[Federal Register Volume 63, Number 78 (Thursday, April 23, 1998)]
[Proposed Rules]
[Pages 20140-20141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10757]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 123


Disaster Loan Program

AGENCY: Small Business Administration (SBA).

ACTION: Proposed rule.

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SUMMARY: SBA is proposing to amend its regulations to conform the 
eligibility criteria for disaster loans to those applicable in SBA's 
business loan program. Thus, under the proposed rule, a business could 
not obtain a physical disaster loan if it is engaged in any illegal 
activity; if it is a government owned entity (other than one owned or 
controlled by a Native American tribe); or if it engages in products or 
services of a prurient sexual nature. Under the proposed rule, a 
business would not be eligible for an economic injury disaster loan if 
more than one-third of its revenues are from legal gambling operations 
or from packaging SBA loans; if it is principally engaged in teaching 
or indoctrinating religion; or is primarily engaged in political or 
lobbying activities.

DATES: Comments must be submitted on or before May 26, 1998.

ADDRESSES: Comments may be mailed to Bernard Kulik, Associate 
Administrator for Disaster Assistance, Small Business Administration, 
409 Third Street, SW., Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: Bernard Kulik, 202-205-6734.

SUPPLEMENTARY INFORMATION: Under the proposed rule, SBA would amend 
Sec. 123.201 of its regulations so that an applicant would not be 
eligible for a physical disaster business loan if it is engaged in any 
illegal activity; if it is a government owned entity (other than a 
business owned or controlled by a Native American tribe); or if the 
business (1) presents live performances of a prurient sexual nature or 
(2) derives directly or indirectly more than de minimis gross revenue 
from activities of a prurient sexual nature. This proposed rule would 
codify SBA's existing policy of using the same ineligibility criteria 
for SBA's disaster and business loan programs. Thus, a business that 
would not be eligible to receive an SBA guaranteed business loan 
because it met these criteria, would also not be eligible to obtain a 
physical disaster loan.
    Under this proposed rule amending Sec. 123.301 of SBA's 
regulations, a business would not be eligible for an economic injury 
disaster loan if it (1) derived more than one-third of its gross annual 
revenue from legal gambling activities; (2) earned more than one-third 
of its gross annual revenue from packaging SBA loans; (3) was 
principally engaged in teaching, instructing, counselling or 
indoctrinating religion or religious beliefs, whether in a religious or 
secular setting; or (4) primarily engaged in political or lobbying 
activities. These proposed changes would codify SBA's existing policy 
of using the same ineligibility criteria for its economic injury 
disaster and business loan program. Thus, if a business is not 
eligible, because of these criteria, for an SBA guaranteed loan under 
the business loan program, it would not be eligible for an economic 
injury disaster loan.
    SBA is proposing to correct a typographical error in 
Sec. 123.202(a) by substituting ``lesser'' for ``greater'' in the first 
sentence which would then read: ``Disaster business loans, including 
both physical disaster and economic injury loans to the same borrower, 
together with its affiliates, cannot exceed the lesser of the 
uncompensated physical loss and economic injury or $1.5 million.'' This 
would ensure that an applicant receives disaster assistance for an 
uncompensated loss or injury without obtaining excessive SBA assistance 
at lower than market rates.

Compliance With Executive Orders 12612, 12778, and 12866, the 
Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the 
Paperwork Reduction Act (44 U.S.C. Ch 35)

    SBA certifies that this proposed rule does not constitute a 
significant rule within the meaning of Executive Order 12866 and does 
not have significant economic impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 
et seq. It is not likely to have an annual economic effect of $100 
million or more, result in a major increase in costs or prices, or have 
a significant adverse effect on competition or the United States 
economy. This proposed rule codifies current SBA practices and will not 
affect additional businesses or impose any costs
    For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch 35, SBA 
certifies that this proposed rule contains no new reporting or record 
keeping requirements.
    For purposes of Executive Order 12612, SBA certifies that this 
proposed rule has no federalism implications warranting the preparation 
of a Federalism Assessment.
    For purposes of Executive Order 12778, SBA certifies that this rule 
is drafted, to the extent practicable, in accordance with the standards 
set forth in section 2 of that Order.

(Catalog of Federal Domestic Assistance Programs, No. 59.012 and 
59.008)

List of Subjects in 13 CFR Part 123

    Disaster assistance, Loan programs-business, Small businesses.

    Accordingly, pursuant to the authority contained in section 5(b)(6) 
of the Small Business Act (15 U.S.C. 634(b)(6)), SBA proposes to amend 
part 123, chapter I, title 13, Code of Federal Regulations, as follows:

PART 123--DISASTER LOAN ASSISTANCE

    1. The authority citation for part 123 would continue to read as 
follows:

    Authority: 15 U.S.C. 634(b)(6), 636(b), 636(c) and 636(f); Pub. 
L. 102-395, 106 Stat. 1828, 1864; and Pub. L. 103-75, 107 Stat. 739.

    2. Section 123.201 would be amended by adding paragraphs (d), (e), 
and (f) to read as follows:


Sec. 123.201  When am I not eligible to apply for a physical disaster 
business loan?

* * * * *
    (d) You are not eligible if your business is engaged in any illegal 
activity.
    (e) You are not eligible if you are a government owned entity 
(except for a business owned or controlled by a Native American tribe).
    (f) You are not eligible if your business:
    (1) Presents live performances of a prurient sexual nature or
    (2) Derives directly or indirectly more than de minimis gross 
revenue through the sale of products or services, or the

[[Page 20141]]

presentation of any depictions or displays, of a prurient sexual 
nature.
    3. Section 123.202(a) would be amended by revising the first 
sentence to read as follows:


Sec. 123.202  How much can my business borrow with a physical disaster 
business loan?

    (a) Disaster business loans, including both physical disaster and 
economic injury loans to the same borrower, together with its 
affiliates, cannot exceed the lesser of the uncompensated physical loss 
and economic injury or $1.5 million. * * *
    4. Section 123.301 would be amended by removing ``gambling'' and 
``loan packaging'' in paragraph (a), removing ``or'' at the end of 
paragraph (c), removing the period and adding ``; or'' at the end of 
paragraph (d), and adding paragraphs (e), (f), (g), and (h) to read as 
follows:


Sec. 123.301  When would my business not be eligible to apply for an 
economic injury disaster loan?

* * * * *
    (e) Deriving more than one-third of gross annual revenue from legal 
gambling activities;
    (f) A loan packager which earns more than one-third of its gross 
annual revenue from packaging SBA loans;
    (g) Principally engaged in teaching, instructing, counselling or 
indoctrinating religion or religious beliefs, whether in a religious or 
secular setting; or
    (h) Primarily engaged in political or lobbying activities.

    Dated: April 14, 1998.
Aida Alvarez,
Administrator.
[FR Doc. 98-10757 Filed 4-22-98; 8:45 am]
BILLING CODE 8025-01-P