MEETING: New Markets Lending Company; Pilot Program

SMALL BUSINESS ADMINISTRATION

MEETING: New Markets Lending Company; Pilot Program

AGENCY: Small Business Administration.

ACTION: Public Meeting on SBA's Proposed New Markets Lending Company.

(NMLC) pilot loan program for SBA loans made under Section 7(a) of the

Small Business Act.

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SUMMARY: The SBA recognizes that many segments of the small business

community continue to have difficulty accessing capital in the

commercial loan markets. To assist these New Markets small businesses,

the Agency plans to develop and test several innovative new programs

and initiatives designed to more efficiently and effectively deliver

SBA financing to these markets. The proposed NMLC program is one of

these initiatives. SBA envisions the program as a limited term, limited

participation SBA pilot program under which the Agency will select

approximately ten unique, non-depository lending institutions to make

SBA guaranteed loans targeted to New Markets small businesses. This

pilot will be part of the Agency's 7(a) loan program, which provided

guaranties on loans to approximately 42,000 small businesses for about

$9 billion in FY 1998.

SBA expects to define New Markets under the program as current and

prospective small businesses owned by minorities, women, veterans, and

persons with disabilities, who are underrepresented in the population

of business owners compared to their representation in the overall

population, as well as businesses located or locating in Low and

Moderate Income urban and rural areas.

SBA is continuing to develop criteria for participation in the

program, but participants are expected to be selected competitively

using criteria that may include, among others, the following:

Management Capability

The applicant entity or its management team must demonstrate

appropriate experience in managing a loan underwriting, loan making,

loan collection, and loan liquidation operation;

Adequate Capitalization

A minimum capitalization, including leverage limitations to reflect

both balance sheet and off balance sheet assets, will be required. (A

variety of financing structures will be considered, but a minimum

equity injection of $3-$5 million is being considered);

Commitment to Borrower's Development

Applicant must demonstrate a continuing commitment to the

development of the borrower's management capabilities; and,

Public Purpose

Participants must aggressively and continuously target a range of

SBA defined New Markets communities.

The Agency's monitoring and oversight of NMLCs will include annual

safety and soundness examinations, periodic reviews of lender

effectiveness in reaching targeted markets, and compliance reviews

required of other SBA lenders. SBA will develop program guidelines and

procedures shortly and expects to implement the program by October 1,

1999.

HEARING: SBA will hold a public hearing to obtain comments and

suggestions from the public to assist in developing the NMLC concept.

Interested parties will be given a reasonable time for an oral

presentation and may submit written statements of their oral

presentation in advance. If you wish to make a presentation, please

contact Ms. Lula M. Gardner at (202) 205-6485 at least five days before

the hearing. If a large number of participants desire to make

statements, a time limitation on each presentation will be imposed.

Members of the hearing panel may ask questions of the speaker, but

speakers will not be allowed to question each other. Please submit

written questions in advance to the Chair. If the Chair determines them

to be relevant, the Chair will direct them to the appropriate panel

member.

DATES: March 11, 1999, 1:30 p.m. to 4:30 p.m.

LOCATION: SBA's Washington District Office Conference Room, 1110

Vermont Avenue, NW, Washington, DC 20005.

POSSIBLE ISSUES: The SBA requests that speakers address the following

issues:

Can this concept help increase SBA lending to New Markets?

How should SBA select NMLC participants?

Should the SBA require that a minimum percentage of

lending by each NMLC be directed to New Markets? If so, what should

that minimum percentage be?

How many firms should be allowed to participate?

What, if any, time limit should be established for the

program?

What level of capitalization should SBA require of NMLC

pilot participants?

What loan volume should SBA expect from NMLCs?

What oversight should SBA apply to this program?

Should SBA give these firms PLP and/or SBAExpress

authority?

What incentives should SBA consider to encourage these

firms to lend in non-traditional markets?

What support should SBA provide lenders to address these

markets?

What will be the likely impact of this program on existing

SBA lenders?

In lieu of the proposed NMLC program, should SBA open the

SBLC program to additional participants?

FOR FURTHER INFORMATION CONTACT: Charles Thomas, Chief, Pilot

[[Page 10056]]

Operations, Office of Financial Assistance, (202) 205-6656.

Arnold S. Rosenthal,

Acting Deputy Associate Administrator for Financial Assistance.

[FR Doc. 99-4864 Filed 2-26-99; 8:45 am]

BILLING CODE 8025-01-P