Rule2021-15975
Debt Refinancing in the 504 Loan Program
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 29, 2021
Effective
July 29, 2021
Issuing agencies
Small Business Administration
Abstract
This interim final rule implements section 328 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which revises the requirements for refinancing debt in the 504 Loan Program, including: For 504 debt refinancing involving expansions, increasing the amount of existing indebtedness that may be refinanced; and for 504 debt refinancing not involving expansions, removing two limitations on the program, reinstating an alternate job retention goal for the refinancing project, revising the definition of qualified debt, and removing the prohibition against Certified Development Companies ("CDCs") participating in the Premier Certified Lenders Program using their delegated authority to make these loans.
Full Text
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<title>Federal Register, Volume 86 Issue 143 (Thursday, July 29, 2021)</title>
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[Federal Register Volume 86, Number 143 (Thursday, July 29, 2021)]
[Rules and Regulations]
[Pages 40775-40779]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-15975]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
RIN 3245-AH78
Debt Refinancing in the 504 Loan Program
AGENCY: U.S. Small Business Administration (SBA).
ACTION: Interim final rule with request for comments.
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SUMMARY: This interim final rule implements section 328 of the Economic
Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which
revises the requirements for refinancing debt in the 504 Loan Program,
including: For 504 debt refinancing involving expansions, increasing
the amount of existing indebtedness that may be refinanced; and for 504
debt refinancing not involving expansions, removing two limitations on
the program, reinstating an alternate job retention goal for the
refinancing project, revising the definition of qualified debt, and
removing the prohibition against Certified Development Companies
(``CDCs'') participating in the Premier Certified Lenders Program using
their delegated authority to make these loans.
DATES: Effective Date: This rule is effective July 29, 2021.
Comment Date: Comments must be received on or before September 27,
2021.
ADDRESSES: You may submit comments, identified by RIN 3245-AH78,
through the Federal eRulemaking Portal: <a href="http://www.regulations.gov">http://www.regulations.gov</a>.
Follow the instructions for submitting comments.
SBA will post all comments on <a href="http://www.regulations.gov">http://www.regulations.gov</a>. If you
wish to submit confidential business information (CBI) as defined in
the User Notice at <a href="http://www.regulations.gov">http://www.regulations.gov</a>, please submit the
information via email to <a href="/cdn-cgi/l/email-protection#291c191d5b4c4f40695a4b48074e465f"><span class="__cf_email__" data-cfemail="fbcecbcf899e9d92bb88999ad59c948d">[email protected]</span></a>. Highlight the information
that you consider to be CBI and explain why you believe SBA should hold
this information as confidential. SBA will review the information and
make the final determination whether it will publish the information.
FOR FURTHER INFORMATION CONTACT: Linda Reilly, Chief, 504 Program
Branch, Office of Financial Assistance, Small Business Administration,
409 3rd Street SW, Washington, DC 20416; telephone: (202) 604-5032;
email: <a href="/cdn-cgi/l/email-protection#fd919493999cd38f9894919184bd8e9f9cd39a928b"><span class="__cf_email__" data-cfemail="a3cfcacdc7c28dd1c6cacfcfdae3d0c1c28dc4ccd5">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background Information
The 504 Loan Program is an SBA financing program authorized under
title V of the Small Business Investment Act of 1958, 15 U.S.C. 695 et
seq. The core mission of the 504 Loan Program is to provide long-term
financing to small businesses for the purchase or improvement of land,
buildings, and major equipment, in an effort to facilitate the creation
or retention of jobs and local economic development. Under the 504 Loan
Program, loans are made to small business applicants by Certified
Development Companies (``CDCs''), which are certified and regulated by
SBA to promote economic development within their community. In general,
a project in the 504 Loan Program (a ``504 Project'') includes: A loan
obtained from a private sector lender with a senior lien covering at
least 50 percent of the project cost; a loan obtained from a CDC (a
``504 Loan'') with a junior lien covering up to 40 percent of the total
cost (backed by a 100 percent SBA-guaranteed debenture); and a
contribution from the Borrower of at least 10 percent equity.
In addition, the 504 Loan Program may be used to refinance debt
under two options authorized under section 502(7)(B) and (C) of the
Small Business Investment Act of 1958. First, if a 504 Project involves
the expansion of the small business, any amount of existing
indebtedness that does not exceed 50 percent of the project cost of the
expansion may be refinanced and added to the project's cost (Debt
Refinancing with Expansion) under the conditions set forth in section
502(7)(B) and the implementing regulations. See 13 CFR 120.882(e) and
(f). Second, debt refinancing is available for a 504 Project that does
not involve the expansion of the small business under the requirements
set forth in section 502(7)(C) and 13 CFR 120.882(g) (Debt Refinancing
without Expansion).
Section 328(a) of the Economic Aid to Hard-Hit Small Businesses,
Nonprofits, and Venues Act (Economic Aid Act),
[[Page 40776]]
enacted December 27, 2020, Public Law 116-260, revises the conditions
and requirements for refinancing debt in the 504 Loan Program as
follows:
(1) With respect to Debt Refinancing with Expansion, 13 CFR
120.882(e), the Economic Aid Act increases the amount of existing
indebtedness that may be refinanced as part of a 504 Project from not
more than 50 percent of the project cost of the expansion to not more
than 100 percent of the project cost;
(2) With respect to Debt Refinancing without Expansion, 13 CFR
120.882(g), the Economic Aid Act:
(a) Eliminates the condition that this program shall only be in
effect in any fiscal year during which the cost to the Federal
Government of making guarantees under 13 CFR 120.882(g) and under the
504 Loan Program is zero;
(b) Eliminates the requirement that a CDC limit its financing under
the 504 Loan Program so that, during any Federal fiscal year, new
financings under 13 CFR 120.882(g) do not exceed 50% of the dollars the
CDC loaned under the 504 Loan Program, including under 13 CFR
120.882(g), during the previous fiscal year, unless otherwise waived;
(c) Eliminates the prohibition against Premier Certified Lender
Program (PCLP) CDCs using delegated authority to approve loan
applications for Debt Refinancing without Expansion;
(d) Reinstates an alternate job retention standard that was
previously removed from the Debt Refinancing without Expansion Program
by section 521 of division E of the Consolidated Appropriations Act,
2016, Public Law 114-113, enacted on December 18, 2015;
(e) Revises the definition of ``qualified debt'' to mean debt that
was incurred not less than 6 months before the date of application
instead of 2 years before the date of application;
(f) Removes from the definition of ``qualified debt'' the condition
that the debt not be subject to a guarantee by a Federal agency; and
(g) Eliminates from the definition of ``qualified debt'' the
requirement that the borrower be current on all payments for not less
than 1 year before the date of the application for refinancing.
As described in the section-by-section analysis below, SBA is
issuing this interim final rule to conform the current rules to the
requirements of the Economic Aid Act.
II. Comments and Immediate Effective Date
This interim final rule is effective without the advance notice and
public comment required by section 553 of the Administrative Procedure
Act (APA), 5 U.S.C. 553(b)(3)(B), because section 303 of the Economic
Aid Act authorizes SBA to issue regulations to implement the amendments
described above without regard to notice requirements.
In addition, pursuant to section 553(d)(1), this rule is exempt
from the APA's 30-day delayed effective date requirement on the basis
that it is a substantive rule that relieves restrictions relating to
the debt refinancing options available to small businesses. SBA has
also determined that, pursuant to section 553(d)(3), there is good
cause for dispensing with the 30-day delayed effective date on the
grounds that it would be contrary to the public interest. To meet the
immediate debt refinancing needs of small businesses impacted by the
COVID-19 pandemic, it is essential to be able to implement the
statutory changes to the refinancing programs as expeditiously as
possible.
Although this rule is being published as an interim final rule,
comments are solicited from interested members of the public. These
comments must be submitted on or before the deadline for comments
stated in this rule. SBA will consider any comments it receives and the
need for making any amendments as a result of the comments.
III. Section-by-Section Analysis
Section 120.882(e). This provision currently states that the amount
of existing indebtedness that may be refinanced is limited to no more
than 50 percent of the project cost of the expansion. Section
328(a)(2)(A) of the Economic Aid Act amends section 502(7)(B) of the
Small Business Investment Act to increase the percentage and,
accordingly, SBA is revising this provision to increase the amount of
existing indebtedness that may be refinanced to no more than 100
percent of the project cost.
Section 120.882(g)(3). This section currently provides that the
approval of a Refinancing Project is subject to the requirement that
the cost to the Federal Government of making guarantees under 13 CFR
120.882(g) and under the 504 Loan Program is zero during the fiscal
year in which the guarantee is made. Section 328(a)(1) of the Economic
Aid Act repeals this statutory requirement and, therefore, SBA is
removing this requirement.
In its place, this provision will set forth the conditions and
requirements that will apply to the refinancing of a loan that is
subject to a guarantee by a Federal agency or department. As indicated
above, the Economic Aid Act removes the prohibition against refinancing
a loan that is subject to a guarantee by a Federal agency or
department. Although these loans may now be refinanced in the Debt
Refinancing without Expansion program, the rule will provide that they
must comply with SBA's policies related to the refinancing of existing
504 and 7(a) loans, including that:
(1) For an existing 504 loan, either both the Third Party Loan and
the 504 loan must be refinanced, or the Third Party Loan must have been
paid in full; and
(2) for an existing 7(a) loan, the CDC must verify in writing that
the present lender is either unwilling or unable to modify the current
payment schedule. In addition, in the case of same institution debt, if
the Third Party Lender or the CDC affiliate as authorized under 13 CFR
120.820 is the 7(a) lender, the loan will be eligible for 504
refinancing only if the lender is unable to modify the terms of the
existing loan because a secondary market investor will not agree to
modified terms.
In addition, the rule will require that the refinancing of any
Federally-guaranteed loan will provide a substantial benefit to the
borrower. ``Substantial benefit'' will mean that the portion of the new
installment amount attributable to the debt being refinanced must be at
least 10 percent less than the existing installment amount(s).
Prepayment penalties, financing fees, and other financing costs must be
added to the amount being refinanced in calculating the percentage
reduction in the new installment payment. The portion of the new
installment amount attributable to Eligible Business Expenses will not
need to be included in this calculation. The rule will also allow the
Director, Office of Financial Assistance (D/FA) or designee to approve
an exception to the 10 percent reduction requirement for good cause,
and will not allow PCLP CDCs to use their delegated authority to
approve a loan requiring this exception.
Section 120.882(g)(11). This section currently states that PCLP
CDCs may not use delegated authority to approve refinancing under 13
CFR 120.882(g). Section 328(a) of the Economic Aid Act removes this
statutory prohibition and, accordingly, SBA is removing the current
language. In its place, the rule will state that PCLP CDCs may not
approve the refinancing of same institution debt under their delegated
authority and must submit the loan to SBA for approval. This
requirement is consistent with SBA's long-standing policy of
prohibiting its participating lenders from using their delegated
authority to approve the financing of
[[Page 40777]]
same institution debt due to the potential conflict of interest and the
risk of the 504 loan proceeds being used to shift to SBA a potential
loss from the existing debt.
Section 120.882(g)(15). SBA is redesignating the current paragraph
(g)(15), Definitions, as paragraph (g)(16), and adding a new paragraph
(g)(15) to set forth the alternate job retention standard that is
reinstated by section 328(a) of the Economic Aid Act. Under this
alternate job retention standard, the Agency may provide a 504 loan in
the amount that is not more than the product obtained by multiplying
the number of employees of the borrower by $75,000. The Economic Aid
Act provides that the number of employees of a borrower is equal to the
sum of:
(1) The number of full-time employees of the borrower on the date
on which the borrower applies for a loan under this subparagraph; and
(2) the product obtained by multiplying:
(a) The number of part-time employees of the borrower on the date
on which the borrower applies for a loan under this subparagraph, by
(b) the quotient obtained by dividing the average number of hours
each part-time employee of the borrower works each week by 40.
An example of how this standard is calculated is included in the
text of the rule.
Section 120.882(g)(16). As stated above, SBA is redesignating the
current paragraph (g)(15), Definitions, as paragraph (g)(16) and is
making five changes to the definition of ``Qualified debt''. First,
under the current language of paragraph (i), the debt must not have
been incurred less than 2 years before the date of the application for
refinancing. However, section 328(a) of the Economic Aid Act has
shortened this period to 6 months before the date of the application
for refinancing. Accordingly, SBA is revising this paragraph by
replacing 2 years with 6 months.
Second, paragraph (i) currently allows a loan that was refinanced
within the 2 years before the date of application (the most recent
loan) to be deemed incurred not less than 2 years before the date of
the application provided that the effect of the most recent loan was to
extend the maturity date without advancing any additional proceeds.
With the minimum age of the qualified debt shortened from 2 years to 6
months, SBA believes that it is no longer necessary to address this
situation and is, therefore, removing the second and third sentences of
paragraph (i).
Third, paragraph (ii) currently excludes debt that is subject to a
guarantee by a Federal agency or department. As stated above, section
328(a) of the Economic Aid Act no longer includes this statutory
exclusion and SBA is removing this paragraph and renumbering the
remaining paragraphs accordingly. The conditions and requirements that
will apply to the refinancing of a loan that is subject to a Federal
guarantee will be set forth in paragraph (g)(3).
Fourth, under the current paragraph (vi), the definition of
qualified debt excludes a Third Party Loan that is part of an existing
504 Project. However, under the new paragraph (g)(3), an existing 504
loan may be refinanced when both the Third Party Loan and the 504 loan
are being refinanced. Accordingly, SBA is revising this paragraph,
which will be newly designated as paragraph (v), to incorporate this
exception to the general prohibition against a qualified debt including
a Third Party Loan.
Fifth, the current paragraph (vii) reflects the statutory
requirement that, for the debt to qualify for refinancing, the
applicant must be current on all payments due for not less than one
year preceding the date of application. Section 502(7)(C) of the Small
Business Investment Act, as amended by section 328(a) of the Economic
Aid Act, no longer includes this requirement and, accordingly, SBA is
removing this paragraph from the regulations. In accordance with
prudent lending standards, SBA expects CDCs to consider whether the
applicant is current on all payments due, and the applicant's history
of delinquency, in its credit analysis.
Section 120.882(g)(16). The phrase ``Same institution debt'' is
currently used in connection with the Debt Refinancing without
Expansion program only in reference to the Third Party Loan, see Sec.
120.882(g)(13), and, thus, the current definition of ``same institution
debt'' references only the Third Party Lender. With the requirement in
Sec. 120.882(g)(11) that PCLP CDCs cannot use their delegated
authority to approve the refinancing of same institution debt in the
Debt Refinancing without Expansion program, SBA is revising the
definition of ``Same institution debt'' to also mean the debt of the
CDC (or its affiliates) that is providing funds for the refinancing.
Compliance With Executive Orders 12866, 12988, 13132, and 13563, the
Congressional Review Act (5 U.S.C. 801-808), Paperwork Reduction Act
(44 U.S.C., Ch. 35), and the Regulatory Flexibility Act (5 U.S.C. 601-
612)
Executive Orders 12866 and 13563
The Office of Management and Budget (OMB) has determined that this
rule constitutes a ``significant regulatory action'' for purposes of
Executive Orders 12866 and 13563. SBA, however, is proceeding under the
emergency provision at Executive Order 12866, section 6(a)(3)(D), based
on the need to move expeditiously to mitigate the current conditions
arising from the COVID-19 pandemic.
As shown in the table below, during the five-year period spanning
FY 2016 and FY 2020, a total of 31,248 504 loans were approved for a
total gross approval amount as of May 31, 2021 of $25,720,047,200. In
addition, during this five-year period, SBA approved 202 debt refinance
with expansion loans on average per year with an average annual dollar
volume of $237,880,000, and approved 209 debt refinance without
expansion loans on average per year with an average annual dollar
volume of $203,339,000. Of the debt refinance with expansion loans,
only 16 refinanced a debt that equaled 50 percent of the expansion
costs; if these borrowers had been able to refinance 100 percent of the
expansion costs instead of 50 percent, and assuming that all these
borrowers did so, these borrowers would have been able to borrow $15
million more over five years, or about $3 million more annually.
Table 1--504 Loan Activity FY 2016-FY 2020
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FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
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Total Number of 504 Loans.......................................... 5,938 6,218 5,874 6,099 7,119
Total Dollar Volume of 504 Loans Approved.......................... $4,840,820,000 $5,111,480,700 $4,844,181,000 $5,042,010,500 $5,881,555,000
Number of 504 Debt Refi With Expansion............................. 193 219 181 181 236
Dollar Volume of 504 Debt Refi With Expansion...................... $230,987,000 $244,499,000 $215,311,000 $197,484,000 $301,159,000
Number of 504 Debt Refi Without Expansion.......................... 45 266 181 166 386
[[Page 40778]]
Dollar Volume of 504 Debt Refi Without Expansion................... $41,598,000 $289,491,000 $154,745,000 $156,114,000 $374,749,000
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Data as of 5/31/2021, total dollar volume is lifetime gross
approval amount including increases.
This rule is necessary to implement the Economic Aid Act and
provide economic relief to small businesses adversely impacted by
COVID-19. SBA anticipates that the changes to the 504 debt refinancing
programs will result in benefits to small businesses by providing
greater flexibility to restructure debt.
Congressional Review Act
OMB's Office of Information and Regulatory Affairs has determined
that this rule is not a major rule under Subtitle E of the Small
Business Regulatory Enforcement Fairness Act of 1996 (also known as the
Congressional Review Act), 5 U.S.C. 804(2).
Executive Order 12988
This action meets applicable standards set forth in sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. The action does not
have preemptive effect or retroactive effect.
Executive Order 13132
This rule does not have Federalism implications as defined in
Executive Order 13132. It will not have substantial direct effects on
the States, on the relationship between the National Government and the
States, or on the distribution of power and responsibilities among the
various levels of government, as specified in the Executive order. As
such it does not warrant the preparation of a Federalism Assessment.
Paperwork Reduction Act
In order to implement the Act, SBA has determined that it is
necessary to modify SBA Form 1244, Application for Section 504 Loans,
which is currently approved under OMB Control Number 3245-0071, to
conform the form to the revised requirements for debt refinancing
loans. The changes do not add any new burdens for the respondents,
rather, in some instances, the revisions will result in reduced burden
as applicants and CDCs no longer have to submit certain information.
Summary of Rule Revisions
(a) The information collection currently requires PCLP CDCs to
process all applications for debt refinancing without expansion through
the Sacramento Loan Processing Center (SLPC) and not through the PCLP
CDC's delegated authority. As discussed above, this requirement was
removed by the Economic Aid Act and, accordingly, SBA is removing it
from the information collection. This revision does not change the
information the PCLP CDC is required to collect, only how the
application is processed. In addition, consistent with the changes made
by this rulemaking, SBA is adding two questions to clarify that, for
debt refinancing without expansion, PCLP CDCs must process applications
through the SLPC when the application involves the refinancing of same
institution debt or, in cases involving the refinancing of Federally-
guaranteed debt, the CDC is requesting an exception to the requirement
that the new installment payment be at least 10% less than the existing
installment amount.
(b) With respect to the question regarding whether the Applicant
creates or retains the required number of jobs per debenture amount, an
option has been added for the Applicant to indicate whether the project
is eligible under the 504 debt refinance alternate job goal established
by the Economic Aid Act.
(c) Of the exhibits that are required, Exhibit 20 currently
requires that, if the debt was previously refinanced within two years
of the date of application, non-PCLP CDCs must submit with the
application (and PCLP CDCs must retain in the loan file) copies of the
current debt and lien instruments as well as copies of the debt and
lien instruments for the debt that was replaced by the current debt.
With the minimum age of the qualified debt shortened from 2 years to 6
months by the Economic Aid Act, SBA is revising the form to remove the
requirement that these debt and lien instruments be included as part of
Exhibit 20.
In addition to the changes resulting from this rule, SBA is making
the following technical corrections and clarifying changes to Form
1244: (1) SBA is adding two questions, consistent with the current
regulations, to clarify when PCLP CDCs must submit applications for
refinancing with expansion to the SLPC instead of approving the
application under their delegated authority; (2) SBA is correcting the
description of which exhibits are to be retained and which are to be
submitted with the loan application; (3) SBA is adding a separate entry
to facilitate disclosure of the use of refinancing proceeds involving
land purchases only (the current format of ``Land/Building'' does not
clearly indicate how information is to be reported); and (4) under the
list of economic development objectives met by the project, SBA is
adding references to ``base closures'' and ``minority-owned business''.
SBA has requested emergency approval from OMB for the revised
information collection to implement the Economic Aid Act as
expeditiously as possible.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires
administrative agencies to consider the effect of their actions on
small entities, including small non-profit businesses, and small local
governments. Pursuant to the RFA, when an agency issues a rule, the
agency must prepare an analysis that describes whether the impact of
the rule will have a significant economic impact on a substantial
number of these small entities. However, the RFA requires such analysis
only where notice and comment rulemaking is required. As discussed
above, SBA is publishing this rule as an interim final rule without
advance notice and public comment because section 303 of the Economic
Aid Act authorizes SBA to issue regulations to implement the amendments
in the Act without regard to notice requirements. This rule is,
therefore, exempt from the RFA requirements.
List of Subjects in 13 CFR Part 120
Loan programs-business, Small businesses, Reporting and
recordkeeping requirements.
For the reasons stated in the preamble, SBA amends 13 CFR part 120
as follows:
PART 120--BUSINESS LOANS
0
1. The authority citation for 13 CFR part 120 is revised to read as
follows:
[[Page 40779]]
Authority: 15 U.S.C. 634(b)(6), (b)(7), (b)(14), (h), and note,
636(a), (h), and (m), 636m, 650, 687(f), 696(3), 697, 697a, and
697e; Public Law 111-5, 123 Stat. 115; Public Law 111-240, 124 Stat.
2504; Public Law 116-260, 134 Stat. 1182.
0
2. Amend Sec. 120.882 as follows:
0
a. Remove the number ``50'' in paragraph (e) introductory text and add
the number ``100'' in its place.
0
b. Revise paragraphs (g)(3) and (11);
0
c. Redesignate paragraph (g)(15) as paragraph (g)(16);
0
d. Add a new paragraph (g)(15);
0
e. In the newly redesignated paragraph (g)(16):
0
i. Remove the paragraph heading;
0
ii. In the definition for the term Qualified debt:
0
A. Redesignate paragraphs (i) through (vii) as paragraphs (A) through
(G);
0
B. Revise newly redesignated paragraph (A);
0
C. Remove newly redesignated paragraphs (B) and (G) and further
redesignate paragraphs (C) through (F) as paragraphs (B) through (E);
0
D. In newly redesignated paragraph (B), remove ``(iii)'', ``13 CFR
120.131 and 13 CFR 120.870(b)'', and ``13 CFR 120.131(b)'' and add in
their places ``(B)'', ``Sec. Sec. 120.131 and 120.870(b)'', and
``Sec. 120.131(b)'', respectively;
0
E. Add the word ``and'' at the end of newly redesignated paragraph (D);
and
0
F. Revise newly redesignated paragraph (E); and
0
iii. Revise the definition for the term Same institution debt.
The revisions and addition read as follows:
Sec. 120.882 Eligible Project costs for 504 loans.
* * * * *
(g) * * *
(3) A loan that is subject to a guarantee by a Federal agency or
department may be refinanced under the following conditions and
requirements:
(i) An existing 504 loan may be refinanced if both the Third Party
Loan and the 504 Loan are being refinanced or the Third Party Loan has
been paid in full.
(ii) An existing 7(a) loan may be refinanced if the CDC verifies in
writing that the present lender is either unwilling or unable to modify
the current payment schedule. In the case of same institution debt, if
the Third Party Lender or the CDC affiliate as authorized under Sec.
120.820 is the 7(a) lender, the loan will be eligible for 504
refinancing only if the lender is unable to modify the terms of the
existing loan because a secondary market investor will not agree to
modified terms.
(iii) The refinancing will provide a substantial benefit to the
borrower. For purposes of this paragraph (g)(3)(iii), ``substantial
benefit'' means that the portion of the new installment amount
attributable to the debt being refinanced must be at least 10 percent
less than the existing installment amount(s). Prepayment penalties,
financing fees, and other financing costs must be added to the amount
being refinanced in calculating the percentage reduction in the new
installment payment, but the portion of the new installment amount
attributable to Eligible Business Expenses (as described in paragraph
(g)(6)(ii) of this section) is not included in this calculation.
Exceptions to the 10 percent reduction requirement may be approved by
the Director, Office of Financial Assistance (D/FA) or designee for
good cause. PCLP CDCs may not use their delegated authority to approve
a loan requiring the exception in this paragraph (g)(3)(iii).
* * * * *
(11) PCLP CDCs may not approve the refinancing of same institution
debt under their delegated authority and must submit the application to
SBA for approval.
* * * * *
(15) Notwithstanding Sec. 120.860, a debt may be refinanced under
this paragraph (g) if it does not meet the job creation or other
economic development objectives set forth in Sec. 120.861 or Sec.
120.862. In such case, the 504 loan may not exceed the product obtained
by multiplying the number of employees of the Borrower by $75,000. The
number of employees of the Borrower is equal to the sum of:
(i) The number of full-time employees of the Borrower on the date
of the application; and
(ii) The product obtained by multiplying:
(A) The number of part-time employees of the Borrower on the date
of the application; by
(B) The quotient obtained by dividing the average number of hours
each part-time employee of the Borrower works each week by 40.
Example to paragraph (g)(15): 30 full-time employees and 35 part-
time employees working 20 hours per week is calculated as follows: 30 +
(35 x (20/40)) = 47.5. The maximum amount of the 504 loan would be 47.5
multiplied by $75,000, or $3,562,500.
(16) * * *
Qualified debt * * *
(A) That was incurred not less than 6 months before the date of the
application for refinancing available under this paragraph (g).
* * * * *
(E) That is not a Third Party Loan that is part of an existing 504
Project, except as allowed under paragraph (g)(3) of this section.
* * * * *
Same institution debt means any debt of the CDC or the Third Party
Lender, or an affiliate of either, that is providing funds for the
refinancing.
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2021-15975 Filed 7-28-21; 8:45 am]
BILLING CODE 8026-03-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on July 29, 2021.
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