This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

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Rules and Regulations Federal Register

27243 

Vol. 74, No. 109 

Tuesday, June 9, 2009 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 120 

RIN 3245–AF93 

American Recovery and Reinvestment 

Act: America’s Recovery Capital 

(Business Stabilization) Loan Program 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Interim final rule with request 

for comments. 

SUMMARY: This interim final rule 

implements section 506 of the American 

Recovery and Reinvestment Act of 2009, 

which authorizes SBA to establish a 

temporary program to guarantee loans to 

viable small business concerns that have 

a qualifying small business loan, and are 

experiencing immediate financial 

hardship. Loans made under this 

program, referred to as ‘‘America’s 

Recovery Capital Loan Program’’ (ARC 

Loan Program) can be used to make 

principal and interest payments on 

existing qualifying small business loans. 

DATES: Effective Date: This rule is 

effective June 9, 2009. 

Comment Date: Comments must be 

received on or before August 10, 2009. 

ADDRESSES: You may submit comments, 

identified by RIN: 3245–AF93 by any of 

the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Janet A. Tasker, Office of 

Capital Access, Small Business 

Administration, 409 Third Street, SW., 

Washington, DC 20416. 

• Hand Delivery/Courier: Janet A. 

Tasker, Office of Capital Access, Small 

Business Administration, 409 Third 

Street, SW., Washington, DC 20416. 

SBA will post all comments on 

www.regulations.gov. If you wish to 

submit confidential business 

information (CBI) as defined in the User 

Notice at www.regulations.gov, please 

submit the information to Janet A. 

Tasker, Office of Capital Access, Small 

Business Administration, 409 Third 

Street, SW., Washington, DC 20416, or 

send an e-mail to 

ARCloanprogram@sba.gov. Highlight 

the information that you consider to be 

CBI and explain why you believe SBA 

should hold this information as 

confidential. SBA will review the 

information and make the final 

determination as to whether it will 

publish the information. 

FOR FURTHER INFORMATION CONTACT: 

Janet A. Tasker, Office of Capital 

Access, Small Business Administration, 

409 Third Street, SW., Washington, DC 

20410 or via e-mail at 

ARCloanprogram@sba.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

The American Recovery and 

Reinvestment Act of 2009 (the Recovery 

Act), Public Law 111–5, 123 Stat. 115, 

was enacted on February 17, 2009, to, 

among other things, promote economic 

recovery by preserving and creating 

jobs, and assisting those most impacted 

by the severe economic conditions 

facing the nation. SBA is one of several 

agencies that are intended to play a role 

in achieving these goals. SBA received 

funding and authority through the 

Recovery Act for several actions to help 

small business lending, including 

authority to establish a new temporary 

loan program to help troubled 

businesses. 

One provision included in the 

Recovery Act is to provide SBA with 

temporary authority to fully guarantee 

loans (ARC Loans) to viable small 

businesses that have a qualifying small 

business loan(s) and are experiencing 

immediate financial hardship. In order 

to implement this change, SBA will 

amend the business loan regulations in 

13 CFR part 120 to add the requirements 

which must be met by lenders and 

borrowers participating in the ARC Loan 

Program. The requirements for the ARC 

Loan Program will be promulgated 

under new § 120.398. 

II. Section by Section Analysis 

Sections 120.398(a) and (b) set forth 

the statutory purpose of the ARC Loan 

Program and define terms used in the 

regulation. The purpose of the ARC 

Loan Program is to enable SBA to 

guarantee loans to viable small 

businesses that are experiencing 

immediate financial hardship. SBA is 

applying the rules and other 

requirements of the 7(a) program to the 

ARC Loan Program except as 

specifically set forth in section 120.398 

of the regulations. Accordingly, only 

7(a) lenders may make ARC Loans. 

Lenders who are not currently 7(a) 

lenders may apply to participate in this 

and the 7(a) program. 

The regulation defines an eligible 

borrower, a going concern, a viable 

small business, and a qualifying small 

business loan consistent with the 

requirements of the Recovery Act. The 

definition of eligible borrower includes 

the basic eligibility requirements and 

ineligibility provisions for small 

businesses contained in sections 

120.100 and 120.110, respectively, of 

this Part. Section 1604 of the Recovery 

Act states that no funds appropriated or 

otherwise made available in the 

Recovery Act may be used by any 

private entity for any casino or other 

gambling establishment, aquarium, zoo, 

golf course, or swimming pool. Casinos 

and gambling establishments are 

currently ineligible for SBA financial 

assistance under § 120.110. Aquariums, 

zoos, golf courses and swimming pools 

are eligible for SBA financial assistance 

under the Small Business Act and the 

Small Business Investment Act; 

however, they are not eligible for 

assistance under the Recovery Act. For 

that reason, SBA has determined that 

small business concerns with the 

following primary industry North 

American Industry Classification 

System (NAICS) codes are ineligible for 

ARC Loans: (a) 713210 (Casinos (Except 

Casino Hotels)); (b) 721120 (Casino 

Hotels); (c) 713290 (Other Gambling 

Industries); (d) 713910 (Golf Courses 

and Country Clubs); and (e) 712130 

(Zoos and Botanical Gardens). 

Applications submitted by small 

business concerns with a primary 

industry NAICS code of 713940 (Fitness 

and Recreational Sports Centers), which 

includes both swimming pools and 

other types of fitness and recreational 

centers, will be identified and reviewed 

by SBA to determine eligibility in 

accordance with the Recovery Act 

statutory restriction on assistance to 

swimming pools. A ‘‘going concern’’ is 

defined as a small business that is 

actively engaging in business with the 

expectation of indefinite continuance. 

27244 Federal Register / Vol. 74, No. 109 / Tuesday, June 9, 2009 / Rules and Regulations 

The definition of ‘‘qualifying small 

business loan’’ incorporates the 

provisions of eligible uses of proceeds 

in § 120.120, and ineligible uses of 

proceeds included in §§ 120.130 and 

102.160(d), respectively. A ‘‘viable 

small business’’ is a going concern that 

is having difficulty making periodic 

payments of principal and interest on 

qualifying small business loans and/or 

meeting the operating expenses of the 

business, provided it can reasonably 

demonstrate its projected operation for 

a reasonable period beyond the six 

month period of payment assistance 

with an ARC Loan. 

Section 120.398(c) establishes that the 

ARC Loan Program terminates when 

appropriated funds are exhausted or on 

September 30, 2010, whichever is 

sooner. 

Section 120.398 (d) describes the 

permissible use of proceeds for an ARC 

Loan. It implements the Recovery Act 

requirement that an ARC Loan must be 

used to make periodic payments of 

principal and interest for up to six (6) 

months, on one or more existing 

qualifying small business loans. 

However, under the Recovery Act, an 

ARC Loan cannot be used to make 

payments on loans made or guaranteed 

by SBA prior to February 17, 2009. 

Loans excluded under this provision 

include 7(a) loans guaranteed by SBA, 

Development Company 504 loans/ 

debentures guaranteed by SBA, SBA 

disaster loans made to small businesses, 

and SBA loans made to microloan 

intermediaries, in each case if made 

prior to February 17, 2009. Lenders are 

encouraged to defer, or, if appropriate, 

restructure these excluded loans to best 

assist the small businesses. ARC Loans 

may be used to make payments on loans 

made or guaranteed by SBA on or after 

February 17, 2009. 

Section 120.398(e) establishes basic 

loan terms for ARC Loans: SBA will 

guaranty 100% of each ARC Loan; the 

interest rate on an ARC Loan shall be 

published by the Agency in the Federal 

Register; the maximum amount of an 

ARC Loan shall not exceed $35,000; and 

the maturity shall be up to six and onehalf years. In addition, a lender’s 

disbursements of an ARC loan must be 

made during a period not exceeding six 

(6) consecutive months; the borrower 

will be responsible for all principal 

payments, but will not be required to 

make interest payments on the ARC 

Loan; SBA will make interest payments 

to the lender on the ARC Loan; a 

borrower of an ARC loan does not have 

to make any repayments during the 

disbursement period and for twelve (12) 

months after final disbursement; 

repayment of an ARC Loan shall 

commence no later than thirteen (13) 

months after final disbursement; and the 

loan balance shall be fully amortized 

over the next five (5) years. SBA will 

pay interest to the lender only until the 

date 120 days after the earliest uncured 

payment default on the ARC Loan. In 

addition, the amounts paid by SBA for 

interest and/or the guarantee at the time 

of purchase will be adjusted to reconcile 

for any over- or underpayments of 

interest identified throughout the life of 

the loan. To accommodate timing delays 

in disbursing the ARC Loan after 

approval, SBA will allow up to two 

months after approval to begin 

disbursement of the ARC Loan. Once 

the first disbursement of an ARC Loan 

is made, the disbursement period may 

not exceed six consecutive months. 

Section 120.398(f) provides that no 

small business may obtain more than 

one ARC Loan in order to ensure both 

a comprehensive analysis of a small 

business’ viability as well as to ensure 

the availability of funding to support the 

maximum number of small businesses. 

Section 120.398(g) provides that a 

holder of at least 20 percent ownership 

of the small business must generally 

guarantee the ARC Loan. This 

requirement is identical to the 7(a) loan 

program requirement. 

Section 120.398(h) provides that a 

lender shall secure its ARC loans 

consistent with the collateral policies 

and procedures that it has established 

and implemented for its similarly-sized 

non-SBA guaranteed commercial loans. 

The Lender’s collateral policies must be 

commercially reasonable and prudent. 

SBA will allow lenders to charge 

borrowers for the direct cost of securing 

and liquidating collateral and SBA will 

reimburse lenders for the direct costs of 

liquidating collateral that are not 

reimbursed by borrowers (consistent 

with SBA’s established practices) in the 

event of default. However, SBA will 

limit reimbursement of the direct costs 

of liquidation to the amount of the 

recovery received on an ARC Loan. 

Section 120.398(i) provides that an 

applicant for an ARC Loan must be a 

creditworthy small business with a 

reasonable expectation of repayment, 

taking into consideration the following: 

(1) Character, reputation, and credit 

history of the applicant (and the 

Operating Company, if applicable) and 

its Associates; (2) experience and depth 

of management; (3) strength of the 

business; (4) past earnings, current 

earnings, and projected cash flow; and 

(5) ability to repay the loan with 

earnings from the business. 

Section 120.398(j) prescribes 

certification requirements for each ARC 

Loan. In addition to the certification 

requirements applicable to 7(a) loans 

generally, including, for example, the 

certification that the borrower is current 

with all Federal, state and local taxes (or 

is current in making payments on an 

executed agreement with the 

appropriate taxing authority) and will 

stay current with all such tax 

obligations, borrowers must submit a 

statement certifying that they are 

experiencing immediate financial 

hardship and provide documentation to 

support the certification. SBA will 

provide additional guidance on what 

constitutes immediate financial 

hardship in the procedural guidance 

and forms developed to administer the 

ARC Loan Program. 

Section 120.398(k) was added to 

describe the content of an ARC Loan 

application. At a minimum, ARC Loan 

applications must include information 

on the nature and history of the small 

business, current and historical 

financial statements (or tax returns) and 

such additional information as SBA may 

require. The provisions of section 

120.191 do not apply to ARC Loans. 

Section 120.398(l) allows lenders to 

use the proceeds of an ARC Loan to 

make periodic payments of principal 

and interest on a loan held by the 

lender, without SBA’s consent. This 

provision is consistent with the 

intention of Section 506 of the Recovery 

Act to assist viable small businesses 

facing immediate financial hardship to 

make periodic payments of principal 

and interest on existing loans, whether 

or not held by the same lender because 

it is reasonable to expect that the vast 

majority of lenders making ARC Loans 

will have an established lending 

relationship with the borrower. This 

subsection also provides that certain 

sections in Part 120 which prohibit 

preferences shall not be applicable to 

ARC Loans. These sections are 120.10, 

120.536(a)(2) and 120.925. In addition, 

the provisions of section 120.201 

restricting refinancing do not apply to 

ARC Loans. Section 120.201 provides 

that a borrower may not use 7(a) loan 

proceeds to pay any creditor in a 

position to sustain a loss. 

The Recovery Act prohibits SBA from 

charging any loan fees for ARC Loans. 

With the exception of charging 

borrowers for the direct costs of 

securing and liquidating collateral for 

ARC Loans, SBA has determined that 

lenders may not charge fees or other 

costs to borrowers who receive ARC 

Loans. Lenders are receiving 100% SBA 

guarantees on loans with reasonable 

interest rates that will be paid by SBA, 

made to small businesses that are 

experiencing financial hardships. 

Further, lenders are allowed to use the 

Federal Register / Vol. 74, No. 109 / Tuesday, June 9, 2009 / Rules and Regulations 27245 

proceeds of ARC Loans to make periodic 

principal and interest payments on 

loans they hold and/or service, which 

improves their financial position 

relative to their original loan. This 

combination of factors led SBA to 

conclude that lender-charged fees are 

not appropriate for ARC Loans or 

consistent with the intent of the 

Recovery Act. Excluded fees include, 

but are not limited to, points, bonus 

points, prepayment penalties, brokerage 

fees, fees for processing, origination, or 

application, and out of pocket expenses 

other than the direct costs of securing 

and liquidating collateral. While the 

Recovery Act does not prohibit SBA 

from charging fees to lenders on ARC 

Loans, SBA has determined that in 

order to encourage program 

participation, SBA will not charge any 

fees to lenders making ARC Loans. 

These provisions are included in 

§ 120.398(m). 

Section 120.398 (n) provides that 

Lender reporting to SBA will be 

consistent with requirements 

established by SBA from time to time 

for 7(a) loans and loans made under the 

Recovery Act. 

Sections 120.398(o) and (p) provide 

that ARC Loans will be serviced and 

liquidated by the lender originating the 

ARC Loan, in accordance with the 

practices and procedures that the 

Lender uses for its non-SBA guaranteed 

commercial loans. The practices must 

be commercially reasonable and 

consistent with prudent lending 

standards and in accordance with SBA 

Loan Program requirements defined in 

Section 120.10. SBA will provide 

additional guidance on how lenders 

shall service and liquidate ARC Loans 

in the procedural guidance developed to 

administer the ARC Loan Program. 

Only the originating lender can 

request SBA to honor its guaranty if the 

ARC Loan goes into default. Section 

120.398(q) establishes the standards for 

purchasing guarantees. Lenders may 

request SBA to purchase an ARC Loan 

when there has been an uncured 

payment default exceeding 60 days or 

when the borrower has declared 

bankruptcy. SBA requires Lenders to 

submit loans for purchase no later than 

120 days after the earliest uncured 

payment default on the ARC Loan. 

Additionally, SBA may honor its 

guarantee and require a Lender to 

submit an ARC Loan for purchase at any 

time. Lenders are required to complete 

recovery actions on ARC Loans after 

purchase. SBA will provide additional 

guidance on how lenders shall request 

purchase of an ARC Loan in the 

procedural guidance developed to 

administer the ARC Loan Program. 

Section 120.398(r) provides that ARC 

Loans cannot be sold in the secondary 

market nor may a lender participate a 

portion of an ARC loan with another 

lender. As noted above, it is the 

originating lender who must make the 

request to SBA to honor its guaranty if 

an ARC Loan defaults. 

Funding for the ARC Loan Program is 

limited. In order to ensure that the ARC 

Loans are available to small businesses 

to the maximum extent possible, section 

120.398(s) was included in the rule to 

inform ARC Loan Program participants 

that SBA has the right to allocate 

volume to providers of ARC Loans. With 

this provision, SBA will be able to 

ensure that all lenders have access to 

ARC Loans to support small businesses. 

Section 120.398(t) provides that SBA 

may allow lenders to use their delegated 

authority to process ARC Loans. SBA 

will provide additional guidance on 

how delegated and non-delegated 

lenders may participate in the 

procedural guidance developed to 

administer the ARC Loan Program. 

Given that the small businesses 

eligible for ARC Loans are experiencing 

immediate financial hardship, the 

availability of additional personal 

resources from alternative sources is 

considered remote. Section 120.398(u) 

was added stating that the provisions of 

section 120.102 requiring a personal 

resources test are not applicable to ARC 

Loans. 

Section 120.398(v) provides that the 

provisions of section 120.151 which 

limit the aggregate amount of the SBA 

portions of all loans to a single 

borrower, including the borrower’s 

affiliates, to a certain guaranty amount 

are not applicable to ARC Loans. 

III. Justification for Publication as 

Interim Final Rule 

In general, before issuing a final rule, 

SBA publishes the rule for public 

comment in accordance with the 

Administrative Procedure Act (APA), 5 

U.S.C. 553. The APA provides an 

exception from the general rule where 

the agency finds good cause to omit 

public participation. 5 U.S.C. 

553(c)(3)(B). The good cause 

requirement is satisfied when prior 

public participation can be shown to be 

impracticable, unnecessary, or contrary 

to the public interest. Under such 

circumstances, an agency may publish 

an interim final rule without first 

soliciting public comment. 

In enacting the good cause exception 

to standard rulemaking procedures, 

Congress recognized that emergency 

situations arise where an agency must 

issue a rule without public 

participation. The current turmoil in the 

financial markets is having a negative 

impact on the availability of financing 

for small businesses. There is an urgent 

need to assist viable small businesses 

that are experiencing financial 

hardships due to the current economic 

environment. The ARC Loan Program is 

designed to provide an immediate 

infusion of capital to small businesses to 

assist with making periodic payments of 

principal and interest. A delay in 

obtaining the financing needed by these 

small businesses will, in many cases, 

have a direct impact on their 

survivability. 

SBA finds that good cause exists to 

publish this rule as an interim final rule 

in light of the urgent need to help small 

businesses sustain and survive during 

this economic downturn. Advance 

solicitation of comments for this 

rulemaking would be impracticable, 

contrary to the public interest, and 

would harm those small businesses that 

need immediate relief on eligible debt. 

In addition, the Recovery Act mandates 

that the SBA issue emergency 

regulations to implement the ARC Loan 

Program and specifically exempts any 

such regulations from the notice and 

comment requirement of the APA. 

Although this rule is being published 

as an interim final rule, comments are 

solicited from interested members of the 

public. These comments must be 

submitted on or before August 10, 2009. 

The SBA will consider these comments 

and the need for making any 

amendments as a result of these 

comments. 

IV. Justification for Immediate Effective 

Date 

The APA requires that ‘‘publication or 

service of a substantive rule shall be 

made not less than 30 days before its 

effective date, except * * * as 

otherwise provided by the agency for 

good cause found and published with 

the rule.’’ 5 U.S.C. 553(d)(3). The 

purpose of this provision is to provide 

interested and affected members of the 

public sufficient time to adjust their 

behavior before the rule takes effect. 

The ARC Loan Program is designed to 

provide an immediate infusion of 

capital to small businesses to assist with 

making periodic payments of principal 

and interest. A delay in obtaining the 

financing needed by these small 

businesses will, in many cases, have a 

direct impact on their survivability 

making it necessary to implement this 

rule immediately. Lenders making ARC 

Loans might need time to make system 

adjustments; however this time is 

mitigated by the benefits to lenders and 

small businesses from immediate 

27246 Federal Register / Vol. 74, No. 109 / Tuesday, June 9, 2009 / Rules and Regulations 

implementation of the ARC Loan 

Program. 

In light of the urgent need to help 

small businesses sustain and survive 

during this economic downturn, SBA 

finds that there is good cause for making 

this rule effective immediately instead 

of observing the 30-day period between 

publication and effective date. Delaying 

implementation of the rule would have 

a serious adverse impact on the nation’s 

small businesses. 

Compliance With Executive Orders 

12866, 12988, 13175 and 13132, the 

Paperwork Reduction Act (44 U.S.C., 

Ch. 35), and the Regulatory Flexibility 

Act (5 U.S.C. 601–612) 

Executive Order 12866 

The Office of Management and Budget 

(OMB) has determined that this rule 

constitutes a significant regulatory 

action for purposes of Executive Order 

12866. 

Executive Order 12988 

This action meets applicable 

standards set forth in sections 3(a) and 

3(b)(2) of Executive Order 12988, Civil 

Justice Reform, to minimize litigation, 

eliminate ambiguity, and reduce 

burden. The action does not have 

retroactive or preemptive effect. 

Executive Order 13132 

This rule does not have federalism 

implications as defined in Executive 

Order 13132. It will not have substantial 

direct effects on the States, on the 

relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government, as specified in the 

Executive Order. As such it does not 

warrant the preparation of a Federalism 

Assessment. 

Paperwork Reduction Act 

The SBA has determined that this 

interim final rule imposes reporting and 

recordkeeping requirements as defined 

under the Paperwork Reduction Act, 44 

U.S.C. Chapter 35. This additional 

information consists of the four forms 

described below that are necessary to 

process applications for assistance 

under the ARC Loan Program. SBA has 

submitted these information collections 

to OMB for review under the emergency 

review proceedings. Emergency review 

and approval will facilitate urgent 

implementation of the ARC Loan 

Program, which is expected to provide 

debt relief to small businesses that are 

currently facing financial hardship, 

including difficulties repaying existing 

debt. Delay in implementing the loan 

program would only exacerbate the 

already critical economic conditions 

facing these eligible small business 

concerns. 

A. Title and Description of 

Information Collection: SBA Form 2315: 

America’s Recovery Capital (ARC) 

Borrower Information Form. 

Purpose: The information collected on 

this form is modeled on two currently 

approved information collections: OMB 

Control #3245–0016, SBA’s 7(a) loan 

application, and OMB Control #3245– 

0178, Statement of Personal History, 

which is used to collect personal 

information on the individuals 

associated with the small business loan 

applicant. Those two collections of 

information will not be discontinued; 

they will continue to be used for their 

approved purposes. The application 

information requested includes 

identifying information regarding the 

applicant and its principals, including 

indebtedness; current or previous 

government financing; suspension or 

debarment history; and certain other 

disclosures regarding principals’ 

criminal history. The personal 

information facilitates borrower 

background checks as authorized by 

Section 7(a)(1)(B) of the Small Business 

Act, 15 U.S.C. 636(a)(1)(B). 

OMB Control Number: New 

collection. 

Description of and Estimated Number 

of Respondents: This information will 

be collected from the small business 

concerns that are applying for financial 

assistance under the ARC program. SBA 

estimates 12,000 small businesses will 

submit applications over the course of a 

year. 

Estimated Number of Responses: Each 

small business concern can submit only 

one application under the ARC loan 

program; therefore the estimated 

number of responses is 12,000. 

Estimated Response Time: 10 

minutes. 

Total Estimated Annual Hour Burden: 

2,000 hours. 

B. Title and Description: Form 2316 

(Part A): America’s Recovery Capital 

(ARC) Loan Guaranty Request. 

Purpose: This information collection 

is submitted by approximately nondelegated lenders seeking SBA’s 

guarantee on an ARC loan. The 

information is provided along with 

Forms 2316 (Part B) and (Part C) to the 

SBA’s 7(a) Loan Processing Centers. 

OMB Control Number: New 

collection. 

Description of and Estimated Number 

of Respondents: 400 non-delegated 

lenders (these lenders are a subset of the 

total estimated 2,000 lenders who will 

participate in the ARC program) who 

will not submit information through E– 

Tran. 

Estimated Number of Responses: 840. 

Estimated Response Time: 5 minutes 

per response. 

Estimated Annual Hour Burden: 70 

hours. 

C. Title and Description: Form 2316 

(Part B): Supplemental Information for 

America’s Recovery Capital (ARC) Loan 

Guaranty Request. 

Purpose: Since ARC loans are 

specifically to be used to make 

payments on existing business loans, 

the form is designed to more easily 

identify which debt(s) have been 

reduced through the use of ARC loan 

proceeds. In addition, in order to 

facilitate required reporting under the 

Recovery Act, this form also collects 

information on the number of jobs 

created or retained as a result of the 

ARC loan financing. 

OMB Control Number: New 

collection. 

Description of and Estimated Number 

of Respondents: This form may be 

submitted by all lenders participating in 

the SBA’s 7(a) loan program. We 

estimate that a total of 2,000 lenders 

will submit this information collection. 

Estimated Number of Responses: 

12,000. 

Estimated Response Time: 15 

minutes. 

Total Estimated Annual Hour Burden: 

3,000 hours. 

D. Title and Description: Form 2316 

(Part C), Eligibility Information 

Required for America’s Recovery Capital 

(ARC) Loan Submission. 

Purpose: The information will be used 

to determine whether the loan 

application meets the eligibility criteria 

for an ARC Loan, as stated in this 

regulation. 

OMB Control Number: New 

collection. 

Description of and Estimated Number 

of Respondents: This form may be 

submitted by all lenders participating in 

the SBA’s 7(a) loan program. We 

estimate that a total of 2,000 lenders 

will submit this information collection. 

Estimated Number of Responses: 

12,000. 

Estimated Response Time: 10 

minutes. 

Total Estimated Annual Hour Burden: 

2,000 hours. 

SBA invites comments on these 

information collections, particularly on: 

(1) Whether the proposed collection of 

information is necessary for the proper 

performance of SBA’s functions, 

including whether the information will 

have a practical utility; (2) the accuracy 

of SBA’s estimate of the burden of the 

proposed collections of information; (3) 

Federal Register / Vol. 74, No. 109 / Tuesday, June 9, 2009 / Rules and Regulations 27247 

ways to enhance the quality, utility, and 

clarity of the information to be 

collected; and (4) ways to minimize the 

burden of the collection of information 

on respondents, including through the 

use of automated collection techniques, 

when appropriate, and other forms of 

information technology. 

Please send comments by the closing 

date for comment for this interim final 

rule to SBA Desk Officer, Office of 

Management and Budget, Office of 

Information and Regulatory Affairs, 725 

17th Street, NW., Washington, DC 20503 

and to Janet A. Tasker, Office of Capital 

Access, Small Business Administration, 

409 Third Street, SW., Washington, DC 

20416. 

Regulatory Flexibility Act 

Because this rule is an interim final 

rule, there is no requirement for SBA to 

prepare a Regulatory Flexibility Act 

(RFA) analysis. The RFA requires 

administrative agencies to consider the 

effect of their actions on small entities, 

small non-profit businesses, and small 

local governments. Pursuant to the RFA, 

when an agency issues a rule, the 

agency must prepare analysis that 

describes whether the impact of the rule 

will have a significant economic impact 

on a substantial number of small 

entities. However, the RFA requires 

such analysis only where notice and 

comment rulemaking is required. 

List of Subjects in 13 CFR Part 120 

Loan programs—business, Small 

businesses. 

■ For the reasons stated in the preamble, 

SBA amends 13 CFR part 120 as 

follows: 

PART 120—BUSINESS LOANS 

■ 1. The authority citation for 13 CFR 

part 120 is revised to read as follows: 

Authority: 15 U.S.C. 634(b)(6), (b)(7), 

(b)(14), (h), and note, 636(a), (h) and (m), 650, 

687(f), 696(3), and 697(a) and (e); Public Law 

111–5, 123 Stat. 115. 

■ 2. Add a new undesignated center 

heading and new § 120.398 to subpart C 

to read as follows: 

America’s Recovery Capital (Business 

Stabilization) Loan Program—ARC 

Loan Program 

§ 120.398 America’s Recovery Capital 

(ARC) Loan Program. 

(a) Purpose. The purpose of the ARC 

Loan Program is to enable SBA to 

guarantee certain loans to viable small 

businesses that are experiencing 

immediate financial hardship. Loans 

made under this loan program are 

referred to as ARC Loans and are subject 

to the requirements set forth in this Part 

for 7(a) loans except as noted in this 

section. 

(b) Definitions. 

(1) (i) Eligible Borrower is a small 

business concern as defined in Section 

3 of the Small Business Act and 

§ 120.100. Eligible Borrower does not 

include: 

(A) Ineligible small businesses as 

listed in § 120.110; and 

(B) Small business concerns with the 

following primary industry North 

American Industry Classification 

System (NAICS) codes: 

(1) 713210 (Casinos (Except Casino 

Hotels)); 

(2) 721120 (Casino Hotels); 

(3) 713290 (Other Gambling 

Industries); 

(4) 713910 (Golf Courses and Country 

Clubs); and 

(5) 712130 (Zoos and Botanical 

Gardens). 

(ii) Applications submitted by small 

business concerns with a primary 

industry NAICS code of 713940 (Fitness 

and Recreational Sports Centers) will be 

identified and reviewed by SBA to 

determine eligibility in accordance with 

the statutory restriction on assistance to 

swimming pools. 

(2) Going Concern is a small business 

concern actively engaging in business 

with the expectation of indefinite 

continuance. 

(3) Qualifying Small Business Loan is 

a loan previously made to an Eligible 

Borrower for any of the purposes set 

forth in § 120.120 and not for any of the 

purposes set forth in § 120.130 or 

120.160(d). Qualifying Small Business 

Loans may include credit card 

obligations, capital leases for major 

equipment and vehicles, notes payable 

to vendors or suppliers, loans in the first 

lien position made by commercial 

lenders in connection with the 

Development Company Loan Program 

(504), home equity loans used to finance 

business operations, other loans to small 

businesses made without an SBA 

guaranty, and loans made by or with an 

SBA guaranty on or after February 17, 

2009. Loans made or guaranteed by SBA 

before February 17, 2009 are not 

Qualifying Small Business Loans for the 

purposes of the ARC Loan Program. A 

Qualifying Small Business Loan may 

not be used as the basis for more than 

one ARC Loan but ARC Loans may be 

used to pay multiple Qualifying Small 

Business Loans. 

(4) Viable small business is a small 

business that is a Going Concern but 

which is having difficulty making 

periodic payments of principal and 

interest on Qualifying Small Business 

Loan(s) and/or meeting operating 

expenses of the business although it can 

reasonably demonstrate its projected 

continued operation for a reasonable 

period beyond the six month period of 

payment assistance with an ARC Loan. 

(c) Period of program. The ARC Loan 

Program is authorized through 

September 30, 2010, or until 

appropriated funds are exhausted, 

whichever is sooner. 

(d) Use of proceeds. Loans made 

under the ARC Loan Program are for the 

sole purpose of making periodic 

payments of principal and interest 

(including default interest), in full or in 

part, for up to six (6) months, on one or 

more existing Qualifying Small Business 

Loans. ARC Loan proceeds cannot be 

used to make payments on loans made 

or guaranteed by SBA prior to February 

17, 2009. 

(e) Loan terms. 

(1) Guaranty percentage. ARC Loans 

are 100% guaranteed by SBA. 

(2) Maximum loan size. An ARC Loan 

may not exceed $35,000. 

(3) Interest rate. The interest rate for 

ARC Loans will be published by SBA in 

the Federal Register. 

(4) Loan maturity. An ARC Loan may 

be made with a maturity of up to six and 

one-half years. 

(5) Disbursement period. The 

disbursement period for an ARC Loan is 

up to six consecutive months. 

(6) Loan payments. 

(i) Borrower’s payments. The 

borrower will be responsible for all 

principal payments. 

(ii) Payment of interest by SBA. SBA 

will make periodic interest payments to 

the lender on ARC Loans. Interest will 

accrue only until the date 120 days after 

the earliest uncured payment default on 

the ARC Loan. However, the amount 

paid by SBA on a defaulted ARC Loan, 

when it honors its guarantee, will be 

adjusted to reconcile for any 

overpayments or underpayments of 

interest previously paid to the Lender. 

Interim adjustments to interest paid by 

SBA to lenders may be made during the 

term of the ARC Loan and interest 

payments due the Lender will be 

adjusted to accommodate the interim 

interest adjustments. 

(iii) Deferral period. No principal 

repayment is required during the 

disbursement period or for 12 months 

following the final loan disbursement. 

(iv) Repayment period. The borrower 

will be required to pay the loan 

principal over five years beginning in 

the 13th month following the final loan 

disbursement. The ARC Loan balance 

will be fully amortized over the five 

year repayment period. Balloon 

payments may not be required by 

lenders. The borrower may prepay all or 

27248 Federal Register / Vol. 74, No. 109 / Tuesday, June 9, 2009 / Rules and Regulations 

a portion of the principal during the life 

of the loan without penalty. 

(f) Number of ARC Loans per small 

business. No small business may obtain 

more than one ARC Loan, but the 

proceeds of the ARC loan may be used 

to pay more than one Qualifying Small 

Business Loan. 

(g) Personal guarantees. Holders of at 

least a 20 percent ownership interest in 

the borrower generally must guarantee 

the ARC Loan. 

(h) Collateral. SBA requires each 

lender to follow the collateral policies 

and procedures that it has established 

and implemented for similarly-sized 

non-SBA guaranteed commercial loans. 

The lender’s collateral policies must be 

commercially reasonable and prudent. 

Lenders will certify that the collateral 

policies applied to the ARC Loan meet 

this standard. Lenders may charge 

borrowers the direct cost of securing 

and liquidating collateral for ARC 

Loans. SBA will reimburse Lenders for 

the direct cost of liquidating collateral 

that are not reimbursed by the borrower 

in the event of default. Reimbursement 

of the direct costs of liquidation by SBA 

to the Lender is limited to the amount 

of the recovery received on the ARC 

Loan. 

(i) Credit criteria. To be approved for 

an ARC Loan, the applicant must be a 

creditworthy small business with a 

reasonable expectation of repayment, 

taking into consideration the following: 

(1) Character, reputation, and credit 

history of the applicant (and the 

Operating Company, if applicable) and 

its Associates; 

(2) Experience and depth of 

management; 

(3) Strength of the business; 

(4) Past earnings, current earnings, 

and projected cash flow; and 

(5) Ability to repay the loan with 

earnings from the business. 

(j) Statement of hardship. In addition 

to the certifications required for 7(a) 

loans generally, ARC Loan recipients 

must submit a statement certifying that 

they are experiencing immediate 

financial hardship and provide 

documentation to support the 

certification. 

(k) Loan application. The provisions 

of § 120.191 do not apply for ARC 

Loans. A lender making an ARC Loan 

will provide an application with 

information on the small business that 

includes the nature and history of the 

business, current and historical 

financial statements (or tax returns), and 

other information that SBA may require. 

(l) Preferences and refinancing. A 

lender may make an ARC Loan to an 

Eligible Borrower that intends to use the 

proceeds of the ARC Loan to make 

periodic payments of principal and 

interest on a Qualifying Small Business 

Loan that is owned or serviced by that 

same lender. The provisions of 

§§ 120.10, 120.536(a)(2) and 120.925 

with regard to Preference for 

repayments without prior SBA approval 

do not apply to ARC Loans. The 

provisions of § 120.201 restricting 

refinancing also do not apply to ARC 

Loans. 

(m) Loan fees. Neither the lender nor 

SBA shall impose any fees or direct 

costs on a borrower of an ARC Loan, 

except that lenders may charge 

borrowers for the direct costs of 

securing and liquidating collateral for 

the ARC Loan. Fees include, but are not 

limited to, points, bonus points, 

prepayment penalties, brokerage fees, 

fees for processing, origination, or 

application, and out of pocket expenses 

(other than the direct costs of securing 

and liquidating collateral). SBA will not 

impose any fees on a lender making an 

ARC Loan. 

(n) Lender reporting. Lenders shall 

report on its ARC Loans in accordance 

with requirements established by SBA 

from time to time for 7a loans and loans 

made under the American Recovery and 

Reinvestment Act of 2009. 

(o) Loan servicing. Each originating 

lender shall service all of its ARC Loans 

in accordance with the existing 

practices and procedures that the 

Lender uses for its non-SBA guaranteed 

commercial loans. In all circumstances, 

such practices and procedures must be 

commercially reasonable and consistent 

with prudent lending standards and in 

accordance with SBA Loan Program 

Requirements as defined in § 120.10. 

SBA’s prior written consent is required 

for servicing actions that may have 

significant exposure implications for 

SBA. SBA may require written notice of 

other servicing actions it considers 

necessary for portfolio management 

purposes. 

(p) Liquidations. Each Lender shall be 

responsible for liquidating any 

defaulted ARC Loan originated by the 

Lender. ARC Loans will be liquidated in 

accordance with the existing practices 

and procedures that the Lender uses for 

its non-SBA guaranteed commercial 

loans. In all circumstances, such 

practices and procedures must be 

commercially reasonable and consistent 

with prudent lending standards and in 

accordance with SBA Loan Program 

Requirements as defined in Section 

120.10. Loans with de minimis value 

may, at the Lender’s request and with 

SBA’s approval, be liquidated by SBA or 

its agent(s). Significant liquidation 

actions taken on ARC Loans must be 

documented. The reimbursement of 

liquidation related fees by SBA to the 

Lender is limited to the amount of the 

recovery on the ARC Loan. 

(q) Purchase requests. Any purchase 

request to SBA to honor its guaranty on 

a defaulted ARC Loan shall be made by 

the originating lender. Lenders may 

request SBA to purchase an ARC Loan 

when there has been an uncured 

payment default exceeding 60 days or 

when the borrower has declared 

bankruptcy. SBA requires Lenders to 

submit loans for purchase no later than 

120 days after the earliest uncured 

payment default on the ARC Loan. 

Additionally, SBA may honor its 

guarantee and require a Lender to 

submit an ARC Loan for purchase at any 

time. Except as noted above, the Lender 

is required to complete all recovery 

actions on the ARC Loan after purchase. 

(r) Prohibition on secondary market 

sales and loan participations. A lender 

may not sell an ARC loan into the 

secondary market nor may a lender 

participate a portion of an ARC loan 

with another lender. 

(s) Loan volume. SBA reserves the 

right to allocate loan volume under the 

ARC Loan Program among Lenders (as 

defined in § 120.10). 

(t) Delegated authority. SBA may 

allow lenders to use their delegated 

authority to process ARC Loans. 

(u) Personal resources test. The 

personal resources test provisions of 

§ 120.102 do not apply to ARC Loans. 

(v) Statutory loan limit. The 

provisions of § 120.151 do not apply to 

ARC Loans. 

Karen G. Mills, 

Administrator. 

[FR Doc. E9–13480 Filed 6–8–09; 8:45 am] 

BILLING CODE 8025–01–P 

CONSUMER PRODUCT SAFETY 

COMMISSION 

16 CFR Part 1500 

Labeling Amendment of Blasting Caps 

AGENCY: Consumer Product Safety 

Commission. 

ACTION: Final rule. 

SUMMARY: The Consumer Product Safety 

Commission (Commission or CPSC) is 

issuing a final rule to supplement the 

current definition of ‘‘blasting cap’’ in 

its regulations under the Federal 

Hazardous Substances Act. The final 

rule simply uses the term ‘‘detonator’’ in 

addition to the term ‘‘blasting cap’’ to 

reflect the current usage of those terms 

in the explosives industry. 

DATES: The final rule becomes effective 

June 9, 2009.