25398 Federal Register / Vol. 87, No. 83 / Friday, April 29, 2022 / Rules and Regulations 

5 Id. 

6 5 U.S.C. 553(b). 

7 5 U.S.C. 603, 604. 

8 5 U.S.C. 605(b). 9 44 U.S.C. 3501–3521. 

invasion of personal privacy.’’ 5 The 

Bureau would also consider whether 

there are other reasons to not publicly 

release a final decision or order, in 

whole or in part. The Bureau welcomes 

any comments on whether it should 

amend the rule to codify a standard for 

determinations regarding public release. 

The Bureau notes that this rule will 

have limited effects on the public. 

Nonbank covered persons that are 

respondents may incur incidental costs, 

if they choose to prepare submissions 

on the issue of public release. The rule 

itself will not trigger public release of 

decisions and orders, since it simply 

establishes a procedure to consider that 

issue. If the Bureau does ultimately 

decide to release a decision or order, 

that should generally benefit covered 

persons, consumers, and other members 

of the public by giving them a better 

understanding of the Bureau’s 

decisionmaking. 

In formulating this rule, the Bureau 

has consulted or offered to consult with 

the prudential regulators and the 

Federal Trade Commission. 

II. Regulatory Requirements 

As a rule of agency organization, 

procedure, or practice, this rule is 

exempt from the notice-and-comment 

rulemaking requirements of the 

Administrative Procedure Act.6

Because no notice of proposed 

rulemaking is required, the Regulatory 

Flexibility Act does not require an 

initial or final regulatory flexibility 

analysis.7 Moreover, the Bureau’s 

Director certifies that this rule will not 

have a significant economic impact on 

a substantial number of small entities. 

Therefore, an analysis is also not 

required for that reason.8 As a result of 

the rule, respondents in the relevant 

proceedings may choose to make 

submissions on the issue of public 

release. Some of these respondents may 

be small entities under the Regulatory 

Flexibility Act, but they would 

represent a very small fraction of small 

entities in consumer financial services 

markets. Accordingly, the number of 

small entities affected is not substantial. 

The Bureau has also determined that 

this rule does not impose any new or 

revise any existing recordkeeping, 

reporting, or disclosure requirements on 

covered entities or members of the 

public that would be collections of 

information requiring approval by the 

Office of Management and Budget under 

the Paperwork Reduction Act.9

List of Subjects in 12 CFR Part 1091 

Administrative practice and 

procedure, Consumer protection, Credit, 

Trade practices. 

Authority and Issuance 

For the reasons set forth above, the 

Bureau amends 12 CFR part 1091 as set 

forth below: 

PART 1091—PROCEDURAL RULE TO 

ESTABLISH SUPERVISORY 

AUTHORITY OVER CERTAIN 

NONBANK COVERED PERSONS 

BASED ON RISK DETERMINATION 

■ 1. The authority citation for part 1091 

continues to read as follows: 

Authority: 12 U.S.C. 5512(b)(1), 

5514(a)(1)(C), 5514(b)(7). 

■ 2. In § 1091.115, add headings to 

paragraphs (a) and (b) and revise 

paragraph (c) to read as follows: 

§ 1091.115 Change of time limits and 

confidentiality of proceedings. 

(a) Change of time limits. * * * 

(b) No substantive rights. * * * 

(c) Confidentiality—(1) General rule. 

In connection with a proceeding under 

this part, including a petition for 

termination under § 1091.113, all 

documents, records or other items 

submitted by a respondent to the 

Bureau, all documents prepared by, or 

on behalf of, or for the use of the 

Bureau, and any communications 

between the Bureau and a person, shall 

be deemed confidential supervisory 

information under 12 CFR 1070.2(i)(1). 

However, this paragraph does not apply 

to the version of a document that is 

released on the Bureau’s website under 

paragraph (c)(2). 

(2) Publication of final decisions and 

orders by the Director. The Director will 

make a determination regarding whether 

a decision or order under 

§ 1091.103(b)(2), § 1091.109(a), or 

§ 1091.113(e) will be publicly released 

on the Bureau’s website, in whole or in 

part. The respondent may file a 

submission regarding that issue, within 

seven days after service of the decision 

or order. The Director may also decide 

that the Director’s determination 

regarding public release will itself be 

released on the website, in whole or in 

part. Section 1091.109(c) is not 

applicable to determinations under this 

paragraph. 

Rohit Chopra, 

Director, Consumer Financial Protection 

Bureau. 

[FR Doc. 2022–09107 Filed 4–28–22; 8:45 am] 

BILLING CODE 4810–AM–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Parts 120 and 121 

[Docket No. SBA–2022–0003] 

Community Advantage Pilot Program 

AGENCY: Small Business Administration. 

ACTION: Notification of changes to 

Community Advantage Pilot Program, 

impact on regulations, and request for 

comments. 

SUMMARY: The Small Business 

Administration (SBA) continues to 

refine and improve the design of the 

Community Advantage (CA) Pilot 

Program. SBA is issuing this document 

to revise the CA Pilot Program 

requirements to encourage increased 

lending in historically underserved 

markets. 

DATES: The changes identified in this 

document take effect May 31, 2022. 

Comment date: Comments must be 

received on or before May 31, 2022. 

ADDRESSES: You may submit comments, 

identified by SBA docket number SBA2022–0003, by any of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Darrel Eddingfield, 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 Darrel Eddingfield, 

Office of Financial Assistance, U.S. 

Small Business Administration, 409 

Third Street SW, Washington, DC 

20416, or send an email to 

communityadvantage@sba.gov. 

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: 

Darrel Eddingfield, Office of Financial 


lotter on DSK11XQN23PROD with RULES1
Federal Register / Vol. 87, No. 83 / Friday, April 29, 2022 / Rules and Regulations 25399 

Assistance, U.S. Small Business 

Administration, 409 Third Street SW, 

Washington, DC 20416; telephone: (202) 

516–6676; email: darrel.eddingfield@

sba.gov. 

SUPPLEMENTARY INFORMATION: 

1. Background 

SBA has the authority to suspend, 

modify, or waive certain regulations in 

establishing and testing pilot loan 

initiatives under 13 CFR 120.3. On 

February 18, 2011, SBA issued a notice 

and request for comments introducing 

the CA Pilot Program (76 FR 9626), 

which was created to meet the credit 

needs of small businesses in 

underserved markets. In that notice, 

SBA modified or waived as appropriate 

certain regulations which otherwise 

apply to 7(a) loans for the CA Pilot 

Program. 

Subsequent notices revised the CA 

Pilot Program to improve the program 

experience for participants, improve CA 

Lenders’ ability to deliver capital to 

underserved markets, and appropriately 

manage risk to the Agency. These 

notices were issued on the following 

dates: September 12, 2011 (76 FR 

56262), February 8, 2012 (77 FR 6619), 

November 9, 2012 (77 FR 67433), 

December 28, 2015 (80 FR 80872), 

September 12, 2018 (83 FR 46237), 

March 2, 2020 (85 FR 12369), and July 

15, 2020 (85 FR 42964). On April 1, 

2022 (87 FR 19165), SBA issued a notice 

extending the CA Pilot Program until 

September 30, 2024 and lifting the 

moratorium previously imposed on SBA 

accepting new CA Lender applications. 

2. Comments 

Although the changes take effect May 

31, 2022, comments are solicited from 

interested members of the public on all 

aspects of the CA Pilot Program. 

Comments must be submitted on or 

before the deadline for comments listed 

in the DATES section. SBA will consider 

these comments and the need for 

making any future revisions to the CA 

Pilot Program. 

3. Changes to the CA Pilot Program 

Under 13 CFR 120.3, SBA has the 

authority to test new programs or ideas 

in pilot programs that are limited in size 

and duration to protect SBA from undue 

risk of loss. Testing new ideas in a 

limited pilot program provides SBA 

with an opportunity to collect data to 

determine which ideas most effectively 

accomplish the intended goals and can 

be introduced as permanent rule 

changes versus other ideas that can be 

quickly terminated when data indicates 

they produce poor results. SBA has 

determined there is a gap in funding to 

underserved markets and in small dollar 

loans. Because the CA Pilot Program is 

specifically focused on making small 

loans in underserved markets, SBA is 

using its authority under 13 CFR 120.3 

to implement the following 

modifications to determine their 

effectiveness in expanding capital to 

underserved markets and increasing 

small dollar loans. 

a. Modification of 13 CFR 120.410 and 

120.440 for Participation in and Use of 

Delegated Authority in the CA Pilot 

Program 

To close the gap in funding for small 

businesses in underserved markets by 

expediting loan decisions for small 

dollar loans, SBA is modifying the 

regulations at 13 CFR 120.410 and 

120.440, using the term modify as 

contemplated under 13 CFR 120.3, for 

lender participation in the CA Pilot 

Program and the conditions under 

which SBA will grant delegated 

authority to CA Lenders to make CA 

loans without prior SBA review of 

eligibility or creditworthiness. Subject 

to SBA’s review and prior approval, 

SBA may authorize certain CA Lenders 

to make CA revolving lines of credit. 

Until receiving written authorization 

from SBA, CA Lenders will not be 

permitted to approve revolving lines of 

credit, under either delegated or nondelegated authority. 

New lenders: A lender that is not an 

existing CA Lender as of April 1, 2022, 

must be approved by SBA to participate 

in the CA Pilot Program before it can 

begin making CA loans. A new lender 

applying to participate as a CA Lender 

must demonstrate at the time of its 

application that it currently has at least 

20 similarly-sized commercial or 

business loans in its portfolio. This level 

of experience is necessary because SBA 

will be granting delegated authority if 

the Lender is approved to participate in 

the pilot. 

Existing CA Lenders that have 

delegated authority: These CA Lenders 

do not have to take any action and may 

begin using the procedures in the 

updated CA Participant Guide when it 

is published. 

Existing CA Lenders that do not have 

delegated authority as of April 1, 2022: 

Notwithstanding the new authorities 

stated above, these CA Lenders must 

continue to submit loan applications 

through the Loan Guaranty Processing 

Center (LGPC) using nondelegated 

authority until that time as they qualify 

for and are approved for delegated 

authority. For these CA Lenders, SBA 

will grant delegated authority under the 

rules that were in effect at the time the 

CA Lender was approved to participate 

in the CA Pilot Program. Alternatively, 

a CA Lender may apply for delegated 

authority at any time if it can 

demonstrate that it currently has at least 

20 similarly-sized commercial or 

business loans in its portfolio, which 

may include its CA loans. 

b. Modification of 13 CFR 120.150 

Relating to Lending Criteria 

SBA is modifying the regulation at 13 

CFR 120.150, using the term modify as 

contemplated under 13 CFR 120.3, 

which describes the lending criteria that 

SBA and participating lenders must 

consider when underwriting SBAguaranteed loans. CA Lenders must 

ensure the Applicant (including an 

Operating Company) is creditworthy 

and loans are so sound as to reasonably 

assure repayment. CA Lenders must use 

appropriate and prudent generally 

acceptable commercial credit analysis 

processes and procedures consistent 

with those used for their similarly-sized, 

non-SBA guaranteed commercial loans. 

When approving CA loans, CA Lenders 

may consider any of the following 

criteria: Credit score or credit history of 

the Applicant (and the Operating 

Company, if applicable), its Associates 

and any guarantors; the earnings or 

cashflow of Applicant; or where 

applicable any equity or collateral of the 

Applicant. 

Additionally, CA Lenders may use a 

business credit scoring model. CA 

Lenders may use the FICO® Small 

Business Scoring ServiceSM Score 

(SBSS) credit scoring model used in 

SBA’s 7(a) Small Loan Program or other 

credit scoring models. If a CA Lender 

uses a credit scoring model other than 

SBSS, the CA Lender must validate the 

model, document with appropriate 

statistical methodologies that their 

credit analysis procedures are predictive 

of loan performance and must provide 

that documentation to SBA upon 

request and during lender oversight 

reviews. Credit scoring models could 

incorporate, for example, the earnings 

and cashflow of an Applicant, equity, or 

collateral, in which case those factors 

would not necessarily be separately 

considered by a CA Lender unless 

otherwise specified by SBA Loan 

Program Requirements as defined in 13 

CFR 120.10 (e.g., where SBA requires an 

equity injection for certain project 

financing). SBA will continue to require 

new CA Lender Applicants to submit 

their credit policies at the time of 

application. 

The use of credit scoring models will 

not replace the requirement for CA 

Lenders to comply with other SBA Loan 

Program Requirements, for example, 

ensuring the project meets program 


lotter on DSK11XQN23PROD with RULES1
25400 Federal Register / Vol. 87, No. 83 / Friday, April 29, 2022 / Rules and Regulations 

1 Just Facts: As Many Americans Have Criminal 

Records as College Diplomas. Brennan Center for 

Justice. 

2The Price We Pay: Economic Costs of Barriers 

to Employment for Former Prisoners and People 

Convicted of Felonies. Center For Economic And 

Policy Research, June 16, 2016. 

eligibility requirements, adequate 

controls on disbursements are in place, 

providing accurate descriptions of uses 

of proceeds, and documenting that 

credit is not available elsewhere. 

c. Modification of 13 CFR 120.110(n) for 

the Community Advantage Pilot 

Program 

SBA is modifying the regulation at 13 

CFR 120.110(n), using the term modify 

as contemplated under 13 CFR 120.3, to 

remove restrictions that make ineligible 

any business with an Associate who is 

incarcerated, on probation, on parole, or 

has been indicted for a felony or a crime 

of moral turpitude. CA Lenders may 

continue to conduct background checks 

and make risk-based lending decisions 

in accordance with their own policies. 

SBA is making this change to address 

concerns regarding equitable access 

under SBA programs and economic 

opportunities for these individuals. 

There are roughly as many Americans 

with criminal records as with college 

degrees,1 and the criminal justice 

system disproportionally entangles 

Americans of color. Individuals with 

prior convictions often have difficulty 

finding jobs, many experience 

discrimination, others lack technical 

skillsets for the modern workforce, and 

all face 29,000 employment-related legal 

restrictions (e.g., inability to acquire 

licenses).2 Entrepreneurship may offer 

this population a strong alternative, but 

many formerly incarcerated individuals 

have little access to the credit necessary 

to start a business. 

d. Modification of 13 CFR 120.151 To 

Increase Maximum Allowable CA Loan 

Size From $250,000 to $350,000 

When SBA introduced the CA Pilot 

Program, it modified the maximum loan 

amount for 7(a) loans in 13 CFR 120.151 

to establish a maximum CA loan size of 

$250,000. In this document, SBA is 

again modifying 13 CFR 120.151, using 

the term modify as contemplated under 

13 CFR 120.3, to increase the maximum 

CA loan size to $350,000 to align with 

the current definition of a small loan as 

used in the regular 7(a) program. While 

still considered small dollar loans, the 

larger loan amount limit will allow 

Applicants to make necessary 

investments to start new businesses 

such as the purchase of commercial real 

estate, machinery and equipment, and 

inventory. 

e. Modification of 13 CFR 120.221(a) To 

Revise Maximum Allowable Fees a CA 

Lender May Charge 

Currently, 13 CFR 120.221(a) permits 

Lenders to charge an Applicant a 

reasonable fee to assist the Applicant 

with the preparation of the application 

and supporting materials. However, 

SBA does not permit Lenders to charge 

an Applicant a commitment, broker, 

referral, or similar fee. SBA SOP 50 10 

provides guidance on allowable fees and 

compensation all Lenders, including CA 

Lenders, may charge an Applicant. In a 

notice published on September 12, 2018 

(83 FR 46237), SBA modified 13 CFR 

120.221(a) to limit the fees that a CA 

Lender or Agent is permitted to collect 

from the Applicant to no more than 

$2,500. 

SBA determined the limits on fees 

may negatively affect CA Lenders’ 

willingness to make loans under the CA 

Pilot Program. Therefore, SBA is 

modifying the allowable fee structure to 

offset costs that may prevent CA lenders 

from making more loans, especially 

small loans under $50,000. One of the 

ways SBA 7(a) Lenders are permitted to 

charge a fee for packaging and other 

services is based on a percentage of the 

loan amount, which is 3 percent for 

loans of $50,000 and less, and 2 percent 

for larger loans. This allows a 7(a) 

Lender to charge a fee of up to $7,000 

for a $350,000 7(a) loan where the CA 

Lender is currently permitted to charge 

a fee of up to $2,500 for all CA loans. 

For these reasons, SBA is again 

modifying 13 CFR 120.221(a), using the 

term modify as contemplated under 13 

CFR 120.3, and revising the method of 

calculating the maximum fee a CA 

Lender may charge the Applicant for 

packaging and other services as follows: 

i. For CA loans up to $5,000: Fee may 

not exceed 10 percent of the loan 

amount; 

ii. For CA loans greater than $5,000 

and up to and including $10,000: Fee 

may not exceed $500; 

iii. For CA loans greater than $10,000 

up to and including $50,000: Fee may 

not exceed 5 percent of the loan amount 

or $1,750, whichever is less; and 

iv. For CA loans greater than $50,000: 

Fee may not exceed 2.5 percent or 

$1,750, whichever is greater. 

Except for necessary out-of-pocket 

costs such as filing or recording fees 

permitted in § 120.221(c), this is the 

only fee or compensation a CA Lender 

may directly or indirectly collect from 

an Applicant for assistance with 

obtaining a CA loan. In addition, the CA 

Lender may not split a loan into two 

loans for the purpose of charging an 

additional fee to an Applicant. Any fees 

the CA Lender or any Agent charges an 

Applicant must be disclosed to the 

Applicant and SBA by completion of 

the SBA Form 159, ‘‘Fee Disclosure 

Form and Compensation Agreement,’’ 

and the CA Lender must electronically 

submit a copy of the executed form and 

any supporting documentation through 

SBA’s Capital Access Financial System 

(CAFS). SBA’s Office of Credit Risk 

Management (OCRM) tracks fees and 

compensation Lenders and Agents 

collect from Applicants and Borrowers 

to allow SBA to monitor and track the 

actual costs to Borrowers in obtaining 

SBA-guaranteed loans. 

SBA considers the revised fee 

structure to be reasonable. SBA will 

continue to monitor this fee structure 

and may revise this amount by 

publishing a notice with request for 

comment in the Federal Register. 

f. Modification of 13 CFR 120.213, 

120.214, and 120.215 To Revise 

Maximum Allowable Interest Rates a CA 

Lender May Charge 

When SBA announced the CA Pilot 

Program and again in a subsequent 

notice, it modified the regulations at 13 

CFR 120.213, 120.214, and 120.215 in 

order to permit CA Lenders to charge up 

to Prime plus 6 percent on loans of any 

size. (See, 79 FR 9626, February 18, 

2011, and 77 FR 6619, February 8, 

2012.) To incentivize CA Lenders to 

make more smaller dollar loans, SBA is 

again revising the regulations at 13 CFR 

120.213, 120.214, and 120.215, using 

the term modify as contemplated under 

13 CFR 120.3, by setting the maximum 

interest rates that CA Lenders may 

charge. For CA loans approved on or 

after the effective date of this document, 

CA Lenders may charge, for loans up to 

$50,000, Prime plus 6.5 percent; for 

loans greater than $50,000 up to and 

including $250,000, Prime plus 6 

percent; for loans greater than $250,000 

up to and including $350,000, Prime 

plus 4.5 percent. 

g. Revise Collateral Requirements for CA 

Loans 

SBA is making the following changes 

to collateral requirements to increase 

the speed with which CA Lenders may 

make small loans while also decreasing 

costs to the CA Lender and Borrower. 

Personal and/or corporate guaranties 

must still be obtained in accordance 

with 13 CFR 120.160(a) and SOP 50 10. 

Loans $50,000 or less: CA Lenders 

currently are required to follow the 

guidance on collateral provided in the 

CA Participant Guide and in SBA SOP 

50 10, which states that for loans of 

$25,000 or less, the CA Lender is not 

required to take collateral. For CA loans 


lotter on DSK11XQN23PROD with RULES1
Federal Register / Vol. 87, No. 83 / Friday, April 29, 2022 / Rules and Regulations 25401 

approved on or after the effective date 

of this document, SBA will not require 

CA Lenders to take collateral on loans 

of $50,000 or less. 

Loans greater than $50,000: SBA 

currently requires that for CA loans over 

$50,000, the CA Lender must follow the 

collateral policies and procedures it has 

established and implemented for its 

similarly-sized, non-SBA-guaranteed 

commercial loans; however, at a 

minimum, the CA Lender must require 

as collateral a first lien on all assets 

financed with the CA loan proceeds. 

The CA Lender is also required to take 

a lien on all the Borrower’s fixed assets, 

including real estate, up to the point the 

CA loan is ‘‘fully secured’’ in 

accordance with the collateral 

valuations provided in SOP 50 10 6, 

Part 2, Section B, Chapter 1. Upon the 

effective date of this document, SBA 

will require the CA Lender to take real 

estate as collateral only if one of the 

following conditions are met: 

i. The real estate is being acquired 

with the CA loan proceeds; or 

ii. The CA loan proceeds will finance 

improvements to real estate owned by 

the Borrower or its Associates; or 

iii. The CA loan proceeds will 

refinance debt originally used to 

acquire, or improve the real estate 

owned by the Borrower or its 

Associates. 

h. Modification of 13 CFR 120.130(c) To 

Allow Certain CA Lenders To Provide 

Revolving Lines of Credit 

Under the existing CA Pilot Program, 

CA Lenders are not authorized to make 

revolving lines of credit. To improve 

access to working capital in 

underserved markets, SBA is modifying 

the regulation at 13 CFR 120.130(c), 

using the term modify as contemplated 

under 13 CFR 120.3, which currently 

prohibits a borrower from using loan 

proceeds for floor plan financing or 

other revolving line of credit, except 

under the Export Working Capital 

Program or the CAPLines Program. 

Subject to SBA’s review and prior 

approval, SBA may authorize certain CA 

Lenders to make CA revolving lines of 

credit. Until receiving written 

authorization from SBA, CA Lenders 

will not be permitted to approve 

revolving lines of credit, under either 

delegated or non-delegated authority. 

i. Modification of 13 CFR 120.160(c) To 

Revise the Requirement for Hazard 

Insurance for CA Loans 

As set forth in 13 CFR 120.160(c), 

SBA currently requires hazard 

insurance on all collateral and does not 

distinguish this requirement by loan 

size. SBA determined that the hazard 

insurance requirement is particularly 

burdensome and costly for businesses 

seeking small dollar loans. Therefore, 

SBA is modifying the regulation at 13 

CFR 120.160(c), using the term modify 

as contemplated under 13 CFR 120.3, to 

permit CA Lenders to follow the hazard 

insurance policies and procedures they 

have established and implemented for 

their similarly-sized, non-SBAguaranteed commercial loans. 

CA Lenders must continue ensuring 

that Borrowers obtain flood insurance 

per 13 CFR 120.170 when required 

under the Flood Disaster Protection Act 

of 1973 (42 U.S.C. 4000 et seq.). 

j. Modification of 13 CFR 121.301(f) To 

Modify the Affiliation Principles for 

Applicants for CA Loans 

Currently, 13 CFR 121.301 states the 

size standards and affiliation principles 

that are applicable to SBA’s financial 

assistance programs. Paragraph (f) 

details how affiliation principles are 

applied for the 7(a) Loan Program, 

among others. This paragraph has seven 

sub-paragraphs, each of which details a 

separate affiliation principle that must 

be applied to the applicant and other 

entities to determine whether the 

entities are affiliated. The determination 

of affiliation is necessary to ensure that 

an applicant is ‘‘small’’ for purposes of 

eligibility for SBA financial assistance 

and to ensure that the applicant 

(including affiliates) does not exceed the 

maximum guaranty amount available. 

The seven sub-paragraphs consider: (1) 

Affiliation based on ownership, 

including the principal of control of one 

entity over another; (2) affiliation arising 

under stock options, convertible 

securities, and agreements to merge, 

including the principal of control of one 

entity over another; (3) affiliation based 

on management, including the principal 

of control of one entity over another; (4) 

affiliation based on identity of interest 

between close relatives; (5) affiliation 

based on franchise and license 

agreements, including the principal of 

control of one entity over another; (6) 

determining the concern’s size; and (7) 

exceptions to affiliation. 

Participating CA Lenders and the 

public have requested simplification of 

the affiliation rules for SBA’s financial 

assistance programs, and recent 

Congressional actions have streamlined 

the affiliation rules for certain 

circumstances. For example, certain 

temporary COVID–19 pandemic relief 

programs enacted by Congress 

streamlined SBA’s financial assistance 

affiliation requirements to speed relief 

to small businesses in hard-hit 

industries. For example, the CARES Act 

created the Paycheck Protection 

Program (PPP), which is a temporary 

7(a) Loan Program, and for that program, 

Congress waived affiliation 

requirements for businesses operating 

under North American Industry 

Classification System (NAICS) Code 72 

(Accommodations and Food Services), 

for small businesses operating under a 

franchise agreement listed on SBA’s 

Franchise Directory, and for small 

businesses that were financed by a 

Small Business Investment Company 

(SBIC). 

Drawing on the successful experience 

of affiliation streamlining under the 

temporary pandemic relief programs 

and mindful of CA Lender and public 

comments requesting affiliation 

streamlining for the CA Pilot Program, 

SBA is modifying the regulation at 13 

CFR 121.301(f), using the term modify 

as contemplated under 13 CFR 120.3, 

for Applicants for CA loans to simplify 

the program requirements, streamline 

the application process for CA loans, 

and facilitate the review of such 

applications. SBA is specifically 

removing the principal of control of one 

entity over another when determining 

affiliation because the concept of 

control has proven particularly 

burdensome for applicants and lenders 

to understand and implement. 

Accordingly, for purposes of the CA 

Pilot Program, CA Lenders will apply 

the following principles of affiliation to 

Applicants for CA loans: 

• Affiliation. Any of the 

circumstances described below 

establishes affiliation for applicants of 

the CA Pilot Program: 

1. Ownership. 

i. Considering what the applicant or 

applicant’s owners own. 

A. Entities the Applicant owns. An 

applicant is affiliated with another 

business entity where the applicant 

owns more than 50 percent of another 

business. 

B. Entities owned by owners of the 

applicant. An applicant is affiliated 

with another business entity where no 

single individual or entity owns more 

than 50 percent of the applicant, 

1. An owner of 20 percent or more of 

the applicant owns more than 50 

percent of the other business entity, and 

2. The applicant operates in the same 

3-digit NAICS subsector as the other 

business entity. 

ii. Considering who owns the 

applicant. 

A. An applicant is affiliated with 

another business entity where the other 

business entity owns more than 50 

percent of the applicant. 

B. An applicant is affiliated with 

another business entity where no single 


lotter on DSK11XQN23PROD with RULES1
25402 Federal Register / Vol. 87, No. 83 / Friday, April 29, 2022 / Rules and Regulations 

individual or entity owns more than 50 

percent of the applicant, 

1. The other business entity owns 20 

percent or more of the applicant, and 

2. The other business entity operates 

in the same 3-digit NAICS subsector as 

the applicant. 

2. Stock options, convertible 

securities, and agreements to merge. 

i. SBA considers stock options, 

convertible securities, and agreements 

to merge (including agreements in 

principle) to have a present effect on the 

ownership of the entity. SBA treats such 

options, convertible securities, and 

agreements as though the rights granted 

have been exercised. 

ii. Agreements to open or continue 

negotiations towards the possibility of a 

merger or a sale of stock at some later 

date are not considered ‘‘agreements in 

principle’’ and are thus not given 

present effect. 

iii. Options, convertible securities, 

and agreements that are subject to 

conditions precedent which are 

incapable of fulfillment, speculative, 

conjectural, or unenforceable under 

state or Federal law, or where the 

probability of the transaction (or 

exercise of the rights) occurring is 

shown to be extremely remote, are not 

given present effect. 

iv. SBA will not give present effect to 

individuals’, concerns’, or other entities’ 

ability to divest all or part of their 

ownership interest in order to avoid a 

finding of affiliation. 

3. Determining the concern’s size. In 

determining the concern’s size, SBA 

counts the receipts, employees 

(§ 121.201), or the alternate size 

standard (if applicable) of the concern 

whose size is at issue and all of its 

domestic and foreign affiliates, 

regardless of whether the affiliates are 

organized for profit. 

4. Exceptions to affiliation. For 

exceptions to affiliation, see 13 CFR 

121.103(b). Additional guidance will be 

provided in the updated CA Participant 

Guide. 

4. General Information 

The changes in this document are 

limited to the CA Pilot Program only. 

All other SBA guidelines and regulatory 

modifications related to the CA Pilot 

Program remain unchanged. The 

regulatory modifications described in 

this document are authorized by 13 CFR 

120.3, which provides that the SBA 

Administrator may suspend, modify, or 

waive rules for a limited period to test 

new programs or ideas. These 

modifications apply only to loans made 

under the CA Pilot Program, which 

expires September 30, 2024. 

SBA has provided more detailed 

guidance in the form of a CA Participant 

Guide that is being updated to reflect 

these changes and will be available on 

SBA’s website at https://www.sba.gov. 

SBA may provide additional guidance, 

through SBA notices, which may also be 

published on SBA’s website at https:// 

www.sba.gov/category/lendernavigation/forms-notices-sops/notices. 

Questions regarding the CA Pilot 

Program may be directed to the Lender 

Relations Specialist in the local SBA 

district office. The local SBA district 

office may be found at https://

www.sba.gov/about-offices-list/2. 

Authority: 15 U.S.C. 636(a)(25) and 13 CFR 

120.3. 

Isabella Casillas Guzman, 

Administrator. 

[FR Doc. 2022–09162 Filed 4–28–22; 8:45 am] 

BILLING CODE 8026–03–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 25 

[Docket No. FAA–2022–0442; Special 

Conditions No. 25–823–SC] 

Special Conditions: Commercial 

Aircraft Interiors, LLC, Boeing 767– 

300F Airplane; Installation of MainDeck Crew-Rest Compartment 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final special conditions; request 

for comments. 

SUMMARY: These special conditions are 

issued for the Boeing Model 767–300F 

series airplane. This airplane, as 

modified by Commercial Aircraft 

Interiors, LLC (CAI), will have a novel 

or unusual design feature when 

compared to the state of technology 

envisioned in the airworthiness 

standards for transport category 

airplanes. This design feature is a crewrest compartment that is a one piece 

self-contained unit for installation in the 

forward position of the Class E cargo 

compartment. The applicable 

airworthiness regulations do not contain 

adequate or appropriate safety standards 

for this design feature. These special 

conditions contain the additional safety 

standards that the Administrator 

considers necessary to establish a level 

of safety equivalent to that established 

by the existing airworthiness standards. 

DATES: This action is effective on 

Commercial Aircraft Interiors, LLC on 

April 29, 2022. Send comments on or 

before June 13, 2022. 

ADDRESSES: Send comments identified 

by Docket No. FAA–2022–0442 using 

any of the following methods: 

• Federal eRegulations Portal: Go to 

https://www.regulations.gov/ and follow 

the online instructions for sending your 

comments electronically. 

• Mail: Send comments to Docket 

Operations, M–30, U.S. Department of 

Transportation (DOT), 1200 New Jersey 

Avenue SE, Room W12–140, West 

Building Ground Floor, Washington, DC 

20590–0001. 

• Hand Delivery or Courier: Take 

comments to Docket Operations in 

Room W12–140 of the West Building 

Ground Floor at 1200 New Jersey 

Avenue SE, Washington, DC, between 9 

a.m. and 5 p.m., Monday through 

Friday, except Federal holidays. 

• Fax: Fax comments to Docket 

Operations at 202–493–2251. 

Privacy: Except for Confidential 

Business Information (CBI) as described 

in the following paragraph, and other 

information as described in title 14, 

Code of Federal Regulations (14 CFR) 

11.35, the FAA will post all comments 

received without change to https://

www.regulations.gov/, including any 

personal information you provide. The 

FAA will also post a report 

summarizing each substantive verbal 

contact received about these special 

conditions. 

Confidential Business Information: 

Confidential Business Information (CBI) 

is commercial or financial information 

that is both customarily and actually 

treated as private by its owner. Under 

the Freedom of Information Act (FOIA) 

(5 U.S.C. 552), CBI is exempt from 

public disclosure. If your comments 

responsive to these special conditions 

contain commercial or financial 

information that is customarily treated 

as private, that you actually treat as 

private, and that is relevant or 

responsive to these special conditions, it 

is important that you clearly designate 

the submitted comments as CBI. Please 

mark each page of your submission 

containing CBI as ‘‘PROPIN.’’ The FAA 

will treat such marked submissions as 

confidential under the FOIA, and the 

indicated comments will not be placed 

in the public docket of these special 

conditions. Send submissions 

containing CBI to John Shelden, Human 

Machine Interface, AIR–626, Technical 

Innovation Policy Branch, Policy and 

Innovation Division, Aircraft 

Certification Service, Federal Aviation 

Administration, 2200 South 216th 

Street, Des Moines, Washington 98198; 

telephone 206–231–3214; email 

john.shelden@faa.gov. Comments the 

FAA receives, which are not specifically 

designated as CBI, will be placed in the 


lotter on DSK11XQN23PROD with RULES1