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: SBA is proposing to amend its regulations to conform the

eligibility criteria for disaster loans to those applicable in SBA's

business loan program. Thus, under the proposed rule, a business could

not obtain a physical disaster loan if it is engaged in any illegal

activity; if it is a government owned entity (other than one owned or

controlled by a Native American tribe); or if it engages in products or

services of a prurient sexual nature. Under the proposed rule, a

business would not be eligible for an economic injury disaster loan if

more than one-third of its revenues are from legal gambling operations

or from packaging SBA loans; if it is principally engaged in teaching

or indoctrinating religion; or is primarily engaged in political or

lobbying activities.

DATES: Comments must be submitted on or before May 26, 1998.

ADDRESSES: Comments may be mailed to Bernard Kulik, Associate

Administrator for Disaster Assistance, Small Business Administration,

409 Third Street, SW., Washington, DC 20416.

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

SUPPLEMENTARY INFORMATION: Under the proposed rule, SBA would amend

Sec. 123.201 of its regulations so that an applicant would not be

eligible for a physical disaster business loan if it is engaged in any

illegal activity; if it is a government owned entity (other than a

business owned or controlled by a Native American tribe); or if the

business (1) presents live performances of a prurient sexual nature or

(2) derives directly or indirectly more than de minimis gross revenue

from activities of a prurient sexual nature. This proposed rule would

codify SBA's existing policy of using the same ineligibility criteria

for SBA's disaster and business loan programs. Thus, a business that

would not be eligible to receive an SBA guaranteed business loan

because it met these criteria, would also not be eligible to obtain a

physical disaster loan.

Under this proposed rule amending Sec. 123.301 of SBA's

regulations, a business would not be eligible for an economic injury

disaster loan if it (1) derived more than one-third of its gross annual

revenue from legal gambling activities; (2) earned more than one-third

of its gross annual revenue from packaging SBA loans; (3) was

principally engaged in teaching, instructing, counselling or

indoctrinating religion or religious beliefs, whether in a religious or

secular setting; or (4) primarily engaged in political or lobbying

activities. These proposed changes would codify SBA's existing policy

of using the same ineligibility criteria for its economic injury

disaster and business loan program. Thus, if a business is not

eligible, because of these criteria, for an SBA guaranteed loan under

the business loan program, it would not be eligible for an economic

injury disaster loan.

SBA is proposing to correct a typographical error in

Sec. 123.202(a) by substituting ``lesser'' for ``greater'' in the first

sentence which would then read: ``Disaster business loans, including

both physical disaster and economic injury loans to the same borrower,

together with its affiliates, cannot exceed the lesser of the

uncompensated physical loss and economic injury or $1.5 million.'' This

would ensure that an applicant receives disaster assistance for an

uncompensated loss or injury without obtaining excessive SBA assistance

at lower than market rates.

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 does

not have significant economic impact on a substantial number of small

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

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

million or more, result in a major increase in costs or prices, or have

a significant adverse effect on competition or the United States

economy. This proposed rule codifies current SBA practices and will not

affect additional businesses or impose any costs

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

certifies that this proposed rule contains no new reporting or record

keeping 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. Section 123.201 would be amended by adding paragraphs (d), (e),

and (f) to read as follows:

Sec. 123.201 When am I not eligible to apply for a physical disaster

business loan?

* * * * *

(d) You are not eligible if your business is engaged in any illegal

activity.

(e) You are not eligible if you are a government owned entity

(except for a business owned or controlled by a Native American tribe).

(f) You are not eligible if your business:

(1) Presents live performances of a prurient sexual nature or

(2) Derives directly or indirectly more than de minimis gross

revenue through the sale of products or services, or the

[[Page 20141]]

presentation of any depictions or displays, of a prurient sexual

nature.

3. Section 123.202(a) would be amended by revising the first

sentence to read as follows:

Sec. 123.202 How much can my business borrow with a physical disaster

business loan?

(a) Disaster business loans, including both physical disaster and

economic injury loans to the same borrower, together with its

affiliates, cannot exceed the lesser of the uncompensated physical loss

and economic injury or $1.5 million. * * *

4. Section 123.301 would be amended by removing ``gambling'' and

``loan packaging'' in paragraph (a), removing ``or'' at the end of

paragraph (c), removing the period and adding ``; or'' at the end of

paragraph (d), and adding paragraphs (e), (f), (g), and (h) to read as

follows:

Sec. 123.301 When would my business not be eligible to apply for an

economic injury disaster loan?

* * * * *

(e) Deriving more than one-third of gross annual revenue from legal

gambling activities;

(f) A loan packager which earns more than one-third of its gross

annual revenue from packaging SBA loans;

(g) Principally engaged in teaching, instructing, counselling or

indoctrinating religion or religious beliefs, whether in a religious or

secular setting; or

(h) Primarily engaged in political or lobbying activities.

Dated: April 14, 1998.

Aida Alvarez,

Administrator.

[FR Doc. 98-10757 Filed 4-22-98; 8:45 am]

BILLING CODE 8025-01-P