Disaster Loan Program Changes rule (2021)
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The Disaster Loan Program Changes rule is a significant rule issued by the U.S. Small Business Administration (SBA) and the U.S. Department of the Treasury effective September 8, 2021, that amended regulatory definitions, eligible uses of loan funds, and size standards for certain loan recipients under the COVID-19 Disaster Loan Program. The rule also established a maximum loan limit for corporate groups under the COVID-19 Economic Injury Disaster Loan program and changed the appeals process for declined applications across all small business disaster assistance programs. The rule was issued pursuant to the Small Business Administration (SBA).[1]
Timeline
The following timeline details key rulemaking activity:
- October 8, 2021: The comment period closed.[1]
- September 8, 2021: The interim final rule was published, the comment period opened, and the rule took effect.[1]
Background
The Economic Injury Disaster Loan (EIDL) program was established by the Small Business Administration (SBA) under the Small Business Act. It was initially designed to assist businesses, small agricultural cooperatives, and most private nonprofit organizations suffering substantial economic injury resulting from various types of disasters, such as natural disasters. The program was expanded during the coronavirus pandemic under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Paycheck Protection Program and Health Care Enhancement Act, and the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act). This rule amended the EIDL program based on the expansions.[1]
Summary of the rule
The following is a summary of the rule from the rule's entry in the Federal Register:
| “ | This interim final rule implements changes to the Disaster Loan Program regulations. For applications for COVID–19 Economic Injury Disaster (COVID EIDL) loans, in this rule SBA is changing the definition of affiliation, the eligible uses of loan proceeds, and application of the size standard to certain hard-hit eligible entities, and is establishing a maximum loan limit for borrowers in a single corporate group. In addition, for all disaster assistance programs, in this rule, SBA is changing which SBA official may make the decision on the appeal of an application that has been declined for a second time.[1][2] | ” |
Summary of provisions
The following is a summary of the provisions from the rule's entry in the Federal Register:[1]
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1. Definition of Affiliation for COVID EIDL Loans ... SBA is revising 13 CFR 121.301, 'What size standards and affiliation principles are applicable to financial assistance programs?', to add a new paragraph (g) to state that for COVID EIDL loans, an affiliated business or affiliate is 'a business in which an eligible entity has an equity interest or right to profit distributions of not less than 50 percent, or in which an eligible entity has the contractual authority to control the direction of the business, provided that such affiliation shall be determined as of any arrangements or agreements in existence as of January 31, 2020.' The new paragraph (g) also will include a cross reference to the exceptions to affiliation set forth in 13 CFR 121.103(b), which continue to apply to COVID EIDL loans. 2. Second Decline of Loan Application ... Therefore, SBA is revising the regulation at 13 CFR 123.13, paragraphs (e) and (f), to state that, if SBA declines an application a second time, the Director, DAPDC, or the Director's designee(s), will make the decision. Further, SBA is revising the regulation to state that the Administrator, solely within the Administrator's discretion, may choose to review the matter and make the final decision. Such discretionary authority of the Administrator does not create additional rights of appeal on the part of an applicant not otherwise specified in SBA regulations. The changes to this regulation apply to all SBA Disaster Loan Programs. 3. Eligible Entities for COVID EIDL Loans ... SBA is revising 13 CFR 123.300, 'Is my business eligible to apply for an economic injury disaster loan?', by adding a new paragraph (e) to state that certain hard-hit businesses identified by specific NAICS classifications will be able to qualify as eligible small business concerns for COVID EIDL loans based on the number of employees per physical location. Consistent with the standard in RRF, businesses using the per-physical location eligibility standard must, together with affiliates, have no more than 20 locations. ... 4. COVID EIDL Uses of Proceeds ... SBA is revising the regulation at 13 CFR 123.303, 'How can my business spend my economic injury disaster loan?', to permit COVID EIDL working capital loan proceeds to be used to pay any type of business debt, including loans owned by a Federal agency (including SBA) or an SBIC. SBA also is revising the regulation to clarify that COVID EIDL loan proceeds may be used to make debt payments including monthly payments, payments of deferred interest, and pre-payments, except that pre-payments will not be permitted on debt that is owned by a Federal agency (including SBA) or an SBIC. 5. Limits of COVID EIDL Loans to a Single Corporate Group SBA is adding a new regulation to state that entities that are part of a single corporate group shall in no event receive more than $10,000,000 of COVID EIDL loans in the aggregate. For purposes of this limit, entities are part of a single corporate group if they are majority owned, directly or indirectly, by a common parent. Businesses are subject to this limitation even if the businesses are in certain hard-hit sectors and able to use the per-physical location application of the size standard as set forth in 13 CFR 123.300(e)(5).[2] |
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Significant impact
- See also: Significant regulatory action
Executive Order 12866, issued by President Bill Clinton (D) in 1993, directed the Office of Management and Budget (OMB) to determine which agency rules qualify as significant rules and thus are subject to OMB review.
Significant rules have had or might have a large impact on the economy, environment, public health, or state or local governments. These actions may also conflict with other rules or presidential priorities. Executive Order 12866 further defined an economically significant rule as a significant rule with an associated economic impact of $100 million or more. Executive Order 14094, issued by President Joe Biden (D) on April 6, 2023, made changes to Executive Order 12866, including referring to economically significant rules as section 3(f)(1) significant rules and raising the monetary threshold for economic significance to $200 million or more.[1]
The text of the rule states that OMB deemed this rule economically significant:
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OMB's Office of Information and Regulatory Affairs (OIRA) has determined that this interim final rule is economically significant for the purposes of Executive Orders 12866 and 13563.[2] |
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Text of the rule
The full text of the rule is available below:[1]
See also
External links
Footnotes
