70580 Federal Register / Vol. 88, No. 196 / Thursday, October 12, 2023 / Rules and Regulations 

Subpart D—Delegations of Authority to 

Other General Officers and Agency 

Heads 

■ 5. Amend § 2.32 by adding paragraph 

(a)(14) to read as follows: 

§ 2.32 Chief Information Officer. 

(a) * * * 

(14) Administer the Controlled 

Unclassified Information (CUI) Program 

for the Department pursuant to E.O. 

13556, ‘‘Controlled Unclassified 

Information’’ (75 FR 68675, 3 CFR, 2011 

Comp., p. 267) and 32 CFR part 2002. 

* * * * * 

§ 2.38 [Amended] 

■ 6. Amend § 2.38 by removing and 

reserving paragraphs (a)(1)(xii) and 

(a)(4). 

■ 7. Amend § 2.39 by adding paragraph 

(a)(9) to read as follows: 

§ 2.39 Director, Office of Tribal Relations. 

(a) * * * 

(9) Administer the USDA/1994 Land 

Grant Institutions (Tribal Colleges) 

Programs. 

* * * * * 

Subpart J—Delegations of Authority by 

the Under Secretary for Natural 

Resources and Environment 

■ 8. Amend § 2.60 by adding paragraph 

(a)(45) to read as follows: 

§ 2.60 Chief, Forest Service. 

(a) * * * 

(45) Enforce and conduct 

investigations of violations of the Lacey 

Act, which prohibits importing or 

exporting any plant or plant product in 

interstate or foreign commerce in 

violation of any federal, state, Tribal, or 

foreign law regulating plants or plant 

products (16 U.S.C. 3371–3378). 

* * * * * 

Subpart P—Delegations of Authority 

by the Assistant Secretary for 

Administration 

§ 2.95 [Amended] 

■ 9. Amend § 2.95 by removing and 

reserving paragraph (b)(11). 

Subpart V—Delegations of Authority 

by the Director, Office of Partnerships 

and Public Engagement 

§ 2.700 [Removed and Reserved] 

■ 10. Remove and reserve § 2.700. 

The Secretary of Agriculture, Thomas 

J. Vilsack, having reviewed and 

approved this document, is delegating 

the authority to electronically sign this 

document to Mary Beth Schultz, Acting 

General Counsel, for purposes of 

publication in the Federal Register. 

Mary Beth Schultz, 

Acting General Counsel. 

[FR Doc. 2023–22524 Filed 10–11–23; 8:45 am] 

BILLING CODE 3410–90–P 

DEPARTMENT OF ENERGY 

10 CFR Parts 429 and 431 

[EERE–2017–BT–STD–0048] 

RIN 1904–AF27 

Energy Conservation Program: Energy 

Conservation Standards for Dedicated 

Purpose Pool Pump Motors 

Correction 

In rule document 2023–20343, 

appearing on pages 66966 through 

67041 in the issue of Thursday, 

September 28, 2023, make the following 

correction: 

On page 66967, in Table I.1, in the 

fifth column, on the third line, 

‘‘September 28, 2025’’ should read 

‘‘September 28, 2027’’. 

[FR Doc. C1–2023–20343 Filed 10–11–23; 8:45 am] 

BILLING CODE 0099–10–D 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 120 

RIN 3245–AH78 

Debt Refinancing in the 504 Loan 

Program 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Final rule. 

SUMMARY: SBA is adopting with changes 

the interim final rule published in the 

Federal Register on July 29, 2021. That 

interim final rule implemented section 

328 of the Economic Aid to Hard-Hit 

Small Businesses, Nonprofits, and 

Venues Act, which modified the 

requirements for refinancing debt in the 

504 Loan Program, as set forth in section 

521(a) of title V of division E of the 

Consolidated Appropriations Act, 2016 

and section 502(7) of the Small Business 

Investment Act of 1958. The 

modifications included: increasing the 

amount of existing indebtedness that 

may be refinanced for 504 debt 

refinancing involving expansions; and 

for 504 debt refinancing not involving 

expansions, removing two limitations 

on the program, reinstating an alternate 

job retention standard for the 

refinancing project, revising the 

definition of qualified debt, and 

removing the prohibition against 

Certified Development Companies 

(CDCs) participating in the Premier 

Certified Lenders Program using their 

delegated authority to make these loans. 

DATES: The effective date of this final 

rule is November 13, 2023. 

FOR FURTHER INFORMATION CONTACT: 

Gregorius Suryadi, Senior Financial and 

Loan Specialist, 504 Program Branch, 

Office of Financial Assistance, Small 

Business Administration, 409 3rd Street 

SW, Washington, DC 20416; telephone: 

(202) 205–6806; email: 

gregorius.suryadi@sba.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

The 504 Loan Program is an SBA 

financing program authorized under 

title V of the Small Business Investment 

Act of 1958, 15 U.S.C. 695 et seq. The 

core mission of the 504 Loan Program is 

to provide long-term financing to small 

businesses for the purchase or 

improvement of land, buildings, and 

major equipment, in an effort to 

facilitate the creation or retention of jobs 

and local economic development. Under 

the 504 Loan Program, loans are made 

to small business applicants by Certified 

Development Companies (‘‘CDCs’’), 

which are certified and regulated by 

SBA to promote economic development 

within their community. In general, a 

project in the 504 Loan Program (a ‘‘504 

Project’’) includes: a loan obtained from 

a private sector lender with a senior lien 

covering at least 50 percent of the 

project cost; a loan obtained from a CDC 

(a ‘‘504 Loan’’) with a junior lien 

covering up to 40 percent of the total 

cost (backed by a 100 percent SBAguaranteed debenture); and a 

contribution from the Borrower of at 

least 10 percent equity. 

In addition, the 504 Loan Program 

may be used to refinance debt under 

two options authorized under section 

502(7)(B) and (C) of the Small Business 

Investment Act of 1958. First, if a 504 

Project involves the expansion of the 

small business, any amount of existing 

indebtedness that does not exceed 50 

percent of the project cost of the 

expansion may be refinanced and added 

to the project’s cost (Debt Refinancing 

with Expansion) under the conditions 

set forth in section 502(7)(B) and the 

implementing regulations. See 13 CFR 

120.882(e) and (f). Second, debt 

refinancing is available for a 504 Project 

that does not involve the expansion of 

the small business under the 

requirements set forth in section 

502(7)(C) and 13 CFR 120.882(g) (Debt 

Refinancing without Expansion). 


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Federal Register / Vol. 88, No. 196 / Thursday, October 12, 2023 / Rules and Regulations 70581 

Section 328(a) of the Economic Aid to 

Hard-Hit Small Businesses, Nonprofits, 

and Venues Act (Economic Aid Act), 

enacted December 27, 2020, Public Law 

116–260, revised the conditions and 

requirements for refinancing debt in the 

504 Loan Program as follows: 

(1) With respect to Debt Refinancing 

with Expansion, 13 CFR 120.882(e), the 

Economic Aid Act increased the amount 

of existing indebtedness that may be 

refinanced as part of a 504 Project from 

not more than 50 percent of the project 

cost of the expansion to not more than 

100 percent of the project cost; 

(2) With respect to Debt Refinancing 

without Expansion, 13 CFR 120.882(g), 

the Economic Aid Act: 

(a) Eliminated the condition that this 

program shall only be in effect in any 

fiscal year during which the cost to the 

Federal Government of making 

guarantees under 13 CFR 120.882(g) and 

under the 504 Loan Program is zero; 

(b) Eliminated the requirement that a 

CDC limit its financing under the 504 

Loan Program so that, during any 

Federal fiscal year, new financings 

under 13 CFR 120.882(g) do not exceed 

50% of the dollars the CDC loaned 

under the 504 Loan Program, including 

under 13 CFR 120.882(g), during the 

previous fiscal year, unless otherwise 

waived; 

(c) Eliminated the prohibition against 

Premier Certified Lender Program 

(PCLP) CDCs using delegated authority 

to approve loan applications for Debt 

Refinancing without Expansion; 

(d) Reinstated an alternate job 

retention standard that was previously 

removed from the Debt Refinancing 

without Expansion Program by section 

521 of division E of the Consolidated 

Appropriations Act, 2016 (2016 

Consolidated Appropriations Act), 

enacted on December 18, 2015, Public 

Law 114–113; 

(e) Revised the definition of 

‘‘qualified debt’’ to mean debt that was 

incurred not less than six months before 

the date of application instead of two 

years before the date of application; 

(f) Removed from the definition of 

‘‘qualified debt’’ condition that the debt 

not be subject to a guarantee by a 

Federal agency; and 

(g) Eliminated from the definition of 

‘‘qualified debt’’ the requirement that 

the borrower be current on all payments 

for not less than one year before the date 

of the application for refinancing. 

As described in the section-by-section 

analysis below, SBA is issuing this final 

rule to adopt the previously published 

interim final rule and to conform the 

current rules to the requirements of the 

Economic Aid Act. 

II. Section-by-Section Analysis of 

Comments and Changes 

On July 29, 2021, SBA published in 

the Federal Register an interim final 

rule implementing section 328(a) of the 

Economic Aid Act. 86 FR 40775. 

Although effective immediately, the 

interim final rule included a request for 

comments seeking input from the 

public. The comment period for the 

interim final rule was open from July 

29, 2021, until October 8, 2021. SBA 

received 79 comments of which many 

were duplicative. Of the unique 

comments received, two were from 

national trade associations, 68 were 

from Certified Development Companies, 

one (1) was from a bank, one (1) from 

a private industry, and four (4) from 

individuals. This section includes a 

description of the comments received 

and is organized by the rules being 

revised. SBA received comments from a 

national trade association and 63 CDCs 

recommending changes beyond the 

scope of this rule that will not be 

addressed in this final rule. 

III. Section-by-Section Analysis 

Section 120.882(e). In the interim 

final rule SBA revised this provision by 

increasing the amount of existing 

indebtedness that may be refinanced to 

no more than 100 percent of the project 

cost (from 50 percent of the project cost) 

to conform with the amendments to 

section 502(7)(B) of the Small Business 

Investment Act made by section 

328(a)(2)(A) of the Economic Aid Act. 

SBA did not receive any comments on 

this change and is adopting this change 

as set forth in the interim final rule. 

Section 120.882(g)(3). In the interim 

final rule SBA removed the requirement 

that the approval of a Refinancing 

Project is subject to the requirement that 

the cost to the Federal Government of 

making guarantees under 13 CFR 

120.882(g) and under the 504 Loan 

Program is zero during the fiscal year in 

which the guarantee is made in 

accordance with section 328(a)(1) of the 

Economic Aid Act, which repealed this 

statutory requirement set forth in the 

2016 Consolidated Appropriations Act. 

In its place SBA inserted a provision 

that set forth the conditions and 

requirements that apply to the 

refinancing of a loan that is subject to 

a guarantee by a Federal agency or 

department. As indicated above, the 

Economic Aid Act removed the 

prohibition against refinancing a loan 

that is subject to a guarantee by a 

Federal agency or department. Although 

these loans may now be refinanced if 

the refinancing project does not involve 

expansion, the loan must comply with 

the following conditions and 

requirements: 

(1) for an existing 504 loan, either 

both the Third Party Loan and the 504 

loan must be refinanced, or the Third 

Party Loan must have been paid in full; 

and 

(2) for an existing 7(a) loan, the CDC 

must verify in writing that the present 

lender is either unwilling or unable to 

modify the current payment schedule. 

In addition, in the case of same 

institution debt, if the Third Party 

Lender or the CDC affiliate as 

authorized under 13 CFR 120.820 is the 

7(a) lender, the loan will be eligible for 

504 refinancing only if the lender is 

unable to modify the terms of the 

existing loan because a secondary 

market investor will not agree to 

modified terms. 

(3) the refinancing of any federallyguaranteed loan must provide a 

substantial benefit to the borrower. 

‘‘Substantial benefit’’ means that the 

portion of the new installment amount 

attributable to the debt being refinanced 

must be at least 10 percent less than the 

existing installment amount(s). 

Prepayment penalties (including any 

subsidy recoupment fee), financing fees, 

and other financing costs must be added 

to the amount being refinanced in 

calculating the percentage reduction in 

the new installment payment. The 

portion of the new installment amount 

attributable to Eligible Business 

Expenses will not need to be included 

in this calculation. The rule allows the 

Director, Office of Financial Assistance 

(D/FA) or designee, to approve an 

exception to the 10 percent reduction 

requirement for good cause and does not 

allow PCLP CDCs to use their delegated 

authority to approve a loan requiring 

this exception. 

SBA received 66 comments on this 

rule change, of which 50 supported the 

rule change with modifications. There 

were no comments opposing the rule 

change. 

A national trade association and its 

member CDCs requested that SBA not 

include in regulation any conditions or 

requirements that restrict or limit the 

ability to refinance a loan that is subject 

to a guarantee by a Federal agency or 

department as no such conditions or 

restriction exists in statute or in the 

Economic Aid Act (EAA) update. 

The national trade association and its 

member CDCs also recommended that 

SBA remove the requirement that CDCs 

obtain written verification of the 

existing 7(a) lender’s inability or 

unwillingness to modify the current 

payment schedule as a requirement to 

allowing the refinance of an existing 

7(a) loan. The national trade association 


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70582 Federal Register / Vol. 88, No. 196 / Thursday, October 12, 2023 / Rules and Regulations 

asked that the ability to refinance an 

existing 7(a) loan be unfettered and 

guided by what is in the best interest of 

the borrower. 

Another national trade association 

proposed safeguards of increasing the 

substantial benefit requirement for both 

7(a) and 504 programs, which include, 

but are not limited to, the SBA issuing 

specific guidance on the underwriting 

for both programs. In addition, to 

protect the borrower from paying 

additional and significant fees, the 

national trade association recommended 

the SBA limit fees for new 504 loans. 

SBA feels that increasing the substantial 

benefit requirement as requested in a 

rising interest rate environment would 

not be in the best interest of the small 

business borrower. 

Based on the public comments 

received, SBA is revising this rule to 

remove the requirement that CDCs and 

7(a) lenders be given the opportunity to 

modify existing debt. Instead, SBA is 

transferring the burden of contacting the 

CDC or 7(a) lender whose debt is being 

refinanced from the borrower to the 

CDC that will be packaging the 504 loan 

for the borrower. The revised rule 

requires the CDC to notify in writing (by 

email or letter) the existing CDC or 7(a) 

lender to advise them in advance when 

a government guaranteed loan is being 

refinanced. 

Section 120.882(g)(11). In the interim 

final rule SBA removed the section that 

states PCLP CDCs may not use delegated 

authority to approve refinancing under 

13 CFR 120.882(g), in accordance with 

section 328(a) of the Economic Aid Act, 

which removed this statutory 

prohibition. In its place, the interim 

final rule stated that PCLP CDCs may 

not approve the refinancing of same 

institution debt under their delegated 

authority and must submit the loan to 

SBA for approval. This requirement is 

consistent with SBA’s long-standing 

policy of prohibiting its participating 

lenders from using their delegated 

authority to approve the financing of 

same institution debt due to the 

potential conflict of interest and the risk 

of the 504 loan proceeds being used to 

shift to SBA a potential loss from the 

existing debt. SBA did not receive any 

comments on this change and is 

adopting this change as set forth in the 

interim final rule. 

Section 120.882(g)(15). In the interim 

final rule SBA redesignated paragraph 

(g)(15), Definitions, as paragraph (g)(16), 

and added a new paragraph (g)(15) to set 

forth the alternate job retention standard 

that was reinstated by section 328(a) of 

the Economic Aid Act. Under this 

alternate job retention standard, for a 

Refinancing Project under 13 CFR 

120.882(g) the debt does not need to 

meet the job creation or other economic 

development objectives set forth in 13 

CFR 120.861 or 120.862, provided that 

the 504 loan does not exceed the 

product obtained by multiplying the 

number of employees of the borrower by 

$75,000. On May 11, 2023, SBA 

published in the Federal Register a 

notice announcing an increase to the job 

creation or retention standards for the 

504 Loan Program to reflect increases in 

the Consumer Price Index (CPI) for All 

Urban Consumers. 88 FR 30379. This 

included increasing the amount per Job 

Opportunity that a 504 Loan Project 

must create or retain from $75,000 to 

$90,000. Accordingly, the amount set 

forth in 13 CFR 120.882(g)(15) is 

adjusted from $75,000 to $90,000. 

The alternate job retention standard 

provides that the number of employees 

of a borrower is equal to the sum of: 

(1) the number of full-time employees 

of the borrower on the date on which 

the borrower applies for a loan under 

this subparagraph; and 

(2) the product obtained by 

multiplying: 

(a) the number of part-time employees 

of the borrower on the date on which 

the borrower applies for a loan under 

this subparagraph, by 

(b) the quotient obtained by dividing 

the average number of hours each parttime employee of the borrower works 

each week by 40. 

An example of how this standard is 

calculated is included in the text of the 

rule. 

SBA did not receive any comments on 

this adjustment. The final rule adopts 

the interim final rule with one change, 

namely an increase in the amount per 

Job Opportunity that a 504 Loan Project 

must create from $75,000 to $90,000 as 

per SBA’s announcement in the Federal 

Register on May 11, 2023. 

Section 120.882(g)(16). As stated 

above, SBA redesignated paragraph 

(g)(15), Definitions, as paragraph (g)(16) 

and made five changes to the definition 

of ‘‘Qualified debt’’. First, paragraph (i) 

of the definition of ‘‘Qualified debt’’ 

(redesignated as paragraph (A)) 

previously required that the debt must 

not have been incurred less than two 

years before the date of the application 

for refinancing. However, section 328(a) 

of the Economic Aid Act shortened this 

period to six months before the date of 

the application for refinancing. 

Accordingly, SBA revised this 

paragraph by replacing two years with 

six months. 

Second, paragraph (i) of the definition 

of ‘‘Qualified debt’’ (redesignated as 

paragraph (A)) previously allowed a 

loan that was refinanced within the two 

years before the date of application (the 

most recent loan) to be deemed incurred 

not less than two years before the date 

of the application provided that the 

effect of the most recent loan was to 

extend the maturity date without 

advancing any additional proceeds. 

With the minimum age of the qualified 

debt shortened from two years to six 

months, SBA believed that it was no 

longer necessary to address this 

situation and therefore SBA removed 

the second and third sentences of 

paragraph (i) (redesignated as paragraph 

(A)). 

Third, paragraph (ii) of the definition 

of ‘‘Qualified debt’’ previously excluded 

debt that was subject to a guarantee by 

a Federal agency or department. As 

stated above, section 328(a) of the 

Economic Aid Act removed this 

statutory exclusion and SBA 

consequently removed this paragraph 

and renumbered the remaining 

paragraphs accordingly. The conditions 

and requirements that apply to the 

refinancing of a loan that is subject to 

a Federal guarantee are set forth in 

paragraph (g)(3). 

Fourth, paragraph (vi) of the 

definition of ‘‘Qualified debt’’ 

previously excluded a Third Party Loan 

that is part of an existing 504 Project. 

However, under the new paragraph 

(g)(3), an existing 504 loan may be 

refinanced when both the Third Party 

Loan and the 504 loan are being 

refinanced. Accordingly, SBA revised 

this paragraph, which was redesignated 

as paragraph (E), to incorporate this 

exception to the general prohibition 

against a qualified debt including a 

Third Party Loan. 

Fifth, paragraph (vii) of the definition 

of ‘‘Qualified debt’’ previously reflected 

the statutory requirement that, for the 

debt to qualify for refinancing, the 

applicant had to be current on all 

payments due for not less than one year 

preceding the date of application. 

Because section 328(a) of the Economic 

Aid Act removed this requirement from 

section 502(7)(C) of the Small Business 

Investment Act, SBA removed this 

paragraph from the regulations. In 

accordance with prudent lending 

standards, SBA expects CDCs to 

consider whether the applicant is 

current on all payments due, and the 

applicant’s history of delinquency, in its 

credit analysis. SBA did not receive any 

comments on these specific revisions 

and is adopting the revisions as set forth 

in the interim final rule. 

SBA did however receive comments 

from a national trade association and its 

member CDCs requesting that SBA 

lower the Qualified debt definition’s 

standard of ‘‘substantially all (85% or 


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Federal Register / Vol. 88, No. 196 / Thursday, October 12, 2023 / Rules and Regulations 70583 

more)’’ to a ‘‘majority’’ standard of 51% 

or more to increase access to and 

utilization of 504 debt refinancing. SBA 

agrees that a decrease to the 

‘‘substantially all’’ standard would 

increase refinancing opportunities for 

small businesses. Neither the Small 

Business Act nor the Small Business 

Investment Act define or test for 

‘‘substantially all.’’ The 85% 

‘‘substantially all’’ standard in 

paragraph (g) was established with 

regulations implementing section 1122 

of the Small Business Jobs Act of 2010. 

76 FR 9213. SBA is modifying the 

‘‘substantially all’’ definition to 75% 

from 85% with the remainder being 

adjusted to 25% from 15%. SBA has 

determined that ‘‘substantially all’’ is 

not 51%. 

Finally, the phrase ‘‘Same institution 

debt’’ was previously used with Debt 

Refinancing without Expansion only in 

reference to the Third Party Loan, see 13 

CFR 120.882(g)(13), and, thus, the 

definition of ‘‘same institution debt’’ 

referenced only the Third Party Lender. 

With the requirement in 13 CFR 

120.882(g)(11) that PCLP CDCs cannot 

use their delegated authority to approve 

the refinancing of same institution debt 

in the Debt Refinancing without 

Expansion program, SBA revised the 

definition of ‘‘Same institution debt’’ to 

also mean the debt of the CDC (or its 

affiliates) that is providing funds for the 

refinancing. SBA did not receive any 

comments on this change and is 

adopting this change as set forth in the 

interim final rule. 

Section 120.883(e). SBA currently 

allows certain administrative costs that 

are not part of Project costs to be paid 

with the proceeds of the 504 loan and 

the Debenture. 13 CFR 120.882. This 

includes CDC Closing Fees up to a 

maximum of $2,500. 13 CFR 120.882(e). 

Since the publication of the interim 

final rule SBA conducted a series of 

roundtable discussions with CDCs and 

lenders at annual and regional events. In 

alignment with the adjustment with jobs 

created/retained due to the CPI, SBA 

received multiple comments during the 

regional roundtables for an inflation 

adjustment also to update § 120.883, 

Eligible administrative costs for 504 

loans, in paragraph (e) which currently 

limits of the amount of CDC closing fees 

allowed to be included in 504 financing 

portion of a project to be capped at 

$2,500. In alignment with these changes 

and in an attempt to keep the limit of 

CDC closing costs relevant to 

administrative costs, SBA is proposing 

an increase to the legal fees. According 

to the public comments, this cap does 

not reflect current administrative costs 

and creates a burden on the borrower to 

pay for closing expenses from its own 

account. In the final rule, SBA increases 

the amount from $2,500 to $10,000. 

Compliance With Executive Orders 

12866, 12988, 13132, and 13563, the 

Congressional Review Act (5 U.S.C. 

801–808), Paperwork Reduction Act (44 

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

Flexibility Act (5 U.S.C. 601–612) 

Executive Orders 12866 and 13563 

The Office of Management and Budget 

(OMB) has determined that this rule 

constitutes a ‘‘significant regulatory 

action’’ for purposes of Executive 

Orders 12866 and 13563. SBA, however, 

is proceeding under the emergency 

provision at Executive Order 12866, 

section 6(a)(3)(D), based on the need to 

move expeditiously to mitigate the 

current conditions arising from the 

COVID–19 pandemic. 

As shown in Table 1 below, during 

the five-year period spanning fiscal year 

(FY) 2018 and FY 2022, a total of 38,022 

504 loans were approved for a total 

gross approval amount as of September 

30, 2022, of $32,965,182,830. In 

addition, during this five-year period, 

SBA approved 247 debt refinance with 

expansion loans on average per year 

with an average annual dollar volume of 

$309,165,400, and approved 451 debt 

refinance without expansion loans on 

average per year with an average annual 

dollar volume of $469,596. The 

Economic Aid Act passage increased the 

debt refinance with expansion from 50 

percent of a project to 100 percent of a 

project. Prior to this change, of the debt 

refinance with expansion loans, only 16 

refinanced a debt that equaled 50 

percent of the expansion costs; if these 

borrowers had been able to refinance 

100 percent of the expansion costs 

instead of 50 percent, and assuming that 

all these borrowers did so, these 

borrowers would have been able to 

borrow $15 million more over five 

years, or about $3 million more 

annually. Since the passage of the 

Economic Aid Act, and the issuance of 

the interim final rule, there have been 

746 504 loan refinancing with 

expansion projects approved for a total 

of $1,030,563,000 approved. This 

legislative change has expanded the 

access to capital to small business for 

expansion projects that also need debt 

refinancing. 

TABLE 1—504 LOAN ACTIVITY FY 2018–FY 2022 

FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 

Total Number of 504 Loans .......................................... 5,874 6,099 7,119 9,676 9,254 3,844 

Total Dollar Volume of 504 Loans Approved ............... $4,753,644,000 $4,958,552,000 $5,826,885,000 $8,218,105,540 $9,207,996,290 $3,533,163,000 

Number of 504 Debt Refi With Expansion ................... 181 181 236 301 336 109 

Dollar Volume of 504 Debt Refi With Expansion ......... $212,098,000 $192,968,000 $296,392,000 $389,801,000 $454,568,000 $186,194,000 

Number of 504 Debt Refi Without Expansion .............. 181 166 386 693 829 249 

Dollar Volume of 504 Debt Refi Without Expansion .... $154,062,000 $154,842,000 $370,160,000 $709,020,000 $959,897,000 $270,151,000 

TABLE 2—504 LOAN ACTIVITY BY DEFINED COHORT AUGUST 2018–JULY 2023 

Aug’ 18–Jul’ 19 Aug’ 19–Jul’ 20 Aug’ 20–Jul’ 21 Aug’ 21–Jul’ 22 Aug’ 22–Jul’ 23 

Total Number of 504 Loans ........................................................................ 6,153 6,836 9,572 9,392 6,253 

Total Dollar Volume of 504 Loans Approved ............................................. $5,063,078,000 $5,575,249,000 $7,934,192,540 $9,248,887,290 $6,624,952,000 

Number of 504 Debt Refi With Expansion ................................................. 183 243 295 332 183 

Dollar Volume of 504 Debt Refi With Expansion ....................................... $191,786,000 $309,027,000 $362,039,000 $446,975,000 $305,619,000 

Number of 504 Debt Refi Without Expansion ............................................ 160 302 66 934 388 

Dollar Volume of 504 Debt Refi Without Expansion .................................. $157,880,000 $295,396,000 $601,831,000 $1,057,386,000 $432,638,000 

Data as of 9/15/2023, total dollar 

volume is lifetime gross approval 

amount including increases. 

This rule was necessary to implement 

the Economic Aid Act and provide 

economic relief to small businesses 

adversely impacted by COVID–19. SBA 

anticipates that finalizing these changes 

to the 504 debt refinancing programs 

will continue to result in benefits to 


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70584 Federal Register / Vol. 88, No. 196 / Thursday, October 12, 2023 / Rules and Regulations 

small businesses by providing greater 

flexibility to restructure debt. 

To assess the impact of the interim 

final rule, SBA evaluated 504 loan 

activity (including the number of loans 

and dollar volume of both debt 

refinance with and without expansion) 

between August 2018 and July 2023. 

Because the interim final rule was 

published on July 29, 2021, with 

immediate effectiveness, the first full 

month during which the modifications 

to 504 debt refinancing were available 

was August 2021, with August 2021 

through July 2022 being the first 12- 

month period during which the 

modifications to 504 debt refinancing 

were available to 504 applicants. SBA 

divided the data into five cohorts of 12 

months each, with the first cohort 

beginning in August 2018 and the last 

cohort beginning August 2023. See 

Table 2. 

As an appropriate baseline for 

evaluation of the impacts of the interim 

final rule that would be made 

permanent in this rule, SBA considers 

the state of 504 lending for debt 

refinance with expansion and without 

expansion before July 2021. SBA 

examines the 12-month periods from 

August 1, 2018, through July 31, 2019, 

to the period from August 1, 2022, to 

July 31, 2023, noting that external 

influences from the pandemic and from 

the payments made on behalf of 

borrowers by SBA under section 1112 of 

the Coronavirus Aid Recovery, and 

Economic Security Act (Section 1112 

Payments) that ended in September 

2021 occurred. The Section 1112 

Payments required SBA to make 

principal and interest payments on 504 

loans for certain periods of time 

depending on the when the 504 loan 

was approved, which would have made 

a 504 loan an attractive option for small 

businesses and consequently would 

have increased 504 loan volume. 

Further, interest rates on 504 loans in 

these two periods differ, from a range of 

approximately 4.0 to 5.0 percent in the 

earlier period to rates up to 7.0 percent 

in the later period, as do rates on 

alternatives to 504 loans. These changes 

mean that lending total volume 

comparisons may not be appropriate for 

assessment of impact. Because the major 

changes in the interim final rule were 

the increases in the amounts of existing 

indebtedness that may be refinanced for 

both 504 debt involving expansions and 

504 debt not involving expansions, SBA 

examined the percentages of 504 

lending that were for these two types of 

debt refinancing. The chart below shows 

these percentages for five August-July 

cohorts. 

2018–19 

% 

2019–20 

% 

2020–21 

% 

2021–22 

% 

2022–23 

% 

Dollar Volume of 504 Debt Refi with Expansion as Percentage of Dollar Volume of Total 504 Loans ............................................................. 3.79 5.54 4.56 4.83 4.61 

Dollar Volume of 504 Debt Refi without Expansion as Percentage of 

Dollar Volume of Total 504 Loans ....................................................... 3.12 5.30 7.59 11.43 6.53 

As indicated in the chart, the 

percentages of 504 debt refinancing 

loans with and without expansion are in 

the recent period returning to the levels 

seen prior to the publication of the 

interim final rule in July 2021. For debt 

refinancing without expansion, the 

August 2020–July 2021 period was 

elevated and the August 2021–July 2022 

cohort was an outlier, but the next 12 

months settled to a percentage that at a 

level consistent with the periods before 

the interim final rule and not indicative 

of a significant impact. These two 

cohorts with higher percentages were 

during the pandemic and were covered, 

at least in part, by Section 1112 

Payments. The 12-month percentages of 

504 debt refinancing with expansion did 

not vary widely. 

The interim final rule increased the 

amounts on 504 debt refinancing with 

and without expansion. Aggregate 504 

lending over the period in question 

ranged from approximately $5 billion to 

almost $9.25 billion, with total 504 

lending in the latest 12-month cohort at 

about $6.6 billion. Even in the unlikely 

scenario of the interim final rule as the 

sole cause of an increase in total 504 

lending from the low volume in the 

examined period of $5 billion (in 2018– 

19) to the latest 12-month total of $6.6 

billion, the incremental impact, as 

indicated by changes in the percentage 

of total lending accounted for by each, 

is under $100 million. 

Congressional Review Act 

OMB’s Office of Information and 

Regulatory Affairs has determined that 

this rule is not a major rule under 

Subtitle E of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (also known as the Congressional 

Review Act), 5 U.S.C. 804(2). Per the 

above cost benefit analysis, the annual 

effect on the economy is less than $100 

million. 

Executive Order 12988 

This action meets applicable 

standards set forth in sections 3(a) and 

3(b)(2) of Executive Order 12988, Civil 

Justice Reform, to minimize litigation, 

eliminate ambiguity, and reduce 

burden. The action does not have 

preemptive effect or retroactive effect. 

Executive Order 13132 

This rule does not have federalism 

implications as defined in Executive 

Order 13132. It will not have substantial 

direct effects on the States, on the 

relationship between the National 

Government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government, as specified in the 

Executive order. As such it does not 

warrant the preparation of a Federalism 

Assessment. 

Paperwork Reduction Act 

In order to implement the Act, SBA 

determined that it was necessary to 

modify SBA Form 1244, Application for 

Section 504 Loans, which is currently 

approved under OMB Control Number 

3245–0071, to conform the form to the 

revised requirements for debt 

refinancing loans. The changes did not 

add any new burdens for the 

respondents, rather, in some instances, 

the revisions will result in reduced 

burden as applicants and CDCs no 

longer have to submit certain 

information. 

(a) The information collection 

previously required PCLP CDCs to 

process all applications for debt 

refinancing without expansion through 

the Sacramento Loan Processing Center 

(SLPC) and not through the PCLP CDC’s 

delegated authority. As discussed above, 

this requirement was removed by the 

Economic Aid Act and, accordingly, 

SBA removed the requirement from the 

information collection when the interim 

final rule (IFR) was released in 2021. 

The final rule would result in no further 

changes. This revision did not change 

the information the PCLP CDC is 

required to collect, only how the 

application is processed. In addition, 

consistent with the changes made by the 


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Federal Register / Vol. 88, No. 196 / Thursday, October 12, 2023 / Rules and Regulations 70585 

IFR, SBA added two questions to clarify 

that, for debt refinancing without 

expansion, PCLP CDCs must process 

applications through the SLPC when the 

application involves the refinancing of 

same institution debt or, in cases 

involving the refinancing of federallyguaranteed debt, the CDC is requesting 

an exception to the requirement that the 

new installment payment be at least 

10% less than the existing installment 

amount. No further changes are 

necessary. 

(b) With respect to the question 

regarding whether the Applicant creates 

or retains the required number of jobs 

per debenture amount, an option has 

been added for the Applicant to indicate 

whether the project is eligible under the 

504 debt refinance alternate job 

standard reinstated by the Economic 

Aid Act. 

(c) Of the exhibits that are required, 

Exhibit 20 required that if the debt had 

been refinanced within two years of the 

date of application, non-PCLP CDCs had 

to submit with the application (and 

PCLP CDCs had to retain in the loan 

file) copies of the current debt and lien 

instruments as well as copies of the debt 

and lien instruments for the debt that 

was replaced by the current debt. With 

the minimum age of the qualified debt 

shortened from two years to six months 

by the Economic Aid Act, SBA revised 

the form to remove the requirement that 

these debt and lien instruments be 

included as part of Exhibit 20. 

In addition to the changes resulting 

from this rule, SBA made the following 

technical corrections and clarifying 

changes to Form 1244: (1) SBA 

corrected the description of which 

exhibits the CDC must retain and which 

the CDC must submit with the loan 

application; (2) SBA added a separate 

entry to facilitate disclosure of the use 

of refinancing proceeds involving land 

purchases only (the previous format of 

‘‘Land/Building’’ did not clearly 

indicate how information is to be 

reported); and (3) under the list of 

economic development objectives met 

by the project, SBA added references to 

‘‘base closures’’ and ‘‘minority-owned 

business’’. 

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

612 

When an agency issues a rulemaking, 

the Regulatory Flexibility Act (RFA), 5 

U.S.C. 601–612, requires the agency to 

‘‘prepare and make available for public 

comment an initial regulatory analysis’’ 

which will ‘‘describe the impact of the 

proposed rule on small entities.’’ 

Section 605 of the RFA allows an 

agency to certify a rule, in lieu of 

preparing an analysis, if the proposed 

rulemaking is not expected to have a 

significant economic impact on a 

substantial number of small entities. 

The changes in the final rule are a 

codification of new legislation and will 

involve changes to regulations at 13 CFR 

120.882, however there will be no 

changes to SBA Form 1244, and the 

burden hours to the small business 

concern and the Certified Development 

Company will remain the same. There 

are no anticipated additional 

compliance costs. Furthermore, SBA 

does not anticipate that any changes to 

the Eligible Project costs for 504 loans 

regulations would have a significant 

impact to a substantial number of small 

businesses. This is because only a small 

percentage of each year’s 504 loans 

involve debt refinancing without 

expansion. Each loan represents a 

unique small business borrower because 

these borrowers are only eligible to 

refinance their debt once in a fiscal year 

with the 504 Loan Program, and 

therefore do not have multiple 504 debt 

refinancing without expansion loans in 

any given year. Based on the average 

number of 504 loans from FY 2021– 

2023, only 13% involved debt 

refinancing without expansion. 

Specifically, in FY 2021, out of 9,676 

loans, 693 loans or 7% were for debt 

refinancing without expansion. In FY 

2022, this figure was 829 out of 9,254 

or 9% 504 loans, while in FY 2023, 

1,005 out of 4,451 or 23% of 504 loans 

were for debt refinancing without 

expansion. While the percentage of the 

504 loan portfolio involving debt 

refinancing without expansion 

increased by 20% from FY 2021 to 2023, 

this increase was due in part to the 

Section 1112 Payments, and in part to 

a rapidly increasing interest rate 

environment. The Section 1112 

Payments have sunset and SBA 

anticipates some adjustment due to the 

continued interest rate increases 

planned by the Federal Reserve. 

Because Section 1112 Payments have 

sunset, SBA believes that the 504 debt 

refinancing without expansion volume 

will return to the pre-section 1112 level 

of less than 10% of small entities. As 

such, SBA concludes that the rule will 

not impact a substantial number of 

small entities. 

While the economic implications of 

the final rule are small and the data do 

not reveal a significant economic impact 

on a substantial number of small 

entities, SBA anticipates a refinancing 

growth rate more in alignment with prepandemic levels, with some adjustment 

to the economic impact because the 

final rule will expand program 

eligibility. SBA analyzed potential 

growth scenarios of up to 30% growth 

in the 504 loan program, and even using 

this impact model (actual growth has 

never exceeded 15% in any prior fiscal 

year) the total of 504 debt refinance 

without expansion projects as a 

percentage of either number of loans or 

dollar volume of loans is not estimated 

to exceed 16% of the overall portfolio. 

When this percentage is applied to the 

estimated number of loans (small 

businesses impacted), this would result 

in less than 1,100 small businesses 

impacted. SBA estimates that the 

average monthly savings for small 

businesses that refinance their existing 

loans through the 504 loan program 

would be between $7,000 to $8,300 per 

month, with a total estimated savings 

over the life of the loan of between 

$180,000 to $205,000. SBA determined 

this estimate based on the historical 

average of a 504 debt refinancing 

without expansion loan averaging 

$1,000,000 for each small business 

applicant. SBA used the 504 July 2023 

interest rates to calculate both the 

monthly and total loan savings to each 

small business concern. The lower end 

of the $180,000 to $205,000 range 

reflects the economic impact if a small 

business concern refinanced for 20 

years, while the higher end reflects the 

economic impact of a small business 

concern refinanced for 25 years. Small 

business concerns do not use 10 year 

504 loans for debt refinancing without 

expansion, as their goal is to lower their 

payments by not only taking advantage 

of the 504 loan program’s fixed interest 

rate, but also the longer 20 and 25-year 

loan terms available. 

For the reasons stated above, SBA 

certifies that this action would not have 

a significant economic impact on a 

substantial number of small entities. 

List of Subjects in 13 CFR Part 120 

Loan programs-business, Reporting 

and recordkeeping requirements, Small 

businesses. 

Accordingly, the interim rule 

amending 13 CFR part 120, which was 

published at 86 FR 40775 on July 29, 

2021, is adopted as final with the 

following changes: 

PART 120—BUSINESS LOANS 

■ 1. The authority citation for part 120 

is revised to read as follows: 

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

(14), (h), and note, 636(a), (h) and (m), 650, 

687(f), 696(3) and (7), and 697(a) and (e); sec. 

521, Pub. L. 114–113, 129 Stat. 2242; sec. 

328(a), Pub. L. 116–260, 134 Stat. 1182. 

■ 2. Amend § 120.882 as follows: 

■ a. Revise paragraphs (g)(3) and (15); 

and 


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70586 Federal Register / Vol. 88, No. 196 / Thursday, October 12, 2023 / Rules and Regulations 

■ b. In paragraph (g)(16), in paragraph 

(B) of the definition of Qualified debt, 

remove ‘‘85%’’, ‘‘120.131 and 

120.870(b)’’, and ‘‘120.131(b)’’ and add 

in their places ‘‘75%’’, ‘‘§§ 120.131 and 

120.870(b)’’, and ‘‘§ 120.131(b)’’, 

respectively. 

The revisions read as follows: 

§ 120.882 Eligible Project costs for 504 

loans. 

* * * * * 

(g) * * * 

(3) A loan that is subject to a 

guarantee by a Federal agency or 

department may be refinanced under 

the following conditions and 

requirements: 

(i) An existing 504 loan may be 

refinanced if both the Third Party Loan 

and the 504 Loan are being refinanced 

or the Third Party Loan has been paid 

in full. If the 504 Loan being refinanced 

received approval through another CDC, 

the CDC working on the current 

refinancing must provide advance 

notice to the other CDC in writing (by 

email or letter). 

(ii) An existing 7(a) loan may be 

refinanced if the CDC notifies the 7(a) 

lender in advance in writing (by email 

or letter). 

(iii) The refinancing will provide a 

substantial benefit to the borrower. For 

purposes of this paragraph (g)(3)(iii), 

‘‘substantial benefit’’ means that the 

portion of the new installment amount 

attributable to the debt being refinanced 

must be at least 10 percent less than the 

existing installment amount(s). 

Prepayment penalties (including 

subsidy recoupment fees), financing 

fees, and other financing costs must be 

added to the amount being refinanced in 

calculating the percentage reduction in 

the new installment payment, but the 

portion of the new installment amount 

attributable to Eligible Business 

Expenses (as described in paragraph 

(g)(6)(ii) of this section) is not included 

in this calculation. Exceptions to the 10 

percent reduction requirement may be 

approved by the Director, Office of 

Financial Assistance (D/FA) or designee 

for good cause. PCLP CDCs may not use 

their delegated authority to approve a 

loan requiring the exception in this 

paragraph (g)(3)(iii). 

* * * * * 

(15) Notwithstanding § 120.860, a 

debt may be refinanced under this 

paragraph (g) if it does not meet the job 

creation or other economic development 

objectives set forth in § 120.861 or 

§ 120.862. In such case, the 504 loan 

may not exceed the product obtained by 

multiplying the number of employees of 

the Borrower by $90,000. The number of 

employees of the Borrower is equal to 

the sum of: 

(i) The number of full-time employees 

of the Borrower on the date of the 

application; and 

(ii) The product obtained by 

multiplying: 

(A) The number of part-time 

employees of the Borrower on the date 

of the application; by 

(B) The quotient obtained by dividing 

the average number of hours each parttime employee of the Borrower works 

each week by 40. 

Example 1 to paragraph (g)(15): 30 

full-time employees and 35 part-time 

employees working 20 hours per week 

is calculated as follows: 30 + (35 × (20/ 

40)) = 47.5. The maximum amount of 

the 504 loan would be 47.5 multiplied 

by $90,000, or $4,275,000. 

* * * * * 

■ 3. Amend § 120.883 by revising 

paragraph (e) to read as follows: 

§ 120.883 Eligible administrative costs for 

504 loans. 

* * * * * 

(e) CDC Closing Fee (see 

§ 120.971(a)(2)) up to a maximum of 

$10,000; and 

* * * * * 

Isabella Casillas Guzman, 

Administrator. 

[FR Doc. 2023–22169 Filed 10–11–23; 8:45 am] 

BILLING CODE 8026–09–P 

DEPARTMENT OF JUSTICE 

28 CFR Part 68 

[EOIR Docket No. 022–0010; AG Order No. 

5812–2023] 

RIN 1125–AB28 

Office of the Chief Administrative 

Hearing Officer, Review Procedures 

AGENCY: Executive Office for 

Immigration Review, Department of 

Justice. 

ACTION: Interim final rule; request for 

comment. 

SUMMARY: The Department of Justice 

(‘‘Department’’) is revising its 

regulations to provide that the Attorney 

General may, in his discretion, review 

decisions and orders of Administrative 

Law Judges (‘‘ALJs’’) in the Office of the 

Chief Administrative Hearing Officer 

(‘‘OCAHO’’) in cases arising under 

section 274B of the Immigration and 

Nationality Act (‘‘INA’’ or ‘‘the Act’’). 

This revision will ensure that the 

adjudicatory process for section 274B 

cases is consistent with the Supreme 

Court’s decision in the 2021 case United 

States v. Arthrex, Inc., and will align 

that process with similar processes for 

discretionary review of decisions by 

ALJs in OCAHO and throughout the 

Executive Branch. It will not limit or 

alter parties’ right to seek judicial 

review of adverse decisions. 

DATES: 

Effective date: This rule is effective 

October 12, 2023. 

Comments: Electronic comments must 

be submitted and written comments 

must be postmarked or otherwise 

indicate a shipping date on or before 

December 11, 2023. 

ADDRESSES: If you wish to provide 

comment regarding this rulemaking, you 

must submit comments, identified by 

the agency name and reference RIN 

1125–AB28 or EOIR Docket No. 022– 

0010, by one of the two methods below. 

• Federal eRulemaking Portal: 

https://www.regulations.gov. Follow the 

website’s instructions for submitting 

comments. The electronic Federal 

Docket Management System (FDMS) at 

https://www.regulations.gov will accept 

electronic comments until 11:59 p.m. 

Eastern Time on December 11, 2023. 

• Mail: Paper comments that 

duplicate an electronic submission are 

unnecessary. If you wish to submit a 

paper comment in lieu of electronic 

submission, please direct the mail/ 

shipment to: Raechel Horowitz, Chief, 

Immigration Law Division, Office of 

Policy, Executive Office for Immigration 

Review, 5107 Leesburg Pike, Suite 1800, 

Falls Church, VA 22041. To ensure 

proper handling, please reference the 

agency name and RIN 1125–AB28 or 

EOIR Docket No. 022–0010 on your 

correspondence. Mailed items must be 

postmarked or otherwise indicate a 

shipping date on or before the 

submission deadline. 

FOR FURTHER INFORMATION CONTACT: 

Raechel Horowitz, Chief, Immigration 

Law Division, Office of Policy, 

Executive Office for Immigration 

Review, 5107 Leesburg Pike, Suite 1800, 

Falls Church, VA 22041, telephone 

(703) 305–0289 (not a toll-free call). 

SUPPLEMENTARY INFORMATION: 

I. Public Participation 

Interested persons are invited to 

participate in this rulemaking by 

submitting written data, views, or 

arguments on all aspects of this interim 

final rule (‘‘IFR’’) via one of the methods 

and by the deadline stated above. The 

Department also invites comments that 

relate to the economic, environmental, 

or federalism effects that might result 

from this IFR. Comments that will 

provide the most assistance to the 


ddrumheller on DSK120RN23PROD with RULES1