30114 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

DEPARTMENT OF AGRICULTURE 

Rural Business-Cooperative Service 

7 CFR Part 4280 

RIN 0570–AA71 

Rural Microentrepreneur Assistance 

Program 

AGENCY: Rural Business-Cooperative 

Service, USDA. 

ACTION: Interim rule with request for 

comments. 

SUMMARY: This interim rule establishes 

the Rural Microentrepreneur Assistance 

Program. This interim rule provides 

technical and financial assistance in the 

form of loans and grants to qualified 

Microenterprise Development 

Organizations (MDOs) to support 

microentrepreneurs in the development 

and ongoing success of rural 

microenterprises. 

DATES: This interim rule is effective 

June 28, 2010. Comments must be 

received on or before July 27, 2010. 

ADDRESSES: You may submit comments 

to this rule by any of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Submit written comments via 

the U.S. Postal Service to the Branch 

Chief, Regulations and Paperwork 

Management Branch, U.S. Department 

of Agriculture, STOP 0742, 1400 

Independence Avenue, SW., 

Washington, DC 20250–0742. 

• Hand Delivery/Courier: Submit 

written comments via commercial mail 

delivery or other courier service 

requiring a street address to the Branch 

Chief, Regulations and Paperwork 

Management Branch, U.S. Department 

of Agriculture, 300 7th Street, SW., 7th 

Floor, Washington, DC 20024. 

All written comments will be 

available for public inspection during 

regular work hours at the 300 7th Street, 

SW., 7th Floor address listed above. 

FOR FURTHER INFORMATION CONTACT: Lori 

Washington, Loan Specialist, Business 

Programs, Specialty Programs Division, 

USDA, Rural Development, Rural 

Business-Cooperative Service, Room 

6868, South Agricultural Building, Stop 

3225, 1400 Independence Avenue, SW., 

Washington, DC 20250–3225; 

Telephone: (202) 720–9815, E-mail: 

lori.washington@wdc.usda.gov. 

SUPPLEMENTARY INFORMATION: 

Executive Order 12866 

This interim rule has been determined 

to be significant and has been reviewed 

by the Office Management and Budget 

in conformance with Executive Order 

12866. The Agency conducted a 

qualitative benefit cost analysis to fulfill 

the requirements of Executive Order 

12866. Based on the results of this 

qualitative analysis, the Agency has 

identified potential benefits to 

prospective program participants and 

the Agency that are associated with 

improving the availability of microlevel 

business capital, business-based training 

and technical assistance, and enhancing 

the ability of microlenders to service the 

microentrepreneurs to whom they are 

making their microloans. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act 1995 (UMRA), Public Law 

104–4 establishes requirements for 

Federal agencies to assess the effects of 

their regulatory actions on State, local, 

and tribal governments and the private 

sector. Under section 202 of the UMRA, 

Rural Development generally must 

prepare a written statement, including a 

cost-benefit analysis, for proposed and 

final rules with ‘‘Federal mandates’’ that 

may result in expenditures to State, 

local, or tribal governments, in the 

aggregate, or to the private sector of 

$100 million or more in any one year. 

With certain exception, section 205 of 

UMRA requires Rural Development to 

identify and consider a reasonable 

number of regulatory alternatives and 

adopt the least costly, more costeffective, or least burdensome 

alternative that achieves the objectives 

of the rule. This interim rule contains 

no Federal mandates (under the 

regulatory provisions of Title II of the 

UMRA) for State, local, and tribal 

governments or the private sector. 

Participation in this program is 

voluntary. Thus, this rule is not subject 

to the requirements of sections 202 and 

205 of the UMRA. 

Environmental Impact Statement 

This document has been reviewed in 

accordance with 7 CFR part 1940, 

subpart G, ‘‘Environmental Program.’’ 

Rural Development has determined that 

this action does not constitute a major 

Federal action significantly affecting the 

quality of the human environment, and 

in accordance with the National 

Environmental Policy Act (NEPA) of 

1969, 42 U.S.C. 4321 et seq., an 

Environmental Impact Statement is not 

required. 

Executive Order 12988, Civil Justice 

Reform 

This interim rule has been reviewed 

under Executive Order 12988, Civil 

Justice Reform. In accordance with this 

rule: 

(1) All State and local laws and 

regulations that are in conflict with this 

rule will be preempted; 

(2) No retroactive effect will be given 

this rule; and 

(3) Administrative proceedings in 

accordance with the regulations of the 

Department of Agriculture National 

Appeals Division (7 CFR part 11) must 

be exhausted before bringing suit in 

court challenging action taken under 

this rule unless those regulations 

specifically allow bringing suit at an 

earlier time. 

Executive Order 13132, Federalism 

It has been determined, under 

Executive Order 13132, Federalism, that 

this interim rule does not have 

sufficient federalism implications to 

warrant the preparation of a Federal 

Assessment. The provisions contain in 

the interim rule will not have a 

substantial direct effect on States or 

their political subdivisions or on the 

distribution of power and 

responsibilities among the various 

government levels. 

Regulatory Flexibility Act 

This interim rule has been reviewed 

with regard to the requirements of the 

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

612). Rural Development has 

determined that this action will not 

have a significant economic impact on 

a substantial number of small entities 

for the reasons discussed below. While, 

the majority of MDOs expected to 

participate in this Program will be small 

businesses, the average cost to an MDO 

is estimated to be approximately 1 

percent of the total mandatory funding 

available to the program in fiscal years 

2009 through 2012. Further, this 

regulation only affects MDOs that 

choose to participate in the program. 

Executive Order 12372, 

Intergovernmental Review of Federal 

Programs 

This program is subject to Executive 

Order 12372, which requires 

intergovernmental consultation with 

State and local officials. 

Intergovernmental consultation will 

occur for the assistance to MDOs in 

accordance with the process and 

procedures outlined in 7 CFR part 3015, 

subpart V. Assistance to rural 

microenterprises will not require 

intergovernmental review. 

Rural Development will conduct 

intergovernmental consultation using 

RD Instruction 1940–J, 

‘‘Intergovernmental Review of Rural 

Development Programs and Activities,’’ 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30115 

available in any Rural Development 

office, on the Internet at http:// 

www.rurdev.usda.gov/regs and in 7 CFR 

part 3015, subpart V. Note that not all 

States have chosen to participate in the 

intergovernmental review process. A list 

of participating States is available at the 

following Web site: http:// 

www.whitehouse.gov/omb/grants/ 

spoc.html. 

Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

This executive order imposes 

requirements on Rural Development in 

the development of regulatory policies 

that have tribal implications or preempt 

tribal laws. Rural Development has 

determined that the proposed rule does 

not have a substantial direct effect on 

one or more Indian tribe(s) or on either 

the relationship or the distribution of 

powers and responsibilities between the 

Federal Government and the Indian 

tribes. Thus, this interim rule is not 

subject to the requirements of Executive 

Order 13175. 

Programs Affected 

The Catalog of Federal Domestic 

Assistance Program numbers assigned to 

this program is 10.870. 

Paperwork Reduction Act 

Pursuant to the Paperwork Reduction 

Act of 1995 (44 U.S.C. Chap. 35; see 5 

CFR part 1320), the information 

collection provisions associated with 

this interim rule have been submitted to 

the Office of Management and Budget 

(OMB) for approval as a new collection 

and assigned OMB number 0570–XXXX. 

In the publication of the proposed rule 

on October 7, 2009, the Agency solicited 

comments on the estimated burden. The 

Agency received no public comment 

letters in response to this solicitation. 

This information collection requirement 

will not become effective until approved 

by OMB. Upon approval of this 

information collection, the Agency will 

publish a notice in the Federal Register. 

Title: Rural Microentrepreneur 

Assistance Program. 

OMB Number: 0570–XXXX 

(assigned). 

Type of Request: New collection. 

Expiration Date: Three years from the 

date of approval. 

Abstract: The collection of 

information is vital to Rural 

Development to make decisions 

regarding the eligibility of projects and 

loan and grant recipients in order to 

ensure compliance with the regulations 

and to ensure that the funds obtained 

from the Government are being used for 

the purposes for which they were 

awarded. Microenterprise development 

organizations seeking funding under 

this program will have to submit 

applications that include specified 

information, certifications, and 

agreements as stated in the interim rule. 

The estimated information collection 

burden has decreased by approximately 

$38,500, from $275,844 estimated for 

the proposed rule to $237,339 estimated 

for the interim rule. The majority of this 

decrease is attributable to removing 

enhancement grants from the interim 

rule. This change was made in response 

to public comment, but will be reevaluated by the Agency upon receipt of 

public comment on enhancement grants 

after the interim rule is published. 

E-Government Act Compliance 

USDA is committed to complying 

with the E-Government Act of 2002 

(Pub. L. 107–347, December 17, 2002), 

to promote the use of the Internet and 

other information technologies to 

provide increased opportunities for 

citizen access to government 

information and services, and for other 

purposes. 

I. Background 

Title VI, Section 6022 of the Food, 

Conservation, and Energy Act of 2008 

(Pub. L. 110–246, June 18, 2008) (the 

Act) established the Rural 

Microentrepreneur Assistance Program 

(RMAP). This interim rule implements 

the program to make loans and grants to 

microenterprise development 

organizations (MDOs) to support 

microentrepreneurs in the development 

and ongoing success of rural 

microenterprises. 

Under this program, the Agency will 

make available to MDOs direct loans 

and grants. As provided in the Act, 

MDOs that qualify for direct loans 

(participating microlenders) will use the 

funds borrowed from the Agency to 

make fixed interest rate microloans of 

not more than $50,000 at a term not to 

exceed 20 years to microentrepreneurs 

for startup and growing rural 

microenterprises. 

The Agency will also make available 

technical assistance (TA) grants for 

microlenders and technical assistance 

only (TA-only) grants for entities that 

provide training and technical 

assistance to microentrepreneurs and 

microenterprises but do not wish to 

fund microloans under this program. 

The TA grants will be annual grants 

made to participating microlenders to 

provide business based training and 

technical assistance to 

microentrepreneurs that have received 

or are seeking a microloan from a 

microlender under this program. 

TA-only grants will also be made 

available, on a limited basis, to MDOs 

that are not participating in the program 

as microlenders. 

II. Discussion of the Interim Rule 

USDA Rural Development is issuing 

this regulation as an interim rule, with 

an effective date of June 28, 2010. All 

provisions of this regulation are adopted 

on an interim final basis, are subject to 

a 60-day comment period, and will 

remain in effect until the Agency adopts 

a final rule. 

III. Changes to the Rule 

This section presents changes from 

the proposed rule. Most of the changes 

were the result of the Agency’s 

consideration of public comments on 

the proposed rule. Some changes, 

however, are being made to clarify 

proposed provisions. Unless otherwise 

indicated, rule citations refer to those in 

this interim rule. 

A. Highlighted Changes 

The following list highlights some of 

the changes made to the rule. These 

changes are also discussed in the 

section specific change portion that 

follows this list. All changes resulting 

from public comments are explained in 

detail in that portion of the preamble. 

• Creation of a technical assistance 

only grant program for non-lending 

MDOs. 

• Deferral of the enhancement grant 

category. 

• Increasing the maximum size of 

technical assistance grants. 

• Implementation of a simplified 

interest rate structure. 

• Removing the maximum margin 

requirement on loans made by the 

microlender to the microentrepreneur. 

• Implementation of a minimum 

score for qualification as a microlender 

or grantee. 

• Adjusting the cost share and 

matching requirements, including 

limiting the cost share requirement to 

loans and the matching requirement to 

grants. 

• Allowing microlenders two cost 

share options for establishing the rural 

microloan revolving fund. 

B. Section-Specific Changes 

Purpose and Scope (§ 4280.301) 

There were two primary changes to 

this section: 

First. The Agency added discussion 

concerning the availability of technical 

assistance-only grants as one of the 

types of funding to be available under 

the program (§ 4280.301(a)(4) and (d)). 

Second. The Agency clarified that 

participating microlenders can use the 


sroberts on DSKD5P82C1PROD with RULES
30116 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

TA grants to provide technical 

assistance not only to 

microentrepreneurs who have actually 

received a loan from the microlender, 

but also to microentrepreneurs who are 

seeking a loan from the microlender 

(§ 4280.301(a)(2)). 

As the purpose of this Program is to 

support the development and ongoing 

success of rural microentrepreneurs and 

microenterprises, microentrepreneurs 

are encouraged to contact the Agency 

for a list of MDOs in or near their 

geographic area that are participating in 

this Program. 

Definitions and Abbreviations 

(§ 4280.302) 

The Agency made changes to the 

definitions section of the rule, including 

adding several new definitions. Except 

for terms in which the changes were 

grammatical, the following identify each 

affected term. 

Agency personnel. Because no Agency 

personnel are eligible for a microloan 

under the interim rule, revised by 

removing the last clause (‘‘who are more 

than 6 months from separating from the 

Agency’’) because it is no longer 

necessary. 

Close relative. Added to clarify the 

implementation of § 4280.323(d) 

concerning the restrictions on the use of 

loan funds. 

Default. Has been simplified for 

purposes of clarity. 

Eligible project cost. Has been added 

as part of the implementation of the cost 

share requirement. 

Facilitation of access to capital. To 

clarify this term, the words ‘‘access to’’ 

have been added. 

Fiscal year. Added the word ‘‘Federal’’ 

for clarity. 

Indian tribal government employee. 

Has been removed as a conforming 

change. 

Loan loss reserve fund. Revised by 

removing text not associated with the 

definition of the term, but which was 

also covered elsewhere within the rule. 

Microborrower. Added for 

clarification in implementing the rule. 

Microentrepreneur. Revised to clarify 

that both the microentrepreneur and the 

microenterprise to be assisted under the 

program must be located in a rural area. 

In addition, the phrase ‘‘business 

financing’’ was replaced with ‘‘business 

capital.’’ Lastly, a sentence was added to 

note that a microentrepreneur who has 

received a loan under this program may 

also be referred to as a microborrower 

within the rule. 

Military personnel. Revised to add the 

words ‘‘or grade’’ after the word ‘‘rank’’; 

‘‘United States’’ after the word ‘‘active’’; 

‘‘active duty’’ after the word ‘‘their’’; and 

to remove to the word ‘‘enlisted’’. 

Nonprofit entity. Has been simplified 

and reference to the ‘‘U.S. Internal 

Revenue Service’’ has been removed. 

Rural microenterprise. Revised the 

term to ‘‘microenterprise’’ and expanded 

the definition for clarity. 

Rural microloan revolving fund. 

Revised for clarity. 

Significant outmigration. Removed 

because the term is not used in the 

interim rule for the reasons discussed in 

the responses to comments. 

State. Added to clarify the 

applicability of the program. 

Review of Appeal Rights and 

Administrative Concerns (§ 4280.304) 

In paragraph (a), the words ‘‘a 

microlender, or grantee MDO’’ were 

added after the word ‘‘MDO’’ to clarify 

the applicability of this paragraph. 

Nondiscrimination and Compliance 

With Other Federal Laws (§ 4280.305) 

In paragraph (a), ‘‘Applicant’’ was 

replaced with ‘‘Any entity receiving 

funds under this subpart’’ to clarify the 

applicability of this paragraph. 

Forms, Regulations, and Instructions 

(§ 4280.306) 

This section has been added to 

identify where applicants can access 

forms, regulations, and instructions 

noted within the subpart. 

Program Requirements for MDOs 

(§ 4280.310) 

This section has been revised and 

redesignated. The substantive changes 

are described below: 

First. The citizenship requirements 

have been clarified to apply only to nonprofit entities (paragraph (a)(2)), not 

American Indian tribes or United States 

public institutions of higher education. 

Second. In addition to moving the 

requirements specific to potential 

microlenders into paragraph (a)(4), the 

Agency has added a new provision 

(paragraph (a)(4)(ii)) regarding obtaining 

an attorney’s opinion regarding the 

microlender’s legal status and its ability 

to enter into program transactions at the 

time of initial entry into the program. 

Third. A minimum score threshold 

has been added for MDOs to be 

considered for receiving an award under 

this subpart (paragraph (b)). Generally, 

applicants must receive at least 70 

points out of 100 in order to be eligible 

to receive an award under the program. 

Fourth. The Agency removed ‘‘is 

delinquent in meeting U.S. Internal 

Revenue Service (IRS) requirements’’ 

from the list of provisions identifying 

ineligible applicants. 

Loan Provisions for Agency Loans to 

Microlenders (§ 4280.311) 

A number of changes have been made 

to this section, including grammatical 

changes and redesignation of 

paragraphs. The substantive changes are 

described below: 

First. The Agency revised the 

provisions associated with the cost 

share requirements by applying them 

only to loans and identifying two 

options for how microlenders can 

establish Rural Microloan Revolving 

Funds (RMRFs). The provisions also 

allow microlenders the option of setting 

up multiple RMRFs (paragraph d)). 

Because of this revision, a conforming 

change was made to paragraph (c) to 

refer to ‘‘RMRF’’ funds instead of 

‘‘Agency loan’’ funds. 

Second. The provisions concerning 

the term of a loan have been recast to 

state that a term shorter than 20 years 

will be considered if requested by the 

applicant MDO and must be agreed to 

by the microlender and the Agency 

(paragraph (e)(3)). 

Third. The number of days loan 

closing must take place has been revised 

to within 90 days, rather than 60 days 

as proposed, before funds would be 

forfeited (paragraph (e)(8)). 

Fourth. Revised the number of day 

microlenders have to make at least one 

microloan from within 30 days to 

within 60 days of disbursement 

(paragraph (e)(10)). Further, failure to 

make a microloan within this time 

period may result in the microlender 

not receiving any additional funds from 

the Agency and may result in the 

Agency demanding return of any funds 

already disbursed to the microlender. 

Fifth. Revised substantially the 

interest rate provisions. In the interim 

rule, each microloan made to a 

microlender during the first five years of 

participation will bear an interest rate of 

2 percent and each loan made to the 

microlender after the fifth year of 

participation will bear an interest rate of 

1 percent (paragraph (e)(12)). 

Sixth. Revised several dates in the 

section, including the date when the 

Agency will calculate and amortize the 

microlender’s debt after the deferral 

period (e.g., (paragraph (e)(13)). 

Seventh. Removed the provisions 

associated with negative amortization 

and reamortization (proposed 

§ 4280.311(d)(15)(i) and (ii)). 

Eighth. Modified the rule to indicate 

that loans can be used to recapitalize 

existing Agency funded RMRFs 

(paragraph (f)(2)). 

Ninth. Added a provision to provide 

microlenders 30 days to replenish the 

loan loss reserve fund (LLRF) if it falls 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30117 

below the required amount (paragraph 

(g)(2)(i)). 

Tenth. Removed the phrase ‘‘and 

partially funded’’ in paragraph (g)(4). 

Eleventh. Added a conforming change 

to the requirement for maintaining a 

minimum 100 percent of the amount 

owed by the microlender to the Agency 

for those microlenders with 3 years or 

less experience (paragraph (h)(2)). 

Twelfth. Added a provision requiring 

microlenders to provide Agency access 

to any of the microlender’s records 

pertaining to any microloan made to the 

microlender under this program. This 

was added to enable the Agency to 

better enforce the provision of this 

program (paragraph (h)(7)). 

Thirteenth. Added a provision 

requiring prior written Agency approval 

before the microlender makes any key 

personnel changes (paragraph (h)(8)). 

Loan Approval and Closing (§ 4280.312) 

This section has been added and is 

comprised of proposed § 4280.311(g) 

and (h) for clarity. Changes to these 

paragraphs are: 

• The promissory note and security 

agreement have been added to the list of 

items that may be used to demonstrate 

that the RMRF and LLRF have been 

established and the LLRF has been, or 

will be, funded as described in 

§ 4280.11(f)(4) prior to loan closing 

(paragraph (c)(1)). 

• This section has been clarified to 

explain what constitutes ‘‘sufficient 

evidence’’ to demonstrate that no law 

suits are pending or threatened that 

would adversely affect the security of 

the microlender when the security 

instruments are filed (paragraph (c)(3)). 

Grant Provisions (§ 4280.313) 

This section has been redesignated 

(proposed § 4280.312) and a number of 

changes have been made, including 

grammatical changes and reordering of 

paragraphs. The substantive changes are 

described below: 

First. The calculation of the maximum 

TA grant amount has been revised such 

that the maximum annual TA grant to 

any one microlender could be $205,000 

(paragraphs (a)(1)(i) and (b)(2)). The 

maximum TA grant amount for a 

microlender is now calculated as 25 

percent of the first $400,000 of 

outstanding microloans owed to the 

microlender under this program, plus an 

additional 5 percent of the outstanding 

loan amount owed by the 

microborrowers to the lender over 

$400,000 up to and including $2.5 

million. 

Second. The addition of provisions 

that a microlender who expends more 

than 10 percent of its TA grant funding 

on administrative expenses will be 

considered in performance default and 

may have to forfeit funding (paragraph 

(b)(3)(iii)). 

Third. Provisions have been added to 

address funding of the TA-only grants 

(paragraphs (a)(1)(ii) and (c)). 

Fourth. The matching requirements 

have been revised (paragraph (a)(2)). 

Fifth. The Agency added a provision 

requiring prior written Agency approval 

before the microlender makes any key 

personnel additions (paragraph (a)(5)). 

Sixth. The grant oversight provisions 

were moved from this section and 

consolidated with those in § 4280.320. 

MDO Application and Submission 

Information (§ 4280.315) 

Most of the changes to the section 

reflect a reorganization of the provisions 

found in the proposed rule. Substantive 

changes include: 

• Redefining less experienced MDOs 

as those with 3 years or less experience, 

rather than less than 3 years experience, 

and redefining more experienced MDOs 

as those with more than 3 year 

experience, rather than 3 or more years 

experience; 

• Requiring certificates of good 

standing to be not more than 6 months 

old; 

• Adding documentation 

requirements for TA-only grant 

applications; 

• Requiring documentation that the 

applicant has certified to the Agency 

that it cannot find credit elsewhere 

(pursuant to the requirements as 

provided in the Consolidated Farm and 

Rural Development Act (Sec. 333(1)); 

• Revising and simplifying the 

requirement associated with separate 

applications to indicate that MDOs may 

only submit and have pending for 

consideration, at any given time, one 

application, regardless of funding 

category; and 

• Requiring all applicants seeking 

status as a microlender to identify 

which cost share option(s) they will use 

to set up their RMRF(s) and the 

amount(s) and source(s) of the nonFederal share. 

Application Scoring (§ 4280.316) 

A number of changes have been made 

to this section, including grammatical 

changes, redesignation of paragraphs, 

and clarification as to whether the 

information to be submitted applied to 

rural or non-rural microentrepreneurs 

and microenterprises, or both, and to 

microloans or loans or the microlenders 

entire portfolio. The substantive 

changes are described below: 

The Agency notes that, except for 

applications from microlenders with 

more than 5 years experience with this 

program: 

1. The maximum number of points 

that each application can receive is 100; 

2. Each application will be scored 

against the criteria specified in 

§ 4280.316(a) for which it can receive a 

maximum of 45 points; 

3. Each application will be scored 

against the criteria specified in 

§ 4280.316(b), (c), or (d), as applicable, 

for which it can receive a maximum of 

55 points; and 

4. An application must receive at least 

70 points in order to be eligible. 

Applications from lenders with more 

than 5 years experience in this program 

will be scored on a pass/fail basis. 

Those applications that pass will be 

assigned a score of 90 points. 

Figure 1 illustrates the RMAP scoring 

process. 

Application Requirements for All 

Applicants (§ 4280.316(a)) 

BILLING CODE 3410–XY–P 


sroberts on DSKD5P82C1PROD with RULES
30118 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

BILLING CODE 3410–XY–C 


sroberts on DSKD5P82C1PROD with RULESER28MY10.002</GPH>
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30119 

Changes to these application 

requirements are mostly editorial in 

nature; there were no changes in the 

basic scoring criteria or points to be 

awarded. Substantive changes included: 

• Indicating that there should be a 

corresponding resume for each of the 

key individuals noted and named on the 

organizational chart; 

• Noting that the mission statement 

does not need to be submitted twice if 

it is already included in other submitted 

documents; and 

• Deleting ‘‘as well as the needs of the 

service area’’ and reference to areas of 

significant outmigration from the 

scoring criterion addressing information 

regarding the geographic area to be 

served. 

Program Loan Application 

Requirements for MDOs Seeking To 

Participate as RMAP Microlenders With 

More Than 3 Years of Experience 

(§ 4280.316(b)) 

There were several important changes 

associated with the scoring criteria for 

these applications, including: 

• Removing reference to demographic 

group and replacing that term with 

reference to racial and ethnic minorities, 

women, and the disabled in Figure 1; 

• Replacing reference to the U.S. 

Census Bureau with the ‘‘applicable 

decennial census for the State’’ 

(paragraph (b)(1)(v)); 

• Replacing ‘‘race, ethnicity, and 

socio-economic status’’ with ‘‘racial and 

ethnic minority status’’ and indicating 

that disability will be defined as under 

The Americans with Disabilities Act 

under the scoring criterion for diversity 

(paragraph (b)(1)(v)); 

• Replacing ‘‘percentage points’’ with 

‘‘percent’’ (paragraph (b)(1)(v)); 

• Removing the scoring criterion for 

outmigration and adding ‘‘non-rural’’ to 

the total number of microentrepreneurs 

that received both microloans and TA 

services in the scoring criterion for 

history of provision of technical 

assistance to microentrepreneurs 

(paragraph (b)(3)); 

• Removing ‘‘socially-disadvantaged’’ 

and clarifying that the percentage of 

rural entrepreneurs that received both 

microloans and TA services will be 

broken down by racial and ethnic 

minority, disabled, and gender in 

paragraph (b)(3)(iii); and 

• Adding a new scoring criterion on 

the ratio of TA clients that also received 

microloans during each of the last three 

years (paragraph (b)(4)). 

With the removal of outmigration as 

a scoring criterion for loans and the 

addition of the new scoring criterion, 

the points associated with most of the 

criteria also changed. 

Application Requirements for MDOs 

Seeking To Participate as RMAP 

Microlenders With 3 Years or Less 

Experience (§ 4280.316(c)) 

There are no significant substantive 

changes to the scoring criteria for these 

applications other than a redistribution 

of points. 

Application Requirements for MDOs 

Seeking Technical Assistance-Only 

Grants (§ 4280.316(d)) 

This is a completely new set of 

scoring criteria required by the addition 

to the interim rule of providing 

technical assistance grants to MDOs that 

are otherwise not participating as a 

microlender. The criteria included 

address: History of provision of 

technical assistance to 

microentrepreneurs, ability to provide 

technical assistance to 

microentrepreneurs, technical 

assistance plan, and proposed 

administrative expenses to be spent 

from TA grant funds. 

Re-Application Requirements for 

Participating Microlenders With More 

Than 5 Years Experience as a 

Microlender Under This Program 

(§ 4280.316(e)) 

The substantive changes to this 

section were to: 

• Replace ‘‘the number of businesses’’ 

with ‘‘the number and percent of 

program microentrepreneurs and 

microenterprises’’ and replace ‘‘after 

loan repayment’’ with ‘‘after microloan 

disbursement’’ in paragraph (e)(1)(iii); 

• Add to paragraph (e)(2) ‘‘over the 

life of its participation in the program’’ 

to indicate the appropriate timeframe 

that data are to be reported; 

• Provide better guidance on 

requirements for assessing overall 

program performance with regards to 

the successful use of TA dollars 

(paragraph (e)(2)(iii)); 

• Replaced proposed 

§ 4280.316(e)(2)(iv), because it is 

duplicative of § 4280.316(e)(1)(iii), with 

a request for a statement discussing the 

need for more funding; and 

• Removing proposed 

§ 4280.316(e)(2)(vi) regarding other such 

issues as deemed appropriate. 

Selection of Applications for Funding 

(§ 4280.317) 

A few changes have been made to this 

section as briefly described below: 

• The introductory text is revised to 

clarify that all applications will be 

scored on a 100-point scale and will be 

ranked together and to allow the 

Administrator to prioritize applications 

that score the same for geographic 

diversity. This latter provision is added 

in order to facilitate the distribution of 

limited program funds throughout rural 

America, because the Agency does not 

want program funds to be concentrated 

in a few states. 

• Provisions for application packages 

have been added (paragraph (a)(1)). 

• Provisions associated with internal 

procedures were removed (proposed 

§ 4280.317(c) and (d)). 

• Clarification that awardees have 90 

days to close or forfeit their funding 

(paragraph (d)). 

Grant Administration (§ 4280.320) 

The changes made to this section 

addressed presentation of the 

requirements and updating and revising 

the forms to be submitted. This section 

now also states that if a microlender has 

more than one grant from the Agency, 

a separate report must be made for each. 

Loans From the Microlenders to the 

Microentrepreneurs and 

Microenterprises (§ 4280.322) 

A number of changes have been made 

to this section, including grammatical 

changes and reordering of paragraphs. 

The substantive changes are described 

below: 

• The provision limiting the margin 

of the interest rate on the loan made to 

the microborrower has been deleted. 

Instead, the microlender may establish 

its margin of earnings but may not 

adjust the margin so as to violate Fair 

Credit Lending laws. In addition, 

margins must be reasonable so as to 

ensure that microloans are affordable to 

the microborrowers (paragraph (b)(3)). 

• The provisions in § 4280.322(c) 

concerning insurance requirements have 

been revised by removing ‘‘except that 

* * * excessive.’’ 

• The requirement that a 

microborrower has been turned down 

has been removed and replaced with 

more appropriate options for meeting 

the test that have a lesser impact on the 

microborrower’s ability to build a 

favorable credit history. (paragraph (d)), 

In the introductory text of paragraph (f), 

the rule clarifies that Agency loan funds 

may be used for any legal business 

purpose provided it is not identified in 

§ 4280.323 as ineligible. 

• The rule includes clarification on 

the eligibility of military personnel for 

funding under the program (paragraph 

(g)). The rule also clarifies that Indian 

Tribal government employees will be 

treated as any other MDO employee 

regarding eligibility for a microloan. 

Ineligible Microloan Purposes 

(§ 4280.323) 

A few changes have been made to this 

section: 


sroberts on DSKD5P82C1PROD with RULES
30120 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

• Reference to ‘‘his/her family 

members’’ has been removed (paragraph 

(d)); 

• The paragraph on military 

personnel has been moved to 

§ 4280.322; 

• Reference to swimming pools has 

been removed from (paragraph (l); 

• Proposed paragraphs (o) and (p) 

have been removed; and 

• Lines of credit and subordinated 

liens were added as an ineligible 

purpose (paragraphs (n) and (o)). 

IV. Discussion of Comments 

The proposed rule was published in 

the Federal Register on October 7, 2009 

(74 FR 51713), with a 45-day comment 

period that ended November 23, 2009. 

Comments were received from 48 

commenters yielding over 450 

individual comments on the proposed 

rule, which have been grouped into 

similar categories. Commenters 

included members of Congress, Rural 

Development personnel, 

microenterprise development 

organizations, trade associations, states, 

universities, environmental 

organizations, and individuals. As a 

result of some of the comments, the 

Agency made changes in the rule. The 

Agency sincerely appreciates the time 

and effort of all commenters. Responses 

to the comments on the proposed rule 

are discussed below. 

General 

Comment: Several commenters 

provided general support for the 

program, and positive discussion of 

other microenterprise development 

activities and programs to address rural 

need. 

One commenter provided general 

support for the program’s efforts to 

build the capacity of the 

microenterprise development industry 

to achieve new levels of performance 

and effectiveness. Due to tightened 

credit markets as a result of the 

recession, microlenders face increased 

demands to provide capital and 

technical assistance to both start-ups 

and existing microentrepreneurs. 

Several commenters stated that they 

strongly support this commenter’s 

comments on the proposed rule. 

Response: The Agency appreciates the 

support for the program reflected by the 

commenters, acknowledges the 

microenterprise development work that 

has produced positive activity both in 

the United States and abroad for several 

decades, and looks forward to 

formalizing the Agency’s participation 

in this economic development sector. 

Comment: One commenter stated that 

they believe RMAP will do much good 

in reversing the economic and financial 

crisis in rural communities. With many 

rural areas underserved or not served at 

all by MDOs, the Agency should be 

doing all it can to recruit as many 

qualified organizations as possible to 

become engaged in rural training and 

microentrepreneur lending. The 

proposed rule’s scoring should 

encourage the effort to build MDO 

networks to serve these communities 

with as many organizations with the 

necessary expertise as possible. 

Response: The Agency acknowledges 

the commenter’s support. 

Funding Allocations 

Comment: Four commenters stated 

that the terms of the proposed rule make 

it difficult to determine how USDA will 

make decisions on applications that 

seek funding from different components 

(the so-called ‘‘enhancement grants’’ and 

the loans/TA grants) without stating 

how much of available funding goes to 

each component. The commenters 

recommended that the final rule should 

contain information concerning program 

funding, including the subsidy rate that 

will be used to calculate the RMAP loan 

program level and legislative intent in 

the USDA FY 2010 appropriations bill. 

If this information is unattainable or 

otherwise not available, the commenter 

recommended that all RMAP dollars not 

previously identified by Congress as 

loan subsidy dollars be used to provide 

TA training grants to MDOs. 

Response: The Agency considered a 

standard division among the program 

components and determined that such a 

balance should be adjustable in future 

years based on market demands and 

conditions. Therefore, the Agency has 

not included program funding in the 

rule with one exception. As noted later 

in this preamble, the Agency plans to 

use up to 10 percent of program funding 

each year for technical assistance only 

grants for MDOs that are not otherwise 

participating in the program. The 

Agency will publish program levels 

annually in a Notice of Funding 

Availability (NOFA). 

Existing MDO Emphasis 

Comment: Several commenters were 

concerned that the proposed rule 

applies exclusively to existing MDOs, 

especially those heavily involved in 

lending. The commenters stated that 

one of the purposes of the law is to 

build and enhance microenterprise 

services in rural areas, particularly 

remote rural areas and believe the 

application and scoring emphasis on 

MDO history (particularly an MDO’s 

lending history) implies funding only 

for existing MDOs, and the 

‘‘enhancement grants’’ provision (of the 

proposed rule) is defined in terms of 

‘‘microlenders’’ and ‘‘projects’’ and 

activities that enhance the microlenders’ 

capabilities, implying that funds will go 

exclusively for existing MDOs involved 

in lending. According to the 

commenters, this upsets the intended 

balance in RMAP between training, 

technical assistance (not connected to 

loans to MDOs) and lending, and 

between existing MDOs and developing 

a network of MDOs in unserved and 

underserved rural areas. The 

commenters suggested that the final rule 

restore the intended balance in both 

respects. 

Response: With regard to the 

comment concerning training and 

technical assistance, the Agency agrees 

that microlenders who are not 

participating in RMAP as lenders 

should have access to technical 

assistance grants in order to provide 

such assistance to rural 

microentrepreneurs. Thus, the Agency 

has included in the rule § 4280.301 

provisions for MDOs who are otherwise 

not participating in the program to be 

eligible to receive technical assistance 

grants. 

With regard to the comment 

concerning existing MDOs and 

developing a network of MDOs, the 

Agency disagrees with the commenters 

that the rule does not address both. As 

provided in both the proposed rule and 

this interim rule, MDOs with less than 

3 years experience are eligible to 

compete for program funds. Thus, this 

would allow for developing a network 

of MDOs. However, to further meet the 

need for developing a network, the 

Agency is requesting that comments and 

suggestions regarding the delivery of an 

enhancement grant program be 

submitted (see Section V of this 

preamble). 

Administrative Management 

Comment: One commenter expressed 

concern that the interest rate criteria 

specified were too complex for the 

current automated systems to monitor or 

effectively manage. 

Response: During the development of 

the regulation, the program area has 

been engaged in system requirements 

discussions with Agency information 

technology staff. The Agency anticipates 

that, by the time the first applications 

are received, systems (the Rural Utilities 

Loan Servicing System (RULSS)) will be 

ready to accommodate the interest rate 

provisions in the rule. 

Comment: One commenter stated that 

the program should be aligned with 

existing Rural Development programs 

and administrative capabilities. The 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30121 

commenter believes that the 

Administrative requirements overall are 

too complex to manage within existing 

Agency systems and substantially out of 

sync with other Agency programs to be 

cost-effective to the taxpayer for 

management. According to the 

commenter, the proposed rule must 

align payment and deferral options with 

the Intermediary Relending Program 

(IRP) in order to be cost-effective. 

Response: The Agency disagrees with 

the commenter’s characterization of the 

proposed RMAP regulation. The Agency 

is in the process of placing its 

administrative systems under RULSS. 

RMAP will be aligned with other similar 

programs to leverage electronic 

reporting resources with the objective of 

improved information-gathering and 

more efficient program management. 

The RMAP program will begin the 

program area’s move to newer, more 

flexible, more responsive administration 

of the program. This is expected to 

result in improved electronic reporting, 

less paper-based program 

administration, and mitigation of 

duplicative or unnecessary work, 

thereby allowing RMAP to be 

implemented efficiently. 

Furthermore, RMAP is different from 

the IRP and, thus, certain provisions 

will not align intentionally with the IRP. 

Finally, the Agency believes that the 

RMAP provisions are very similar to 

other existing Federal microenterprise 

programs and the participating entities 

will understand the provisions 

contained in RMAP. 

Comment: One commenter believes 

that the rule as proposed could cause 

issues with Office of the Inspector 

General (OIG) audits. 

Response: The Agency believes that 

OIG audits are helpful in terms of 

suggesting program improvements. It 

further believes that programs that are 

efficiently and effectively managed will 

have few negative comments as the 

result of such audits. 

Micromanagement 

Comment: One commenter stated that 

as proposed there is too much micromanagement in the program, especially 

if the MDO is applying for the minimum 

loan amount of $50,000. According to 

the commenter, the reporting burden is 

too great to make it worth their while. 

Response: Reporting requirements for 

this program have been kept to a 

minimum as a result of instituting an 

electronic reporting system. Reporting is 

flexible, automated, and easily accessed 

by lenders, grantees, and agency 

personnel. 

Loans, TA Grants, Enhancement Grants 

Comment: A number of commenters 

believe that the proposed rule should be 

revised to maintain the intent of 

Congress by restoring the balance 

between the funding for loan capital and 

funding for training and technical 

assistance. As one claimed, the 

proposed rule is in ‘‘direct contradiction 

to the law’’ because it eliminates all 

grants to microenterprise programs to 

provide business training to existing 

and prospective microentrepreneurs. 

The commenter stated that, by 

eliminating the training funds (and by 

capping technical assistance funds), the 

proposed rule will make it difficult for 

organizations to fund the staff needed to 

work with borrowers and other clients. 

Another commenter stated that the 

proposed rule directs most of the RMAP 

funds to loan capital and gives short 

shrift to support for training, financial 

planning, and critical support services 

that MDOs offer. The proposed rule 

does this by limiting the purposes of 

grants to support microenterprise 

development and by capping the 

maximum technical assistance grant an 

MDO can receive at $100,000, rather 

than 25 percent of the MDO’s total 

balance of microloans. 

Response: The Agency disagrees that 

the proposed rule was in direct 

contradiction to the law, because it 

provided for loans and for grants for 

both technical assistance to 

microentrepreneurs (referred to as 

technical assistance grants) and training 

of MDOs staff to enhance their 

capabilities in providing technical 

assistance to their clients (referred to as 

enhancement grants). Nevertheless, the 

Agency, as noted later in this preamble, 

has added in § 4280.301 that technical 

assistance grants may be made available 

to MDOs that are not otherwise 

participating in RMAP. The Agency 

believes that this change provides for an 

improved program and satisfies the 

concerns expressed by these 

commenters. 

Finally, the Agency understands that 

those seeking technical assistance 

funding would prefer no funding cap. 

The Agency believes that, in order to 

fund more MDOs in rural areas 

nationwide, a cap is necessary. 

However, as later discussed, the 

maximum amount of technical 

assistance grants has been increased. 

Inflexibility 

Comment: Several commenters stated 

that the proposed rule is inflexible and 

will unnecessarily increase expenses for 

microenterprise service providers. To 

illustrate their concern, one commenter 

states that programs must identify 

prospective borrowers before they can 

receive loan funds from USDA. The 

result is that more time must be spent 

completing paperwork, leaving less time 

to serve microentrepreneurs. These 

rules ignore the flexibility needed to 

help microentrepreneurs be successful. 

One commenter believes that the 

proposed rule does not reflect the reality 

of how lending to microentrepreneurs 

actually works. 

Another commenter believes that the 

approach is far too elaborate and 

unnecessarily complex, particularly in 

the way RMAP loans are structured and 

reamortized and in the scoring system. 

The commenter stated there is the 

maximum need for flexibility and 

latitude for the program to succeed. 

Three of the commenters stated that 

the rule, as proposed, will add to the 

administrative burdens on MDOs and 

decrease the portion of staff time that 

can be devoted where it should be 

devoted—servicing loans, providing 

technical assistance and conducting 

outreach that brings more 

microentrepreneurs in the door for 

services. 

Response: It is not the intent of the 

Agency to require microlenders to 

identify prospective borrowers before 

they can receive loan funds from the 

USDA. There is no such requirement in 

the proposed rule. Similarly, the 

restrictions placed on the relationship 

between the microlender and the 

microborrowers are minimal and stem 

from statutory requirements, such as the 

maximum loan amount, the maximum 

term of a microloan, and the provision 

of technical assistance and training for 

microborrowers. The proposed rule did, 

however, require that the microlender 

make a microloan within 30 days of 

receipt of funds from the Agency. To the 

extent that the commenter may be 

referring to this policy, the interim rule 

instead adopts a 60 day requirement to 

provide microlenders more flexibility. 

Notice of Funding Availability 

Comment: Two commenters proposed 

that the Agency set a timeline for a 

NOFA that both reflects the 

Congressional funding process and 

allows for greater accountability to 

RMAP participants. The commenter 

recommended that a NOFA be made 

either no later than 45 days after the 

enactment of the appropriate spending 

bill or no later than 30 days after the 

disbursement of funds and/or budget 

authority to USDA. 

Response: The Agency disagrees that 

it is necessary to set a timeline for 

issuing a NOFA, in part because there 

is no relationship between when the 


sroberts on DSKD5P82C1PROD with RULES
30122 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

Agency will accept applications and 

when it issues a NOFA. It is the 

Agency’s intent, however, to publish 

RMAP NOFAs as early as possible each 

fiscal year. This comment is associated 

with the administration of RMAP and 

not with the proposed rule itself. Thus, 

no changes have been made to the rule 

as a result of this comment. 

MDO Administrative Costs 

Comment: One commenter believes 

that the Agency’s expectation, noted 

under its Regulatory Flexibility Act 

discussion, that participating MDOs will 

be able to cover most of their 

administrative costs by ‘‘the interest rate 

spread between the one percent loan 

from Rural Development and the 

interest rate on loans made to the 

microentrepreneurs by the MDO’’ seems 

to be in conflict with subsequent 

sections of the proposed rule that 

severely limit MDO uses of interest 

income and must be clarified. 

Response: The Agency agrees with the 

commenter that the statement in the 

preamble to the proposed rule was in 

error. The Agency has not repeated this 

statement in this preamble. 

Intermediary Relending Program 

Comment: One commenter 

recommended that the program be 

delivered under the published IRP 

regulations with the exception that the 

term must be 20 years and that 

microborrowers comply with the criteria 

in the proposed rule (i.e., proposed 

§§ 4280.322 and 4280.323). The 

commenter further suggested that RMAP 

grant funds be administered under the 

published Rural Business Enterprise 

Grants regulations with the exception 

that the RMAP grants would be awarded 

in the proportional amounts indicated 

in the proposed rule (25 percent of the 

RMAP loan) and accompany RMAP loan 

awards. According to the commenter, 

adopting existing, well-understood, 

functional program regulations will 

allow rapid deployment and operation 

of the important RMAP initiative. 

Response: The Agency disagrees with 

the commenter’s recommendation to 

administer RMAP under the IRP and 

RBEG regulations because of the many 

statutory differences between the 

programs. 

Purpose and Scope—(§ 4280.301) 

Comment: In referring to proposed 

§ 4280.301(b), one commenter expressed 

concern that the sentence ‘‘Technical 

assistance grants will be awarded to 

microlenders to provide technical 

assistance to microentrepreneurs who 

have received one or more microloans 

from the MDO under this program’’ 

would mean that entrepreneurs that 

have not received a microloan from an 

MDO under this program would not be 

able to receive technical assistance. 

Response: The Agency agrees that it is 

in the best interest of the program not 

to limit technical assistance only to 

those microborrowers who actually 

receive a microloan under RMAP. 

Therefore, the Agency has revised the 

sentence for clarity to indicate that a 

microentrepreneur seeking a microloan 

would also be eligible to receive 

technical assistance. 

Definitions and Abbreviations— 

(§ 4280.302) 

Administrative Expenses 

Comment: One commenter 

recommended removing the limitation 

on the percent of TA grant funding that 

may be used to fund expenses because 

it has nothing to do with the definition. 

Response: While the Agency does not 

disagree with the commenter’s 

observation, the Agency believes that it 

is helpful here to explain the limitations 

to the public and Agency staff. For these 

reasons, and because it does ‘‘no harm,’’ 

the Agency has not revised the 

definition as suggested by the 

commenter. 

Agency Personnel 

Comment: Two commenters asked 

why there was a distinction made in the 

definition for personnel who are more 

than 6 months from separating from the 

Agency. One of the commenters also 

asked how someone would know that 

they are more than 6 months from 

separating from the Agency. One of the 

commenters believes that it is 

inappropriate, if not illegal, for the 

Agency to ask its staff when they plan 

to separate and the other commenter 

suggested deleting this phrase. 

Response: As proposed, the Agency 

intended to allow Agency personnel 

who knew that they would be leaving 

the Agency within 6 months to apply for 

and receive RMAP funds. This 

distinction was intended to parallel the 

provisions for military personnel 

elsewhere in the proposed rule. After 

considering this and other similar 

comments, the Agency has determined 

that a ‘‘blanket’’ prohibition for all 

Agency employees while they are still 

with the Agency is easier to implement 

and consistent with other program 

regulations. The Agency, therefore, has 

removed the language from the rule. 

Application 

Comment: One commenter suggested 

adding ‘‘required to be’’ after the word 

‘‘documentation’’ in the definition, so 

that it would read: ‘‘The forms and 

documentation required to be submitted 

by an MDO for acceptance into the 

program.’’ 

Response: The Agency disagrees with 

the commenter’s suggestion. The 

application is what is submitted, not 

what is required. Section 4280.315 

makes clear what items are required for 

a complete application. Therefore, the 

Agency has not revised this definition. 

Business Incubator 

Comment: One commenter stated that 

a business incubator is not an 

organization, but is generally a ‘‘thing’’, 

such as a building. 

Response: The Agency disagrees with 

the commenter. As used in this interim 

rule, a business incubator is an 

organization that can perform such tasks 

as renting space, using equipment, etc. 

A building cannot do such tasks. The 

Agency, however, is adding to the 

definition the condition that, to be 

considered a business incubator, the 

organization provides temporary 

premises ‘‘at below market rates.’’ This is 

a condition that the Agency overlooked 

when proposing the rule and believes is 

an important aspect of a business 

incubator. 

Default 

Comment: One commenter asked why 

a definition of default was included in 

the proposed rule. 

Response: The Agency is including a 

definition of default for clarity because 

its history in the administration of other 

loan programs has shown that defaults 

other than the more common monetary 

default (e.g., nonperformance is a form 

of default) can and do occur. 

Comment: One commenter stated the 

definition of monetary default (found in 

paragraph (i) of the proposed definition 

of default) is extremely and 

unnecessarily complex. Further, 

according to the commenter, it is 

inconsistent with current Agency 

practice of annual installments for 

principal and interest or semi-annual 

installments for interest. 

Response: The Agency agrees that a 

simpler definition is sufficient and has 

revised the definition accordingly. The 

Agency notes that it will collect 

payments on a monthly basis via an 

automated system. 

Fiscal Year 

Comment: One commenter stated that 

‘‘fiscal year’’ should be clarified as 

‘‘Federal fiscal year’’ because most 

organizations work off of either the 

calendar year or their individual fiscal 

year. 

Response: The Agency agrees with the 

commenter and has revised the rule to 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30123 

more clearly identify the fiscal year as 

being the Federal fiscal year. 

MDO 

Comment: One commenter suggested 

adding quasi-public entities that are 

formed by State or other governmental 

statutes whose purposes for operation 

are consistent with the program as 

eligible MDOs. According to the 

commenter, many quasi-public state 

agencies operate business and microbusiness programs and, therefore, they 

need to be included as eligible entities. 

Another commenter believes the term 

‘‘non-profit’’ is used rather ambiguously 

in the proposed rule and recommended 

that the Agency provide a clarification 

to ensure that public non-profit entities, 

such as Councils of Governments, 

Regional Planning Commissions and 

Economic Development Districts, are 

eligible to apply for program assistance 

as MDOs. The commenter stated that 

many of these entities are experienced 

lenders as they currently operate USDA 

IRP, a program similar to RMAP, which 

also provides valuable assistance for 

financing business and economic 

development activity in rural regions of 

this country. 

A third commenter requested that 

local governments be included as 

eligible applicants for program funds. 

The commenter asked why their local 

government organization is not 

considered the equivalent of an MDO, or 

at least eligible to apply for the funding 

as USDA has considered them capable 

of providing these services in the past 

when they awarded funding. The 

commenter suggests the language of the 

RMAP be changed to refer to MDOs and 

other entities that provide assistance to 

microentrepreneurs. 

Response: Section 379E of the 

Consolidated Farm and Rural 

Development Act provides the 

definition for MDO. The Agency cannot 

change the definition and, thus, for 

example, quasi-governmental 

organizations cannot be included unless 

they otherwise meet the definition. 

Consistent with the eligibility 

requirements provided in other loan 

programs under the Consolidated Farm 

and Rural Development Act, the 

reference to non-profits is understood to 

mean only private non-profits. If 

Congress had intended to include other 

entities, they would have done so as 

they have done for other provisions in 

the Consolidated Farm and Rural 

Development Act. For this reason, the 

Agency has not revised the definition of 

MDO as suggested by the commenters. 

Comment: A number of commenters 

requested that the rule clarify the ability 

of multiple groups to collaborate on an 

application (example: statewide 

microenterprise associations, statewide 

community action agency/programs). 

According to the commenters, such 

collaboratives could prove valuable in 

unserved and underserved rural areas, 

and bring together efficient and effective 

microenterprise development services 

among multiple MDOs. Potential 

collaborations are likely to be non-profit 

entities as contained in the definition of 

MDO in the proposed rule. The 

commenters suggest that the final rule 

be clarified to allow applications by 

such collaborations where other 

eligibility requirements are met. Scoring 

of such collaborative applications 

should consider the combined strengths 

and experiences of the collaborators. 

Three of the commenters further 

stated that the Agency should apportion 

20 percent of available funds to 

enhancement grants and allow 

collaborations and associations that 

have proven track records in providing 

capacity building services to MDOs to 

apply for these grants. Enhancement 

programs are an opportunity to build 

the capacity of MDOs to reach more 

clients with stronger and more effective 

services. This involves training trainers; 

curriculum development; increasing 

access to markets; quality assessment 

and evaluation; and much more. One of 

the purposes of this legislation is to 

create a strong network of MDOs. 

Collaborations and associations serve to 

build the strength of the entire industry. 

Response: The Agency is not opposed 

to collaborative MDO efforts. MDOs 

selected to participate in the program 

are encouraged to develop communitybased partnerships. However, such 

partnerships and collaboratives will be 

developed outside of the relationship 

between the Agency and the 

participating MDOs. 

The Agency disagrees with the 

commenters’ suggestion to specify a 

percent of available funds to be 

apportioned to any single aspect of the 

program. In order to facilitate equitable 

distribution between loans and grants 

and provide for flexibility to meet 

program needs, the Agency will 

announce anticipated distributions in 

an annual Federal Register notice. 

Microentrepreneur 

Comment: Two commenters pointed 

out that the proposed definition states 

that ‘‘All microentrepreneurs assisted 

under this regulation must be located in 

rural areas.’’ The commenters 

recommended changing this to read ‘‘All 

microenterprises assisted under this 

regulation must be located in rural 

areas’’. The commenters stated that, 

while some entrepreneurs do work from 

home, they are concerned that an 

entrepreneur that provides a service or 

operates a microenterprise in a rural 

area may be disqualified from 

participation under this definition. 

Response: The Agency disagrees with 

the commenters’ recommendation. It is 

the Agency’s intent that both the 

microenterprise and microentrepreneur 

be located in a rural area, so both 

definitions have been revised to clearly 

state this. The Agency has not revised 

this definition as suggested by the 

commenter. 

Military Personnel 

Comment: One commenter was 

concerned that the proposed rule was 

purposefully eliminating National 

Guard employees that are not deployed. 

The commenter pointed out that there 

was an administrative notice issued for 

the IRP that addressed IRP loans to 

certain military personnel. The 

commenter, therefore, recommended 

that RMAP be as inclusive as it can to 

service members. 

Response: Although it was not the 

intent of the Agency, the Agency agrees 

with the commenter that National Guard 

employees that are not deployed would 

have been excluded from the program. 

The Agency has revised the definition to 

remove the reference to ‘‘enlisted’’ and 

added other provisions (see 

§ 4280.322(g)) that would make such 

personnel eligible under this program. 

Nonprofit Entity 

Comment: One commenter 

recommended removing ‘‘that has 

applied for or received such designation 

from the U.S. Internal Revenue Service’’ 

as a criterion for defining a non-profit 

entity. According to the commenter, this 

criterion is inconsistent with all other 

Rural Development programs. The 

commenter suggested that instead the 

criterion should be ‘‘registered as a nonprofit in the State, Commonwealth, 

Territory, etc. in which the entity is 

located.’’ 

Response: The Agency agrees with the 

commenter that the proposed rule 

would have been too restrictive. 

Therefore, the Agency removed the IRS 

requirement from the definition and has 

revised it to read: ‘‘A private entity 

chartered as a nonprofit entity under 

State law.’’ 

Rural or Rural Area 

Comment: One commenter stated that, 

for the purposes of this program, the 

terms ‘‘rural’’ and ‘‘rural area’’ are 

defined as any area of a State not in a 

city or town that has a population of 

more than 50,000 inhabitants, according 

to the latest decennial census of the 


sroberts on DSKD5P82C1PROD with RULES
30124 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

United States; and the contiguous and 

adjacent urbanized area. The commenter 

then pointed out that the Freely 

Associated States (Republic of Palau, 

Republic of the Marshall Islands, and 

the Federated States of Micronesia) are 

not under the jurisdiction of the U.S. 

Census Bureau and do their own 

internal Census. The commenter, 

therefore, recommended adding after 

‘‘according to the latest decennial census 

of the United States’’ the following: ‘‘or 

of any of the Freely Associated States, 

as appropriate.’’ 

Response: The Agency agrees with the 

commenter’s concern. However, rather 

than revising the text as suggested by 

the commenter, the Agency has added a 

definition of ‘‘State’’ to include reference 

to each of the Freely Associated States 

identified by the commenter. By doing 

so, it is unnecessary to make the change 

suggested by the commenter. 

Significant Outmigration 

Comment: Four commenters stated 

that this definition was more restrictive 

than it should be and that the definition 

rejects the definitions of the term that 

already exist in law or proposed in 

legislation. The commenters provided, 

as examples, the American Jobs Creation 

Act of 2004 (Pub. L. 108–357) and the 

proposed ‘‘New Homestead Act of 2007’’ 

(S. 1093). These use a net out-migration 

of at least 10 percent during a 20-year 

period. The commenters suggested 

defining ‘‘significant outmigration’’ as 

outmigration of 7.5 percent over two 

Census periods and/or 5 percent 

outmigration over one Census period in 

order to recognize the current state of 

rural demographics and to enable the 

program to be widespread throughout 

the nation. 

Another commenter suggested that 

the population outmigration criteria be 

lowered from 15 percent over thirty 

years to 10 percent over thirty years. In 

Iowa, this change would provide a 

threefold increase in the number of 

targeted outmigration counties 

compared to the 12 counties under the 

currently proposed criteria. 

One commenter stated that the U.S. 

Department of the Treasury’s 

Community Development Financial 

Institutions Fund (CDFI Fund) uses the 

following definition of ‘‘significant 

outmigration:’’ ‘‘In counties located 

outside of a Metropolitan Area, the 

county population loss during the 

period between the most recent 

decennial census and the previous 

decennial census is at least 10 percent; 

or (5) in counties located outside of a 

Metropolitan Area, the county net 

migration loss during the five-year 

period preceding the most recent 

decennial census is at least five 

percent.’’ The commenter urged USDA 

to adopt this definition. 

Response: The Agency agrees that the 

definition of outmigration should take 

other current definitions into 

consideration. However, because 

outmigration issues apply to 

enhancement grants only, the Agency 

will address this issue when it 

publishes the final rule. 

Comment: One commenter pointed 

out that the Freely Associated States 

(Republic of Palau, Republic of the 

Marshall Islands, and the Federated 

States of Micronesia) are not under the 

jurisdiction of the U.S. Census Bureau 

and do their own internal Census. The 

commenter, therefore, recommended 

revising the definition of significant 

outmigration to reflect this. 

Response: The Agency agrees with the 

commenter’s concern regarding the 

Freely Associated States. The Agency 

has revised the text in this definition (as 

noted in the response to the previous 

comment) and, in doing so, has removed 

reference to the U.S. Census Bureau. 

Socially Disadvantaged 

Comment: One commenter requested 

that the Agency define racially and 

ethnically diverse populations by using 

the same definition as found in the 

Small, Socially Disadvantaged Producer 

Program. Socially-Disadvantaged 

Individuals are those who have been 

subjected to racial, ethnic or gender 

prejudice because of their identity as 

members of a group, without regard for 

their individual qualities. 

Another commenter recommended 

either including a definition for 

‘‘socially disadvantaged’’ under 

proposed § 4280.302 that includes 

women and other disadvantaged groups 

or expanding proposed 

§ 4280.316(b)(1)(v) to include an 

explanation of the term ‘‘socially 

disadvantaged.’’ The commenter pointed 

out that the scoring rules concerning 

provision of technical assistance to 

microentrepreneurs (proposed 

§ 4280.316(b)(3)(iii)) contain a reference 

to an undefined group of ‘‘socially 

disadvantaged’’ microentrepreneurs. It is 

not stated whether ‘‘socially 

disadvantaged’’ includes gender 

(presumably female 

microentrepreneurs). This is 

inconsistent with proposed 

§ 4280.316(b)(1)(v) where gender is a 

specifically-mentioned demographic 

group. The commenter stated that any 

provision under the Program’s rules 

should ensure that female 

microentrepreneurs should be 

considered ‘‘socially disadvantaged.’’ 

Response: The Agency agrees with the 

commenters that, as proposed, the rule 

did not adequately address whether 

gender was included in ‘‘socially 

disadvantaged.’’ The Agency, however, 

has determined that ‘‘socially 

disadvantaged’’ is too broad a phrase 

and has changed the scoring criteria to 

include racial and ethnic minorities, the 

disabled, and gender. The Agency made 

this determination in consultation with 

Agency Civil Rights staff, consideration 

of other agencies, and Civil Rights 

reporting requirements. The latter is 

based on demographic data and 

‘‘socially disadvantaged’’ is not 

specified. 

Non-Discrimination and Other Federal 

Laws—(§ 4280.305) 

Comment: One commenter expressed 

concern with the use of the word 

‘‘applicants’’ in the beginning of 

proposed § 4280.305(a) that states ‘‘All 

applicants must comply with other 

applicable Federal laws.’’ The 

commenter asked: What about ultimate 

recipients? The commenter suggested 

that there needs to be consistency with 

this proposed rule and the IRP. 

Response: The Agency agrees with the 

commenter that the provisions of this 

paragraph need to apply to both the 

microlender participating in this 

program and to the microborrower 

receiving RMAP funds from the 

participating microlender. Therefore, 

the Agency has revised the text in this 

paragraph to state clearly that any entity 

receiving funds under this program is 

covered by this paragraph. 

MDO Requirements—(§ 4280.310) 

General 

Comment: One commenter 

recommended that the rule minimize 

duplication, and the unintended 

development of underutilized surplus 

reserves in local RMRF loan capacity, by 

discouraging MDOs from providing 

services in overlapping service areas 

unless the MDO first approved in a 

designated area provides a letter of 

endorsement for the second MDO. 

According to the commenter, differing 

MDOs may target different market 

segments, which can be a rationale for 

overlapping service areas. However, the 

application approach should encourage 

collaboration when appropriate and 

discourage duplication when 

inappropriate. 

Response: The Agency acknowledges 

that different MDOs may target different 

market segments, but disagrees with 

suggestion to discourage MDOs from 

providing services in overlapping areas. 

The Agency has determined that 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30125 

encouraging competition generally 

provides the greatest potential for 

benefits for intended end users. The 

Agency encourages collaboration among 

MDOs regarding client referrals across 

different market segments. No changes 

have been made in response to this 

general comment. 

Eligibility (Proposed § 4280.310(a)) 

Comment: One commenter suggested 

replacing ‘‘under RMAP’’ with ‘‘per 

§ 4280.302(a)’’. 

Response: While not inaccurate, the 

Agency believes that ‘‘under this 

program’’ should reference the subpart 

instead and has rephrased the text to 

read, in part, ‘‘To be eligible for a loan 

or grant award under this subpart, an 

applicant’’. The Agency believes the 

broader designation is more appropriate 

than the commenter’s suggested crossreference to § 4280.302(a) by itself. 

Citizenship (Proposed § 4280.310(a)(2)) 

Comment: One commenter believes 

the requirement in § 4280.310(a)(2) for 

MDO ‘‘citizenship’’ is unworkable 

because nonprofits, tribes, and 

institutions of higher learning are 

entities with no ‘‘owners’’. Therefore, 

establishing their citizenship is not 

possible. Instead, the commenter 

suggests requiring that the nonprofit/ 

tribe/institution of higher learning be 

legally established within the U.S. 

Response: The Agency agrees with 

commenter that the citizenship 

requirements would not be ‘‘workable’’ 

as applied to tribes and institutions of 

higher learning. However, for nonprofit 

entities, the Agency has determined that 

the citizenship requirements are 

applicable. Therefore, the Agency has 

revised the citizenship requirements in 

the rule to apply only to applicants that 

are non-profit entities, as is consistent 

with other Rural Development 

programs. 

Legal Authority/Responsibility 

(Proposed § 4280.310(a)(3)) 

Comment: One commenter asked 

whether the Rural Development State 

Office will determine whether the 

applicant has the legal authority to carry 

out the purpose of the award or, as in 

the case with Rural Business 

Opportunity Grants (RBOG), will 

concurrence from the Office of General 

Counsel (OGC) be required. The 

commenter stated that having the 

applicant provide a current (not more 

than 6 months old) Certificate of Good 

Standing in addition to articles and bylaws would allow the Agency (National 

or State Office official) to make a 

preliminary determination. The 

commenter then recommended that 

OGC concurrence be obtained for 

entities with an initial application and 

subsequent applicants that have 

experienced a material change to their 

articles or bylaws since their last OGC 

eligibility concurrence. 

Response: The Agency will make an 

eligibility determination, including 

whether the applicant has the legal 

authority necessary to carry out the 

purpose of the award, based on the 

information provided in the application. 

Consultation with OGC is an internal 

operating procedure which is beyond 

the scope of this regulation. The rule 

now requires an attorney’s opinion 

regarding the microlender’s legal status 

to make loans specifically to allow the 

Agency to make such determination. 

The Agency may seek OGC advice as 

needed. 

Direct Loans (Proposed § 4280.310(a)(4)) 

Comment: One commenter would like 

the Agency to consider easing the 

requirement for receiving education and 

training from a qualified 

microenterprise training entity 

(proposed § 4280.310(a)(4)(ii)). Being a 

relatively new lending concept, such 

education, according to the commenter, 

is not common to a majority of 

professionals involved in agriculture in 

the U.S. nor is such training readily 

available. If not, the commenter states 

the Agency should define what is 

considered ‘‘adequate experience.’’ 

Response: The microenterprise 

development industry has been active in 

the United States for more than two 

decades. It is important that the 

minimum standards of quality that have 

been generally recognized over time be 

maintained so that the industry can 

continue to grow. The Agency has 

determined that experience (as 

determined in the scoring), or training/ 

education, or participation in the 

similar Small Business Administration 

(SBA) Microloan Program will help to 

ensure a baseline of capacity. No 

changes have been made in response to 

this comment. 

Comment: In commenting on 

proposed § 4280.310(a)(4)(iii), one 

commenter suggested easing the 

requirement that MDOs be ‘‘actively and 

successfully participating as an 

intermediary lender.’’ According to the 

commenter, this requirement will 

exclude many small producer groups 

with clientele that would benefit greatly 

from a microenterprise lending program. 

According to the commenter, most 

microlending institutions in the U.S. are 

located in major urban areas serving 

urban clients, not rural ones. 

Response: The Agency notes that 

§ 4280.310(a)(4)(i) indicates that only 

one of the three provisions found in 

§§ 4280.310(a)(4)(i)(A), 4(i)(B), or 4(i)(C), 

is required to be met, not all three. 

Thus, an applicant is eligible if it meets 

any one of the following: 

• Has demonstrated experience in the 

management of a revolving loan fund, or 

• Certifies that it, or its employees, 

have received education and training as 

described, or 

• Is actively and successfully 

participating as an intermediary lender 

in good standing under the SBA 

Microloan Program or other similar 

Federal loan program. 

Thus, no single organization will be 

required to meet all three of these 

requirements and newer organizations 

will be accommodated via the second 

option. 

Enhancement Grants (Proposed 

§ 4280.310(a)(5)) 

Comment: Several commenters 

believe that the proposed rule fails to 

properly implement section 

379E(b)(4)(A) of the Consolidated Farm 

and Rural Development Act as added by 

the 2008 Farm Bill, which addresses 

grants to support rural microenterprise 

development, and as expressed in the 

report accompanying the 2008 Farm 

Bill. 

One commenter noted that the 

proposed rule limits enhancement 

grants to organizations that already 

operate a program for training and other 

enhancement services, which would 

ultimately result in strengthening these 

organizations internally. According to 

the commenter, the overall purpose of 

section 379E(b)(4)(A) was to develop the 

technical infrastructure necessary to 

increase the success of 

microentrepreneurs by offering them 

training in critical business skills. This 

could be accomplished by building the 

capacity of local nonprofit organizations 

to provide training and technical 

assistance to microentrepreneurs. The 

proposed rule does not contemplate this 

approach and should be changed to 

accommodate the capacity building, 

training, and technical assistance clearly 

authorized under the law. By 

eliminating the training funds and 

capping technical assistance funds, the 

proposed rule will make it difficult for 

organizations to provide the services 

microentrepreneurs need to succeed. 

One commenter stated that the 

proposed rule leaves out rural 

microenterprise development grants. 

The commenter stated that the final rule 

should be amended to include the 

missing statutory subprogram. 

According to the commenter, there are 

two appropriate ways to accomplish 

this. First, retain the enhancement grant 


sroberts on DSKD5P82C1PROD with RULES
30126 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

category, which is overall a very helpful 

idea, and to create a rural 

microenterprise development grant 

category and purpose statement. 

Second, incorporate the enhancement 

grant idea into the rural microenterprise 

development grant category and 

purpose as a noteworthy addition to the 

statutory requirements. One of these two 

approaches is required in order for the 

rule to conform to the statute. 

Another commenter also believes that 

the Agency misinterpreted the statutory 

provision as well as the accompanying 

report language in creating 

‘‘enhancement grants.’’ According to this 

commenter, the statute shows the 

primary intent to be the provision of 

operating grants to MDOs, so they may 

better serve rural microentrepreneurs, 

and the commenter believes that the 

proposed ‘‘enhancement grant’’ method 

is not an accurate regulatory 

representation of statute. In support of 

this position, the commenter referred to 

the report language accompanying the 

statute (H. Rept. 110–256 Sec.367(b)(3)), 

which states that ‘‘The Secretary may 

make a grant under the program to a 

qualified organization (i) to provide 

training, operational support, or a rural 

capacity building service to a qualified 

organization to assist the qualified 

organization in developing 

microenterprise training, technical 

assistance * * * and other related 

services.’’ According to the commenter, 

the proposed ‘‘enhancement grants’’ fail 

to meet stated Congressional intent as 

expressed in the law’s report language, 

primarily by awarding grants to MDO 

trainees rather than MDO trainers as 

mandated. 

This commenter claimed that the 

result of these misinterpretations are 

that the proposed ‘‘enhancement grants’’ 

result in neither technical assistance to 

rural microentrepreneurs, as intended 

by the law, nor as a tool for broader 

field-wide capacity building. While 

capacity building can involve the staff 

development purposes expressed in the 

‘‘enhancement grants’’ provision, 

capacity building of the rural 

microenterprise development field as a 

whole provides a broader scope by 

which to build the field’s infrastructure 

capacity. As a general rule, rural MDOs 

have few resources for technical 

assistance for their clients, and RMAP 

should be designed and implemented to 

help to fill the gaps in service that exist 

in many rural areas. 

This commenter, therefore, (and as 

similarly expressed by several other 

commenters) recommended deleting 

‘‘enhancement grants’’ and replacing 

them with ‘‘Rural Microenterprise Field 

Technical Assistance Grants’’ that 

adheres to both statute and report 

language. The commenter suggested 

several approaches including funding 

for State Microenterprise Associations 

and for MDOs. The commenter also 

recommended a 4:1 ratio towards 

providing MDOs with core funding. 

Response: In consideration of these 

comments, the Agency considered a 

number of options for implementing a 

technical assistance and network 

enhancement category. As noted, the 

comments differed on appropriate 

approaches. Due to the broad range of 

suggestions, and the considerable 

interest in an enhancement grant 

program, this interim rule is published 

without reference to an enhancement 

grant category. Instead, comments and 

concepts regarding the best delivery 

approaches are requested (see Section V 

of this preamble). Submitted comments 

and concepts will be fully considered 

prior to publication of an RMAP final 

rule. 

However, the interim rule does make 

technical assistance grants available to 

MDOs that are not participating in the 

program as microlenders (see 

§ 4280.313(c)). By broadening the 

eligibility for technical assistance 

grants, the Agency is addressing the 

concerns of the commenters indicating 

the need for more technical assistance 

funding. No specific provision was 

made for State Associations. 

Technical Assistance Grants (Proposed 

§ 4280.310(a)(6)) 

Comment: One commenter suggested 

that the text ‘‘with the exception that up 

to 10 percent of the grant funds may be 

used to cover administrative expenses’’ 

be revised by replacing ‘‘to cover’’ with 

‘‘for MDO’’. 

Response: The Agency revised the 

text (see § 4280.313(b)(3)) identified by 

the commenter by inserting ‘‘the 

microlender’s’’ as follows: ‘‘may be used 

to cover the microlender’s 

administrative expenses.’’ The Agency 

believes this adequately addresses the 

commenter’s suggestion. 

Delinquencies (Proposed 

§ 4280.310(a)(8)) 

Comment: One commenter suggested 

that proposed § 4280.310(a)(8) be made 

part of § 4280.310(a)(7), Ineligible 

applicants. 

Response: The Agency understands 

the commenter’s suggestion, but has 

elected to keep the subject paragraph as 

a stand-alone paragraph to ensure its 

visibility to the public (see 

§ 4280.310(d)). 

Business Incubators (Proposed 

§ 4280.310(c)) 

Comment: One commenter was 

unclear as to what the ‘‘business 

incubator’’ paragraph was saying. 

Response: The paragraph referred to 

by the commenter (now § 4280.310(f)) 

states that a microlender who owns or 

operates a small business incubator is 

eligible to participate in RMAP. The 

paragraph also states that such a 

microlender may use RMAP funding to 

make a loan to an eligible 

microentrepreneur who is a tenant in 

that microlender’s facility. This 

language is clear and was not further 

clarified. However, regulatory 

instructions will be published after 

promulgation of the interim rule that 

may assist with this commenter’s 

concern. 

Loan Provisions for Agency Loans to 

Microlenders (§ 4280.311) 

Complicated Process 

Comment: Eleven commenters stated 

that the proposed rule outlines an 

unnecessarily complicated process for 

the disbursement of loan funds to 

lenders participating in RMAP, with one 

commenter referencing in particular 

proposed § 4280.311(d)(10), (11), and 

(12). The commenters expressed 

concern that if these rules are not 

revised, the cumbersome methods 

outlined for loan disbursement will 

keep many qualified rural MDOs from 

participating in RMAP. 

Response: Of particular concern to the 

commenters was that the Agency would 

require a list of probable 

microentrepreneurs prior to 

disbursement of loan funds. This is not 

the case and language has been added 

to § 4280.311(e)(11) to address this 

concern. Specifically, descriptions of 

anticipated need provided with a 

request for disbursement will indicate 

the anticipated amount and number of 

microloans to be made with the funds 

but need not identify each loan. These 

requirements are needed to adequately 

monitor use of program funds. 

Co-financing 

Comment: One commenter 

recommended that co-financing with 

local lenders and revolving loan funds 

for projects with total loan requests up 

to $150,000 be allowed with the $50,000 

microloan maximum and subordinated 

position of the RMRF. According to the 

commenter, this would multiply the 

benefits of the program, encourage 

collaboration rather than duplication 

with commercial lenders and other loan 

funds, and encourage the transition of 

microloan clients back to commercial 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30127 

lenders. The commenter also noted that 

this would be consistent with the 

flexibility for MDOs that is allowed 

under the SBA Microloan program. 

Response: The Agency understands 

the recommendation that microlenders 

be allowed more flexibility in lending to 

microborrowers. In addition, small 

businesses that can receive loans from 

commercial lenders should not be able 

to receive microloans, because 

microborrowers must meet the credit 

elsewhere test; that is, microborrowers 

must be able to show that, but for the 

microloan, they would not have access 

to business capital. At this time, lines of 

credit and subordinated liens will not 

be authorized. However, the Agency 

will continue to accept comments 

during the interim rule phase. 

Purpose of Loan (Proposed 

§ 4280.311(a)) 

Comment: One commenter was 

unclear as to what ‘‘interest earnings’’ 

were being referred to in the 

introductory text to proposed 

§ 4280.311(a). The commenter stated 

that this could be referring to either 

bank account accrued interest or to loan 

payment interest and that this needed to 

be clarified. 

Response: The intent of this 

paragraph is to refer to any type of 

interest earnings, including the two 

types referenced by the commenter. 

While the Agency has removed the 

referenced text from § 4280.311(a), the 

Agency has revised the text in 

§ 4280.311(e)(2) to more clearly address 

the issue raised by the commenter. 

Comment: Two commenters 

recommended that the Agency clarify 

that proposed § 4280.311(a) applies only 

to interest earnings on the underlying 

USDA loan to the MDO. 

Response: The Agency disagrees. The 

commenters are most likely referring to 

the sentence in the proposed rule that 

states: ‘‘Interest earnings accrued by the 

RMRF will become part of the RMRF 

and may be used only for the purposes 

stated above.’’ The rule requires 

microlenders to retain the interest 

earned in the RMRF and LLRF accounts 

so that earnings may be reloaned or 

used to recapitalize the LLRF. 

Comment: One commenter referred to 

the sentence: ‘‘However, with advance 

written approval by the Agency, the 

microlender may increase the funding 

in its LLRF with interest earnings from 

the RMRF.’’ According to the 

commenter, this is going to be very hard 

to monitor and will ultimately result in 

OIG findings because the Agency has 

failed to provide advance approval to 

increase the account via interest 

earnings. 

Response: The Agency disagrees that 

monitoring the movement of interest 

earnings will be difficult because the 

movement of those earnings between 

the RMRF and the LLRF will be evident 

in bank statements and quarterly 

reports. Because it will be able to 

monitor such movement, the Agency 

further disagrees with the commenter’s 

assertion that this provision will lead to 

OIG concerns or investigations. Finally, 

the Agency will emphasize during 

training that microlenders need Agency 

written permission to move money out 

of the RMRF unless it is to make a 

payment on their Agency loan. 

Comment: One commenter stated that 

Community Development Financial 

Institutions (CDFIs) often reinvest 

interest earnings into capital available 

for lending. However, interest earnings 

are also a source of operations revenue 

that help support technical assistance, 

allow CDFIs to lower the interest rate to 

borrowers, and otherwise provide 

products and services to their markets. 

Especially if the Agency maintains the 

scoring criteria related to use of 

administrative funds, it should allow 

flexibility in the use of interest earned 

from the RMRF and LLRF. USDA 

should, in addition, explicitly state that 

income earned from RMAP loans to 

microborrowers belongs to the lender 

and can be used flexibly. 

Two other commenters stated that 

USDA should codify that interest 

income from microloans: (a) Need not 

be deposited into the RMRF, and/or (b) 

may be deposited and withdrawn from 

the RMRF without restriction. The 

commenters stated that failure to clearly 

allow MDOs to keep and use microloan 

interest income would likely render 

RMAP unusable for MDOs. 

Twelve commenters noted that the 

proposed rule does not explicitly state 

that income earned from RMAP loans to 

microborrowers belongs to the lender. 

They stated that they believe that 

microlenders should be allowed to keep 

earnings on microloans, and that this 

needs to be explicitly stated in the 

appropriate section of the RMAP final 

rule. 

Three other commenters stated that 

limiting MDO use of accrued interest 

that comes about as a result of an 

agreement between the MDO and a 

borrower is an overreach by USDA, 

limits the ability of an MDO to realize 

program income from its activities, and 

ultimately will limit the ability of MDOs 

to fund their programs and services. The 

commenters suggested the Final Rule 

remove all limits on use of interest 

accrued by RMRFs. In particular, The 

commenters suggested that, because the 

law and the proposed rule limit the 

amount funding for administrative 

expenses to an MDO, administrative 

expenses should be an allowed use of 

interest earnings on the RMRF in 

proposed § 4280.311(d)(2). 

Two commenters recommended 

allowing accrued interest to be used by 

MDOs for purposes consistent with the 

mission of the organization and the 

purposes of the RMAP statute. One 

commenter noted that this would be 

consistent with current practices with 

other USDA loan funds including IRP. 

As proposed, such interest must be 

deposited in the LLRF. 

One other commenter stated that, as 

written, the proposed rule would not 

allow the MDO to use any revenues 

from the operation of the microloan 

funds to cover its administrative 

expenses. All repayments on microloans 

must be deposited in the loan fund and 

used for either new microloans or 

payments to USDA. Thus, there is no 

provision for paying the MDO’s loan 

officer, etc. and the presumption is that 

all these costs will be covered by other 

funding sources. According to the 

commenter, this is unfair to the MDO, 

which should be able to use the 

revenues from their operations for the 

operation of the microloan program. 

Response: While the Agency 

acknowledges the points raised, the 

Agency has not revised RMAP as 

recommended by the commenters. It is 

the Agency’s position that, because the 

interest is earned on monies owed back 

to the Agency, the Agency is within its 

purview to dictate the use of interest 

earned on that money. Further, 

requiring interest earned to be used to 

recapitalize the RMRF and LLRF will 

help ensure that those two funds are 

maintained at adequate levels over time 

and that earnings that remain in the 

LLRF account will help to mitigate the 

cost of reimbursing the RMRF from the 

LLRF in the event of a loss. Such 

earnings may also be used to help fund 

the non-Federal share. 

Finally, the Agency notes that the rule 

allows MDOs that receive technical 

grants to use up to 10 percent of the 

funds to cover MDO administrative 

expenses for administering the technical 

assistance grants. 

Term of Loan (Proposed 

§ 4280.311(d)(3)) 

Comment: One commenter 

recommended that the Agency eliminate 

the uncertainty about the term ‘‘20 years 

and may be less’’ and simply follow the 

loan structure used by the IRP 

program—a 1 percent fixed rate loan 

with a 20-year term with 3 years of 

interest-only payments and with annual 

payments. The commenter stated that 


sroberts on DSKD5P82C1PROD with RULES
30128 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

this will allow for a predictable 

payment level for the MDO which is 

very helpful in running a microlending 

program. 

Response: The Agency disagrees that 

RMAP needs to set the same term 

requirements as found in the IRP. While 

the Agency acknowledges that setting a 

standard term length would simplify the 

loan structure, the Agency wants to 

provide flexibility to accommodate 

lesser term lengths as permitted by 

statute. The Agency has revised the rule 

to allow a term of less than 20 years if 

requested by the microlender and as 

agreed upon between the microlender 

and the Agency. 

Loan Repayments (Proposed 

§ 4280.311(d)(4)) 

Comment: One commenter stated that 

the reference to the 24th month of the 

life of the loan is confusing at this point 

in the rule because not until later in the 

rule is the 2-year deferral referred to. 

Response: The Agency has rearranged 

and revised proposed paragraphs (d)(4), 

(d)(5), and (d)(8), as discussed in 

response to a later comment. This 

rearrangement addresses the 

commenter’s concern by placing this 

provision after reference to the two-year 

deferral period. 

Comment: One commenter 

recommended that proposed 

§ 4280.311(d)(4) be revised to state the 

payments would begin on the 1st day of 

the 25th month instead of making 

payments beginning on the last day of 

the 24th month. The commenter noted 

that traditionally the Agency has 

avoided making payments due on the 

29th, 30th, or 31st of the month due to 

the fluctuating number of days in the 

month and the fact that the payments 

are not credited to the account for 

several days after the beginning of the 

next month. Thus, all end-of-the-month 

reports will show the payment not made 

when, in fact, the funds may already be 

in the Finance Office. 

Response: The Agency disagrees with 

the commenter and has kept the 

provision to read ‘‘on the last day of the 

24th month’’ to be consistent with 

RULSS system requirements. 

Comment: One commenter stated that 

monthly installments are not practical 

and that annual payments would be far 

less burdensome and labor intensive for 

both the MDO and USDA. According to 

the commenter, this approach works 

well with the IRP program and there is 

no real advantage to using monthly 

payments. Many microentrepreneur 

borrowers, especially farm borrowers, 

will not have year-round, monthly 

revenues and so will not be able to make 

monthly payments to the MDO. The 

commenter asked how, in such cases, 

the MDO can be expected to make 

monthly payments to USDA. 

Response: The Agency disagrees with 

the commenter that monthly 

installments are not practical. It is the 

Agency’s experience that by requiring 

monthly payments, lenders are better 

able to manage and match their portfolio 

cash flow and that the Agency is better 

able to monitor the repayment behavior 

of the microlender. Therefore, the 

Agency has not revised the rule as 

suggested by the commenter. 

Prepayment (Proposed § 4280.311(d)(5)) 

Comment: One commenter 

recommended that proposed 

§ 4280.311(d)(5) simply state that there 

is no pre-payment penalty. 

Response: The Agency is satisfied that 

this paragraph clearly states a no prepayment penalty provision, but has 

clarified that this also applies to prepayments during the deferral period (see 

§ 4280.311(e)(5)). 

Deferral Period (Proposed 

§ 4280.311(d)(8)) 

Comment: One commenter asked why 

the proposed rule was making the 2-year 

deferral automatic and what if the MDO 

does not want a deferral. 

Response: Section 379E of the Act 

allows the Agency to defer payments for 

2 years. The Agency has provided a 

commensurate default provision 

wherein no payments are required until 

this 2-year period is completed. 

However, if a microlender wishes to 

make payments prior to the end of the 

2-year period, the microlender can do so 

and without any prepayment penalties 

being assessed. The Agency has revised 

and rearranged proposed paragraphs 

(d)(4), (d)(5), and (d)(8) to make this 

more clear. 

Loan Closing (Proposed 

§ 4280.311(d)(9)) 

Comment: Five commenters were 

concerned about the 60 day time limit 

imposed by this paragraph. According 

to one of the commenters, it is often 

difficult to get loan closing instructions 

from OGC and get title set up and the 

loan closed in 60 days. This commenter 

was also concerned that there may be 

unusual and unavoidable issues that 

prevent a loan being closed within 60 

days of loan approval. To address these 

concerns, the commenter recommended 

adding at the end of the paragraph: 

‘‘Unless otherwise negotiated and agreed 

to by the Agency.’’ 

Two of the other commenters 

recommended a longer deadline of 90 or 

120 days. Finally, one commenter 

recommended that the period be 

extended to at least 180 days, and 

further suggested that the timeframe be 

left to the judgment of the USDA State 

Office. 

Response: In considering all of the 

commenters’ suggestions, the Agency 

has revised the proposed timeframe for 

closing loans from 60 days to 90 days 

(see § 4280.311(e)(8)). This longer 

timeframe is sufficient to close loans 

under RMAP. The Agency has not 

accepted the suggestion to include 

‘‘unless otherwise negotiated and agreed 

to by the Agency.’’ The Agency is 

concerned that such an open-ended 

deadline would result in unnecessary 

delays. Lastly, if loans are not closed 

within 90 days, the funds will be 

forfeited. 

Loan Disbursement (§ 4280.311(e)(10)) 

Comment: Several commenters noted 

that the rule, as proposed, allows 

microlenders to receive a disbursement 

of up to 25 percent of the total loan 

amount at the time of the loan closing. 

In general, the commenters stated that it 

is not clear why this limit is necessary 

and that it appears arbitrary. According 

to the commenters, this draw down 

limitation has the potential to limit the 

number of loans an MDO can make and 

limit the funds an MDO can loan. The 

commenters suggested modifying the 

rule to allow MDOs to draw down their 

entire loan if needed. 

Another commenter recommended 

that, once a loan has been closed 

between the Agency and a microlender, 

the MDO be able to draw down at least 

half of the total loan amount. The 

commenter stated, in addition, that 

requests for draw downs should not 

require an iteration of specific pending 

loans for specific amounts, but should 

be based on the organization’s lending 

history schedule. The commenter noted 

that successful microlending is more 

time consuming than conventional 

lending and that onerous paperwork 

requirements subtract from the time 

MDO staff can spend conducting 

outreach, providing technical 

assistance, and servicing loans. If an 

MDO has the track record, credibility 

and financial controls in place to 

warrant a loan from the Agency that 

MDO should be trusted to do their work 

and not be hamstrung by unnecessarily 

rigid requirements. 

Response: The Agency included the 

provision (see § 4280.311(e)(9)) to limit 

full disbursement of the loan to the 

microlender in order to ensure that 

microloans are made in an expedient 

fashion and that disbursed funds are not 

accruing interest on the Agency loan 

before they begin to earn interest on 

microloans. The Agency, therefore, has 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30129 

not revised the rule as suggested by the 

commenters. 

30-Day Disbursement Provision 

(Proposed § 4280.311(d)(11)) 

Comment: A number of commenters 

noted that the requirement for an MDO 

to make one or more microloans within 

30 days of any disbursement it receives 

from USDA seems to be an unnecessary 

rule. The commenters stated that, if an 

MDO is drawing down funds, they are 

clearly planning on placing loans in the 

near future and that if a loan to a client 

would not happen at the last minute, 

programs could easily violate this 30 

day rule. One of the commenters stated 

that it seems arbitrary to insist that at 

least one loan be made within 30 days 

of disbursement and not particularly 

realistic given the realities of 

microlending in the field. The 

commenters, therefore, recommended 

omitting this from the rule. 

Another commenter stated that the 

limitations that a microlender can only 

request funds once a quarter based on 

their pipeline and then must relend the 

drawn funds within 30 days is 

unnecessarily burdensome. The 

commenter acknowledged that there is 

certainly an expectation that the drawn 

funds will be promptly reloaned, but 

recommended that mitigating 

circumstances be allowed for. 

Response: As noted by the 

commenters, the proposed rule required 

that the microlender make a microloan 

within 30 days of receipt of funds from 

the Agency. The Agency agrees that this 

may be too short under certain 

circumstances, but disagrees with the 

suggestion to have no timeframe. For 

example, some microlenders will 

already have a list of potential 

microborrowers for RMAP funds. For 

these microlenders, some amount of 

time may be required to evaluate and 

verify the eligibility of the 

microborrower for participation in the 

program. Some microlenders will not 

begin aggressively marketing the 

availability of RMAP loan funds until 

such funds have been drawn. Some 

amount of time, therefore, will be 

required to attract microentrepreneurs 

to the program. Thus, the Agency 

believes that a 30-day period may be 

insufficient. The Agency has, therefore, 

revised the rule to reflect a 60-day 

requirement (see § 4280.311(e)(10)). 

Comment: One commenter asked 

what the ramifications would be if loans 

are not made within the specified 

timeframe. 

Response: If a microlender fails to 

make a loan within 60 days of 

disbursement, the Agency may not 

provide the microlender with any 

additional funds and the Agency may 

demand return of any funds already 

disbursed to the microlender (see 

§ 4280.311(e)(10)). 

Quarterly Disbursement of Funds 

(Proposed § 4280.311(d)(12) and 

§ 4280.320) 

Comment: Several commenters were 

concerned over the proposed 

disbursement of loans and grants on a 

quarterly basis as found in proposed 

§§ 4280.311(d)(12) and 4280.320(b). 

One commenter asked why grant 

payments would not be made more 

often than quarterly. According to the 

commenter, monthly payments for loans 

or grants can be acceptable if they are 

accompanied by a brief narrative of 

activity that justifies the requested 

funds. The commenter also asked why 

the Agency should not allow monthly 

draw downs for loans. 

Another commenter stated that the 

requirement for quarterly disbursements 

seems overtly regulatory rather than 

necessary. According to this commenter, 

an active MDO may need funds prior to 

the end of the 90 waiting period. The 

commenter stated that the IRP currently 

allows disbursements every 30 days. 

Another commenter stated that the 

quarterly disbursement of loan dollars is 

cumbersome and unnecessary. The 

commenter stated that, if the Agency’s 

goal in restricting loan disbursements is 

to ultimately prevent the misuse of the 

loan dollars as well as the technical 

assistance grant dollars that accompany 

those loan dollars, a better way to do 

this would be to allow the MDO to draw 

down as needed and receive annual or 

quarterly technical assistance grants. As 

currently designed, an MDO with four 

loans from the Agency would need to 

keep track of four RMRF accounts, and 

submit various reports per year. 

According to the commenter, these 

regulations are unnecessarily 

burdensome, and could deter many 

small, rural MDOs from participating in 

RMAP. The commenter, thus, 

recommended allowing MDOs to draw 

down as needed and receive annual or 

quarterly technical assistance grants 

based on statutory allowances, program 

performance, and demonstrated needs. 

Another commenter noted that, with 

the tools of electronic funds transfer, the 

approach should simply be that an MDO 

may request RMAP draws as microloans 

are ready to close; they should not be 

limited to once a quarter. 

Response: The Agency is requiring 

quarterly draws rather than monthly 

draws for several reasons. The Agency 

has determined that quarterly payments 

enable both the Agency and the MDO to 

more efficiently utilize staff resources in 

part because quarterly payments match 

the quarterly reporting requirements. 

Further, monthly draws would require 

undue Agency resources. Second, 

matching fund payments with reporting 

requirements allows the Agency and the 

microlender to keep like calendars, 

which will facilitate reconciliations. 

Thus, the Agency has not incorporated 

the commenter’s suggestion into the 

rule. 

Comment: Two commenters stated 

that proposed § 4280.311(d)(12) requires 

that requests by MDOs for loan 

disbursement must be accompanied by 

a description of the incoming microloan 

pipeline. The commenters stated that it 

is questionable whether any MDO has a 

‘‘microloan pipeline’’ that can be 

described to a funder. Generally, MDOs 

do not line up loans and then make a 

drawdown. The incoming pipeline is 

totally unpredictable. MDOs typically 

base their drawdowns on previous 

history and draw down as needed. The 

commenters recommended that the 

Agency remove this requirement from 

the rule and replace it with a provision 

that draw downs be allowed as needed 

by the MDO. According to the 

commenters, keeping this requirement 

will add to the administrative burdens 

on MDOs and decrease the portion of 

staff time that can be devoted where it 

should be devoted—servicing loans, 

providing technical assistance and 

conducting outreach that brings more 

microentrepreneurs in the door for 

services. 

Another commenter stated that, 

regarding the ‘‘microloan pipeline,’’ the 

rule has two very serious flaws: (a) It 

conflates borrower interest in pursuing 

a microloan with the certainty of that 

borrower qualifying for a microloan, and 

(b) it fails to consider the impact of 

unpredictable economic factors and 

outside forces. This commenter stated 

that a ‘‘microloan pipeline,’’ as the term 

is used in the microenterprise field, is 

not a predictor of future borrowers, but 

rather an expression of loans in the 

process of closing. While an MDO may 

work to forecast demand for microloans, 

the incoming pipeline is ultimately 

unpredictable and does not provide a 

reliable proxy by which to judge the 

intent of MDOs requesting a loan 

disbursement. The commenter 

recommended that the ‘‘microloan 

pipeline’’ be utilized as an indicator of 

microloan demand. 

Response: Agency experience 

indicates that lenders are able to 

anticipate what they will lend over the 

next 3 to 6 months. Generally, a 

microloan pipeline can be anticipated 

by assessing those clients that are in the 

pre-loan technical assistance and 


sroberts on DSKD5P82C1PROD with RULES
30130 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

planning stages. A well managed 

microlending institution will recognize 

those clients that are ready for loan 

approval and those clients that are not. 

They will also recognize those clients 

that intend to borrow and those clients 

that do not. Therefore, it should not be 

difficult for a microlender to anticipate 

the need for microlending funds. The 

‘‘microloan pipeline’’ language, 

therefore, has been removed to state that 

the request for disbursement will be 

accompanied by a description of the 

microlender’s anticipated need (i.e., the 

amount and number of microloans 

anticipated to be made with the 

funding) (see § 4280.311(e)(11)). 

Interest Rate Adjustment (Proposed 

§ 4280.311(d)(13)) 

Comment: Many commenters 

expressed concern over the interest rate 

provisions in the rule at proposed 

§§ 4280.311(d)(13) and (d)(17). One of 

the commenters noted that the statute 

established a minimum interest rate of 

at least 1 percent for USDA loans 

(section 379E(b)(3)(B)(ii)) and claimed 

that the proposed rule does not 

implement the interest rate as set out 

under the law. This commenter then 

referred to the proposed formulations in 

proposed § 4280.311(d)(17) and stated 

that they may have merit, but are not 

clearly explained in the rule and have 

the potential to raise interest rate 

charges to microenterprises. In the 

interest of time, clarity, and ease, the 

commenter believes that the Agency 

should follow the law and implement 

the loan rate set out by the statute. 

The other commenters recommended 

adopting fixed rate loans at a 1 percent 

interest rate. 

Response: The Agency agrees that the 

interest rate provisions found in 

proposed § 4280.311(d)(13) and (d)(17) 

should be revised to reflect a simpler 

structure. However, the Agency 

disagrees that the rate should be less 

than 1 percent. The statute does not 

anticipate a 1 percent rate at all times 

on every loan. It only states that the 

interest rate must be at least 1 percent. 

To address the commenters’ concerns 

regarding the rate structure, and Agency 

concerns regarding the cost and broad 

distribution of loan funds, the Agency 

has revised the rule at § 4280.311(e)(12) 

to set a fixed interest rate of 2 percent 

on all loans to any MDO that are made 

in the first 5 years of an MDO’s 

participation in RMAP. After 5 years of 

successful and continuous participation 

in RMAP, each new loan to an MDO 

will be at a fixed 1 percent interest rate. 

Depending on future Treasury bill rates, 

these revised interest rate provisions 

may be more expensive to the 

Government, but comply with the law 

and will eventually provide the lower 1 

percent rate to the best MDO 

performers. In addition, these revised 

interest rate provisions should 

encourage microlenders to continue 

successful participation in the program. 

Interest Rate Adjustments (Proposed 

§ 4280.311(d)(14) and (d)(15)) 

Comment: One commenter asked how 

the Agency’s Financial Office would 

deal with the provisions of proposed 

§ 4280.311(d)(14) and (d)(15). 

Response: The RMAP will utilize the 

RULSS technology platform, which 

includes the calculation of capitalized 

interest. 

Amortization (Proposed 

§ 4280.311(d)(15)(i)) 

Comment: One commenter suggested 

replacing ‘‘subject itself to negative 

amortization’’ with ‘‘subject itself to a 

balloon payment’’ as being clearer. 

Response: The Agency has revised the 

rule to remove reference to negative 

amortization. Because the Agency’s 

Finance Office will always adjust 

payments so that negative amortization 

will not occur, there is no need to 

address this issue in the rule. 

Comment: One commenter asked why 

amortization calculations are performed 

at month 22 for the end of the deferral 

period and to start payments, but then 

turning around and automatically 

reamortizing their loan at month 34. 

Response: The Agency has removed 

the paragraph concerning reamortizing 

loans at month 34, because it is no 

longer necessary for the implementation 

of this program. The Agency notes that 

amortization calculations are to be 

performed during the 24th month of the 

deferral period, rather than on the first 

day of the 22nd month as had been 

proposed. Section 4280.311(e)(13) has 

been revised accordingly. 

Loan Deobligation and Evaluation 

(Proposed § 4280.311(d)(16) and (d)(17)) 

Comment: One commenter asked how 

the Agency’s Financial Office would 

deal with the provisions of these 

paragraphs. 

Response: The RMAP will utilize the 

RULSS technology platform, which can 

facilitate the calculations. 

Interest Rate Adjustments (Proposed 

§ 4280.11(d)(17)) 

Comment: Two commenters were 

concerned over how the Agency was 

proposing to adjust the interest rates on 

loans made to microlenders. One of the 

commenters requested clarification of 

when interest rates will change for 

MDO’s that have used all their funds 

(proposed § 4280.311(d)(17)(i)) by the 

24th month and expressed concern 

regarding proposed 

§ 4280.311(d)(17)(ii). 

The other commenter stated that 

different incentives to reward 

microlenders who relend their funds 

quickly can be developed instead of the 

interest rate adjustment. The commenter 

also suggested that incentives be built 

into the use of the TA grant funds. 

Response: For the reasons discussed 

earlier in response to comments on 

proposed § 4280.311(d)(13), the Agency 

has revised the interest rate structure 

and has removed proposed 

§ 4280.311(d)(17). Thus, it is 

unnecessary to adopt the commenters’ 

suggestions. 

Minimum and Maximum Loan Amounts 

(Proposed § 4280.311(e)(1)) 

Comment: A number of commenters 

were concerned about the maximum 

loan amounts being proposed. Most 

recommended raising both the single 

year maximum and the aggregate 

maximum to $1 million and $5 million, 

respectively. Other amounts suggested 

were $750,000 for single year maximum 

and $4 million aggregate maximum. 

Points made by the commenters 

included: 

• While most rural MDOs will not 

borrow the maximum amount, large 

lenders that can demonstrate success in 

making and managing a large volume of 

loans should have the opportunity to do 

so; 

• The low limit may constrain MDOs 

with robust pipelines of potential 

borrowers; and 

• The low limit creates additional 

administrative expenses for both the 

Agency and the MDO. 

Response: In order to fund as many 

qualified microlenders as possible, it is 

important to have a maximum loan 

amount that is both large enough for 

larger lenders and small enough to 

allow equitable distribution of loan 

funds. Additionally, the current 

maximums and minimums provide the 

Agency with the opportunity to spread 

risk across a higher number of local 

economies than would a more 

condensed distribution. Therefore, the 

Agency has not revised these limits in 

response to the comments. 

The Agency notes that it has retained 

the proposed minimum loan amount of 

$50,000 in the interim rule. The Agency 

considered whether to lower this 

minimum amount, but decided against 

doing so for two primary reasons. First, 

the Agency is concerned that an MDO 

seeking to borrow, for example, only 

$10,000 or $20,000 is unlikely to be a 

well established MDO with a sufficient 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30131 

‘‘critical mass’’ and would therefore 

present a higher risk to the Agency for 

repayment. Second, even if the MDO 

seeking such a small amount was wellestablished, the Agency believes that a 

$10,000 or $20,000 loan to the MDO 

under this Program would represent a 

small portion of the MDO’s overall 

portfolio of loans and would not be the 

type of MDO the Agency is most 

interested in for the Program. 

Use of Funds (Proposed 

§ 4280.311(e)(2)) 

Comment: One commenter asked 

what an MDO would do concerning 

establishing an RMRF if the MDO wants 

to apply in a subsequent year to 

recapitalize the loan fund. 

Response: The Agency has rewritten 

the beginning part of § 4280.311(f)(2) to 

state: ‘‘Loans must be used only to 

establish or recapitalize an RMRF out of 

which microloans will be made.’’ By 

including ‘‘or recapitalize’’, the Agency 

is allowing MDOs to apply in 

subsequent years for loan funds to 

recapitalize an existing loan fund. In 

addition, other changes have been made 

to this paragraph. 

Comment: One commenter suggested 

revising the sentence ‘‘Interest earned by 

the microlender on these funds may, 

with advance written authorization from 

the Agency, be used to help fund the 

LLRF’’ to read ‘‘Repayments plus Interest 

earned on these funds may be used to 

help fund the LLRF.’’ The commenter 

believes that requiring advance written 

authorization is another opportunity for 

Agency non-compliance. 

Response: The Agency has not revised 

the provision requiring advanced 

written notification for using the 

interest earned on the RMRF for 

increasing funding to the LLRF (see 

§ 4280.311(e)(2)). The Agency disagrees 

with the commenter’s assertion that this 

is an opportunity for Agency noncompliance. This requirement is a 

sound oversight provision. 

Loan Loss Reserve Fund (LLRF) 

(Proposed § 4280.311(f)) 

Comment: One commenter asked why 

the LLRF would be set up to cover 

delinquent payments. 

Response: The statute requires the 

establishment of at least a 5 percent 

LLRF (see section 379E(b)(3)(C)). The 

purpose of the LLRF is to cover 

microloans that have gone into default. 

This provides a cushion to protect the 

microlender from becoming delinquent 

to the Federal government. 

Comment: One commenter stated the 

‘‘105 percent rule’’ that requires the 

MDO at all times to maintain a 

microloan fund and loss reserve equal to 

105 percent of the RMAP loan balance, 

or be in default, is unworkable and 

unnecessary. What this means is that if 

an MDO suffers any loss whatsoever 

(which is realistically likely), it either 

must immediately refund the entire loss 

up to the 105 percent level, or be 

liquidated by USDA. This is required 

even if the MDO is otherwise current on 

their RMAP loan and performing as 

agreed. If an MDO suffers a loss but 

continues to stay current on its 

payments, it should be monitored 

closely by USDA, but it may yet recover 

its losses through operations or other 

means. There is no benefit or reason to 

liquidate an MDO that is making 

payments as agreed and operating its 

microloan fund in accordance with the 

mission of the RMAP program. Again, 

the IRP program’s approach to default is 

perfectly workable as a quick substitute. 

Another commenter recommended 

that USDA provide further guidance on 

the available grace period for an MDO 

to replenish the LLRF in case of 

microloan default. 

Response: The statute requires that 

each microlender establish and 

maintain a loan loss reserve fund of at 

least 5 percent of the outstanding 

balance of debt owed to the Agency 

under the program by the microlender. 

It is not the intent of the Agency to 

declare a microlender in default based 

on the loss by a microborrower. The 

Agency is also aware that it takes time 

to replenish the reserves. Therefore, the 

Agency has added a 30-day grace period 

for such replenishment. Regarding the 

reference to the IRP program, it is not 

the Agency’s intent to operate the 

RMAP as if it were an extension of the 

IRP. 

Capitalization and Maintenance 

(Proposed § 4280.311(f)(2)) 

Comment: A number of commenters 

were concerned with the proposed 

provision that would require the 5 

percent funding level for the loan loss 

reserve fund to be met using ‘‘nonFederal funding’’ (e.g., RMAP funds 

cannot be used to establish the loan loss 

reserve) (proposed § 4280.311(f)(2)(iii)). 

The commenters noted that this 

provision would require the LLRF to be 

funded by the borrower. The 

commenters stated that this is contrary 

to Congressional intent that the 5 

percent level be met using the USDA/ 

RMAP loan. Most of the commenters 

recommended that the rule reflect this 

Congressional intent. 

In supporting this position, several of 

the commenters stated that requiring the 

use of non-Federal funds would limit 

the ability of smaller rural MDOs to 

participate in the program. According to 

the commenters, many rural MDOs 

depend on federal funds to operate, as 

state, local and private funds for 

microenterprise development are 

limited and decreasing. According to 

one commenter, even in the best of 

times, securing non-Federal funding is a 

challenge. These funds provide critical 

resources for achieving the MDOs 

mission of serving rural 

microenterprises. Making them nearly 

inaccessible for 20 years will pose 

significant challenges for all MDOs. The 

commenters believe that, if forced to use 

non-Federal funds for the LLRF, the 

program will be unattractive to many 

MDOs and many rural MDOs will not be 

able to participate in RMAP because 

they have no (or limited) non-federal 

funds to capitalize the required loan 

loss reserve. 

Two of the commenters indicated that 

they understood the Agency’s 

reluctance to allow use of RMAP funds 

to capitalize the loan loss reserve. These 

commenters stated that some flexibility 

should be provided to allow the use of 

other federal funds and suggested that, 

as an alternative, this provision be 

modified to allow federal funds other 

than RMAP (Rural Business Enterprise 

Grant (RBEG) or Community 

Development Block Grants (CDBG) 

funds, for example) to capitalize the 

required loan loss reserve. 

Finally, one commenter suggested 

that the requirement for the LLRF as 

proposed be eliminated in its entirety 

and be replaced with the IRP’s approach 

of requiring that a 6 percent loss reserve 

be built up by the third year of 

operations and maintained thereafter, 

with the understanding that losses will 

cut into the reserve and that therefore 

time is allowed in rebuilding the loss 

reserve. 

Response: While the Agency 

understands the issues raised by the 

commenters, especially as it regards 

MDOs with less history, the Agency has 

not revised the requirement to use nonFederal funds. Based on the lending 

program history of Rural Development, 

it has greatest level of long-term success 

awarding projects with program 

participants who have their own capital 

in the project rather than having the 

government fully finance the project. In 

addition, there is a statutory 

requirement in section 379E to provide 

a 25 percent non-Federal share against 

funds received from the Federal 

Government for the cost of the project. 

The MDO’s non-federal investment in 

the LLRF can be considered a part of the 

non-Federal share. 


sroberts on DSKD5P82C1PROD with RULES
30132 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

LLRF Funded in Advance (Proposed 

§ 4280.311(f)(4)) 

Comment: One commenter in 

reference to ‘‘The LLRF account must be 

established and partially funded’’ asked: 

If they do not initially establish at 5 

percent, what is the period of time the 

microlender has to fully capitalize the 

account? The commenter pointed out 

that proposed § 4280.311(h), Loan 

closing, requires at least 5 percent of 

initial disbursement be deposited. One 

commenter also asked: Why would the 

LLRF need to be funded with 5 percent 

of the initial disbursement when the 

account is required to have 5 percent of 

each loan made. If no loans have been 

made, the commenter believes that such 

a requirement would be an undue 

financial burden on the applicant to tie 

up funds for this. 

Response: The initial amount of 

capitalization will be 5 percent of the 

initial disbursal amount requested from 

the Agency by the MDO. The remaining 

loan loss reserve funds can be front 

loaded into the account, or built over 

time as microloans are made. The MDO 

will maintain a minimum cash balance 

of 5 percent of the amount owed to the 

Agency under this program in the LLRF 

at all times, including at the time of the 

initial and all subsequent draws, with 

the exception that if the LLRF falls 

below the required amount, the 

microlender will have 30 days to 

replenish the LLRF. The paragraph has 

been clarified accordingly. 

Approval/Obligation (Proposed 

§ 4280.311(g)) 

Comment: One commenter pointed to 

the part of proposed § 4280.311(g) that 

states that the Request for Obligation of 

Funds form ‘‘may be executed by the 

loan approving official provided the 

microlender has the legal authority to 

contract for a loan, and to enter into 

required agreements.’’ The commenter 

then asked if OGC will be making the 

determination that the MDO has the 

legal authority to contract for a loan. 

Response: As indicated previously in 

this preamble, the interim rule now 

requires the MDO to submit an 

attorney’s opinion regarding the MDO’s 

legal status to make loans, which the 

Agency will use in making the 

determination but may consult with 

OGC as necessary. 

Comment: One commenter suggested 

replacing ‘‘loan approving official’’ with 

‘‘Agency’’ for consistency within the 

rule. 

Response: The Agency agrees with the 

suggestion to replace ‘‘loan approving 

official’’ with ‘‘Agency’’ and has revised 

the paragraph accordingly. 

Loan Closing (Proposed § 4280.311(h)) 

Comment: One commenter suggested 

that the proposed rule needs to address 

the applicant signing a promissory note, 

security agreement, financing statement, 

etc., at loan closing. 

Response: The Agency agrees that the 

rule needs to identify the promissory 

note and security agreement and has 

added them accordingly. 

Comment: One commenter asked: 

Wouldn’t the RMRF account have to be 

set up prior to ‘‘loan closing’’ because 

the Agency would have had to establish 

the electronic funds transfer (EFT)? 

Response: The Agency agrees with the 

commenter that the RMRF account 

would have to be set up prior to loan 

closing. Section 4280.312(c)(1) provides, 

in part: ‘‘Prior to loan closing, 

microlenders must provide evidence 

that the RMRF and LLRF bank accounts 

have been set up.’’ No change has been 

made in response to this comment. 

Comment: One commenter suggested 

using the term ‘‘Agency Personnel’’ in 

proposed § 4280.311(h)(2)(ii) in order to 

allow seamless movement of the 

program from the national level to the 

state level at a future date if necessary. 

Response: The commenter is referring 

to an earlier version of the proposed 

rule. The Agency is using the term 

‘‘Agency’’ and that is sufficient to 

address the commenter’s concern. 

Comment: One commenter suggested 

replacing ‘‘processing officer’’ with 

‘‘Agency Official’’ in proposed 

§ 4280.311(h)(4) for consistency. 

Response: The Agency agrees with the 

suggestion to replace ‘‘processing 

officer’’ with ‘‘Agency’’ and has made the 

change accordingly. 

Comment: One commenter asked why 

tax considerations were included in 

proposed § 4280.311(h)(4) as a reason 

for not approving changes (‘‘Changes in 

legal entities or where tax 

considerations are the reason for the 

change will not be approved’’). 

Response: The Agency does not 

believe it is necessary to refer to ‘‘tax 

considerations’’ as questioned by the 

commenter. The Agency has recast the 

sentence to state: ‘‘Changes in legal 

entities prior to loan closing will not be 

approved.’’ (See § 4280.312(b).) Such a 

change would be considered a material 

change since the issuance of the letter 

of conditions, so the loan would not be 

closed. 

Comment: One commenter referred to 

the phrase ‘‘provide sufficient evidence’’ 

in proposed § 4280.311(h)(5) and asked 

what this meant. According to the 

commenter, this is inconsistent with 

other Rural Development programs. 

Response: The Agency agrees that the 

phrase ‘‘provide sufficient evidence’’ 

needs clarification and has revised the 

rule accordingly (see § 4280.312(c)(3)). 

The Agency has determined that 

sufficient evidence is best demonstrated 

through the provision of mechanics’ lien 

waivers. In some cases, the Agency 

recognizes that such waivers may not be 

available or applicable. In such 

instance, the provision of receipts of 

payment would suffice. 

Comment: One commenter 

recommended that the program require 

a standard closing opinion, as required 

under the Intermediary Relending 

Program via OGC standard format in 

order to be consistent with existing 

programs. 

Response: The Agency has 

determined that an attorney’s opinion 

regarding the entity’s legal status and its 

ability to enter into program 

transactions at the time of initial entry 

into the program will be required (see 

§ 4280.310(a)(4)(ii)). Subsequent to an 

entity’s acceptance into the program, an 

attorney’s opinion will not be required 

unless the Agency determines 

significant changes to the entity have 

occurred. The rule has been revised 

accordingly. 

Report/Records/Oversight (Proposed 

§ 4280.311(i)) 

Comment: One commenter stated that 

the program appears to be heavily 

bureaucratic in terms of data collection 

and reporting requirements compared to 

the SBA Microloan program. The 

reporting requirements need to be 

streamlined and reduced so 

administrative costs of the MDOs can be 

kept lower with more focus on serving 

the microloan clients. 

Response: The Agency makes every 

attempt to streamline requirements. The 

portfolio reporting system for this 

program will be fully electronic. The 

grant reporting requirements are in line 

with Standard Federal reports. 

Therefore, no changes have been made 

in response to the comment. 

Reporting Frequency 

Comment: One commenter requested 

that reporting be semi-annual, and not 

quarterly, for both loans and grants. 

According to the commenter, only 

qualified and experienced MDOs will be 

selected, via the scoring criteria, as 

lenders in the program and that, in the 

‘‘spirit of non-micromanagement’’, 

reporting should start out as semiannual. The commenter also suggested 

quarterly reports until loan funds are 

spent by MDO and then convert to semiannual reporting unless there are 

servicing or delinquency issues and 

then they may be reverted to quarterly 

reports until operations are found to be 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30133 

satisfactory. Lastly, the commenter 

recommended that, for grants, reports be 

required quarterly during drawdown of 

the grant, and then semi-annually 

thereafter. 

Response: The Agency does not 

disagree that selected applicants will be 

qualified and experienced MDOs will be 

selected to participate. However, the 

level of experience may vary widely. 

The Agency proposed that reporting be 

quarterly because microloans will be 

short- to intermediate-term loans. With 

short- and intermediate-term lending, 

more frequent reporting (quarterly 

versus semi-annual) should help the 

microlender better manage the loan. 

Comment: One commenter was 

concerned with the phrase ‘‘such 

information as the Agency may require’’ 

(proposed § 4280.311(i)(1)(i)) and 

suggested that the rule needs to be 

specific in what information will be 

asked for in order to ensure consistency 

across the States. 

Response: The list of required 

reporting forms is provided in 

§ 4280.311(h)(1) and any other 

requirements will be determined by the 

Agency as necessary based on the 

activities of the particular MDO. 

Comment: In reference to proposed 

§ 4280.311(i)(4), one commenter stated 

that there is no ‘‘RD Form 1951–4, 

Report of RMAP/RMRF Lending 

Activity’’ but that there is a ‘‘Form 1951– 

04, Report of IRP/RDLF Lending 

Activity’’. The commenter then asked if 

there is a plan to make a new form or 

use the existing form. 

Response: The Agency has 

determined that Form RD 1951–4 is no 

longer needed because the relevant part 

of that form will be moved into the 

Guaranteed Loan System (GLS). Thus, 

reference to the form has been removed 

from the rule and the Agency will use 

the GLS. 

Grant Provisions (§ 4280.313) 

Grant Amounts (Proposed 

§ 4280.312(a)(1)) 

Comment: Many commenters 

expressed concern that the proposed 

rule would limit technical assistance 

grants to $100,000 despite ‘‘clear 

legislative language allowing such 

grants up to 25 percent of outstanding 

loans.’’ Three of the commenters 

referred to Section 6022(b)(4)(B), stating 

that this section clearly states that the 

maximum amount of grant is ‘‘an 

amount equal to not more than 25 

percent of the total balance of 

microloans made by the MDO * * * as 

of the date the grant is awarded.’’ One 

commenter stated that the statute does 

not place any limit on the amount of the 

grants to support rural microenterprise 

development. According to this 

commenter, the purpose statement in 

the law could be read to suggest that 

these grants should generally represent 

50 percent of the program, with 

technical assistance and financial 

assistance the other 50 percent. This 

commenter, therefore, recommended 

that, at a minimum, rural 

microenterprise development grants to 

an individual MDO be capped no lower 

than $250,000 annually. 

These commenters believe that such a 

cap will make it difficult for 

organizations to fund the staff needed to 

work with borrowers and other clients, 

noting that good business planning, 

skills in marketing, management, and 

accounting are essential to business 

success. Several stated that the rule 

should be ‘‘revised to reflect the 

language of the law.’’ 

Two commenters believe that by 

capping technical assistance funds, the 

proposed rule will make it difficult for 

organizations to provide the services 

microenterprises need to succeed. 

Often, borrowers from this program 

have been deemed not creditworthy by 

commercial lenders. Microenterprise 

programs work exclusively with such 

borrowers and help microenterprises 

succeed by committing significant staff 

resources to training and technical 

assistance. A cap in technical assistance 

will likely result in more defaults. 

Another commenter stated that this 

limitation ignores the possibility of high 

performing, successful organizations 

that may not be able to meet market 

demand for loans simply because of the 

limitation on technical assistance funds 

available. In the commenter’s view, the 

reason for this provision was to ensure 

that micro-lenders had adequate 

financial capacity to support their loan 

volume. The $100,000 cap undermines 

this provision. 

In sum, commenters requested (1) no 

cap, (2) using the 25 percent cap across 

the board, or (3) raising the limit from 

$100,000 to $250,000 (to be consistent 

with the $1 million annual RMRF limit 

for the MDO). 

Finally, some commenters requested 

clarification as to whether the maximum 

amount of the TA grant accompany 

every borrowed loan; that is, if there is 

a separate TA grant of up to $100,000 

for every loan to a microlender (in 

proposed § 4280.311(e)), and the 

proposed rule provides a maximum loan 

of $500,000, with an aggregate debt 

owed the program by any single 

microlender of $2,500,000, the 

implication is a possibility of up to five 

separate loans to a single microlender 

and the potential of up to an aggregate 

of $500,000 in TA grants to a single 

microlender). The commenters 

suggested that the final rule be clarified 

to allow the TA grant accompanying the 

loan to an MDO to be the maximum 

amount allowed by law. 

Response: The Agency has 

determined that the $100,000 proposed 

maximum could be more limiting than 

intended in order to provide sufficient 

technical assistance to microenterprises 

and microentrepreneurs. However, the 

Agency has also determined that, 

considering the economies of scale, 

funding technical assistance grants at 25 

percent for all outstanding loans up to 

the $2.5 million maximum is 

unnecessary and could divert too much 

of the program’s funds away from loan 

purposes. Therefore, the Agency has 

revised the rule to allow technical 

assistance grants at a rate of 25 percent 

for the first $400,000 of aggregate 

outstanding microloans owed to the 

microlender under this program and 

then 5 percent on all additional 

outstanding microloans owed to the 

microlender under this program above 

$400,000 up to the $2.5 million total 

debt cap (see § 4280.313(a)(1)(i)). As a 

result, the maximum TA grant to any 

one MDO in any given year would now 

be $205,000. The Agency has also 

clarified that the TA grant amount is an 

annual amount, as specified in the 

statutory language. 

Cost Share (Proposed § 4280.312(a)(2)) 

Comment: One commenter was 

concerned with the cost share provision 

limiting the ‘‘Federal share’’ to 75 

percent as it would be applied to the 

Freely Associated States (Republic of 

Palau, Republic of the Marshall Islands, 

and the Federated States of Micronesia). 

The commenter pointed out that the 

Freely Associated States get much of 

their financial support from the 

Compact of Free Association with the 

United States, which is funneled 

through the Department of Interior, 

Office of Insular Affairs. This Compact 

funding could be a potential source of 

match for the RMAP program and the 

commenter would hate to see it 

excluded. The commenter, therefore, 

suggested this provision be revised to 

reflect ‘‘Rural Development’’ funding. 

The commenter suggested combining 

proposed § 4280.312(a)(2) and (a)(3) to 

simply say that the Agency portion 

cannot exceed 75 percent of the grant 

amount. 

Lastly, one commenter stated that the 

math in proposed § 4280.312(a)(2) and 

(a)(3) does not ‘‘add up’’. The commenter 

provided the following example: 

Paragraph (a)(2) states the maximum TA 

or enhancement grant cannot exceed 75 


sroberts on DSKD5P82C1PROD with RULES
30134 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

percent and paragraph (a)(3) states that 

the total matching requirement is 25 

percent of the grant. If the cost of the 

grant project is $10,000 and the grant 

portion is 75 percent or ($7,500) and the 

match is 25 percent of the grant amount 

($1,875), there is a shortage of $625 of 

complete funding for the project. 

Response: Federal funding may not be 

used as the non-Federal share or match 

for the RMAP program unless 

specifically permitted by laws other 

than the statute authorizing RMAP. 

Instead, language has been provided 

that clarifies the statutory language 

regarding cost share (see § 4280.311(d)) 

and matching funds (see 

§ 4280.313(a)(2)). The Agency has 

revised the cost share and matching 

requirements, which address the 

commenters’ concerns (see 

§§ 4280.311(d) and 4280.313(a)(2)). 

Matching Requirements (Proposed 

§ 4280.312(a)(3)) 

Comment: One commenter suggested 

recasting the text to refer to the ‘‘nonAgency cash’’. 

Response: With regard to the 

suggested text edit, the Agency has 

retained ‘‘non-Federal’’ because, with 

the exception of certain laws that allow 

the use of specific funding, other 

Federal funding may not be used. 

Comment: Two commenters 

expressed concern about an apparent 

inconsistency between the law and the 

proposed rule with respect to matching 

funds for the grant provisions in the 

RMAP. 

One of the commenters referred to 

section 379E(c)(1)(B) of the 2008 Farm 

Bill, which indicates that an MDO must 

provide a match of 15 percent the grant 

amount in the form of matching funds, 

indirect costs, or in-kind goods or 

services. For both enhancement grants 

and for technical assistance grants, 

proposed § 4280.312(a)(3) states that 

microlenders must provide a 10 percent 

match against any grant and a 15 

percent cash or in-kind contribution 

against any grant for a total matching 

requirement of 25 percent. The 

proposed rule indicates that the loan 

loss reserve fund does not count for this 

requirement. The law, however, only 

requires either a cash match or an inkind contribution. According to this 

commenter, there seems to be an 

inconsistency between the law and the 

proposed rule. For an MDO, the 

difference could have serious 

ramifications. Rural MDOs are 

challenged by the relative lack of local 

foundations, the fact that fewer 

corporations are headquartered in rural 

areas, and continually strained state 

budgets. The commenter, therefore, 

recommended that the Agency clarify 

the matching requirement, which the 

commenter understands—based on the 

law—to be a 15 percent match in the 

form of cash or in-kind funds. 

The other commenter also noted that 

for both enhancement grants and for TA 

grants, the proposed rule states that 

microlenders must provide a 10 percent 

match against any grant and a 15 

percent cash or in-kind contribution 

against any grant for a total matching 

requirement of 25 percent. The LLRF 

does not count for this requirement 

(proposed § 4280.312(a)(3)). The law, 

however, only requires either a cash 

match or an in-kind contribution; not 

both (section 379E(c)(1)(C)). 

Lastly, one commenter noted that the 

law authorizes the use of CDBGs for use 

as a non-federal match. The commenter 

thus recommended that the Agency 

should include this in the final rule. 

Response: The Agency has revised the 

non-Federal share and matching 

requirements, which address the 

commenters’ concerns. 

With regard to the CDBG comment, 

when permitted by laws other than the 

statute authorizing RMAP, Federal 

funding may be used as the non-Federal 

share or match for the RMAP program. 

Oversight (Proposed § 4280.312(a)(4)) 

Comment: One commenter noted that 

the proposed rule already has 

provisions for oversight at proposed 

§ 4280.311(i) and suggested combining 

the two provisions. 

Response: The oversight provisions 

the commenter is referring to in 

proposed § 4280.311(i) apply to loans. 

The oversight provisions in proposed 

§ 4280.312(a)(4) apply to grants. Because 

the provisions are different and apply to 

two different types of financial 

assistance, the Agency has not 

combined the two paragraphs as 

suggested by the commenter. However, 

the Agency has determined that there is 

no need for two grant oversight 

paragraphs found in proposed 

§§ 4280.312(a)(4) and 4280.320(a). 

Therefore, the Agency has deleted the 

first occurrence so that all grant 

oversight provisions are found in 

§ 4280.320(a). 

Comment: In reference to proposed 

§ 4280.312(a)(4)(i), one commenter 

asked if the reporting will be with SF– 

269, ‘‘Financial Status Report,’’ (Long 

Form) or (Short Form). The commenter 

also asked if this was in addition to the 

narrative and to Form RD 1951–4. 

Response: The SF–269 has been 

replaced with SF–PPR, ‘‘Performance 

Progress Report.’’ The new form will be 

submitted in conjunction with the 

narrative. As noted in a previous 

response, the Agency has determined 

that Form 1951–4 is no longer needed 

because the relevant part of that form 

will be moved into GLS. 

Comment: In reference to proposed 

§ 4280.312(a)(4)(iii), one commenter 

suggested adding ‘‘as revised’’ after the 

reference to ‘‘OMB Circulars A–102 and 

A–110.’’ 

Response: The Agency has replaced 

reference to these specific circulars with 

a more general reference to OMB 

circulars and regulations, eliminating 

the need to add the language suggested 

by the commenter. 

Comment: One commenter suggested 

that all reporting requirements should 

be listed in one section and not spread 

out. 

Response: While the Agency agrees 

with the commenter, the Agency will 

address this in regulatory instructions. 

Administrative Expenses (Proposed 

§ 4280.312(a)(5)) 

Comment: One commenter stated that 

there is a need for additional clarity 

about what the technical assistance 

grant may be used for. According to the 

commenter, the limitation at proposed 

§ 4280.312(a)(5) that not more than 10 

percent of the technical assistance grant 

be used for administrative costs is 

confusing and problematic. The 

commenter stated that an MDO should 

be able to use its technical assistance 

grant to pay for all of the costs 

associated with providing a functional 

staff to provide technical assistance to 

microentrepreneurs. Such costs should 

be expressly allowed and not be 

governed by the 10 percent figure. 

Response: The Agency acknowledges 

that intensive technical assistance is 

widely recognized in the microlending 

community as a critical component to 

the success of potential and existing 

microborrowers. The 10 percent 

limitation is statutory (section 

379E(b)(4)(C)). With regard to the 

commenter’s request for additional 

clarity, the Agency disagrees that the 

rule is not sufficiently clear as to what 

the technical assistance grant may be 

used for and no changes have been 

made to the rule in response to this 

comment. 

Enhancement Grants (Proposed 

§ 4280.312(b)) 

Comment: One commenter stated that 

the enhancement grant is an 

unnecessary diversion of scarce RMAP 

funds. Enhancement grants as proposed 

are small ($25,000) and limited to the 

purpose of building MDO capacity. 

There are other USDA Rural 

Development programs available to do 

this—RBEG, RBOG, Rural Community 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30135 

Development Initiative (RCDI)—as well 

as other sources from other funders and 

federal programs. There is no expressed 

requirement in the statute to create an 

Enhancement Grant program, and it 

would be a much better approach to 

direct all of the scarce RMAP grants to 

supporting the MDO’s who are actually 

making microloans instead. 

One commenter suggested an optional 

approach to provide enhancement 

grants, recommending that the rule 

allow the Agency to make larger 

enhancement grants to microlenders 

that, on a competitive basis, will select 

a group of rural microlenders to provide 

a platform for group, individual, and 

peer-to-peer enhancement services. The 

commenter referred to the U.S. Small 

Business Administration’s Program for 

Investment in Microentrepreneurs 

(PRIME) as an example of such an 

approach. 

Response: The Agency disagrees with 

the commenter concerning the statutory 

basis for the ‘‘enhancement grant’’ 

program. The statute states at section 

379E(b)(4)(A)(i)(II): ‘‘Carry out such 

other projects and activities as the 

Secretary determines appropriate to 

further the purpose of the program.’’ 

However, because opinions differ 

widely on how best to approach an 

enhancement grant category to this 

program, the Agency is requesting 

comments on this subject (see Section V 

of this preamble). Comments will be 

considered prior to publication of the 

final rule. 

Technical Assistance Grants (Proposed 

§ 4280.312(c)) 

Comment: One commenter noted that 

this section states that TA grants will be 

based on the loan amount made to an 

MDO ‘‘in accordance with the statute.’’ 

The statute does not at any time state 

that TA grants should be calculated in 

this manner; however, the report 

language does allow for this mechanism. 

Response: The statute states at section 

379E(b)(4)(B)(ii): ‘‘Maximum amount of 

grant. A microenterprise development 

organization shall be eligible to receive 

an annual grant under this subparagraph 

in an amount equal to not more than 25 

percent of the total outstanding balance 

of microloans made by the 

microenterprise development 

organization under paragraph (3), as of 

the date the grant is awarded.’’ While 

the text in the preamble to which the 

commenter is referring may not reflect 

this statutory provision clearly, this is 

the statutory language on which the 

statement in question was made. The 

Agency will ensure clarity in the 

interim rule. 

Comment: Several commenters noted 

that this section does not address 

borrowers who are ‘‘seeking a loan from 

an MDO’’; that it addresses only people 

who have received one or more 

microloans and that this is in 

contradiction to the statute authorizing 

the program. As one of the commenters 

stated: This section of the proposed rule 

states that TA grants can only be used 

for people that have ‘‘received one or 

more microloans’’ from the MDO. 

However, the law also allows these TA 

grant funds to be used for services to 

microentrepreneurs that ‘‘are seeking a 

loan from the’’ MDO (Section 

6022(b)(4)(B)(i)(II)). The law clearly 

intends to support microentrepreneurs 

who are owners and operators of rural 

businesses or prospective owners and 

operators of rural businesses. The 

definition of ‘‘microentrepreneur’’ in 

both the law and Proposed Rule include 

both types of microentrepreneurs. This 

section would ignore the need for 

technical assistance for prospective 

microborrowers as contemplated by the 

law. The commenters suggested that the 

final rule be modified to conform to the 

law. 

One commenter also stated that, in 

practical terms, most 

microentrepreneurs seeking a loan need 

technical assistance to complete the 

loan process, and it is often difficult for 

MDO lenders to determine in advance 

whether an applicant will successfully 

complete the borrowing process. In fact, 

in some cases, well-crafted pre-loan 

assistance will enable a 

microentrepreneur to determine a 

means to grow or stabilize their business 

without taking on the risk of a loan, and 

as a result they will choose not to 

borrow. 

Response: The Agency agrees with the 

commenters that the rule should 

include these entities and has so 

modified the rule (see § 4280.313(b)(1)). 

Disbursement of TA Grant (Proposed 

§ 4280.312(c)(2)) 

Comment: Several commenters 

discussed the manner proposed for 

disbursing TA grants. Four suggested 

that the TA grant be a full year grant and 

not based on the microloans made for 

the first year. Another similarly 

recommended that, during the first year 

of an intermediary’s participation in 

RMAP, the TA grant should be a full 

year grant based on the amount of the 

loan to the intermediary. 

Commenters noted that this section of 

the proposed rule states that during the 

first year of operation the disbursement 

of TA grants to MDOs shall be a 

percentage based on the amount of the 

loan to the microlender, but will be 

disbursed on a quarterly basis based on 

the amount of microloans made. This 

limitation of TA grant disbursement will 

limit the amount of technical assistance 

an MDO can offer to borrowers or 

potential borrowers. In the long-run it 

could affect the pipeline of microloan 

borrowers, something about which the 

proposed rule is concerned in other 

sections. 

One commenter stated that the 

manner for disbursement of funds needs 

to be clearer. This commenter states that 

it appears that the proposed rule 

envisions awarding TA grants only in 

conjunction with the award of RMAP 

loan funds. Initially this certainly makes 

sense, but in years after an RMAP fund 

is established, it is still desirable to 

provide TA grant support. In fact, it 

would be ideal if an RMAP MDO, once 

funded, could depend upon rather than 

compete for TA grants. A possible 

structure might be to award a TA grant 

equal to 25 percent of the RMAP loan 

award in Year 1, with a commitment 

that provided the MDO makes 

satisfactory progress, it will be 

noncompetitively awarded a subsequent 

TA grant in Years 2, 3, and 4 equal to 

20 percent, 15 percent, and 10 percent 

respectively of their RMAP microloan 

portfolio. This will have the effect of 

creating incentives for the MDO to get 

their RMAP funds loaned out quickly 

(since the size of subsequent TA grants 

will be pegged to their portfolio size) 

and will provide a reliable funding 

stream with the understanding that the 

RMAP MDO will need to get established 

internally and gradually come to rely 

less on RMAP TA grant. (It should be 

noted that there is a precedent for Rural 

Development awarding grants for multiyear terms—e.g., the Section 523 SelfHelp TA program. A similar approach 

would make sense for the RMAP TA 

grant.) 

A sixth commenter recommended that 

the TA grant structure allow for the 

training and technical assistance of 

prospective microentrepreneurs as well 

as existing microentrepreneurs by 

awarding TA grants quarterly or 

annually, based on statutory allowances, 

program performance, and 

demonstrated need. 

Response: With regard to the initial 

(first year) grant, the amount will be 

calculated against the initial loan 

amount. With regard to the manner of 

disbursement, these will coincide with 

loan disbursements to ensure that funds 

are available for microlending for loan 

ready clients, that these clients can 

receive post loan technical assistance, 

and that incoming clients can also 

receive technical assistance. This will 

allow the initial disbursement of grant 


sroberts on DSKD5P82C1PROD with RULES
30136 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

dollars in advance with the remaining 

quarters to be funded in reimbursement. 

The Agency notes that quarterly 

disbursements do not imply that onequarter of the grant will be disbursed 

each quarter. If an MDO needs, for 

example, 50 percent of the grant in the 

first quarter, the rule allows the Agency 

to provide that amount in the first 

quarter. 

Overall, the Agency is satisfied that 

the proposed distribution of money is 

sufficient for participating MDOs to 

implement technical assistance 

associated with loans made under this 

program. As the program matures, the 

Agency will evaluate this method of 

disbursement. 

MDO Application and Submission 

Information (§ 4280.315) 

Comment: One commenter noted that 

the application content specified in 

USDA Rural Development’s IRP 

regulation (7 CFR 4274.338, including 

the use of the IRP application—Form RD 

4274–1) provides a detailed, wellunderstood, and complete set of all of 

the information needed for a revolving 

loan fund loan application. The 

commenter recommended using this 

form in lieu of the SF–424 as specified 

in § 4280.315. 

Response: The Agency disagrees with 

the commenter’s recommendation 

because this program is not meant to 

replicate the IRP program. The program 

information requested by the Agency 

will provide the data necessary to 

appropriately evaluate applicants for 

this program. 

Submission Requirements (Proposed 

§ 4280.315(c)) 

Comment: One commenter was 

concerned that the submission 

requirements did not include mention 

of a narrative, detailed budget, and 

submission of lending and servicing 

policies. 

Response: As proposed, there were 

several places within § 4280.316 that 

asked for a narrative. In addition, 

financial information was requested in 

proposed § 4280.316(a)(5) and loan 

policies and procedures were requested 

in proposed § 4280.316(a)(2). These 

provisions have been retained and 

appropriate reference to § 4280.316 has 

been added to § 4280.315 for clarity. 

Comment: One commenter asked why 

the proposed rule did not ask for 

organizational documents and suggested 

that it be added to the list of documents 

to be submitted. According to the 

commenter, organization documents 

should be submitted to Agency 

personnel for analysis and eligibility 

determination. Another commenter 

suggested adding organizational 

documents as an additional 

documentation requirement. 

Response: As proposed, the rule 

requested organizational documents in 

§ 4280.316(a)(1) as part of the 

application. This has been retained and 

an appropriate reference has been added 

to § 4280.315(d)(1). 

Comment: One commenter suggested 

using the certification under 1940–Q 

instead of Form SF LLL. According to 

the commenter, 1940–Q is used more 

frequently than SF LLL. 

Response: While the commenter is 

correct in that either the certification 

under 1940–Q or Form SF LLL can be 

used, the Agency prefers to use SF LLL 

because it is shorter, meets the needs of 

the Agency, and is consistent with the 

Agency’s other grant programs. 

Therefore, the reference to SF LLL has 

been retained in the interim rule. 

Additional Documentation (Proposed 

§ 4280.315(d)) 

Comment: One commenter 

recommended adding the following 

requirement for additional 

documentation: ‘‘Applicants are strongly 

encouraged to review the scoring 

criteria and provide documentation that 

will support the score.’’ According to the 

commenter, this needs to be brought to 

the applicant’s attention or they will 

look only at the application submission 

requirements and not provide sufficient 

information for scoring or a successful 

application. There is a disconnect in 

many of our programs between ‘‘scope of 

work requirements’’ and ‘‘scoring 

criteria’’. We need to do a better job of 

having applicants address burdensome 

scoring data—particularly with a 

program that is going to be administered 

at the National level initially. 

Response: The Agency agrees with the 

commenter that the proposed text 

would be useful to help ensure receipt 

of better applications and has modified 

the rule accordingly with reference to 

the additional application requirements 

in § 4280.316. 

Comment: In reference to proposed 

§ 4280.315(d)(1)(i), one commenter 

expressed concern that the requirement 

for copies of an applicant’s IRS 

designation as a non-profit would 

effectively block all non-profits in the 

Freely Associated States from being 

eligible. The commenter asked: Why not 

just get an OGC opinion similar to the 

Community Facilities program? 

Response: The Agency agrees with the 

commenter’s concern. As noted 

previously in a response to a comment 

on the definition of ‘‘nonprofit entity,’’ 

the Agency has revised this requirement 

(found in § 4280.315(c)(8)(ii)) to, in part, 

remove reference to the IRS. 

Comment: In reference to proposed 

§ 4280.315(d)(1)(iv), one commenter 

suggested adding the words ‘‘not more 

than 6 months old’’ after ‘‘A Certificate 

of Good Standing.’’ 

Response: The Agency agrees with the 

commenter’s suggestion that the 

certificate of good standing not be more 

than 6 months old and has revised the 

rule accordingly. 

Comment: Another commenter 

expressed concern with the requirement 

that the Certificate of Good Standing 

come from the applicant’s home state’s 

Office of the Secretary of State. 

According to the commenter, the 

commenter’s State does not provide 

these certificates to institutions of 

higher education and doubted that other 

States would do so for an Indian tribe 

within their borders. 

Response: The Agency understands 

the commenter’s concern. As a result, 

the language has been altered to exclude 

the need of a Certificate of Good 

Standing for institutions of higher 

education and for Indian tribes. 

Application Scoring (§ 4280.316) 

Comment: One commenter stated that 

a new application scoring process will 

be needed if the Agency includes in the 

rule grants to MDOs solely for the 

purpose of the provision of training, 

technical assistance, and other business 

development services to 

microentrepreneurs. 

Response: As noted in a response to 

previous comments, the Agency is 

including such grants in the rule and 

has provided a new application scoring 

system for these grants (see 

§ 4280.316(d)). 

Past Experience Requirement 

Comment: Many commenters 

expressed concern over the proposed 

rule’s emphasis on an MDO’s past 

experience, especially in rural areas, 

when scoring applications. 

Commenters, in general, were 

concerned with the proposed scoring 

that would enable MDOs with past 

experience and those currently 

operating in rural areas to be awarded 

more points (and thus be able to score 

higher) than to those MDOs that do not. 

According to the commenters, such 

scoring would not only put urban MDOs 

at a disadvantage, but would also 

discourage their expansion into rural 

areas. 

Several commenters also stated that 

the proposed rule does not adequately 

account for MDOs creating and 

proposing an effective plan for 

providing services to rural areas. By 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30137 

awarding points to MDOs with past 

experience, the proposed rule puts rural 

MDOs who want to add microenterprise 

services at a disadvantage. As one 

commenter stated, an MDO with a 

proven microenterprise track record that 

has a viable plan to now provide 

lending services may be prohibited from 

doing so by the scoring rules, thus 

potentially denying microlending 

services to an unserved or underserved 

rural area. 

In sum, these commenters stated that, 

if RMAP is to succeed, it must prompt 

both the development of new services 

by existing providers of a single service 

and the expansion of existing urban 

programs into rural areas. The 

commenters believe that the rule as 

proposed would discourage both and 

thereby undermine the success of RMAP 

in achieving the purposes for which it 

was created. 

On the other hand, another 

commenter urged the Agency to 

maintain a strong commitment to 

supporting microlenders who are 

located in and predominantly serve 

rural communities. While 

understanding the interests of some to 

incentivize urban-based microlenders to 

expand their lending territories into 

rural communities, this commenter 

believes that the best service providers 

are locally based, have strong ties to 

their rural communities, and are 

intimately connected with the rural 

economies they serve. The commenter 

further believes that the greatest benefit 

to rural entrepreneurs will be felt 

through building the capacity of ruralbased microlenders, not through 

additional outreach from urban markets 

and asks that the Agency preserve 

priority for microlending organizations 

having a strong history with, and a clear 

commitment to, rural communities. 

Response: The Agency understands 

and recognizes the commenter’s concern 

as it regards MDOs with more than 3 

years experience, but without rural area 

experience. However, it is specifically 

the intent of RMAP to leverage as much 

as possible the existing rural 

development experience of MDOs and 

to serve, exclusively, rural areas. 

Further, if the MDO has 3 years or less 

experience, the scoring does not take 

into account past experience in making 

loans to rural areas or to rural 

microentrepreneurs. Thus, RMAP does 

not discourage the development of new 

providers as suggested by the 

commenter. 

Finally, each of the categories of 

prospective participants adds up to a 

total score of 100 points so that no 

category of applicants will have any 

advantage over another category of 

applicants. 

Too Complex/Replace Scoring System 

Comment: One commenter stated that 

the proposed scoring system is overly 

elaborate and complex, and it will not 

really single out projects with the 

greatest merit. This commenter 

recommended replacing the proposed 

scoring system with a much simpler 

system that is based on only three 

factors: Leverage of USDA funds 

(Matching Funds); Prospect for Success 

(Experience and Track Record); and 

Targeted Groups (Outmigration/ 

Minority Focus). 

Response: The commenter’s suggested 

three factors are included in the scoring 

criteria. The Agency believes that some 

level of detail, in addition to those three 

factors, regarding applicant capabilities, 

legal status, historical performance, and 

other details are important in 

determining the applicant’s abilities to 

make and service microloans, provide 

technical assistance, and facilitate 

access to capital. Therefore, the scoring 

criteria have been designed to provide 

the Agency with in-depth information 

regarding each applicant and help 

ensure the success of the program and 

its end user clients. 

Subjective Scoring Criteria 

Comment: Two commenters stated 

that numerous criteria are subjective 

and may lead to inconsistent or 

unreliable scoring, particularly if 

reviewers were to lack familiarity with 

rural microlending management best 

practices. One of the commenters 

specifically stated that the criteria found 

in proposed § 4280.316(c)(1), (3), (5), (6), 

and (7) are highly subjective and scoring 

may vary greatly from individual 

reviewer to individual reviewer. 

Response: The Agency disagrees that 

these provisions are unduly subjective 

and will result in inconsistent scoring. 

Because the same staff within the 

National Office will score all 

applications as the program is 

implemented, the Agency can ensure 

consistent and reliable scoring. As the 

program matures, the Agency may have 

State office personnel score RMAP 

applications. At the time of publication 

of the final rule, the Agency will 

publish detailed regulatory instructions 

with guidance on scoring to help ensure 

consistency across the State offices. 

Points for Partnering 

Comment: Two commenters suggested 

awarding points for partnering. The 

commenters noted that under proposed 

§ 4280.316(a) no points will be awarded 

based on the capacity of the applicant 

to partner with key local, regional, and 

statewide stakeholders that can help 

MDOs succeed in their mission. Most 

successful economic development 

efforts are due to key local, regional and 

statewide partnerships that bring 

together community stakeholders 

engaged in economic development 

efforts. These partnerships provide 

MDOs with additional sources of 

financing, technical assistance and buyin from economic development agencies 

that are critical to program success. 

They also help to ensure that MDOs are 

not working in a vacuum or duplicating 

services that are already available to 

microentrepreneurs. The commenters 

recommended that USDA add an 

additional scoring component that 

requires MDOs to demonstrate their 

ability to partner with these key 

stakeholders. One of the commenters 

suggested up to 15 points be awarded 

and that this new criterion should also 

be included in enhancement grant 

scoring criteria (proposed § 4280.316(d) 

and (e)). 

Response: The critical and essential 

scoring criteria have been included at 

this time. While we agree there is value 

in partnering, our primary need is to 

establish an understanding of the 

capacity of each applicant to provide 

microloans and technical assistance. As 

noted previously in this preamble, 

MDOs selected to participate in the 

program are encouraged to develop 

community-based partnerships. 

However, such partnerships and 

collaboratives will be developed outside 

of the relationship between the Agency 

and the participating MDOs. Thus, no 

further points are needed. 

Fixed Versus Ranges in Scoring 

Comment: One commenter was 

concerned with scoring criteria that 

relied on ranges. According to the 

commenter, awarding points through 

the use of ranges is not objective; most 

states will award the applicant the full 

score just to be competitive. To be 

objective, the criteria must be based on 

whether the applicant has either 

addressed the criteria or not. In the 

commenter’s experience with the RBOG 

program, the commenter has issues with 

the subjectivity of a range of score 

versus the objectivity of a set score. The 

commenter believes that the rule should 

be kept simple; that is, no ranges, just 

points. Either the applicant has 

documented the criteria or not with 

points being awarded if they have and 

no points if they have not. 

The commenter was also concerned 

that there is insufficient direction on 

how to score the criteria when scoring 

is shown as 0 to 5 points, for example. 


sroberts on DSKD5P82C1PROD with RULES
30138 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

To illustrate, the commenter referred to 

proposed § 4280.316(a)(1), which states 

‘‘an organizational chart [must be 

submitted] clearly showing the 

positions and naming the individuals in 

those positions. Of particular interest to 

the Agency are the management 

positions and those positions essential 

to the operation of microlending and TA 

programming; award 0–5 points.’’ The 

commenter asked how the Agency 

would make a decision of 0 to 5 points, 

because there is no requirement for 

experience, until you get to paragraph 

(a)(4), which is another scoring 

criterion. The commenter was also 

concerned that the lack of direction 

would result in inconsistency in scoring 

across the states. 

Lastly, this commenter expressed 

several concerns with the proposed 

scoring found in proposed 

§ 4280.316(a). The commenter stated 

that there needs to be thresholds for 

scoring different categories; that is, the 

rule should clearly identify what 

information will result in a score of 1 

point or 3 points or 5 points. In other 

words, there needs to be more detail on 

how to distinguish between, for 

example, scoring 10 out of 10 on 

financial statements versus scoring 3 out 

of 10. 

Response: The Agency believes that 

ranges are appropriately identified for 

the scoring criteria identified by the 

commenter. For each criterion, it will be 

up to the applicant as to how much 

material to provide in addressing the 

criterion and the quality of that 

material. To help ensure consistency in 

scoring these criteria among National 

Office Agency staff, the Agency will be 

providing regulatory instructions on 

how to score each of these criteria. 

Points for Smaller Loans 

Comment: One commenter stated that, 

to become an effective national program, 

the benefits must be spread across the 

widest range of rural entrepreneurs and 

rural communities. To accomplish this 

goal, consideration should be given to 

providing some application points for 

MDOs that will target the provision of 

smaller loans and provide 

complementary nanoloan programs 

(loans of less than $5,000) designed for 

helping to repair credit scores. In 

today’s economic environment it is very 

easy for rural clients to see their credit 

scores plummet due to loss of a job, 

unplanned medical bills, housing crisis, 

or credit crisis. Small credit builder loan 

programs require more administration 

and technical assistance per dollar value 

of loan balances and the commenter 

suggested that they be given extra 

consideration weight in the application 

scoring system, since they are an 

increasingly necessary component in 

providing a comprehensive program and 

would provide greater marginal impacts. 

Response: Nanoloans fit well within 

program requirements and can be easily 

accommodated. The Agency also sees 

value in spreading risk via numerous 

loans at smaller amounts. Because these 

loans will fit well within program 

requirements, no additional scoring for 

that level of lending will be given. At 

this point in time, lending history 

information called for in the scoring 

criteria will provide the Agency with 

sufficient data to make appropriate 

decisions. 

Narrative Length 

Comment: One commenter 

recommended setting a page limit (or 

number of words) whenever the 

proposed rule requests the applicant to 

provide a narrative. The commenter 

noted two spots where there are page 

limits (5 and 7) and suggested in both 

cases that is still too many pages for a 

narrative. 

Response: The Agency agrees and has 

set a uniform length (5 pages) for all 

narratives. 

Fairness of <3 Years vs. >3 Years 

Experience 

Comment: One commenter stated that 

setting up different standards for 

inexperienced MDO’s (‘‘<3 years’’ 

experience) and established MDO’s (‘‘3+ 

years’’ experience), is not fair, nor is it 

good policy because it has the effect of 

slightly favoring inexperienced 

applicants for a high risk undertaking. 

Response: The statute requires that 

MDOs have ‘‘a demonstrated record of 

delivering services to rural 

microentrepreneurs, or an effective plan 

to develop a program to deliver services 

to rural microentrepreneurs, as 

determined by the Secretary.’’ As a 

result, it is necessary to consider 

experienced as well as new entities. The 

scoring system has been created so that 

all categories of applicants can score up 

to 100 points. Thus, no category of 

applicants will have an advantage. 

Relative Points Awarded 

Comment: A number of commenters 

expressed concern with the relative 

weighting of points among the scoring 

criteria in proposed § 4280.316(a) and 

(b). Concerns expressed were: 

(1) Proposed § 4280.316(a)(4) requires 

that resumes of all staff on the MDO’s 

organizational chart be provided in the 

application, and up to 5 points are 

awarded for both the ‘‘quality’’ of staff 

resumes and for inclusion of the 

organizational chart. Meanwhile, the 

same number of points is awarded for 

the MDOs understanding of 

microlending. The allocation of points 

for the basic scoring of all applicants 

fails to recognize what is important for 

MDOs to properly serve rural 

microentrepreneurs. The ability of staff 

to administer the program can be 

determined through other required 

application items and through MDO 

history, and the points awarded for 

resumes and an organizational chart 

could be focused elsewhere. 

(2) It seems superfluous to award up 

to 5 points for an organizational chart 

and another 5 points for adequate 

resumes for a combined 10 points. 

These two categories can be combined 

for fewer points and demonstrating an 

understanding of microlending with 

equal emphasis on loan making and 

providing technical assistance should 

earn more than the current up to 5 

points. 

(3) Under proposed § 4280.316(b)(1), 

History of Provision of microloans, 

paragraphs (b)(ii) through (b)(iv), award 

up to 8 points for the percentage of the 

number and amount of loans made in 

rural areas, but only up to 4 points for 

the number and amount of microloans 

made in rural areas. The commenter 

recommended that, if the goal of RMAP 

is to maximize the number and value of 

loans made to rural microenterprises, 

the scoring system should provide 

relatively more points to lenders with a 

history of making larger numbers (and a 

larger dollar value) of microloans in 

rural areas, regardless of the percentage 

of their total microloan portfolio those 

loans represent. In other words, a lender 

that has made 40 microloans in rural 

areas that represent 10 percent of its 

total portfolio should receive a 

relatively higher score than a lender that 

has made 4 loans in rural areas that 

represent 100 percent of its total 

portfolio. 

(4) Proposed § 4280.316(b)(3)(v) 

provides seven points for providing loan 

and TA services to 75 percent or more 

socially-disadvantaged 

microentrepreneurs, but cuts the points 

nearly in half (to four points) for 50 to 

74 percent. According to the 

commenters, it could be very hard in 

many places, like the Great Plains, to 

reach 75 percent, particularly with other 

rules requiring services to match the 

service area demographics. The 

commenters suggested increasing the 

points awarded in this section to six 

points for loans and technical assistance 

to at least 67 percent but less than 75 

socially-disadvantaged 

microentrepreneurs, and four points for 

at least 50 percent but not more than 67 

percent. That way MDOs in less racially 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30139 

diverse rural areas like the Great Plains 

will not have to sacrifice points while 

still having a diverse portfolio. 

(5) The scoring structure for 

microlenders with more than three years 

of experience should be changed to 

value that experience by awarding 

lenders that have made larger numbers 

(and lent more dollars) to 

microentrepreneurs. 

(6) More points should be awarded for 

an MDOs successful training history 

because successful MDOs train many 

more microentrepreneurs than they 

provide loans. According to the 

commenter, if the MDOs are good at the 

work, some of the microentrepreneurs 

find they do not need credit or gain the 

knowledge to allow them to receive 

loans in the commercial credit market. 

The proposed scoring metric awards too 

many points for having made loans and 

disadvantages organizations whose 

emphasis is on training. The long-term 

positive effect of the program will 

depend on how successful it is at 

building community economic capacity, 

which depends at least as much on 

effective training as on lending. 

(7) Require an organizational chart 

and staff resumes together and awarding 

a maximum of less than 5 points 

combined for the two items, and 

reallocating the remaining points (5 plus 

whatever is remaining from the 

organizational chart/resume 

combination) to other items, such as 

location in an outmigration area and 

information regarding understanding of 

technical assistance to 

microentrepreneurs. The commenters 

also recommended that staff information 

and resumes, if required, be required 

only for organizational employees 

dealing directly with 

microentrepreneurs, microlending, and/ 

or the providing of technical assistance 

services. 

(8) Amend these criteria in the final 

rule to emphasize that applicants will 

be judged on the governance structure of 

the MDO. In particular, the board of 

directors or governing body of the MDO 

should include a diverse representation 

of various sectors of the community 

including local elected officials. In 

supporting this recommendation, the 

commenter states that USDA 

emphasizes the management positions 

as a critical component of the scoring 

for this section and notes that this is an 

important factor in a MDO applicant’s 

success. However, the most critical 

organizational component that should 

be evaluated for an MDO is the 

composition of its governing body or 

board. This body will be responsible for 

compliance with the funding award 

regardless of staff changes and its 

composition demonstrates the diversity 

of local stakeholders that are involved 

in the governance of the MDO. 

Response: The Agency accepts that 

the proposed scoring system was 

complicated and sometimes unclear. As 

a result, categories have been clarified 

and reorganized, specific items have 

been moved to specific loan and grant 

type categories, subjective and objective 

items have been assigned points more 

appropriate to their actual value, and 

other such changes have been applied. 

The new scoring criteria are located in 

§ 4280.316. 

The Agency disagrees that the quality 

of resumes and organizational structure 

are not important. Without such quality 

and structure, the MDO may not have 

the right level of management and 

understanding to make microloans. 

Lastly, as indicated in § 4280.316(a)(2), 

resumes are requested for the 

individuals shown on the organizational 

chart which would be, as indicated in 

§ 4280.316(a)(1), management positions 

and those positions essential to the 

operation of the subject program. 

Understanding of Microlending 

(Proposed § 4280.316(a)(2)) 

Comment: One commenter 

recommended that an MDO’s 

understanding of technical assistance 

play a stronger role in the scoring of 

applications because, according to the 

commenter, the TA portions of RMAP 

are essential and the consensus view is 

that technical assistance is crucial for 

the success of rural microentrepreneurs. 

The commenter pointed out that up to 

5 points would be awarded for the 

applicant’s understanding of 

microlending. Included in proposed 

§ 4280.316(a)(2) also is the term 

‘‘provision of technical assistance.’’ This 

seems to indicate that applicant MDOs 

must also provide evidence of their 

understanding of technical assistance. 

Response: The Agency agrees with the 

commenter that this provision needs to 

address the MDO’s experience with 

providing technical assistance and has 

revised the rule accordingly (see 

§ 4280.316(a)(4)) to request provision of 

the MDO’s policy and procedures 

manual addressing technical assistance. 

Resumes (Proposed § 4280.316(a)(4)) 

Comment: One commenter noted that 

proposed § 4280.316(a)(4) requires that 

resumes of all staff on the MDO’s 

organizational chart be provided in the 

application, and up to 5 points are 

awarded for both the ‘‘quality’’ of staff 

resumes and for inclusion of the 

organizational chart. Meanwhile, the 

same number of points is awarded for 

the MDOs understanding of 

microlending. The allocation of points 

for the basic scoring of all applicants 

fails to recognize what is important for 

MDOs to properly serve rural 

microentrepreneurs. The ability of staff 

to administer the program can be 

determined through other required 

application items and through MDO 

history, and the points awarded for 

resumes and an organizational chart 

could be focused elsewhere. 

Response: The organizational chart is 

requested of all applicant entities (see 

§ 4280.316(a)(1)) for several reasons. It is 

important to know which personnel are 

in program-pertinent position on the 

chart. It is also important to know 

whether or not there is a larger 

organization beyond the microenterprise 

specific offices. This provides the 

Agency with a sense of whether 

applicants are stand-alone entities or 

have a greater support structure behind 

them. When used in concert with the 

resumes, the Agency will have a more 

complete picture of the capacity and 

capability of the applicant. The 

organizational structure and resumes of 

key people provide insight into the 

understanding of microlending and the 

ability of the applicant entity to serve 

rural microentrepreneurs that is in 

addition to information found in the 

policies and procedures manuals as 

requested in § 4280.316(a)(4). No change 

has been made in response to this 

comment. 

Organization Mission Statement 

(Proposed § 4280.316(a)(6)) 

Comment: Two commenters stated 

that proposed § 4280.316(a)(6) awards 

up to 5 points for the applicant’s 

organizational mission statement. The 

commenters recommended that this 

scoring component be clarified to 

emphasize the importance of an 

applicant’s connection to broader local 

and regional economic development 

plans and efforts. One of the 

commenters referenced the 

development strategies as outlined in 

the U.S. Economic Development 

Administration’s Comprehensive 

Economic Development Strategy (CEDS) 

or other federally recognized plans. The 

other commenter recommended that 

this section provide up to 15 points and 

should also be included in proposed 

§ 4280.316(d) and (e). 

One commenter suggested that the 

scoring criteria in proposed 

§ 4280.316(a)(1) through (a)(7) be 

enhanced to ensure that applicants are 

representative of their communities, 

working in partnership with other local 

and regional development entities and 

are linked to a broader local or regional 

economic development planning effort. 


sroberts on DSKD5P82C1PROD with RULES
30140 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

If the applicant does not currently 

possess these additional criteria, they 

should still be encouraged to develop a 

plan to enhance these connections in 

their application and be scored 

favorably for developing these plans. 

Response: As indicated previously, 

we agree that connections to broader 

local and regional CEDS are valuable. 

However, the focus at this time is to 

include entities that best deliver 

microloans and technical assistance. 

Geographic Service Area (Proposed 

§ 4280.316(a)(7)) 

Comment: Many commenters 

expressed concern on the outmigration 

provisions proposed. These comments 

fell into the following two main 

concerns: 

(1) Do not include outmigration 

criterion in the loan provisions because 

the statute is silent on this as it regards 

loans. These commenters noted that the 

only mention of outmigration is in 

connection with the proposed 

‘‘enhancement grants’’ and not with 

loans or with technical assistance 

grants. 

(2) Reduce the emphasis on 

outmigration in scoring and rating of 

proposals. Three commenters stated that 

population dynamics look quite 

different throughout rural America, and 

outmigration, as the main criteria for 

assessing need, is not a good indicator. 

Each commenter referred to California, 

noting that California and other states 

that are not experiencing net 

outmigration are prejudiced by the 

emphasis on this as criteria for 

qualification for these RMAP funds. 

Poverty and economic decline exist in 

rural California despite the fact that 

population levels have stabilized or 

even increased. A fourth commenter 

suggested the Agency consider lowering 

the rating system for ‘‘outmigration’’. By 

rewarding extremely high outmigration, 

associated infrastructure may not be 

available to support 

microentrepreneurs. 

One commenter stated that the law 

does not define outmigration as is done 

in the proposed rule and that the 

definition will significantly curtail the 

ability of MDOs to serve rural areas. The 

commenter stated that residents of 

distressed rural communities are more 

dependent on microenterprises for their 

livelihoods and often are unable to 

move to areas with more employment 

opportunities. The commenter 

recommended that the Agency align the 

proposed rule with the structure of the 

law by not including areas of 

outmigration as part of the loan program 

requirements. 

Response: With regard to the 

consideration of outmigration for 

making loans and TA grants, the 

commenters are correct in that the 

criterion does not apply to loan 

applications as written in the statute. 

The outmigration scoring criterion 

should have been applied to 

enhancement grants, which, as noted 

elsewhere in this preamble, are not 

included in the interim rule. 

MDOs With More Than 3 Years 

Experience (Proposed § 4280.316(b)(1)) 

Comment: One commenter stated that 

the application scoring rules provide 

substantial points for MDOs with 

demonstrated track records of providing 

lending services to rural 

microentrepreneurs, but fail to provide 

points for effective plans to deliver such 

services. In the definition of MDO, the 

statute states an MDO is an organization 

that ‘‘has a demonstrated record of 

delivering services to rural 

microentrepreneurs, or an effective plan 

to develop a program to deliver services 

to rural microentrepreneurs’’ (section 

379E(a)(3)(D)). In the final rule, 

provision should be made to provide 

significant points to an MDO with a 

proven microenterprise track record that 

has a viable plan to now provide 

lending services. This change will be 

critical to reaching micro-businesses in 

underserved areas or among 

underserved populations. 

Response: The Agency agrees that 

there is value in having a proven track 

record as well as a plan. The initial 

information required of all applicants 

will provide the Agency with sufficient 

information to determine basic capacity. 

In addition, there is a scoring section for 

MDOs that have a demonstrated record 

(§ 4280.316(b)). There is a separate 

section (§ 4280.316(c)) for MDOs that 

have 3 years or less of experience; this 

section calls for written plans. 

Comment: Two commenters were 

concerned over the amount of 

recordkeeping that would be required to 

comply with proposed 

§ 4280.316(b)(1)(v) and in scoring in 

general. These commenters stated that 

some application requirements are 

overly burdensome for the borrower 

compared to the dollars requested. 

Recordkeeping required for scoring 

criteria, such as those found in 

proposed § 4280.316(b)(1)(v), involves 

notable efforts of recordkeeping that 

does not have anything to do with the 

fundamental business of the MDOs and 

involves information that MDOs cannot 

require borrowers to provide. 

Response: The Agency disagrees. 

Keeping appropriate records is essential 

to the understanding, assessment, and 

evaluation of the MDO. However, to 

respond to the demographic questions, 

the Agency has named three 

demographic groups by which MDOs 

should be able to illustrate their 

activities. These are women, minorities, 

and the disabled. 

Diversity (Proposed § 4280.316(b)(1)(v)) 

Comment: A number of commenters 

were concerned about how the scoring 

would affect MDOs that specialize in 

serving specific populations. Most 

submitted similar comments as captured 

by the following comment: 

Proposed § 4280.316(b)(1)(v) provides 

points for how closely an MDOs 

microloan portfolio matches the 

demographics of the MDO’s service 

area. Some MDOs will naturally serve 

certain segments of the service area (e.g., 

female or low-income entrepreneurs), 

generally for reasons that such 

demographic segments are historically 

underserved or unserved. For that 

reason, their portfolio may not match 

the demographics of the service area, 

thus potentially penalizing those MDOs 

in the scoring pursuant to this section. 

This paragraph also provides points 

when at least one loan made to each 

demographic group is within specified 

percentage points of the demographic 

makeup of the service area. This 

paragraph is confusing, as it is not clear 

what ‘‘each demographic group’’ means 

(does it mean, for example, every racial 

or ethnic or socio-economic group that 

has at least one resident in the service 

area?); also MDOs that focus on certain 

segments of the population (female or 

low-income entrepreneurs, for instance) 

may be penalized. While we support 

using RMAP to support diverse 

clientele, we would suggest that the 

final rule recognize and not penalize 

MDOs that serve historically 

underserved or unserved populations in 

their rural service areas. We also suggest 

that language on ‘‘each demographic 

group’’ as outlined above be clarified in 

the final rule. 

One commenter recommended 

deleting this criterion or reducing the 

number of points associated with it. 

According to the commenter, many of 

the most successful MDOs concentrate 

on training, technical assistance, and 

lending to one or several disadvantaged 

demographic groups. They have the 

knowledge and credibility to serve these 

underserved populations best and 

should not be disadvantaged for 

concentrating their work. In order to 

ensure the program is reaching diverse 

groups, the commenter recommended 

that the Agency charge application 

reviewers to ensure proper lending 

coverage to all groups in a geographic 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30141 

area when they consider which MDOs 

to fund. 

Response: The Agency disagrees that 

the proposed scoring criteria would 

penalize entities that serve certain 

segments of the population. The Agency 

offers no penalties regarding scoring on 

the provision of services. Organizations 

that have historically served a specific 

group of prospective microborrowers 

will be required, by Fair Credit Lending 

rules, to open their doors to all, whether 

or not they fit the particular 

demographics of the historic customers 

or the geographical area. Following the 

pattern of fairness, the Agency would 

anticipate that TA grant recipients will 

provide services to all groups as well. 

Comment: One commenter suggested 

that the scoring structure be altered so 

that the applications of MDOs that have 

stated missions to provide services to 

underserved populations are scored 

appropriately. 

Response: The Agency agrees with the 

commenter and does require mission 

statements as a part of the application 

process. As the mission statements are 

reviewed, they will be scored in 

accordance with how well the 

applicant’s mission statement matches 

program requirements. The capacity to 

serve underserved populations is 

considered as a part of § 4280.316. 

Comment: One commenter noted that 

proposed § 4280.316(b)(1) requests data 

regarding the history of the MDO’s 

provision of microloans for the three 

years prior to its application. Most of 

these data are readily available; 

however, some of the data points 

requested appear to reflect the more 

narrowly targeted goals of the 

Enhancement Grant program as opposed 

to the loan program. For example, 

proposed § 4280.316(b)(1)(v) requests 

information on the diversity of the 

MDO’s microloan portfolio. The 

proposed rule’s scoring criteria appear 

to disadvantage MDOs whose rural 

markets have less diversity than others. 

For example, the racial diversity in the 

cities of Portland and Lewiston, Maine 

is much higher than the rural areas of 

Maine that the commenter also serves. 

Data on the diversity of the commenter’s 

entire service area does not accurately 

reflect the diversity of its rural areas. 

Response: The Agency disagrees that 

the scoring criteria provide for rural 

markets with less diversity than others. 

The statute requires that training and 

technical assistance be provided via 

organizations of varying sizes and that 

serve racially and ethnically diverse 

populations. Therefore, these data are 

requested to ensure that the Agency 

meets this intent. 

Comment: One commenter 

recommended that the rule further 

define or list demographic groups being 

targeted. 

Response: The Agency has identified 

the specific demographic groups in 

response to the comment. Demographic 

groups shall include gender, racial or 

ethnic minority status, and disability as 

defined by The Americans with 

Disabilities Act. (See 

§ 4280.316(b)(1)(v)) 

Portfolio Management (Proposed 

§ 4280.316(b)(2)) 

Comment: Two commenters 

expressed several similar concerns with 

this criterion. The issues cited by these 

commenters are: 

(1) This criterion proposes to use a set 

of measures of portfolio performance 

that are not commonly used in the 

microenterprise and community 

development field, and that would not 

provide full or sufficient information on 

the level of risk in the applicant’s loan 

portfolio. Specifically, proposed 

§ 4280.316(b)(2)(i) requests that 

applicants ‘‘enter the total number of 

your microloans paying on time for the 

three previous fiscal years.’’ The term 

‘‘paying on time for the three previous 

fiscal years’’ is not defined, and could be 

interpreted numerous ways, including: 

The number of outstanding loans that 

never experienced a late payment over 

the course of the year, the number of 

loans that were current at year-end, or 

the number of loans that paid off as 

scheduled during the course of the year. 

However, this term might be defined by 

the applicant, none of the above is a 

widely-accepted measure of portfolio 

quality in the microenterprise or 

community development finance 

industry. 

(2) Proposed § 4280.316(b)(2)(ii) 

requires applicants to ‘‘enter the total 

number of microloans 30 to 90 days in 

arrears or that have been written off at 

year end.’’ There are several issues with 

this approach. First, it conflates 

delinquent loans with loan losses, 

which are typically reported and 

assessed separately (in part because the 

commonly accepted definitions of these 

measures require different denominators 

when calculating a percentage value). 

Second, the measures required in the 

Proposed Rule involve the number of 

late or written off loans, not the dollar 

value of those loans. In assessing the 

level of risk in a portfolio, it is the value 

of loans at risk rather than the number 

that is most significant—as a delinquent 

or bad loan of $40,000 will necessarily 

pose more risk to a portfolio than a 

delinquent or bad loan of $4,000. 

(3) The approach in the proposed rule 

does not request information on loans 

that are greater than 90 days in arrears, 

but have not yet been written off. These 

are the delinquent loans that generally 

pose the greatest risk to the lender, 

particularly if the lender does not have 

or adhere to a strict policy and time 

frame for writing off loans that have 

become significantly delinquent. 

The commenters recommended that, 

in assessing portfolio quality, the rule 

require applicants provide information 

for the past three fiscal years on the 

following three measures: 

(a) Portfolio at risk: Defined as the 

outstanding principal balance of loans 

with payments greater than 30 days past 

due, divided by the total dollar amount 

of outstanding loans, as of the last day 

of the fiscal year. 

(b) Loan loss rate: Defined as the total 

dollar value of loans declared as written 

off or nonrecoverable, net of recoveries, 

divided by the average outstanding 

value of the portfolio over the course of 

the fiscal year. 

(c) Restructured loan rate: The dollar 

amount of all loans that have been 

restructured, divided by the total dollar 

amount of outstanding loans as of the 

last day of the fiscal year. 

Lastly, the commenters noted that 

they believe it is important to examine 

loans that have been restructured, as 

well as those that are delinquent and/or 

written off, because those loans do 

indicate risk to the portfolio. 

Response: The Agency understands 

that microlenders nationwide may differ 

in their portfolio management 

definitions. In response, the Agency 

attempted to provide scoring criteria 

that could be best addressed by all 

entities as opposed to numerous criteria 

that would meet regionally-specific 

benchmarks. 

Technical Assistance History (Proposed 

§ 4280.316(b)(3)) 

Comment: One commenter was 

concerned about the burden imposed by 

the scoring criteria in proposed 

§ 4280.316(b)(3)(i) through (iv). This 

commenter stated that the requirements 

to provide data on the total numbers 

and percentages of rural 

microentrepreneurs—including for 

minority, socially-disadvantaged, or 

disabled microentrepreneurs, and those 

in areas of outmigration—that received 

both microloans and technical 

assistance services for each of the 

previous three fiscal years are unduly 

burdensome. These requirements 

suggest that one of the primary 

measures of success for an MDO is the 

number of the microenterprises it serves 

that receives both technical assistance 


sroberts on DSKD5P82C1PROD with RULES
30142 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

and loans. The commenter believes that 

this assumption could be detrimental to 

the very microentrepreneurs that MDOs 

are serving. 

The commenter’s technical assistance 

programs are functionally independent 

of their lending programs so that the 

commenter can maintain the 

confidentiality of clients and because 

each program provides distinct services 

that meet the needs of their clients. In 

practice, many TA clients pursue loan 

funding from the commenter; however, 

microentrepreneurs seek technical 

assistance from the commenter for a 

variety of reasons, and many may not 

ultimately apply for a loan. Both 

services are critical to the success of 

rural microentrepreneurs. As a result of 

this programmatic structure, technical 

assistance and lending data are tracked 

in separate databases. 

The commenter, therefore, 

recommended that the requirements of 

proposed § 4280.316(b)(3)(i) through (iv) 

be minimized because of the 

burdensome nature of collecting these 

data, at least in the currently proposed 

combinations. 

Response: The Agency disagrees that 

the collection and maintenance of the 

proposed data is unduly burdensome 

and considers it to be an appropriate 

part of a soundly managed program. 

However, the criterion regarding data 

types were of concern to a number of 

commenters and have been revised in 

this document to clarify, and ease 

confusion, regarding what data to 

collect. The suggested data chart and 

scoring criteria have been revised as a 

part of the overall clarification of data 

and other application requirements. The 

revised requirements are located in 

§ 4280.316. 

Technical Assistance to Rural 

Microentrepreneurs (Proposed 

§ 4280.316(b)(3)(i) and (ii)) 

Comment: Two commenters were 

concerned that the scoring criteria in 

proposed § 4280.316(b)(1)(i) and (ii) 

demonstrate the bias expressed in the 

proposed rule toward MDOs that engage 

only in lending and against MDOs that 

provide both lending and technical 

assistance or training technical 

assistance only. According to the 

commenters, this proposed scoring 

section will significantly penalize 

MDOs that provide both technical 

assistance and lending and will 

virtually exclude programs that in the 

past provided TA services only or even 

training to nonborrowers. Full service 

MDOs typically train far more 

microentrepreneurs than the number 

that receive loans, because the demand 

is greatest for training. Such MDOs 

would be penalized by the criteria for 

not providing loans to most of their 

trainees, because most trainees do not 

need loans or in other cases, use the 

training to develop skills to gain access 

to commercial credit. 

According to the commenters, this 

‘‘backward looking’’ scoring system fails 

to recognize the law’s emphasis on 

MDOs having an ‘‘effective plan to 

develop a program to deliver services to 

rural microentrepreneurs.’’ By failing to 

recognize this portion of the law, these 

sections will result in curtailing 

microenterprise development services 

in unserved and underserved rural areas 

by new rural MDOs, by rural MDOs 

which seek to expand their services, and 

by MDOs which may seek to expand 

their services into rural areas. The 

commenters recommended that the final 

rule develop a mechanism to recognize 

the eligibility of each of those types of 

MDOs by conforming to the law’s 

prescription of allowing MDOs to 

develop an ‘‘effective plan’’ to deliver 

services to rural microentrepreneurs. 

Response: The Agency disagrees that 

there is a bias toward entities that 

deliver microlending programs over 

entities that provide only technical 

assistance. However, to ensure like 

recognition of each applicant type, each 

set of scoring criterion allows for a 

maximum of 100 points so that each 

type of applicant is able to equitably 

compete against each other. In balance, 

the Agency has revised the rule to 

address all types of MDOs and provide 

for funds to MDOs that wish to 

participate through loans and/or grants. 

The changes are included in the rule, 

thus, address the concerns expressed by 

these commenters. 

Socially-Disadvantaged (Proposed 

§ 4280.316(b)(3)(iii)) 

Comment: Several commenters were 

concerned about the reference to 

‘‘socially disadvantaged’’ in proposed 

§ 4280.316(b)(3)(iii), stating that 

‘‘socially disadvantaged’’ was not 

defined or not defined well enough. For 

example, one commenter noted that it is 

not stated whether ‘‘socially 

disadvantaged’’ includes gender 

(presumably female 

microentrepreneurs). According to the 

commenter, this appears inconsistent 

from proposed § 4280.316(b)(v), where 

gender is a specifically mentioned 

demographic group. The commenter, 

therefore, suggested that these 

provisions be made consistent and that 

the final rule clarify that female 

microentrepreneurs are specifically 

included in any definition of ‘‘socially 

disadvantaged.’’ 

Another commenter recommended 

either including a definition for 

‘‘socially disadvantaged’’ under 

§ 4280.302 that includes women and 

other disadvantaged groups, or 

expanding § 4280.316(b)(1)(v) to include 

an explanation of the term ‘‘socially 

disadvantaged.’’ Ultimately, the 

commenter believes that female 

microentrepreneurs should be 

considered ‘‘socially disadvantaged’’ for 

the purposes of any provision under the 

proposed rule. 

Response: As noted in response to a 

comment on the definition of ‘‘socially 

disadvantaged,’’ the Agency agrees with 

the commenters that, as proposed, the 

rule did not adequately address whether 

gender was included in ‘‘socially 

disadvantaged.’’ The Agency, however, 

has determined that it is unnecessary to 

include socially disadvantaged in the 

scoring criteria cited by the commenters 

and has removed that term from the 

rule. The Agency made this 

determination in consideration of Civil 

Rights reporting, which is based on 

demographic data and ‘‘socially 

disadvantaged’’ is not one of those data. 

Administrative Expenses (Proposed 

§ 4280.316(b)(5)) 

Comment: A number of commenters 

recommended removing this scoring 

criterion, all expressing similar reasons 

including: 

• The Proposed Rule arbitrarily 

provides points on an application 

according to how much below 10 

percent an MDO proposes using for 

administrative expenses, providing 0 

points for 8 to 10 percent of the TA 

grant used for administrative expenses. 

An MDO could be penalized for doing 

precisely what the law allows. This 

section of the rule also has the potential 

to penalize non-profits (a focused 

eligible organization throughout the 

proposed rule) that may have no other 

access to funds for administrative 

expenses. 

• This is a punitive measure for rural 

MDOs who have few resources for 

administration and operations. 

Corporate and foundation grants that 

contribute to administrative operations 

are largely unavailable to support 

nonprofit, community based MDOs in 

rural areas. This criterion would put 

such agencies at disadvantage, despite 

their track record of producing positive 

economic outcomes. 

• It is punitive measure for rural 

MDOs who have few resources for 

administration and operations. Small, 

nonprofit community-based MDOs have 

few sources of discretionary funds for 

overhead. These criteria would put such 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30143 

agencies at disadvantage to larger 

institutions. 

• Depending on the definition of 

administration expenses, it could be 

that this provision would penalize 

organizations that are seeking to build 

the organizational capacity to expand 

their lending and training activities in 

accordance with and support of the 

intent of this program. 

• The law states in section 

379E(b)(4)(C) that not more than 10 

percent of a grant received by an MDO 

can be used to pay administrative 

expenses. The proposed rule proposes a 

tiered scoring system that favors MDOs 

who use fewer grant funds for 

administrative expenses. The 

commenter understands the Agency’s 

desire to maximize the use of RMAP 

funds for the benefit of rural 

microentrepreneurs; however, the 

commenter believes the proposed 

scoring system will disproportionately 

favor MDOs with the ability to fund 

administrative expenses with other 

funding streams so that they can benefit 

from these criteria. Administrative 

funds are critical to the success of any 

microenterprise program and 10 percent 

is a very reasonable, even modest, 

amount to budget for these purposes. 

The commenter recommended that the 

Agency align the proposed rule with the 

law and remove the tiered system 

proposed in the rule. 

• Scrimping on administration is not 

a good way to run an effective program. 

MDOs should not receive points for 

reporting administrative costs that are 

either artificial or so low that the 

organization will be badly run. The 

statute provides for up to 10 percent for 

administrative costs. 

Four commenters suggested replacing 

this criterion with a statement on 

administrative expenses that conforms 

to the law. One commenter also noted 

that these comments apply equally to 

proposed § 4280.316(c)(8). 

Response: It is not the Agency’s intent 

to force entities into scrimping. Rather, 

the intent is to score in favor of an 

applicant’s ability to provide services in 

a cost effective and efficient manner. 

MDOs With 3 Years or Less Experience 

(Proposed § 4280.316(c)) 

Comment: Two commenters were 

concerned that the scoring system did 

not request any historic information on 

the organization’s microenterprise 

activities beyond the date on which it 

opened its doors for business as an 

MDO or similar entity. While it is 

understandable that the proposed rule 

would not request or substantially 

weigh historic data for an organization 

that is less than a year old, for an 

organization between 1 and 3 years old, 

certainly information on the 

organization’s loan volume, diversity, 

history of TA provision, and portfolio 

management and quality is relevant, and 

in fact, essential to the application and 

scoring process. According to the 

commenters, if such data are not 

submitted and evaluated, the Agency 

runs the risk of selecting organizations 

for funding that may have developed 

strong plans, but failed to execute them 

well during their initial years of 

operation. 

The commenters, therefore, 

recommended that all applicants with 

more than one year of operations as an 

MDO be required to submit information 

on their loan volume, diversity, history 

of TA provision and portfolio quality, 

and that this information be evaluated 

in the scoring process. 

Response: The Agency disagrees. The 

Agency chose to examine new entities 

as those entities with 3 years of 

experience or less and based on their 

ability to meet certain criteria designed 

for this specific group of applicants. It 

was determined that such new entities, 

including those with 3 years of 

experience or less, will have little or 

unreliable data by which to compare or 

score historical activity and borrower 

success. Rather, the Agency anticipated 

looking more prospectively for this 

group. 

Scoring Range (Proposed 

§ 4280.316(c)(3) and (c)(4)) 

Comment: One commenter suggested 

that the scoring of the criteria in 

proposed § 4280.316(c)(3) and (c)(4) not 

be based on a range, but instead be a 

scoring scheme in which the applicant 

receives a certain amount of points or 

not depending on whether they have 

provided the appropriate 

documentation. The commenter 

believes that allowing for ranges is not 

objective and raises issues with 

subjectivity. The commenter believes 

that providing for specific points to be 

awarded will be simpler than using 

ranges. 

Response: As noted in a response to 

another comment concerning the 

provision of a range for scoring, the 

Agency believes that ranges are 

appropriately identified for these 

scoring criteria identified by the 

commenter. For this and the other 

criteria in which scoring ranges are 

provided, it will be up to the applicant 

as to how much material to provide in 

addressing each criterion and the 

quality of that material. To help ensure 

consistency in scoring these criteria 

among Agency staff, the Agency will be 

providing guidelines to Agency staff on 

how to score each of these criteria. 

Finally, for those criteria that require a 

standard set of points per item, a 

specific number of points will be 

awarded for a specific set of 

benchmarks. Thus, the scoring system 

provides for a combination of objective 

and more subjective scoring. 

Enhancement Grants (Proposed 

§ 4280.316(d)) 

Comment: Two commenters pointed 

out the statutory provisions related to 

significant outward migration were not 

proposed for scoring enhancement 

grants, as required in section 

379E(b)(4)(A)(ii) of the statute, which 

states that an emphasis will be placed 

on MDOs that are located in areas that 

have suffered ‘‘significant outward 

migration.’’ The commenters noted that 

in the proposed rule scoring description 

nothing is said about MDOs located in 

such areas, only the ‘‘number of counties 

or other jurisdictions of the service area’’ 

that suffer from significant outmigration 

(as defined). The scoring matrix in the 

proposed rule allows only up to 10 

points (of the 45 basic points for all 

applicants) for service to outmigration 

areas, an issue of emphasis in the law. 

The commenters suggested that the final 

rule place an emphasis on MDOs 

located in areas of ‘‘significant outward 

migration’’ as stated in the law, and that 

greater emphasis through the point 

system be placed on MDO service to an 

outmigration area for those MDOs 

seeking grants. The commenters believe 

it is important to focus on location of 

MDOs because it is crucial to provide 

incentives and funding to create more 

MDOs in rural areas suffering from 

significant outmigration and because, if 

MDOs are located in such areas, they 

will be more attuned to the services 

necessary for the entrepreneurs in that 

area. 

Response: The Agency agrees that the 

proposed rule did not appropriately 

address outmigration as a scoring 

criterion for enhancement grants, as 

required by the statute. While the 

Agency appreciates the commenter’s 

suggestion, opinions differ widely on 

how best to approach and enhancement 

grant category to this program. 

Therefore, the Agency is requesting 

comments on this subject (see Section V 

of this preamble). Comments will be 

considered prior to publication of the 

final rule. 

MDOs With More Than 5 Years 

Experience Under This Program 

(Proposed § 4280.316(e)) 

Comment: One commenter 

recommended revising the application 

requirements in proposed § 4280.316(e) 


sroberts on DSKD5P82C1PROD with RULES
30144 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

to ensure that applicants are 

representative of their communities, 

working in partnership with other local 

and regional development entities and 

are linked to a broader local or regional 

economic development planning effort. 

If the applicant does not currently 

possess these additional criteria, then 

they should still be encouraged to 

develop a plan to enhance these 

connections in their application and be 

scored favorably for developing these 

plans. 

Response: The Agency disagrees that 

applicants should be required to work 

in partnership with other entities. The 

goal of the program is to enhance the 

network of MDOs and increase services 

in that sector. While we do not 

discourage partnerships and 

participation in regional planning, the 

Agency will not require partnering. 

Selection of Applications for Funding 

(§ 4280.317) 

Comment: In reference to proposed 

§ 4280.317(d), one commenter suggested 

removing the wording ‘‘If your 

application is unsuccessful’’ and change 

the end of this sentence to read ‘‘nonselected applications.’’ 

Response: As noted earlier in this 

preamble, this proposed paragraph was 

removed from the rule because it is 

considered internal procedures and 

does not need to be in the rule. 

Loans From Microlenders to 

Microentrepreneurs and 

Microenterprises (§ 4280.322) 

Comment: Three commenters 

expressed concern with the 

requirements specified in proposed 

§ 4280.322(b)(1), (b)(3), and (d), noting 

that these requirements are not in the 

authorizing statute. According to one of 

the commenters, these loan terms may 

have merit, but could also constrain the 

ability of MDOs to provide credit to 

microentrepreneurs in rural areas. The 

other commenter stated that, taken as a 

whole, these requirements limit the 

ability of local organizations to craft a 

lending program that can address the 

specific needs of its local market. One 

of the commenters, therefore, 

recommended that these requirements 

be removed. 

One of the commenters noted that the 

MDO is responsible for operating a 

successful microloan program in the 

context of the communities they serve 

and, therefore, it is not appropriate for 

RMAP at proposed § 4280.322(b)(1) to 

place a cap (i.e., the 7.5 percent spread) 

on the interest rate charged to the 

microborrower. According to the 

commenter, the MDO should have the 

flexibility to price their microloans as 

they see fit for the sustainability of their 

fund and based on the risk and the cost 

of its operation. 

One of the commenters recommended 

that § 4280.322(b)(3) be revised to limit 

the microloan term to no longer than the 

term of the loan with the Agency rather 

than the proposed limit of no more than 

10 years. A third commenter also stated 

that the MDO should have the expressed 

permission to establish terms of 

repayment (fees, late fees and penalties, 

amortizations and deferrals, etc.) as they 

deem appropriate and workable. 

One of the commenters noted that 

proposed § 4280.322(d) includes a 

statement that borrowers will be subject 

to a ‘‘credit elsewhere’’ test, but 

indicates that bank rejection letters will 

not be required. The commenter was 

unclear as to the purpose of this 

requirement and how an MDO should 

meet it. The commenter, therefore, 

recommended that this requirement be 

dropped. 

Response: The Agency agrees with the 

commenters that microlenders know 

their market and should be able to 

design programs to meet those markets. 

Section 4280.322(b) recognizes this in 

allowing the terms and conditions for 

microloans to be negotiated by the 

microborrower and the microlender. 

The Agency agrees that the rule does not 

need to implement a maximum margin 

that a lender can charge the 

microborrower, but is still concerned 

that the rate must be ‘‘reasonable.’’ The 

Agency has removed the specified 

margin requirement and in its place 

added the provision (see 

§ 4280.322(b)(3)) that the microlender 

may establish its margin of earnings, but 

may not adjust the margin so as to 

violate Fair Credit Lending laws. 

Further, margins must be reasonable so 

as to ensure that microloans are 

affordable to the microborrowers. 

With regard to the suggestion 

concerning adjusting the term of loan 

from ‘‘no more than 10 years’’ to ‘‘no 

longer than the term of the loan with the 

Agency,’’ the Agency has not revised the 

rule because such a revision would put 

the microlender and the agency at 

increased risk in the latter years of the 

term and would diminish the capacity 

of the microlender to revolve its funds 

into and out of the RMRF. 

Finally, with regard to the credit 

elsewhere test, the Agency is including 

this provision to ensure that only those 

in the most need of program resources 

receive assistance under this program. 

Thus, the Agency has not revised this 

provision. 

Credit Elsewhere (Proposed 

§ 4280.322(d)) 

Comment: One commenter suggested 

that the last two sentences of proposed 

§ 4280.322(d) be removed. 

Response: The Agency disagrees with 

the suggestion to delete the last two 

sentences of this paragraph. The Agency 

specifically does not want to require 

denial letters from other lenders to be 

part of this documentation because the 

Agency does not want such denial 

letters to negatively affect the 

microborrower’s credit report as it 

works to build credit. 

Comment: One commenter suggested 

that the rule should allow the 

microborrower to determine what goes 

in his file to document credit elsewhere. 

Response: The Agency disagrees with 

the commenter’s suggestion to allow the 

microborrower to determine what goes 

into the file to document credit 

elsewhere. The microlender determines 

whether or not this test is met and as 

such it is the microlender’s 

responsibility to clearly identify what it 

needs to make this determination. 

Furthermore, this will provide 

consistency in the microlender’s 

determination across microborrowers. 

The Agency reserves the right to 

examine microlender files to ensure that 

program requirements are met 

(§ 4280.311(h)(6)). 

Eligible Purposes (Proposed 

§ 4280.322(f)) 

Comment: One commenter suggested 

that the list of authorized microloan 

purposes be prefaced with a statement 

that the MDO is ‘‘not limited to’’ these 

uses. 

Response: While the use of 

‘‘including’’ means that the list is not 

exhaustive, the Agency has included the 

text suggested by the commenter to 

ensure clarity. 

Comment: One commenter stated that 

the prohibition at proposed 

§ 4280.322(f) on any construction or 

demolition was too inflexible; the 

remodeling of a suitable business space 

often requires this. 

Response: The Agency included 

construction and demolition as an 

ineligible loan purpose in order to 

expedite loan processing by mitigating 

the need to conduct environmental 

evaluations. The Agency notes that 

other Rural Development programs can 

provide construction financing. Thus, 

the Agency has not revised the rule as 

suggested by the commenter. 

Ineligible Loan Purposes (§ 4280.323) 

Comment: One commenter asked if 

lines of credit would be an eligible or 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30145 

ineligible purpose. The commenter 

pointed out that lines of credit are not 

listed under either eligible purposes or 

ineligible purposes and recommended 

that the rule needs to be clear whether 

lines of credit are eligible or not 

because, in part, the IRP allows lines of 

credit under certain circumstances. 

Response: Lines of credit are not an 

eligible loan purpose for microloans 

under RMAP. The Agency agrees with 

the commenter that this was not 

indicated in the proposed rule and, 

therefore, has added a provision to 

§ 4280.323 that specifically identifies 

lines of credit as an ineligible loan 

purpose for RMAP loans. 

Comment: One commenter suggested 

that tenant improvements, debt 

refinancing, and business acquisition 

should be expressly permitted. 

Response: The Agency has 

determined that indication of eligible 

and ineligible activities is sufficient, but 

has added debt refinancing and business 

acquisition to the list of eligible 

activities for clarity. Tenant 

improvements are already sufficiently 

covered by § 4280.322(f)(2) and (f)(3). 

Any legal business purpose not 

identified as ineligible in § 4280.323 is 

acceptable. 

Comment: One commenter stated that 

the ineligible purposes at proposed 

§ 4280.323(c) should simply disallow 

relending to Agency or MDO personnel. 

Such lending simply has the appearance 

of a conflict of interest and should never 

be allowed. On the other hand, there is 

no conflict of interest in lending to 

military, National Guard members, or 

government employees aside from Rural 

Development employees, and this 

should simply be permitted. 

Response: Microloans to Agency 

personnel and MDO personnel are 

prohibited. Regarding military 

personnel, based on Agency experience, 

a pattern of difficulty in obtaining 

financial assistance has begun to 

emerge. The language proposed 

regarding this issue was initially 

confusing as it was posted in the 

ineligibility section as an exception. As 

a result, the language has been moved 

to § 4280.322(g) as an eligible purpose. 

In clarifying the language, the Agency 

hopes to encourage a greater level of 

lending to military personnel. Regarding 

Tribal government employees, language 

regarding loans to Tribal employees has 

been eliminated to ensure that Tribal 

microlenders are treated as all other 

microlenders in regards to conflicts of 

interest. 

Comment: In reference to proposed 

§ 4280.323(d), one commenter 

recommended that a definition for 

‘‘Agency employee family member’’ be 

included. The commenter also raised 

questions concerning how the definition 

would be crafted. For example, how 

would domestic partners and same-sex 

married parties be treated? The 

commenter then asked, how would this 

be monitored? How would an Agency 

employee possibly know all Agency 

employee family members? 

Response: The Agency agrees with the 

commenter that a definition for ‘‘family 

member’’ is needed. The Agency has 

replaced ‘‘family member’’ with ‘‘close 

relative.’’ Close relative is being defined 

as: Individuals who are closely related 

by blood, marriage, or adoption, or live 

within the same household, such as a 

spouse, domestic partner, parent, child, 

brother, sister, aunt, uncle, grandparent, 

grandchild, niece, or nephew. 

Comment: One commenter asked why 

RMAP discriminated against military 

personnel and Tribal members under 

proposed § 4280.323(i) and (j). 

Response: The Agency disagrees with 

the commenter’s characterization of the 

proposed rule as discriminating against 

active military personnel and Tribal 

employees. Language specific to 

military personnel is included to ensure 

specific attention to the needs of 

veterans. Language regarding loans to 

Tribal employees has been eliminated to 

ensure that Tribal microlenders are 

treated as all other microlenders in 

regards to conflicts of interest. 

V. Request for Comments 

The Agency is interested in receiving 

comments on all aspects of the interim 

rule. Areas in which the Agency is 

seeking specific comments are 

identified below. All comments should 

be submitted as indicated in the 

ADDRESSES section of this preamble. 

1. Enhancement grants. The Agency is 

seeking comments regarding how to 

incorporate a network enhancement 

grant program for microenterprise 

development organizations in their 

support of rural microentrepreneurs in 

accordance with Section 

379E(b)(4)(A)(i)(I) of the 2008 Farm Bill. 

Please be sure to include your rationale 

for your suggestions. 

2. The Agency is seeking comment on 

whether the 2-year deferral period 

allowing microlenders not to make any 

payments on a loan to the Agency (see 

§ 4280.311(e)(4)) under this program 

should be automatic (i.e., the default) or 

whether the Agency should establish 

specific criteria for determining whether 

or not payments would be deferred. 

Please be sure to include your rationale 

for your suggestions. 

List of Subjects in 7 CFR 4280 

Business programs, Grant programs, 

Loan programs, Microenterprise 

development organization, 

Microentrepreneur, Rural areas, Rural 

development, Small business. 

■ For the reasons set forth in the 

preamble, chapter XLII of title 7 of the 

Code of Federal Regulations is amended 

as follows: 

CHAPTER XLII—RURAL BUSINESSCOOPERATIVE SERVICE AND RURAL 

UTILITIES SERVICE, DEPARTMENT OF 

AGRICULTURE 

■ 1. Part 4280 is amended by adding a 

subpart D to read as follows: 

PART 4280—LOANS AND GRANTS 

Subpart D—Rural Microentrepreneur 

Assistance Program 

Sec. 

4280.301 Purpose and scope. 

4280.302 Definitions and abbreviations. 

4280.303 Exception authority. 

4280.304 Review or appeal rights and 

administrative concerns. 

4280.305 Nondiscrimination and 

compliance with other Federal laws. 

4280.306 Forms, regulations, and 

instructions. 

4280.307 4280.309 [Reserved] 

4280.310 Program requirements for MDOs. 

4280.311 Loan provisions for Agency loans 

to microlenders. 

4280.312 Loan approval and closing. 

4280.313 Grant provisions. 

4280.314 [Reserved] 

4280.315 MDO application and submission 

information. 

4280.316 Application scoring. 

4280.317 Selection of applications for 

funding. 

4280.318 4280.319 [Reserved] 

4280.320 Grant administration. 

4280.321 Grant and loan servicing. 

4280.322 Loans from the microlenders to 

the microentrepreneurs. 

4280.323 Ineligible microloan purposes and 

uses. 

4280.324 4280.399 [Reserved] 

4280.400 OMB control number. 

Authority: 7 U.S.C. 1989(a), 7 U.S.C. 

2009s. 

Subpart D—Rural Microentrepreneur 

Assistance Program 

§ 4280.301 Purpose and scope. 

(a) This subpart contains the 

provisions and procedures by which the 

Agency will administer the Rural 

Microenterprise Assistance Program 

(RMAP). The purpose of the program is 

to support the development and ongoing 

success of rural microentrepreneurs and 

microenterprises. To accomplish this 

purpose, the program will make direct 

loans, and provide grants to selected 

Microenterprise Development 


sroberts on DSKD5P82C1PROD with RULES
30146 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

Organizations (MDOs). Selected MDOs 

will use the funds to: 

(1) Provide microloans to rural 

microentrepreneurs and 

microenterprises; 

(2) Provide business based training 

and technical assistance to rural 

microborrowers and potential 

microborrowers; and 

(3) Perform other such activities as 

deemed appropriate by the Secretary to 

ensure the development and ongoing 

success of rural microenterprises. 

(b) The Agency will make direct loans 

to microlenders, as defined in 

§ 4280.302, for the purpose of providing 

fixed interest rate microloans to rural 

microentrepreneurs for startup and 

growing microenterprises. Eligible 

microlenders will also be automatically 

eligible to receive microlender technical 

assistance grants to provide technical 

assistance and training to 

microentrepreneurs that have received 

or are seeking a microloan under this 

program. 

(c) To allow for extended 

opportunities for technical assistance 

and training, the Agency will make 

technical assistance-only grants to 

MDOs that have sources of funding 

other than program funds for making or 

facilitating microloans. 

§ 4280.302 Definitions and abbreviations. 

(a) General definitions. The following 

definitions apply to the terms used in 

this subpart. 

Administrative expenses. Those 

expenses incurred by an MDO for the 

operation of services under this 

program. Not more than 10 percent of 

TA grant funding may be used for such 

expenses. 

Agency. USDA Rural Development, 

Rural Business-Cooperative Service or 

its successor organization. 

Agency personnel. Individuals 

employed by the Agency. 

Applicant. The legal entity, also 

referred to as a microenterprise 

development organization or MDO, 

submitting an application to participate 

in the program. 

Application. The forms and 

documentation submitted by an MDO 

for acceptance into the program. 

Award. The written documentation, 

executed by the Agency after the 

application is approved, containing the 

terms and conditions for provision of 

financial assistance to the applicant. 

Financial assistance may constitute a 

loan or a grant or both. 

Business incubator. An organization 

that provides temporary premises at 

below market rates, technical assistance, 

advice, use of equipment, and may 

provide access to capital, or other 

facilities or services to rural 

microentrepreneurs and 

microenterprises starting or growing a 

business. 

Close relative. Individuals who are 

closely related by blood, marriage, or 

adoption, or live within the same 

household: a spouse, domestic partner, 

parent, child, brother, sister, aunt, 

uncle, grandparent, grandchild, niece, 

or nephew. 

Default. The condition that exists 

when a borrower is not in compliance 

with the promissory note, the loan and/ 

or grant agreement, or other related 

documents evidencing the loan. 

Delinquency. Failure by an MDO to 

make a scheduled loan payment by the 

due date or within any grace period as 

stipulated in the promissory note and 

loan agreement. 

Eligible project cost. The total cost of 

a microborrower’s project for which a 

microloan is being sought from a 

microlender less any costs identified as 

ineligible in § 4280.323. 

Facilitation of access to capital. For 

purposes of this program, facilitation of 

access to capital means assisting a 

technical assistance client of the TAonly grantee in obtaining a microloan 

whether or not the microloan is wholly 

or partially capitalized by funds 

provided under this program. 

Federal Fiscal year (FY). The 12- 

month period beginning October 1 of 

any given year and ending on 

September 30 of the following year. 

Full-time equivalent employee (FTE). 

The Agency uses the Bureau of Labor 

Statistics definition of full-time jobs as 

its standard definition. For purposes of 

this program, a full-time job is a job that 

has at least 35 hours in a work week. As 

such, one full-time job with at least 35 

hours in a work week equals one FTE; 

two part-time jobs with combined hours 

of at least 35 hours in a work week 

equals one FTE, and three seasonal jobs 

equals one FTE. If an FTE calculation 

results in a fraction, it should be 

rounded up to the next whole number. 

Indian tribe. As defined in section 4 

of the Indian Self-Determination and 

Education Assistance Act (25 U.S.C. 

450b), ‘‘any Indian tribe, band, nation, or 

other organized group or community, 

including any Alaska Native village, or 

regional or village corporation as 

defined in or established pursuant to the 

Alaska Native Claims Settlement Act (85 

Stat. 688) [43 U.S.C. 1601 et seq.], which 

is recognized as eligible for the special 

programs and services provided by the 

United States to Indians because of their 

status as Indians.’’ 

Loan loss reserve fund (LLRF). An 

interest-bearing deposit account that 

each microlender must establish and 

maintain in an amount equal to not less 

than 5 percent of the total amount owed 

by the microlender under this program 

to the Agency to pay any shortage in the 

RMRF caused by delinquencies or losses 

on microloans. 

Microborrower. A microentrepreneur 

or microenterprise that has received 

financial assistance from a microlender 

under this program in an amount of 

$50,000 or less. 

Microenterprise. Microenterprise 

means: 

(i) A sole proprietorship located in a 

rural area; or 

(ii) A business entity, located in a 

rural area, with not more than 10 fulltime-equivalent employees. Rural 

microenterprises are businesses 

employing 10 people or fewer that are 

in need of $50,000 or less in business 

capital and/or in need of business based 

technical assistance and training. Such 

businesses may include any type of 

legal business that meets local standards 

of decency. Business types may also 

include agricultural producers provided 

they meet the stipulations in this 

definition. 

(iii) All microenterprises assisted 

under this regulation must be located in 

rural areas. 

Microenterprise development 

organization (MDO). An organization 

that is a non-profit entity; an Indian 

tribe (the government of which tribe 

certifies that no MDO serves the tribe 

and no RMAP exists under the 

jurisdiction of the Indian tribe); or a 

public institution of higher education; 

and that, for the benefit of rural 

microentrepreneurs and 

microenterprises: 

(i) Provides training and technical 

assistance and/or; 

(ii) Makes microloans or facilitates 

access to capital or another related 

service; and/or 

(iii) Has a demonstrated record of 

delivering, or an effective plan to 

develop a program to deliver, such 

services. 

Microentrepreneur. An owner and 

operator, or prospective owner and 

operator, of a microenterprise who is 

unable to obtain sufficient training, 

technical assistance, or credit other than 

under this section, as determined by the 

Secretary. All microentrepreneurs 

assisted under this regulation must be 

located in rural areas. 

Microlender. An MDO that has been 

approved by the Agency for 

participation under this subpart to make 

microloans and provide an integrated 

program of training and technical 

assistance to its microborrowers and 

prospective microborrowers. 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30147 

Microloan. A business loan of not 

more than $50,000 with a fixed interest 

rate and a term not to exceed 10 years. 

Military personnel. Individuals, 

regardless of rank or grade, currently in 

active United States military service 

with less than 6 months remaining in 

their active duty service requirement. 

Nonprofit entity. A private entity 

chartered as a nonprofit entity under 

State Law. 

Program. The Rural 

Microentrepreneur Assistance Program 

(RMAP). 

Rural microloan revolving fund 

(RMRF). An exclusive interest-bearing 

account on which the Agency will hold 

a first lien and from which microloans 

will be made; into which payments from 

microborrowers and reimbursements 

from the LLRF will be deposited; and 

from which payments will be made by 

the microlender to the Agency. 

Rural or rural area. For the purposes 

of this program, the terms ‘‘rural’’ and 

‘‘rural area’’ are synonymous and are 

defined as any area of a State not in a 

city or town that has a population of 

more than 50,000 inhabitants, according 

to the latest applicable decennial census 

for the State; and the contiguous and 

adjacent urbanized area. 

(i) For purposes of this definition, 

cities and towns are incorporated 

population centers with definite 

boundaries, local self-government, and 

legal powers set forth in a charter 

granted by the State. 

(ii) Notwithstanding any other 

provision of this paragraph, within the 

areas of the County of Honolulu, 

Hawaii, and the Commonwealth of 

Puerto Rico, the Secretary may 

designate any part of the areas as a rural 

area if the Secretary determines that the 

part is not urban in character, other than 

any area included in the Honolulu 

census designated place (CDP) or the 

San Juan CDP. 

State. Any of the 50 States of the 

United States, the Commonwealth of 

Puerto Rico, the District of Columbia, 

the U.S. Virgin Islands, Guam, 

American Samoa, the Commonwealth of 

the Northern Mariana Islands, the 

Republic of Palau, the Federated States 

of Micronesia, and the Republic of the 

Marshall Islands. 

Technical assistance and training. 

The provision of education, guidance, or 

instruction to one or more rural 

microentrepreneurs to prepare them for 

self-employment; to improve the state of 

their existing rural microenterprises; to 

increase their capacity in a specific 

technical aspect of the subject business; 

and, to assist the rural 

microentrepreneurs in achieving a 

degree of business preparedness and/or 

functioning that will allow them to 

obtain, or have the ability to obtain, one 

or more business loans of $50,000 or 

less, whether or not from program 

funds. 

Technical assistance grant. A grant, 

the funds of which are used to provide 

technical assistance and training, as 

defined in this section. 

(b) Abbreviations. The following 

abbreviations apply to the terms used in 

this subpart: 

FTE—Full-time employee 

LLRF—Loan loss reserve fund. 

MDO—Microenterprise development 

organization. 

RMAP—Rural microentrepreneur assistance 

program. 

RMRF—Rural microloan revolving fund. 

TA—Technical assistance. 

§ 4280.303 Exception authority. 

The Administrator may make limited 

exceptions to the requirements or 

provisions of this subpart. Such 

exceptions must be in the best financial 

interest of the Federal government and 

may not conflict with applicable law. 

No exceptions may be made regarding 

applicant eligibility, project eligibility, 

or the rural area definition. In addition, 

exceptions may not be made: 

(a) To accept an applicant into the 

program that would not normally be 

accepted under the eligibility or scoring 

criteria; or 

(b) To fund an interested party that 

has not successfully competed for 

funding in accordance with the 

regulations. 

§ 4280.304 Review or appeal rights and 

administrative concerns. 

(a) Review or appeal rights. An 

applicant MDO, a microlender, or 

grantee MDO may seek a review of an 

adverse Agency decision under this 

subpart from the appropriate Agency 

official that oversees the program in 

question, and/or appeal the Agency 

decision to the National Appeals 

Division in accordance with 7 CFR part 

11. 

(b) Administrative concerns. Any 

questions or concerns regarding the 

administration of the program, 

including any action of the microlender, 

may be addressed to: USDA Rural 

Development, Rural BusinessCooperative Service, Specialty Programs 

Division or its successor agency, or the 

local USDA Rural Development office. 

§ 4280.305 Nondiscrimination and 

compliance with other Federal laws. 

(a) Any entity receiving funds under 

this subpart must comply with other 

applicable Federal laws, including the 

Equal Employment Opportunities Act of 

1972, the Americans with Disabilities 

Act, the Equal Credit Opportunity Act, 

the Civil Rights Act of 1964, Section 504 

of the Rehabilitation Act of 1973, the 

Age Discrimination Act of 1975, and 7 

CFR part 1901, subpart E. 

(b) The U.S. Department of 

Agriculture (USDA) prohibits 

discrimination in all its programs and 

activities on the basis of race, color, 

national origin, age, disability, and 

where applicable, sex, marital status, 

familial status, parental status, religion, 

sexual orientation, genetic information, 

political beliefs, reprisal, or because all 

or part of an individual’s income is 

derived from any public assistance 

program. (Not all prohibited bases apply 

to all programs.) Persons with 

disabilities who require alternative 

means for communication of program 

information (Braille, large print, 

audiotape, etc.) should contact USDA’s 

TARGET Center at (202) 720–2600 

(voice and TDD). Any applicant that 

believes it has been discriminated 

against as a result of applying for funds 

under this program should contact: 

USDA, Director, Office of Adjudication, 

1400 Independence Avenue, S.W., 

Washington, DC 20250–9410, or call 

(866) 632–9992 (toll free) or (202) 401– 

0216 (TDD) for information and 

instructions regarding the filing of a 

Civil Rights complaint. USDA is an 

equal opportunity provider, employer, 

and lender. 

(c) A pre-award compliance review 

will take place at the time of application 

when the applicant completes Form RD 

400–8, ‘‘Compliance Review’’. Postaward compliance reviews will take 

place once every three years after the 

beginning of participation in the 

program and until such time as a 

microlender leaves the program. 

§ 4280.306 Forms, regulations, and 

instructions. 

Copies of all forms, regulations, and 

instructions referenced in this subpart 

are available in any Agency office, the 

Agency’s Web site at http:// 

www.rurdev.usda.gov/regs/, and for 

grants on the Internet at http:// 

www.grants.gov. 

§§ 4280.307–4280.309 [Reserved] 

§ 4280.310 Program requirements for 

MDOs. 

(a) Eligibility requirements for 

applicant MDOs. To be eligible for a 

direct loan or grant award under this 

subpart, an applicant must meet each of 

the criteria set forth in paragraphs (a)(1) 

through (4) of this section, as applicable. 

(1) Type of applicant. The applicant 

must meet the definition of an MDO 

under this program. 


sroberts on DSKD5P82C1PROD with RULES
30148 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

(2) Citizenship. For non-profit entities 

only, to be eligible to apply for status as 

an MDO, the applicant must be at least 

51 percent controlled by persons who 

are either: 

(i) Citizens of the United States, the 

Republic of Palau, the Federated States 

of Micronesia, the Republic of the 

Marshall Islands, American Samoa, or 

the Commonwealth of Puerto Rico; or 

(ii) Legally admitted permanent 

residents residing in the U.S. 

(3) Legal authority and responsibility. 

The applicant must have the legal 

authority necessary to carry out the 

purpose of the award. 

(4) Other eligibility requirements. For 

potential microlenders only, 

(i) The applicant must also provide 

evidence that it: 

(A) Has demonstrated experience in 

the management of a revolving loan 

fund; or 

(B) Certifies that it, or its employees, 

have received education and training 

from a qualified microenterprise 

development training entity so that the 

applicant has the capacity to manage 

such a revolving loan fund; or 

(C) Is actively and successfully 

participating as an intermediary lender 

in good standing under the U.S. Small 

Business Administration (SBA) 

Microloan Program or other similar loan 

programs as determined by the 

Administrator. 

(ii) An attorney’s opinion regarding 

the potential microlender’s legal status 

and its ability to enter into program 

transactions is required at the time of 

initial entry into the program. 

Subsequent to acceptance into the 

program, an attorney’s opinion will not 

be required unless the Agency 

determines significant changes to the 

microlender have occurred. 

(b) Minimum score. Once deemed 

eligible, an entity will be evaluated 

based on the scoring criteria in 

§ 4280.316 for adequate qualification to 

participate in the program. Eligible 

MDOs must score a minimum of seventy 

points (70 points) in order to be 

considered to receive an award under 

this subpart. 

(c) Ineligible applicants. An applicant 

will be considered ineligible if it: 

(1) Does not meet the definition of an 

MDO as provided in § 4280.302; 

(2) Is debarred, suspended or 

otherwise excluded from, or ineligible 

for, participation in Federal assistance 

programs; and 

(3) Has an outstanding judgment 

against it, obtained by the United States 

in a Federal Court (other than U.S. Tax 

Court). 

(d) Delinquencies. No applicant will 

be eligible to receive a loan if it is 

delinquent on a Federal debt. 

(e) Application eligibility and 

qualification. An application will be 

considered eligible for funding if it is 

submitted by an eligible MDO. The 

applicant will qualify for funding based 

on the results of review, scoring, and 

other procedures as indicated in this 

subpart, and will further: 

(1) Establish an RMRF, or add capital 

to an RMRF originally capitalized under 

this program and establish or continue 

a training and TA program for its 

microborrowers and prospective 

microborrowers; or 

(2) Fund a TA-only grant program to 

provide services to rural 

microentrepreneurs and 

microenterprises. 

(f) Business incubators. Because the 

purpose of a business incubator is to 

provide business-based technical 

assistance and an environment in which 

micro-level, very small, and small 

businesses may thrive, a microlender 

that meets all other eligibility 

requirements and owns and operates a 

small business incubator will be 

considered eligible to apply. In 

addition, a business incubator selected 

to participate as a microlender may use 

RMAP funding to lend to an eligible 

microenterprise tenant, without creating 

a conflict of interest under 

§ 4280.323(c). 

§ 4280.311 Loan provisions for Agency 

loans to microlenders. 

(a) Purpose of the loan. Loans will be 

made to eligible and qualified 

microlenders to capitalize RMRFs that it 

will administer by making and servicing 

microloans in one or more rural areas. 

(b) Eligible activities. Microlenders 

may make microloans for qualified 

business activities and use Agency loan 

funds only as provided in § 4280.322. 

(c) Ineligible activities. Microlenders 

may not use RMRF funds for 

administrative costs or expenses and 

may not make microloans under this 

program for ineligible purposes as 

specified in § 4280.323. 

(d) Cost share. The Federal share of 

the eligible project cost of a 

microborrower’s project funded under 

this section shall not exceed 75 percent. 

The cost share requirement shall be met 

by the microlender using either of the 

options identified in paragraphs (d)(1) 

and (2) of this section in establishing an 

RMRF. A microlender may establish 

multiple RMRFs utilizing either option. 

Whichever option is selected for an 

RMRF, it must apply to the entire RMRF 

and all microloans made with funds 

from that RMRF. 

(1) Microborrower project level option. 

The loan covenants between the Agency 

and the microlender and the 

microlender’s lending policies and 

procedures shall limit the microlender’s 

loan to the microborrower to no more 

than 75 percent of the eligible project 

cost of the microborrower’s project and 

require that the microborrower obtain 

the remaining 25 percent of the eligible 

project cost from non-Federal sources. 

The non-Federal share of the eligible 

project cost of the microborrower’s 

project may be provided in cash 

(including through fees, grants 

(including community development 

block grants), and gifts) or in the form 

of in-kind contributions. 

(2) RMRF level option. The 

microlender shall capitalize the RMRF 

at no more than 75 percent Agency loan 

funds and not less than 25 percent nonFederal funds, thereby allowing the 

microlender to finance 100 percent of 

the microborrower’s eligible project 

costs. All contributed funds shall be 

maintained in the RMRF. 

(e) Loan terms and conditions for 

microlenders. Loans will be made to 

microlenders under the following terms 

and conditions: 

(1) Funds received from the Agency 

and any non-Federal share will be 

deposited into an interest-bearing 

account that will be the RMRF account. 

(2) The RMRF account, including any 

interest earned on the account and the 

microloans made from the account, will 

be used to make fixed-rate microloans, 

to accept repayments from 

microborrowers and reimbursements 

from the LLRF, to repay the Agency and, 

with the advance written approval of 

the Agency, to supplement the LLRF 

with interest earnings (from payments 

received or from account earnings) from 

the RMRF. 

(3) The term of a loan made to a 

microlender will not exceed 20 years. If 

requested by the applicant MDO, a 

shorter term may be agreed upon by the 

microlender and the Agency. 

(4) Each loan made to a microlender 

will automatically receive a 2-year 

deferral during which time no 

repayment to the Agency will be 

required. Voluntary payments will be 

accepted. 

(i) Interest will accrue during the 

deferral period only on funds disbursed 

by the Agency. 

(ii) The deferral period will begin on 

the day the Agency loan to the 

microlender is closed. 

(iii) Loan repayments will be made in 

equal monthly installments to the 

Agency beginning on the last day of the 

24th month of the life of the loan. 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30149 

(5) Partial or full repayment of debt to 

the Agency under this program may be 

made at any time, including during the 

deferral period, without any prepayment penalties being assessed. 

(6) The microlender is responsible for 

full repayment of its loan to the Agency 

regardless of the performance of its 

microloan portfolio. 

(7) The Agency may call the entire 

loan due and payable prior to the end 

of the full term, due to any nonperformance, delinquency, or default on 

the loan. 

(8) Loan closing between the 

microlender and the Agency must take 

place within 90 days of loan approval or 

funds will be forfeited and the loan will 

be deobligated. 

(9) Microlenders will be eligible to 

receive a disbursement of up to 25 

percent of the total loan amount at the 

time of loan closing. Interest will accrue 

on all funds disbursed to the 

microlender beginning on the date of 

disbursement. 

(10) A microlender must make one or 

more microloans within 60 days of any 

disbursement it receives from the 

Agency. Failure to make a microloan 

within this time period may result in 

the microlender not receiving any 

additional funds from the Agency and 

may result in the Agency demanding 

return of any funds already disbursed to 

the microlender. 

(11) Microlenders may request in 

writing, and receive additional 

disbursements not more than quarterly, 

until the full amount of the loan to the 

microlender is disbursed, or until the 

end of the 36th month of the loan, 

whichever occurs first. Letters of request 

for disbursement must be accompanied 

by a description of the microlender’s 

anticipated need. Such description will 

indicate the amount and number of 

microloans anticipated to be made with 

the funding. 

(12) Each loan made to a microlender 

during its first five years of participation 

in this program will bear an interest rate 

of 2 percent. After the fifth year of an 

MDO’s continuous and satisfactory 

participation in this program, each new 

loan made to the microlender will bear 

an interest rate of 1 percent. Satisfactory 

participation requires a default rate of 5 

percent or less and a pattern of 

delinquencies of 10 percent or less. 

Except in the case of liquidation or early 

repayment, loans to microlenders must 

fully amortize over the life of the loan. 

(13) During the initial deferral period, 

each loan to a microlender will accrue 

interest at a rate of 1 or 2 percent based 

on the ultimate interest rate on the loan. 

Interest accrued during the 2-year 

deferral period will be capitalized so 

that, during the 24th month of the initial 

deferral period, the microlender’s debt 

to the Agency will be calculated and 

amortized over the remaining life of the 

loan. The first payment will be due to 

the Agency on the last day of the 24th 

month of the life of the loan. 

(14) Funds not disbursed to the 

microlender by the end of the 36th 

month of the loan from the Agency will 

be de-obligated. 

(15) The Agency will hold first lien 

position on the RMRF account, the 

LLRF, and all notes receivable from 

microloans. 

(16) If a microlender makes a 

withdrawal from the RMRF for any 

purpose other than to make a microloan, 

repay the Agency, or, with advance 

written approval, transfer an 

appropriate amount of non-Federal 

funds to the LLRF, the Agency may 

restrict further access to withdrawals 

from the account by the microlender. 

(17) In the event a microlender fails 

to meet its obligations to the Agency, 

the Agency may pursue any 

combination of the following: 

(i) Take possession of the RMRF and/ 

or any microloans outstanding, and/or 

the LLRF; 

(ii) Call the loan due and payable in 

full; and/or 

(iii) Enter into a workout agreement 

acceptable to the Agency, which may or 

may not include transfer or sale of the 

portfolio to another microlender 

(whether or not funded under this 

program) deemed acceptable to the 

Agency. 

(f) Loan funding limitations. 

(1) Minimum and maximum loan 

amounts. The minimum loan amount a 

microlender may borrow under this 

program will be $50,000. The maximum 

any microlender may borrow on a single 

loan under this program, or in any given 

Federal fiscal year, will be $500,000. In 

no case will the aggregate outstanding 

balance owed to the program by any 

single microlender exceed $2,500,000. 

(2) Use of funds. Loans must be used 

only to establish or recapitalize an 

existing Agency funded RMRF out of 

which microloans will be made, into 

which microloan payments will be 

deposited, and from which repayments 

to the Agency will be made. In some 

instances, as described in 

§ 4280.311(e)(2), interest earned by 

these funds may be used to fund and 

recapitalize both RMRF and the LLRF. 

(g) Loan loss reserve fund (LLRF). 

Each microlender that receives one or 

more loans under this program will be 

required to establish an interest-bearing 

LLRF. 

(1) Purpose. The purpose of the LLRF 

is to protect the microlender and the 

Agency against losses that may occur as 

the result of the failure of one or more 

microborrowers to repay their loans on 

a timely basis. 

(2) Capitalization and maintenance. 

The LLRF is subject to each of the 

following conditions: 

(i) The microlender must maintain the 

LLRF at a minimum of 5 percent of the 

total amount owed by the microlender 

under this program to the Agency. If the 

LLRF falls below the required amount, 

the microlender will have 30 days to 

replenish the LLRF. The Agency will 

hold a security interest in the account 

and all funds therein until the MDO has 

repaid its debt to the Agency under this 

program. 

(ii) No Agency loan funds may be 

used to capitalize the LLRF. 

(iii) The LLRF must be held in an 

interest-bearing, Federally-insured 

deposit account separate and distinct 

from any other fund owned by the 

microlender. 

(iv) The LLRF must remain open, 

appropriately capitalized, and active 

until such time as: 

(A) All obligations owed to the 

Agency by the microlender under this 

program are paid in full; or 

(B) The LLRF is used to assist with 

full repayment or prepayment of the 

microlender’s program debt. 

(v) Earnings on the LLRF account 

must remain a part of the account 

except as stipulated in § 4280.311(e)(2). 

(3) Use of LLRF. The LLRF must be 

used only to: 

(i) Recapitalize the RMRF in the event 

of the loss and write-off of a microloan; 

that is, when a loss has been paid to the 

RMRF, from the LLRF, the microlender 

must, within 30 days, replenish the 

LLRF, with non-federal funds, to the 

required level; 

(ii) Accept non-Federal deposits as 

required for maintenance of the fund at 

a level equal to 5 percent or more of the 

amount owed to the Agency by the 

microlender under this program; 

(iii) Accrue interest (interest earnings 

accrued by the LLRF will become part 

of the LLRF and may be used only for 

eligible purposes); and 

(iv) Prepay or repay the Agency 

program loan. 

(4) LLRF funded at time of closing. 

The LLRF account must be established 

by the microlender prior to the closing 

of the loan from the Agency. At the time 

of initial loan closing, sources of 

funding for the LLRF must be identified 

by the microlender so that as microloans 

are made, the amount in the LLRF can 

be built over time to an amount greater 

than or equal to 5 percent of the amount 

owed to the Agency by the microlender 

under this program. After the first 


sroberts on DSKD5P82C1PROD with RULES
30150 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

disbursement is made to a microlender, 

further disbursements will only be made 

if the LLRF is funded at the appropriate 

amount. After the initial loan is made to 

a microlender, subsequent loan closings 

will require the LLRF to be funded in 

an amount equal to 5 percent of the 

anticipated initial drawdown of funds 

for the RMRF. Federal funds, except 

where specifically permitted by other 

laws, may not be used to fund LLRF. 

(5) Additional LLRF funding. In the 

event of exhibited weaknesses, such as 

losses that are greater than 5 percent of 

the microloan portfolio, on the part of 

a microlender, the Agency may require 

additional funding be put into the LLRF; 

however, the Agency may never require 

an LLRF of more than 10 percent of the 

total amount owed by the microlender. 

(h) Recordkeeping, reporting, and 

oversight. Microlenders must maintain 

all records applicable to the program 

and make them available to the Agency 

upon request. Microlenders must submit 

quarterly reports as specified in 

paragraphs (h)(1) through (4) of this 

section. Portfolio reporting requirements 

must be met via the electronic reporting 

system. Other reports, such as narrative 

information, may be submitted as hard 

copy in the event the microlender, 

grantee, or Agency do not have the 

capability to submit or accept same 

electronically. 

(1) Periodic reports. On a quarterly 

basis, within 30 days of the end of the 

calendar quarter, each microlender that 

has an outstanding loan under this 

section must provide to the Agency: 

(i) Quarterly reports, using an Agencyapproved form, containing such 

information as the Agency may require, 

and in accordance with OMB circulars 

and guidance, to ensure that funds 

provided are being used for the 

purposes for which the loan to the 

microlender was made. At a minimum, 

these reports must identify each 

microborrower under this program and 

should include a discussion reconciling 

the microlender’s actual results for the 

period against its goals, milestones, and 

objectives as provided in the application 

package; 

(ii) SF–PPR, ‘‘Performance Progress 

Report’’ cover sheet, performance 

measures (SF–PPR–A), and activity 

based expenditures (SF–PPR–E); and 

(iii) SF–270, ‘‘Request for Advance or 

Reimbursement’’. 

(2) Minimum retention. Microlenders 

must provide evidence in their quarterly 

reports that the sum of the unexpended 

amount in the RMRF, plus the amount 

in the LLRF, plus debt owed by the 

microborrowers is equal to a minimum 

of 105 percent of the amount owed by 

the microlender to the Agency unless 

the Agency has established a higher 

LLRF reserve requirement for a specific 

microlender. 

(3) Combining accounts and reports. If 

a microlender has more than one loan 

from the Agency, a separate report must 

be made for each except when RMRF 

accounts have been combined. A 

microlender may combine RMRF 

accounts only when: 

(i) The underlying loans have the 

same rates, terms and conditions; 

(ii) The combined report allows the 

Agency to effectively administer the 

program, including providing the same 

level of transparency and information 

for each loan as if separate RMRF 

reports had been prepared; and 

(iii) The accompanying LLRF fund 

reports also provide the same level of 

transparency and information for each 

loan as if separate LLRF reports had 

been prepared. 

(iv) The Agency must approve the 

combining of accounts and reports in 

writing before such accounts are 

combined and reports are submitted. 

(4) Delinquency. In the event that a 

microlender has delinquent loans in its 

RMAP portfolio, quarterly reports will 

include narrative explanation of the 

steps being taken to cure the 

delinquencies. 

(5) Other reports. Other reports may 

be required by the Agency from time to 

time in the event of poor performance, 

one or more work out agreements or 

other such occurrences that require 

more than the usual set of reporting 

information. 

(6) Site visits. The Agency may, at any 

time, choose to visit the microlender 

and inspect its files to ensure that 

program requirements are being met. 

(7) Access to microlender’s records. 

Upon request by the Agency, the 

microlender will permit representatives 

of the Agency (or other agencies of the 

U.S. Department of Agriculture 

authorized by that Department or the 

U.S. Government) to inspect and make 

copies of any records pertaining to 

operation and administration of this 

program. Such inspection and copying 

may be made during regular office hours 

of the microlender or at any other time 

agreed upon between the microlender 

and the Agency. 

(8) Changes in key personnel. Before 

any additions are made to key 

personnel, the microlender must notify 

and the Agency must approve such 

changes. 

§ 4280.312 Loan approval and closing. 

(a) Loan approval and obligating 

funds. The loan will be considered 

approved on the date the signed copy of 

Form RD 1940–1, ‘‘Request for 

Obligation of Funds,’’ is signed by the 

Agency. Form RD 1940–1 authorizes 

funds to be obligated and may be 

executed by the Agency provided the 

microlender has the legal authority to 

contract for a loan, and to enter into 

required agreements, including an 

Agency-approved loan agreement, and 

meets all program loan requirements 

and has signed Form RD 1940–1. 

(b) Letter of conditions. Upon 

reviewing the conditions and 

requirements in the letter of conditions, 

the applicant must complete, sign, and 

return Form RD 1942–46, ‘‘Letter of 

Intent to Meet Conditions,’’ to the 

Agency; or if certain conditions cannot 

be met, the applicant may propose 

alternate conditions. The Agency will 

review any requests for changes to the 

letter of conditions. The Agency may 

approve only minor changes that do not 

materially affect the microlender. 

Changes in legal entities prior to loan 

closing will not be approved. 

(c) Loan closing. 

(1) Prior to loan closing, microlenders 

must provide evidence that the RMRF 

and LLRF bank accounts have been set 

up and the LLRF has been, or will be, 

funded as described in § 4280.311(g)(4). 

Such evidence shall consist of: 

(i) A pre-authorized debit form 

allowing the Agency to withdraw 

payments from the RMRF account, and 

in the event of a repayment workout, 

from the LLRF account; 

(ii) An Agency-approved automatic 

deposit authorization form from the 

depository institution providing the 

Agency with the RMRF account number 

into which funds may be deposited at 

time of disbursement to the 

microlender; 

(iii) A statement from the depository 

institution as to the amount of cash in 

the LLRF account; 

(iv) An Agency-approved promissory 

note must be executed at loan closing; 

and 

(v) An appropriate security agreement 

on the LLRF and RMRF accounts. 

(2) At loan closing, the microlender 

must certify that: 

(i) All requirements of the letter of 

conditions have been met and 

(ii) There has been no material 

adverse change in the microlender or its 

financial condition since the issuance of 

the letter of conditions. If one or more 

adverse changes have occurred, the 

microlender must explain the changes 

and the Agency must determine that the 

microlender remains eligible and 

qualified to participate as an MDO. 

(3) The microlender will provide 

sufficient evidence, which may include 

but is not limited to, mechanics’ lien 

waivers or in their absence receipts of 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30151 

payment, that no lawsuits are pending 

or threatened that would adversely 

affect the security of the microlender 

when Agency security instruments are 

filed. 

§ 4280.313 Grant provisions. 

(a) General. The following provisions 

apply to each type of grant offered 

under this program unless otherwise 

specified annually in a Federal Register 

notice. Competition for these funds will 

occur as a part of the application and 

qualification process of becoming a 

microlender. Failure to meet scoring 

benchmarks will preclude an applicant 

from receiving loan and/or grant dollars. 

Once an MDO is participating as a 

microlender, grant funds will be made 

available automatically based on 

lending and the availability of funds. 

(1) Grant amounts. 

(i) The maximum TA grant amount for 

a microlender is 25 percent of the first 

$400,000 of outstanding microloans 

owed to the microlender under this 

program, plus an additional 5 percent of 

the outstanding loan amount owed by 

the microborrowers to the lender under 

this program over $400,000 up to and 

including $2.5 million. This calculation 

leads to a maximum grant of $205,000 

annually for any microlender to provide 

technical assistance to its clients. These 

grants will be awarded annually. 

(ii) The maximum amount of a TAonly grant under this program will not 

exceed 10 percent of the amount of 

funding available for TA-only grants. 

The amount of funding available for TA 

funding will be announced annually 

and will be based on the availability of 

funds. In no case will funding for the 

TA-only grants exceed 10 percent of the 

amount appropriated for the program 

each Federal fiscal year. 

(2) Matching requirement. The MDO 

is required to provide a match of not 

less than 15 percent of the total amount 

of the grant in the form of matching 

funds, indirect costs, or in-kind goods or 

services. Unless specifically permitted 

by laws other than the statute 

authorizing RMAP, matching 

contributions must be made up of nonFederal funding. 

(3) Administrative expenses. Not more 

than 10 percent of a grant received by 

a MDO for a Federal fiscal year (FY) 

may be used to pay administrative 

expenses. MDOs must submit an annual 

budget of proposed administrative 

expenses for Agency approval. The 

Agency has the right to deny the 10 

percent and to fund administration 

expenses at a lower level. 

(4) Ineligible grant purposes. Grant 

funds, matching funds, indirect costs, 

and in-kind goods and services may not 

be used for: 

(i) Grant application preparation 

costs; 

(ii) Costs incurred prior to the 

obligation date of the grant; 

(iii) Capital improvements; 

(iv) Political or lobbying activities; 

(v) Assistance to any ineligible entity; 

(vi) Payment of any judgment or debt 

owed; and 

(vii) Payment of any costs other than 

those allowed in paragraphs (b)(1) and 

(c) of this section. 

(5) Changes in key personnel. Before 

any additions are made to key 

personnel, the microlender must notify 

and the Agency must approve such 

changes. 

(b) Grants to assist 

microentrepreneurs (Microlender 

Technical Assistance (TA) Grants). The 

capacity of a microlender to provide an 

integrated program of microlending and 

technical assistance will be evaluated 

during the scoring process. An eligible 

MDO selected to be a microlender will 

be eligible to receive a microlending TA 

grant if it receives funding to provide 

microloans under this program. 

(1) Purpose. The Agency shall make 

microlender TA grants to microlenders 

to assist them in providing marketing, 

management, and other technical 

assistance to rural microentrepreneurs 

and microenterprises that have received 

or are seeking one or more microloans 

from the microlender. 

(2) Grant amounts. Microlender TA 

grants will be limited to an amount 

equal to not more than 25 percent of the 

total outstanding balance of microloans 

made under this program and active by 

the microlender as of the date the grant 

is awarded for the first $400,000 plus an 

additional 5 percent of the loan amount 

owed by the microborrowers to the 

lender under this program over 

$400,000 up to and including $2.5 

million. Funds cannot be used to pay off 

the loans. During the first year of 

operation, the percentage will be 

determined based on the amount of the 

loan to the microlender, but will be 

disbursed on a quarterly basis based on 

the amount of microloans made. Any 

grant dollars obligated, but not spent, 

from the initial grant, will be subtracted 

from the subsequent year grant to ensure 

that obligations cover only microloans 

made and active. 

(3) TA grant fund uses and 

limitations. The microlender will agree 

to use TA grant funding exclusively for 

providing technical assistance and 

training to eligible microentrepreneurs 

and microenterprises, with the 

exception that up to 10 percent of the 

grant funds may be used to cover the 

microlender’s administrative expenses, 

except as may be reduced as provided 

under § 4280.313(a)(4). The following 

limitations will apply to TA grant 

funding: 

(i) Administrative expenses should be 

kept to a minimum. As such, the 

applicant MDO is required, in the 

application materials, to provide an 

administrative budget plan indicating 

the amount of funding it will need for 

administrative purposes. Applicants 

will be scored accordingly, with those 

using less than 10 percent of the 

funding for administrative purposes 

being scored higher than those using 10 

percent of the funding for 

administrative purposes. 

(ii) While operating the program, the 

selected microlender will be expected to 

adhere to the estimates it provides in 

the application. If for any reason, the 

microlender cannot meet the 

expectations of the application, it must 

contact the Agency in writing to request 

a budget adjustment. 

(iii) At no time will it be appropriate 

for the microlender to expend more than 

10 percent of its grant funding on 

administrative expenses. Microlenders 

that go over 10 percent will be 

considered in performance default and 

may be subject to forfeiting funding. 

(iv) Budget adjustments will be 

considered within the 10 percent 

limitation and approved or denied on a 

case-by-case basis. 

(c) TA-only grants. Grants will be 

competitively made to MDOs for the 

purpose of providing technical 

assistance and training to prospective 

microborrowers. Technical assistanceonly grants will be provided to eligible 

MDOs that seek to provide businessbased technical assistance and training 

to eligible microentrepreneurs and 

microenterprises, but do not seek 

funding for an RMRF. Entities receiving 

microlending TA grants will not be 

eligible to apply for TA-only grants. 

(1) Grant term. TA-only grants will 

have a grant term not to exceed 12 

months from the date the grant 

agreement is signed. 

(2) Funding level. The maximum 

amount of a TA-only grant under this 

program will not exceed 10 percent of 

the amount of funding available for TAonly grants. In no case will funding for 

the TA-only grants exceed 10 percent of 

the amount appropriated for the 

program each Federal fiscal year. 

(3) Loan referencing. TA-only grantees 

will be required to: 

(i) Refer clients to internal or external 

non-program funded lenders for loans of 

$50,000 or less and 

(ii) Collect data regarding such 

clients. TA-only grantees will be 


sroberts on DSKD5P82C1PROD with RULES
30152 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

considered successful if a minimum of 

1- in-5 TA clients are referred for a 

microloan and are operating a business 

within 18 months of receiving technical 

assistance. 

(4) Facilitation of access to capital. 

Technical assistance-only grantees will 

be expected to provide training and 

technical assistance services to the 

extent that access to capital for eligible 

microentrepreneurs and 

microenterprises is facilitated by referral 

to either an internal or external nonprogram loan fund so that these clients 

may take advantage of available 

financing programs. 

(5) Microlender funding. No entity 

will receive grant funding as both a 

microlender and a TA-only provider; 

that is, RMAP microlenders are not 

eligible for TA-only funding and an 

MDO receiving TA-only funding are not 

eligible for microlender funding. 

(d) Grant agreement. For any grant to 

an MDO or microlender, the Agency 

will notify the approved applicant in 

writing, using an Agency-approved 

grant agreement setting out the 

conditions under which the grant will 

be made. The form will include those 

matters necessary to ensure that the 

proposed grant is completed in 

accordance with the proposed project, 

that grant funds are expended for 

authorized purposes, and that the 

applicable requirements prescribed in 

the relevant Department regulations are 

complied with. 

§§ 4280.314 [Reserved] 

§ 4280.315 MDO application and 

submission information. 

(a) Initial and subsequent 

applications. Applications shall be 

submitted in accordance with the 

provisions of this subpart unless 

adjusted by the Agency in an annual 

Federal Register Notice for Solicitation 

of Applications (NOSA) or a Notice of 

Funding Availability (NOFA), 

depending on the availability of funds at 

the time of publication. 

(1) The information required in this 

section is necessary for an application to 

be considered complete. 

(2) When preparing applications, 

applicants are strongly encouraged to 

review the scoring criteria in § 4280.316 

and provide documentation that will 

support a competitive score. 

(3) Only those applicants that meet 

the basic eligibility requirements in 

§ 4280.310 will have their applications 

fully scored and considered for 

participation in the program under this 

section. 

(b) Content and form of submission. 

The content and form requirements will 

differ based on the nature of the 

application. All applicants must provide 

the information specified in paragraph 

(c) of this section. Additional 

application information is required in 

paragraph (d) of this section depending 

on the type of application being 

submitted. 

(c) Application information for all 

applicants. All applicants must provide 

the following information and forms 

fully completed and with all 

attachments: 

(1) Standard Form-424, ‘‘Application 

for Federal Assistance.’’ 

(2) Standard Form-424A, ‘‘Budget 

Information—Non-construction 

Programs.’’ 

(3) Standard Form-424B, 

‘‘Assurances—Non-construction 

Programs.’’ 

(4) For entities that are applying for 

more than $150,000 in loan funds and/ 

or more than $100,000 in grant funds, 

only, SF LLL, ‘‘Disclosure of Lobbying 

Activities.’’ 

(5) AD 1047, ‘‘Certification Regarding 

Debarment, Suspension, and other 

Responsibility Matters—Primary 

Covered Transaction.’’ 

(6) For entities applying for program 

loan funds to become an RMAP 

microlender only, Form RD 1910–11, 

‘‘Certification of No Federal Debt.’’ 

(7) Form RD 400–8, ‘‘Compliance 

Review.’’ 

(8) Demonstration that the applicant 

is eligible to apply to participate in this 

program. To demonstrate eligibility, 

applicants must submit documentation 

that the applicant is an MDO as defined 

in § 4280.302, as follows: 

(i) If a nonprofit entity, evidence that 

the applicant organization meets the 

citizenship requirements; 

(ii) If a nonprofit entity, a copy of the 

applicant’s bylaws and articles of 

incorporation, which include evidence 

that the applicant is legally considered 

a non-profit organization; 

(iii) If an Indian tribe, evidence that 

the applicant is a Federally-recognized 

Indian tribe, and that the tribe neither 

operates nor is served by an existing 

MDO; 

(iv) If a public institution of higher 

education, evidence that the applicant is 

a public institution of higher education; 

and 

(v) For nonprofit applicants only, a 

Certificate of Good Standing, not more 

than 6 months old, from the Office of 

the Secretary of State in the State in 

which the applicant is located. If the 

applicant has offices in more than one 

state, then the state in which the 

applicant is organized and licensed will 

be considered the home location. 

(9) Certification by the applicant that 

it cannot obtain sufficient credit 

elsewhere to fund the activities called 

for under this program with similar 

rates and terms. 

(10) Form RD 400–4, ‘‘Assurance 

Agreement.’’ 

(d) Type of application specific 

information. In addition to the 

information required under paragraph 

(c) of this section, the following 

information is also required, as 

applicable: 

(1) The information specified in 

§ 4280.316(a). 

(2) An applicant for status as a 

microlender with more than 3 years of 

experience as an MDO seeking to 

participate as a microlender must 

provide the additional information 

specified in § 4280.316(b). Such an 

applicant will be applying for a loan to 

capitalize an RMRF, which, unless 

otherwise requested by the applicant, 

will be accompanied by a microlending 

TA grant. 

(3) An applicant for status as a 

microlender with 3 years or less 

experience as an MDO seeking to 

participate as a microlender must 

provide the additional information 

specified in § 4280.316(c). Such an 

applicant will be applying for a loan to 

capitalize an RMRF, which, unless 

otherwise requested by the applicant, 

will be accompanied by a microlending 

TA grant. 

(4) All applicants seeking status as a 

microlender must identify in their 

application which cost share option(s) 

the applicant will utilize, as described 

in § 4280.311(d), to meet the Federal 

cost share requirement. If the applicant 

will utilize the RMRF-level option, the 

applicant shall identify the amount(s) 

and source(s) of the non-Federal share. 

(5) An applicant seeking TA-only 

grant funding must provide the 

additional information specified in 

§ 4280.316(e). 

(e) Application limits. Paragraph (d) 

of this section sets out three types of 

funding under which applications may 

be submitted. MDOs may only submit 

and have pending for consideration, at 

any given time, one application, 

regardless of funding category. 

(f) Completed applications. 

Applications that fulfill the 

requirements specified in paragraphs (a) 

through (e) of this section will be fully 

reviewed, scored, and ranked by the 

Agency in accordance with the 

provisions of § 4280.316. 

§ 4280.316 Application scoring. 

Applications will be scored based on 

the criteria specified in this section 

using only the information submitted in 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30153 

the application. The total available 

points per application are 100. Points 

will be awarded as shown in paragraphs 

(a) through (e) of this section. Awards 

will be based on the ranking, with the 

highest ranking applications being 

funded first, subject to available 

funding. 

(a) Application requirements for all 

applicants. All applicants must submit 

the eligibility information described in 

§ 4280.315. Only those applicants 

deemed eligible will be scored for 

qualification. Qualification information 

provides the complete forms and 

information necessary to determine a 

baseline of capacity. Additional 

information is specified depending on 

the level of experience or type of 

funding being applied for. The 

maximum points available in this part 

of the application are 45. In addition to 

the eligibility information, all applicants 

will submit: 

(1) An organizational chart clearly 

showing the positions and naming the 

individuals in those positions. Of 

particular interest to the Agency are 

management positions and those 

positions essential to the operation of 

microlending and TA programming. Up 

to 5 points will be awarded. 

(2) Resumes for each of the 

individuals shown on the organizational 

chart and indicated as key to the 

operation of the activities to be funded 

under this program. There should be a 

corresponding resume for each of the 

key individuals noted and named on the 

organizational chart. Points will be 

awarded based on the quality of the 

resumes and on the ability (based on the 

resumes) of the key personnel to 

administer the program. Up to 5 points 

will be awarded. 

(3) A succession plan to be followed 

in the event of the departure of 

personnel key to the operation of the 

applicant’s RMAP activities. Up to 5 

points will be awarded. 

(4) Information indicating an 

understanding of microenterprise 

development concepts. Provide those 

parts of your policy and procedures 

manual that deal with the provision of 

loans, management of loan funds, and 

provision of technical assistance. Up to 

5 points will be awarded. 

(5) Copies of the applicant’s most 

recent, and two years previous, financial 

statements. Points will be awarded 

based on the demonstrated ability of the 

applicant to maintain or grow its bottom 

line fund balance, its ability to manage 

one or more federal programs, and its 

capacity to manage multiple funding 

sources, restricted and non-restricted 

funding sources, income, earnings, and 

expenditures. Up to 10 points will be 

awarded. 

(6) A copy of the applicant’s 

organizational mission statement. The 

mission statement will be rated based 

on its relative connectivity to 

microenterprise development and 

general economic development. The 

mission statement may or may not be a 

part of a larger statement. For example, 

if the mission statement is included in 

the by-laws or other organizational 

documents, please so note, direct the 

reviewer to the proper document, and 

do not submit these documents twice. 

Up to 5 points will be awarded. 

(7) Information regarding the 

geographic service area to be served. 

Describe the service area, which must be 

rural as defined. State the number of 

counties or other jurisdictions to be 

served. Describe the demographics of 

the service area and whether or not the 

population is a diverse population. Note 

that the applicant will not be scored on 

the size of the service area, but on its 

ability to fully cover the service area as 

described. Up to 10 points will be 

awarded. 

(b) Program loan application 

requirements for MDOs seeking to 

participate as RMAP microlenders with 

more than 3 years of experience. In 

addition to the information required 

under paragraph (a) of this section, 

applicants with more than 3 years of 

experience as a microlender also must 

provide the information specified in 

paragraphs (b)(1) through (5) of this 

section. The total number of points 

available under this paragraph, in 

addition to the up to 45 points available 

in paragraph (a) of this section, is 55, for 

a total of 100. 

(1) History of provision of microloans. 

The applicant must provide data 

regarding its history of making 

microloans for the three years previous 

to this application by answering the 

questions in paragraphs (b)(1)(i) through 

(vi) of this section. This information 

should be provided clearly and 

concisely in numerical format as the 

data will be used to calculate points as 

noted. Figure 1 presents an example of 

the format and data required. The 

maximum number of points under this 

criterion is 20. 

Figure 1. Example of Format and Data 

Requirements 

Data item 

Federal FY 

Last fiscal 

year 

Year before 

last fiscal year 

2nd year 

before last 

fiscal year 

Total 

Total # of Microloans Made ............................................................................. ........................ ........................ ........................ ........................

Total $ Amount of Microloans Made ............................................................... ........................ ........................ ........................ ........................

# of Microloans Made in Rural Areas .............................................................. ........................ ........................ ........................ ........................

Total $ Amount of Microloans Made in Rural Areas ....................................... ........................ ........................ ........................ ........................

# of Microloans Made to Racial and Ethnic Minorities .................................... ........................ ........................ ........................ ........................

# of Microloans Made to women ..................................................................... ........................ ........................ ........................ ........................

# of Microloans Made to the Disabled ............................................................. ........................ ........................ ........................ ........................

(i) Number and amount of microloans 

made during each of the three previous 

Federal FYs. Do not include current 

year information. A narrative may be 

included as a separate attachment, not 

in the body of the suggested table. 

(ii) Number and amount of microloans 

made in rural areas in each of the three 

years prior to the year in which the 

application is submitted. If the history 

of providing microloans in rural areas 

shows: 

(A) More than the three consecutive 

years immediately prior to this 

application, 5 points will be awarded; 

(B) At least two of the years but not 

more than the three consecutive years 

immediately prior to this application, 3 

points will be awarded; 

(C) At least 6 months, but not more 

than one year immediately prior to this 

application, 1 point will be awarded. 

(iii) Percentage of number of loans 

made in rural areas. Calculate and enter 

the total number of microloans made in 

rural areas as a percentage of the total 

number of all microloans made for each 

of the past three Federal FYs. If the 


sroberts on DSKD5P82C1PROD with RULES
30154 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

percentage of the total number of 

microloans made in rural areas is: 

(A) 75 percent or more, 5 points will 

be awarded; 

(B) At least 50 percent but less than 

75 percent, 3 points will be awarded; 

(C) At least 25 but less than 50 

percent, 1 point will be awarded. 

(iv) The percentage of dollar amount 

of loans made in rural areas. Enter the 

dollar amount of microloans made in 

rural areas as a percentage of the dollar 

amount of the total portfolio (rural and 

non-rural) of microloans made for each 

of the previous three Federal FYs. If 

percentage of the dollar amount of the 

microloans made in rural areas is: 

(A) 75 percent or more of the total 

amount, 5 points will be awarded; 

(B) At least 50 percent but less than 

75 percent, 3 points will be awarded; 

(C) At least 25 percent but less than 

50 percent, 1 point will be awarded. 

(v) Each applicant shall compare the 

diversity of its entire microloan 

portfolio to the demographic makeup of 

its service area (as determined by the 

latest applicable decennial census for 

the State) based on the number of 

microloans made during the three years 

preceding the subject application. 

Demographic groups shall include 

gender, racial and ethnic minority 

status, and disability (as defined in The 

Americans with Disabilities Act). Points 

will be awarded on the basis of how 

close the MDO’s microloan portfolio 

matches the demographic makeup of its 

service area. A maximum of 5 points 

will be awarded. 

(A) If at least one loan has been made 

to each demographic group and if the 

percentage of loans made to each 

demographic group is each within 5 or 

less percent of the demographic 

makeup, 5 points will be awarded. 

(B) If at least one loan has been made 

to each demographic group and if the 

percentage of loans made to each 

demographic group is each within 10 or 

less percent of the demographic 

makeup, 3 points will be awarded. 

(C) If at least one loan has been made 

to each demographic group and if the 

percentage of loans made to one or more 

of the demographic groups is greater 

than 10 percent of the demographic 

makeup or if no loans have been made 

to one of the demographic groups and 

if the percentage of loans made to each 

of the other demographic groups is each 

within 10 or less percent of the 

demographic makeup, 1 point will be 

awarded. 

(D) If no loans have been made to two 

or more demographic groups, no points 

will be awarded. 

(2) Portfolio management. Each 

applicant’s ability to manage its 

portfolio will be determined based on 

the data provided in response to 

paragraphs (b)(2)(i) and (ii) of this 

section and scored accordingly. The 

maximum number of points under this 

criterion is 10. 

(i) Enter the total number of your 

microloans paying on time for the three 

previous Federal FYs. If the total 

number of microloans paying on time at 

the end of each year over the prior three 

Federal FYs is: 

(A) 95 percent or more, 5 points will 

be awarded; 

(B) At least 85 percent but less than 

95 percent, 3 points will be awarded; 

(C) Less than 85 percent, 0 points will 

be awarded. 

(ii) Enter the total number of 

microloans 30 to 90 days in arrears or 

that have been written off at year end for 

the three previous Federal FYs. If the 

total number of these microloans is: 

(A) 5 percent or less of the total 

portfolio, 5 points will be awarded; 

(B) More than 5 percent, 0 points will 

be awarded. 

(3) History of provision of technical 

assistance. Each applicant’s history of 

provision of technical assistance to 

microentrepreneurs and 

microenterprises, and their ability to 

reach diverse communities, will be 

scored based on the data specified in 

paragraphs (b)(3)(i) through (iv) of this 

section. Applicants may use a chart 

such as that suggested in Figure 1 as 

they deem appropriate. The maximum 

number of points under this criterion is 

15. 

(i) Provide the total number of rural 

and non-rural microentrepreneurs and 

microenterprises that received both 

microloans and TA services for each of 

the previous three Federal FYs. 

(ii) Provide the percentage of the total 

number of only rural 

microentrepreneurs and rural 

microenterprises that received both 

microloans and TA services for each of 

the previous three Federal FYs 

(calculate this as the total number of 

rural microloans made each year 

divided by the total number of loans 

made during the past three Federal 

FYs). If provision of both microloans 

and technical assistance to rural 

microentrepreneurs and rural 

microenterprises is demonstrated at a 

rate of: 

(A) 75 percent or more, 5 points will 

be awarded; 

(B) At least 50 percent but less than 

75 percent, 3 points will be awarded; 

(C) At least 25 percent but less than 

50 percent, 1 point will be awarded. 

(iii) Provide the percentage of the total 

number of rural microentrepreneurs and 

rural microenterprises by racial and 

ethnic minority, disabled, and/or gender 

that received both microloans and TA 

services for each of the previous three 

Federal FYs. If the demonstrated 

provision of microloans and technical 

assistance to these rural 

microentrepreneurs and rural 

microenterprises is at a rate of: 

(A) 75 percent or more, 5 points will 

be awarded; 

(B) At least 50 percent but less than 

75 percent, 3 points will be awarded; 

(C) At least 25 percent but less than 

50 percent, 1 point will be awarded. 

(iv) Provide the ratio of TA clients 

that also received microloans during 

each of the previous three Federal FYs. 

If the ratio of clients receiving technical 

assistance to clients receiving 

microloans is: 

(A) Between 1:1 and 1:5, 5 points will 

be awarded. 

(B) Between 1:6 and 1:8, 3 points will 

be awarded. 

(C) Either 1:9 or 1:10, 1 point will be 

awarded. 

(4) Ability to provide technical 

assistance. In addition to providing a 

statistical history of their provision of 

technical assistance to 

microentrepreneurs, microenterprises, 

and microborrowers, applicants must 

provide a narrative of not more than five 

pages describing the teaching and 

training methods used by the applicant 

organization to provide such technical 

assistance and discussing the outcomes 

of their endeavors. Technical assistance 

is defined in § 4280.302. The narrative 

will be scored as specified in paragraphs 

(b)(4)(i) through (iv) of this section. The 

maximum number of points under this 

criterion is 5. 

(i) Applicants that have used more 

than one method of training and 

technical assistance (e.g., classroom 

training, peer-to-peer discussion groups, 

individual assistance, distance learning) 

will be awarded 2 points. 

(ii) Applicants that provide success 

stories to demonstrate the effects of 

technical assistance on their clients will 

be awarded 1 point. 

(iii) Applicants that provide evidence 

that they require evaluations by the 

clients of their training programs and 

indicate that the average level of 

evaluation scores is ‘‘good’’ or higher 

will be awarded 1 point. 

(iv) Applicants that present their 

narrative information clearly and 

concisely (five pages or less) and at a 

level expected by trainers and teachers 

will be awarded 1 point. 

(5) Proposed administrative expenses 

to be spent from TA grant funds. The 

maximum number of points under this 

criterion is 5. If the percentage of grant 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30155 

funds to be used for administrative 

purposes is: 

(i) Less than 5 percent of the TA grant 

funding, 5 points will be awarded; 

(ii) Between 5 percent and 8 percent, 

but not including 8 percent, 3 points 

will be awarded; and 

(iii) Between 8 percent up to and 

including 10 percent, 0 point will be 

awarded. 

(c) Application requirements for 

MDOs seeking to participate as RMAP 

microlenders with 3 years or less 

experience. In addition to the 

information required under paragraph 

(a) of this section, an applicant MDO 

with 3 years or less experience that is 

applying to be a microlender must 

submit the information specified in 

paragraphs (c)(1) through (8) of this 

section. The total number of points 

available under this paragraph, in 

addition to the up to 45 points available 

in paragraph (a) of this section, is 55, for 

a total of 100. 

(1) The applicant must provide a 

narrative work plan that clearly 

indicates its intention for the use of loan 

and grant funding. Provide goals and 

milestones for planned microlending 

and technical assistance activities. In 

relation to the information requested in 

paragraph (a) of this section, the 

applicant must describe how it will 

incorporate its mission statement, 

utilize its employees, and maximize its 

human and capital assets to meet the 

goals of this program. The applicant 

must provide its strategic plan and 

organizational development goals and 

clearly indicate its lending goals for the 

five years after the date of application. 

The narrative work plan should be not 

more than five pages in length. Up to 10 

points will be awarded. 

(2) The applicant will provide the 

date that it began business as an MDO 

or other provider of business education 

and/or facilitator of capital. This date 

will reflect when the applicant became 

licensed to do business, in good 

standing with the Secretary of State in 

which it is registered to do business, 

and regularly paid staff to conduct 

business on a daily basis. If the 

applicant has been in business for: 

(i) More than 2 years but less than 3 

years, 5 points will be awarded; 

(ii) At least 1 year, but not more than 

2 years, 3 points will be awarded; 

(iii) At least 6 months, but not more 

than 1 year, 1 point will be awarded; 

(iv) Less than 6 months, or more than 

3 full years, 0 points will be awarded. 

(If more than 3 full years, the applicant 

must apply under the provisions for 

MDOs with more than 3 years 

experience as specified in § 4280.315.) 

(3) The applicant must describe in 

detail any microenterprise development 

training received by it as a whole, or its 

employees as individuals, to date. The 

narrative may refer reviewers to already 

submitted resumes to save space. The 

training received will be rated on its 

topical variety, the quality of the 

description, and its relevance to the 

organization’s strategic plan. The 

applicant should not submit training 

brochures or conference 

announcements. Up to 10 points will be 

awarded. 

(4) The applicant must indicate its 

current number of employees, those that 

concentrate on rural 

microentrepreneurial development, and 

the current average caseload for each. 

Indicate how the caseload ratio does or 

does not optimize the applicant’s ability 

to perform the services described in the 

work plan. Discuss how Agency grant 

funding will be used to assist with TA 

program delivery and how loan funding 

will affect the portfolio. Up to 5 points 

will be awarded. 

(5) The applicant must indicate any 

training organizations with which it has 

a working relationship. Provide contact 

information for references regarding the 

applicant’s capacity to perform the work 

plan provided. If the recommendations 

received from references are: 

(i) Generally excellent, 5 points will 

be awarded; 

(ii) Generally above average, 3 points 

will be awarded; 

(iii) Generally average, 1 point will be 

awarded; 

(iv) Generally less than average, 0 

points will be awarded. 

(6) Describe any plans for continuing 

training relationship(s), including 

ongoing or future training plans and 

goals, and the timeline for same. Up to 

5 points will be awarded. 

(7) The applicant will describe its 

internal benchmarking system for 

determining client success, reporting on 

client success, and following client 

success for up to 5 years after 

completion of a training relationship. 

Up to 10 points will be awarded. 

(8) The applicant will identify its 

proposed administrative expenses to be 

spent from TA grant funds. The 

maximum total number of points under 

this criterion is 5. If the percentage of 

grant funds to be used for administrative 

purposes is: 

(i) Less than 5 percent of the TA grant 

funding, 5 points will be awarded; 

(ii) Between 5 percent and 8 percent, 

but not including 8 percent, 3 points 

will be awarded; and 

(iii) Between 8 percent up to and 

including 10 percent, 0 points will be 

awarded. 

(d) Application requirements for 

MDOs seeking technical assistance-only 

grants. TA-only grants may be provided 

to MDOs that are not RMAP 

microlenders seeking to provide training 

and technical assistance to rural 

microentrepreneurs and rural 

microenterprises. An applicant seeking 

a TA-only grant must submit the 

information specified in paragraphs 

(d)(1) through (4) of this section. The 

total number of points available under 

this section, in addition to the 45 points 

available in paragraph (a) of this section, 

is 55, for a total of 100 points. 

(1) History of provision of technical 

assistance. Each applicant’s history of 

provision of technical assistance to 

microentrepreneurs and 

microenterprises, and their ability to 

reach diverse communities, will be 

scored based on the data specified in 

paragraphs (d)(1)(i) through (iv) of this 

section. Applicants may use a chart 

such as that suggested in Figure 1 as 

they deem appropriate. The maximum 

number of points under this criterion is 

20. 

(i) Provide the total number of rural 

and non-rural microentrepreneurs and 

microenterprises that received both 

microloans and TA services for each of 

the previous three Federal FYs. 

(ii) Provide the percentage of the total 

number of rural microentrepreneurs and 

rural microenterprises that received 

both microloans and TA services for 

each of the previous three Federal FYs 

(calculate this as the total number of 

rural microloans made each year 

divided by the total number of rural and 

non-rural microloans made during the 

past three Federal FYs). If provision of 

both technical assistance and resultant 

microloans to rural microentrepreneurs 

and rural microenterprises is 

demonstrated at a rate of: 

(A) 75 percent or more, 5 points will 

be awarded; 

(B) At least 50 percent but less than 

75 percent, 3 points will be awarded; 

(C) At least 25 percent but less than 

50 percent, 1 point will be awarded. 

(iii) Provide the percentage of the total 

number of rural microentrepreneurs by 

racial and ethnic minority, disabled, 

and/or gender that received both 

microloans and TA services for each of 

the previous three Federal FYs. If the 

demonstrated provision of technical 

assistance and resultant microloans to 

these rural microentrepreneurs when 

compared to the total number of 

microentrepreneurs assisted, is at a rate 

of: 

(A) 75 percent or more, 10 points will 

be awarded; 

(B) At least 50 percent but less than 

75 percent, 7 points will be awarded; 


sroberts on DSKD5P82C1PROD with RULES
30156 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

(C) At least 25 percent but less than 

50 percent, 5 point will be awarded. 

(iv) Provide the ratio of TA clients 

that also received microloans during 

each of the last three years. If the ratio 

of clients receiving technical assistance 

to clients receiving microloans is: 

(A) Between 1:1 and 1:5, 5 points will 

be awarded. 

(B) Between 1:6 and 1:8, 3 points will 

be awarded. 

(C) Either 1:9 or 1:10, 1 point will be 

awarded. 

(2) Ability to provide technical 

assistance. In addition to providing a 

statistical history of their provision of 

technical assistance to 

microentrepreneurs, microenterprises, 

and microborrowers, applicants must 

provide a narrative of not more than five 

pages describing the teaching and 

training method(s) used by the applicant 

organization to provide technical 

assistance and discussing the outcomes 

of their endeavors. The narrative will be 

scored as specified in paragraphs 

(d)(2)(i) through (iv) of this section. The 

maximum number of points under this 

criterion is 20. 

(i) Applicants that have used more 

than one method of training and 

technical assistance (e.g., classroom 

training, peer-to-peer discussion groups, 

individual assistance, distance learning) 

will be awarded 5 points. 

(ii) Applicants that provide success 

stories to demonstrate the effects of 

technical assistance on their clients will 

be awarded points under either of the 

following paragraphs, but not both. 

(A) News stories that highlight 

businesses made successful as a result 

of technical assistance, 5 points will be 

awarded. 

(B) Internal stories that highlight 

businesses made successful as a result 

of technical assistance, 3 points. 

(iii) Applicants that provide evidence 

that they require evaluations by the 

clients of their training programs and 

indicate that the evaluation scores are 

generally: 

(A) Excellent, 5 points will be 

awarded. 

(B) Good, 3 points will be awarded. 

(C) Less than good, 0 points will be 

awarded. 

(iv) Applicants that present wellwritten narrative information that is 

clearly and concisely written and is five 

pages or less will be awarded 5 points. 

(3) Technical assistance plan. Submit 

a plan for the provision of technical 

assistance explaining how the funding 

will benefit the current program and 

how it will allow the applicant to 

expand its non-program microlending 

activities. Up to 10 points will be 

awarded 

(4) Proposed administrative expenses 

to be spent from TA grant funds. The 

maximum number of points under this 

criterion is 5. If the percentage of grant 

funds to be used for administrative 

purposes is: 

(i) Less than 5 percent of the TA grant 

funding, 5 points will be awarded; 

(ii) Between 5 percent and 8 percent, 

but not including 8 percent, 3 points 

will be awarded; and 

(iii) Between 8 percent up to and 

including 10 percent, 1 point will be 

awarded. 

(e) Re-application requirements for 

participating microlenders with more 

than 5 years experience as a 

microlender under this program. 

(1) Microlender applicants with more 

than 5 years of experience as an MDO 

under this program may choose to 

submit a shortened loan/grant 

application that includes the following: 

(i) A letter of request for funding 

stating the amount of loan and/or grant 

funds being requested; 

(ii) An indication of the loan and/or 

grant amounts being requested 

accompanied by a completed SF 424 

and any pertinent attachments; 

(iii) An indication of the number and 

percent of program microentrepreneurs 

and microenterprises remaining in 

business for two years or more after 

microloan disbursement; and 

(iv) A recent resolution of the 

applicant’s Board of Directors approving 

the application for debt. 

(2) The Agency, using this request, 

and data available in the reports 

submitted under previous fundings, will 

review the overall program performance 

of the applicant over the life of its 

participation in the program to 

determine its continued qualification for 

subsequent funding. Requirements 

include: 

(i) A default rate of 5 percent or less; 

(ii) A pattern of delinquencies during 

the period of participation in this 

program of 10 percent or less; 

(iii) A pattern of use of TA dollars that 

indicates at least one in ten TA clients 

receive a microloan; 

(iv) A statement discussing the need 

for more funding, accompanied by 

account documentation showing the 

amounts in each of the RMRF and LLRF 

accounts established to date; and 

(v) A pattern of compliance with 

program reporting requirements. 

(3) Shortened applications under this 

section will be rated on a pass or fail 

basis. Passing applications will be 

assigned a score of 90 points and will 

be ranked accordingly in the quarterly 

competitions. Failing applications will 

be scored 0. 

§ 4280.317 Selection of applications for 

funding. 

All applications received will be 

scored using the scoring criteria 

specified in § 4280.316. Because each 

set of applicants is scored on a 100 

point scale, applications will be ranked 

together. Shortened applications can 

only receive 90 points. Within funding 

limitations, applications will be funded 

in descending order, from the highest 

ranking application down. If two or 

more applications score the same, the 

Administrator may prioritize such 

applications to help the program 

achieve overall geographic diversity. 

(a) Timing and submission of 

applications. 

(1) All applications must be submitted 

as a complete application, in one 

package. Packages must be bound in a 

three ring binder and evidence must be 

organized in the order of appearance in 

§ 4280.315 of this document. 

Applications that are unbound, 

disorganized, or otherwise not ready for 

evaluation will be returned. 

(2) Applications will be accepted on 

a quarterly basis using Federal fiscal 

quarters. Deadlines and specific 

application instructions will be 

published annually in the Federal 

Register. 

(3) Applications received will be 

reviewed, scored, and ranked quarterly. 

Unless withdrawn by the applicant, the 

Agency will retain unsuccessful 

applications that score 70 points or 

more, for consideration in subsequent 

reviews, through a total of four quarterly 

reviews. Applications unsuccessful after 

4 quarters will be returned. 

(b) Availability of funds. If an 

application is received, scored, and 

ranked, but insufficient funds remain to 

fully fund it, the Agency may elect to 

fund an application requesting a smaller 

amount that has a lower score. Before 

this occurs, the Agency, as applicable, 

will provide the higher scoring 

applicant the opportunity to reduce the 

amount of its request to the amount of 

funds available. If the applicant agrees 

to lower its request, it must certify that 

the purposes of the project can be met, 

and the Agency must determine that the 

project is financially feasible at the 

lower amount. 

(c) Applicant notification. The 

Agency will notify applicants regarding 

their selection or non-selection, provide 

appeal rights of unsuccessful applicants, 

and closing procedures for the loans 

and/or grants to awardees. 

(d) Closing. Awardees unable to 

complete closing for obligation within 

90 days will forfeit their funding. Such 

funding will revert back to the Agency 

for later use. 


sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 30157 

§§ 4280.318–4280.319 [Reserved] 

§ 4280.320 Grant administration. 

(a) Oversight. Any MDO receiving a 

grant under this program is subject to 

Agency oversight, with site visits and 

inspection of records occurring at the 

discretion of the Agency. In addition, 

MDOs receiving a grant under this 

subpart must submit reports, as 

specified in paragraphs (a)(1) through 

(3) of this section. 

(1) On a quarterly basis, within 30 

days after the end of each Federal fiscal 

quarter, the microlender will provide to 

the Agency an Agency-approved 

quarterly report containing such 

information as the Agency may require 

to ensure that funds provided are being 

used for the purposes for which the 

grant was made, including: 

(i) SF–PPR, ‘‘Performance Progress 

Report,’’ including narrative reporting 

information as required by Office of 

Management and Budget (OMB) 

circulars and successor regulations. This 

report will include information on the 

microlender’s technical assistance, 

training, and/or enhancement activity, 

and grant expenses, milestones met, or 

unmet, explanation of difficulties, 

observations and other such 

information; 

(ii) As appropriate, SF–270; and 

(iii) If requesting grant funding at the 

time of reporting, SF–PPR–E, ‘‘Activity 

Based Expenditures.’’ 

(2) If a microlender has more than one 

grant from the Agency, a separate report 

must be made for each. 

(3) Other reports may be required by 

the Agency from time to time in the 

event of poor performance or other such 

occurrences that require more than the 

usual set of reporting information. 

(b) Payments. The Agency will make 

grant payments not more often than on 

a quarterly basis. The first payment may 

be made in advance and will equal no 

more than one fourth of the grant award. 

Payment requests must be submitted on 

Standard Form 270 and will only be 

paid if reports are up to date and 

approved. 

§ 4280.321 Grant and loan servicing. 

In addition to the ongoing oversight of 

the participating MDOs: 

(a) Grants. Grants will be serviced in 

accordance with all applicable 

regulations: 

(1) Department of Agriculture 

regulations including, but not limited to 

7 CFR part 1951, subparts E and O, parts 

3015, 3016, 3017, 3018, 3019, and 3052; 

and 

(2) Office of Management and Budget 

(OMB) regulations including, but not 

limited to, 2 CFR parts 215, 220, 230, 

and OMB Circulars A–110 and A–133. 

(b) Loans. Loans to microlenders will 

be serviced in accordance with the 

following: 

(1) Department of Agriculture 

regulations 7 CFR part 1951, subparts E, 

O, and R; 

(2) Other Department of Agriculture 

regulations as may be applicable; and 

(3) OMB Circular A–129. 

§ 4280.322 Loans from the microlenders to 

microentrepreneurs. 

The primary purpose of making a loan 

to a microlender is to enable that 

microlender to make microloans. It is 

the responsibility of each 

microborrower to repay the microlender 

in accordance with the terms and 

conditions agreed to with the 

microlender. It is the responsibility of 

each microlender to make microloans in 

such a fashion that the terms and 

conditions of the microloan will support 

microborrower success while enabling 

the microlender to repay the Federal 

Government. 

(a) Maximum microloan amount. The 

maximum amount of a microloan made 

under this program will be $50,000. 

(b) Microloan terms and conditions. 

The terms and conditions for 

microloans made by microlenders will 

be negotiated between the prospective 

microborrower and the microlender, 

with the following limitations: 

(1) No microloan may have a term of 

more than 10 years; 

(2) The interest rate charged to the 

microborrower will be established at, or 

before the closing of the microloan; and 

(3) The microlender may establish its 

margin of earnings but may not adjust 

the margin so as to violate Fair Credit 

Lending laws. Margins must be 

reasonable so as to ensure that 

microloans are affordable to the 

microborrowers. 

(c) Microloan insurance requirements. 

The requirement of reasonable hazard, 

key person, and other insurance will be 

at the discretion of the microlender. 

(d) Credit elsewhere test. 

Microborrowers will be subject to a 

‘‘credit elsewhere’’ test so that the 

microlender will make loans only to 

those borrowers that cannot obtain 

business funding of $50,000 or less at 

affordable rates and on acceptable 

terms. Each microborrower file must 

contain evidence that the 

microborrower has sought credit 

elsewhere or that the rates and terms 

available within the community at the 

time were outside the range of the 

microborrower’s affordability. Evidence 

may include a comparison of rates, loan 

limitations, terms, etc. for other funding 

sources to those forth offered by the 

microlender). Denial letters from other 

lenders are not required. 

(e) Fair credit requirements. To ensure 

fairness, microlenders must publicize 

their rates and terms on a regular basis. 

Microlenders are also subject to Fair 

Credit lending laws as discussed in 

§ 4280.305. 

(f) Eligible microloan purposes. 

Agency loan funds may be used to make 

microloans as defined in § 4280.302 for 

any legal business purpose not 

identified in § 4280.323 as an ineligible 

purpose. Microlenders may make 

microloans for qualified business 

activities and expenses including, but 

not limited to: 

(1) Working capital; 

(2) The purchase of furniture, fixtures, 

supplies, inventory or equipment; 

(3) Debt refinancing; 

(4) Business acquisitions; and 

(5) The purchase or lease of real estate 

that is already improved and will be 

used for the location of the subject 

business only, provided no demolition 

or construction will be accomplished 

with program funding. Neither interior 

decorating, nor the affixing of chattel to 

walls, floors, or ceilings are considered 

to be demolition or construction. 

(g) Military personnel. Military 

personnel who are or seek to be a 

microentrepreneur and are on active 

duty with six months or less remaining 

in their active duty status may receive 

a microloan and/or technical assistance 

and training if they are otherwise 

qualified to participate in the program. 

§ 4280.323 Ineligible microloan purposes 

and uses. 

Agency loan funds will not be used 

for the payment of microlender 

administrative costs or expenses and 

microlenders may not make microloans 

under this program for any of purposes 

and uses identified as ineligible in 

paragraphs (a) through (p) of this 

section. 

(a) Construction costs. 

(b) Any amount in excess of that 

needed by a microborrower to 

accomplish the immediate business 

goal. 

(c) Assistance that will cause a 

conflict of interest or the appearance of 

a conflict of interest including but not 

limited to: 

(1) Financial assistance to principals, 

directors, officers, or employees of the 

microlender, or their close relatives as 

defined; and 

(2) Financial assistance to any entity 

the result of which would appear to 

benefit the microlender or its principals, 

directors, or employees, or their close 

relatives, as defined, in any way other 

than the normal repayment of debt. 


sroberts on DSKD5P82C1PROD with RULES
30158 Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules and Regulations 

(d) Distribution or payment to a 

microborrower when such will use any 

portion of the microloan for other than 

the purpose for which it was intended. 

(e) Distribution or payment to a 

charitable institution not gaining 

revenue from sales or fees to support the 

operation and repay the microloan. 

(f) Microloans to a fraternal 

organization. 

(g) Any microloan to an applicant that 

has an RMAP funded microloan 

application pending with another 

microlender or that has an RMAPfunded microloan outstanding with 

another microlender that would cause 

the applicant to owe a combined 

amount of more than $50,000 to one or 

more microlenders under this program. 

(h) Assistance to USDA Rural 

Development (Agency) employees, or 

their close relatives, as defined. 

(i) Any illegal activity. 

(j) Any project that is in violation of 

either a Federal, State, or local 

environmental protection law, 

regulation, or enforceable land use 

restriction unless the microloan will 

result in curing or removing the 

violation. 

(k) Microloans to lending and 

investment institutions and insurance 

companies. 

(l) Golf courses, race tracks, or 

gambling facilities. 

(m) Any lobbying activities as 

described in 7 CFR part 3018. 

(n) Lines of credit. 

(o) Subordinated liens. 

(p) Use of an Agency funded loan to 

pay debt service on a previous Agency 

loan. 

§§ 4280.324–4280.399 [Reserved] 

§ 4280.400 OMB control number. 

The information collection 

requirements contained in this 

regulation have been approved by the 

Office of Management and Budget 

(OMB) and have been assigned OMB 

control number 0570–XXXX. A person 

is not required to respond to this 

collection of information unless it 

displays a currently valid OMB control 

number. 

Dated: May 13, 2010. 

Curtis A. Wiley, 

Acting Administrator, Rural BusinessCooperative Service. 

[FR Doc. 2010–11931 Filed 5–27–10; 8:45 am] 

BILLING CODE 3410–XY–P 


sroberts on DSKD5P82C1PROD with RULES