[Federal Register Volume 89, Number 206 (Thursday, October 24, 2024)]
[Proposed Rules]
[Pages 84831-84836]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24753]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120

RIN 3245-AI21


ALP Express Pilot to Permanent Status

AGENCY: U.S. Small Business Administration.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The U.S. Small Business Administration (``SBA'' or Agency) is 
proposing to make permanent the increased delegated authorities made 
available under the ALP Express Pilot for Certified Development 
Companies (``CDCs'') approved for the Accredited Lenders Program 
(``ALP''). These increased delegated authorities for 504 loans of 
$500,000 or less (``ALP Express authority'') were authorized under the 
Economic Aid to Hard-hit Small Businesses, Nonprofits, and Venues Act 
(Economic Aid Act or EAA). When these increased delegated authorities 
expired on September 30, 2023, SBA implemented the ALP Express Pilot in 
October 2023 to allow SBA to further evaluate the improved customer 
service levels for SBA Borrowers and the use of these increased 
delegated authorities by ALP CDCs. The ALP Express Pilot expires on 
September 30, 2025. SBA is proposing rules to make the pilot permanent 
and is seeking public comment to help the Agency identify which parts 
of the pilot have been successful and which may need further 
modification. SBA notified Congress of the pilot prior to OMB approval 
and notified Congress of the intent to convert the pilot to become a 
permanent part of the 504 Loan Program in September 2024.

DATES: SBA must receive comments on this proposed rule on or before 
November 25, 2024.

ADDRESSES: You may submit comments, identified by SBA docket number 
Docket No. SBA-2023-0012, by any of the following methods:
    <bullet> Federal eRulemaking Portal: https://www.regulations.gov/. 
Follow the instructions for submitting comments.
    <bullet> Mail: Gregorius Suryadi, Office of Financial Assistance, 
U.S. Small Business Administration, 409 Third Street SW, Suite 8300, 
Washington, DC 20416.
    <bullet> Hand Delivery/Courier: Gregorius Suryadi, Office of 
Financial Assistance, U.S. Small Business Administration, 409 Third 
Street SW, Washington, DC 20416.
    SBA will post all comments on https://www.regulations.gov/.
    If you wish to submit confidential business information (``CBI'') 
as defined in the User Notice at https://www.regulations.gov/, please 
submit the information to Gregorius Suryadi, Office of Financial 
Assistance, U.S. Small Business Administration, 409 Third Street SW, 
Suite 8300, Washington, DC 20416; or send an email to 
<a href="/cdn-cgi/l/email-protection#12756077757d607b67613c6167606b73767b526170733c757d64"><span class="__cf_email__" data-cfemail="e3849186848c918a9690cd9096919a82878aa3908182cd848c95">[email protected]</span></a>. Highlight the information that you consider 
to be CBI and explain why you believe SBA should hold this information 
as confidential. SBA will review the information and make the final 
determination as to whether it will publish the information.

FOR FURTHER INFORMATION CONTACT: Gregorius Suryadi, Office of Financial 
Assistance, U.S. Small Business Administration at (202) 205-6806 or 
<a href="/cdn-cgi/l/email-protection#97f0e5f2f0f8e5fee2e4b9e4e2e5eef6f3fed7e4f5f6b9f0f8e1"><span class="__cf_email__" data-cfemail="583f2a3d3f372a312d2b762b2d2a21393c31182b3a39763f372e">[email protected]</span></a>. The phone number above may also be reached 
by individuals who are deaf or hard of hearing, or who have speech 
disabilities, through the Federal Communications Commission's TTY-Based 
Telecommunications Relay Service teletype service at 711.

SUPPLEMENTARY INFORMATION:

1. Background Information

    The 504 Loan Program is an SBA financing program authorized under 
title V of the Small Business Investment Act of 1958, as amended, 15 
U.S.C. 695 et seq (``Small Business Investment Act''). 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, and to facilitate the creation or retention of jobs 
and local economic development. Under the 504 Loan Program, loans are 
made to small business applicants by Certified Development Companies 
(``CDCs''), which are certified and regulated by SBA to promote 
economic development within their community. In general, a project in 
the 504 Loan Program (a ``504 Project'') includes: a loan obtained from 
a private sector lender with a senior lien covering at least 50 percent 
of the project cost; a loan obtained from a CDC (a ``504 Loan'') with a 
junior lien covering up to 40 percent of the total cost (backed by a 
100 percent SBA guaranteed debenture); and a contribution from the 
Borrower of at least ten percent equity.
    There are three types of CDCs that participate in the 504 Loan 
Program. This document relates to the temporary increased delegated 
authority that was granted, in accordance with section 328(b) of the 
Economic Aid Act (``EAA''), to CDCs that are approved by SBA to 
participate in the Accredited Lenders Program (hereafter ``ALP CDCs''), 
which is authorized under section 507(a) of the Small Business 
Investment Act. Under section 507(c) of the Small Business Investment 
Act, SBA is authorized to develop an expedited procedure for processing 
a loan application or servicing action submitted by ALP CDCs. [15 
U.S.C. 697d.]
    Prior to the Economic Aid Act, ALP CDCs were required to obtain 
SBA's approval on both the loan's eligibility and creditworthiness 
determinations. In addition, ALP CDCs only had delegated authority to 
make certain ``No Adverse Change'' certifications prior to loan closing 
without SBA's review and approval and were only authorized to close 504 
loans under the expedited loan closing procedures applicable to a 
Priority CDC. Further, ALP CDCs were required to obtain SBA's approval 
for most servicing actions. Section 328(b) of the EAA temporarily 
provided ALP CDCs increased delegated authority to ``approve, 
authorize, close and service covered loans,'' for loans of not more 
than $500,000 and that are not made to a borrower in an industry with a 
high rate of default as defined by SBA (hereafter referred to as ``ALP 
Express Loans''). SBA implemented these increased delegated authorities 
with the publication of an interim final rule on June 27, 2022. (87 FR 
37979). Pursuant to the EAA, these delegated authorities were to expire 
on September 30, 2023.
    In order to evaluate the use of these increased delegated 
authorities by ALP CDCs and to identify opportunities for further 
modification, SBA developed the ALP Express Pilot program to provide 
these increased delegated authorities through September 30, 2025

[[Page 84832]]

to ALP CDCs (hereafter referred to as ``ALP Express Pilot Loans''). The 
ALP Express Pilot's delegated authorities in effect represented a 
continuation of the ALP Express authority provided by the Economic Aid 
Act. (88 FR 69529 (October 6, 2023)). When ALP Express delegated 
authorities become permanent, SBA is not including the prohibition 
found in section 328(b) of the EAA against making loans with ALP 
Express authority to a borrower in an industry with a high rate of 
default because this mandatory requirement sunset with the EAA 
expiration date. A subsequent review of the 504 portfolio in June 2024 
also found that no ALP Express Pilot program loans or covered loans 
made pursuant to Section 328(b) of the EAA were in default or 
liquidation as of June 30, 2024.
    Pursuant to its authority set forth in Section 507(c) of the Small 
Business Investment Act (15 U.S.C. 697d(c)), which authorizes SBA to 
develop expedited procedures for processing a loan application or 
servicing action submitted by ALP CDCs, SBA proposes to make permanent 
the increased delegated authorities available under the ALP Express 
Pilot. The Agency requests comments on all aspects of regulatory 
revisions in this proposed rule.

2. Evaluation Criteria for ALP Express Pilot

    SBA typically initiates a pilot loan program to test an innovative 
approach to enhance or streamline assistance to small businesses, or a 
subset of small businesses, and/or lower taxpayer cost or risk. Pilot 
loan program evaluations assess how well a program is achieving its 
objectives and other aspects of performance in the context in which the 
program operates. Our ongoing evaluations of the 504 program and 
delegations authorized will give the SBA the opportunity to refine the 
design of the program and assist in determining whether the program 
operations have resulted in the desired benefits for participants.
    By documenting on SBA Form 1244 whether the ALP CDC is using its 
ALP Express authority when submitting an application for an ALP Express 
Pilot Loan, SBA was able to track ALP CDCs' use of this increased 
delegated authority. In addition to the program changes introduced 
through the ALP Express Pilot, on May 11, 2023, SBA instituted an E-
Tran risk mitigation technology compliance check on all 504 loans, 
including those with ALP Express authority, and streamlined the 
affiliation policy guidance that reduced the amount of paperwork 
required for submitting loan packages. The ALP Express ``covered 
loans'' had performed well prior to this quality control upgrade and 
continue to perform well with this enhanced fraud risk management 
systems upgrade in place. The processing time for ALP Express loans was 
reduced significantly from an average of 5 days to 2.3 days (one loan 
processed in 3 hours). The quality of the ALP Express Pilot 504 loans 
have been reviewed by the SBA Office of Credit Risk Management (OCRM) 
and present low risk to the 504 portfolio. The E-Tran risk mitigation 
protocols consists of background checks on 504 borrowers, checks of 
USCIS verifications, confirmation of the identity of the borrower using 
their social security number or tax identification number and 
verification by checking government databases if the applicant has 
prior loss on government debt. This enhancement streamlines the 
application process requirements for the CDCs and provides government 
resources to assist in detecting and preventing fraud for 504 
applicants.
    SBA reviewed the following data related to ALP CDCs and their use 
of ALP Express authority under the Economic Aid Act and used the same 
evaluation criteria for the ALP Express Pilot:
    A. Did the number and percentage of 504 loans in the portfolio 
under $500,000 increase as a result of the availability of ALP Express 
authority? It is hard to evaluate the success of ALP Express based 
solely on the increased number of 504 loans during this period, as 
there were other factors that influenced demand. During the pandemic, 
SBA experienced a surge of 504 loan activity in part due to Section 
1112 of the CARES Act, which authorized SBA to make the loan payments 
on SBA loans for SBA borrowers for six months (or more, in some cases). 
For a more accurate comparison, loan activity prior to this surge 
period was also considered. Therefore, SBA analyzed recent and pre-
pandemic activity levels, as shown in table 1.

                             Table 1--Portfolio Trends for 504 Loans Under $500,000
                                                [FY 19 to FY 24]
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                                      Non-ALP Express loans       ALP Express loans       Total 504 loans under
                                   ----------------------------------------------------         $500,000
            Fiscal Yr.                                                                 -------------------------
                                        No.          % Ch         No.          % Ch         No.          % Ch
----------------------------------------------------------------------------------------------------------------
2019..............................        2,983  ...........  ...........  ...........        2,983  ...........
2020..............................        3,426           15  ...........  ...........        3,426           15
2021..............................        4,471           31  ...........  ...........        4,471           31
2022..............................        3,414          -24          162  ...........        3,576          -20
2023..............................        1,113          -67        1,060          554        2,173          -39
2024..............................          908          -18          772          -27        1,680          -23
----------------------------------------------------------------------------------------------------------------
* Note: ALP Express Loans were made available in June 2022.

    Table 1 provides 504 Loan Program activities for loans of $500,000 
or less. In FY 2019, SBA approved 2,983 non-ALP Express loans, and in 
FY 2020, SBA approved 3,426 loans, an increase of 15 percent from FY 
2019. In FY 2021, SBA approved 4,471 loans, an increase of 31 percent 
from FY 2020. In FY 2020, SBA approved 3,414 loans, a decrease of 24 
percent from FY 2020. In FY 2023, SBA approved 1,113 loans, a decrease 
of 67 percent from FY 2022. For FY 2024 starting from October 1, 2024 
until June 30, 2024, when this NPRM was drafted, SBA approved 908 
loans.
    While the Economic Aid Act authorized these increased delegated 
authorities, SBA did not implement ALP Express until June 27, 2022. 
From June 27, 2022 to September 20, 2022, SBA approved 162 ALP Express 
loans for a combined total of 3,576 loans of 504 loans of $500,000 or 
less. In FY 2023, SBA approved 1,060 ALP Express loans, and at the same 
time the number of approved non-ALP Express loan of $500,000 or less 
was 1,113 for a combined total of 2,173 of 504 loans for $500,000 or 
less. Finally, for FY 2024 from October 1, 2024 to June 30, 2024,

[[Page 84833]]

SBA approved a total of 908 non-ALP Express loans of $500,000 or less, 
while approving 772 ALP Express loans, during the same time period, for 
a combined total of approved 504 loans of $500,000 or less of 1,680. 
Even though the total number of non-ALP Express decreased in FY 2023 
and in the first three quarters of FY 2024, the total approved ALP 
Express loans were almost the same number as the approved non-ALP 
Express loan.
    B. How do the default rates of ALP Express loans compare with 
similarly sized loans not processed and serviced using this authority? 
Since the implementation of the ALP Express Pilot program (June 27, 
2022) through the end of June 2024, SBA has approved 1,994 ALP Express 
Pilot loans for a total dollar amount of $579,958,000 with no defaults 
reported. At the same time, SBA approved 4,581 non-ALP Express loans 
for a total dollar amount of $1,391,408,000 with no defaults reported.
    C. Did ALP Express loan approvals and servicing turn times improve, 
resulting in enhanced customer service? Currently the average approval 
processing time of ALP Express loans is 2.3 business days, one day less 
than regular 504 loan applications. The fastest approval processing 
time recorded during the ALP Express Pilot program has been three 
hours. The average processing time is calculated based on loan volume 
and the number of loan officers available at the SBA loan center 
processing 504 loans at the time of application. This is compared to 
the standard five business days processing time for 504 new loan 
applications at the SBA loan processing center, which during pandemic 
had increased up to 10 business days due to the 504 loan volume surge 
and the Section 1112 payment impact.
    SBA issued an interim final rule to implement the ALP Express 
temporary delegated authority authorized under the Economic Aid Act 
with an effective date of June 27, 2022. (87 FR 37979). Between June 
27, 2022, and September 30, 2022 (the end of FY 2022), SBA approved 162 
ALP Express Pilot loans for a total loan amount of $49,543,000. In FY 
2023, SBA approved 1,060 ALP Express Pilot loans for a total loan 
amount of $306,236,000. In FY 2024, from October 1, 2024 to June 30, 
2024, SBA has approved 772 ALP Express loans for a total dollar amount 
of $224,179,000.
    In comparison, in FY 2022 SBA approved 3,414 non-ALP Express loans 
of $500,000 or less and 162 ALP Express Pilot loans for a period of 
June 27, 2022 to September 30, 2022, for a combined total of 3,576 
loans of $500,000 or less. In FY 2023 SBA approved 1,113 non-ALP-
Express loans and 1,060 ALP Express Pilot loans, for a combined total 
of 2,173 loans. This was due to a return to pre-pandemic lending levels 
before the surge created by the availability of Section 1112 funding. 
Even though the total combined approved loans decreased by 39 percent 
due to COVID-19, the ALP Express Pilot loans contributed almost half of 
the total combined approved 504 loans under $500,000. Finally, for FY 
2024 (October 1, 2023, to June 30, 2024), SBA approved 908 non-ALP 
Express loans of $500,000 or less and 728 ALP Express Pilot loans for a 
combined of 1,636 loans with a total loan amount of $224,179,000.
    Therefore, SBA has used the standard five Government Accountability 
Office evaluation methodologies for evaluating a pilot beyond the 
Federal Register notice stated objectives in the pilot notice and added 
additional an explanation: (1) The measurable objectives achieved 
through the pilot were demonstrated by increased ALP processing of 
loans under $500,000 and additional CDCs that applied to become ALP 
CDCs under the pilot; (2) The data SBA collected and analyzed was based 
on actual 504 loan portfolio performance; (3) SBA evaluated acceptable 
costs of the pilot and reviewed potential losses and obtain cost 
savings due to staff time not required to review credit decisions or 
process certain servicing actions with no increase of costs to SBA; (4) 
due to the limited universe of CDCs and the self-selection opt in 
process, SBA considers there were sufficient numbers and types of 
lenders using the pilot; (5) the factors evidencing a continuing need 
for the pilot included public support from the CDCs and their trade 
association and approval to continue to the pilot by the SBA 
Administrator; and (6) time frames for completion which necessitate 
this NPRM to convert the pilot to permanent status or the delegated 
authorities of the ALP Express Pilot will expire on September 30, 2025. 
By beginning the NPRM process in November 2024, this should allow the 
full clearance process by SBA and OMB and the public comment period and 
comment disposition to move to the final rule making and publication 
stage before the September 30, 2025, deadline.

CDC's Authorities

    Under the ALP Express Pilot, SBA delegated to ALP CDCs the 
authority to make the final decision with respect to the applicant's 
creditworthiness on ALP Express Pilot Loans. SBA continued to be 
responsible for reviewing each 504 loan to ensure that it meets all 
loan program requirements for program eligibility, and the risk 
management E-Tran enhancement provided a tool to assist with fraud 
detection and prevention. SBA proposes to make these increased 
authorities permanent for loans that meet ALP Express eligibility 
criteria. SBA is not proposing any additional changes to current ALP 
Express underwriting, servicing or closing authorities as established 
by the ALP Express Pilot Program. SBA's Office of General Counsel and 
the Office of Credit Risk Management noted the top five lender 
oversight findings of the closed ALP Express loans were minor and 
resolved promptly. Based on the excellent performance of this cohort of 
the 504 loans portfolio, there has been low risk to the national 
portfolio, due to the implementation of the ALP Express Pilot. ALP CDCs 
appear to have used their delegated authority as prudent lenders. Of 
all ALP Express approved loans since inception of the pilot through 
June 30, 2024, none are in default or in liquidation.
    SBA also delegated to ALP CDCs the authority to approve certain 
servicing actions after closing on ALP Express Pilot Loans (though ALP 
CDCs were still required to notify the appropriate SBA servicing center 
of their approval of any servicing action on ALP Express Pilot Loans). 
Finally, SBA delegated to ALP CDCs the responsibility to undertake all 
actions necessary to close the ALP Express Pilot Loan and Debenture in 
accordance with the expedited loan closing procedures applicable to a 
Priority CDC and with 13 CFR 120.960. SBA is proposing to make these 
increased authorities permanent for loans that meet ALP Express 
eligibility criteria. CDCs use these delegated authorities to approve 
certain servicing actions after closing. SBA has not found issues with 
the ALP Express loan cohort performance or risk that have become a 
concern and prompted SBA to reconsider the increased delegated 
authorities.
    In their own discretion, ALP CDCs may decide not to exercise their 
delegated authority with respect to an ALP Express Pilot Loan and may 
instead submit the loan to SBA under nondelegated procedures. ALP CDCs 
may not use their ALP Express authority to service a loan that was 
approved under non-delegated authority that could have been made as an 
ALP Express Pilot Loan. In addition, PCLP CDCs may decide to process an 
ALP Express Pilot Loan under their status as an ALP CDC instead of as a 
PCLP CDC,

[[Page 84834]]

thereby not requiring the CDC to comply with Loan Loss Reserve Fund 
requirements for that loan. SBA is proposing to make these increased 
authorities permanent for loans that meet ALP Express eligibility 
requirements and the Loan Loss Reserve Fund requirements for PCLP CDCs 
that process ALP Express Loan under their status as an ALP CDC instead 
of as a PCLP CDC.
    In making, closing, servicing, or liquidating an ALP Express Pilot 
Loan, CDCs were required to follow all Loan Program Requirements under 
the 504 Loan Program. This included the loan closing and disbursement 
procedures in SOP 50 10 7.1 and the servicing and liquidation 
requirements in 13 CFR 120.535, 120.536, 120.540, 120.842 and 120.960, 
as well as SOP 50 55. SBA does not propose any changes to these 
responsibilities in making the increased authorities available to ALP 
CDCs under the ALP Express Pilot delegations of authority permanent.
    For further guidance on ALP Express authority, SBA published the 
ALP Express Pilot Program Guide. This guide will continue in use until 
SOP 50 55 is amended after this pilot is converted to a permanent 
program.

Application and Reporting Requirements

    CDCs are required to use the application forms for current 504 loan 
processing and execute an SBA Terms and Conditions document for each 
504 loan, including ALP Express Pilot loans, as set forth in SOP 50 10 
7.1.
    By documenting on SBA Form 1244 whether the ALP CDC is using its 
ALP Express authority when submitting an application for an ALP Express 
Pilot Loan, SBA was able to track ALP CDCs' use of this increased 
delegated authority. CDCs were also required to comply with the 
reporting requirements in 13 CFR 120.830. SBA does not propose any 
changes to these responsibilities in making the increased authorities 
available to ALP CDCs under the ALP Express Pilot Program permanent.

Lender Oversight

    ALP CDC oversight procedures shall continue to follow the 
requirements set forth in 13 CFR part 120, subpart I and SOPs 50 53 
(Lender Supervision and Enforcement) and SOP 51 00 (On-Site Lender 
Reviews and Examinations). The SOPs can be found on the SBA website. 
ALP CDCs will be monitored both for performance and other risk 
characteristics as well as for compliance with the requirements of the 
ALP Express Pilot Program. The ALP CDC must maintain compliance with 
the requirement that it only makes ALP Express Pilot Loans in an amount 
of $500,000 or less, along with all other loan program requirements. 
ALP CDCs also will be subject to 13 CFR 120.1400 through 120.1600 and 
the provisions of SOP 50 53 concerning supervision and enforcement. SBA 
does not propose any changes to these responsibilities in making the 
increased authorities available to ALP CDCs under the ALP Express Pilot 
delegations of authority permanent.

Compliance With Executive Orders 12866, 12988, 13132, 13563, and 14904, 
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

    Executive Order 12866, ``Regulatory Planning and Review,'' directs 
agencies to assess all costs and benefits of available regulatory 
alternatives and, if regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety effects, distributive impacts, 
and equity). Executive Order 13563, ``Improving Regulation and 
Regulatory Review,'' emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility. Executive Order 14094, ``Modernizing Regulatory 
Review,'' amends section 3(f) of Executive Order 12866 and supplements 
and reaffirms the principles, structures and definitions governing 
contemporary regulatory review established in Executive Order 12866 and 
Executive Order 13563. The OMB Office of Information and Regulatory 
Affairs has determined that this rulemaking is not a significant 
regulatory action. SBA has drafted a cost-benefit analysis for the 
public's information in the next section.

A. Cost-Benefit Analysis

Is there a need for the Regulatory Action?
    Access to capital is one of the primary challenges for small 
business to start, grow and sustain their business. SBA 504 loan 
programs serve an important role in business lending for small 
businesses that do not have credit available elsewhere from 
conventional sources on reasonable terms. The Agency believes that a 
streamlined process for small dollar loans particularly for loans of 
$500,000 or less will facilitate increased participation by small 
business owners, especially those in underrepresented communities. As a 
result of proceeding under the emergency provision at Executive Order 
12866, section 6(a)(3)(D), based on the need to move expeditiously to 
mitigate the COVID-19 pandemic, SBA was able to reduce the processing 
and approval time of loan applications that were favorable to small 
businesses that need immediate financial assistance from the 
government. The ALP Express Pilot delegated authority has proven that 
ALP CDCs are able to process, approve, and service ALP Express Pilot 
loans within the guidelines issued by the SBA. SBA hopes to make these 
reductions permanent. Accordingly, the proposed change will reduce 
regulatory burdens, reduce the number of hours spent processing an 
application to deliver a loan for both SBA and lenders and increase 
access to capital for small businesses.

B. Benefits and Costs of the Rulemaking

What are the potential benefits and costs of this Regulatory Action?
    SBA anticipates that implementing the ALP Express Loan authority 
and providing ALP CDCs with greater authority to approve and service 
loans will reduce processing time and therefore benefit small 
businesses, their employees, and the communities they serve.
    As a result of the temporary 504 Express Loan Authority (ALP 
Express Pilot) SBA provides to ALP CDCs, the processing time and 
approval of loans for $500,000 or less has an average of 2.3 business 
days whereas the processing time of regular 504 loans non-delegated 
authority has an average of 5 days. Therefore, small businesses will 
have access to capital to start, grow, and sustain their businesses in 
reasonable time. SBA does not anticipate additional costs or impact on 
the subsidy to operate ALP Express loan.

C. What alternatives have been considered?

    SBA could allow the pilot to expire and resume the ALP authority 
delegation limited under the 504 program requirements prior to the 
implementation of the Economic Aid Act. Due to the efficiency gains 
under the ALP Express pilot, SBA considered it more prudent to retain 
these delegated authorities to reduce regulatory burdens for CDCs with 
ALP approved status and responsibly streamline the processing, approval 
and closings of 504 loan application under $500,000 without 
substantially increasing the risk of waste, fraud, or abuse of the 
programs, or threatening the integrity of the

[[Page 84835]]

business loan programs or taxpayer dollars.

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 would 
not have preemptive effect or retroactive effect.

Executive Order 13175

    This proposed rule would not have Tribal implications under 
Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments, because it would not have a substantial direct effect on 
one or more Indian tribes, on the relationship between the Federal 
Government and Indian tribes, or on the distribution of power and 
responsibilities between the Federal Government and Indian tribes.

Executive Order 13132

    This rulemaking would not have federalism implications as defined 
in Executive Order 13132, Federalism. It would 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, 44 U.S.C., Ch. 35

    This rulemaking does not impose additional reporting or 
recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C. 
chapter 35. In order to implement the Economic Aid Act, SBA determined 
that it was necessary to temporarily modify SBA Form 1244, which was 
approved on November 22, 2022, under OMB Control Number 3245-0071, 
Application for Section 504 Loans, to conform the application with the 
revised requirements for ALP Express Loan authority. The changes did 
not add any new burdens for the respondents. SBA made the following 
technical corrections and clarifying changes to SBA Form 1244: (1) 
revised question number 4 on page 2 to include the updated language of 
Criminal Justice Rule; (2) added paragraph on page 4 authorizing the 
SBA to release information regarding existing SBA loan to Lender/CDC; 
(3) revised the instructions on page 5 (Purpose of the Form) to clarify 
that CDCs with ALP Express Loan authority must use the form; (4) added 
a new ALP Express checkbox to page 8 in the Submission Method field; 
(5) added additional row to the project table on page 9 for Other 
Secured Debt to be Refinanced; and (6) updated the instructions on 
pages 11 and 12 (Required Exhibits) to identify which exhibits must be 
completed and uploaded in SBA's E-Tran system for ALP Express Loans and 
which exhibits non-ASM CDCs must complete and upload into E-Tran. SBA 
obtained emergency approval from OMB for the revised information 
collection. No additional modifications to SBA Form 1244 were necessary 
for the ALP Express Pilot, and no additional modifications to SBA Form 
1244 will be necessary for purposes of making the ALP Express increased 
authorities permanent through this rulemaking.

Regulatory Flexibility Act 5 U.S.C. 601-612

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small businesses, small organizations, and small governmental 
jurisdictions. Pursuant to the RFA, when an agency issues a proposed 
rulemaking, it must prepare and make available for public comment an 
initial regulatory flexibility analysis to address the impact of the 
rule on small entities. However, section 605 of the RFA allows an 
agency to certify a rule, in lieu of preparing an analysis, if the 
rulemaking is not expected to have a significant economic impact on a 
substantial number of small entities. The rulemaking will impact 85 ALP 
CDCs; however, SBA believes the impact will be positive and beneficial 
to all ALP CDCs. This rulemaking makes permanent the temporary 
increased delegated authorities available under the ALP Express Pilot 
program. This will improve the approval time of 504 loan applications 
for loans in an amount of $500,000 or less.
    For the three-year period between FY 2022 (June 27, 2022) to FY 
2024 (June 30, 2024) SBA approved 4,581 non-ALP Express loans of 
$500,000 or less, for a total dollar amount of $1,391,408,000. In the 
same time period SBA approved 1,994 ALP Express loans for a total 
dollar amount of $579,958,000. The total combined approved loans for 
504 loan of less than $500,000 over the same three-year period is 6,575 
loans for a total of $1,971,366,000.
    Based on the actual loans approved in the three-year period since 
ALP Express Pilot program implementation, ALP CDCs have demonstrated 
success in processing and servicing loans for less than $500,000 less 
through the ALP Express program using their ALP delegated authority. In 
addition, since ALP Express implementation, there have been no 
instances of ALP Express in default or in liquidation. SBA estimates 
the burden for completing SBA Form 1244, ``Application For Section 504 
Loans'', including time for reviewing instructions, gathering data and 
documentation needed, and completing and reviewing the form, is 2.5 
hours. SBA will not need to change SBA Form 1244 as a result of the 
proposed rulemaking of ALP Express as permanent program. SBA 
anticipates the proposed rule will increase CDCs participation in 
making loans of $500,000 or less and increase the number of approved 
504 program loans as a whole. The ALP Express pilot added no additional 
cost burdens to SBA, CDCs, or small business borrowers. There were 
minimal changes to forms and SBA used existing staff to implement the 
pilot. The zero default and liquidation rates of the ALP Express pilot 
portfolio cohort document no potential impact to SBA subsidy.
    Based on the foregoing, the Administrator of the SBA hereby 
certifies that this rulemaking will not have a significant economic 
impact on most small businesses. The SBA invites comments from the 
public on this certification.

List of Subjects in 13 CFR Part 120

    Accredited Lender Program, Certified development companies, 
Community development, Debentures, Loan programs--business, Small 
businesses.

    For the reasons discussed in the preamble, the Small Business 
Administration proposes to amend 13 CFR part 120 as follows:

PART 120--BUSINESS LOANS

0
1. The authority citation for part 120 continues 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.

0
2. Amend Sec.  120.842 by revising paragraph (a) and removing paragraph 
(d) to read as follows:


Sec.  120.842  ALP Express Loans.

    (a) Definition. For the purposes of this section, an ALP Express 
loan means a 504 loan in an amount that is not more than $500,000 and 
which is underwritten, approved, closed and

[[Page 84836]]

serviced using the authorities set forth in this section.
* * * * *

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2024-24753 Filed 10-23-24; 8:45 am]
BILLING CODE 8026-09-P


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