Disaster Loan Program

SMALL BUSINESS ADMINISTRATION

13 CFR Part 123

Disaster Loan Program

AGENCY: Small Business Administration (SBA).

ACTION: Proposed rule.

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SUMMARY: Under this proposed rule, an SBA disaster loan borrower could

request an increase in a disaster loan within two years after the loan

was approved. The increase must be used to cover eligible damages

resulting from events that occurred after the loan was approved and

were beyond the borrower's control. Under the proposed rule, the SBA

Associate Administrator for Disaster Assistance could waive the two

year limit because of extraordinary circumstances.

DATES: Comments must be submitted on or before December 26, 1997.

ADDRESSES: Comments should be mailed to Bernard Kulik, Associate

Administrator for Disaster Assistance, Small Business Administration,

409 Third Street, S.W., Washington, D.C. 20416.

FOR FURTHER INFORMATION CONTACT: Bernard Kulik, 202/205-6734.

SUPPLEMENTARY INFORMATION: SBA makes thousands of physical and economic

injury disaster loans to repair or replace damaged property or to help

a business recover from economic injury. Borrowers must use such loans

only to help them recover from the effects of a specific disaster.

Borrowers may request increases in their loans after the initial

disaster loans were made and, where appropriate, SBA will approve the

request. Under this proposed rule, SBA is defining the circumstances

under which a borrower can request an increase and limiting the time

period for the request to two years. The SBA Associate Administrator

for Disaster Assistance (AA/DA) would have the authority to waive the

two year limit for extraordinary and unforeseeable circumstances.

Under the proposed rule, a borrower of a disaster loan (whether

physical or economic injury) could request an increase in the loan

amount if the eligible cost of repair or replacement of damages

increases because of events occurring after the loan approval that were

beyond the borrower's control. For example, a borrower can request an

increase of a physical disaster loan before the repair, renovation or

reconstruction is completed if hidden damage is discovered or if

official building codes changed since SBA approved the physical

disaster loan. With respect to economic injury disaster loans,

borrowers could request an increase in working capital if they could

not resume business activity as quickly as planned because of events

beyond their control. These examples, while not all inclusive, would

support a borrower's request for an increase in the amount of a

disaster loan. These kinds of events usually will be apparent within

two years after SBA approves a disaster loan. However, in extraordinary

circumstances, the proposed rule would permit the AA/DA to waive the

two year limitation.

Compliance With Executive Orders 12612, 12778, and 12866, the

Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork

Reduction Act (44 U.S.C. Ch. 35)

SBA certifies that this proposed rule does not constitute a

significant rule within the meaning of Executive Order 12866 and will

not have a significant economic impact on a substantial number of small

entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C.

601 et seq. It is not likely to have an annual economic effect of $100

million or more on the economy, result in a major increase in costs or

prices, or have a significant adverse effect on competition or the

United States economy.

For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA

certifies that this proposed rule contains no new reporting or

recordkeeping requirements.

For purposes of Executive Order 12612, SBA certifies that this

proposed rule has no federalism implications warranting the preparation

of a Federalism Assessment.

For purposes of Executive Order 12778, SBA certifies that this rule

is drafted, to the extent practicable, in accordance with the standards

set forth in section 2 of that Order.

(Catalog of Federal Domestic Assistance Programs, No. 59.012 and

59.008)

List of Subjects in 13 CFR Part 123

Disaster assistance, Loan programs-business, Small Businesses.

Accordingly, pursuant to the authority contained in section 5(b)(6)

of the Small Business Act (15 U.S.C. 634(b)(6)), SBA proposes to amend

part 123, chapter I, title 13, Code of Federal Regulations, as follows:

PART 123--DISASTER LOAN ASSISTANCE

1. The authority citation for Part 123 would continue to read as

follows:

Authority: 15 U.S.C. 634(b)(6), 636(b), 636(c) and 636(f); Pub.

L. 102-395, 106 Stat. 1828, 1864; and Pub. L. 103-75, 107 Stat. 739.

2. Sections 123.18, 123.19 and 123.20 would be added to read as

follows:

Sec. 123.18 Can I request an increase in the amount of a physical

disaster loan?

SBA will consider your request for an increase in your loan if you

can show that the eligible cost of repair or replacement of damages

increased because of events occurring after the loan approval that were

beyond your control. An eligible cost is one which is

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related to the disaster for which SBA issued the original loan. For

example, if you discover hidden damage within a reasonable time after

SBA approved your original disaster loan and before repair, renovation,

or reconstruction is complete, you may request an increase. Or, if

applicable building code requirements were changed since SBA approved

your original loan, you may request an increase in your loan amount.

Sec. 123.19 Can I request an increase in the amount of an economic

injury loan?

SBA will consider your request for an increase in the loan amount

if you can show that the increase is essential for your business to

continue and is based on events occurring after SBA approved your

original loan which were beyond your control. For example, delays may

have occurred beyond your control which prevent you from resuming your

normal business activity in a reasonable time frame. Your request for

an increase in the loan amount must be related to the disaster for

which the SBA economic injury disaster loan was originally made.

Sec. 123.20 How long do I have to request an increase in the amount of

a physical disaster loan or an economic injury loan?

You should request a loan increase as soon as possible after you

discover the need for the increase, but not later than two years after

SBA approved your physical disaster or economic injury loan. After two

years, the SBA Associate Administrator for Disaster Assistance (AA/DA)

may waive this limitation after finding extraordinary and unforeseeable

circumstances.

Dated: November 14, 1997.

Aida Alvarez,

Administrator.

[FR Doc. 97-30847 Filed 11-24-97; 8:45 am]

BILLING CODE 8025-01-P