Regulation

Small Business Administration

§ 123.11

protect damaged or destroyed real
property from possible future similar
disasters.
§ 123.8 Does SBA charge any fees for
obtaining a disaster loan?
SBA does not charge points, closing,
or servicing fees on any disaster loan
authorized under Section 7(b). You will
be responsible for payment of any closing costs owed to third parties on these
loans, such as recording fees and title
insurance premiums. If your loan is
made under Section 7(b) in participation with a financial institution, SBA
will charge a guarantee fee to the financial institution, which then may recover the guarantee fee from you. SBA
does not charge a guarantee fee for an
IDAP loan made under Section 42.

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[75 FR 60598, Oct. 1, 2010]

§ 123.9 What happens if I don’t use
loan proceeds for the intended purpose?
(a) For disaster loans authorized
under Section 7(b), when SBA approves
each application, it issues a loan authorization which specifies the amount
of the loan, repayment terms, any collateral requirements, and the permitted use of loan proceeds. If you
wrongfully misapply the proceeds of a
disaster loan authorized under Section
7(b), you will be liable to SBA for one
and one-half times the proceeds disbursed to you as of the date SBA learns
of
your
wrongful
misapplication.
Wrongful misapplication means the
willful use of any loan proceeds without SBA approval contrary to the loan
authorization. If you fail to use loan
proceeds for authorized purposes for 60
days or more after receiving a loan disbursement check, such non-use also is
considered a wrongful misapplication
of the proceeds.
(b) If SBA learns that you may have
misapplied your loan proceeds from a
disaster loan authorized under Section
7(b), SBA will notify you at your last
known address, by certified mail, return receipt requested. You will be
given at least 30 days to submit to SBA
evidence that you have not misapplied
the loan proceeds or that you have corrected any such misapplication. Any
failure to respond in time will be considered an admission that you mis-

applied the proceeds. If SBA finds a
wrongful misapplication, it will cancel
any undisbursed loan proceeds, call the
loan, and begin collection measures to
collect your outstanding loan balance
and the civil penalty.
(c) If you misapply loan proceeds of
any disaster loan under this Part, including an IDAP loan, you may face
criminal prosecution or civil or administrative action.
[61 FR 3304, Jan. 31, 1996, as amended at 75
FR 60598, Oct. 1, 2010]

§ 123.10 What happens if I cannot use
my insurance proceeds to make repairs?
If you must pay insurance proceeds
to the holder of a recorded lien or encumbrance against your damaged property instead of using them to make repairs, you may apply to SBA for the
full amount needed to make such repairs. If you voluntarily pay insurance
proceeds to a recorded lienholder, your
loan eligibility is reduced by the
amount of the voluntary payment.
§ 123.11 Does SBA require collateral
for any of its disaster loans?
Generally, SBA will not require that
you pledge collateral to secure a disaster home loan or a physical disaster
business loan of $14,000 or less (or such
higher amount as the Administrator
determines appropriate in the event
the President declares a major disaster), or an economic injury disaster
loan of $5,000 or less. However, for the
purposes of the Military Reservist
EIDL only, as described in section
123.513, SBA will not generally require
that you pledge collateral to secure a
loan of $50,000 or less. For loans larger
than these amounts, you will be required to provide available collateral
such as a lien on the damaged or replacement property, a security interest
in personal property, or both.
(a) Sometimes a borrower, including
affiliates as defined in part 121 of this
title, will have more than one loan
after a single disaster. In deciding
whether collateral is required, SBA
will add up all physical disaster loans
to see if they exceed $14,000 and all economic injury disaster loans to see if
they exceed $5,000.

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§ 123.12

13 CFR Ch. I (1–1–11 Edition)

(b) SBA will not decline a loan if you
lack a particular amount of collateral
as long as it is reasonably sure that
you can repay your loan. If you refuse
to pledge available collateral when requested by SBA, however, SBA may decline or cancel your loan.
(c) Collateral requirements for IDAP
loans are set forth in Subpart H of this
part.
[61 FR 3304, Jan. 31, 1996, as amended at 73
FR 54675, Sept. 23, 2008; 75 FR 14332, Mar. 25,
2010; 75 FR 60598, Oct. 1, 2010]

§ 123.12 Are books and records required?
You must retain complete records of
all transactions financed with your
SBA loan proceeds, including copies of
all contracts and receipts, for a period
of 3 years after you receive your final
disbursement of loan proceeds. If you
have a physical disaster business or
economic injury loan, you must also
maintain current and accurate books
of account, including financial and operating statements, insurance policies,
and tax returns. You must retain applicable books and records for 3 years
after your loan matures including any
extensions, or from the date when your
loan is paid in full, whichever occurs
first. You must make available to SBA
or other authorized government personnel upon request all such books and
records for inspection, audit, and reproduction during normal business
hours and you must also permit SBA
and any participating financial institution to inspect and appraise your assets. (OMB Approval No. 3245–0110.)

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§ 123.13 What happens if my loan application is denied?
(a) If SBA denies your loan application, SBA will notify you in writing
and set forth the specific reasons for
the denial. Any applicant whose request for a loan is declined for reasons
other than size (not being a small business) has the right to present information to overcome the reason or reasons
for the decline and to request reconsideration in writing. (OMB Approval No.
3245–0122.)
(b) Any decline due to size can only
be appealed as set forth in part 121 of
this chapter.

(c) Any request for reconsideration
must be received by SBA’s Disaster Assistance Processing and Disbursement
Center (DAPDC) within six months of
the date of the decline notice. After six
months, a new loan application is required.
(d) A request for reconsideration
must contain all significant new information that you rely on to overcome
SBA’s denial of your original loan application. Your request for reconsideration of a business loan application
must also be accompanied by current
business financial statements.
(e) If SBA declines your application a
second time, you have the right to appeal in writing to the Director, Disaster Assistance Processing and Disbursement Center. All appeals must be
received by the processing center within 30 days of the decline action. Your
request must state that you are appealing, and must give specific reasons why
the decline action should be reversed.
(f) The decision of the Director,
DAPDC, is final unless:
(1) The Director, DAPDC, does not
have the authority to approve the requested loan;
(2) The Director, DAPDC, refers the
matter to the AA/DA; or
(3) The AA/DA, upon a showing of
special circumstances, requests that
the Director, DAPDC, forward the matter to him or her for final consideration. Special circumstances may include, but are not limited to, policy
considerations or alleged improper acts
by SBA personnel or others in processing the application.
(g) This section does not apply to
IDAP loans.
[61 FR 3304, Jan. 31, 1996, as amended at 71
FR 63676, Oct. 31, 2006; 75 FR 60598, Oct. 1,
2010]

§ 123.14 How does the Federal Debt
Collection Procedures Act of 1990
apply?
(a) Under the Federal Debt Collection
Procedures Act of 1990 (28 U.S.C.
3201(e)), a debtor who owns property
which is subject to an outstanding
judgment lien for a debt owed to the
United States generally is not eligible
to receive a disaster loan. The SBA Associate Administrator for Disaster Assistance, or designee, may waive this

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