Document ID: DOT-OST-2008-0236-0003
Agency: dot
Document Type: Rule
Title: Short-Term Lending Program
Posted Date: 2010-04-14T04:00Z

[Federal Register: April 14, 2010 (Volume 75, Number 71)]
[Rules and Regulations]               
[Page 19285-19295]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14ap10-21]                         

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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

49 CFR Part 22

[Docket No OST-2008-0236]
RIN 2105-AD50

 
Short-Term Lending Program (STLP)

AGENCY: Office of the Secretary (OST), Department of Transportation 
(DOT).

ACTION: Final rule.

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SUMMARY: This final rule governs the Short Term Lending Program (STLP), 
which provides financial assistance in the form of guarantees of short-
term revolving lines of credit from Participating Lenders (PLs) to 
disadvantaged Business Enterprises (DBEs) and other certified small and 
disadvantaged business (SDBs) in connection with transportation-related 
contracts at the local, state and federal levels. The program is 
administered through cooperative agreements between DOT's Office of 
Small and Disadvantaged Business Enterprise (OSDBU) and Participating 
Lenders and under the STLP's governing policies and procedures.

DATES: This rule is effective May 14, 2010.

FOR FURTHER INFORMATION CONTACT: Nancy Strine, Financial Assistance 
Division Manager, U.S Department of Transportation, OSDBU, 1200 New 
Jersey Ave, SE., Room W56-497, Washington, DC 20590. Telephone: (800) 
532-1169 or e-mail: Nancy.Strine@dot.gov.

SUPPLEMENTARY INFORMATION:

Background

    On August 21, 2008, the Office of Small and Disadvantaged Business 
Utilization (OSDBU) of the Office of the Secretary (OST) of the 
Department of Transportation (DOT) issued a Notice of Proposed 
Rulemaking (NPRM) in Docket OST-2008-0236 proposing to adopt 
regulations governing its Short Term Lending Program (STLP) and 
published the NPRM in the Federal Register. See ``Department of 
Transportation, Office of the Secretary, 49 CFR part 22 [Docket NO: 
OST-2008-0236], RIN 2105-AD50, 73 FR 49386 et seq. (August 21, 2008).'' 
In the NPRM, we announced that we were considering regulations to 
replace the internal policies and guidelines that had for years been 
used to manage the STLP.
    As noted in the NPRM, the Secretary of Transportation has delegated 
the authority to carry out the functions in

[[Page 19286]]

section 906 of the Railroad Revitalization and Regulatory Reform Act of 
1976 (Pub. L. 940-210, as amended) known as the Minority Business 
Resource Center Program, which includes a guaranteed loan program, to 
the Director of DOT's OSDBU. 49 U.S.C. 332 authorizes DOT's OSDBU to 
establish, under the Minority Business Resource Center, programs that 
would assist disadvantaged business enterprises (DBEs) and small 
disadvantaged businesses (SDBs) in acquiring access to working capital 
and to debt financing, in order to obtain transportation-related 
contracts wholly or partially funded by DOT. To implement this 
authority, OSDBU developed its Short Term Lending Program (STLP) which 
offers DBE's and other certified small and disadvantaged businesses 
short term working capital loans at variable interest rates to perform 
on these transportation-related contracts.
    Initially developed in 1989 as a direct loan program, the STLP was 
converted in 2001 to a loan guarantee program under which private 
sector Participating Lenders offer loans with a government guarantee of 
up to 75 percent for qualified applicants.
    These loans are revolving lines of credit that provide working 
capital funds to assist the borrower in financing the direct labor and 
material costs of completing transportation contracts. The contracts 
that are funded are assigned to the loan as collateral, and the 
Participating Lender advances monies up to 85% of eligible and approved 
Accounts Receivable that arise from the Assigned Contract(s). The 
contracts must be transportation-related and receive at least one 
dollar of DOT funding. Repayment comes in the form of a two-party check 
to the borrower and to the PL directly from the contract proceeds. The 
total length of time that an eligible borrower may remain in the 
program cannot exceed a total of five years.
    DOT monitors these loans, which require contract assignments and 
direct joint payee check remittances for principal repayment, through 
its relationship with the transportation agencies and recipients that 
receive DOT funds and the Participating Lenders. In recent years the 
total funds available for full principal amount of loans under the STLP 
has been limited to $18,367,000 per fiscal year.
    We pointed out in the NPRM that the STLP has undergone an extensive 
program review to improve its business processes and achieve 
operational and financial efficiencies and that, as part of this 
effort, we were asking for comments on proposed regulations to replace 
the internal policies and guidelines that were being used to manage the 
program. We received no comments in response to the NPRM.
    We have determined to adopt the rule as proposed, with one minor 
exception. In the NPRM, we proposed to include as part of the rule 
copies of the actual forms to be used by DBEs and Participating Lenders 
for various aspects of the STLP, such as Loan Activation, Loan 
Extension, Loan Close-out, and various certifications required for loan 
applications. Because those forms may be amended and in order to make 
up-to-date forms more easily accessible to DBEs and Participating 
Lenders, we have determined that it would be in the public interest to 
make those forms available through the OSDBU Web site instead of 
including them with the rule itself. Accordingly, changes to the final 
rule have been made to accomplish this objective, including providing 
the appropriate Web site address for each form.

Section-by-Section Analysis

    The proposed regulations utilize objective, plain language in an 
attempt to make the regulations more understandable to Participating 
Lenders, DBEs and other small and disadvantaged businesses.
    Sec.  22.1 Purpose: The purpose of the DOT OSDBU STLP is to provide 
financial assistance, in the form of a short-term loan from 
Participating Lenders that is guaranteed by DOT OSDBU, to DBE's and 
other certified small businesses for the execution of DOT funded and 
supported transportation-related contracts.
    Sec.  22.3 Definitions: This section contains definitions of common 
banking and lending terminology included in STLP documents and the STLP 
Policy and Procedure Manual.
    Sec.  22.11 Eligibility Criteria: Paragraph (a) defines those 
requirements needed in order to qualify for a STLP loan. Paragraph (b) 
clarifies what instrument qualifies as a ``transportation-related 
contract,'' and paragraph (c) explains the maximum length of time in 
which a qualified business may remain as an STLP borrower, as well as 
what circumstances and documentation are required on an annual basis in 
order to remain eligible.
    Sec.  22.13 Loan Terms and Conditions: Section 22.13 describes the 
parameters of the Short Term Lending Program, including: maximum loan 
amount, interest rates, the term and structure of the loan, source of 
funds for loan repayment, allowable uses of the loan proceeds, how loan 
disbursements are made, as well as any personal guarantees, collateral 
or insurance.
    Sec.  22.15 Delinquency on Federal, State, or Municipality Debt: 
This section provides that the borrower must be current on all federal, 
state, and local taxes to be able to participate in the program.
    Sec.  22.17 Compliance with Child Support Obligations: STLP 
applicants must submit a certification that he or she is not more than 
60 days delinquent in child support payments. The Office of Management 
and Budget (OMB) Circular No. A-129, Revised (Policies for Federal 
Credit Programs and Non-Tax Receivables) prohibits individuals that are 
delinquent in child support obligations from eligibility for Federal 
financial assistance.
    Sec.  22.19 Credit Criteria: Section 22.19 describes the required 
creditworthiness of an STLP applicant, and lists those aspects of 
creditworthiness that OSDBU will consider in its evaluation of an STLP 
application.
    Sec.  22.21 Participation Criteria: Section 22.21 describes the 
criteria for banks in order to qualify as STLP Participating Lenders, 
including certifications, documentation, history of community 
involvement, loan experience, and the ability to implement, monitor and 
manage this loan program.
    Sec.  22.23 Agreement: Section 22.23 describes the Cooperative 
Agreement that is executed between DOT and the Participating Lender 
that defines the relationship between the two, as well as the 
responsibilities and obligations of each party with regard to the STLP.
    Sec.  22.25 Lender Deliverables and Delivery Schedule: This section 
describes the obligation of the Participating Lenders to adhere to 
established deadlines for actions, such as the submission of periodic 
reports and site visits.
    Sec.  22.27 Eligible Reimbursements to Participating Lenders: 
Section 22.27 describes the fees and expenses for which Participating 
Lenders are eligible to be reimbursed.
    Sec.  22.29 DOT Access to Participating Lenders' Files: Section 
22.29 describes the policy that governs DOT access to Participating 
Lenders' records and files.
    Sec.  22.31 Suspension or Revocation of Eligibility to Participate: 
This section describes the circumstances under which the STLP 
eligibility of a Participating Lender may be suspended or revoked, and 
the notification procedure for such an action.
    Sec.  22.33 Termination of Participation in STLP: Section 22.33 
explains the situations under which the cooperative agreement between 
DOT OSDBU and

[[Page 19287]]

the Participating Lender may be terminated, by either party, and the 
notification procedure for such action.
    Sec.  22.41 Application Procedures: Describes the complete STLP 
application process, the supporting documentation that must accompany 
the STLP application, and the submission process of the application to 
the Participating Lender.
    Sec.  22.43 Approval or Denial: Section 22.43 describes what will 
occur when an application is approved or denied, and the method of 
notification.
    Sec.  22.45 Allowable Fees to Borrowers: This section describes 
those fees that a Participating Lender may collect from the borrower.
    Sec.  22.51 Loan Closing: Section 22.51 discusses the process that 
the Participating Lender must follow to close and execute an STLP loan 
to a recipient.
    Sec.  22.53 Loan Monitoring and Servicing Requirements: Section 
22.53 describes what is required of the Participating Lender insofar as 
the monitoring and servicing of an STLP loan.
    Sec.  22.57 Loan Reporting Requirements: Section 22.57 clarifies 
that the STLP loan is subject to the Federal Credit Reform Act of 1990, 
and describes those reporting requirements that a Participating Lender 
must undertake to keep DOT OSDBU informed of the borrower's compliance 
with the terms of the STLP loan.
    Sec.  22.59 Loan Modifications: Describes the procedure that the 
Participating Lender must follow for any proposed modifications of the 
terms of the guarantee agreement between DOT OSDBU and the 
Participating Lender.
    Sec.  22.61 Loan Guarantee Extensions: Section 22.61 describes the 
process under which an extension of the loan guarantee may be requested 
and granted.
    Sec.  22.63 Loan Close Outs: Section 22.63 describes the process 
for closing out an STLP loan in DOT's records that has been fully 
repaid.
    Sec.  22.65 Subordination: Section 22.65 describes the parameters 
of a subordination of the line of credit in which the debt guarantee of 
DOT OSDBU has priority over any other debt of the borrower.
    Sec.  22.67 Delinquent Loans and Loan Defaults: This section 
describes the notification procedure that a Participating Lender must 
undertake whenever an STLP loan is delinquent. This section also 
indicates the possible collection or litigation processes that are 
available in the event of loan delinquency or default.
    Sec.  22.69 Claim Process: Section 22.69 describes the action that 
the Participating Lender may take once all means for the collection of 
a delinquent debt have been exhausted.

Regulatory Analyses and Notices

A. Executive Order 12866 (Regulatory Planning and Review)

    This proposed rule is not a ``significant regulatory action'' under 
section 3(f) of Executive Order 12866, Regulatory Planning and Review, 
and does not require an assessment of potential costs and benefits 
under section 6(a)(3) of the Order, as it does not have an annual 
effect on the economy of $100 million or more, nor affect the economy 
adversely; does not interfere or cause a serious inconsistency with any 
action or plan of another agency; does not materially alter the impact 
of entitlements, grants, user fees or loan programs; and does raise 
novel legal or policy issues. The rule is essentially a streamlining of 
the provisions for implementing an existing program, and it will not 
create additional burdens on program participants.

B. Executive Order 12372 (Intergovernmental Review)

    The STLP is not subject to the provisions of Executive Order 12372, 
which requires intergovernmental consultation with state and local 
officials that would provide the non-Federal funds for, or that would 
be directly affected by, proposed Federal financial assistance or 
direct Federal development, as the STLP program facilitates the 
participation of small and disadvantaged businesses in fully or 
partially federally funded local and state transportation projects.

C. Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), I certify that this rule will not have a significant economic 
impact on a substantial number of small entities. The rule will not 
place burdens on small entities. Rather, the rule is intended to 
provide benefits to small entities by providing a loan guarantee for 
DBEs and SDBs who require financial assistance to perform on 
transportation-related contracts.

D. Executive Order 13132 (Federalism)

    A rule has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect on State or local 
governments and would either preempt State law or impose a substantial 
direct cost of compliance on them. We have analyzed this proposed rule 
under the Order and have determined that it does not have implications 
for federalism, as the loan program creates relationships and 
obligations between a borrower (usually a sub-contractor), a prime 
contractor, a Participating Lender and DOT/OSDBU only.

E. Paperwork Reduction Act

    As required by the Paperwork Reduction Act of 1995, DOT has 
submitted the Information Collection Requests (ICRs) below to the 
Office of Management and Budget (OMB). Before OMB decides whether to 
approve these proposed collections of information and issue a control 
number, the public must be provided 30 days to comment. Organizations 
and individuals desiring to submit comments on the collection of 
information should direct them to the Office of Management and Budget, 
Attention: Desk Officer for the Office of the Secretary of 
Transportation, Office of Information and Regulatory Affairs, 
Washington, DC 20503, and should also send a copy of their comments to 
Department of Transportation, OSDBU, 1200 New Jersey Ave, SE., 
Washington, DC 20590. OMB is required to make a decision concerning the 
collection of information requirements contained in this rule between 
30 and 60 days after publication of this document in the Federal 
Register. Therefore, a comment is best assured of having its full 
effect if OMB receives it within 30 days of publication.
    We will respond to any OMB or public comments on the information 
collection requirements contained in this rule. OST OSDBU may not 
impose a penalty on persons for violating information collection 
requirements which do not display a current OMB control number, if 
required. OST OSDBU intends to obtain current OMB control numbers for 
the new information collection requirements resulting from this 
rulemaking action. The OMB control number, when assigned, will be 
announced by separate notice in the Federal Register.
    The ICRs were previously published in the Federal Register as part 
of NPRM [73 FR 49386] and the Department invited interested persons to 
submit comments on any aspect of these ICRs, including: (1) Whether the 
proposed collection is necessary for the OSDBU's performance; (2) the 
accuracy of the estimated burdens; (3) ways for OSDBU to enhance the 
quality, usefulness, and clarity of the collected information; and (4) 
ways that the burden could be minimized without reducing the quality of 
the collected information.

[[Page 19288]]

    For each of these information collections, the title, a description 
of the entity to which it applies, and an estimate of the annual 
recordkeeping and periodic reporting burden are set forth below.
    It is estimated that the total burden hours for 100 Participating 
Lenders to qualify as such, monitor loans, comply with monthly 
reporting and retain loan records to be approximately 8,000 hours per 
year. It is estimated that the total burden hours for 100 borrowers to 
complete the STLP application, with supporting documentation, loan 
renewals and the submission of the same, to be approximately 2,700 
hours.
    Title: Short Term Lending Program--Participating Lenders--
Qualifying Criteria.
    Background: OSDBU's Short Term Lending Program (STLP) offers 
certified Disadvantaged Business Enterprises (DBEs) and other Certified 
Small Businesses (8a, women-owned, small disadvantaged, HubZone, 
veteran-owned, and service-disabled veteran-owned) the opportunity to 
obtain short-term working capital at prime interest rates for 
transportation-related projects. The STLP provides up to a 75% 
guaranteed revolving line of credit for a maximum of $750,000 to 
finance accounts receivable arising from transportation-related 
contracts. The primary collateral consists of the proceeds of the 
transportation-related contracts. These loans are provided through 
banks that serve as STLP Participating Lenders (PL).
Participating Lender Qualifying Criteria
    As a requirement for approval as a Participating Lender, banks must 
submit documentation that demonstrates:
    (A) Their philosophy and history of lending to small and 
disadvantaged businesses in their communities. As part of their 
submission, the bank must show these efforts in relationship to its 
overall lending portfolio.
    Respondents: 100.
    Frequency: Once.
    Estimated Average Burden per Response: 3 hours.
    Estimated Total Annual Burden Hours: 300 hours.
    (B) Their experience in administering monitored lines of credit, 
such as construction loans, accounts receivable financing, and/or 
contract financing for at least two years. Such experience should be 
held by any Participating Lender representative managing, reviewing or 
authorizing STLP loan portfolios.
    Respondents: 100.
    Frequency: Once.
    Estimated Average Burden per Response: \1/2\ hour.
    Estimated Total Annual Burden Hours: 50 hours.
    (C) At least two (2) years experience with other federal government 
lending programs such as U.S. Small Business Administration (SBA), 
Agriculture Rural Development, Bureau of Indian Affairs (BIA), Economic 
Development Administration (EDA), Department of Housing and Urban 
Development (HUD), Export Import Bank of the United States and/or state 
loan programs.
    Respondents: 100.
    Frequency: Once.
    Estimated Average Burden per Response: \1/2\ hour.
    Estimated Total Annual Burden Hours: 50 hours.
    (D) At least a satisfactory or better Community Reinvestment Act 
(CRA) rating.
    Respondents: 100.
    Frequency: Once.
    Estimated Average Burden per Response: 15 minutes.
    Estimated Total Annual Burden Hours: 25 hours.
    (E) The ability to implement, monitor and manage a two-party payee 
check system, in which the Participating Lender and borrower are joint 
payees of any checks paid to the borrower for performance under the 
assigned contract(s).
    Respondents: 100.
    Frequency: Once.
    Estimated Average Burden per Response: 15 minutes.
    Estimated Total Annual Burden Hours: 25 hours.
    (F) That it is not currently debarred or suspended from 
participation in a government contract or delinquent on a government 
debt by submitting a current form DOT F 2309-1 Certification Regarding 
Debarment, Suspension. The certification form is available at http://
www.osdbu.dot.gov/financial/docs/Cert_Debarment_DOT_F_2309-1.pdf.
    Respondents: 100.
    Frequency: Once.
    Estimated Average Burden per Response: 15 minutes.
    Estimated Total Annual Burden Hours: 25 hours.
    (G) That it is a drug-free workplace by executing a current form 
DOT F 2307-1 Drug-Free Workplace Act Certification for a Grantee Other 
Than an Individual. The certification form is available at http://
www.osdbu.dot.gov/financial/docs/Cert_Drug-Free_DOT_F_2307-1.pdf.
    Respondents: 100.
    Frequency: Once.
    Estimated Average Burden per Response: 15 minutes.
    Estimated Total Annual Burden Hours: 25 hours.
    (H) That no Federal funds will be utilized for lobbying by 
executing a current form DOT F 2308-1 Certificate Regarding Lobbying 
For Contracts, Grants, Loans, and Cooperative Agreements in compliance 
with Section 1352, Title 21, of the U.S. Code. The certification form 
is available at http://www.osdbu.dot.gov/financial/docs/Cert_
Lobbying_DOT_F_2308-1.pdf.
    Respondents: 100.
    Frequency: Once.
    Estimated Average Burden per Response: 15 minutes.
    Estimated Total Annual Burden Hours: 25 hours.
Participating Lender Record Retention
    A Participating Lender must allow the authorized representatives of 
OSDBU, as well as representatives of the Office of Inspector General 
(OIG) and General Accountability Office (GAO), access to its STLP loan 
files to review, inspect, and copy all records and documents pertaining 
to OSDBU guaranteed loans. The PL shall retain all documents, files, 
books, and records relevant to the execution and implementation of the 
terms of its Cooperative Agreement with OSDBU for a period of not less 
than three years from the date of termination of the Cooperative 
Agreement or payment in full from the borrower; except in cases where 
litigation, collection action, or audit is commenced. In these cases, 
records and other materials shall be retained until the litigation, 
collection action, or audit is judicially or administratively final.
    Respondents: 100.
    Frequency: Annually.
    Estimated Average Burden per Response: \1/2\ hour.
    Estimated Total Annual Burden Hours: 50 hours.
Participating Lender Reporting Requirements
    The STLP is subject to the requirements of the Federal Credit 
Reform Act of 1990 (FCRA) that includes certain budgeting and 
accounting requirements for Federal credit programs. The Participating 
Lender must undertake processes to activate, monitor, service, and 
close out STLP loans. To fulfill the requirements of FCRA, the 
Participating Lender must submit regular reports and required 
documentation to OSDBU on these processes.
    (A) Loan Activation: The Participating Lender must submit to OSDBU 
a form DOT F 2303-1 Bank Verification Loan

[[Page 19289]]

Activation Form that indicates the date in which the loan has been 
activated/funded. The form is available at  http://www.osdbu.dot.gov/
financial/docs/Loan_Activation_DOT_F_2303-1.pdf.
    Respondents: 100.
    Frequency: Annually, up to five years.
    Estimated Average Burden per Response: \1/2\ hour.
    Estimated Total Annual Burden Hours: 50 hours.
    (B) Loan Close-out: The Participating Lender must submit to OSDBU a 
form DOT F 2304-1 Bank Acknowledgement Loan Close-Out Form upon full 
repayment of the STLP loan, or upon expiration of the loan guarantee. 
The form is available at http://www.osdbu.dot.gov/financial/docs/Loan_
Close-Out_DOT_F_2304-1.pdf.
    Respondents: 100.
    Frequency: Annually.
    Estimated Average Burden per Response: \1/2\ hour.
    Estimated Total Annual Burden Hours: 50 hours.
    (C) Monthly Reporting Requirement: The Participating Lender must 
submit each month to OSDBU form DOT F 2306-1 Pending Loan Status Report 
and form DOT F 2305-1 Guaranty Loan Status Report detailing the 
previous month's activity for their STLP loans. These forms are 
available at http://www.osdbu.dot.gov/financial/docs/Pending_Loan_
DOT_F_2306-1.xls and http://www.osdbu.dot.gov/financial/docs/
Guaranty_Loan_DOT_F_2305-1.xls respectively.
    Respondents: 100.
    Frequency: Monthly.
    Estimated Average Burden per Response: 1 hour.
    Estimated Total Annual Burden Hours: 1,200 hours.
    (D) Call Reports or Thrift Financial Reports: Participating Lenders 
shall provide two copies of their quarterly Reports of Condition and 
Income (Federal Financial Institutions Examination Council--FFIEC Form 
041), or quarterly Thrift Financial Reports (Office of Thrift 
Supervision--OTS Form 1313) within 60 days after the close of each 
calendar quarter.
    Respondents: 100.
    Frequency: Quarterly.
    Estimated Average Burden per Response: 15 minutes.
    Estimated Total Annual Burden Hours: 100 hours.
    (E) Credit verification: The Participating Lender's internal credit 
approval memo, credit analysis, and any other third-party credit 
verifications obtained to the process the loan application must 
accompany their internally-approved loan package submission to OSDBU.
    Respondents: 100.
    Frequency: For each loan submitted (minimum 1, approximate maximum 
5).
    Estimated Average Burden per Response: 12 hours.
    Estimated Total Annual Burden Hours: (1,200, 6,000).
    (F) Loan Guarantee Extension: The Participating lender must submit 
to OSDBU a form DOT F 2310-1 to request an extension of the original 
loan guarantee for a maximum period of ninety (90) days. The form is 
available at http://www.osdbu.dot.gov/financial/docs/Loan_Extension_
DOT_F_2310-1.pdf.
    Respondents: 100.
    Frequency: Annually.
    Estimated Average Burden per Response: \1/2\ hour.
    Estimated Total Annual Burden Hours: 50 hours.
Loan Application Process--Loan Renewal
    A current STLP participant may submit a guaranteed loan renewal 
application package, comprised of an updated loan application, with 
supporting documentation.
    (A) Updated loan application form. The application may be obtained 
directly from OSDBU, from a current Participating Lender, or online 
from the agency's Web site currently at http://osdbu.dot.gov/documents/
pdf/stlp/stlpapp.pdf.
    Respondents: 100.
    Frequency: Annually, up to five years.
    Estimated Average Burden per Response: 8 hours.
    Estimated Total Annual Burden Hours: 800 hours.
    (B) Application supporting documentation. Supporting documentation 
may include, but is not limited to, the following items:
    a. Current job performance reference letter (within the past 12 
months);
    b. Evidence of current DBE and/or other eligible certification;
    c. Business tax returns for the most recent fiscal year;
    d. Business financial statements for the most recent fiscal year;
    e. If the business' last fiscal year has ended longer than 90 days 
at the time of application, then applicant must submit interim business 
financial statements to include balance sheet, P&L and updated aging 
reports of both receivables and payables;
    f. Current work in progress schedule or statement;
    g. Personal income tax returns;
    h. Personal financial statements;
    i. Signed and dated copy of transportation-related contracts to be 
used as collateral;
    j. Updated cash flow projections;
    Respondents: 100.
    Frequency: Annually, up to five years.
    Estimated Average Burden per Response: 4 hours.
    Estimated Total Annual Burden Hours: 400 hours.
New Loan Application Process
    A potential STLP participant must submit a guaranteed loan 
application package, comprised of a loan application, with supporting 
documentation.
    (A) Completed loan application form. The application may be 
obtained directly from OSDBU, from a current Participating Lender, or 
online from the agency's Web site currently at http://osdbu.dot.gov/
documents/pdf/stlp/stlpapp.pdf.
    Respondents: 100.
    Frequency: Once.
    Estimated Average Burden per Response: 2 hours.
    Estimated Total Annual Burden Hours: 200 hours.
    (B) New loan application supporting documentation may include, but 
is not limited to, the following items:
    a. Business, trade or job performance reference letters;
    b. DBE or other eligible certification letters;
    c. Signed and dated borrower certification that all federal, state 
and local taxes are current;
    d. Business tax returns;
    e. Business financial statements;
    f. Personal income tax returns;
    g. Personal financial statements;
    h. Schedule of work in progress;
    i. Signed and dated copy of transportation-related contracts to be 
used as collateral;
    j. Business debt schedule;
    k. Income and cash flow projections;
    l. Evidence of bonding and insurance.
    Respondents: 100.
    Frequency: Once.
    Estimated Average Burden per Response: 12 hours.
    Estimated Total Annual Burden Hours: 1,200 hours.
    (C) Loan package submission: Application packages are submitted 
directly to a Participating Lender in the applicant's geographic area. 
The list of Participating Lenders is available on the OSDBU Web site: 
http://osdbu.dot.gov/Default.aspx?tabid=72. In the event that there is 
no Participating Lender in the applicant's geographic area, the loan 
application package may be sent directly to OSDBU at 400 Seventh 
Street, SW., Room 9414, S-40, Attention STLP, Washington, DC 20590.
    Respondents: 100.
    Frequency: Once.

[[Page 19290]]

    Estimated Average Burden per Response: 1 hour.
    Estimated Total Annual Burden Hours: 100 hours.

    Authority:  The Paperwork Reduction Act of 1995; 44 U.S.C. 
Chapter 35, as amended; and 49 CFR 1.48.

    Issued this 25th day of March 2010, at Washington, DC.
Ray LaHood,
Secretary of Transportation.

List of Subjects in 49 CFR Part 22

    Loan programs--Business and industry, Programs, Small business, 
Transportation, Commerce.

0
For the reasons set forth in this preamble, the Department is adding 49 
CFR part 22 as follows:

PART 22-SHORT-TERM LENDING PROGRAM (STLP)

Subpart A-General
22.1 Purpose.
22.3 Definitions.
Subpart B--Policies Applying to STLP Loans
22.11 Eligibility Criteria.
22.13 Loan terms and Conditions.
22.15 Delinquency on Federal, State, and Municipal Debt.
22.17 Compliance with Child Support Obligations.
22.19 Credit Criteria.
Subpart C--Participating Lenders
22.21 Participation Criteria.
22.23 Agreements.
22.25 Lender Deliverables and Delivery schedule.
22.27 Eligible Reimbursements to Participating Lenders.
22.29 DOT access to Participating Lender Files.
22.31 Suspension or Revocation of Eligibility to Participate.
22.33 Termination of Participation in the STLP.
Subpart D--Loan Application Process
22.41 Application Procedures.
22.43 Approvals and Denials.
22.45 Allowable Fees to Borrowers.
Subpart E--Loan Administration
22.51 Loan Closings.
22.53 Loan Monitoring & Servicing Requirements.
22.57 Loan Reporting Requirements.
22.59 Loan Modifications.
22.61 Loan Guarantee Extensions.
22.63 Loan Close Outs.
22.65 Subordination.
22.67 Delinquent Loans and Loan Defaults.
22.69 Claims Process.

    Authority: 49 U.S.C. 332.

Subpart A--General

Sec.  22.1  Purpose.

    The purpose of the DOT OSDBU STLP is to provide financial 
assistance in the form of short-term loans from Participating Lenders 
that are guaranteed by DOT OSDBU, to DBEs and SDBs for the execution of 
DOT funded and supported transportation-related contracts.

Sec.  22.3  Definitions.

    As used in this part:
    Accounts receivable means monies that are due to the borrower for 
work performed or services rendered under a contract, subcontract, or 
purchase order.
    Activation date means the date that the STLP loan is established on 
the Participating Lender's books and recorded as an open loan. It is 
also the date that the borrower can begin to drawn funds from the line 
of credit. Activation date is also the date in which the DOT OSDBU 
guarantee becomes effective.
    Assigned contract means the transportation-related contract(s), 
subcontract(s), and/or purchase order(s) that has been pledged as 
collateral to a STLP loan and perfected through an assignment form 
executed by all appropriate parties.
    Borrower is the obligor of a DOT OSDBU guaranteed loan.
    Cooperative agreement is the written agreement between DOT OSDBU 
and a Participating Lender that outlines the terms and conditions under 
which the lender may submit eligible loan requests to DOT OSDBU for 
consideration of its loan guarantee. The cooperative agreement further 
outlines the responsibilities and requirements of the lender in order 
to participate in the STLP.
    Director means Director, Office of Small and Disadvantaged Business 
Utilization, U.S. Department of Transportation.
    Disadvantaged business enterprise or DBE means a business that is 
certified as such by a recipient of DOT financial assistance as 
provided in 49 CFR part 23 or 49 CFR part 26.
    Guarantee agreement means DOT OSDBU's written agreement with a 
Participating Lender that provides the terms and conditions under which 
DOT OSDBU will guarantee a STLP loan. It is not a contract to make a 
direct loan to the borrower.
    Loan guarantee means the agreement of DOT OSDBU to issue a 
guarantee of payment of a specified portion of an approved STLP loan to 
the Participating Lender, under DOT OSDBU stated terms and conditions, 
in the event that the borrower defaults on the loan.
    Loan purpose means the approved uses for STLP loan proceeds. That 
is, only for short-term working capital needs related to the direct 
costs of an eligible transportation-related contract.
    Other eligible certifications mean the following certifications 
obtained by a borrower through the U.S. Small Business Administration 
(SBA): Small Disadvantaged Business (SDB); Section 8(a) Program 
participant; HUBZONE Empowerment Contracting Program; and Service-
Disabled Veteran Program (SDV).
    Participating Lender (PL) is a bank or other lending institution 
that has agreed to the terms of a cooperative agreement and has been 
formally accepted into the STLP by DOT OSDBU.
    Small and disadvantaged business (SDB) includes 8(a); small 
disadvantaged business; women-owned business, HubZone, and service-
disabled veteran-owned business.
    Socially and economically disadvantaged individual has the same 
meaning as stated in 49 CFR 26.5.
    Technical assistance means service provided by the Participating 
Lender to the DBE or SDB that will enable the DBE or SDB to become more 
capable of managing its transportation-related contracts. Technical 
assistance can be provided by collaborating with agencies that offer 
small business management counseling such as the SBA, the U. S. 
Department of Commerce's Minority Business Development Centers (MBDCs), 
the Service Corps of Retired Executives (SCORE), Procurement Technical 
Assistance Centers (PTACs), and Small Business Development Centers 
(SBDCs).
    Transportation-related contract means a contract, subcontract, or 
purchase order, at any tier, for the maintenance, rehabilitation, 
restructuring, improvement, or revitalization of any of the nation's 
modes of transportation that receive DOT funding.
    Work-out means a plan that offers options to avoid loan default or 
collateral foreclosure and/or liquidation that is intended to resolve 
delinquent loans or loans in imminent default, which may include, but 
not limited to: deferring or forgiving principal or interest, reducing 
the borrower's interest rate, extending the loan maturity and the 
government guarantee to the Participating Lender, or postponing 
collection action.

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Subpart B--Policies Applying to STLP Loans

Sec.  22.11   Eligibility Criteria.

    (a) Eligible Borrower. To be eligible to apply for a STLP loan 
guarantee, a borrower must meet the following requirements:
    (1) Be a for-profit entity;
    (2) Have an eligible transportation-related contract;
    (3) Demonstrate an eligible use for the desired credit;
    (4) Be an established business with experience in the 
transportation industry and trade for which the STLP loan is sought;
    (5) Be certified as a DBE or have another eligible certification 
issued by the SBA; and
    (6) Be current on all federal, state, and local tax liabilities.
    (b) Eligible Transportation-Related Contract. Any fully-executed 
transportation-related contract, subcontract, or purchase order held 
directly with DOT or with grantees and recipients receiving federal 
funding from DOT for the maintenance, rehabilitation, restructuring, 
improvement or revitalization of any of the nation's modes of 
transportation shall be considered an eligible contract.
    (c) Eligibility Period. A borrower is eligible for participation in 
the STLP for a period up to a total of five (5) years. The STLP renewal 
is not automatic. The borrower has to demonstrate its continued 
eligibility and creditworthiness for STLP and must submit a complete 
application package.
    (1) The continued eligibility of any borrower who would exceed the 
period limit in paragraph (c) of this section will be determined on a 
case-by-case basis by the OSDBU Director and is subject to the 
following provisions:
    (i) The STLP loan guarantee may be reduced; and
    (ii) The STLP loan interest rate may be increased.
    (2) Should any borrower currently in the STLP become ineligible per 
paragraph (a) of this section during the term of a STLP loan, the 
failure to comply with a specific requirement must be brought to the 
immediate attention of all remaining parties.
    (3) Borrower ineligibility may result in a termination of the 
current guarantee.

Sec.  22.13  Loan Terms and Conditions.

    (a) Amount. The maximum face amount for an individual STLP loan may 
not exceed seven hundred and fifty thousand ($750,000) dollars, unless 
the requested increased amount is authorized by the OSDBU Director.
    (b) Interest Rates. All STLP loans shall have a variable interest 
rate.
    (1) Initial Interest Rate. The base rate guideline for STLP loans 
is the prime rate in effect on the first business day of the month in 
which the STLP loan guarantee is approved by DOT OSDBU. The prime rate 
is the rate printed in a national financial newspaper published each 
business day. The Participating Lender may increase the base rate by 
the maximum allowable percentage points currently allowed by STLP 
policies and procedures and as communicated in subsequent DOT OSDBU 
notices.
    (2) Frequency of Change. The first change may occur on the first 
calendar day of the month following the initial loan disbursement, 
using the above base rate in effect on the first business day of the 
month. Subsequent interest rate changes may occur no more than monthly.
    (c) Loan Structure and Term. A STLP loan shall be set up as a 
revolving line of credit. The line permits the borrower to request 
principal advances, pay them back, and then re-borrow, not to exceed 
the face value of the line of credit. Participating Lenders are 
required to provide DOT OSDBU written notification of the activation 
date of each line of credit under the STLP. The term of the Federal 
guarantee of the line of credit commences on the activation date.
    (d) Repayment. Interest payments must be made monthly. The 
principal of the loan is repaid as payment from approved accounts 
receivable are received by the Participating Lender through a joint 
payee check system. The assigned contract supporting the STLP loan is 
the primary source of repayment.
    (e) Use of Loan Proceeds. STLP loans must be used to finance short-
term working capital needs, specifically direct costs generated by the 
assigned contract. Proceeds may not be used for the following purposes:
    (1) For long term working capital;
    (2) To repay delinquent State or Federal withholding taxes, local 
taxes, sales taxes or similar funds that should be held in trust or 
escrow; and/or
    (3) To provide funds for the distribution or payment to the owners, 
partners or shareholders of the business; and/or
    (4) To retire short or long-term debt.
    (f) Non-compliance by the DBE in using the STLP loan for purposes 
not consistent with these regulations will result in a non-renewal of 
the STLP loan and in forfeiture of the STLP loan guarantee to the PL on 
any ineligible principal advances requested by the borrower and made by 
the PL.
    (g) Disbursements. STLP funds may only be released to an eligible 
borrower upon the submission and verification of a valid written 
accounts receivable invoice, showing labor and/or materials amounts due 
for completed work on the contract. The Participating Lender must 
verify the accuracy of the invoice with the paying transportation 
government agency, if the borrower is a prime contractor, and/or with 
the prime contractor, if the borrower is a subcontractor. This 
verification must be obtained by the Participating Lender prior to 
advancing funds. No more than 85% of an approved accounts receivable 
invoice shall be advanced to the borrower by the Participating Lender.
    (1) Processing time. Disbursement of STLP funds to the borrower 
should be accomplished within three (3) business days of an accounts 
receivable invoice approval by the paying agency and/or prime 
contractor.
    (2) Electronic funds transfer. If the disbursement of STLP funds is 
being sent to the borrower through a local Participating Lender, the 
disbursement should be made by electronic funds transfer with the 
preferred method of payment being the Automated Clearing House (ACH) 
system.
    (3) Wire transfers. Wire transfers can be used if the ACH system is 
not available or if a same day disbursement is required.
    (4) Joint payee check system. A two-party payee check system is 
required in which the Participating Lender and the borrower will be the 
co-payees of any checks paid to the borrower for performance under the 
assigned contract. Alternative payment methods must have prior written 
approval by DOT OSDBU.
    (h) Personal Guarantees. Individuals who own at least a 20% 
ownership interest in the borrower shall personally guarantee the STLP 
loan. DOT OSDBU, in its discretion and in consulting with the 
Participating Lender, may require other appropriate guarantees for the 
loan as well.
    (i) Collateral. All advances under the STLP loan must be secured, 
at a minimum, by the assignment of the proceeds due under the 
transportation-related contract(s) being funded with loan proceeds (the 
Assigned Contract). The Participating Lender must have first lien 
position on the Accounts Receivable generated by the Assigned Contract. 
The Participating Lender and/or DOT OSDBU may request additional 
collateral on any loan request or loan guarantee request in order to 
mitigate the credit risk and reduce potential defaults and loan losses.

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    (j) Key Person Life Insurance. The assignment of existing life 
insurance policies of personal guarantors or other individuals critical 
to the borrower's operations may be required by the Participating 
Lender and/or DOT OSDBU in certain instances; and it is encouraged for 
those business applicants that do not have a management succession plan 
clearly in place or where a personal guarantee provides nominal 
financial strength to the credit.

Sec.  22.15  Delinquency on Federal, State, or Municipality Debt.

    (a) The borrower must not be delinquent on any Federal, State, or 
municipality debt, including tax debts. Further, none of the principals 
and/or owners of the borrower can be delinquent on any Federal, State, 
or municipality debt, including personal tax debt. The borrower must 
acknowledge its status in writing as part of any STLP loan guarantee 
application. Participating Lenders and the DOT OSDBU must verify the 
borrower's status through the use of business and personal credit 
reports, as well as other appropriate Federal and State databases.
    (b) If any delinquencies are determined during the application 
process, consideration of the request must be suspended until the 
delinquency is satisfactorily resolved, as determined and approved by 
the Director. If the delinquency cannot be resolved within a reasonable 
amount of time, the loan request must be declined.

Sec.  22.17  Compliance with Child Support Obligations.

    Any holder of 50% or more of the ownership interest in the 
recipient of a STLP Loan must certify that he or she is not more than 
60 days delinquent on any obligation to pay child support arising 
under:
    (a) An administrative order;
    (b) A court order;
    (c) A repayment agreement between the holder and a custodial 
parent; or
    (d) A repayment agreement between the holder and a State agency 
providing child support enforcement services.

Sec.  22.19  Credit Criteria.

    An applicant for a STLP loan must be creditworthy and demonstrate 
an ability to repay the loan as well as satisfactory handling of the 
repayment of past and current debts. The Participating Lender and DOT 
OSDBU shall consider:
    (a) Character, reputation, and credit history of the applicant, its 
principals and owners, and all other guarantors;
    (b) Experience and depth of key management in the industry;
    (c) Financial strength of the business;
    (d) Past earnings, projected earnings and cash flow, and work in 
progress;
    (e) Ability to repay the loan;
    (f) Sufficient equity to operate on a sound financial basis; and
    (g) Capacity to perform under the transportation-related 
contract(s).

Subpart C--Participating Lenders

Sec.  22.21  Participation Criteria.

    A lender who participates in the STLP must meet the following 
criteria:
    (a) It must operate as a lending institution certified by the 
Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board, 
Office of the Comptroller of the Currency, Office of Thrift 
Supervision, Community Development Corporation (CDC), or Community 
Development Financial Institution (CDFI), for at least five (5) years;
    (b) It must demonstrate a philosophy and history of lending to 
small, disadvantaged and women-owned businesses in their communities. 
Information will be requested by the Director on the number of short-
term loans made to companies listed in paragraph (a)(5) of Sec.  22.11. 
The Participating Lender shall submit information showing its efforts 
in relationship to its overall portfolio;
    (c) It must demonstrate experience in administering monitored lines 
of credit, such as construction loans, accounts receivable financing, 
and/or contract financing for at least two years. Such experience 
should be held by any Participating Lender representative managing, 
reviewing or authorizing STLP loan portfolios;
    (d) It must have at least two (2) years experience with other 
federal government lending programs such as U.S. Small Business 
Administration (SBA), Agriculture Rural Development, Bureau of Indian 
Affairs (BIA), Economic Development Administration (EDA), Department of 
Housing and Urban Development (HUD), Export Import Bank of the United 
States and/or state loan programs.
    (e) It must have at least a satisfactory or better Community 
Reinvestment Act (CRA) rating;
    (f) It must designate a Participating Lender representative to 
effectively administer the STLP loan portfolio;
    (g) It must have the ability to evaluate, process, close, disburse, 
service and liquidate STLP loans;
    (h) It must demonstrate the ability to implement, monitor and 
manage a two-party payee check system, in which the Participating 
Lender and borrower are joint payees of any checks paid to the borrower 
for performance under the assigned contract(s);
    (i) It must not currently be debarred or suspended from 
participation in a government contract or delinquent on a government 
debt. The Participating lender must submit a current form DOT F 2309-1 
Certification Regarding Debarment, Suspension. The certification form 
is available at http://www.osdbu.dot.gov/financial/docs/Cert_
Debarment_DOT_F_2309-1.pdf.
    (j) It must be a drug-free workplace. The Participating Lender must 
execute current form DOT F 2307-1 Drug-Free Workplace Act Certification 
For A Grantee Other Than An Individual. The certification form is 
available at http://www.osdbu.dot.gov/financial/docs/Cert_Drug-Free_
DOT_F_2307-1.pdf.; and
    (k) It must certify that no Federal funds will be utilized for 
lobbying by executing a current form DOT F 2308-1 Certificate Regarding 
Lobbying For Contracts, Grants, Loans, and Cooperative Agreements in 
compliance with section 1352, title 21, of the U.S. Code. The 
certification form is available at http://www.osdbu.dot.gov/financial/
docs/Cert_Lobbying_DOT_F_2308-1.pdf.

Sec.  22.23  Agreements.

    (a) DOT OSDBU may enter into a cooperative agreement with a lender 
that meets the criteria defined in Sec.  22.21 in order for the lender 
to become a Participating Lender in the STLP. Such an agreement does 
not obligate DOT OSDBU to participate in any specific proposed loan 
that a lender may submit. The existence of a cooperative agreement does 
not limit the rights of DOT OSDBU to deny a specific loan or establish 
general policies. The current cooperative agreement is available at 
http://www.osdbu.dot.gov/financial/docs/Coop_Agreement.pdf.
    (b) The cooperative agreement is generally for a minimum period of 
twenty-four (24) months. DOT OSDBU will consider the cooperative 
agreement for renewal at the end of the designated term. If a 
cooperative agreement has expired, no further applications for the STLP 
shall be submitted to DOT OSDBU by the Participating Lender until a new 
cooperative agreement is executed by both parties.
    (c) Unless instructed otherwise by DOT OSDBU, after the expiration 
of the cooperative agreement, the Participating Lender will complete 
the documentation of any loans which have been given final DOT OSDBU 
approval prior to expiration of the cooperative agreement.
    (d) Following the expiration of the cooperative agreement, the 
Participating

[[Page 19293]]

Lender may, subject to the written concurrence of DOT OSDBU, sell its 
STLP loans to another bank or to another Participating Lender that 
assumes the original rights and responsibilities to fund, service and 
collect the loan or loans.

Sec.  22.25  Lender Deliverables and Delivery Schedule.

    All Participating Lenders must adhere to certain required periodic 
reports, submissions, and other actions that are outlined in the 
cooperative agreement and the loan guarantee agreements, as well as to 
the required due dates to DOT OSDBU.

Sec.  22.27  Eligible Reimbursements to Participating Lenders.

    Participating Lenders will be reimbursed by DOT OSDBU for 
reasonable expenses and costs that are incurred in the processing, 
administration, and monitoring of a STLP loan. The Participating Lender 
will be reimbursed as follows:
    (a) Processing/Underwriting Fee. A fee, as specified in the 
cooperative agreement will be reimbursed by DOT OSDBU, with a minimum 
fee of not less than one thousand ($1,000), per approved STLP loan 
guarantee, provided that DOT OSDBU receives proper notification of the 
activation date of the STLP loan.
    (b) Additional Administrative Fee: For total loan amounts of 
$150,000.00 or less, the Participating Lender can request an additional 
one-half (\1/2\) percent administrative fee for the increased loan 
monitoring and administrative assistance required to process the loan. 
The request must be supported with the information specified in the 
cooperative agreement.
    (c) Travel Expenses. For any pre-approved travel expenses, the 
Participating Lender will be reimbursed for certain costs, provided 
that paragraphs (c)(1) and (2) of this section are met:
    (1) A written request for travel, along with a statement of the 
purpose of the travel and proposed cost estimate, is submitted for DOT 
OSDBU for its approval no less than ten (10) business days prior to 
travel; and
    (2) A travel invoice accompanied by a written report explaining the 
findings of the travel is submitted to DOT OSDBU no later than thirty 
(30) days following the approved travel. Payment or reimbursement for 
travel shall be in accordance with the Joint Travel Regulations, 
Federal Travel Regulations and DOD FAR 31.205.46.
    (d) Attorney Fees. Legal fees incurred by the PL may be eligible 
for reimbursement. Prior written approval from DOT OSDBU is required. 
Attorney fees will be reimbursed on a pro-rata basis in proportion to 
the percentage of the government loan guarantee in relation to the 
total loan amount.

Sec.  22.29  DOT Access to Participating Lenders Files.

    A Participating Lender must allow the authorized representatives of 
DOT OSDBU, as well as representatives of the Office of Inspector 
General (OIG) and General Accountability Office (GAO), access to its 
STLP loan files to review, inspect, and copy all records and documents 
pertaining to DOT OSDBU guaranteed loans. Record retention of all 
relevant documents and other materials is specified in the cooperative 
agreement between DOT OSDBU and the Participating Lender.

Sec.  22.31  Suspension or Revocation of Eligibility to Participate.

    (a) DOT OSDBU may suspend or revoke the eligibility of a 
Participating Lender to participate in the STLP by giving written 
notice in accordance with the terms and conditions cited in the 
cooperative agreement. Such notice may be given because of a violation 
of DOT OSDBU regulations; a breach of any agreement with DOT OSDBU; a 
change of circumstance resulting in the Participating Lender's 
inability to meet operational requirements; or a failure to engage in 
prudent lending practices. A suspension or revocation will not 
invalidate a loan guarantee previously approved by DOT OSDBU, providing 
that the specific loan was handled in accordance with its guarantee 
agreement, the cooperative agreement and/or these regulations.
    (b) The written notice to suspend or revoke participation in the 
STLP will specify the corrective actions that the Participating Lender 
must take, as well as the time period allowed for cure, prior to DOT 
OSDBU considering a termination of the cooperative agreement.

Sec.  22.33  Termination of Participation in the STLP.

    (a) DOT OSDBU Termination for Convenience. DOT OSDBU may terminate 
a cooperative agreement for the convenience of the government, and 
without cause, upon prior written notice of thirty (30) days of its 
intent to terminate. Upon termination, DOT OSDBU shall remain liable on 
the pro-rata share of the loan guarantee(s) received by the PL which 
received the Director's final approval, prior to the effective date of 
termination.
    (b) Participating Lender's Termination. The Participating Lender 
may terminate a cooperative agreement with written notice of sixty (60) 
days to DOT OSDBU of its intent to terminate. Upon termination, DOT 
OSDBU shall remain liable on the pro-rata share of the loan 
guarantee(s) received by the Participating Lender which received the 
Director's final approval, prior to the effective date of termination 
of the cooperative agreement.
    (c) DOT OSDBU Termination for Cause. DOT OSDBU may terminate a 
cooperative agreement, in whole or in part, at any time before the 
expiration of the term of the cooperative agreement or the expiration 
of any renewal term of the cooperative agreement, and without allowing 
any cure period as described in this section, if it determines that the 
Participating Lender failed to comply with any terms and conditions of 
its cooperative agreement and such failure cannot be reasonably 
addressed. DOT OSDBU shall promptly notify the Participating Lender in 
writing of this determination and the reasons for the termination, 
together with the effective date of termination.
    (d) DOT OSDBU may also terminate for cause any cooperative 
agreement with a Participating Lender that fails to comply with the 
corrective actions requested in a written notice of suspension of 
revocation within the specified cure period, in accordance with the 
terms and conditions further described in the cooperative agreement.

Subpart D--Loan Application Process

Sec.  22.41  Application Procedures.

    (a) A STLP loan guarantee request application package shall consist 
of the DOT OSDBU Application for Loan Guarantee and supporting 
documentation as outlined below at paragraph (b) of this section. The 
application may be obtained directly from the office of DOT OSDBU, from 
a current Participating Lender, or online from the agency's Web site, 
currently at http://osdbu.dot.gov/documents/pdf/stlp/stlpapp.pdf.
    (b) Supporting documentation may include, but is not limited to, 
the following items: Business, trade or job performance reference 
letters; current DBE or SDB eligibility certification letters and/or 
affidavit; signed and dated borrower certification that all federal, 
state and local taxes are current; business tax returns; business 
financial statements; personal income tax returns; personal financial 
statements; schedule of work in progress; signed and dated copy of 
transportation-related contracts; business debt schedule; income and 
cash flow projections; and evidence of bonding and insurance. It also 
includes,

[[Page 19294]]

from the Participating Lender, the lender's internal credit approval 
memo and analysis and other third-party credit verifications obtained.
    (c) Application packages are submitted directly to a Participating 
Lender, which will perform its own credit review. The Participating 
Lender must initially approve or decline the loan based upon its 
internal analysis of the request. Loans approved by the Participating 
Lender are then forwarded to DOT OSDBU for its STLP eligibility review, 
independent credit review, and for presentation to the DOT OSDBU Loan 
Committee. All loan approvals shall require the final approval of the 
Director, or the Director's designee, for the issuance of a Government 
Loan Guarantee.

Sec.  22.43  Approval or Denial.

    If a loan guarantee is approved by DOT OSDBU, a Guarantee 
Agreement, form DOT F 2314-1, will be issued to the Participating 
Lender. If a loan guarantee is declined by the Participating Lender, 
the Participating Lender is responsible for communicating the reasons 
for the decline to the applicant. The Participating Lender must notify 
the applicant, in writing, of the reasons for the decline; and a copy 
of this notification must be sent to DOT OSDBU. If a loan guarantee is 
declined by the DOT OSDBU, DOT OSDBU will be responsible for 
communicating the reasons for the decline to the applicant. The form is 
available at http://www.osdbu.dot.gov/financial/docs/Loan_Guarantee_
DOT_F_2314-1.pdf.

Sec.  22.45  Allowable Fees to Borrowers.

    (a) Application Fees. The Participating Lender may charge the 
applicant a non-refundable loan application fee, as determined from 
time to time by DOT OSDBU, for each STLP loan application processed, 
whether a new loan request or a renewal request.
    (b) Reasonable Closing Expenses. Provided the Participating Lender 
charges similar fees to its non-STLP borrowers, the Participating 
Lender may collect reasonable closing expenses from the borrower, 
provided that full disclosure of such fees is made to the borrower 
prior to the loan closing date. These expenses include necessary out-
of-pocket expenses to third parties such as filing and recordation 
fees, as well as loan closing document preparation fees.

Subpart E-Loan Administration

Sec.  22.51  Loan closings.

    (a) The Participating Lender must promptly close all STLP loans in 
accordance with the terms and conditions approved by DOT OSDBU in its 
Guarantee Agreement. The Participating Lender must report circumstances 
concerning any STLP loans not closed within a reasonable time period 
after DOT OSDBU approval.
    (b) The Participating Lender uses its own internal loan closing 
documents and must use standard banking practices and procedures to 
ensure proper execution of the debt and perfection of the collateral. 
The Participating Lender must forward copies of all executed closing 
documents and filings to DOT OSDBU within the time period specified in 
the cooperative agreement.

Sec.  22.53  Loan Monitoring and Servicing Requirements.

    The Participating Lender must review STLP principal advance 
requests, process loan disbursements, and payments, and maintain 
contact with the borrower during the term of the loan. The 
Participating Lender must monitor the progress of the project being 
financed and the borrower's continued compliance with the terms and 
conditions of the loan. The Participating Lender must promptly report 
any material adverse change in the financial condition or business 
operations of the borrower to DOT OSDBU.

Sec.  22.57  Loan Reporting Requirements.

    The STLP is subject to the requirements of the Federal Credit 
Reform Act of 1990 (FCRA) that includes certain budgeting and 
accounting requirements for Federal credit programs. To fulfill the 
requirements of FCRA, the Participating Lender must provide DOT OSDBU 
prompt written notification of the activation date by the time period 
specified in the cooperative agreement. The Participating Lender must 
submit to OSDBU a form DOT F 2303-1 Bank Verification Loan Activation 
Form that indicates the date in which the loan has been activated/
funded. The form is available at http://www.osdbu.dot.gov/financial/
docs/Loan_Activation_DOT_F_2303-1.pdf. The Participating Lender 
must also provide DOT OSDBU prompt written notification of the date the 
loan is repaid and closed. The Participating Lender must submit to 
OSDBU a form DOT F 2304-1 Bank Acknowledgement Loan Close-Out Form upon 
full repayment of the STLP loan, or upon expiration of the loan 
guarantee. The form is available at http://www.osdbu.dot.gov/financial/
docs/Loan_Close-Out_DOT_F_2304-1.pdf. To fulfill this requirement, 
the Participating Lender must also submit a monthly report to the DOT 
OSDBU detailing the previous month's activity for their STLP loans. The 
Participating Lender must submit form DOT F 2306-1 Pending Loan Status 
Report and form DOT F 2305-1 Guaranty Loan Status Report. These forms 
are available at http://www.osdbu.dot.gov/financial/docs/Pending_
Loan_DOT_F_2306-1.xls and http://www.osdbu.dot.gov/financial/docs/
Guaranty_Loan_DOT_F_2305-1.xls respectively.

Sec.  22.59  Loan Modifications.

    Any modification to the terms of the DOT OSDBU guarantee agreement 
must have prior written approval of the Director, and executed in 
writing as an Addendum to the original guarantee agreement.

Sec.  22.61  Loan Guarantee Extensions.

    An extension of the original loan guarantee may be requested, in 
writing, by the Participating Lender. The Participating lender must 
submit to OSDBU a form DOT F 2310-1 to request an extension of the 
original loan guarantee for a maximum period of ninety (90) days. The 
form is available at http://www.osdbu.dot.gov/financial/docs/Loan_
Extension_DOT_F_2310-1.pdf. The request must comply with the terms 
and conditions described in the guarantee agreement and with the STLP 
policies and procedures. All extension requests must be approved by the 
Director.

Sec.  22.63  Loan Close Outs.

    Upon full repayment of the STLP loan, or upon expiration of the 
loan guarantee, the Participating Lender must submit to OSDBU a form 
DOT F 2304-1 Bank Acknowledgement Loan Close-Out Form. The form is 
available at http://www.osdbu.dot.gov/financial/docs/Loan_Close-Out_
DOT_F_2304-1.pdf.

Sec.  22.65  Subordination.

    DOT OSDBU must not be placed in a subordinate position to any other 
debt.

Sec.  22.67  Delinquent Loans and Loan Defaults.

    (a) The Participating Lender must bring to the immediate attention 
of the Director any delinquent STLP loans. The Participating Lender and 
DOT OSDBU are jointly responsible for establishing collection 
procedures and must exercise due diligence with respect to collection 
of delinquent debt. The Participating Lender is responsible for 
initiating actions to recover such debt. DOT OSDBU must approve any 
compromise of a claim, resolution of a dispute, suspension or 
termination of

[[Page 19295]]

collection action, or referral for litigation. A work-out solution will 
only be considered if it is expected to minimize the cost to the 
federal government in resolving repayment delinquencies and/or loan 
default. They must only be used when the borrower is likely to be able 
to repay the loan under the terms of the work-out, and if the cost of 
establishing the work-out plan is less than the costs of loan default 
and/or foreclosure.
    (b) In an appropriate situation, DOT OSDBU may authorize the 
Participating Lender to undertake legal action deemed necessary to 
collect delinquent loans and DOT will reimburse the Participating 
Lender on a pro rata basis in proportion to the loan guarantee 
percentage for the associated fees and costs, with prior authorization 
from the Director. Penalties and late fees are not eligible for 
reimbursement. Any legal action undertaken by the Participating Lender 
without OSDBU authorization will not be eligible for a pro rata basis 
reimbursement of the associated fees and costs. Net recoveries 
applicable to accrued interest must be applied on a pro rata basis in 
proportion to the formula used during the term of the loan.

Sec.  22.69  Claim Process.

    After reasonable efforts have been exhausted to collect on a 
delinquent debt, the Participating Lender may demand in writing that 
DOT OSDBU honor its loan guarantee, provided however that the maximum 
liability of DOT OSDBU shall not at any time exceed the guaranteed 
amount. The borrower must be in default for no less than thirty (30) 
days, and the Participating Lender must have made written demand for 
payment from the borrower, in accordance with the guarantee agreement.

[FR Doc. 2010-7622 Filed 4-13-10; 8:45 am]
BILLING CODE 4910-9X-P