Disaster Loan Program

SMALL BUSINESS ADMINISTRATION

13 CFR Part 123

Disaster Loan Program

AGENCY: Small Business Administration (SBA).

ACTION: Final rule.

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SUMMARY: Under this rule, an SBA disaster loan borrower can 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 rule, the SBA Associate Administrator

for Disaster Assistance can waive the two year limit because of

extraordinary circumstances.

DATES: This rule is effective March 30, 1998.

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. On November 25, 1997, SBA published a notice of proposed

rulemaking (62 FR 62707), to define the circumstances under which a

borrower could request an increase and to limit the time period for the

request to two years. The SBA Associate Administrator for Disaster

Assistance (AA/DA) has the authority to waive the two year limit for

extraordinary and unforeseeable circumstances. SBA received no comments

from the public on the proposed rule. The final rule is identical to

the proposed rule.

Under the rule, a borrower of a disaster loan (whether physical or

economic injury) can 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 can request increases in working capital if they cannot

resume business activity as quickly as planned because of events beyond

their control. These examples, while not all inclusive, 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 rule permits 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 rule does not constitute a significant rule

within the meaning of Executive Order 12866 and does 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 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 amends part 123,

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

PART 123--DISASTER LOAN ASSISTANCE

1. The authority citation for part 123 continues 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 are 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 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.

123.19 May 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

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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: March 20, 1998.

Aida Alvarez,

Administrator.

[FR Doc. 98-8245 Filed 3-27-98; 8:45 am]

BILLING CODE 8025-01-P