[Federal Register Volume 60, Number 80 (Wednesday, April 26, 1995)]
[Rules and Regulations]
[Pages 20392-20394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10178]



-----------------------------------------------------------------------



SMALL BUSINESS ADMINISTRATION
13 CFR Part 108


Loans to State and Local Development Companies; Premier Certified 
Lenders Program for Certified Development Companies

AGENCY: Small Business Administration (SBA).

ACTION: Interim final rule.

-----------------------------------------------------------------------

SUMMARY: On October 22, 1994, the President signed Public Law 103-403, 
the Small Business Administration Reauthorization and Amendments Act of 
1994. Section 217 of that Act added a new section 508 to the Small 
Business Investment Act, 15 U.S.C. 695 et seq. This new section 
authorizes the Small Business Administration (SBA) to establish a 
Premier Certified Lenders Program. This rule, published in accordance 
with Public Law 103-403, is intended to implement this new program.

DATES: This rule is effective on April 26, 1995; however, SBA will 
accept comments submitted by May 26, 1995.

ADDRESSES: Comments should be sent to LeAnn M. Oliver, Acting Director, 
Office of Rural Affairs & Economic Development, Small Business 
Administration, 409 Third Street SW., suite 8300, Washington, DC 20416.

[[Page 20393]] FOR FURTHER INFORMATION CONTACT:
LeAnn Oliver, (202) 205-6485.

SUPPLEMENTARY INFORMATION: Public Law 103-403, enacted October 22, 
1994, established a Premier Certified Lenders Program (PCLP) for 
Certified Development Companies (CDCs). The law provides that, on a 
three-year pilot program basis, SBA may establish the PCLP for not more 
than 15 CDCs. The PCLP is intended to emulate the successful Preferred 
Lender Program for the SBA's General Business Loan Program and to 
transfer that experience to the development company loan program. This 
recognizes the maturity of individual local certified development 
companies and the favorable track record of the overall development 
company loan program. In this way, it will enable SBA to increase 
responsiveness to small business borrowers by taking the partnership 
role it normally maintains with the certified development companies to 
a higher level with CDCs that are designated as PCLP/CDCs.
    The concept of a PCLP/CDC is based on the PLP designation for 
lenders participating with the SBA 7(a) General Business Loan Program. 
In consideration for a PCLP/CDC agreeing to share in the risk of loan 
making, the SBA will delegate authority to the PCLP/CDC for the purpose 
of authorizing, closing and servicing development company loans. 
Similar to the work of the preferred participating lender in the 
General Business Loan Program, a PCLP/CDC will be required to obtain 
SBA's final approval of the eligibility of a debenture for guaranty, 
but will not be required to obtain SBA's approval for underlying 
decisions regarding creditworthiness of the borrower, loan closing, or 
legal requirements imposed by law or regulation. Both PCLP and PLP 
loans will be processed through the same centralized SBA processing 
center.
    The Premier Certified Lender Program responds to the significant 
increase in development company loan program activity and recognizes 
the growing strength and capability of CDCs. A PCLP/CDC will be 
designated based on a high level of 504 loan activity, a history of 
submitting adequately analyzed debenture guarantee application packages 
to SBA, and a favorable recommendation from the SBA field office with 
which the CDC works. Also as a condition of designation, a PCLP/CDC 
will commit to establish and maintain a loss reserve equal to the 
greater of the company's historic loss rate on guaranteed debentures or 
1% of the outstanding amount of debentures issued by the company and 
guaranteed by SBA under the PLCP Program.

Compliance With Executive Orders 12612, 12778, and 12866, the 
Regulatory Flexibility Act and the Paperwork Reduction Act

    For purposes of the Regulatory Flexibility Act, 5 U.S.C. 601 et 
seq., SBA certifies that this rule will not have a significant economic 
impact on a substantial number of small entities.
    SBA certifies that this rule will not constitute a significant 
regulatory action for purposes of Executive Order 12866, since the 
change is not likely to result in an annual effect on the economy of 
$100 million or more.
    SBA certifies this rule will not impose additional reporting or 
recordkeeping requirements which would be subject to the Paperwork 
Reduction Act, 44 U.S.C. Ch. 35.
    SBA certifies that this rule will not have Federalism implications 
warranting the preparation of a Federalism Assessment in accordance 
with Executive Order 12612.
    SBA certifies that this rule is drafted, to the extent practicable, 
in accordance with the standards set forth in Section 2 of Executive 
Order 12778.

List of Subjects in 13 CFR Part 108

    Loan programs--business, Small businesses.

    For the reasons set forth above, SBA amends part 108 of title 13 of 
the Code of Federal Regulations as follows:

PART 108--[AMENDED]

    1. The authority citation for part 108 continues to read as 
follows:

    Authority: 15 U.S.C. 687(c), 695, 696, 697a, 697b, 697c.

    2. Section 108.2 is amended by adding definitions of the following 
terms in the appropriate alphabetical order: ``Premier Certified 
Lender'' and ``PCLP'' to read as follows:


Sec. 108.2  Definitions.

* * * * *
    PCLP means the Premier Certified Lenders Program as provided for in 
Sec. 108-509.
    Premier Certified Lender means a 503 Company which has met the 
eligibility requirements of Sec. 108.509-3 and which has executed with 
SBA the PCLP Agreement.
* * * * *
    3. A new undesignated center heading and Secs. 108.509-1 through 
108.509-5 are added to read as follows:

Premier Certified Lenders Program


Sec. 108.509-1  Objectives and characteristics of premier certified 
lenders program.

    (a) Purpose. The purpose of this subpart is to implement section 
217 of Public Law 103-403 which authorizes SBA to delegate authority to 
designated 503 companies, hereinafter called Premier Certified Lenders, 
to undertake processing, approval, closing and servicing of loans made 
with the proceeds of SBA guaranteed debentures.
    (b) Characteristics. SBA will solicit and approve qualified 503 
companies to serve as Premier Certified Lenders. Each Premier Certified 
Lender will be delegated authority to approve loans that are funded 
with the proceeds of debentures issued by such company. SBA will retain 
the responsibility to guarantee any such debenture. All rules in this 
part 108 relating to the operations of participating 503 companies 
shall apply to Premier Certified Lenders.
    (c) Approval. The approval of a loan by a Premier Certified Lender 
shall be subject to final approval by SBA as to eligibility of the 
guarantee of a debenture, the proceeds of which will fund the loan. 
Such final approval shall not include a detailed review of decisions by 
the Lender relative to the loan involving creditworthiness, loan 
closing, or compliance with legal requirements imposed by law or 
regulation, provided that SBA will satisfy itself that its guarantee of 
any debenture issued by a Premier Certified Lender is fully supportable 
under applicable laws and regulations as to the eligibility of the 
guaranty of a debenture before it approves any such guarantee.
    (d) Pilot Program Period. On a pilot program basis, SBA may 
designate not more than fifteen Premier Certified Lenders. Effective on 
October 1, 1997, the pilot program ends and sections 108-509-1 thru 
108-509-5 of part 108 are repealed.


Sec. 108.509-2  Application procedure.

    Upon the request of a 503 company to participate in the Premier 
Certified Lender program, the SBA branch or district office with which 
the 503 Company has had its most significant activity shall review the 
503 company's application and prepare its recommendation. The District 
Director or Branch Manager of that district or branch office shall 
transmit all requests, accompanied by the district or branch office 
recommendation, to SBA Central Office where the Director of the Office 
of Rural Affairs and Economic Development shall make the final decision 
on all such requests. After a [[Page 20394]] favorable decision, the 
district director will designate the lender by executing with the 503 
Company the PCLP Agreement. Before it can operate as a Premier 
Certified Lender, the 503 company must execute such PCLP Agreement.


Sec. 108.509-3  Eligibility.

    In making the determination of whether a 503 company may become a 
Premier Certified Lender, SBA shall consider, but is not limited to, 
the following factors:
    (a) Whether the 503 company has been an active participant in the 
Accredited Lenders Program under Sec. 108.508 for not less than the 
preceding 12 months, and whether the 503 company has demonstrated 
ability to work with the local SBA office in a cooperative and 
constructive manner. Prior to January 1, 1996, SBA may waive the 
requirement for prior activity in the Accredited Lenders Program if 
such company is otherwise qualified to participate in that program;
    (b) Whether the 503 company has a history of submitting to SBA 
complete, accurate and adequately analyzed debenture guaranty 
application packages;
    (c) Whether the 503 company agrees to assume and to reimburse SBA 
for 10 percent of any loss sustained by the SBA as a result of a 
default by the company in the payment of principal or interest on a 
debenture issued by such company and guaranteed by SBA under the PCLP 
Program; and
    Whether the 503 company has a historical loss rate acceptable to 
SBA.


Sec. 108.509-4  Loss reserve.

    Each Premier Certified Lender shall establish a loss reserve for 
financings approved pursuant to the PCL Program.
    (a) Amount. The amount of the loss reserve shall be the greater of:
    (1) The historic loss rate on all debentures issued by such 
company; or
    (2) 10 percent of the amount of the company's exposure on 
debentures issued under the PCL Program.
    (b) Assets. The loss reserve shall be comprised of segregated 
assets of the company which shall be securitized in favor of the SBA.
    (c) Contributions. For each debenture issued by a Premier Certified 
Lender, the company shall make a contribution proportionate to the 
total amount of loss reserve required in the following amounts and at 
the following intervals:

    (1) 50 percent when the debenture is funded,
    (2) 25 percent not later than one year after the debenture is 
funded, and
    (3) 25 percent not later than two years after the debenture is 
funded.


Sec. 108.509-5  Suspension or revocation.

    (a) Cause. The designation of a 503 Company as a Premier Certified 
Lender may be suspended or revoked if the SBA determines that:

    (1) The 503 company has not continued to meet the criteria for 
eligibility under Sec. 108.509-3; or

    (2) The 503 company has not established or maintained the loss 
reserve required under Sec. 108.509-4; or

    (3) The 503 company has failed to adhere to the SBA's rules and 
regulations or has violated any other applicable provision of law.

    (b) Review. At intervals not greater than 12 months, SBA shall 
review the financings made by each Premier Certified Lender. The review 
shall include the lender's credit decisions and general compliance with 
the eligibility requirements for each financing approved under the 
program authorized by this section.

    (c) Procedure. SBA reserves the unilateral right to suspend or 
revoke the designation of any Premier Certified Lender as a result of 
any violation of SBA regulations, any breach of any agreement with SBA, 
or any change of circumstance resulting in the Lender's inability to 
meet the operational requirements set forth herein: Provided, however, 
that such suspension or revocation shall not invalidate any guaranty 
previously entered into by SBA. Proceedings for such purposes will be 
initiated by a determination to suspend or revoke issued by the 
Director of the Office of Rural Affairs and Economic Development. Such 
determination may be appealed to the Associate Deputy Administrator for 
Economic Development whose decision on any appeal shall be the final 
decision of SBA.

    Catalog of Federal Domestic Assistance 59.036 Certified 
Development Company Loans (503 Loans); 59.041 Certified Development 
Company Loans (504 Loans).

    Dated: March 17, 1995.

Philip Lader,

Administrator.

[FR Doc. 95-10178 Filed 4-25-95; 8:45 am]

BILLING CODE 8025-01-M