after
                submitting the COVID EIDL loan application.
                 Therefore, SBA is revising the regulation at 13 CFR 123.303, ``How
                can my business spend my economic injury disaster loan?'', to permit
                COVID EIDL working capital loan proceeds to be used to pay any type of
                business debt, including loans owned by a Federal agency (including
                SBA) or an SBIC. SBA also is revising the regulation to clarify that
                COVID EIDL loan proceeds may be used to make debt payments including
                monthly payments, payments of deferred interest, and pre-payments,
                except that pre-payments will not be permitted on debt that is owned by
                a Federal agency (including SBA) or an SBIC.
                5. Limits of COVID EIDL Loans to a Single Corporate Group
                 SBA is adding a new regulation to state that entities that are part
                of a single corporate group shall in no event receive more than
                $10,000,000 of COVID EIDL loans in the aggregate. For purposes of this
                limit, entities are part of a single corporate group if they are
                majority owned, directly or indirectly, by a common parent. Businesses
                are subject to this limitation even if the businesses are in certain
                hard-hit sectors and able to use the per-physical location application
                of the size standard as set forth in 13 CFR 123.300(e)(5).
                 Given the changes in the COVID EIDL maximum loan amount,
                eligibility, and increased outreach to industries that have been
                particularly hard hit by the pandemic (for example, restaurants,
                hotels, gyms, travel and tourism), SBA expects an increase in the
                number of applications submitted and average loan size. The
                Administrator determined that limiting the amount of COVID EIDL loans
                that a single corporate group may receive will promote the availability
                of COVID EIDL loans to the largest possible number of borrowers. The
                Administrator has concluded that a limitation of $10,000,000 strikes an
                appropriate balance between broad availability of COVID EIDL loans and
                program resource constraints. SBA's affiliation rules, which relate to
                an applicant's eligibility for COVID EIDL loans, continue to apply
                independent of this limitation.
                6. Additional Information
                 SBA may provide further information through guidance that will be
                posted on SBA's website at www.sba.gov, if needed. Questions may be
                directed to an SBA Disaster Customer Service Representative at 1-800-
                659-2955 (individuals who are deaf or hard of hearing may call 1-800-
                877-8339), or a local SBA Field Office; the list of local SBA Field
                Offices may be found at https://www.sba.gov/tools/local-assistance/districtoffices.
                Compliance With Executive Orders, the Congressional Review Act,
                Paperwork Reduction Act, and the Regulatory Flexibility Act
                Executive Orders 12866 and 13563
                 OMB's Office of Information and Regulatory Affairs (OIRA) has
                determined that this interim final rule is economically significant for
                the purposes of Executive Orders 12866 and 13563. SBA, however, is
                proceeding under the emergency provision at Executive Order 12866
                section 6(a)(3)(D), based on the need to move expeditiously to mitigate
                the current economic hardships and conditions arising from the COVID-19
                emergency.
                 This rule is necessary to provide economic relief to small
                businesses and private nonprofit organizations nationwide adversely
                impacted by COVID-19. As evidence of unmet need, the Restaurant
                Revitalization Fund (RRF) received $28.6 billion in appropriations and
                in 21 days, received 278,304 RRF applications totaling more than $72
                billion, which resulted in 177,300 businesses without assistance.
                Further, with the end of the Paycheck Protection Program (PPP),
                businesses
                [[Page 50218]]
                and nonprofit organizations that are still struggling will turn to the
                COVID EIDL program for long-term recovery. For these reasons, SBA
                anticipates that this rule will result in substantial benefits to small
                businesses, nonprofit organizations, their employees, and the
                communities they serve.
                Executive Order 12988
                 SBA has drafted this rule, to the extent practicable, in accordance
                with the standards set forth in section 3(a) and 3(b)(2) of Executive
                Order 12988, to minimize litigation, eliminate ambiguity, and reduce
                burden. The rule has no preemptive or retroactive effect.
                Executive Order 13132
                 SBA has determined that this rule will 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 layers of government. Therefore, SBA
                has determined that this rule has no federalism implications warranting
                preparation of a federalism assessment.
                Congressional Review Act
                 OIRA has determined that this is a major rule for purposes of
                subtitle E of the Small Business Regulatory Enforcement and Fairness
                Act of 1996 (also known as the Congressional Review Act or CRA), 5
                U.S.C. 804(2) et seq. Under the CRA, a major rule takes effect 60 days
                after the rule is published in the Federal Register. 5 U.S.C.
                801(a)(3).
                 Notwithstanding this requirement, the CRA allows agencies to
                dispense with the requirements of section 801 when the agency for good
                cause finds that such procedure would be ``impracticable, unnecessary,
                or contrary to the public interest,'' and provides that the rule shall
                take effect at such time as the Federal agency promulgating the rule
                determines. 5 U.S.C. 808(2). Pursuant to section 808(2), SBA for good
                cause finds that a 60-day delay to provide public notice would be
                impracticable, unnecessary, and contrary to the public interest.
                Likewise, for the same reasons, SBA for good cause finds that there are
                grounds to waive the 30-day effective date delay under the
                Administrative Procedure Act. 5 U.S.C. 553(d)(3).
                 Other SBA COVID-19 relief programs have recently ended or exhausted
                the funding provided for the program (including PPP and RRF), yet
                businesses and nonprofit organizations are still in need of support.
                The COVID EIDL program is more critical now than it was before because
                of the lack of these other resources and the continuing economic
                instability. An immediate effective date will give small businesses,
                nonprofit organizations, qualified agricultural businesses, and
                independent contractors affected by this interim final rule the maximum
                amount of time to apply for loans and SBA the maximum amount of time to
                process applications before the program ends on December 31, 2021.
                Given the short duration of this program, SBA has determined that it is
                impractical and not in the public interest to provide a delayed
                effective date.
                Paperwork Reduction Act, 44 U.S.C. Chapter 35
                 SBA has determined that this rule will require revisions to the
                COVID-19 Economic Injury Disaster Loan Application information
                collection (OMB Control Number 3245-0406). The application form will be
                revised to require the disclosure of the NAICS code for the applicant
                in order to determine the size of the applicant on a per-physical
                location basis and to add an option to identify the eligible entity as
                a business that is assigned a NAICS code beginning with 61, 71, 72,
                213, 3121, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812,
                employs not more than 500 employees per physical location, and together
                with affiliates has no more than 20 locations. In addition, to simplify
                and streamline the process for applicants, SBA has consolidated Forms
                3501 (COVID-19 Economic Injury Disaster Loan Application), 3502
                (Economic Injury Disaster Loan Supporting Information), and 3503 (Self-
                Certification for Verification of Eligible Entity for Economic Injury
                Disaster Loan) into one form. This will reduce the burden on applicants
                as they will only need to enter certain information once. SBA also
                added questions related to entity type and types of business activity
                to assist borrowers in making the eligibility certification. Further,
                SBA revised the questions related to the calculation of economic injury
                for clarity and to aid in automating the review process. Finally, SBA
                made additional technical edits to the form for clarity. SBA has
                obtained emergency approval of the revisions, including waiver of
                public comment notices. The collection is approved for use until
                February 28, 2022. SBA will take the necessary steps to solicit
                comments and revise the information collection, if necessary, before
                approval expires.
                Regulatory Flexibility Act (RFA)
                 The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, generally
                requires that when an agency issues a proposed rule, or a final rule
                pursuant to section 553(b) of the Administrative Procedure Act or
                another law, the agency must prepare a regulatory flexibility analysis
                that meets the requirements of the RFA and publish such analysis in the
                Federal Register. 5 U.S.C. 603, 604.
                 Rules that are exempt from notice and comment are also exempt from
                the RFA requirements, including conducting a regulatory flexibility
                analysis, such as when, among other exceptions, the agency for good
                cause finds that notice and public procedure are impracticable,
                unnecessary, or contrary to the public interest. SBA Office of Advocacy
                Guide: How To Comply with the Regulatory Flexibility Act, Ch.1. p.9.
                Since this rule is exempt from notice and comment, SBA is not required
                to conduct a regulatory flexibility analysis.
                List of Subjects
                13 CFR Part 121
                 Loan programs--business, Reporting and recordkeeping requirements,
                Small business.
                13 CFR Part 123
                 Loan Program--disaster loan program.
                 For the reasons stated in the preamble, SBA amends 13 CFR parts 121
                and 123 as follows:
                PART 121--SMALL BUSINESS SIZE REGULATIONS
                0
                1. The authority citation for 13 CFR part 121 continues to read as
                follows:
                 Authority: 15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, and
                694a(9); Pub. L. 116-136, Section 1114.
                0
                2. Amend Sec. 121.301 by adding paragraph (g) to read as follows:
                Sec. 121.301 What size standards and affiliation principles are
                applicable to financial assistance programs?
                * * * * *
                 (g) For COVID-19 Economic Injury Disaster (COVID EIDL) loans, an
                ``affiliated business'' or ``affiliate'' is a business in which an
                eligible entity has an equity interest or right to profit distributions
                of not less than 50 percent, or in which an eligible entity has the
                contractual authority to control the direction of the business,
                provided that such affiliation shall be determined as of any
                arrangements or agreements in existence as of January 31, 2020. For
                exceptions to affiliation, see Sec. 121.103(b).
                [[Page 50219]]
                PART 123--DISASTER LOAN PROGRAM
                0
                3. The authority citation for 13 CFR part 123 is revised to read as
                follows:
                 Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 636(d), and 657n;
                Section 1110, Pub. L. 116-136, 134 Stat. 281; and Section 331, Pub.
                L. 116-260, 134 Stat. 1182.
                0
                4. Amend Sec. 123.13 by revising the first sentence of paragraph (e)
                and paragraph (f) to read as follows:
                Sec. 123.13 What happens if my loan application is denied?
                * * * * *
                 (e) If SBA declines your application a second time, you have the
                right to appeal in writing to the Director, Disaster Assistance
                Processing and Disbursement Center (DAPDC) or the Director's
                designee(s). * * *
                 (f) The decision of the Director, DAPDC or the Director's
                designee(s), is final unless:
                 (1) The Director, DAPDC or the Director's designee(s), does not
                have the authority to approve the requested loan;
                 (2) The Director, DAPDC or the Director's designee(s), refers the
                matter to the SBA Associate Administrator for Disaster Assistance (AA/
                DA);
                 (3) The AA/DA, upon a showing of special circumstances, requests
                that the Director, DAPDC or the Director's designee(s), forward the
                matter to him or her for final consideration; or
                 (4) The SBA Administrator, solely within the Administrator's
                discretion, chooses to review the matter and make the final decision.
                Such discretionary authority of the Administrator does not create
                additional rights of appeal on the part of an applicant not otherwise
                specified in SBA regulations.
                * * * * *
                0
                5. Amend Sec. 123.300 by adding paragraph (e) to read as follows:
                Sec. 123.300 Is my business eligible to apply for an economic injury
                disaster loan?
                * * * * *
                 (e) COVID-19 Economic Injury Disaster (COVID EIDL) loans are
                available if, as of the date of application, you:
                 (1) Are a business, including an agricultural cooperative,
                aquaculture enterprise, nursery, or producer cooperative (but excluding
                all other agricultural enterprises), that is small under SBA Size
                Standards (as defined in part 121 of this chapter);
                 (2) Are an individual who operates under a sole proprietorship,
                with or without employees, or as an independent contractor;
                 (3) Are a private non-profit organization that is a non-
                governmental agency or entity that currently has an effective ruling
                letter from the Internal Revenue Service (IRS) granting tax exemption
                under sections 501(c), (d), or (e) of the Internal Revenue Code of
                1954, or satisfactory evidence from the State that the non-revenue-
                producing organization or entity is a non-profit one organized or doing
                business under State law, or a faith-based organization;
                 (4) Are a business, cooperative, agricultural enterprise, Employee
                Stock Ownership Plan (as defined in 15 U.S.C. 632), or tribal small
                business concern (as described in 15 U.S.C. 657a(b)(2)(C)), with not
                more than 500 employees; or
                 (5) Are a business that is assigned a North American Industry
                Classification System (NAICS) code beginning with 61, 71, 72, 213,
                3121, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812, employs
                not more than 500 employees per physical location, and together with
                affiliates has no more than 20 locations.
                0
                6. Amend Sec. 123.303 by adding a sentence to the end of paragraph (a)
                and revising paragraph (b)(2) to read as follows:
                Sec. 123.303 How can my business spend my economic injury disaster
                loan?
                 (a) * * * COVID EIDL loan proceeds also may be used to make debt
                payments including monthly payments, payment of deferred interest, and
                pre-payments on any business debts, except pre-payments are not
                permitted on any loans owned by a Federal agency (including SBA) or a
                Small Business Investment Company licensed under the Small Business
                Investment Act.
                 (b) * * *
                 (2) Except for COVID EIDL loan proceeds, make payments on loans
                owned by a Federal agency (including SBA) or a Small Business
                Investment Company licensed under the Small Business Investment Act;
                * * * * *
                0
                7. Add Sec. 123.304 to read as follows:
                Sec. 123.304 Is there a limit on the maximum loan amount to a single
                corporate group for COVID EIDL Loans?
                 Entities that are part of a single corporate group shall in no
                event receive more than $10,000,000 of COVID EIDL loans in the
                aggregate. For purposes of this limit, entities are part of a single
                corporate group if they are majority owned, directly or indirectly, by
                a common parent.
                Isabella Casillas Guzman,
                Administrator.
                [FR Doc. 2021-19232 Filed 9-7-21; 8:45 am]
                BILLING CODE 8026-03-P
                

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT