Final Rule

39491

Rules and Regulations

Federal Register
Vol. 82, No. 160
Monday, August 21, 2017

This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.

SMALL BUSINESS ADMINISTRATION
13 CFR Parts 109, 115, and 120
RIN 3245–AF85

Miscellaneous Amendments to
Business Loan Programs and Surety
Bond Guarantee Program
U.S. Small Business
Administration.
ACTION: Final rule.
AGENCY:

This final rule amends SBA
regulations to update, streamline and
clarify rules for the Business Loan
Programs (as defined below) and the
Surety Bond Guarantee Program
(‘‘SBG’’). For purposes of this rule, the
7(a) Loan Program, the Microloan
Program, the Intermediary Lending Pilot
(ILP) Program, and the Development
Company Loan Program (‘‘504 Loan
Program’’) are collectively referred to as
the ‘‘Business Loan Programs.’’
DATES: This rule is effective September
20, 2017, except for the amendment to
§ 120.1400(a), which is effective October
20, 2017.
FOR FURTHER INFORMATION CONTACT:
Robert Carpenter, Acting Chief, 7(a)
Program and Policy Branch, Office of
Financial Assistance, Office of Capital
Access, Small Business Administration,
409 Third Street SW., Washington, DC
20416; telephone: (202) 205–7654;
email: [email protected].
SUPPLEMENTARY INFORMATION:
SUMMARY:

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I. Background
The SBA programs that are affected by
this final rule are: (1) The 7(a) Loan
Program; (2) the Microloan Program; (3)
the Intermediary Lending Pilot (ILP)
Program; (4) the 504 Loan Program, and
(5) the Surety Bond Guarantee (‘‘SBG’’)
Program.
SBA published in the Federal
Register (81 FR 52595, August 9, 2016)
a proposed rule containing proposed
regulatory revisions for the 7(a) Loan
Program, the Microloan Program, the

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504 Loan Program, and the SBG
Program. The ILP Program was
inadvertently omitted from the
proposed rule; therefore, changes to the
ILP Program were added to this final
rule to maintain consistency across SBA
loan programs. The comment period
ended October 11, 2016.
II. Summary of Comments
The Agency reviewed the public
comments it received concerning its
proposed rule changes for 13 CFR parts
115 and 120. The comment review of
specific final rule changes for the 7(a)
Loan Program, the Microloan Program,
the 504 Loan Program, and the SBG
Program is summarized as follows:
SBA received 57 comment
submissions, of which two were
duplicates from the same commenter.
The 55 net comments were reviewed by
the Agency.
The comments submitted consisted of
20 from Certified Development
Companies (CDCs), 15 from banks and
non-bank lenders, 12 from trade
associations, three from lender service
providers, two from law firms, and three
from private citizens. SBA received
comments from 51 commenters
pertaining only to changes to the 7(a)
Loan Program, the Microloan Program,
and the 504 Loan Program (13 CFR part
120), and comments from three
commenters pertaining only to changes
in the SBG Program (13 CFR part 115).
The majority of the commenters
supported the proposed changes, with
some commenters recommending minor
modifications. SBA addresses the
comments in detail within the
appropriate Section-by-Section analysis
below.
III. Section-by-Section Analysis of
Comments and Changes
A. Intermediary Lending Pilot Program
Section 109.400 Eligible Small
Business Concerns. Revisions to the ILP
Program regulations were added to this
final rule to conform the program to
changes being made to the other
Business Loan Programs. Although no
new ILP intermediaries are authorized,
there are currently intermediaries with
outstanding revolving funds for eligible
small businesses. Therefore, the ILP
Program is affected by the rule changes.
SBA is removing § 109.400(b)(12) to
align with the removal of § 120.110(l),
which stated that consumer and

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marketing cooperatives were not eligible
to participate in the Business Loan
Programs. While SBA did not originally
propose any changes to this section, the
removal is appropriate to align
requirements consistently across SBA
programs.
Section 109.510 On-site and off-site
reviews. To align this section with the
removal of the terms ‘‘on-site’’ and ‘‘offsite’’ from 13 CFR part 120, SBA is
removing these terms from 13 CFR part
109.
B. Surety Bond Guarantee Program
Section 115.19 Denial of liability. In
§§ 115.19(c)(1), (d)(2) and (e)(2), SBA
proposed modifying the threshold
amount for determining when an
increase in the Contract or bond
amounts may result in a denial of
liability from ‘‘25% or $100,000,
whichever is less’’ to simply ‘‘25%.’’
One commenter noted that, under
paragraph (c)(1), grounds for denial
include when the Surety has committed
a material breach of the terms or
conditions of the Prior Approval or
Preferred Surety Bond (PSB)
Agreements, and a material breach is
considered to have occurred if ‘‘[s]uch
breach . . . causes an increase in the
Contract amount or in the bond amount
of at least 25% or $100,000, whichever
is less.’’ Similarly, under paragraph (d),
grounds for denial include when the
Surety has committed a substantial
violation of SBA regulations, and such
violation occurs when a violation
‘‘causes an increase in the bond amount
of at least 25% or 100,000, whichever is
less in the aggregate . . .’’ The
commenter stated that they could not
contemplate a scenario where a breach
or violation actually causes the contract
or bond amounts to increase. However,
the intent of the regulation is to make
this connection between the breach or
violation and an increase in the contract
or bond amount, and it is appropriate as
written. The commenter also suggested
that the rule be clarified to state that the
base amount to which the 25% is being
applied is the ‘‘original contract
amount.’’ SBA agrees with this
suggestion and is revising the rule
accordingly.
In addition, for the reasons discussed
in section 115.32 below, SBA is revising
the rule to retain a dollar threshold, but
to increase it from $100,000 to $500,000.
Section 115.22 Quarterly Contract
Completion Report. As proposed, this

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new section would require participating
Sureties to submit Contract Completion
Reports within 45 days of the end of
each quarter, identifying completed
contracts, contract amount changes, and
any related fees due. Two commenters
expressed concern this may be an
administrative burden limiting Sureties’
program participation. The third
commenter recommended that this
provision not be incorporated due to the
increased administrative burden of
reporting this information to SBA
within 45 days.
SBA considered these comments, but
has decided not to accept the
recommendation. As SBA stated in the
preamble to the proposed rule (81 FR
52597), SBA currently does not receive
a final accounting of fees due and paid
by the Surety and Principal on contracts
that are successfully completed and,
consequently, SBA is unable to ensure
that fees due the Government as a result
of an increase in the contract amount
are paid in a timely manner on contracts
that do not default. This report will
assist SBA in ensuring that fees due for
increases on successfully completed
contracts are accurately calculated and
paid timely. SBA is amending this
section as proposed.
Section 115.30 Submission of
Surety’s guarantee application. SBA
proposed to amend paragraph (d)(2)(i) of
this section to increase the Quick Bond
eligible contract limit from $250,000 to
$400,000. Two commenters support this
change to provide greater bonding
opportunities for small contractors. SBA
is amending this section as proposed.
Section 115.32 Fees and Premiums.
In the proposed rule, SBA proposed to
revise § 115.32(d)(1) to modify the
threshold amount for determining when
an increase in the Contract or bond
amounts would require a Prior Approval
Surety to notify SBA, or obtain SBA’s
prior written approval, from ‘‘25% or
$100,000, whichever is less’’ to ‘‘25%.’’
SBA explained that it was proposing the
change to better align SBA requirements
with the prevailing practice in the
surety industry—which now allows
increases to the Contract and bond
amounts without prior notification to
the Surety—while managing the
increased bond liability to the
Government.
Three commenters generally
expressed support for this provision and
indicated that, with the increase in the
maximum contract amount from $2
million to $6.5 million (and to $10
million for certain Federal contracts),
the $100,000 threshold was too low and
unduly burdensome. However, two of
the commenters also expressed concern
that smaller contracts would be

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negatively impacted by a threshold
based only on percentage. These
comments have caused SBA to
reconsider the effects of totally
removing the dollar threshold. For
example, with no dollar threshold, a $5
million contract could be increased by
$1 million without the Prior Approval
Surety notifying SBA or requesting,
when required, SBA’s prior approval.
To minimize the risks to the Agency
that would be posed by such a large
increase, the Surety should be required
to notify SBA or, when required, seek
SBA’s prior approval. Thus, upon
reconsidering this issue, SBA has
decided to retain a dollar threshold, but
in the interests of striking a balance
between the risks to the Agency and
minimizing any burden on Sureties, the
rule is being revised to increase the
dollar threshold from $100,000 to
$500,000.
In addition, as discussed above for
§ 115.19, SBA is accepting and
incorporating the recommendation to
add clarifying language in the final rule
to read ‘‘25% of the original contract
amount’’.
Section 115.60 Selection and
admission of PSB Sureties. SBA
proposed that a Surety, for the initial
nine months following admission to the
PSB Program, must obtain SBA’s prior
written approval before executing a
bond greater than $2 million. One
commenter requested that SBA clarify
that this change does not apply to
Sureties that participate in the PSB
Program prior to the effective date of
this final rule. SBA confirms that this
change applies only to Sureties that are
admitted to the PSB Program after the
effective date of the final rule.
Another commenter suggested that
this requirement may discourage
applications from Sureties for
acceptance into the PSB Program. With
PSB Sureties executing SBA-guaranteed
bonds without SBA’s prior approval,
SBA believes that it is in the taxpayers’
and the Agency’s best interests to
require newer Sureties to demonstrate
an understanding of the program before
being allowed to issue bonds larger than
$2 million without SBA’s oversight.
SBA is amending this section as
proposed.
Section 115.67 Changes in Contract
or bond amount. In the proposed rule,
SBA proposed to change the threshold
for when a PSB Surety must remit
additional fees due as a result of
increases to the Contract or bond
amount from ‘‘25% of the contract or
bond amount or $100,000, whichever is
less’’ to ‘‘25%.’’ As discussed above,
two commenters supported this change
but expressed concern that this could

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negatively impact smaller contracts. For
the reasons discussed above for section
115.32, and because the same thresholds
should apply to when PSB Sureties are
required to remit the additional fees
owed, the rule is being revised to retain
and increase the dollar threshold from
$100,000 to $500,000. The rule is also
being revised to add clarifying language
that the increases will be based on the
original contract amount.
Section 115.68 Guarantee
percentage. In the proposed rule, SBA
proposed to revise this section to
provide that SBA will reimburse a PSB
Surety in the same percentages and
under the same terms as set forth in
§ 115.31, as authorized by § 874 of Title
VIII of Division A of the National
Defense Authorization Act, 2016, Public
Law 114–92, 129 Stat. 726. All
commenters supported this revision and
this provision is adopted as proposed.
C. 7(a) Loan, 504 Loan, and Microloan
Programs
Section 120.110 What businesses are
ineligible for SBA business loans?
As proposed, SBA is removing
consumer and marketing cooperatives
from the ineligible types of businesses
identified in this section and is
reserving paragraph (l). SBA received
support for the proposed change from
22 commenters. With respect to the
comments received, 18 commenters
requested the removal of the
requirement that at least one individual
or entity provide an unlimited guaranty
for a loan made to a consumer or
marketing cooperative, and instead
permit the use of a loan guarantee pool
funded by cooperative enterprises.
Commenters suggested that the
ownership for many cooperatives
consists of multiple members, and that
obtaining personal guaranties from
multiple members can be overly
burdensome and should not apply to
cooperatives. Currently, SBA allows for
an entity to provide the required loan
guaranty in lieu of a personal guaranty
from an individual. SBA is not
removing the guaranty requirements for
cooperatives at this time due to the
inequity it would create for all other
classes of loan applicants where the
unlimited guaranty of an individual or
entity is required. The rules governing
guaranties will continue to apply to
cooperatives. SBA is amending this
section as proposed.
Section 120.111 What conditions
must an Eligible Passive Company
satisfy?
SBA is amending this regulation as
proposed with some modifications as
discussed below. The amended
regulation will permit SBA loan

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proceeds to be used to finance a change
of ownership between existing owners
of the Eligible Passive Company (EPC).
SBA does not intend for this regulation
to be used to finance a change of
ownership in an EPC that has only been
in existence for a limited period of time.
This regulatory change is intended to
assist with the preservation of a
business that might otherwise cease
operations due to the departure of an
owner, as opposed to simply facilitating
the withdrawal of capital out of the
business. SBA will include in Standard
Operating Procedure (SOP) 50 10 further
guidance on when an EPC may use loan
proceeds to finance a change of
ownership between existing owners.
In the 504 Loan Program, the
amended regulation will permit loan
proceeds to be used to finance a change
of ownership in the EPC when the
asset(s) of the EPC are limited to real
estate and/or other eligible long-term
fixed assets that the EPC leases to one
or more Operating Companies (‘‘OC’’)
for conducting the OC’s business. SBA
recognizes that an EPC’s balance sheet
may include limited assets in addition
to the real estate or other eligible longterm fixed assets, such as capital
replacement reserves or escrow
accounts for taxes and/or insurance
(such assets are referred to in this
discussion as ‘‘ineligible assets’’). In
such case, 504 loan proceeds may be
used to finance a change of ownership
between existing owners of the EPC as
long as (1) the ineligible assets are
directly related to the real estate or other
eligible long-term fixed assets, (2) the
amount attributable to such ineligible
assets is de minimis, and (3) the
ineligible assets are excluded from the
Project financing. Further guidance for
the 504 Loan Program will be
incorporated into SOP 50 10.
SBA received 15 comments in support
of this change with no objection. Nine
additional commenters supported this
change with minor modification and
suggested language revisions to the
introductory paragraph to clarify what
purpose loan proceeds may be used for
when an OC is a co-borrower with the
EPC. One commenter suggested
changing the term ‘‘Lender’’ to ‘‘SBA
Lender’’ as it is a defined term that
includes both a 7(a) Lender and CDC in
this section. The term ‘‘lender’’ as used
in paragraph (a)(3) of this section
includes Third Party Lenders in 504
Loan projects, so it is not appropriate to
use ‘‘SBA Lender.’’ However, the term
‘‘lender’’ as used in paragraph (a)(6) is
directed to both a 7(a) Lender and a
CDC; therefore, SBA is accepting this
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this section, changing the term ‘‘lender’’
to read ‘‘SBA Lender.’’
Eight commenters also suggested
revised language that they believe
would clarify the Direct Final Rule that
took effect on May 17, 2012 (77 FR
19531, April 2, 2012). That revision
provided that in an EPC/OC structure,
when the OC is a co-borrower the
Agency would allow loan proceeds to be
used for working capital (as was already
allowed) as well as for ‘‘the purchase of
other assets for use by the OC, including
the purchase of stock or intangible
assets (such as trademarks, copyrights,
intellectual property or goodwill).’’ An
industry trade association, suggested in
its comments that when the Direct Final
Rule was published in 2012, SBA
inadvertently omitted language from the
introductory paragraph of § 120.111,
and the omission of the language led to
incorrect interpretations of the revised
regulation. SBA considers this
particular comment to be a logical
outgrowth of reviewing § 120.111 and
within the context of the proposed rule
to clarify and correct areas of the
regulations that are out of date or
inconsistent with the current
procedures. While not included in the
proposed rule, based on the comments
received, SBA is adding language to the
introductory paragraph to clarify the
eligible uses of loan proceeds when the
OC is a co-borrower on the loan to the
EPC.
SBA is amending § 120.111(a)(3) to
clarify that rent or lease payments made
by the OC to the EPC cannot exceed the
amount necessary to make the loan
payment to the lender, and additional
amounts to cover the EPC’s direct
expenses of holding the property, such
as maintenance, insurance and property
taxes. SBA received 32 comments
concerning this proposed change, 12 in
support of and 20 objecting to the
proposed change to this paragraph.
Commenters recommended the
proposed language be amended to
specify that the rents charged by the
EPC to the OC could include a reserve
to cover capital asset replacement such
as heating, ventilation, and air
conditioning (HVAC). One commenter
stated that the proposed regulation
refers only to the ‘‘the loan payment to
the lender’’ and does not take into
consideration that in a 504 Loan, the
EPC/OC rent includes payments to the
CDC, the Third Party Lender and any
junior financing such as a borrowed
equity loan or other financing outside of
the 504 Project. Payments to the Third
Party Lender participating in a 504
project are included in the ‘‘loan
payment to the lender’’ and SBA

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determined that no additional
clarification for this issue is necessary.
Several commenters who objected to
the proposed change recommended that
SBA adopt Internal Revenue Service
(IRS) standards for holding companies
and not require additional regulatory
requirements. IRS rules generally do not
consider or address SBA Loan Program
Requirements such as the prohibition of
financing for investors or landlords.
While SBA permits eligible EPCs to
hold certain assets financed for the
benefit of the OC, it is not the intent of
SBA to permit the EPC to profit from its
relationship with the OC.
It is SBA’s positon that routine
maintenance costs, Project debt
payments, and repairs are already
included in the permissible direct
expenses of holding the property and as
such would be permissible under the
regulation. Additional guidance on this
issue will be placed in SOP 50 10.
SBA also proposed to add language to
§ 120.111(a)(6) to provide the Agency
may, in its discretion and in
consultation with the SBA Lender,
require the guaranty of individuals or
entities with less than 20 percent
ownership of the EPC or the OC when
circumstances warrant. In 2010, the
Small Business Jobs Act of 2010, Public
Law 111–240, 124 Stat. 2504 (September
27, 2010) (the ‘‘2010 Jobs Act’’)
increased the maximum loan size for
7(a) and 504 Loans. SBA now receives
more loan requests from applicants with
multiple owners who may hold less
than 20 percent of the company
regardless of managerial
responsibilities, corporate titles or
ownership interest, if any.
SBA received 24 comments on this
proposed change: 18 in full support, five
in support with modification, and one
objecting to the proposed change.
Recommended modifications to this
paragraph included revising the
language to provide greater detail as to
when individuals could be required to
guarantee the loan, and to provide
authority to both SBA and delegated
lenders to determine when there are
sufficient reasons to do so. One
commenter expressed concern that the
proposed change would be ‘‘all
encompassing’’ and may result in
unintended consequences.
It is prudent for SBA to require a
lender to obtain a guaranty when one or
more individuals or entities have the
authority and responsibility to manage
operations regardless of their ownership
interest in the applicant business. SBA
will generally not require individuals or
entities with less than 20 percent
ownership of the applicant business to
guarantee the loan when the lender

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obtains a guaranty from those with 20
percent or more ownership interest.
SBA considered and accepts the
recommendation to include the
authority for delegated lenders to obtain
full or limited guaranties from
appropriate individuals or entities
regardless of their ownership interest in
the EPC or the OC, and is modifying the
rule to state that SBA and, for loans
processed under a SBA Lender’s
delegated authority, the SBA Lender,
may determine when credit or other
reasons make it necessary to obtain a
full or limited guaranty from
appropriate individuals or entities. SBA
will provide additional guidance on the
guaranty requirements in SBA SOP 50
10. In addition, as stated above, SBA is
modifying § 120.111(a)(6) to replace the
term ‘‘Lender’’ with ‘‘SBA Lender.’’
Section 120.130 Restrictions on uses
of proceeds. SBA proposed moving
§ 120.160(d) to § 120.130 as new
paragraph (e) and redesignating
§ 120.130 (e) and (f) as paragraphs (f)
and (g), respectively. The new
paragraph (e) includes the text currently
found in § 120.160 Loan Conditions, in
paragraph (d), Taxes, which prohibits
the use of proceeds for payment of pastdue Federal or state payroll taxes. This
requirement is a restriction, not a loan
condition, and is appropriately moved
to § 120.130(e). SBA also proposed
revising what will become paragraph (g)
to remove an inaccurate reference to
§ ‘‘120.203’’ and replacing it with
§ ‘‘120.202.’’ Section 120.203 cited in
this paragraph was removed in 1996.
SBA received eight comments, one in
support and seven requesting a
modification. The majority of
commenters asked SBA to consider
expanding the prohibited use of
proceeds to include other similar taxes,
such as sales taxes, that may be required
to be collected by the small business in
trust on behalf of a Federal, state or
local government entity. SBA has
considered and is accepting the
recommendation to include the
references to other local, state and
Federal taxes in the final rule.
Section 120.160 Loan conditions.
SBA proposed adding the word
‘‘generally’’ to the last sentence of
§ 120.160(a) to clarify that SBA may
require a personal guaranty of an
individual or entity with less than five
percent ownership in the applicant
business when the circumstances
warrant. SBA received 24 comments
concerning this proposed change: 22 in
support, with 11 of the supporters
recommending modification. Only two
commenters expressed concerns, one
that wanted to require no guaranties
from non-owners, while another

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observed that this requirement is not
currently included in the regulation.
Recommendation was also made to use
the defined term ‘‘SBA Lender’’ as it is
appropriate for both the 7(a) and 504
Loan Programs. Finally, one commenter
expressed concern that the proposed
change was ‘‘all encompassing’’ and
may result in unintended consequences.
SBA agrees with the recommendation
that the term ‘‘SBA Lender’’ should be
used since the regulation includes both
7(a) lenders and CDCs, and will replace
‘‘Participating Lender’’ with ‘‘SBA
Lender.’’ As stated in the discussion of
guaranties for EPCs and OCs in
§ 120.111 above, the 2010 Jobs Act
increased the maximum loan size for
7(a) and 504 loans. Small businesses
needing larger loans are more likely to
have complex ownership structures and
multiple owners, where each owner
may hold less than five percent of the
company regardless of managerial
responsibilities or corporate titles. The
current regulation language restricts
SBA from requiring personal guaranties
from individuals with less than five
percent ownership under any
circumstance.
SBA deems it prudent to maintain
discretion for SBA, in consultation with
the Lender, to require guaranties from
individuals or entities with less than
20% ownership of the applicant
business when they are critical to the
extension of credit. The removal of the
reference to 5% as the strict measure for
required guaranties will allow SBA to
obtain full or limited guaranties from
appropriate individuals or entities
regardless of their ownership interest in
the applicant business, if any, when
deemed necessary. In addition, SBA
considered and is accepting the
recommendation to provide this
discretion to delegated SBA Lenders as
well and, therefore, is modifying the
rule to state that SBA and, for loans
processed under an SBA Lender’s
delegated authority, the SBA Lender,
may determine when credit or other
reasons make it necessary to obtain a
full or limited guaranty from
appropriate individuals or entities
regardless of their ownership interest, if
any, in the applicant business. SBA will
provide additional guidance on the
guaranty requirements in the
appropriate SBA SOP.
Twenty commenters recommended
the proposed changes to the personal
guaranty rules be provided in SOPs,
where exceptions can be made. While
SBA provides additional detail on
guaranty requirements in its SOPs,
program-wide rules are appropriately
included in this regulation. SBA is

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amending this section as proposed with
the modifications discussed above.
Section 120.194 Use of computer
forms. SBA is removing § 120.194 in its
entirety, and reserving this section for
future use. Technology has rendered
this regulation unnecessary. SBA
received nine comments on this
proposed change: Eight in support of the
proposed change and one objection. The
objection was based on a misconception
that SBA Lenders will no longer be able
to submit loan packages using their own
or commercially available lending
software. SBA continues to work with
participants and their software sources
to expand electronic access in all
program applications. SBA is removing
this section as proposed.
Section 120.214 What conditions
apply for variable interest rates? SBA is
not proceeding with the proposed
revisions to § 120.214 regarding when
the allowable base rate is determined
and when adjustments in the variable
interest rate will be permitted. SBA
received 10 comments, generally in
support of a change, with some
comments indicating that the guidance
did not fully address the issues
regarding the timing of rate changes and
base rates. After reviewing current
market activity, the impact of rate
adjustments on the small business
borrower, and the potential need to
further simplify the guidance, SBA will
conduct a more thorough discussion
with internal and external stakeholders
on how best to manage interest rate
changes in the 7(a) Loan Program. SBA
will not make changes to this section at
this time.
Section 120.220 Fees that Lender
pays SBA. As set forth in section
7(a)(31) of the Small Business Act (15
U.S.C. 636(a)(31)) (‘‘the Act’’), SBA is
adding a new paragraph (a)(3) to
§ 120.220 to codify the statutory waiver
of the up-front guaranty fee for SBA
Express loans made to businesses
owned and controlled by a veteran or
spouse of a veteran (as defined in the
Act) for fiscal years when the subsidy
rate for the 7(a) program is zero. SBA
received eight comments regarding the
proposed changes. Of those, seven
commenters recommended that SBA
specifically use the term ‘‘SBA Express’’
to identify loans delivered under section
7(a)(31) of the Act. The conditions a
business must meet to qualify for this
fee waiver will be explained in SBA
Loan Program Requirements.
In § 120.220(b), SBA is amending the
regulation to advise Lenders to pay the
guaranty fee electronically and revising
the timeframe within which a Lender
must pay the guaranty fee to SBA for
loans with a maturity of 12 months or

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less (‘‘short-term loans’’). SBA is
revising the timing of payment of the fee
on a short-term loan from the ‘‘time of
application’’ to ‘‘within 10 business
days of SBA’s approval of the loan.’’
The current requirements were
implemented when Lenders paid fees
using checks. Currently, fees are paid
electronically through www.pay.gov,
and requiring fee payments with the
application on short-term loans can
delay application processing and turnaround times. SBA received eight
comments on this proposed change, all
in support of the change. SBA is also
amending paragraph (b) of this section
to permit a Lender to be reimbursed by
the Borrower for the guaranty fee on a
short-term loan only after the Lender
pays the fee to SBA. SBA will not
permit Lenders to collect the guaranty
fee from the Borrower prior to paying
SBA. The final rule is incorporating
both the 10 day fee payment guidance
and the timeline for collection of the fee
from the Borrower.
In § 120.220(c), SBA also proposed
and is adopting the rule change
removing the first two sentences which
state when SBA will refund the
guaranty fee paid on a short-term loan.
The additional 10 day time period postloan approval for payment of the fee
negates the need for refunds. SBA
received eight comments supporting the
proposed change in the timing of
payment to SBA of guarantee fees on
loans of 12 months or less, but the
commenters asked that SBA provide a
provision for refund of the guaranty fee
of an approved loan if the Lender had
not made any disbursements. The
guaranty fee is limited to one quarter of
one percent of the guaranteed portion of
the short-term loan and is only
refundable if a short-term loan
application is withdrawn by the Lender
prior to approval by SBA, if SBA
declines to guarantee the loan, or if SBA
approves the loan but substantially
changes the terms and SBA’s modified
terms are unacceptable to the Lender.
SBA deems the fee earned for short-term
loans once the SBA loan number is
issued. SBA is not adopting the
suggestion regarding refunds on shortterm loans.
Section 120.221 Fees which the
Lender may collect from a loan
applicant.
SBA is adopting, as proposed, the
addition of an introductory paragraph
stating that, unless otherwise permitted
by SBA Loan Program Requirements
(e.g., the guaranty fee under § 120.220),
the fees listed in § 120.221 are the only
fees a Lender is permitted to charge and
collect from an Applicant or Borrower.
SBA received eight comments on this

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proposed change, all supporting the
improvement in clarity. SBA also
proposed to remove the contents of
§ 120.221(e), as it is not a fee a Lender
may collect from a loan applicant in
accordance with the stated purpose of
§ 120.221. SBA will insert in its place
language which permits Lenders to
collect fees for legal services. This
change combines and provides clear
guidance on the only fees a Lender is
permitted to charge and collect from an
Applicant or Borrower. Eight comments
were received that suggested the
language be revised to specifically
include legal fees provided by ‘‘either
outside or in-house counsel.’’ SBA has
determined that the proposed language
was somewhat cumbersome and revised
the language slightly to incorporate SBA
permits the Lender to charge the
Borrower for legal services rendered on
an hourly basis. SBA is revising the
paragraph (e) to read ‘‘Legal services.
Lender may charge the Borrower for
legal services rendered on an hourly
basis.’’
Section 120.222 Fees which the
Lender or Associate may not collect
from the Borrower or share with third
parties. As proposed, SBA is retitling
§ 120.222 from ‘‘Fees which the Lender
or Associate may not collect from the
Borrower or share with third parties’’ to
‘‘Prohibition on sharing premiums for
secondary market sales.’’ SBA is also
removing the contents of paragraphs (a),
(b), (c), (d), and (e), and inserting the
following language: ‘‘The Lender or its
Associate may not share any premium
received from the sale of an SBA
guaranteed loan in the secondary market
with a Service Provider, packager, or
other loan-referral source.’’ All eight
comments received indicated support
for this proposed change. This proposed
change completes the consolidation and
re-organization of §§ 120.221 and
120.222, by clearly identifying the only
fees that a Lender may charge and
collect from an applicant. Unless
otherwise permitted by SBA Loan
Program Requirements, any fee not
identified in § 120.221 is prohibited.
SBA is retaining the prohibition on the
sharing of secondary market fees in
§ 120.222 for consistency with 13 CFR
103.5(c), which prohibits a Lender from
sharing any secondary market premium
with a lender service provider. SBA is
amending this section as proposed.
Section 120.394 What are the
eligible uses of proceeds? For the
Builders Loan Program, SBA proposed
to increase the regulatory limitation on
use of proceeds for land acquisition
from 20 percent to 33 percent. SBA
received eight comments regarding this
proposed rule change, all in support.

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SBA is amending this section as
proposed.
Section 120.400 Loan Guarantee
Agreements. Section 120.400 includes a
cross reference to §§ 120.441(b) and
120.451(d). SBA proposed to delete
these sections and is deleting both in
this final rule. In addition, SBA
proposed revisions to § 120.440, which
it is adopting as proposed with a minor
modification. Accordingly, SBA is
revising the cross reference in § 120.400
to read ‘‘See also 120.440(c) concerning
Supplemental Guaranty Agreements.’’
Although this revision was not included
in the proposed rule, SBA is revising
§ 120.400 to correct this inadvertent
omission from the proposed rule.
Multiple Sections—On-Site/Off-Site
Reviews for 7(a) Lenders, CDCs and
Microloan Intermediaries
(‘‘Intermediaries’’). Due to SBA’s
improved electronic methods, virtual
reviews, such as Analytical Reviews,
may cover much of what was previously
performed in the scope of ‘‘on-site’’
reviews, diminishing the distinction
between ‘‘off-site’’ and ‘‘on-site’’
reviews and allowing for more costeffective reviews. Therefore, SBA
proposed to remove all references to
‘‘on-site’’ reviews in §§ 120.410(a)(2),
120.424(b), 120.433(b), 120.434(c),
120.630(a)(5), 120.710(e)(1), 120.812(c),
120.816(c), 120.839, 120.841(c),
120.1050, 120.1051, 120.1070 and
120.1400(c)(4). SBA will retain the term
‘‘review/examination assessments’’ in
these regulations. SBA also proposed to
replace references to ‘‘off-site’’ reviews
and monitoring with ‘‘monitoring’’ in
§§ 120.1025 and 120.1051(a). SBA
received eight comments on the
proposed changes, with no objections.
SBA is amending the specified
sections to remove the terms ‘‘on-site’’
and ‘‘off-site’’ as proposed.
SBA proposed and is adopting
replacement of the term ‘‘Good
Standing’’ with ‘‘Satisfactory’’ as it
relates to a Lender’s status with its other
Federal regulators in §§ 120.410(e),
120.630(a)(4), and 120.1703(a)(4). SBA
will determine if a Lender is considered
‘‘Satisfactory’’ by its other regulators
based on, for example, information in
published orders/agreements and call
reports. Eight commenters provided no
objection to the proposed changes.
Undesignated Center Heading—The
Certified Lenders Program. SBA is
adopting the proposed rule change to
the heading immediately following
§ 120.435 in Subpart D—Lenders as
proposed. SBA is removing ‘‘Certified
Lenders Program (CLP)’’ and inserting
in its place ‘‘Delegated Authority
Criteria.’’ There were eight comments

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received on this change with no
objections.
Section 120.440 The Certified
Lenders Program. SBA is adopting the
proposed rule change to remove the
heading and remove §§ 120.440 and
120.441 as proposed. Implementation of
more efficient technology-based
processing, closing, servicing, and
liquidation render this delivery method
unnecessary and obsolete. SBA will
remove the existing CLP language and
insert guidance for Delegated Authority
Criteria (see addition of Delegated
Authority Criteria below). SBA received
eight comments on this proposed
change with no objections.
New Section 120.440 How does a
7(a) Lender obtain delegated authority?
SBA is adopting the proposed rule
change adding the criteria for initial
approval or renewal of delegated
authority in this section as proposed
with a minor modification to the
heading as discussed below. As stated
in the preamble to the Notice of
Proposed Rulemaking, these criteria are
essentially identical to the criteria
currently included in SBA’s SOP 50 10
5(I), Subpart A for the 7(a) Loan
Program delegated authorities (e.g., PLP
(including PLP–EWCP), SBA Express
and Export Express Programs). In
applying these criteria when processing
requests for PLP–EWCP authority, SBA
will continue to also consider
experience in providing trade finance to
exporters and active participation in
SBA’s EWCP program. In addition, for
lenders participating in the Delegated
Authority Lender Program of the ExportImport Bank (or any successor Program),
such lenders are eligible to participate
in the PLP–EWCP Program, pursuant to
15 U.S.C. 636(a)(2)(C). SBA received a
detailed comment and
recommendations from a trade
association as well as seven other
comments supporting the trade
association’s position. The trade
association commented they have no
objection to the inclusion in regulations
of the criteria for a Lender to obtain
delegated authority and noted the listed
criteria is similar to that currently
provided in other SBA Loan Program
Requirements. However, the trade
association objected to paragraph (b) of
the proposed section, which states
delegated authority decisions are final.
The trade association strongly
recommended SBA provide a
mechanism by which a Lender, if it is
denied delegated authority, could
provide SBA with additional
information to overcome and
administratively appeal such decision.
SBA reviewed the suggested
modification and determined that an

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additional appeal of SBA’s decision to
deny a Lender delegated authority is not
necessary because, if delegated
authority is declined, the Lender will
still be able to process loans on a nondelegated basis and, when the Lender
has overcome the reasons for the
decline, it may re-apply. SBA is
amending the regulation as proposed
with a slight modification in the
heading to clarify this section applies to
7(a) Lenders.
Section 120.441 How does a Lender
become a CLP Lender? SBA is removing
and reserving § 120.441 as proposed.
SBA received eight comments, all in
support of the proposed change.
Section 120.451 How does a Lender
become a PLP Lender? SBA is removing
and reserving § 120.451 as proposed.
The process for lenders to obtain
delegated authority for the 7(a) program,
which includes Preferred Lender
Program authority, will be set forth in
§ 120.440 pursuant to this final rule.
There is no longer a need for the
specific regulation at § 120.451. SBA
received eight comments, all of which
provided no objection to the proposed
change.
Section 120.524 When is SBA
released from liability on its guarantee?
In this regulation, SBA proposed to
clarify its rights to collect monies paid
on a guaranty from which the Agency
determines it has been released of
liability. This includes judicial remedies
and the right to offset funds due the
Lender for the guaranty purchase of
another loan. SBA’s right to seek these
remedies arises under contract law as
interpreted by the courts. SBA received
eight comments on this proposed
change, all of which supported the
rights provided to SBA under the
proposed language. The eight
commenters supported the proposed
language; however, they recommended
the language be amended to state such
remedies will only be undertaken if all
other attempts to collect from the lender
have failed. Commenters also noted
SBA is removing the specific language
‘‘responsible for those events’’ in
paragraph (b) and requested an
explanation of this specific change.
The Agency’s ability to recover on a
loan guaranty is not limited to the
actions of the current holder of the Note.
For example, when a Lender acquires a
guaranteed loan from another lender,
the acquiring lender is ultimately
responsible for any action resulting in a
loss on the loan, whether the loss is the
result of its actions or inaction, or the
actions or inaction of the original
lender. SBA is amending this section as
proposed.

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Section 120.660 Suspension or
revocation. SBA is adopting the
proposed rule change in § 120.660(a) to
provide that decisions regarding a
temporary suspension or revocation of a
Lender from SBA’s Secondary Market
under this regulation be made jointly by
the Director, Office of Financial
Assistance (D/FA) and the Director,
Office of Credit Risk Management (D/
OCRM). SBA received comments from
eight commenters regarding the
provisions in this proposed regulation;
all registered no objection to the change.
In addition, SBA is adopting as
proposed a limit of no more than 120
calendar days for temporary
suspensions under this regulation, and
no more than two years under this
regulation for temporary revocations of
the privilege of a Lender, broker, dealer
or Registered Holder to sell, purchase,
broker or deal in loans or Certificates in
SBA’s Secondary Market. All eight
commenters registered support for the
timeframes in the proposed rule.
In § 120.660(a)(1)(ii), SBA is removing
references to SBA Form 1085 from the
current regulation, as proposed. SBA
Form 1085 is no longer in use in the 7(a)
Loan Program. SBA received only one
comment and it was in support of the
change. In § 120.660(a)(3), SBA is
adding additional reasons under which
SBA may temporarily suspend or revoke
a Lender’s privilege to participate in
SBA’s Secondary Market. As proposed,
SBA may temporarily suspend or revoke
a Lender from participation in SBA’s
Secondary Market when (1) a Lender
receives from its primary Federal or
state regulator (including SBA): (a) A
cease and desist order; (b) a consent
agreement affecting capital or
commercial lending issues; or (c) a
supervisory action citing unsafe or
unsound banking practices or other
items of concern to SBA that may create
potential risk to SBA through loan sales;
or (2) a Lender receives a going concern
opinion issued by its auditor. SBA
received eight comments all of which
supported the proposed change with
some modifications. The suggested
modifications centered on better
defining the phrase, ‘‘other items of
concern to SBA . . .’’ and the
practicality of providing SBA with
notice within five business days from
the issuance of the regulatory action or
going concern opinion. SBA wants to
avoid situations in which current
supervisory actions from a Federal or
state regulator are renamed, or new
actions involving unsafe or unsound
lending practices are created and are
disclosed, but are not expressly listed in
the SBA regulation.

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SBA considered the comments
provided. SBA has modified the text to
provide a more complete explanation of
supervisory actions which are
subsequently renamed or have yet to be
defined. This ensures that the grounds
for temporary suspension or termination
from SBA’s Secondary Market are not
limited by the prevailing terminology
used by Federal or state regulators.
Regarding the practicality of a Lender
providing SBA notice, commenters
raised the issue of disclosure of nonpublic supervisory actions and the date
by which the required disclosure of
public supervisory actions should be
measured. At this time, Lenders will be
required to notify SBA only for public
actions.
SBA also modified the final rule to
define the required notification date to
SBA as five business days (or as soon as
practicable thereafter) from the date that
the regulatory action is placed into the
public domain. This will establish a
verifiable benchmark for when notice
from the Lender is due to SBA. Note,
SBA does not intend to require a Lender
to disclose a non-public supervisory
action unless SBA notifies the Lender
that SBA has either an agreement with
or consent from the regulator issuing the
action. Lenders receiving a going
concern opinion will have five business
days (or as soon as practicable
thereafter) from the date of the auditor’s
letter indicating a going concern
opinion to provide written notice to
SBA.
SBA also proposed to add a new
paragraph (d) to this section to provide
for early termination of a temporary
suspension or revocation at the joint
discretion of the D/FA and the D/
OCRM, if warranted for good cause.
SBA received eight comments regarding
this proposed change, all in support,
and SBA is adding the paragraph as
proposed.
Section 120.823 CDC Board of
Directors. SBA proposed to revise
§ 120.823(c)(5) to eliminate the language
that prevents a CDC Board member from
serving on the board of another entity,
except for civic or charitable
organizations not involved in financial
services or economic development. SBA
received 15 comments in support of this
proposed change.
SBA also proposed in
§ 120.823(d)(4)(ii)(C) to clarify that
individuals serving on the Loan
Committee of a CDC do not have to be
members of the CDC or the CDC’s Board
of Directors. SBA received 15 comments
regarding this proposed change, all in
support. Twelve of the commenters
recommended § 120.823(d)(4)(ii)(A) also
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proposed revision in
§ 120.823(d)(4)(ii)(C). SBA considered
these comments and agrees that
individuals who are not CDC members,
shareholders, or Board members may be
appointed by the Board of Directors to
serve on the Loan Committee provided
that the individual has background and
expertise in financial risk management,
commercial lending, or legal issues
relating to commercial lending and is
not associated with another CDC.
In order to ensure consistency in this
section on Loan Committees, SBA will
revise paragraphs (d)(4)(ii)(A),
(d)(4)(ii)(B), (d)(4)(ii)(C) and (d)(4)(ii)(E)
references to members of the Loan
Committee. SBA will revise the terms
‘‘member’’ and ‘‘committee member’’ in
this section to read ‘‘Loan Committee
member’’.
SBA also received one comment
requesting reconsideration of SBA’s
general prohibition in § 120.820 against
a CDC having an affiliation with a 7(a)
Lender now that CDCs may offer 7(a)
loans under the Community Advantage
Pilot Program. Community Advantage is
currently a pilot program—for which
SBA has granted a regulatory waiver of
the affiliation prohibition. SBA is not
considering changes to this general
prohibition at this time, and is adopting
the changes to this section as described
above.
Section 120.839 Case-by-case
application to make a 504 loan outside
of a CDC’s Area of Operations. SBA
proposed to replace the term ‘‘District
Offices’’ in this section with ‘‘504 loan
processing center’’ to reflect the SBA
office that processes 504 loan
applications. SBA received 13
comments supporting this change. One
of the 13 commenters expressed concern
with removing the District Office from
the decision process. The commenter
noted that a District Office may have
local insights on markets not available
to the 504 loan processing center.
However, as explained in the preamble
to the proposed rule, SBA is making this
change to reflect the SBA office that
processes 504 loan applications.
Although SBA is not making any
changes to the rule as proposed, the 504
loan processing center may consider
input from the local District Office
when making such a determination to
allow a CDC to make a loan outside of
its Area of Operations.
Section 120.884 Ineligible costs for
504 loans. SBA is amending this section
to define heavy duty construction
equipment in § 120.884(e)(3) without
reference to the IRS definition because
the IRS no longer publishes a definition
for ‘‘capital equipment.’’ SBA is adding
the requirement that the equipment

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have a remaining useful life of at least
10 years. SBA received one comment on
this section which supported the
change, yet expressed concern about
adding a useful life requirement. In
order to be consistent with the overall
purpose of the 504 program, SBA will
only permit the financing of
construction equipment if it is heavy
duty construction equipment integral to
the business’ operations with a
remaining useful life of at least 10 years.
Section 120.1060 Confidentiality of
Reports, Risk Ratings and related
Confidential Information. SBA proposed
a limited expansion of its definition in
§ 120.1060 of ‘‘permitted parties’’ to
include a party who demonstrates a
legitimate need to know Review/Exam
Report information, Risk Rating, and
Confidential Information for the
purpose of assisting in improving an
SBA Lender’s, Intermediary’s or NonLending Technical Assistance
Provider’s (NTAP’s) SBA program
operations in conjunction with SBA’s
Lender Oversight Program and SBA’s
portfolio management. This limited
expansion of permitted parties may
include the lender’s parent entity,
directors, auditors and those lender
consultants under written contract
specifically to assist the Lender in
addressing SBA Findings and Corrective
Actions Required to SBA’s satisfaction.
Consultants do not include Lender
Service Providers. The change codifies
SBA’s practice of approving disclosure
of Reports, Risk Rating, and
Confidential Information for the
expanded group of permitted parties,
obviating the need for case-by-case
approval and the use of a
Confidentiality Agreement for these
parties going forward. SBA received
eight comments in support of this
proposed change. Commenters
suggested that it may also be
appropriate for SBA to consider
allowing Lenders to share SBA reports
and other oversight information with
their regulators in order to improve the
overall quality of the program.
Generally, SBA manages information
sharing with other regulators on a caseby-case basis and in conjunction with
agency-to-agency information sharing
agreements. If a Lender’s other regulator
requests § 120.1060 information, the
Lender should refer the regulator to
SBA. SBA is adopting the change to this
section as proposed.
Section 120.1070 Lender oversight
fees. SBA proposed to amend this
section to categorize the fee components
as Examinations, Reviews, Monitoring,
and Other Lender Oversight Activities.
The proposed section also provided that
SBA has discretion in how it allocates

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lender oversight costs to Lenders to
allow contracting flexibility in how SBA
pays for this cost and the fair and
efficient allocation of costs to Lenders.
The change specifies, consistent with
SBA’s current practice and current
contracts, that, in general, where the
costs that SBA incurs for the oversight
activity are specific to a Lender, SBA
will charge that Lender for the actual
costs. Where the costs SBA incurs for
the oversight activity are not sufficiently
specific to a particular Lender and a flat
fee is paid to a vendor, SBA may charge
a Lender based on that Lender’s portion
of SBA guaranties in the portfolio or
segment of the portfolio that the activity
covers. SBA received nine comments
regarding the proposed change. One
commenter suggested SBA change the
use of the word ‘‘Lender’’ to ‘‘SBA
Lender,’’ which is a defined term in the
regulations. The term ‘‘SBA Lender’’ is
defined as 7(a) Lenders and CDCs in 13
CFR 120.10. This regulation only
applies to 7(a) Lenders in accordance
with 15 U.S.C. 634(b)(14). Therefore,
SBA is not adopting the suggestion to
use ‘‘SBA Lender’’ in this regulation.
Another commenter, a trade
association, joined by seven other
commenters, stated that, while they
have no objection to the proposed
change, they have concerns that SBA
has virtually no incentive to limit the
costs that it imposes on program
participants for the review function. The
trade association expressed concern that
increasing oversight costs could, at
some point, make program participation
too expensive for some lenders, thus
limiting small business’ access to
critically needed capital. The trade
association recommended that SBA
continue to find ways to make the
OCRM review function as cost-effective
as possible for SBA and for program
participants.
SBA disagrees that it has little
incentive to limit the costs of lender
oversight. SBA is committed to
developing and operating a robust risk
management program at the most
efficient cost possible and to reducing
costs where possible. SBA will continue
to minimize its oversight costs and the
fees it charges program participants
through competitive bidding processes,
using fixed price contracts where
appropriate, contract monitoring, and
efficiently coordinating the work with
its contractors.
In addition, one commenter requested
that SBA publish its lender oversight
fees annually. SBA lender oversight fees
do not always change from year-to-year,
so it may not be necessary to publish
each fee every year. However, generally,
when a lender oversight fee changes,

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SBA communicates the fees to all 7(a)
Lenders via SBA notice. SBA is
adopting this section as proposed.
Section 120.1400 Grounds for
enforcement actions—SBA Lenders.
SBA proposed to amend § 120.1400(a) to
provide that by making 7(a) guaranteed
loans or 504 loans after a certain date,
SBA Supervised Lenders (except Other
Regulated Small Business Lending
Companies (SBLCs)) or CDCs, as
applicable, consent to the appointment
of a receiver and such injunctive relief
or other equitable relief as appropriate,
and waive in advance any defenses to
such relief as sought by SBA, in
connection with an enforcement action.
There were responses from 27
commenters concerning the proposed
changes in this section. There were
eight commenters in support of the
changes. However, there were some
concerns that SBA continues to cite
SBA Form 750, Loan Guaranty
Agreement (Deferred Participation), as
the document that Lenders should rely
on as ‘‘fully’’ setting forth 7(a) Loan
Program Requirements, considering that
the current version of the SBA Form 750
in use is outdated and may not be
reflective of current policy and SBA
Loan Program Requirements. There
were eight commenters who were
concerned about the SBA’s intention
when imposing a prior waiver
provision—that is, whether the SBA
Supervised Lender or CDC would be
waiving only its defenses against having
SBA bring the matter before the court,
or whether it also would be waiving all
of its defenses with respect to all of the
actions that SBA may be seeking to
enforce against the SBA Supervised
Lender or CDC, and sought additional
clarification on this point.
There were 18 commenters who
voiced objection to the proposed
language as overly broad and not
necessary under the current regulations.
The objecting commenters stated that,
while they agree SBA has a right to
regulate the 504 Loan Program, they
believe that the right of SBA to appoint
an uncontested receiver for an SBA
Supervised Lender or CDC over-reaches
the SBA’s regulatory authority over
these entities. The objectors believe the
language in the proposed rule is
unnecessarily broad in that it seeks to
include a waiver of any and all defenses
an SBA Supervised Lender or CDC may
validly raise to an enforcement action
by the SBA. Additionally, the
commenters stated that while SBA may
be able to manage and service the SBA
loan portfolio, they believe SBA has no
interest in managing and servicing the
non-SBA loans of a CDC or an SBA
Supervised Lender that is a Non-

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Federally Regulated Lender or managing
the contracts CDCs may have with their
state, city, or other governmental
organizations.
SBA considered the receivership
comments concerning SBA Supervised
Lenders and CDCs, but determined that
the proposed provisions that allow SBA
to seek receiverships by consent will
provide the Agency added flexibility in
protecting and safeguarding the security
and integrity of these federally funded
loan programs. SBA is conditioning its
guarantee of 7(a) loans made by SBA
Supervised Lenders (except Other
Regulated SBLCs) and 504 debentures
after a certain date on consent to this
relief in connection with an
enforcement action because the injury to
SBA and its supervision and regulatory
oversight of the SBA Supervised Lender
or CDC due to the SBA Supervised
Lender’s or CDC’s default under its
agreement(s) with SBA would be
irreparable and the amount of damage
would be difficult to ascertain, making
this relief necessary. Consent to
receivership is not without precedent in
Federal agency practice and has been
upheld by the courts as valid and legally
enforceable. SBA identified an example
of such a case in the proposed rule, U.S.
v. Mountain Village Company, 424 F.
Supp. 822 (D. Mass. 1976). The consent
to receivership does not mandate the
appointment of a receiver in connection
with every enforcement action. SBA
will review the facts and circumstances
of the enforcement action when
deciding whether or not to seek the
appointment of a receiver and in
determining the scope of the receiver’s
duties and powers, including whether
the receiver’s duties and powers will be
limited to taking possession of,
servicing and/or selling or transferring
the 7(a) or 504 loan portfolios.
After careful consideration of
comments, SBA believes that it is in the
best interests of the taxpayers for SBA
to have the added flexibility of seeking
receiverships, if necessary or
appropriate, when taking enforcement
actions. However, in response to
comments, SBA has revised the
language of the proposed rule to clarify
that along with the consent to the
remedies in §§ 120.1500(c)(3) or
120.1500(e)(3), the SBA Supervised
Lender or CDC waives in advance any
right to contest the validity of the
appointment of a receiver. SBA has not
adopted the proposed regulatory text
providing for a waiver in advance of any
defenses to the relief sought by SBA.
Section 120.1500 Types of
enforcement actions—SBA Lenders.
SBA proposed to revise the language
permitting the Agency to initiate a

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Federal Register / Vol. 82, No. 160 / Monday, August 21, 2017 / Rules and Regulations
request for the appointment of a receiver
of an SBA Supervised Lender in
§ 120.1500(c)(3) and proposed to add
language permitting SBA to initiate a
request for the appointment of a receiver
of a CDC in § 120.1500(e)(3). After
careful consideration of comments
received, SBA believes that it is in the
best interests of the taxpayers for the
Agency to have the added flexibility of
seeking receiverships, if necessary or
appropriate, when taking enforcement
actions. SBA has therefore determined
that it will amend this section as
proposed. There were responses from 27
commenters concerning the proposed
changes in this section. There were 19
commenters who voiced objection to the
proposed language as overly broad and
not necessary under the current
regulations. Again, the objecting
commenters provided that, while they
agree SBA has a right to regulate its loan
programs, they believe that the right of
SBA to appoint an uncontested receiver
for a CDC over-reaches the SBA’s
regulatory authority over these entities.
While the objectors did support the
need for proper oversight and
supervision of SBA Supervised Lenders
and CDCs, they also believe that SBA
Supervised Lenders and CDCs should be
afforded their constitutional right to
notice and a hearing before being
deprived of their property rights and
interests. SBA considered the
constitutional issue of due process/
waiver of notice. Consent to
receivership in favor of Federal
agencies—including without notice—
has been upheld in Federal court as
valid, enforceable and meeting
constitutional due process. SBA
identified an example of such a case in
the proposed rule, U.S. v. Mountain
Village Company, supra.
As stated above, SBA considered the
receivership comments concerning SBA
Supervised Lenders and CDCs, but
determined that the proposed
provisions that allow SBA to seek
receiverships by consent will provide
the Agency with added flexibility in
protecting and safeguarding the security
and integrity of these federally funded
loan programs. SBA is conditioning its
guarantee of 7(a) loans made by SBA
Supervised Lenders (except Other
Regulated SBLCs) and 504 debentures
after a certain date on consent to this
relief in connection with an
enforcement action because the injury to
SBA and its supervision and regulatory
oversight of the SBA Supervised Lender
or CDC due to the SBA Supervised
Lender’s or CDC’s default under its
agreement(s) with SBA would be
irreparable and the amount of damage
would be difficult to ascertain, making

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this relief necessary. The consent to
receivership does not mandate the
appointment of a receiver in connection
with every enforcement action. SBA
will review the facts and circumstances
of the enforcement action when
deciding whether or not to seek the
appointment of a receiver and in
determining the scope of the receiver’s
duties and powers, including whether
the receiver’s duties and powers will be
limited to taking possession of,
servicing and/or selling or transferring
the 7(a) or 504 loan portfolios.
Section 120.1600 General
procedures for enforcement actions
against SBA Lenders, SBA Supervised
Lenders, Other Regulated SBLCs,
Management Officials, Other Persons,
Intermediaries, and NTAPs. SBA
proposed to add language regarding the
procedures for the appointment of a
receiver over a CDC or an SBA
Supervised Lender in §§ 120.1600(a),
120.1600(a)(6) and 120.1600(b)(4). The
proposed amendments allow SBA to
follow applicable procedures under
Federal law to obtain the appointment
of a receiver and to enforce an SBA
Supervised Lender’s or CDC’s consent
and waiver in advance. The comments
that SBA received on this section
repeated the comments received on
§§ 120.1400 and 120.1500. SBA
considered the comments received on
this section, and for the reasons stated
above in response to the comments
received on §§ 120.1400 and 120.1500,
SBA has determined the proposed
amendments to § 120.1600 will provide
the Agency added flexibility in
protecting and safeguarding the security
and integrity of the federally funded 7(a)
and 504 Loan Programs. SBA is
amending this section as proposed.
Section 120.1707 Seller’s retained
Loan Interest. SBA proposed to replace
the execution of a new First Lien
Position 504 Loan Pool Guarantee
Agreement with an allonge. This would
obligate the purchaser of a Seller
Receipt in the First Lien Position 504
Loan Pooling (‘‘FMLP’’) Program to the
same terms and conditions of the First
Lien Position 504 Loan Pool Guarantee
Agreement. No comments were
received. SBA is adopting the change
into the final rule as proposed.
Subpart K—Establishment of an SBA
Direct Loan Program for Systemically
Important Secondary Market BrokerDealers (SISMBD Loan Program). SBA
proposed to remove §§ 120.1800
through 120.1900. These regulations
relate to rules which establish a
temporary, short-term loan program for
systemically-important secondary
market broker-dealers. Sections
120.1800–120.1893 set forth the

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39499

program participation criteria and the
conditions under which qualified
participants could obtain secured debt
financing from SBA. Section 120.1900
established a sunset date for the
program of no later than February 16,
2011, with all loan proceeds due to be
paid in full by no later than February
16, 2013. SBA received seven comments
on its proposal to remove these
regulations. All commenters supported
the removal of the regulation and, as a
result, SBA is removing these
regulations in the Final Rule.
Compliance with Executive Orders
12866, 12988, 13132, 13563, 13771, and
13777, the Paperwork Reduction Act (44
U.S.C., Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601–612).
Executive Order 12866
This final rule is the result of a
proposed rule that the Office of
Management and Budget (OMB)
determined is not a ‘‘significant’’
regulatory action for the purposes of
Executive Order 12866. This is not a
major rule under the Congressional
Review Act, 5 U.S.C. 800.
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
retroactive or preemptive effect.
Executive Order 13132
SBA has determined that this final
rule 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. Therefore,
for the purposes of Executive Order
13132, SBA has determined that this
proposed rule has no federalism
implications warranting preparation of a
federalism assessment.
Executive Order 13563
SBA’s Business Loan Programs
operate through the Agency’s lending
partners, which are 7(a) Lenders for the
7(a) Loan Program, Third Party Lenders
and CDCs for the 504 Loan Program,
Microloan Intermediaries for the
Microloan Program, and ILP
Intermediaries for the ILP Program.
SBA’s SBG Program operates through
Surety Bond Companies. The Agency
has participated in public forums and
meetings which have included outreach
to hundreds of its lending partners and
surety bond companies to seek valuable

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Federal Register / Vol. 82, No. 160 / Monday, August 21, 2017 / Rules and Regulations

insight, guidance, and suggestions for
program reform.

sradovich on DSK3GMQ082PROD with RULES

Executive Orders 13771 and 13777
On January 30, 2017, President Trump
signed Executive Order 13771, Reducing
Regulation and Controlling Regulatory
Costs, which, among other objectives, is
intended to ensure that an agency’s
regulatory costs are prudently managed
and controlled so as to minimize the
compliance burden imposed on the
public. For every significant regulation
an agency proposes to implement, this
Executive Order requires the agency to
(i) identify at least two existing
regulations that the agency can cancel;
and (ii) use the cost savings from the
cancelled regulations to offset the cost
of the new regulation. On February 24,
2017, the President issued Executive
Order 13777, Enforcing the Regulatory
Agenda, which further emphasized the
goal of the Administration to alleviate
the regulatory burdens placed on the
public. Under Executive Order 13777,
agencies must evaluate their existing
regulations to determine which ones
should be repealed, replaced, or
modified. In doing so, agencies should
focus on identifying regulations that,
among other things, eliminate jobs or
inhibit job creation; are outdated,
unnecessary or ineffective; impose costs
that exceed benefits; create a serious
inconsistency or otherwise interfere
with regulatory reform initiatives and
policies; or implemented Executive
Orders or other Presidential directives
that have been rescinded or
substantially modified. SBA has
reviewed this final rule in light of these
two new Executive Orders.
Regulation elimination as proposed
for this rule will eliminate duplication
of effort costs for sureties, lenders and
certified development companies to
develop computerized forms and sunsets two prior SBA initiatives the CLP
lender designations and the SBA
Director Program for Systematically
Important Secondary Market BrokerDealers (SISMD Loan Program). The cost
savings of sun-setting the two programs
have already been absorbed by SBA so
no further cost savings is anticipated.
The final rule increases the Quick
Bond eligible contract limit in § 115.30
from $250,000 to $400,000. This action
reduces administrative burden that
results in cost savings to the sureties.
The following 29 regulations are
removed as of the publication of this
Federal Register document:
(1) 13 CFR 120.194 Use of computer
forms
(2) 13 CFR 120.441 How does a
Lender become a CLP Lender

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Subpart K—Establishment of an SBA
Direct Program for Systematically
Important Secondary Market BrokerDealers (SISMD Loan Program) which
consists of the following regulations:
(3) 13 CFR 120.1800 Definitions
used in subpart K
(4) 13 CFR 120.1801 Program
Purpose
(5) 13 CFR 120.1802 How does a
broker-dealer participate in the SISMID
Loan Program?
(6) 13 CFR 120.1810 What is a
Systematically Important SBA
Secondary Market Broker-Dealer
(SISMBD)?
(7) 13 CFR 120.1820 What are the
basic eligibility requirements for SBA
designation as a Systemically Important
Secondary Market Broker-Dealer?
(8) 13 CFR 120.1821 What is the
process to obtain designation as a
Systematically Important Secondary
Market Broker-Dealer?
(9) 13 CFR 120.1822 What is the
process to apply for an SISMBD Loan?
(10) 13 CFR 120.1823
Creditworthiness
(11) 13 CFR 120.1824 How will an
SISMBD receive notice of an approval of
denial of a loan or request for an
advance under an SISMBD Loan?
(12) 13 CFR 120.1825 May an
SISMBD request reconsideration after
denial?
(13) 13 CFR 120.1830 What are the
terms and conditions of an SBA loan to
an SISMBD?
(14) 13 CFR 120.1831 Is there a limit
to the number of SISMBD Loans or
advances that an SISMBD may request
from SBA?
(15) 13 CFR 120.1832 What is the
minimum and maximum SISMBD Loan
advance amount?
(16) 13 CFR 120.1833 May an
SISMBD request an increase in the loan
amounts?
(17) 13 CFR 120.1834 What fees are
associated with an SISMBD Loan?
(18) 13 CFR 120.1840 What are the
allowable uses of proceeds of an
SISMBD Loan?
(19) 13 CFR 120.1850 Will the
Collateral be held by SBA?
(20) 13 CFR 120.1860 How will the
SISMBD Loan be disbursed?
(21) 13 CFR 120.1870 How does the
SISMBD provide funds for the
Premium?
(22) 13 CFR 120.1880 How will the
loan be repaid?
(23) 13 CFR 120.1881 How are
payments on the Collateral allocated
between the SISMBD borrower and
repayment of the SISMBD Loan?
(24) 13 CFR 120.1882 What happens
if funds to make required loan payments
are not generated from the Collateral?

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(25) 13 CFR 120.1890 What is the
maturity on a SISMBD Loan from SBA?
(26) 13 CFR 120.1891 What happens
if an SISMBD is ineligible to receive an
SISMBD Loan or an adverse?
(27) 13 CFR 120.1892 What happens
if an SISMBD does not use SISMBD
Loan funds for a statutorily mandated
purpose?
(28) 13 CFR 120.1893 Data
collections and reporting
(29) 13 CFR 120.1900 When does the
Secondary Market Lending Authority
Program end?
Paperwork Reduction Act, 44 U.S.C.,
Ch. 35
SBA has determined that this final
rule imposes additional reporting
requirements under the Paperwork
Reduction Act (PRA). As described
above, SBA proposed to require all
participating sureties to notify SBA of
all contracts that were successfully
completed on a quarterly basis. SBA
invited the public to comment on this
proposed new report and to submit any
comments by October 11, 2016.
SBA invited comments on: (1)
Whether the proposed collection of
information is necessary for the proper
performance of SBA’s functions,
including whether the information will
have a practical utility; (2) the accuracy
of SBA’s estimate of the burden of the
proposed collection of information,
including the validity of the
methodology and assumptions used; (3)
ways to enhance the quality, utility, and
clarity of the information to be
collected; and (4) ways to minimize the
burden of the collection of information
on respondents, including through the
use of automated collection techniques,
when appropriate, and other forms of
information technology. Three
comments were received related to the
requirement of this proposed form. A
discussion of the comments received is
included in the section-by-section
analysis of § 115.22. As stated above,
SBA considered the comments, but will
proceed with requiring the form as
proposed. SBA will submit the final
form and other documents required
under the Paperwork Reduction Act to
OMB for review and approval.
A summary description of this
information collection, the respondents,
and the estimate of the annual hour
burden resulting from this new process
is provided below. Included in the
estimate is the time for reviewing
instructions, searching existing data
sources, gathering information needed,
and completing and reviewing the
responses.
Title: Quarterly Contract Completion
Report (SBA Form 2461).

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Federal Register / Vol. 82, No. 160 / Monday, August 21, 2017 / Rules and Regulations
Description: The Quarterly Contract
Completion Report will be submitted by
all participating surety companies to
provide SBA with information about
successfully completed contracts. The
information reported will include the
Surety Bond Guarantee number, the
name of the Principal, the original
Contract dollar amount, the revised
Contract dollar amount (if applicable),
the date of Contract completion, and a
fee recap. Reports will be due to SBA
within 45 days of each fiscal quarter
end.
OMB Control Number: 3245–0395.
Description of and Estimated Number
of Respondents: The collection will be
submitted by the surety companies that
participate in the SBG Program. The
burden estimate for this requirement is
based on the 30 current participants.
Estimated Number of Responses: Each
of the estimated 30 sureties would be
required to submit the report to SBA
four times per year, for a total of 120
responses.
Estimated Response Time: It is
estimated that each surety would need
approximately one hour to complete the
proposed report.
Total Estimated Annual Hour Burden:
120 hours.
Estimated Annual Cost Burden:
$6,005.

loan applications simply because there
is a reduced burden for small businesses
to apply for a business loan). Therefore,
the proposed modernization of certain
program participation requirements
would not have a substantial economic
impact or cost on the small business
borrower, lender, or CDC, and in fact,
may reduce costs to lender participants.
SBA’s final rule encompasses clear
and transparent best practice guidance
that aligns with the Agency’s mission to
increase access to capital for small
businesses and facilitate American job
preservation and creation by removing
unnecessary regulatory requirements. A
review of the summary and preamble
provides more detailed discussion on
the specific improvements that will
reduce regulatory burdens and
encourage increased program
participation. For these reasons, SBA
has determined that there is no negative
impact on a substantial number of small
entities.

Regulatory Flexibility Act, 5 U.S.C. 601–
612
When an agency issues a rulemaking
proposal, the Regulatory Flexibility Act
(RFA), 5 U.S.C. 601–612, requires the
agency to ‘‘prepare and make available
for public comment an initial regulatory
analysis’’ which will ‘‘describe the
impact of the proposed rule on small
entities.’’ Section 605 of the RFA allows
an agency to certify a rule, in lieu of
preparing an analysis, if the proposed
rulemaking is not expected to have a
significant economic impact on a
substantial number of small entities.
Currently, there are 30 Sureties that
participate in the SBG Program, and no
part of this rule would impose any
significant cost or burden on them.
Although the rulemaking will impact all
of the approximately 6,000 7(a) Lenders
(some of which are small), all of the
approximately 230 CDCs (all of which
are small), all of the approximately 145
Microloan Intermediaries (most of
which are small), and all of the
approximately 35 ILP Intermediaries
(most of which are small), SBA does not
believe the impact will be significant.
This rule will reduce the burden of the
Agency’s lending partners because they
choose their own level of program
participation (i.e., 7(a) Lenders and
CDCs are not required to process more

13 CFR Part 115

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13 CFR Part 109
Community development, Loan
programs-business, Reporting and
recordkeeping requirements, Small
businesses, Intermediary lending pilot
program.
Claims, Reporting and recordkeeping
requirements, Small businesses, Surety
bonds.
13 CFR Part 120
Community development, Equal
employment opportunity, Loan
programs—business, Reporting and
recordkeeping requirements, Small
businesses.
For the reasons stated in the
preamble, SBA amends 13 CFR parts
109, 115, and 120 as follows:
PART 109—INTERMEDIARY LENDING
PILOT PROGRAM
1. The authority citation for part 109
continues to read as follows:

■

Authority: 15 U.S.C. 634(b)(6), (b)(7), and
636(l).
[Amended]

2. Amend § 109.400 by removing and
reserving paragraph (b)(12).
■ 3. Revise § 109.510 to read as follows:
■

§ 109.510

PART 115—SURETY BOND
GUARANTEE
4. The authority citation for part 115
continues to read as follows:

■

Authority: 5 U.S.C. app 3; 15 U.S.C. 687b,
687c, 694a, 694b note; and Pub. L. 110–246,
Sec. 12079, 122 Stat. 1651.
§ 115.19

[Amended]

5. Amend § 115.19 by removing the
phrase ‘‘$100,000, whichever is less’’
and by adding in its place the phrase
‘‘$500,000 of the original contract or
bond amount, whichever is less’’ in
paragraph (c)(1), the second sentence of
paragraph (d), and paragraph (e)(2).
■ 6. Add § 115.22 to subpart A to read
as follows:
§ 115.22
Report.

Quarterly Contract Completion

The Surety must submit a Quarterly
Contract Completion Report within 45
days after the close of each fiscal year
quarter ending December 31, March 31,
June 30, and September 30, that
identifies each contract successfully
completed during the quarter. The
report shall include:
(a) The SBA Surety Bond Guarantee
Number,
(b) Name of the Principal,
(c) The original Contract Dollar
Amount,
(d) The revised Contract Dollar
Amount (if applicable),
(e) The date of Contract completion,
and
(f) A summary specifying the fee
amounts paid to SBA by the Surety and
Principal, the fee amounts due to SBA
as a result of any increases in the
Contract amount, and the fee amounts to
be refunded to the Principal or rebated
to the Surety as a result of any decreases
in the Contract amount.

Reviews.

(a) General. SBA may conduct
reviews and monitoring of ILP
Intermediaries, including ILP
Intermediaries’ self-assessments. SBA
may also perform reviews of ILP

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Intermediaries as needed, as determined
by SBA in its discretion.
(b) Corrective actions. SBA may
require an ILP Intermediary to take
corrective actions to address findings
from reviews. Failure to take required
corrective actions may constitute an
event of default, as described in
§ 109.520(c).
(c) Confidentiality of reports. Review
reports and other SBA prepared review
related documents are subject to the
confidentiality requirements of
§ 120.1060.

■

List of Subjects

§ 109.400

39501

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§ 115.30

[Amended]

7. Amend § 115.30 by removing
‘‘$250,000’’ from the second sentence of
paragraph (d)(2)(i) and adding in its
place ‘‘$400,000.’’

■

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§ 115.32

Federal Register / Vol. 82, No. 160 / Monday, August 21, 2017 / Rules and Regulations
[Amended]

8. Amend § 115.32 by removing the
phrase ‘‘or $100,000, whichever is less’’
and adding in its place the phrase ‘‘or
$500,000 of the original contract or
bond amount, whichever is less’’ after
‘‘25%’’ in the first and second sentences
of paragraph (d)(1).
■ 9. Amend § 115.60 by adding third
and fourth sentences at the end of
paragraph (b) to read as follows:
■

§ 115.60 Selection and admission of PSB
Sureties.

*

*
*
*
*
(b) * * * For a period of nine months
following admission to the PSB
program, the Surety must obtain SBA’s
prior written approval before executing
a bond greater than $2 million so that
SBA may evaluate the Surety’s
performance in its underwriting and
claims and recovery functions. At the
end of this nine month period, SBA may
in its discretion extend this period to
allow SBA to further evaluate the
Surety’s performance.
■ 10. Amend § 115.67 by revising the
second sentence of paragraph (a) to read
as follows:
§ 115.67 Changes in Contract or bond
amount.

(a) * * * The Surety must present
checks for additional fees due from the
Principal and the Surety on any
increases aggregating 25% of the
original Contract or bond amount or
$500,000, whichever is less, and attach
such payments to the respective
monthly bordereau. * * *
*
*
*
*
*
■ 11. Revise § 115.68 to read as follows:
§ 115.68

Guarantee percentage.

SBA reimburses a PSB Surety in the
same percentages and under the same
terms as set forth in § 115.31.
PART 120—BUSINESS LOANS
12. The authority citation for part 120
is revised to read as follows:

■

Authority: 15 U.S.C. 634(b)(6), (b)(7),
(b)(14), (h) and note, 636(a), (h) and (m), 650,
687(f), 696(3) and 697(a) and (e); Pub. L. 111–
5, 123 Stat. 115; Pub. L. 111–240, 124 Stat.
2504; Pub. L. 114–38, 129 Stat. 437.
§ 120.110

[Amended]

13. Amend § 120.110 by removing and
reserving paragraph (l).
■ 14. Amend § 120.111 by revising the
introductory text and paragraphs (a)(3)
and (6) to read as follows:

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■

§ 120.111 What conditions must an
Eligible Passive Company satisfy?

An Eligible Passive Company must
use loan proceeds only to acquire or

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lease, and/or improve or renovate, real
or personal property (including eligible
refinancing), that it leases to one or
more Operating Companies for
conducting the Operating Company’s
business, or to finance a change of
ownership between the existing owners
of the Eligible Passive Company. When
the Operating Company is a co-borrower
on the loan, loan proceeds also may be
used by the Operating Company for
working capital and/or the purchase of
other assets, including intangible assets,
for the Operating Company’s use as
provided in paragraph (a)(5) of this
section. (References to Operating
Company in paragraphs (a) and (b) of
this section mean each Operating
Company.) In the 504 loan program, if
the Eligible Passive Company owns
assets in addition to the real estate or
other eligible long-term fixed assets,
loan proceeds may not be used to
finance a change of ownership between
existing owners of the Eligible Passive
Company unless the additional assets
owned by the Eligible Passive Company
are directly related to the real estate or
other eligible long-term fixed assets, the
amount attributable to the additional
assets is de minimis, and the additional
assets are excluded from the Project
financing. Any ownership structure or
legal form may qualify as an Eligible
Passive Company. Any ownership
structure or legal form may qualify as an
Eligible Passive Company.
(a) * * *
(3) The lease between the Eligible
Passive Company and the Operating
Company must be in writing and must
be subordinate to SBA’s mortgage, trust
deed lien, or security interest on the
property. The Eligible Passive Company
(as landlord) must furnish as collateral
for the loan an assignment of all rents
paid under the lease. The rent or lease
payments cannot exceed the amount
necessary to make the loan payment to
the lender, and an additional amount to
cover the Eligible Passive Company’s
direct expenses of holding the property,
such as maintenance, insurance and
property taxes;
*
*
*
*
*
(6) Each holder of an ownership
interest constituting at least 20 percent
of either the Eligible Passive Company
or the Operating Company must
guarantee the loan. The trustee shall
execute the guaranty on behalf of any
trust. When deemed necessary for credit
or other reasons, SBA or, for a loan
processed under an SBA Lender’s
delegated authority, the SBA Lender
may require other appropriate
individuals or entities to provide full or
limited guarantees of the loan without

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regard to the percentage of their
ownership interests, if any.
*
*
*
*
*
■ 15. Amend § 120.130 by redesigning
paragraphs (e) and (f) as paragraphs (f)
and (g) respectively, adding new
paragraph (e), and revising newly
redesignated paragraph (g).
The addition and revision read as
follows:
§ 120.130

Restrictions on uses proceeds.

*

*
*
*
*
(e) The applicant may not use any of
the proceeds to pay past-due Federal,
state, or local payroll taxes, sales taxes,
or other similar taxes that are required
to be collected by the applicant and
held in trust on behalf of a Federal,
state, or local government entity.
*
*
*
*
*
(g) Any use restricted by §§ 120.201,
120.202, and 120.884 (specific to 7(a)
loans and 504 loans respectively).
■ 16. Amend § 120.160 by revising the
second sentence of paragraph (a) and by
removing paragraph (d).
The revision reads as follows:
§ 120.160

Loan conditions.

*

*
*
*
*
(a) * * * When deemed necessary for
credit or other reasons, SBA or, for a
loan processed under an SBA Lender’s
delegated authority, the SBA Lender,
may require other appropriate
individuals or entities to provide full or
limited guarantees of the loan without
regard to the percentage of their
ownership interests, if any.
*
*
*
*
*
§ 120.194

[Removed and Reserved]

17. Remove and reserve § 120.194.
18. Amend § 120.220 by adding
paragraph (a)(3), revising the first,
second, and third sentences of
paragraph (b), and removing the first
two sentences of paragraph (c).
The addition and revisions read as
follows:

■
■

§ 120.220

Fees that Lender pays SBA.

*

*
*
*
*
(a) * * *
(3) For loans approved under section
7(a)(31) of the Small Business Act (SBA
Express loans) to veterans and/or the
spouse of a veteran. In fiscal years when
the 7(a) program is at zero subsidy, SBA
will not collect a guarantee fee in
connection with a loan made under
section 7(a)(31) of the Small Business
Act to a business owned and controlled
by a veteran or the spouse of a veteran.
(b) * * * For a loan with a maturity
of twelve (12) months or less, the
Lender must pay the guaranty fee to

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SBA electronically within 10 business
days after receiving SBA loan approval.
The Lender may only charge the
Borrower for the fee after the Lender
pays the guaranty fee. For a loan with
a maturity in excess of twelve (12)
months, the Lender must pay the
guaranty fee to SBA electronically
within 90 days after SBA gives its loan
approval. * * *
*
*
*
*
*
■ 19. Amend § 120.221 by revising the
section heading, adding introductory
text, and revising paragraph (e) to read
as follows:
§ 120.221 Fees and expenses which the
Lender may collect from a loan applicant or
Borrower.

Unless otherwise allowed by SBA
Loan Program Requirements, the Lender
may charge and collect from the
applicant or Borrower only the
following fees and expenses:
*
*
*
*
*
(e) Legal services. Lender may charge
the Borrower for legal services rendered
on an hourly basis.
■ 20. Revise § 120.222 to read as
follows:
§ 120.222 Prohibition on sharing
premiums for secondary market sales.

The Lender or its Associates may not
share in any premium received from the
sale of an SBA guaranteed loan in the
secondary market with a Service
Provider, packager, or other loan-referral
source.
§ 120.394

[Amended]

21. Amend § 120.394 in the third
sentence by removing the number ‘‘20’’
and adding in its place the number
‘‘33’’.

■

§ 120.400

[Amended]

22. Amend § 120.400 by removing the
phrase ‘‘§§ 120.441(b) and 120.451(d)’’
and adding in its place ‘‘§ 120.440(c)’’.
■ 23. Amend § 120.410 in paragraph
(a)(2) by removing the term ‘‘on-site’’
and by revising paragraph (e).
The revision reads as follows:
■

§ 120.410 Requirements for all
participating Lenders.

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*
*
*
(e) Be in good standing with SBA, as
defined in § 120.420(f) (and determined
by SBA in its discretion), and, as
applicable, with its state regulator and
be considered Satisfactory by its Federal
Financial Institution Regulator (as
determined by SBA and based on, for
example, information in published
orders/agreements and call reports); and
*
*
*
*
*

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§ 120.424

[Amended]

§ 120.451

24. In § 120.424, amend paragraph (b)
by removing the term ‘‘on-site’’.

■

§ 120.433

[Amended]

25. In § 120.433, amend paragraph (b)
by removing the term ‘‘on-site’’.

■

§ 120.434

[Amended]

26. In § 120.434, amend paragraph (c)
by removing the term ‘‘on-site’’.
■ 27. Revise the undesignated center
heading following § 120.435 to read
‘‘Delegated Authority Criteria’’.
■ 28. Revise § 120.440 to read as
follows:
■

§ 120.440 How does a 7(a) Lender obtain
delegated authority?

(a) In making its decision to grant or
renew a delegated authority, SBA
considers whether the Lender, as
determined by SBA in its discretion:
(1) Has the continuing ability to
evaluate, process, close, disburse,
service, liquidate and litigate SBA loans.
This includes the ability to develop and
analyze complete loan packages. SBA
may consider the experience and
capability of Lender’s management and
staff.
(2) Has satisfactory SBA performance
(as defined in § 120.410(a)(2));
(3) Is in compliance with SBA Loan
Program Requirements (e.g., Form 1502
reporting, timely payment of all fees to
SBA);
(4) Has completed to SBA’s
satisfaction all required corrective
actions;
(5) Whether Lender is subject to any
enforcement action, order or agreement
with a regulator or the presence of other
regulatory concerns as determined by
SBA; and
(6) Whether Lender exhibits other risk
factors (e.g., has rapid growth; low SBA
activity; SBA loan volume; Lender, an
officer or director is under investigation
or indictment).
(b) Delegated authority decisions are
made by the appropriate SBA official in
accordance with Delegations of
Authority, and are final.
(c) If delegated authority is approved
or renewed, Lender must execute a
Supplemental Guarantee Agreement,
which will specify a term not to exceed
two years. SBA may grant shortened
renewals based on risk or any of the
other delegated authority criteria.
Lenders with less than 3 years of SBA
lending experience will be limited to a
term of 1 year or less.
§ 120.441
■

[Removed and Reserved]

29. Remove and reserve § 120.441.

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39503

[Removed and Reserved]

30. Remove and reserve § 120.451.
■ 31. Amend § 120.524 by revising
paragraph (b) to read as follows:
■

§ 120.524 When is SBA released from
liability on its guarantee?

*

*
*
*
*
(b) If SBA determines, at any time,
that any of the events set forth in
paragraph (a) of this section occurred in
connection with that loan, SBA is
entitled to recover any moneys paid on
the guarantee plus interest from the
Lender. In the exercise of its rights, SBA
may utilize all legal means available,
including offset and judicial remedies.
*
*
*
*
*
■ 32. Amend § 120.630 by revising
paragraph (a)(4) and in paragraph (a)(5)
by removing the term ‘‘on-site’’.
The revision reads as follows:
§ 120.630 Qualifications to be a Pool
Assembler.

(a) * * *
(4) Is in good standing with SBA (as
the D/FA determines in his or her
discretion), and is Satisfactory with the
Office of the Comptroller of the
Currency (‘‘OCC’’) if it is a national
bank, the Federal Deposit Insurance
Corporation if it is a bank not regulated
by the OCC, or the Financial Industry
Regulatory Authority (‘‘FINRA’’) if it is
a member as determined by SBA.
*
*
*
*
*
■ 33. Amend § 120.660 by:
■ a. Revising paragraphs (a)
introductory text, (a)(1)(ii), and (a)(2);
■ b. Adding paragraph (a)(3);
■ c. Revising paragraph (c); and
■ d. Adding paragraph (d).
The revisions and additions read as
follows:
§ 120.660

Suspension or revocation.

(a) Temporary suspension or
revocation of Lender, broker, dealer, or
Registered Holder for violation of
Secondary Market rules and regulations
or other risks to SBA. The D/FA together
with the Director, Office of Credit Risk
Management (D/OCRM) may suspend
for a period of no more than 120
calendar days or revoke for a period of
no more than two (2) years, the privilege
of a Lender, broker, dealer, or Registered
Holder to sell, purchase, broker, or deal
in loans or Certificates for:
(1) * * *
(ii) Any provisions in the contracts
entered into by the parties, including
SBA Forms 1086, 1088 and 1454;
(2) Knowingly submitting false or
fraudulent information to the SBA or
FTA; or
(3) A Lender’s receipt, from its
primary Federal or state regulator

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(including SBA), of a cease and desist
order, a consent agreement affecting
capital or commercial lending issues, a
supervisory action citing unsafe or
unsound banking practices, or any other
supervisory action a primary regulator
establishes hereafter that addresses
unsafe or unsound lending practices; or
a going concern opinion issued by the
Lender’s auditor. A Lender subject to a
public action or going concern opinion
must notify the D/FA and the D/OCRM
within five (5) business days (or as soon
as practicable thereafter) of the public
issuance of any such action or the
issuance of a going concern opinion.
The Lender notice shall include copies
of all relevant documents for SBA
review.
*
*
*
*
*
(c) Notice to suspend or revoke. The
D/FA and the D/OCRM shall notify the
affected party in writing, providing the
reasons therefore, at least 10 business
days prior to the effective date of the
suspension or revocation. The affected
party may appeal the suspension or
revocation made under this section
pursuant to the procedures set forth in
part 134 of this chapter. The action
taken by the D/FA and the D/OCRM will
remain in effect pending resolution of
the appeal.
(d) Early termination of suspension or
revocation. SBA may, by written notice,
terminate a Secondary Market
suspension or revocation under this
section, if the D/FA and the D/OCRM,
in their sole discretion, determine that
such termination is warranted for good
cause.
§ 120.710

[Amended]

34. Amend § 120.710 by removing the
term ‘‘on-site’’ from the third sentence
of paragraph (e)(1).

■

35. Amend § 120.812 by revising the
last sentence of paragraph (c) to read as
follows:

■

§ 120.812 Probationary period for newly
certified CDCs.

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*

*
*
*
*
(c) * * * Other factors may include,
but are not limited to, review/
examination assessments, historical
performance measures, loan volume to
the extent that it impacts performance
measures, and other performance
related measurements and information
(such as contribution toward SBA
mission).
*
*
*
*
*
36. Amend § 120.816 by revising the
last sentence of paragraph (c) to read as
follows:

■

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§ 120.816 CDC non-profit status and good
standing.

*

*
*
*
*
(c) * * * Other factors may include,
but are not limited to, review/
examination assessments, historical
performance measures, loan volume to
the extent that it impacts performance
measures, and other performance
related measurements and information
(such as contribution toward SBA
mission).
■ 37. Amend § 120.823 by revising
paragraphs (c)(5) and (d)(4)(ii)(A)
through (C) and (E) to read as follows:
§ 120.823

CDC Board of Directors.

*

*
*
*
*
(c) * * *
(5) No CDC Board member may serve
on the Board of another CDC.
(d) * * *
(4) * * *
(ii) * * *
(A) Be chosen by the Board of
Directors, and consist of individuals
with a background in either financial
risk management, commercial lending,
or legal issues relating to commercial
lending who are not associated with
another CDC;
(B) Have a Quorum of at least five (5)
Loan Committee members authorized to
vote;
(C) Have at least two (2) Loan
Committee members with commercial
lending experience satisfactory to SBA;
*
*
*
*
*
(E) Consist of Loan Committee
members who live or work in the Area
of Operations of the State where the 504
project they are voting on is located
unless the project falls under one of the
exceptions listed in § 120.839.
*
*
*
*
*
■ 38. Amend § 120.839 by revising the
introductory text to read as follows:
§ 120.839 Case-by-case application to
make a 504 loan outside of a CDC’s Area
of Operations.

A CDC may apply to make a 504 loan
for a Project outside its Area of
Operations by submitting a request to
the 504 loan processing center. The
applicant CDC must demonstrate that it
can adequately fulfill its 504 program
responsibilities for the 504 loan,
including proper servicing. In addition,
the CDC must have satisfactory SBA
performance, as determined by SBA in
its discretion. The CDC’s Risk Rating,
among other factors, will be considered
in determining satisfactory SBA
performance. Other factors may include,
but are not limited to, review/
examination assessments, historical
performance measures, loan volume to

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the extent that it impacts performance
measures, and other performance
related measurements and information
(such as contribution toward SBA
mission). The 504 loan processing
center may approve the application if:
*
*
*
*
*
39. Amend § 120.841 by revising the
last sentence of paragraph (c) to read as
follows:

■

§ 120.841

Qualifications for the ALP.

*

*
*
*
*
(c) * * * Other factors may include,
but are not limited to, review/
examination assessments, historical
performance measures, loan volume to
the extent that it impacts performance
measures, and other performance
related measurements and information
(such as contribution toward SBA
mission);
*
*
*
*
*
40. Amend § 120.884 by revising
paragraph (e)(3) to read as follows:

■

§ 120.884

Ineligible costs for 504 loans.

*

*
*
*
*
(e) * * *
(3) Construction equipment (except
for heavy duty construction equipment
integral to the business’ operations with
a remaining useful life of a minimum of
10 years).
41. Amend § 120.1025 by revising the
section heading and removing the
phrase ‘‘off-site reviews and
monitoring’’ and adding in its place
‘‘monitoring’’.
The revision reads as follows:

■

§ 120.1025

Monitoring.

*

*

*

*

*

42. Amend § 120.1050 by revising the
section heading and removing the
phrase ‘‘on-site’’ wherever it occurs.
The revision reads as follows:

■

§ 120.1050

Reviews and examinations.

*

*

*

*

*

43. Amend § 120.1051 by revising the
section heading, removing the phrase
‘‘on-site’’ from the introductory text,
and revising paragraph (a).
The revisions read as follows:

■

§ 120.1051 Frequency of reviews and
examinations.

*

*
*
*
*
(a) Results of monitoring, including
an SBA Lender’s, Intermediary’s or
NTAP’s Risk Rating;
*
*
*
*
*
44. Amend § 120.1060 by revising
paragraph (b) to read as follows:

■

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§ 120.1060 Confidentiality of Reports, Risk
Ratings and related Confidential
Information.

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*
*
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(b) Disclosure prohibition. Each SBA
Lender, Intermediary, and NTAP is
prohibited from disclosing its Report,
Risk Rating, and Confidential
Information, in full or in part, in any
manner, without SBA’s prior written
permission. An SBA Lender,
Intermediary, and NTAP may use the
Report, Risk Rating, and Confidential
Information for confidential use within
its own immediate corporate
organization. SBA Lenders,
Intermediaries, and NTAPs must restrict
access to their Report, Risk Rating and
Confidential Information to their
respective parent entities, officers,
directors, employees, auditors and
consultants, in each case who
demonstrate a legitimate need to know
such information for the purpose of
assisting in improving the SBA
Lender’s, Intermediary’s, or NTAP’s
SBA program operations in conjunction
with SBA’s Program and SBA’s portfolio
management (for purposes of this
regulation, each referred to as a
‘‘permitted party’’), and to those for
whom SBA has approved access by
prior written consent, and those for
whom access is required by applicable
law or legal process. If such law or
process requires SBA Lender,
Intermediary, or NTAP to disclose the
Report, Risk Rating, or Confidential
Information to any person other than a
permitted party, SBA Lender,
Intermediary, or NTAP will promptly
notify SBA and SBA’s Information
Provider in writing and in advance of
such disclosure so that SBA and the
Information Provider have, within their
discretion, the opportunity to seek
appropriate relief such as an injunction
or protective order prior to disclosure.
For purposes of this regulation,
‘‘consultants’’ means only those
consultants that are under written
contract with an SBA Lender,
Intermediary or NTAP specifically to
assist with addressing its Report
Findings and Corrective Actions to
SBA’s satisfaction. The consultant
contract must provide for both the
consultant’s agreement to abide by the
disclosure prohibition in this paragraph
and the consultant’s agreement not to
use the Report, Risk Rating, and
Confidential Information for any
purpose other than to assist with
addressing the Report Findings and
Corrective Actions. ‘‘Information
Provider’’ means any contractor that
provides SBA with the Risk Rating.
Each SBA Lender, Intermediary, and
NTAP must ensure that each permitted

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party is aware of and agrees to these
regulatory requirements and must
ensure that each such permitted party
abides by them. Any disclosure of the
Report, Risk Rating, or Confidential
Information other than as permitted by
this regulation may result in appropriate
action as authorized by law. An SBA
Lender, Intermediary, and NTAP will
indemnify and hold harmless SBA from
and against any and all claims,
demands, suits, actions, and liabilities
to any degree based upon or resulting
from any unauthorized use or disclosure
of the Report, Risk Rating, or
Confidential Information. Information
Provider contact information is
available from the Office of Capital
Access.
■ 45. Amend § 120.1070 by:
■ a. Revising the section heading;
■ b. Revising paragraphs (a)(1) through
(4);
■ c. Redesignating paragraphs (b) and
(c) as paragraphs (c) and (d),
respectively;
■ d. Adding a new paragraph (b);
■ e. Revising the first and second
sentences of newly redesignated
paragraph (c); and
■ f. Revising the final sentence of newly
redesignated paragraph (d)
The addition and revisions read as
follows:
§ 120.1070

SBA Lender oversight fees.

*

*
*
*
*
(a) * * *
(1) Examinations. The costs of
conducting a safety and soundness
examination and related activities of an
SBA-Supervised Lender, including any
expenses that are incurred in relation to
the examination and such activities.
(2) Reviews. The costs of conducting
a review of a 7(a) Lender or a 7(a)
Lender’s loans, and related review
activities (e.g., corrective action
assessments, delegated loan reviews),
including any expenses that are
incurred in relation to the review and
such activities.
(3) Monitoring. The costs of
conducting monitoring reviews of a 7(a)
Lender, including any expenses that are
incurred in relation to the monitoring
review activities.
(4) Other lender oversight activities.
The costs of additional expenses that
SBA incurs in carrying out other lender
oversight activities (for example, the
salaries and travel expenses of SBA
employees and equipment expenses that
are directly related to carrying out
lender oversight activities, technical
assistance and analytics to support the
monitoring and review program, and
supervision and enforcement activity
costs).

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(b) Allocation. SBA will assess to 7(a)
Lender(s) the costs associated with the
review, examination, monitoring, or
other lender oversight activity, as
determined by SBA in its discretion. In
general:
(1) Where the costs that SBA incurs
for a review, exam, monitoring or other
lender oversight activity are specific to
a particular 7(a) Lender, SBA will
charge that 7(a) Lender a fee for the
actual costs of conducting the review,
exam, monitoring or other lender
oversight activity; and
(2) Where the costs that SBA incurs
for the lender oversight activity are not
sufficiently specific to a particular
Lender, SBA will assess a fee based on
each 7(a) Lender’s portion of the total
dollar amount of SBA guarantees in
SBA’s total portfolio or in the relevant
portfolio segment being reviewed or
examined, to cover the costs of such
activity. SBA may waive the assessment
of this fee for all 7(a) Lenders owing less
than a threshold amount below which
SBA determines that it is not cost
effective to collect the fee.
(c) * * * For the examinations or
reviews conducted under paragraphs
(a)(1) and (2) of this section, SBA will
bill each 7(a) Lender for the amount
owed following completion of the
examination, review or related activity.
For monitoring conducted under
paragraph (a)(3) of this section and the
other lender oversight activity expenses
incurred under paragraph (a)(4) of this
section, SBA will bill each 7(a) Lender
for the amount owed on an annual basis.
* * *
(d) * * * In addition, a 7(a) Lender’s
failure to pay any of the fee components
described in this section, or to pay
interest, charges and penalties that have
been charged, may result in a decision
to suspend or revoke a participant’s
eligibility, limit a participant’s
delegated authority, or other remedy
available under law.
■ 46. Effective October 20, 2017, amend
§ 120.1400 by revising paragraph (a) to
read as follows:
120.1400 Grounds for enforcement
actions—SBA Lenders.

(a) Agreements. By making SBA 7(a)
guaranteed loans or 504 loans, SBA
Lenders automatically agree to the
terms, conditions, and remedies in Loan
Program Requirements, as promulgated
or issued from time to time and as if
fully set forth in the SBA Form 750
(Loan Guaranty Agreement),
Development Company 504 Debenture,
CDC Certification, Servicing Agent
Agreement, or other applicable
participation, guaranty, or supplemental
agreement. SBA Lenders further agree

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that a violation of Loan Program
Requirements constitutes default under
their respective agreements with SBA.
(1) Additional agreements by CDCs.
By obtaining approval for 504 loans
after October 20, 2017, a CDC consents
to the remedies in § 120.1500(e)(3) and
waives in advance any right it may have
to contest the validity of the
appointment of a receiver. The CDC
agrees that its consent to SBA’s
application to a Federal court of
competent jurisdiction for appointment
of a receiver of SBA’s choosing, an
injunction or other equitable relief, and
the CDC’s consent in advance to the
court’s granting of SBA’s application,
may be enforced upon any basis in law
or equity recognized by the court.
(2) Additional agreements by SBA
Supervised Lenders (except Other
Regulated SBLCs). By making SBA 7(a)
guaranteed loans after October 20, 2017,
an SBA Supervised Lender (except an
Other Regulated SBLC) consents to the
remedies in § 120.1500(c)(3) and waives
in advance any right it may have to
contest the validity of the appointment
of a receiver. The SBA Supervised
Lender agrees that its consent to SBA’s
application to a Federal court of
competent jurisdiction for appointment
of a receiver of SBA’s choosing, an
injunction or other equitable relief, and
the SBA Supervised Lender’s consent in
advance to the court’s granting of SBA’s
application, may be enforced upon any
basis in law or equity recognized by the
court.
*
*
*
*
*
■ 47. Amend § 120.1500 by revising
paragraph (c)(3) and adding paragraph
(e)(3) to read as follows:
§ 120.1500 Types of enforcement
actions—SBA Lenders.

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*

*
*
*
*
(c) * * *
(3) Initiate request for appointment of
receiver and/or other relief. The SBA
may make application to any Federal
court of competent jurisdiction for the
court to take exclusive jurisdiction,
without notice, of an SBA Supervised
Lender, and SBA shall be entitled to the
appointment of a receiver of SBA’s
choosing to hold, administer, operate,
and/or liquidate the SBA Supervised
Lender; and to such injunctive or other
equitable relief as may be appropriate.
Without limiting the foregoing and with
SBA’s written consent, the receiver may
take possession of the portfolio of 7(a)
loans and sell such loans to a third
party, and/or take possession of
servicing activities of 7(a) loans and sell
such servicing rights to a third party.
*
*
*
*
*

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16:12 Aug 18, 2017

Jkt 241001

(e) * * *
(3) Apply to any Federal court of
competent jurisdiction for the court to
take exclusive jurisdiction, without
notice, of the CDC, and SBA shall be
entitled to the appointment of a receiver
of SBA’s choosing to hold, administer,
operate and/or liquidate the CDC; and to
such injunctive or other equitable relief
as may be appropriate. Without limiting
the foregoing and with SBA’s consent,
the receiver may take possession of the
portfolio of 504 loans and/or pending
504 loan applications, including for the
purpose of carrying out an enforcement
order under paragraph (e)(1) of this
section.
■ 48. Amend § 120.1600 by:
■ a. Revising paragraph (a) introductory
text;
■ b. Adding paragraph (a)(6); and
■ c. Revising paragraph (b)(4).
The revisions and addition read as
follows:
§ 120.1600 General procedures for
enforcement actions against SBA Lenders,
SBA Supervised Lenders, Other Regulated
SBLCs, Management Officials, Other
Persons, Intermediaries, and NTAPs.

(a) In general. Except as otherwise set
forth for the enforcement actions listed
in paragraphs (a)(6), (b) and (c) of this
section, SBA will follow the procedures
listed below.
*
*
*
*
*
(6) Receiverships of Certified
Development Companies and/or other
relief. If SBA undertakes the
appointment of a receiver for a Certified
Development Company and/or
injunctive or other equitable relief,
paragraphs (a)(1) through (5) of this
section will not apply and SBA will
follow the applicable procedures under
Federal law to obtain such remedies and
to enforce the Certified Development
Company’s consent and waiver in
advance to those remedies.
(b) * * *
(4) Receiverships, transfer of assets
and servicing activities. If SBA
undertakes the appointment of a
receiver for, or the transfer of assets or
servicing rights of an SBA Supervised
Lender and/or injunctive or other
equitable relief, SBA will follow the
applicable procedures under Federal
law to obtain such remedies and to
enforce the SBA Supervised Lender’s
consent and waiver in advance to those
remedies.
*
*
*
*
*
■ 49. Amend § 120.1703 by revising
paragraph (a)(4) to read as follows:
§ 120.1703 Qualifications to be a Pool
Originator.

(a) * * *

PO 00000

Frm 00016

Fmt 4700

Sfmt 4700

(4) Is in good standing with SBA (as
the SBA determines), and is Satisfactory
with the Office of the Comptroller of the
Currency (OCC) if it is a national bank,
the Federal Deposit Insurance
Corporation if it is a bank not regulated
by the OCC, the Financial Institutions
Regulatory Authority if it is a member,
the National Credit Union
Administration if it is a credit union, as
determined by SBA; and
*
*
*
*
*
■ 50. Amend § 120.1707 by revising the
fifth sentence and adding a sixth
sentence to read as follows:
§ 120.1707

Seller’s retained Loan Interest.

* * * In addition, in order to
complete such sale, Seller must have the
purchaser of its rights to the Pool Loan
execute an allonge to the Seller’s First
Lien Position 504 Loan Pool Guarantee
Agreement in a form acceptable to SBA,
acknowledging and accepting all terms
of the Seller’s First Lien Position 504
Loan Pool Guarantee Agreement, and
deliver the executed original allonge
and a copy of the corresponding First
Lien Position 504 Loan Pool Guarantee
Agreement to the CSA. All Pool Loan
payments related to a Seller Receipt and
Servicing Retention Amount proposed
for sale will be withheld by the CSA
pending SBA acknowledgement of
receipt of all executed documents
required to complete the transfer.
Subpart K—[Removed]
51. Remove Subpart K, consisting of
§§ 120.1800 through 120.1900.

■

Dated: August 11, 2017.
Linda E. McMahon,
Administrator.
[FR Doc. 2017–17447 Filed 8–18–17; 8:45 am]
BILLING CODE 8025–01–P

DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2017–0419; Product
Identifier 2015–SW–077–AD; Amendment
39–18991; AD 2017–17–01]
RIN 2120–AA64

Airworthiness Directives; Airbus
Helicopters
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:

We are adopting a new
airworthiness directive (AD) for Airbus
Helicopters (Airbus) Model AS332L2

SUMMARY:

E:\FR\FM\21AUR1.SGM

21AUR1