Federal Register / Vol. 76, No. 63 / Friday, April 1, 2011 / Rules and Regulations 18007 

funds were more than adequate. For that 

reason, the requester suggested that the 

increased assessment rate has become 

unnecessary. 

The third handler commenter also 

suggested that the proposed assessment 

rate of $14.00 per ton was higher than 

necessary and offered a counter 

proposal of $8.25 per ton. 

At the time the committee made the 

recommendation for an increased 

assessment rate, they submitted a 

budget of expenses contingent upon the 

proposed assessment rate. If new 

information since that recommendation 

resulted in the need for a revised budget 

and accompanying assessment rate, the 

committee may recommend and submit 

a new budget and revised assessment 

rate for the Secretary’s review. In fact, 

the committee may provide a new 

budget and assessment recommendation 

any time conditions affecting the budget 

and assessment rate change enough to 

warrant a new recommendation. In the 

absence of an alternative 

recommendation from the committee 

regarding a revised budget and 

assessment rate proposal, the USDA has 

determined that issuing this final rule as 

recommended by the committee is 

appropriate. 

In addition, it should be noted that 

the marketing order provides a remedy 

in § 989.81(a) in the event the 

committee collects more assessment 

funds than are needed in a crop year: A 

handler may be credited his share of 

excess assessments collected against 

operations of the following crop year, or 

the handler may request a refund of 

such excess assessments. Moreover, the 

proposed budget and the accompanying 

increased assessment rate were 

unanimously approved at the July 22, 

2010, and October 5, 2010, committee 

meetings. Representatives of all three 

handler commenters attended at least 

one of the meetings and added their 

vote to the unanimous 

recommendations. 

The fourth comment was from a 

member of the public, who stated that 

assessment rates against raisin 

producers should be reduced rather 

than nearly doubled. First, the 

assessment is collected from handlers, 

rather than producers. Also, as noted 

previously, the members of the 

committee are producers and handlers 

of California raisins. They are familiar 

with the committee’s needs and with 

costs for goods and services in their 

local area, and are, thus, in a position 

to formulate an appropriate budget and 

assessment rate. The assessment rate is 

formulated and discussed in a public 

meeting in the production area, and 

therefore, all directly affected persons 

have an opportunity and are encouraged 

to participate and provide input. 

Finally, the producers and handlers 

who comprise the committee made their 

recommendation to increase the 

assessment rate by unanimous vote. 

A small business guide on complying 

with fruit, vegetable, and specialty crop 

marketing agreements and orders may 

be viewed at: http://www.ams.usda.gov/ 

MarketingOrdersSmallBusinessGuide. 

Any questions about the compliance 

guide should be sent to Antoinette 

Carter at the previously mentioned 

address in the FOR FURTHER INFORMATION

CONTACT section. 

After consideration of all relevant 

material presented, including the 

information and recommendation 

submitted by the committee and other 

available information, it is hereby found 

that this rule, as hereinafter set forth, 

will tend to effectuate the declared 

policy of the Act. 

Pursuant to 5 U.S.C. 553, it is also 

found and determined that good cause 

exits for not postponing the effective 

date of this rule until 30 days after 

publication in the Federal Register 

because handlers are already receiving 

2010–11 crop year raisins and the 

assessment rate applies to all raisins 

received during the crop year and 

subsequent crop years. In addition, the 

committee needs the additional revenue 

generated by this assessment rate to 

meet its financial obligations for this 

crop year. Further, handlers are aware of 

this rule, which was unanimously 

recommended at a public meeting. Also, 

a 10-day comment period was provided 

for in the proposed rule. 

List of Subjects in 7 CFR Part 989 

Grapes, Marketing agreements, 

Raisins, Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, 7 CFR part 989 is amended as 

follows: 

PART 989—RAISINS PRODUCED 

FROM GRAPES GROWN IN 

CALIFORNIA 

■ 1. The authority citation for 7 CFR 

part 989 continues to read as follows: 

Authority: 7 U.S.C. 601–674. 

■ 2. Section 989.347 is revised to read 

as follows: 

§ 989.347 Assessment rate. 

On and after August 1, 2010, an 

assessment rate of $14.00 per ton is 

established for assessable raisins 

produced from grapes grown in 

California. 

Dated: March 28, 2011. 

Rayne Pegg, 

Administrator, Agricultural Marketing 

Service. 

[FR Doc. 2011–7759 Filed 3–31–11; 8:45 am] 

BILLING CODE 3410–02–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 109 

[Docket No. SBA–2011–0002] 

RIN 3245–AG18 

Intermediary Lending Pilot Program 

AGENCY: Small Business Administration 

(SBA). 

ACTION: Interim final rule with request 

for comments. 

SUMMARY: This interim final rule 

implements section 1131 of the Small 

Business Jobs Act of 2010, which 

requires SBA to establish an 

Intermediary Lending Pilot (ILP) 

program. The ILP program is a threeyear pilot program in which SBA will 

make direct loans of up to $1 million at 

an interest rate of 1 percent to up to 20 

nonprofit lending intermediaries each 

year, subject to availability of funds. 

Intermediaries will then use the ILP 

loan funds to make loans of up to 

$200,000 to startup, newly established, 

or growing small business concerns. 

DATES: Effective date: April 1, 2011. 

Comment date: Comments must be 

received on or before May 31, 2011. 

ADDRESSES: You may submit comments, 

identified by docket number [SBA– 

2011–0002] by any of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Grady Hedgespeth, Director of 

Financial Assistance, U.S. Small 

Business Administration, 409 3rd Street, 

SW., 8th floor, Washington, DC 20416. 

• Hand Delivery/Courier: Grady 

Hedgespeth, Director of Financial 

Assistance, U.S. Small Business 

Administration, 409 3rd Street, SW., 8th 

floor, Washington, DC 20416. 

All comments will be posted on 

www.Regulations.gov. If you wish to 

include within your comment, 

confidential business information (CBI) 

as defined in the Privacy and Use 

Notice/User Notice at 

www.Regulations.gov and you do not 

want that information disclosed, you 

must submit the comment by either 

Mail or Hand Delivery and you must 

address the comment to the attention of 

Grady Hedgespeth, Director of Financial 


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Assistance, U.S. Small Business 

Administration, 409 3rd Street, SW., 8th 

Floor, Washington, DC 20416. In the 

submission, you must highlight the 

information that you consider is CBI 

and explain why you believe this 

information should be held confidential. 

SBA will make a final determination, in 

its sole discretion, of whether the 

information is CBI and, therefore, will 

be published or not. 

FOR FURTHER INFORMATION CONTACT: 

Grady Hedgespeth, Director of Financial 

Assistance, at (202) 205–7562 or 

Grady.Hedgespeth@sba.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

Section 1131 of the Small Business 

Jobs Act of 2010, Public Law 111–240, 

enacted September 27, 2010 (the Act), 

requires SBA to implement a three year 

Intermediary Lending Pilot (ILP) 

program. Under the ILP program, SBA 

will provide loans to selected nonprofit 

intermediaries for the purpose of 

providing loans to small businesses. 

Eligible intermediaries, which include 

private, nonprofit community 

development corporations, must have at 

least one year of experience making 

loans to startup, newly established, or 

growing small businesses. SBA will use 

a competitive selection process to select 

ILP Intermediaries to participate in the 

program and will make ILP Loans of up 

to $1 million to no more than 20 in each 

of fiscal years 2011, 2012, and 2013 

(depending on availability of funds). ILP 

Loans have a 20 year term and an 

interest rate of 1%, with the first 

payment deferred for two years from the 

date of the first disbursement. SBA 

collects no fees on the loan and requires 

no collateral. An ILP Intermediary must 

use the ILP Loan proceeds to make loans 

of up to $200,000 to startup, newly 

established, or growing small 

businesses. An ILP Intermediary will 

deposit the principal portion of all 

payments received on loans made to 

small businesses under the program into 

an ILP Relending Fund; the ILP 

Intermediary will then be required to 

lend 100% of the ILP Loan proceeds 

within two years of the date of the ILP 

Note. In addition, the ILP Intermediary 

will be required to continue making 

loans to small businesses from the ILP 

Relending Fund for as long as its loan 

from SBA remains outstanding. 

In order to implement this new loan 

program, SBA is adding a new part 109 

to the Agency’s regulations. Many 

provisions, such as ILP Intermediary 

reporting requirements, fees charged to 

small business borrowers, and 

restrictions on types of businesses 

eligible to receive loans under the ILP 

program, are based on existing 

requirements in SBA’s other business 

loan programs under Part 120 of SBA’s 

regulations. 

II. Section by Section Analysis 

Sections 109.10 and 109.20 describe 

the ILP program and define the terms 

used in Part 109. The definitions for 

Affiliate, Associate, Close Relative, ILP 

Program Requirements, and Native 

American Tribal Government are based 

on similar or identical terms used in 

other SBA programs. In addition, the 

definitions for the various reports (ILP 

Program Activities Report, Portfolio 

Identification Report, and Portfolio 

Status Report) and the Intermediary 

Lending Program Electronic Reporting 

System (ILPERS) are based on similar 

reports used in SBA’s Microloan 

program. The remaining definitions 

describe terms unique to the ILP 

program. 

Sections 109.100 through 109.220 

describe the qualifications for the ILP 

program, the application process, and 

the evaluation and selection of ILP 

Intermediaries. Section 109.100 sets 

forth the eligibility and continuing 

participation requirements for ILP 

Intermediaries. An applicant must meet 

these requirements in order to be 

eligible to become an ILP Intermediary 

and, if selected, must maintain 

compliance with these requirements. 

Under the Act, an applicant must be a 

private, nonprofit entity with not less 

than one year of experience making 

loans to startup, newly established, or 

growing small businesses to be eligible 

to become an ILP Intermediary. At time 

of application, the applicant must have 

a minimum of one year of internal 

experience making loans to startup, 

newly established, or growing small 

businesses. The applicant must have 

directly funded the loans and not 

simply provided referrals to, or 

guarantees against, loans made by 

another entity. If an applicant is made 

up of a consortium of organizations, 

each member of the consortium must be 

individually eligible or the entire 

consortium will be considered not 

eligible. The Act further defines an 

eligible private, nonprofit entity to 

include a private, nonprofit community 

development corporation, a consortium 

of private, nonprofit organizations or 

community development corporations, 

and an agency or nonprofit entity 

established by a Native American tribal 

government. Examples of nonprofit 

community development corporations 

include certified nonprofit Community 

Development Fund Institutions (CDFIs) 

participating in Treasury’s CDFI Fund 

program and Certified Development 

Companies (CDCs) participating in 

SBA’s 504 lending program. 

Intermediaries that currently participate 

in SBA’s Microloan program, as 

described in subpart G of part 120, are 

not eligible to become ILP 

Intermediaries; however, affiliates of 

Microloan intermediaries may apply. 

SBA is requiring that a Microloan 

intermediary establish an affiliate 

organization (or use an existing affiliate 

organization) for participation in the ILP 

program in order to maintain separation 

between SBA program funds and 

activities, as well as to facilitate 

adequate and proper oversight of both 

programs. The Act requires that 

applicants to the ILP Intermediary 

program have at least one year of 

experience making loans to startup, 

newly established, or growing small 

businesses. Therefore, newly 

established affiliates will not be eligible 

to apply for the ILP program for fiscal 

year 2011; however, such affiliates may 

apply for the second round of ILP 

Intermediary selections in fiscal year 

2012 after they have established the one 

year of required lending experience. 

Paragraph (c) of section 109.100 

includes additional requirements 

relating to an ILP Intermediary’s 

management and operations. SBA 

modeled these requirements on existing 

lender participation requirements in its 

guaranteed loan programs. 

Section 109.200 describes the ILP 

Intermediary application process. There 

is a limited amount of funds available 

to make loans to ILP Intermediaries; 

therefore SBA will run a competition to 

select the most qualified applicants to 

become ILP Intermediaries and receive 

an ILP Loan of up to $1,000,000. SBA 

has authority to make ILP Loans to no 

more than 20 ILP Intermediaries in each 

of fiscal years 2011, 2012, and 2013, for 

a maximum total of 60 ILP 

Intermediaries. SBA will select 20 ILP 

Intermediaries through a competitive 

application process in fiscal year 2011 

and another 20 ILP Intermediaries 

through a second competitive 

application round in fiscal year 2012, 

for a total of 40 ILP Intermediaries. SBA 

currently has funding to make ILP Loans 

only in fiscal years 2011, and 2012. If 

additional funds are appropriated for 

the ILP program, SBA will select 

another 20 ILP Intermediaries in fiscal 

2013 for a total of 60 ILP Intermediaries. 

As stated in § 109.200(a), SBA will 

publish a Notice of Funds Availability 

(NOFA) in the Federal Register to 

advise potential applicants of when they 

may begin submitting applications to 

become an ILP Intermediary. SBA will 

only accept applications during the 


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specific application period set forth in 

the NOFA. Section 109.200(b) lists the 

contents of the ILP Intermediary 

application. As required by the Act, an 

applicant must describe the type of 

small businesses it will assist; the size 

and range of loans it will make; the 

interest rate and terms of the loans it 

will make; the geographic area to be 

served and the economic, poverty, and 

unemployment characteristics of the 

area; and the status of small businesses 

in the area to be served and an analysis 

of the availability of credit. SBA will 

provide further details regarding the 

contents of the application in the 

NOFA. 

Section 109.210 describes the 

evaluation and selection of ILP 

Intermediaries by SBA. SBA will 

consider only completed applications. 

Each complete application will be 

evaluated and scored based on the 

criteria stated in the NOFA. In general, 

eligible applications with the highest 

scores will be granted ILP Intermediary 

status. SBA reserves the right to select 

less than the maximum authorized 

number of ILP Intermediaries and to 

select ILP Intermediaries in such a way 

as to diversify geographic areas served. 

By allowing geographic diversity to 

serve as a possible selection criterion, 

SBA hopes to expand the impact of the 

ILP program. 

As required by the Act, Section 

109.220 provides that no ILP 

Intermediary (including affiliates) may 

receive more than $1,000,000 in ILP 

Loans. Although SBA has authority to 

make ILP Loans of less than $1 million, 

SBA anticipates making ILP Loans of $1 

million to each ILP Intermediary in 

order to fully utilize all available loan 

funds. Each ILP Intermediary will only 

be eligible to receive one ILP Loan. 

Sections 109.300 through 109.360 

describe the requirements of the ILP 

program. As stated in Section 109.300, 

an ILP Intermediary must maintain 

compliance with ILP Program 

Requirements until it has repaid its ILP 

Loan to SBA. In addition, ILP 

Intermediaries are subject to certain 

provisions in 13 CFR Part 120 that are 

applicable to all lenders that participate 

in SBA loan programs: Section 120.140, 

What ethical requirements apply to 

participants?, describes the ethical 

requirements of lenders participating in 

SBA programs and any associates of 

such lenders; § 120.197, Notifying SBA’s 

Office of Inspector General of suspected 

fraud, requires lenders to notify the SBA 

Office of Inspector General of any 

information which indicates that fraud 

may have occurred in connection with 

a loan made under the ILP program; 

§ 120.412, Other services Lenders may 

provide Borrowers, provides that lenders 

and associates of lenders may provide 

services to and contract for goods with 

a borrower only after full disbursement 

of the loan, and § 120.413, 

Advertisement of relationship with SBA, 

describes how a lender may refer to SBA 

in its advertising. 

Section 109.310 provides the terms of 

SBA’s ILP Loan to an ILP Intermediary. 

An ILP Loan must be fully repaid within 

20 years from the date of the ILP Note. 

An ILP Intermediary may draw down 

ILP Loan funds as needed to fund loans 

to Eligible Small Business Concerns. 

SBA may place restrictions on 

disbursement, including the amount 

that may be disbursed to an ILP 

Intermediary at one time or conditions 

on subsequent disbursements. If SBA, in 

its sole discretion, finds that an ILP 

Intermediary is not complying with ILP 

Program Requirements, it may withhold 

any remaining disbursements of the ILP 

Loan until the ILP Intermediary comes 

into compliance. 

Sections 109.310 (c) and (d) provide 

that the interest rate on an ILP Loan will 

be fixed at 1%, and that payments of 

principal and interest must be made to 

SBA on a quarterly basis. SBA will defer 

the first payment on an ILP Loan for two 

years from the date of the first 

disbursement of ILP Loan proceeds, as 

required by the Act. Interest will accrue 

on all disbursed funds during the 

deferment period. Accrued interest will 

be added to the outstanding principal 

balance at the end of the deferment 

period and amortized over the 

remaining life of the loan. An ILP 

Intermediary may prepay an ILP Loan at 

any time without penalty. As required 

by the Act and set forth in § 109.310(e) 

and (f), SBA will not require an ILP 

Intermediary to provide any collateral 

for an ILP loan, nor will SBA charge an 

ILP Intermediary any fees. 

Section 109.320 states that ILP Loan 

funds must only be used to provide 

direct loans to Eligible Small Business 

Concerns. An ILP Intermediary may not 

use ILP Loan funds for any other 

purpose, including maintenance of loan 

loss reserves or payment of 

administrative costs or expenses. SBA 

believes that these restrictions are 

appropriate in order to maximize the 

funds available for loans to Eligible 

Small Business Concerns. An ILP 

Intermediary may recoup the costs of 

making and servicing loans under this 

program from the interest spread 

between its ILP Loan and the loans to 

Eligible Small Business Concerns and 

from reasonable fees, as described in 

§ 109.420(e). 

Section 109.330 provides that an ILP 

Intermediary must establish an ILP 

Relending Fund in an account separate 

and distinct from its other assets and 

financial activities, and maintain it for 

as long as its ILP Loan from SBA is 

outstanding. All ILP Loan funds 

disbursed from SBA to the ILP 

Intermediary must be deposited into the 

ILP Relending Fund, as well as all 

payments received from Eligible Small 

Business Concerns on loans made under 

this program. SBA does not require the 

ILP Intermediary to retain the interest 

portions of payments received from 

Eligible Small Business Concerns in the 

ILP Relending Fund. The ILP 

Intermediary must not commingle funds 

from any other public programs in this 

account. An ILP Intermediary must use 

the ILP Relending Fund to disburse 

loans made to Eligible Small Business 

Concerns under this program and to 

make payments to SBA on its ILP Loan, 

and may not use the ILP Relending 

Fund for any other purpose. 

Section 109.340 sets forth SBA’s 

lending requirements for ILP Loan 

funds. In paragraph (a), SBA requires 

that an ILP Intermediary commit 100% 

of its ILP Loan funds to Eligible Small 

Business Concerns within two years of 

the date of the ILP Note, unless it 

receives an extension from the Associate 

Administrator of Capital Access (AA/ 

CA) or designee. SBA designed this 

requirement to prevent ILP Loans from 

remaining idle for extended periods of 

time, while also allowing an ILP 

Intermediary sufficient time to relend its 

ILP Loan funds in a prudent manner. 

After meeting the initial lending 

requirement, the ILP Intermediary must 

relend the funds in its ILP Relending 

Fund so that the total principal balance 

of loans outstanding to Eligible Small 

Business Concerns does not fall below 

75% of the outstanding principal 

balance of the ILP Loan at any time. 

SBA based this relending model on 

current practices of intermediaries 

participating in similar programs, such 

as SBA’s Microloan program and 

USDA’s Intermediary Relending 

Program, which are referenced in the 

Act’s legislative history as bases for the 

ILP program. Requiring ILP 

Intermediaries to relend ILP Loan funds 

maximizes the impact of the ILP 

program, and is consistent with 

statutory intent. SBA anticipates that an 

ILP Intermediary will relend its ILP 

Loan proceeds approximately 2.5 times 

over the 20 year term. 

Section 109.350 provides that the ILP 

Intermediary must maintain a 

reasonable loan loss reserve appropriate 

for the quality of the ILP Intermediary’s 

portfolio in a federally insured 

depository account established by the 

ILP Intermediary at a well-capitalized 


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financial institution. The loan loss 

reserve must be in an account separate 

and distinct from the ILP Intermediary’s 

other assets and financial activities. The 

loss reserve may be established using 

the ILP Intermediary’s own funds, 

interest income from loans made to 

Eligible Small Business Concerns, or 

proceeds from the application or 

origination fees described in 

§ 109.420(e). ILP Relending Fund 

proceeds may not be used to establish 

the loss reserve. In order to provide 

some protection against default, SBA 

will require an ILP Intermediary to 

maintain the loss reserve at not less than 

5% of the principal balance of all 

outstanding loans to Eligible Small 

Business Concerns made from the ILP 

Relending Fund. The 5% requirement is 

intended as a floor. SBA recognizes that 

the appropriate level of reserves will 

vary depending on the ILP 

Intermediary’s portfolio and current 

economic conditions; therefore SBA 

will allow ILP Intermediaries to 

determine their appropriate individual 

levels of reserves above the required 

5%. If the AA/CA or designee 

determines that an ILP Intermediary’s 

loss reserve level is potentially 

inadequate to protect SBA from loss, the 

AA/CA or designee may require the ILP 

Intermediary to maintain a larger loss 

reserve. Section 109.360 details the 

recordkeeping and reporting 

requirements for the ILP program. 

Section 109.360(a) states that the ILP 

Intermediary must maintain accurate 

and current financial records and all 

documents and supporting materials 

relating to the ILP Intermediary’s 

activities in the ILP program. Section 

109.360(b) lists the required reports the 

ILP Intermediary must submit: (1) 

Portfolio Identification Reports 

containing information on each loan 

made to Eligible Small Business 

Concerns that must be submitted within 

seven days of closing a loan; (2) 

quarterly Portfolio Status Reports that 

update payment and balance 

information on the ILP Intermediary’s 

ILP portfolio; (3) quarterly ILP Program 

Activities Reports (with accompanying 

bank statements) that demonstrate the 

use and management of ILP program 

funds; (4) audited financial statements; 

and (5) reports of any changes in the ILP 

Intermediary’s organization or 

financing. SBA based these reporting 

requirements on the reports required in 

the Microloan program. The Portfolio 

Identification Reports and Portfolio 

Status Reports will be submitted 

electronically through SBA’s web-based 

Intermediary Lending Program 

Electronic Reporting System (ILPERS). 

Annually, the ILP Intermediary must 

submit audited financial statements 

prepared by an independent certified 

public accountant, except that ILP 

Intermediaries that are subject to the 

Single Audit Act under OMB Circular 

A–133 must instead submit audits 

prepared in accordance with that 

circular. SBA will provide further 

guidance on the application of the 

Single Audit Act and OMB Circular 

A–133 in the procedural guidance 

developed to administer the ILP 

program. An ILP Intermediary must 

submit its audited financial statements 

(or A–133 audit, as applicable) within 

four months after the close of the ILP 

Intermediary’s fiscal year. SBA based 

this requirement on existing 

requirements in the Microloan program. 

The AA/CA or designee may provide 

extensions to the filing deadline. Sections 109.400 through 109.440 

describe the requirements for the loans 

an ILP Intermediary makes to small 

businesses. Section 109.400 provides 

the requirements a borrower must meet 

in order to receive a loan from an ILP 

Intermediary under this program. By 

statute, an ILP Intermediary must 

provide loans to startup, newly 

established, or growing small business 

concerns. In addition to these statutory 

requirements, paragraph (a) includes 

basic eligibility requirements that SBA 

requires for all of its business loans: the 

business must be organized for profit 

and located in the United States; it must 

meet SBA size standards; it must not 

have credit available elsewhere; and it 

must be creditworthy and demonstrate 

reasonable assurance of repayment of 

the loan. The business must be a small 

business as defined under the size 

requirements applicable to 7(a) business 

loans. The ILP Intermediary must also 

document that the small business 

borrower does not have credit available 

elsewhere and that the borrower 

demonstrates reasonable assurance or 

repayment. SBA will provide further 

guidance on the credit elsewhere test 

and what is required to demonstrate 

repayment ability in the procedural 

guidance developed to administer the 

ILP program. Paragraph (b), which lists the types of 

businesses that are not eligible for loans 

under the ILP program, is also based on 

the eligibility requirements applicable 

to SBA’s existing business loan 

programs. (See 13 CFR 120.110) 

The Act provides that the maximum 

amount of a loan from an ILP 

Intermediary to a small business is 

$200,000. SBA has interpreted this 

restriction in § 109.410 to mean that the 

total amount of all loans received by a 

small business under this program must 

not exceed $200,000 at any one time. 

Section 109.420 describes the terms of 

a loan from an ILP Intermediary to an 

Eligible Small Business Concern. The 

term of a loan to an Eligible Small 

Business Concern must be the shortest 

appropriate term. The maximum loan 

term is 10 years, unless the loan 

finances or refinances real estate or 

equipment with a useful life exceeding 

ten years, in which case the maximum 

term is 25 years. SBA modeled these 

loan maturity limits on the terms used 

in SBA’s 7(a) guaranteed loan program. 

The maximum rate will depend on the 

size of the loan: Loans less than or equal 

to $50,000 have a maximum interest rate 

of 8.75 percent; loans greater than 

$50,000 have a maximum interest rate of 

7 percent. 

SBA chose to differentiate between 

smaller and larger loan sizes because 

smaller loans generally carry more risk. 

SBA may adjust the maximum interest 

rates from time to time, and will publish 

any such change by Notice in the 

Federal Register. Changes to the 

maximum interest rate do not apply to 

loans made to Eligible Small Business 

Concerns prior to publication of the 

change in the Federal Register. SBA 

will publish these maximum rates in the 

Federal Register from time to time. 

Finally, paragraph (f) provides that an 

ILP Intermediary may not charge any 

fees on loans made under the program 

except for the reasonable direct costs of 

liquidation, necessary out-of-pocket 

expenses such as filing or recording 

fees, a late payment fee not to exceed 5 

percent of the scheduled loan payment, 

and reasonable application and 

origination fees. The provisions on late 

payment fees, out-of-pocket expenses, 

and direct costs of liquidation are 

consistent with permissible fees in 

SBA’s 7(a) guaranteed loan program. 

SBA decided to allow optional 

reasonable application and origination 

fees so that an ILP Intermediary may 

recoup some of its loan processing costs. 

The total amount of application and 

origination fees charged to an Eligible 

Small Business Concern must not 

exceed the maximum total fee cap, 

currently set at 1 percent of the amount 

of the loan to the Eligible Small 

Business Concern. SBA will publish a 

Notice in the Federal Register prior to 

implementing any changes to this fee 

cap. 

Section 109.430 describes the eligible 

purposes for loans from ILP 

Intermediaries, as required by the Act. 

An Eligible Small Business Concern 

may only use the proceeds of a loan 

received under this program for working 

capital; real estate; and the acquisition 

of materials, supplies, furniture, 


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fixtures, or equipment. Loan proceeds 

must not be used to acquire real estate 

held primarily for sale, lease or 

investment. This restriction is 

consistent with SBA’s policies against 

speculative uses of proceeds in its other 

business loan programs. 

Section 109.440 describes 

requirements of ILP Intermediaries 

imposed under other laws and orders. 

These requirements apply governmentwide to all programs that provide 

Federal financial assistance, and are 

applicable to all of SBA’s loan 

programs. Section 120.170 (Flood 

insurance) states that a loan recipient 

must obtain flood insurance if any 

building, machinery, or equipment 

acquired, installed, improved, 

constructed, or renovated with the 

proceeds of SBA financial assistance is 

located in a special flood hazard area. 

ILP Intermediaries are responsible for 

notifying borrowers that flood insurance 

must be maintained. Section 120.172 

(Flood-plain and wetlands management) 

details the steps an ILP Intermediary 

must follow if the location for which 

financial assistance is proposed is in a 

floodplain or wetland. Section 120.173 

(Lead-based paint) states that if loan 

proceeds are for the construction or 

rehabilitation of a residential structure, 

lead-based paint may not be used on 

any interior surface, or on any exterior 

surface that is readily accessible to 

children under the age of seven. Section 

120.173 (Earthquake hazards) provides 

that when loan proceeds are used to 

construct a new building or an addition 

to an existing building, the construction 

must conform with the National 

Earthquake Hazards Reduction Program 

(NEHRP) Recommended Provisions for 

the Development of Seismic Regulations 

for New Buildings. Finally, ILP 

Intermediaries must comply with the 

civil rights laws in parts 112, 113, 117, 

and 136 of this chapter prohibiting 

discrimination on the grounds of race, 

color, national origin, religion, sex, 

marital status, disability or age. 

As required by the Act, section 

109.450 provides that SBA will not 

review a loan made under this program 

prior to approval of the loan by the ILP 

Intermediary. An ILP Intermediary is 

responsible for all loan decisions 

regarding eligibility (including size). If 

SBA discovers that an ILP Intermediary 

has made a loan under this program to 

an ineligible business or for an 

ineligible purpose, SBA will require the 

ILP Intermediary to refinance the 

ineligible loan with non-ILP program 

funds and to deposit into its ILP 

Relending Fund an amount equal to the 

outstanding principal balance on the 

ineligible loan. 

Section 109.460 provides that an ILP 

Intermediary may not sell all or any 

portion of a loan made to an Eligible 

Small Business Concern without prior 

written consent from the AA/CA or 

designee. SBA wants to prevent small 

business loans made under the ILP 

program from being sold to entities that 

have not been vetted and approved by 

SBA. SBA anticipates approving loan 

sales only in unusual circumstances. 

Finally, Sections 109.500 to 109.530 

set forth SBA’s oversight of ILP 

Intermediaries. Section 109.500 requires 

the ILP Intermediary to allow SBA 

access to its files to review, inspect, and 

copy all records and documents relating 

to loans made from the ILP Relending 

Fund or as requested for SBA oversight. 

Section 109.510 states that SBA may 

conduct off-site reviews and monitoring 

of ILP Intermediaries and on-site 

reviews as needed. SBA may require an 

ILP Intermediary to take corrective 

actions to address findings from on-site 

or off-site reviews. Failure to take 

required corrective actions may 

constitute an event of default, as 

described in § 109.520(c). Any reports 

and other SBA prepared review related 

documents generated as a result of such 

reviews are subject to the confidentiality 

requirements of § 120.1060. These 

provisions are based on SBA’s lender 

oversight regulations applicable to its 

other business loan programs. Reviews 

may include analysis of ILP 

Intermediaries’ quarterly Portfolio 

Status Reports and ILP Program 

Activities Reports, annual audited 

financial statements, and loan 

information entered electronically into 

ILPERS. In addition, SBA may conduct 

on-site reviews of ILP Intermediaries at 

SBA’s discretion. SBA may also review 

selected ILP loan files of those ILP 

Intermediaries that receive on-site 

reviews as part of their participation in 

other SBA programs (e.g., SBA’s 504 

program) as a part of those reviews. 

Loans made under the ILP program will 

not affect a lender’s risk rating in other 

SBA programs. 

Section 109.520 describes events of 

default on an ILP Loan and SBA’s 

remedies for an ILP Intermediary’s 

noncompliance with ILP Program 

Requirements. This section provides 

three categories of events of default: 

automatic events of default, events of 

default with notice, and events of 

default with opportunity to cure. SBA 

based this provision on default 

provisions used in its Small Business 

Investment Company (SBIC) and New 

Markets Venture Capital (NMVC) 

programs. Finally, § 109.530 provides 

that SBA may debar or suspend an ILP 

Intermediary or any participant in the 

affairs of an ILP Intermediary’s SBA 

operations in accordance with the 

government-wide nonprocurement 

debarment and suspension provisions in 

2 CFR Parts 180 and 2700. SBA will 

provide further guidance on its 

oversight of ILP Intermediaries in the 

procedural guidance developed to 

administer the ILP program. 

III. Justification for Interim Final Rule 

In general, SBA publishes a rule for 

public comment before issuing a final 

rule, in accordance with the 

Administrative Procedure Act (APA), 5 

U.S.C. 553 and SBA regulations at 13 

CFR 101.108. The APA provides an 

exception to this standard rulemaking 

process, however, where an agency 

finds good cause to adopt a rule without 

prior public participation. 5 U.S.C. 

553(b)(3)(B). The good cause 

requirement is satisfied when prior 

public participation is impracticable, 

unnecessary, or contrary to the public 

interest. Under such circumstances, an 

agency may publish an interim final 

rule without soliciting prior public 

comment. 

In enacting the good cause exception 

to standard rulemaking procedures, 

Congress recognized that emergency 

situations arise where an agency must 

issue a rule without prior public 

participation. SBA finds that good cause 

exists to publish this rule as an interim 

final rule in light of the urgent need to 

help small businesses during this 

economic downturn and the short-term 

nature of the funding for this new pilot 

program. The ILP program will offer a 

significant opportunity for nonprofit 

intermediaries to provide loans to 

startup, newly established, or growing 

small businesses. In order to select the 

20 most qualified participants for the 

ILP program, SBA must run a 

competition. Under current 

appropriations, SBA can provide loans 

to 20 ILP Intermediaries in each of fiscal 

years 2011 and 2012; however, the 2011 

appropriations for the ILP program are 

only available for loans made in fiscal 

year 2011. Furthermore, SBA must run 

a competition to select the ILP 

Intermediaries that will receive loans in 

fiscal year 2011. Advance solicitation of 

comments for this rulemaking would be 

impracticable and contrary to the public 

interest, as it would probably delay the 

delivery of the ILP program until fiscal 

year 2012 and prevent the Agency from 

maximizing the funds available for 

loans in fiscal year 2011. In addition, 

the Act included a deadline to publish 

regulations by March 26, 2011. In order 

to meet this statutory deadline and to 

maximize the use of available program 

funds, SBA needs to implement this 


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program without advance solicitation of 

comments. 

SBA invites comments from all 

interested members of the public. These 

comments must be received on or before 

the close of the comment period noted 

in the DATES section of this interim final 

rule. SBA may then consider these 

comments in making any necessary 

revisions to these regulations. 

IV. Justification for Immediate Effective 

Date 

The APA requires that ‘‘publication or 

service of a substantive rule shall be 

made not less than 30 days before its 

effective date, except as * * * 

otherwise provided by the agency for 

good cause found and published with 

the rule.’’ 5 U.S.C. 553(d)(3). The 

purpose of this provision is to provide 

interested and affected members of the 

public sufficient time to adjust their 

behavior before the rule takes effect. 

Under current appropriations, SBA 

can provide loans to 20 ILP 

Intermediaries in each of fiscal years 

2011 and 2012; however, the 2011 

appropriations for the ILP program are 

only available for loans made in fiscal 

year 2011. As stated above, SBA must 

run a competition to select the most 

qualified applicants to become ILP 

Intermediaries and receive ILP Loans. 

An immediate effective date is 

necessary to ensure that there is 

sufficient time to select ILP 

Intermediaries and make ILP Loans 

before the end of this fiscal year; 

therefore, SBA finds that there is good 

cause for making this rule effective 

immediately instead of observing the 

30-day period between publication and 

effective date. While this rule is 

effective immediately upon publication, 

the SBA is inviting public comment on 

the rule during a 60-day period and will 

consider comments in developing a 

final rule. 

Compliance With Executive Orders 

12866, 12988, 13132, 13175, and 13563, 

the Paperwork Reduction Act (44 

U.S.C. Ch. 35) and the Regulatory 

Flexibility Act (5 U.S.C. 601–612) 

Executive Order 12866 

The Office of Management and Budget 

has determined that this rule constitutes 

a ‘‘significant regulatory action’’ under 

Executive Order 12866, thus requiring a 

Regulatory Impact Analysis, as set forth 

below. 

A. Regulatory Objective of the Proposal 

Under the ILP program, SBA will 

provide direct loans of up to $1,000,000 

to eligible nonprofit intermediaries. 

These direct loans will enable the 

nonprofit intermediaries to provide 

loans of up to $200,000 to startup, 

newly established, or growing small 

business concerns for working capital, 

real estate, or the acquisitions of 

materials, supplies, furniture, fixtures, 

or equipment. The ILP program 

addresses current financing gaps 

including the limited availability of 

commercial loans of $200,000 or less. 

B. Benefits of the Rule 

The Eligible Small Business Concerns 

that receive loans from ILP 

Intermediaries directly benefit from the 

ILP program. In monetary terms, these 

direct benefits total approximately $150 

million, as described below. An ILP 

Intermediary must use the proceeds of 

an ILP Loan to make loans to Eligible 

Small Business Concerns, and must 

continue to relend the principal portion 

of payments received on those loans 

while the ILP Loan remains outstanding 

to SBA. SBA anticipates that each ILP 

Intermediary will relend its ILP Loan 

proceeds approximately 2.5 times before 

it has fully repaid its ILP Loan to SBA. 

SBA is authorized to make loans of $1 

million to 20 ILP Intermediaries in each 

of fiscal years 2011, 2012, and 2013, 

subject to the availability of 

appropriations (current appropriations 

allow SBA to make $20 million in ILP 

Loans in each of fiscal years 2011 and 

2012). Therefore, each ILP Intermediary 

will make approximately $2.5 million in 

loans to Eligible Small Business 

Concerns. Assuming that SBA receives 

the same funding for the ILP program in 

fiscal year 2013, SBA anticipates that 

the total benefit of the ILP program to 

Eligible Small Business Concerns will 

be approximately $150 million (60 ILP 

Intermediaries at $2.5 million in loans 

to Eligible Small Business Concerns per 

ILP Intermediary). 

The ILP Intermediaries will also 

benefit from the ILP program because 

the favorable ILP Loan terms will enable 

an ILP Intermediary to participate in the 

ILP program at little to no cost to the ILP 

Intermediary. By statute, an ILP Loan 

has a 20 year term, no collateral, no fees, 

a 2 year payment deferral, and a 1% 

fixed interest rate. In addition, the 

regulations would permit ILP 

Intermediaries to charge Eligible Small 

Business Concerns a reasonable interest 

rate, application and origination fees 

and closing costs for loans made under 

the ILP program. SBA anticipates that 

most ILP Intermediaries will be able to 

fund the operations of their ILP 

programs through these fees and the 

interest spread on loans to Eligible 

Small Business Concerns. 

C. Costs of the Rule 

The bulk of the immediate costs of the 

ILP program are borne by the U.S. 

taxpayers due to the current subsidy 

appropriations of $8 million for fiscal 

years 2011 and 2012. Based on current 

subsidy models, however, SBA 

anticipates using only $6,115,129 in FY 

2011 and $5,145,704 in FY 2012 to carry 

out the ILP program. In addition to the 

subsidy costs, the SBA and U.S. 

taxpayers will incur costs associated 

with launching and operating the ILP 

program, for which Congress has 

appropriated $6.5 million. The agency 

will use this funding for program 

development, implementation and 

support. 

The small business borrowers that 

receive loans from ILP Intermediaries 

will have some costs associated with the 

loan. As stated above, the regulations 

would permit ILP Intermediaries to 

charge a reasonable interest rate, 

application fee, origination fee and 

closing costs for loans to Eligible Small 

Business Concerns. These fees are 

necessary to cover the ILP 

Intermediaries’ administrative costs of 

running the ILP program. In addition, 

the regulations would allow ILP 

Intermediaries to charge the Eligible 

Small Business Concerns for direct costs 

of liquidation and a late payment fee of 

less than 5 percent of the scheduled 

loan payment. These fees safeguard the 

ILP Intermediary in the case of default 

or delinquency by an Eligible Small 

Business Concern. 

Finally, ILP Intermediaries will incur 

some costs of administering this 

program. For instance, ILP 

Intermediaries must maintain the ability 

to administer, monitor, and service the 

small business loans through adequate 

staffing, capital, and other resources. 

Also, the regulations mandate certain 

reporting requirements: ILP 

Intermediaries must report each loan 

transaction in an electronic reporting 

system; submit quarterly reports; and 

annual audited financial statements. In 

addition, ILP Intermediaries will incur 

costs to maintain required loan loss 

reserves. The regulations would require 

ILP Intermediaries to maintain a loan 

loss reserve fund of not less than 5 

percent of the principal balance of 

outstanding loans to Eligible Small 

Business Concerns under the program. 

While the loan loss reserve fund and 

reporting requirements represent a cost 

to ILP Intermediaries, SBA finds these 

costs necessary to facilitate the ILP 

program and to ensure prudent lending 

practices. 


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D. Alternatives 

Given that the program is the result of 

a Congressional mandate, SBA had little 

leeway in providing alternatives for the 

basic programmatic structure. However, 

SBA did consider various alternative 

ways of implementing the specific 

statutory requirements. For example, 

SBA considered prohibiting loans to 

Eligible Small Business Concerns of less 

than $50,000 in order to avoid any risk 

of overlap with SBA’s Microloan 

program, but decided that such a 

restriction would unduly restrict the ILP 

program and possibly lead to artificial 

inflation of loan amounts to meet 

program requirements. Furthermore, 

SBA plans to select ILP Intermediaries 

with demonstrated experience in 

making loans between $50,000 and 

$200,000; therefore, SBA anticipates 

that the majority of loans made to small 

businesses through the ILP program will 

exceed $50,000. 

SBA also considered restricting the 

application and origination fees an ILP 

Intermediary can charge to a nominal 

amount. SBA decided that it will allow 

ILP Intermediaries to charge reasonable 

application and origination fees totaling 

up to 1% of the amount of the loan to 

the small business borrower in order to 

recoup some of the administrative costs 

associated with making loans under the 

ILP program. In addition, SBA 

considered requiring monthly payments 

on the ILP Loan and submission of 

monthly reports. However, SBA decided 

that while more frequent loan payments 

and reporting would benefit the agency, 

quarterly payments and reporting 

imposed a less stringent requirement for 

the ILP Intermediaries without adding 

much additional risk. 

Having considered these alternatives, 

SBA believes that this rule is SBA’s best 

available means for achieving its 

regulatory objective of implementing the 

ILP program and incorporating the 

provisions of the Small Business Jobs 

Act of 2010. 

Executive Order 12988 

For the purposes of Executive Order 

12988, Civil Justice Reform, SBA has 

determined that this rule is crafted, to 

the extent practicable, in accordance 

with the standards set forth in sections 

3(a) and 3(b)(2), to minimize litigation, 

eliminate ambiguity, and reduce 

burden. This rule does not have 

retroactive or pre-emptive effect. 

Executive Order 13132 

For the purposes of Executive Order 

13132, the SBA determined that this 

rule has no federalism implications 

warranting preparation of a federalism 

assessment. 

Executive Order 13175 

Executive Order 13175, Consultation 

and Coordination with Indian Tribal 

Governments, requires agencies to 

consult with tribal officials in the 

development of Federal policies that 

have tribal implications. As defined in 

the order, policies that have tribal 

implications refers to regulations that 

have substantial direct effects on one or 

more Indian tribes, on the relationship 

between the Federal Government and 

the Indian tribes, or on the distribution 

of power and responsibilities between 

the Federal Government and Indian 

tribes. 

In these regulations, SBA has defined 

Native American Tribal Governments to 

include the governing body of any 

Native American tribe, band, nation, or 

other organized group or community, 

including any Alaska Native village or 

regional or village corporation as 

defined in or established pursuant to the 

Alaska Native Claims Settlement Act (43 

U.S.C.A. 1601 et seq.), which is 

recognized as eligible for the special 

programs and services provided by the 

United States to Native Americans 

because of their status as Native 

Americans. This definition is based on 

the definition of ‘‘qualified Indian tribe’’ 

in the Small Business Act (15 U.S.C. 

632), which is in turn based on the 

definition of ‘‘Indian tribe’’ in the Indian 

Self-Determination and Education 

Assistance Act (25 U.S.C. 450b). 

As set forth in section 1131 of the Act, 

the ILP program provides an 

opportunity for agencies of a Native 

American Tribal Government or 

nonprofit entities established by a 

Native American Tribal Government to 

apply to become ILP Intermediaries. 

SBA welcomes the opportunity to 

discuss the ILP program with the tribal 

and ANC communities during the 

public comment period. 

Executive Orders 12866 and 13563 

A description of the need for this 

regulatory action and benefits and costs 

associated with this action is included 

above in the Regulatory Impact Analysis 

under Executive Order 12866. 

As further described above, SBA 

needs to implement this program 

without advance solicitation of 

comments in order to maximize the use 

of available program funds. Under 

current appropriations, SBA can 

provide loans to 20 ILP Intermediaries 

in each of fiscal years 2011 and 2012; 

however, the 2011 appropriations for 

the ILP program are only available for 

loans made in fiscal year 2011. 

The requirements imposed on ILP 

Intermediaries are designed to maximize 

net benefits of the ILP program. In order 

to minimize the burdens on the ILP 

Intermediaries while also ensuring 

protection of taxpayer dollars, SBA 

compared requirements in similar 

programs (such as SBA’s Microloan 

program and USDA’s Intermediary 

Relending Program) and conducted 

market research. For example, SBA 

sought information from several nonprofit lenders currently participating in 

similar lending programs regarding their 

average loss reserve rates and their 

experiences in relending loan funds. 

SBA used this information in 

formulating the relending and loss 

reserve requirements for the ILP 

program. 

In addition, SBA sought to use 

flexible approaches in designing ILP 

program requirements. For example, ILP 

Intermediaries may use their own forms 

and underwriting processes for selecting 

small business borrowers. 

As the ILP program is a new lending 

program, retrospective analyses of 

existing significant regulations is not 

applicable to this program. 

Paperwork Reduction Act, 44 U.S.C., 

Ch. 35 

SBA has determined that this rule 

imposes new reporting and 

recordkeeping requirements under the 

Paperwork Reduction Act, 44 U.S.C. 

Chapter 35. This new information 

collection requires that interested 

nonprofit intermediaries submit an 

application and exhibits to SBA to 

facilitate an application selection 

process. This new information 

collection also requires certain reporting 

requirements that selected ILP 

Intermediaries must fulfill to maintain 

participation in the ILP Program. SBA is 

submitting this set of information 

collections as described below to OMB 

for review and approval together with 

the interim final rule. 

1. Title and Description: 

Recordkeeping requirements. 

Purpose: Section 109.360(a) requires 

the ILP Intermediary to maintain 

accurate and current financial records, 

including books of accounts, and all 

documents and supporting materials 

relating to the ILP Intermediary’s 

activities in the ILP program, including 

files on loan made to Eligible Small 

Business Concerns. Records may be 

preserved electronically if the original is 

available for retrieval within 15 

calendar days. 

OMB Control Number: New 

collection. 

Description of, and Estimated Number 

of Respondents: All ILP Intermediaries 

will be required to maintain records of 

their activities in the ILP program. 


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Given the current appropriated funds, 

SBA anticipates making loans to 20 ILP 

Intermediaries in fiscal year 2011 and 

20 additional ILP Intermediaries in 

fiscal year 2012, for a total of 40 ILP 

Intermediaries. 

Estimated Number of Responses: No 

responses are required. 

Estimated Response Time: No 

responses are required. 

Estimated Annual Hour Burden: The 

annual hour burden is de minimis, 

because ILP Intermediaries would 

maintain such records in the ordinary 

course of business. 

2. Title and Description of 

Information Collection: SBA Form XX: 

Intermediary Lending Pilot Program 

Application—Part I, Management 

Assessment Questionnaire and Part II, 

Exhibits. 

Purpose: Part I of this form collects 

identifying information regarding the 

intermediary applicant and its Officers, 

the loan request, lending history, 

projected lending activity, information 

regarding current or previous 

government financing, and the 

intermediary’s financial health and 

viability. Part II of this form collects 

supplemental information from the 

intermediary applicant and its 

principals such as resumes, 

organizational charts, loan policies and 

procedures, one year of financial 

statements, and Employer Identification 

Number documentation. 

OMB Control Number: New 

collection. 

Description of, and Estimated Number 

of Respondents: SBA anticipates 200 

ILP Intermediary Applicants will 

respond to this information collection. 

Estimated Number of Responses: 200 

estimated responses. 

Estimated Response Time: 35 hours 

estimated response time per applicant. 

Total Estimated Annual Hour Burden: 

7,000 hours estimated annual hour 

burden. 

3. Title and Description: SBA Form 

XX: ILP Program Activities Report. 

Purpose: This electronic form collects 

quarterly account activity information 

in the ILP Program Relending Fund and 

the ILP loan loss reserve account. ILP 

Intermediaries must use this account to 

receive ILP loan proceeds from the SBA 

and to disburse small business loan 

proceeds to the small business 

borrower, and to maintain adequate loan 

loss reserves. The form collects 

information such as principal 

repayment from borrowers, interest paid 

by borrowers, interest earned, 

disbursements to small business 

borrowers, and repayments to SBA. 

Intermediaries must also submit 

accompanying bank statements (3 

months) to support the data reported in 

the ILP Relending Fund and the ILP 

loan loss reserve account. 

OMB Control Number: New 

collection. 

Description of, and Estimated Number 

of Respondents: SBA anticipates 40 ILP 

Intermediaries to respond to this 

information collection per quarter. 

Estimated Number of Responses: One 

response per intermediary per quarter, 

or 160 total estimated responses. 

Estimated Response Time: 1 hour 

estimated response time per quarter. 

Estimated Annual Hour Burden: 160 

hours estimated annual hour burden. 

4. Title and Description: Intermediary 

Lending Program Electronic Reporting 

System (ILPERS), Portfolio 

Identification Reports. 

Purpose: This electronic submission 

collects identifying information on each 

small business borrower such as 

demographic information, use of 

proceeds, payment terms, and jobs 

created and retained. 

OMB Control Number: New 

collection. 

Description of, and Estimated Number 

of Respondents: SBA anticipates 40 ILP 

Intermediaries to respond to this 

information collection. 

Estimated Number of Responses: 6 

estimated annual responses per 

intermediary, or 240 total estimated 

responses. 

Estimated Response Time: 15 minutes 

estimated response time. 

Estimated Annual Hour Burden: 60 

hours estimated annual hour burden. 

5. Title and Description: Intermediary 

Lending Program Electronic Reporting 

System (ILPERS), Portfolio Status 

Report. 

Purpose: This form collects the 

payment status and outstanding 

principal balance of loans to small 

business borrowers on a quarterly basis. 

OMB Control Number: New 

collection. 

Description of, and Estimated Number 

of Respondents: SBA anticipates 40 ILP 

Intermediaries to respond to this 

information collection per quarter. 

Estimated Number of Responses: One 

response per intermediary per quarter, 

or 160 total estimated responses. 

Estimated Response Time: 30 minutes 

estimated response time. 

Estimated Annual Hour Burden: 2 

hours per intermediary annually, or 80 

total hours estimated annual hour 

burden. 

7. Title and Description: Audited 

Financial Statements. 

Purpose: ILP Intermediaries are 

required to submit audited financial 

statements as prepared by an 

independent certified public 

accountant. ILP Intermediaries subject 

to OMB Circular A–133 must submit 

audits in accordance with that circular. 

OMB Control Number: New 

collection. 

Description of, and Estimated Number 

of Respondents: SBA anticipates 40 ILP 

Intermediaries to respond to this 

information collection. 

Estimated Number of Responses: 40 

estimated responses. 

Estimated Response Time: 80 hours 

estimated response time per 

intermediary per year. SBA believes that 

this burden will be reduced to the 

extent that many intermediaries already 

maintain this information for other 

purposes, and thus any costs resulting 

from this requirement may be de 

minimis. 

Estimated Annual Hour Burden: 3,200 

hours estimated annual hour burden. 

8. Title and Description: Reports of 

Changes. 

Purpose: ILP Intermediaries must 

submit ad hoc summaries of any 

changes in the ILP Intermediary’s 

organization or financing (within 30 

calendar days of the change). 

OMB Control Number: New 

collection. 

Description of, and Estimated Number 

of Respondents: SBA anticipates 40 ILP 

Intermediaries to respond to this 

information collection. 

Estimated Number of Responses: 40 

estimated responses, based on an 

assumption that, on average, each 

intermediary will need to submit one 

Report of Changes in any given year. 

Estimated Response Time: 30 minutes 

estimated response time per 

intermediary per year. 

Estimated Annual Hour Burden: 20 

hours estimated annual hour burden. 

SBA invites comments on the ILP 

program information collections, 

particularly on: (1) Whether the 

proposed collection of information is 

necessary for the proper performance of 

the program, including whether the 

information will have a practical utility; 

(2) the accuracy of SBA’s estimate of the 

burden of the proposed collections of 

information; (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. 

Please send comments by the closing 

date for comment for this interim final 

rule to SBA Desk Officer, Office of 

Management and Budget, Office of 

Information and Regulatory Affairs, 725 

17th Street, NW., Washington, DC 20503 


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and to Grady B. Hedgespeth, Director of 

Financial Assistance, Small Business 

Administration, 409 Third Street, SW., 

Washington, DC 20416. 

Regulatory Flexibility Act 5 U.S.C. 601– 

612 

The Regulatory Flexibility Act (5 

U.S.C. 601–612) (RFA) requires 

administrative agencies to consider the 

economic impact of their actions on 

small entities, which includes small 

businesses, small nonprofit businesses, 

and small local governments. The RFA 

requires agencies to prepare a regulatory 

flexibility analysis, which describes the 

economic impact that the rule will have 

on small entities, or certify that the rule 

will not have a significant economic 

impact on a substantial number of small 

entities. However, the RFA requires 

such analysis only where notice and 

comment rulemaking are required. 

Rules are exempt from the APA notice 

and comment requirements when the 

agency for good cause finds that notice 

and public procedure thereon is 

impracticable, unnecessary, or contrary 

to the public interest. As detailed above, 

SBA has determined that there is good 

cause to adopt this rule without prior 

public participation; therefore, the rule 

is also exempt from the RFA 

requirements. SBA invites comments on 

this determination. 

List of Subjects in 13 CFR Part 109 

Community development, Loan 

program—business, Reporting and 

recordkeeping requirements, Small 

businesses. 

For the reasons stated in the 

preamble, the Small Business 

Administration amends 13 CFR Chapter 

I by adding part 109 to read as follows: 

PART 109—INTERMEDIARY LENDING 

PILOT PROGRAM 

Subpart A—Introduction 

Sec. 

109.10 Description of the Intermediary 

Lending Pilot program. 

109.20 Definitions. 

Subpart B—ILP Intermediary Application 

and Selection Process 

109.100 ILP Intermediary eligibility and 

continuing participation requirements. 

109.200 Application to become an ILP 

Intermediary. 

109.210 Evaluation and selection of ILP 

Intermediaries. 

109.220 Loan limits—loans to ILP 

Intermediaries. 

Subpart C—ILP Program Requirements 

109.300 General. 

109.310 Terms of loans to ILP 

Intermediaries. 

109.320 ILP Loan purposes. 

109.330 ILP Relending Fund. 

109.340 Lending requirements. 

109.350 Maintenance of loan loss reserve. 

109.360 Recordkeeping and reporting 

requirements. 

Subpart D—Requirements for ILP 

Intermediary Loans to Small Businesses 

109.400 Eligible Small Business Concerns. 

109.410 Loan limits—loans to Eligible 

Small Business Concerns. 

109.420 Terms of Loans from ILP 

Intermediaries to Eligible Small Business 

Concerns. 

109.430 Loan purposes. 

109.440 Requirements imposed under other 

laws and orders. 

109.450 SBA Review of ILP Intermediary 

loans to Eligible Small Business 

Concerns. 

109.460 Prohibition on sales of ILP 

Intermediary loans to Eligible Small 

Business Concerns. 

Subpart E—Oversight 

109.500 SBA access to ILP Intermediary 

files. 

109.510 On-site and off-site reviews. 

109.520 Events of default and revocation of 

authority to participate in the ILP 

program. 

109.530 Debarment and Suspension. 

Authority: 15 U.S.C. 634(b)(6), (b)(7), and 

636(l). 

Subpart A—Introduction 

§ 109.10 Description of the Intermediary 

Lending Pilot program. 

The Small Business Intermediary 

Lending Pilot program (ILP program) 

provides direct loans to ILP 

Intermediaries to make loans of up to 

$200,000 to startup, newly established, 

or growing small businesses. ILP 

Intermediaries continue to relend a 

portion of the payments received on 

small business loans made under the 

program until they have fully repaid 

their loans to SBA. 

§ 109.20 Definitions. 

Affiliate has the meaning set forth in 

§ 121.103 of this chapter. 

Associate. (1) An Associate of an ILP 

Intermediary is: 

(i) An officer, director, key employee, 

or holder of 20 percent or more of the 

value of the ILP Intermediary or its debt 

instruments, or an agent involved in the 

loan process; 

(ii) Any entity in which one or more 

individuals referred to in paragraph 

(1)(i) of this definition or a Close 

Relative of any such individual owns or 

controls at least 20 percent; 

(2) An Associate of an Eligible Small 

Business Concern is: 

(i) An officer director, owner of more 

than 20 percent of the equity, or key 

employee of the Eligible Small Business 

Concern; 

(ii) Any entity in which one or more 

individuals referred to in paragraphs 

(2)(i) of this definition owns or controls 

at least 20 percent; and 

(iii) Any individual or entity in 

control of or controlled by the small 

business (except a Small Business 

Investment Company (SBIC) licensed by 

SBA). 

(3) For the purposes of this definition, 

the time during which an Associate 

relationship exists commences six 

months before the following dates and 

continues as long as the ILP Note or the 

loan to the Eligible Small Business 

Concern is outstanding: 

(i) For an ILP Intermediary, the date 

of the ILP Note; 

(ii) For an Eligible Small Business 

Concern, the date of the loan 

application to the ILP Intermediary. 

Close Relative is a spouse; a parent; a 

child or sibling, or the spouse of any 

such person. 

Eligible Small Business Concern is a 

small business that meets the 

requirements of § 109.400. 

ILP Intermediary means a private, 

nonprofit entity that has applied for and 

been selected by SBA to receive an ILP 

Loan through the competitive 

application process described in this 

Part. 

ILP Loan means a direct loan made by 

SBA to an ILP Intermediary under this 

program. 

ILP Note means the instrument that 

represents the obligation of the ILP 

Intermediary to repay the ILP Loan to 

SBA. 

ILP Program Activities Report means 

the quarterly report that identifies the 

use and management of ILP program 

funds. 

ILP Program Requirements are 

requirements imposed upon an ILP 

Intermediary by statute, SBA 

regulations, any agreement executed 

between SBA and the ILP Intermediary, 

SBA SOPs, SBA procedural guidance, 

official SBA notices and forms 

applicable to the ILP program, any 

NOFA applicable to the ILP program, 

and the ILP Note and Loan 

Authorization, as such requirements are 

issued and revised by SBA from time to 

time. 

ILP Relending Fund means a federally 

insured depository account established 

by the ILP Intermediary at a wellcapitalized financial institution which 

includes, at a minimum, the ILP Loan 

proceeds and the principal portion of 

repayments from Eligible Small 

Business Concerns. 

Intermediary Lending Program 

Electronic Reporting System (ILPERS) 

means the web-based, electronic 

reporting system used by the ILP 


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Intermediary to report each loan made 

to Eligible Small Business Concerns, to 

provide aging information on each loan, 

and to update the outstanding principal 

balance of each loan until all loans are 

either paid in full or charged off. 

Native American Tribal Government 

means the governing body of any Native 

American tribe, band, nation, or other 

organized group or community, 

including any Alaska Native village or 

regional or village corporation as 

defined in or established pursuant to the 

Alaska Native Claims Settlement Act (43 

U.S.C.A. § 1601 et seq.), which is 

recognized as eligible for the special 

programs and services provided by the 

United States to Native Americans 

because of their status as Native 

Americans. 

Portfolio Identification Report means 

the electronic report that collects 

identifying information on loans made 

to Eligible Small Business Concerns, 

including demographic information, use 

of proceeds, payment terms, and jobs 

created and retained. 

Portfolio Status Report means the 

quarterly electronic report that 

summarizes the payment status and 

outstanding principal balances of an ILP 

Intermediary’s loans to Eligible Small 

Business Concerns. 

Subpart B—ILP Intermediary 

Application and Selection Process 

§ 109.100 ILP Intermediary eligibility and 

continuing participation requirements. 

(a) Organization type: An ILP 

Intermediary must be a private, 

nonprofit entity other than an 

intermediary participating in the SBA 

Microloan program as described in 

subpart G of Part 120. Eligible entities 

include: 

(1) Private, nonprofit community 

development corporations; 

(2) Consortiums of private, nonprofit 

organizations or nonprofit community 

development corporations; and 

(3) Agencies of or nonprofit entities 

established by Native American tribal 

governments. 

(b) Prior experience: An ILP 

Intermediary must have at least one year 

of successful experience making and 

servicing loans to startup, newly 

established, or growing small 

businesses. 

(c) Management and operations. (1) 

An ILP Intermediary must have paid 

staff with loan making and servicing 

experience acceptable to SBA. 

(2) An ILP Intermediary must have a 

continuing ability to evaluate, process, 

close, disburse, service and liquidate 

small business loans including, but not 

limited to: 

(i) Holding sufficient permanent 

capital (as determined by SBA) to 

support lending activities under this 

program; and 

(ii) Maintaining satisfactory SBA 

performance, as determined by SBA in 

its discretion. 

(3) An ILP Intermediary must meet 

and maintain the ethical requirements 

of 13 CFR 120.140. 

(4) An ILP Intermediary (and any 

Affiliates) that participates in other SBA 

programs must be in compliance with 

those program requirements. 

(5) An ILP Intermediary must be in 

good standing with its Federal and/or 

State regulator, as applicable. 

(6) An ILP Intermediary must have the 

ability to comply with the ILP Program 

Requirements, including reporting 

requirements, as such requirements are 

revised from time to time, and maintain 

compliance with ILP Program 

Requirements for as long as the ILP 

Intermediary participates in the ILP 

program. 

§ 109.200 Application to become an ILP 

Intermediary. 

(a) Notice of Funds Availability 

(NOFA). SBA will periodically publish 

a NOFA in the Federal Register, 

advising potential applicants of the 

availability of funds for the ILP 

program. Any eligible entity may then 

submit an application to become an ILP 

Intermediary. When submitting its 

application, an applicant must comply 

with both these regulations and any 

requirements specified in the NOFA, 

including submission deadlines. The 

NOFA may specify limitations, special 

rules, procedures, and restrictions for a 

particular funding round. 

(b) Contents of application. The 

application to become an ILP 

Intermediary must include: 

(1) Documentation that the applicant 

meets the eligibility and continuing 

participation requirements for the ILP 

program set forth in § 109.100; 

(2) A completed ILP Intermediary 

application form provided by SBA; 

(3) A description of: 

(i) The type of small businesses to be 

assisted; 

(ii) The size and range of loans to be 

made; 

(iii) The interest rate and terms of the 

loans to be made; 

(iv) The geographic area to be served 

and the economic, poverty, and 

unemployment characteristics of the 

area; 

(v) The status of small businesses in 

the area to be served and an analysis of 

the availability of credit; and 

(4) Any additional forms and 

documentation required by SBA. 

§ 109.210 Evaluation and selection of ILP 

Intermediaries. 

(a) General. SBA will evaluate and 

select applicants to participate in the 

ILP program in accordance with this 

section and the NOFA. SBA reserves the 

right, in its discretion, to loan less than 

all available funds. 

(b) Number of ILP Intermediaries. 

SBA will make loans to not more than 

20 of the selected ILP Intermediaries in 

each of the fiscal years for which 

funding is available. 

(c) Eligibility and completeness. SBA 

will not consider any application that is 

not complete or that is submitted by an 

applicant that does not meet the 

eligibility and participation criteria 

established by SBA. SBA, at its sole 

discretion, may request from an 

applicant additional information, 

including information concerning 

participation criteria or the application, 

in order to allow SBA to consider that 

applicant’s application. Failure to 

provide such additional information 

may be considered grounds to reject the 

application. 

(d) Evaluation criteria. Eligible and 

complete applications will be evaluated 

and scored based on the criteria 

established by SBA, as set forth in the 

NOFA. In general, eligible applications 

with the highest scores will be granted 

ILP Intermediary status, up to the 

maximum number allowed by statute. 

SBA reserves the right to select ILP 

Intermediaries in such a way as to 

ensure geographic diversity of areas 

served by ILP Intermediaries. 

§ 109.220 Loan limits—loans to ILP 

Intermediaries. 

No ILP Intermediary (including 

Affiliates) may receive more than 

$1,000,000 in ILP Loans. 

Subpart C—ILP Program Requirements 

§ 109.300 General. 

An ILP Intermediary must maintain 

compliance with all ILP Program 

Requirements until the ILP Intermediary 

has repaid its ILP Loan to SBA. With 

respect to its activities in the ILP 

program, the ILP Intermediary is subject 

to the requirements of §§ 120.140 (What 

ethical requirements apply to 

participants?), 120.197 (Notifying SBA’s 

Office of Inspector General of suspected 

fraud), 120.412 (Other services Lenders 

may provide Borrowers), and 120.413 

(Advertisement of relationship with 

SBA) of this chapter, in addition to the 

regulations specifically set forth in this 

Part. The ILP Intermediary and any 

contractor(s) it may have are 

independent contractors that are 

responsible for their own actions with 


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respect to small business loans made 

under this program. SBA has no 

responsibility or liability for any claim 

by an Eligible Small Business Concern 

or other party for any injury as a result 

of any wrongful action taken by the ILP 

Intermediary or an employee, agent or 

contractor of an ILP Intermediary. 

§ 109.310 Terms of loans to ILP 

Intermediaries. 

(a) Disbursement. An ILP 

Intermediary must be in compliance 

with ILP Program Requirements in order 

to draw down its ILP Loan funds. SBA 

may place restrictions on disbursement, 

including the amount disbursed to an 

ILP Intermediary at one time or 

conditions on subsequent 

disbursements. 

(b) Term. An ILP Loan must be repaid 

within 20 years from the date of the ILP 

Note. 

(c) Interest rate. The interest rate for 

an ILP Loan to an ILP Intermediary is 

fixed at one percent per annum. 

(d) Repayment. Payments of principal 

and interest must be made on a 

quarterly basis, except SBA will defer 

the first payment on an ILP Loan for two 

years from the date of the first 

disbursement. Interest will accrue on all 

disbursed funds during the deferment 

period. Accrued interest will be added 

to the outstanding principal balance at 

the end of the deferment period and 

amortized over the remaining life of the 

loan. An ILP Intermediary may prepay 

an ILP Loan at any time without 

penalty. 

(e) Collateral. SBA does not require 

the ILP Intermediary to provide any 

collateral for an ILP Loan. 

(f) Fees. SBA does not charge an ILP 

Intermediary any fees for an ILP Loan. 

§ 109.320 ILP Loan purposes. 

(a) ILP Loan funds must only be used 

to provide direct loans to Eligible Small 

Business Concerns for working capital, 

real estate, or the acquisition of 

materials, supplies, furniture, fixtures, 

or equipment. 

(b) ILP Loan funds must not be used 

for any other purpose, including 

maintenance of loan loss reserves or 

payment of administrative costs or 

expenses of the ILP Intermediary. 

§ 109.330 ILP Relending Fund. 

(a) General. The ILP Intermediary 

must establish and maintain an ILP 

Relending Fund for as long as it has an 

outstanding balance owed to SBA under 

this program. The ILP Relending Fund 

must be in an account separate and 

distinct from the ILP Intermediary’s 

other assets and financial activities. 

(b) Contents of the ILP Relending 

Fund. All ILP Loan proceeds disbursed 

from SBA to the ILP Intermediary must 

be deposited into the ILP Relending 

Fund. All payments received by the ILP 

Intermediary on loans made to Eligible 

Small Business Concerns must also be 

deposited into the ILP Relending Fund. 

The ILP Intermediary must not 

commingle funds from any other public 

programs (including other SBA 

programs) in this account. 

(c) Interest earned. The ILP 

Intermediary is not required to retain 

the interest portion of payments 

received on loans made to Eligible 

Small Business Concerns in the ILP 

Relending Fund or to retain the interest 

earned on the ILP Relending Fund in 

the ILP Relending Fund. 

(d) Allowable uses of the ILP 

Relending Fund. The ILP Intermediary 

must use the ILP Relending Fund to 

disburse loans made to Eligible Small 

Business Concerns under this program 

and to make payments to SBA on its ILP 

Loan; it may not use the ILP Relending 

Fund for any other purposes. 

§ 109.340 Lending requirements. 

(a) Initial lending requirement. The 

ILP Intermediary must commit 100% of 

its ILP Loan funds to Eligible Small 

Business Concerns within two years of 

the date of the ILP Note. The Associate 

Administrator for Capital Access (AA/ 

CA) or designee may approve extensions 

to the initial lending requirement on a 

case-by-case basis. 

(b) Ongoing relending requirement. 

After meeting the initial lending 

requirement, the ILP Intermediary must 

relend the funds in the ILP Relending 

Fund so that the total principal balance 

of loans outstanding to Eligible Small 

Business Concerns does not fall below 

75% of the outstanding principal 

balance of the ILP Loan at any time 

while the ILP Loan is outstanding. 

Exceptions to this requirement will be 

considered by the AA/CA or designee 

on a case by case basis based on the 

particular facts and circumstances of the 

ILP Intermediary. 

§ 109.350 Maintenance of loan loss 

reserve. 

The ILP Intermediary must maintain a 

reasonable loan loss reserve appropriate 

for the quality of the ILP Intermediary’s 

portfolio in a federally insured 

depository account established by the 

ILP Intermediary at a well-capitalized 

financial institution. The loan loss 

reserve must be in an account separate 

and distinct from the ILP Intermediary’s 

other assets and financial activities. 

This reserve must be maintained at not 

less than 5% of the principal balance of 

all outstanding loans to Eligible Small 

Business Concerns made from the ILP 

Relending Fund. The AA/CA or 

designee may require the ILP 

Intermediary to maintain a larger loss 

reserve if the AA/CA determines that 

the ILP Intermediary’s loss reserve level 

is potentially inadequate to protect SBA 

from loss. ILP Relending Fund proceeds 

must not be used to establish or 

maintain the loan loss reserve. 

§ 109.360 Recordkeeping and reporting 

requirements. 

(a) Maintenance of records. The ILP 

Intermediary must maintain at its 

principal business office accurate and 

current financial records, including 

books of accounts, and all documents 

and supporting materials relating to the 

ILP Intermediary’s activities in the ILP 

program, including files on loans made 

to Eligible Small Business Concerns. 

Records may be preserved electronically 

if the original is available for retrieval 

within 15 calendar days. 

(b) ILP Intermediary reporting. The 

ILP Intermediary must submit the 

following to SBA: 

(1) Portfolio Identification Reports. 

All loans made by the ILP Intermediary 

to an Eligible Small Business Concern 

under this program must be entered into 

the Intermediary Lending Program 

Electronic Reporting System (ILPERS) 

within seven calendar days of closing 

the loan. 

(2) Quarterly reports. By the 30th 

calendar day following the end of each 

calendar quarter, each ILP Intermediary 

must submit a Portfolio Status Report 

via ILPERS to update the payment status 

and outstanding principal balances of 

its loans to Eligible Small Business 

Concerns. Additionally, each ILP 

Intermediary must submit an ILP 

Program Activities Report with 

accompanying bank statements to 

demonstrate the use and management of 

ILP program funds. 

(3) Audited financial statements. 

Within four months after the close of the 

ILP Intermediary’s fiscal year, the ILP 

Intermediary must submit to SBA 

audited financial statements as prepared 

by an independent certified public 

accountant, except that ILP 

Intermediaries subject to OMB Circular 

A–133 must submit audits prepared in 

accordance with that circular. The AA/ 

CA or designee may provide extensions 

to the filing deadline. 

(4) Reports of changes. An ILP 

Intermediary must submit to SBA a 

summary of any changes in the ILP 

Intermediary’s organization or financing 

(within 30 calendar days of the change), 

such as: 

(i) Any change in its name, address or 

telephone number; 


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18018 Federal Register / Vol. 76, No. 63 / Friday, April 1, 2011 / Rules and Regulations 

(ii) Any change in its charter, bylaws, 

or its officers or directors (to be 

accompanied by a statement of personal 

history on the form approved by SBA); 

(iii) Any material change in 

capitalization or financial condition; 

and 

(iv) Any change affecting the ILP 

Intermediary’s eligibility to continue to 

participate in the ILP program. 

(5) Other reports. Each ILP 

Intermediary must submit such other 

reports as SBA may require from time to 

time. 

Subpart D—Requirements for ILP 

Intermediary Loans to Small 

Businesses 

§ 109.400 Eligible Small Business 

Concerns. 

(a) To be eligible to receive loans from 

an ILP Intermediary under this program, 

a small business must: 

(1) Be organized for profit; 

(2) Be located in the U.S.; 

(3) Be small under the size 

requirements applicable to 7(a) business 

loans (including Affiliates); 

(4) Be a startup, newly established, or 

growing small business; 

(5) Together with Affiliates and 

principal owners, not have credit 

elsewhere; and 

(6) Be creditworthy and demonstrate 

reasonable assurance of repayment of 

the loan. 

(b) The following types of businesses 

are not eligible to receive a loan from an 

ILP Intermediary under this program: 

(1) Nonprofit businesses (for-profit 

subsidiaries are eligible); 

(2) Financial businesses primarily 

engaged in the business of lending; 

(3) Passive businesses owned by 

developers and landlords that do not 

actively use or occupy the assets 

acquired or improved with the loan 

proceeds; 

(4) Life insurance companies; 

(5) Businesses located in a foreign 

country; 

(6) Pyramid sale distribution plans; 

(7) Businesses deriving more than 

one-third of gross annual revenue from 

legal gambling activities; 

(8) Businesses engaged in any illegal 

activity; 

(9) Private clubs and businesses 

which limit the number of memberships 

for reasons other than capacity; 

(10) Government-owned entities 

(except for businesses owned or 

controlled by a Native American tribe); 

(11) Businesses principally engaged in 

teaching, instructing, counseling or 

indoctrinating religion or religious 

beliefs, whether in a religious or secular 

setting; 

(12) Consumer and marketing 

cooperatives (producer cooperatives are 

eligible); 

(13) Loan packagers earning more 

than one third of their gross annual 

revenue from packaging SBA loans; 

(14) Businesses in which the ILP 

Intermediary or any of its Associates 

owns an equity interest; 

(15) Businesses with an Associate 

who is incarcerated, on probation, on 

parole, or has been indicted for a felony 

or a crime of moral turpitude; 

(16) Businesses which: 

(i) Present live performances of a 

prurient sexual nature; or 

(ii) Derive directly or indirectly more 

than de minimis gross revenue through 

the sale of products or services, or the 

presentation of any depictions or 

displays, of a prurient sexual nature; 

(17) Businesses that have previously 

defaulted on a Federal loan or Federally 

assisted financing, resulting in the 

Federal government or any of its 

agencies or Departments sustaining a 

loss in any of its programs, and 

businesses owned or controlled by an 

applicant or any of its Associates which 

previously owned, operated, or 

controlled a business which defaulted 

on a Federal loan (or guaranteed a loan 

which was defaulted) and caused the 

Federal government or any of its 

agencies or Departments to sustain a 

loss in any of its programs. For purposes 

of this section, a compromise agreement 

shall also be considered a loss unless 

the agreement provides otherwise; 

(18) Businesses primarily engaged in 

political or lobbying activities; and 

(19) Speculative businesses (such as 

oil wildcatting); 

(20) Businesses located in a Coastal 

Barrier Resource Area (as defined in the 

Coastal Barriers Resource Act); 

(21) Businesses owned or controlled 

by an applicant or any of its Associates 

who are more than 60 days delinquent 

in child support under the terms of any 

administrative order, court order, or 

repayment agreement; 

(22) Businesses in which any 

Associate is an undocumented (illegal) 

alien; or 

(23) Businesses owned or controlled 

by an applicant or any of its Associates 

who are presently debarred, suspended, 

proposed for debarment, declared 

ineligible, or voluntarily excluded from 

participation by any Federal department 

or agency. 

§ 109.410 Loan limits—loans to Eligible 

Small Business Concerns. 

No small business (including 

Affiliates) may have more than $200,000 

outstanding under this program at one 

time. The provisions of § 120.151 do not 

apply to loans under this program. 

§ 109.420 Terms of loans from ILP 

Intermediaries to Eligible Small Business 

Concerns. 

(a) General. The terms of a loan made 

by the ILP Intermediary to an Eligible 

Small Business Concern must be agreed 

to by the ILP Intermediary and the 

Eligible Small Business Concern. The 

loan terms must be within the limits 

established by SBA in these regulations. 

(b) Maximum loan size. The 

maximum amount of a loan by the ILP 

Intermediary to an Eligible Small 

Business Concern under this program is 

$200,000. 

(c) Maturity. The term of a loan by the 

ILP Intermediary to an Eligible Small 

Business Concern under this program 

must be the shortest appropriate term. 

The maximum loan term is 10 years or 

less, unless the loan finances or 

refinances real estate or equipment with 

a useful life exceeding ten years, in 

which case the maximum loan term is 

25 years. 

(d) Interest rate. The maximum 

interest rate the ILP Intermediary may 

charge for loans less than or equal to 

$50,000 is 8.75 percent. The maximum 

interest rate the ILP Intermediary may 

charge for loans greater than $50,000 is 

7%. SBA may adjust the maximum 

interest rates from time to time; SBA 

will publish any such change by Notice 

in the Federal Register. Changes to the 

maximum interest rate do not apply to 

loans made to Eligible Small Business 

Concerns prior to publication of the 

change in the Federal Register. 

(e) Fees. The ILP Intermediary must 

not impose any fees or direct costs on 

an Eligible Small Business Concern, 

except for the following allowed fees or 

direct costs: 

(1) Necessary out-of-pocket expenses, 

such as filing or recording fees; 

(2) The reasonable direct costs of any 

liquidation; 

(3) A late payment fee not to exceed 

5 percent of the scheduled loan 

payment; and 

(4) Reasonable application and 

origination fees, subject to a maximum 

total fee cap of 1 percent of the amount 

of the loan to the Eligible Small 

Business Concern. SBA may adjust the 

maximum total fee cap from time to 

time; SBA will publish any such change 

by Notice in the Federal Register. 

§ 109.430 Loan purposes. 

(a) An Eligible Small Business 

Concern may only use the proceeds of 

a loan under this program for the 

following purposes: 

(1) Working capital; 

(2) Real estate (except for real estate 

acquired and held primarily for sale, 

lease, or investment); and 


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Federal Register / Vol. 76, No. 63 / Friday, April 1, 2011 / Rules and Regulations 18019 

(3) The acquisition of materials, 

supplies, furniture, fixtures, or 

equipment. 

(b) Revolving lines of credit are 

permitted. However, if, at any time, SBA 

determines that the ILP Intermediary’s 

operation of revolving lines of credit is 

causing excessive risk of loss for the 

intermediary or the Government, the 

AA/CA or designee may terminate the 

ILP Intermediary’s authority to use the 

ILP Relending Fund proceeds for 

revolving lines of credit. Such 

termination will be by written notice 

and will prevent the ILP Intermediary 

from approving any new lines of credit 

or extending any existing revolving 

lines of credit beyond the effective date 

of termination contained in the notice. 

§ 109.440 Requirements imposed under 

other laws and orders. 

Loans made by the ILP Intermediary 

under this program must comply with 

all applicable laws, including 

§§ 120.170 (Flood insurance), 120.172 

(Flood-plain and wetlands 

management), 120.173 (Lead-based 

paint), 120.173 (Earthquake hazards), 

and the civil rights laws (see parts 112, 

113, 117, and 136 of this chapter) 

prohibiting discrimination on the 

grounds of race, color, national origin, 

religion, sex, marital status, disability or 

age. 

§ 109.450 SBA review of ILP Intermediary 

loans to Eligible Small Business Concerns. 

(a) Review restrictions. SBA does not 

review loans made by an ILP 

Intermediary under this program before 

approval of the loan by the ILP 

Intermediary. The ILP Intermediary is 

responsible for all loan decisions 

regarding eligibility (including size). 

(b) Subsequent review. SBA will 

periodically review loans made by an 

ILP Intermediary after approval of the 

loan by the ILP Intermediary as part of 

the on-site and off-site reviews 

described in § 109.510. If SBA discovers 

that an ILP Intermediary has made a 

loan under this program to an ineligible 

business or for an ineligible purpose, 

SBA will require the ILP Intermediary to 

refinance the ineligible loan with nonILP program funds and to deposit into 

its ILP Relending Fund an amount equal 

to the outstanding principal balance on 

the ineligible loan. 

§ 109.460 Prohibition on sales of ILP 

Intermediary Loans to Eligible Small 

Business Concerns. 

An ILP Intermediary may not sell all 

or any portion of a loan made to an 

Eligible Small Business Concern 

without prior written consent from the 

AA/CA or designee. 

Subpart E—Oversight 

§ 109.500 SBA access to ILP Intermediary 

files. 

The ILP Intermediary must allow 

SBA’s authorized representatives, 

including other officers of any other 

Federal agency and representatives 

authorized by the SBA Inspector 

General, during normal business hours, 

timely access to its facility and files to 

review, inspect, and copy all records 

and documents, including electronic 

and hard copy, relating to the operations 

of the ILP Intermediary, the ILP Loan, 

and the loans made from the ILP 

Relending Fund and other records and 

documents as requested for oversight of 

the ILP Intermediary. 

§ 109.510 On-site and off-site reviews. 

(a) General. SBA may conduct off-site 

reviews and monitoring of ILP 

Intermediaries, including ILP 

Intermediaries’ self-assessments. SBA 

may also perform on-site reviews of ILP 

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 on-site or off-site reviews. Failure 

to take required corrective actions may 

constitute an event of default, as 

described in § 109.520(c). 

(c) Confidentiality of reports. On-site 

and off-site review reports and other 

SBA prepared review related documents 

are subject to the confidentiality 

requirements of § 120.1060. 

§ 109.520 Events of default and revocation 

of authority to participate in the ILP 

program. 

(a) Automatic events of default. Upon 

the occurrence of one or more of the 

events in this paragraph (a), the ILP 

Loan balance, including accrued 

interest, is immediately due and payable 

to SBA without notice and the ILP 

Intermediary’s authority to participate 

in the ILP program is revoked. 

(1) Insolvency. The ILP Intermediary 

becomes equitably or legally insolvent. 

(2) Voluntary assignment. The ILP 

Intermediary makes a voluntary 

assignment for the benefit of creditors 

without SBA’s prior written approval. 

(3) Bankruptcy. The ILP Intermediary 

files a petition to begin any bankruptcy 

or reorganization proceeding, 

receivership, dissolution or other 

similar creditors’ rights proceeding, or 

such action is initiated against the ILP 

Intermediary and is not dismissed 

within 60 calendar days. 

(b) Events of default with notice and 

possible opportunity to cure. Except as 

provided in paragraph (c) of this 

section, upon receipt of written notice 

to the ILP Intermediary of the 

occurrence (as determined by SBA) of 

one or more of the events in this 

paragraph (b), the ILP loan balance, 

including accrued interest, is 

immediately due and payable to SBA 

and the ILP Intermediary’s authority to 

participate in the ILP program is 

revoked. 

(1) Fraud. The ILP Intermediary 

commits a fraudulent act. 

(2) Violation of SBA’s ethical 

requirements. The ILP Intermediary 

violates 13 CFR § 120.140. 

(3) Non-notification of events of 

default. The ILP Intermediary fails to 

notify SBA in writing as soon as it 

knows or reasonably should have 

known that any event of default exists 

under this section. 

(4) Non-notification of defaults to 

others. The ILP Intermediary fails to 

notify SBA in writing within ten 

calendar days from the date of a 

declaration of an event of default or 

nonperformance under any note, 

debenture or indebtedness, issued to or 

held by anyone other than SBA. 

(5) Failure to make timely payment. 

Unless otherwise approved by the 

AA/CA or designee in writing, the ILP 

Intermediary fails to make timely 

payment to SBA on its ILP Loan. 

(6) Failure to take adequate corrective 

actions. The ILP Intermediary fails to 

take adequate corrective actions, to 

SBA’s satisfaction, as required by SBA 

under § 109.510 within the timeframe 

requested by SBA. 

(7) Violation of ILP Program 

Requirements. The ILP Intermediary 

violates one or more ILP Program 

Requirement. 

(8) Actions that increase risk. The ILP 

Intermediary takes other action which 

increases the risk of loss to SBA. 

(c) Opportunity to Cure. SBA may, in 

its discretion, provide the ILP 

Intermediary with an opportunity to 

cure an event of default identified in 

paragraph (b) of this section. If SBA 

provides the ILP Intermediary with such 

a cure opportunity, SBA will issue 

written notice discussing the relevant 

facts, and directing the ILP Intermediary 

to cure the default and provide SBA 

with documentation to show that the 

default has been cured within a 

specified period of time (generally 15 

days). SBA will then provide the ILP 

Intermediary with a final notification 

advising whether the default has been 

satisfactorily cured. In the event SBA 

determines the default has not been 

cured, the ILP Loan balance, including 

accrued interest, is immediately due 

and payable to SBA and the ILP 

Intermediary’s authority to participate 


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18020 Federal Register / Vol. 76, No. 63 / Friday, April 1, 2011 / Rules and Regulations 

in the ILP program is revoked upon the 

ILP Intermediary’s receipt of this final 

notification. 

(d) Appeals. Notification of default 

without opportunity to cure under 

paragraph (b) of this section and final 

notification of uncured default under 

paragraph (c) of this section are final 

agency decisions. An ILP Intermediary 

may appeal a final agency decision only 

in the appropriate federal district court. 

§ 109.530 Debarment and Suspension. 

In accordance with 2 CFR Parts 180 

and 2700, SBA may take any necessary 

action to debar or suspend an ILP 

Intermediary or any officer, director, 

general partner, manager, employee, 

agent or other participant in the affairs 

of an ILP Intermediary’s SBA 

operations. 

Dated: March 28, 2011. 

Karen G. Mills, 

Administrator. 

[FR Doc. 2011–7741 Filed 3–31–11; 8:45 am] 

BILLING CODE 8025–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2010–0027; Directorate 

Identifier 2008–NM–204–AD; Amendment 

39–16642; AD 2011–07–05] 

RIN 2120–AA64 

Airworthiness Directives; Sicma Aero 

Seat 9140, 9166, 9173, 9174, 9184, 

9188, 9196, 91B7, 91B8, 91C0, 91C2, 

91C4, 91C5, and 9301 Series 

Passenger Seat Assemblies; and 

Sicma Aero Seat 9501311–05, 

9501301–06, 9501311–15, 9501301–16, 

9501441–30, 9501441–33, 9501311–55, 

9501301–56, 9501441–83, 9501441–95, 

9501311–97, and 9501301–98 

Passenger Seat Assemblies; Installed 

on Various Transport Category 

Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), Department of 

Transportation (DOT). 

ACTION: Final rule. 

SUMMARY: We are adopting a new 

airworthiness directive (AD) for the 

products listed above. This AD results 

from mandatory continuing 

airworthiness information (MCAI) 

originated by an aviation authority of 

another country to identify and correct 

an unsafe condition on an aviation 

product. The MCAI describes the unsafe 

condition as: 

Cracks have been found on seat backrest 

links P/N (part number) 90–000200–104–1 

and 90–000200–104–2. These cracks can 

significantly affect the structural integrity of 

seat backrests. * * * 

Failure of the backrest links could 

result in injury to an occupant during 

emergency landing conditions. We are 

issuing this AD to require actions to 

correct the unsafe condition on these 

products. 

DATES: This AD becomes effective May 

6, 2011. 

The Director of the Federal Register 

approved the incorporation by reference 

of a certain publication listed in this AD 

as of May 6, 2011. 

ADDRESSES: You may examine the AD 

docket on the Internet at http:// 

www.regulations.gov or in person at the 

U.S. Department of Transportation, 

Docket Operations, M–30, West 

Building Ground Floor, Room W12–140, 

1200 New Jersey Avenue, SE., 

Washington, DC. 

FOR FURTHER INFORMATION CONTACT: 

Jeffrey Lee, Aerospace Engineer, Boston 

Aircraft Certification Office, FAA, 

Engine & Propeller Directorate, 12 New 

England Executive Park, Burlington, MA 

01803; telephone (781) 238–7161; fax 

(781) 238–7170. 

SUPPLEMENTARY INFORMATION: 

Discussion 

We issued a notice of proposed 

rulemaking (NPRM) to amend 14 CFR 

part 39 to include an AD that would 

apply to the specified products. That 

NPRM was published in the Federal 

Register on January 13, 2010 (75 FR 

1731). That NPRM proposed to correct 

an unsafe condition for the specified 

products. The MCAI states: 

Cracks have been found on seat backrest 

links P/N (part number) 90–000200–104–1 

and 90–000200–104–2. These cracks can 

significantly affect the structural integrity of 

seat backrests. Therefore a life limit is 

introduced on the links. On 9g seats also 

affected by this problem, stronger unlimited 

life limits have been developed and their 

installation has been rendered mandatory. 

However, on 16g seats the affected links have 

a direct influence on certification dynamic 

tests and cannot be replaced by similar 

stronger links without performing again all 

dynamic tests for each seat part number. 

Failure of the backrest links could 

result in injury to an occupant during 

emergency landing conditions. The 

required actions include a general visual 

inspection for cracking of backrest links, 

replacement with new links if cracking 

is found, and eventual replacement of 

all links with new links. You may 

obtain further information by examining 

the MCAI in the AD docket. 

Comments 

We gave the public the opportunity to 

participate in developing this AD. We 

considered the comments received. 

Request To Revise Service Bulletin 

Reference 

Boeing requested that we update all 

references to Sicma Aero Seat Service 

Bulletin 90–25–012, Issue 4, dated 

December 19, 2001, to Issue 5, dated 

March 19, 2004, including Annex 1, 

Issue 2, dated March 19, 2004. The 

commenter justified the request by 

stating that seat series 91C3 (installed 

on Boeing Model 737 airplanes) was 

inadvertently included in Issue 4 of that 

service bulletin in error, and that Issue 

5 of that service bulletin corrects the 

effectivity by limiting it to those 

installed seats that are affected. The 

commenter also requested that we revise 

the ‘‘Relevant Service Information’’ 

section of the NPRM to refer to Issue 5 

of that service bulletin. 

We agree to update the service 

information in the AD for the reason 

given. We have revised paragraphs (c), 

(f)(1) through (f)(4), and (h) of this AD 

to refer to Sicma Aero Seat Service 

Bulletin 90–25–012, Issue 5, dated 

March 19, 2004. We also have added 

Issue 4 of that service bulletin to 

paragraph (f)(5) of this AD to give credit 

for actions done before the effective date 

of this AD in accordance with Issue 4 

of that service bulletin. 

We have not changed the ‘‘Relevant 

Service Information’’ section of the 

NPRM because that section does not 

appear in this final rule. 

Request To Remove Series 91C3 Seat 

From the Applicability 

Boeing requested that we revise the 

Applicability, paragraph (c) of the 

NPRM, to remove seat series 91C3 for 

the reason stated in the previous 

comment. 

We agree to correct the Applicability 

of the AD because Sicma Aero Seat 

Service Bulletin 90–25–012, Issue 5, 

dated March 19, 2004, corrects the 

effectivity, and have removed seat series 

91C3 from paragraph (c) of this AD. 

No Reporting Requirement 

We removed paragraph (g)(3) of the 

NPRM from this final rule because 

reporting findings is not required. 

Conclusion 

We reviewed the available data, 

including the comments received, and 

determined that air safety and the 

public interest require adopting the AD 

with the changes described previously. 

We determined that these changes will 

not increase the economic burden on 


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