Disaster Loan Program

SMALL BUSINESS ADMINISTRATION

13 CFR Part 123

Disaster Loan Program

AGENCY: Small Business Administration.

ACTION: Final rule.

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SUMMARY: The Small Business Administration (SBA) adopts as a final

rule, without change, the provisions of an interim final rule amending

its disaster loan rules. This final rule continues to ensure that when

a legal business entity is engaged in both agricultural enterprises and

non-agricultural business ventures, SBA can provide physical disaster

business loans to the non-agricultural portion which has been damaged

by floods and other catastrophes.

DATES: This rule is effective September 2, 1998.

FOR FURTHER INFORMATION CONTACT: Bernard Kulik, Associate Administrator

for Disaster Assistance, (202) 205-6734.

SUPPLEMENTARY INFORMATION: Section 2(e) of the Small Business Act (15

USC S 631(e)) (``Act'') states that the policy of the Congress is that

the Government aid and assist ``victims'' of floods and other

catastrophes. Section 2(g) of the Act provides that in its

administration of the disaster loan program, pursuant to section 7(b)

of the Act, SBA shall provide, ``to the maximum extent possible,''

assistance and counseling to disaster ``victims.'' In administering the

disaster loan program, SBA is precluded, by section 7(b) of the Act,

from assisting agricultural enterprises. As defined in section 18(b)(1)

of the Act, an ``agricultural enterprise'' is a business engaged in the

production of food and fiber, ranching, and raising of livestock,

aquaculture, and all other farming and agricultural related industries.

SBA previously provided physical disaster business loan assistance

only to business entities which were adversely affected by floods and

other catastrophes when the primary activity of the business entity was

non-agricultural. Thus, if a person or a single business entity

operated both

[[Page 46645]]

agricultural and non-agricultural enterprises, SBA would not assist any

part of the business entity that suffered damage if the primary

activity of the total entity was agricultural.

SBA reconsidered the statutory language above and re-evaluated its

position with respect to the ``primary activity rule'' which it

administratively applied. The Act requires SBA to assist ``victims'' of

floods and other catastrophes, without regard to the primary activity

of a total business entity. If the victim of a flood or other

catastrophe is a non-agricultural business venture, SBA should assist

that victim regardless of whether such business is a part of a larger

business entity whose primary activity is agricultural. Thus, if the

total business operation is comprised of a retail store and a ranch,

and the retail store is destroyed by a flood, SBA should offer physical

disaster assistance to the retail store even if the ranching operation

generated more revenue.

Accordingly, SBA promulgates this final rule to continue to permit

SBA to provide physical disaster business loan assistance to a non-

agricultural business venture within the total business entity if the

non-agricultural business has been damaged by a flood or other

catastrophe, regardless of the primary activity of the total business

entity. The rule also makes clear that the business entity can be a

sole proprietorship, corporation, limited liability company, or

partnership.

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

Regulatory Flexibility Act (15 U.S.C. S601, et seq.), and the

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

SBA certifies that this rule is not a significant rule within the

meaning of Executive Order 12866; it is not likely to have 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. SBA also certifies that this rule 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.

S601 et seq. This rule makes eligible for physical disaster loans only

nonagricultural businesses that are part of a business entity that is

primarily agricultural and, therefore, does not meet the substantial

number of small businesses criterion anticipated by the Regulatory

Flexibility Act.

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

certifies that this final rule contains no new reporting or

recordkeeping requirements.

For purposes of Executive Order 12612, SBA certifies that this 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 standards set

forth in Section 2 of that Order.

An interim final rule was published in the Federal Register on July

1, 1997 (62 FR 35337). An open comment period was provided for

interested persons to respond to the interim final rule. Since the date

of publication of the interim final rule, no comments were received.

Accordingly, the interim final rule is adopted without change as final.

List of Subjects in 13 CFR Part 123

Disaster assistance, Loan programs-business, Small businesses.

Accordingly, the interim final rule amending 13 CFR part 123 which

was published at 62 FR 35337 on July 1, 1997, is adopted as a final

rule without change.

Dated: July 8, 1998.

Aida Alvarez,

Administrator.

[FR Doc. 98-23658 Filed 9-1-98; 8:45 am]

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