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(ii) SBA will announce its intent to terminate a waiver for a class of prod-ucts through the publication of a no-tice in the FEDERAL REGISTER, asking for comments regarding the proposed termination.(iii) Unless public comment reveals that no small business manufacturer or processor in fact exists for the class of products in question, SBA will publish a final Notice of Termination in the FEDERALREGISTER.
(b) Individual waivers for specific solici-tations. (1) A contracting officer’s re-quest for a waiver of the Nonmanufac-turer Rule for specific solicitations need not be in any particular form, but must, at a minimum, include:
(i) A definitive statement of the spe-cific item to be waived and justifica-tion as to why the specific item is re-quired;
(ii) The solicitation number, NAICS code, dollar amount of the procure-ment, and a brief statement of the pro-curement history;
(iii) A determination by the con-tracting officer that there are no known small business manufacturers or processors for the requested items (the determination must contain a nar-rative statement of the contracting of-ficer’s efforts to search for small busi-ness manufacturers or processors of the item and the results of those efforts, and a statement by the contracting of-ficer that there are no known small business manufacturers for the items and that no small business manufac-turer or processor can reasonably be expected to offer the required items); and
(iv) For contracts expected to exceed $500,000, a copy of the Statement of Work.
(2) Requests should be addressed to the Director, Office of Government Contracting, Small Business Adminis-tration, 409 3rd Street, SW., Wash-ington, DC 20416.
(3) SBA will examine the contracting officer’s determination and any other information it deems necessary to make an informed decision on the indi-vidual waiver request. If SBA’s re-search verifies that no small business manufacturers or processors exist for the item, the Director, Office of Gov-ernment Contracting will grant an
in-dividual, one-time waiver. If a small business manufacturer or processor is found for the product in question, the Associate Administrator will deny the request. Either decision represents a final decision by SBA.
[61 FR 3286, Jan. 31, 1996, as amended at 65 FR 30863, May 15, 2000]
§ 121.1205 How is a list of previously granted class waivers obtained?
A list of classes of products for which waivers for the Nonmanufacturer Rule have been granted is maintained in SBA Web site at: http://www.sba.gov/ aboutsba/sbaprograms/gc/programs/ gclwaiverslnonmanufacturer.html. A list of such waivers may also be ob-tained by contacting the Office of Gov-ernment Contracting, U.S. Small Busi-ness Administration, 409 3rd Street, SW., Washington, DC 20416, or the near-est SBA Government Contracting Area Office.
[69 FR 29208, May 21, 2004, as amended at 74 FR 46313, Sept. 9, 2009]
PART 123—DISASTER LOAN
PROGRAM
Subpart A—Overview Sec.
123.1 What do these rules cover?
123.2 What are disaster loans and disaster declarations?
123.3 How are disaster declarations made? 123.4 What is a disaster area and why is it
important?
123.5 What kinds of loans are available? 123.6 What does SBA look for when
consid-ering a disaster loan applicant?
123.7 Are there restrictions on how dis-aster loans can be used?
123.8 Does SBA charge any fees for obtain-ing a disaster loan?
123.9 What happens if I don’t use loan pro-ceeds for the intended purpose?
123.10 What happens if I cannot use my in-surance proceeds to make repairs? 123.11 Does SBA require collateral for any
of its disaster loans?
123.12 Are books and records required? 123.13 What happens if my loan application
is denied?
123.14 How does the Federal Debt Collection Procedures Act of 1990 apply?
123.15 What if I change my mind?
123.16 How are loans administered and serv-iced?
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123.18 Can I request an increase in theamount of a physical disaster loan? 123.19 May I request an increase in the
amount of an economic injury loan? 123.20 How long do I have to request an
in-crease in the amount of a physical dis-aster loan or an economic injury loan? 123.21 What is a mitigation measure?
Subpart B—Home Disaster Loans 123.100 Am I eligible to apply for a home
disaster loan?
123.101 When am I not eligible for a home disaster loan?
123.102 What circumstances would justify my relocating?
123.103 What happens if I am forced to move from my home?
123.104 What interest rate will I pay on my home disaster loan?
123.105 How much can I borrow with a home disaster loan and what limits apply on use of funds and repayment terms? 123.106 What is eligible refinancing? 123.107 How much can I borrow for
post-dis-aster mitigation for my home?
123.108 How do the SBA disaster loan pro-gram and the FEMA grant propro-grams interact?
Subpart C—Physical Disaster Business Loans
123.200 Am I eligible to apply for a physical disaster business loan?
123.201 When am I not eligible to apply for a physical disaster business loan? 123.202 How much can my business borrow
with a physical disaster business loan? 123.203 What interest rate will my business
pay on a physical disaster business loan and what are the repayment terms? 123.204 How much can your business borrow
for post-disaster mitigation?
Subpart D—Economic Injury Disaster Loans 123.300 Is my business eligible to apply for
an economic injury disaster loan? 123.301 When would my business not be
eli-gible to apply for an economic injury dis-aster loan?
123.302 What is the interest rate on an eco-nomic injury disaster loan?
123.303 How can my business spend my eco-nomic injury disaster loan?
Subpart E—Pre-Disaster Mitigation Loans 123.400 What is the Pre-Disaster Mitigation
Loan Program?
123.401 What types of mitigating measures can your business include in an applica-tion for a pre-disaster mitigaapplica-tion loan? 123.402 Can your business include its
reloca-tion as a mitigareloca-tion measure in an appli-cation for a pre-disaster mitigation loan?
123.403 When is your business eligible to apply for a pre-disaster mitigation loan? 123.404 When is your business ineligible to apply for a pre-disaster mitigation loan? 123.405 How much can your business borrow
with a pre-disaster mitigation loan? 123.406 What is the interest rate on a pre-
disaster mitigation loan?
123.407 When does your business apply for a pre-disaster mitigation loan and where does your business get the application? 123.408 How does your business apply for a
pre-disaster mitigation loan?
123.409 Which pre-disaster mitigation loan requests will SBA consider for funding? 123.410 Which loan requests will SBA fund? 123.411 What if SBA determines that your business loan request meets the selection criteria of § 123.409 but SBA is unable to fund it because SBA has already allo-cated all program funds?
123.412 What happens if SBA declines your business’ pre-disaster loan request? Subpart F—Military Reservist Economic
Injury Disaster Loans 123.500 Definitions.
123.501 Under what circumstances is your business eligible to be considered for a Military Reservist Economic Injury Dis-aster Loan?
123.502 Under what circumstances is your business ineligible to be considered for a Military Reservist Economic Injury Dis-aster Loan?
123.503 When can you apply for a Military Reservist EIDL?
123.504 How do you apply for a Military Re-servist EIDL?
123.505 What if you are both an essential employee and the owner of the small business and you started active duty be-fore applying for a Military Reservist EIDL?
123.506 How much can you borrow under the Military Reservist EIDL Program? 123.507 Under what circumstances will SBA
consider waiving the $2 million loan limit?
123.508 How can you use Military Reservist EIDL funds?
123.509 What can’t you use Military Reserv-ist EIDL funds for?
123.510 What if you don’t use your Military Reservist EIDL funds as authorized? 123.511 How will SBA disburse Military
Re-servist EIDL funds?
123.512 What is the interest rate on a Mili-tary Reservist EIDL?
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123.513 Does SBA require collateral on itsMilitary Reservist EIDL?
Subpart G—Economic Injury Disaster Loans as a Result of the September 11, 2001 Terrorist Attacks
123.600 Are economic injury disaster loans under this subpart limited to the geo-graphic areas contiguous to the declared disaster areas?
123.601 Is my business eligible to apply for an economic injury disaster loan under this subpart?
123.602 When would my business not be eli-gible to apply for an economic injury dis-aster loan under this subpart?
123.603 What is the interest rate on an eco-nomic injury disaster loan under this subpart?
123.604 How can my business spend my eco-nomic injury disaster loan under this subpart?
123.605 How long do I have to apply for a loan under this subpart?
123.606 May I request an increase in the amount of an economic injury disaster loan under this subpart?
Subpart H—Immediate Disaster Assistance Program
123.700 What is the Immediate Disaster As-sistance Program?
123.701 What is the application procedure for an IDAP loan?
123.702 What are the eligibility require-ments for an IDAP loan?
123.703 What are the terms of an IDAP loan? 123.704 Are there restrictions on how IDAP
loan funds may be used?
123.705 Are there any fees associated with IDAP loans?
123.706 What are the requirements for IDAP lenders?
AUTHORITY: 15 U.S.C. 632, 634(b)(6), 636(b), 636(d), 657n; Pub. L. 102–395, 106 Stat. 1828, 1864; and Pub. L. 103–75, 107 Stat. 739; and Pub. L. 106–50, 113 Stat. 245.
SOURCE: 61 FR 3304, Jan. 31, 1996, unless otherwise noted.
Subpart A—Overview
§ 123.1 What do these rules cover?
This part covers the disaster loan programs authorized under the Small Business Act, 15 U.S.C. 636(b), (d), and (f); and 15 U.S.C. 657n. Since SBA can-not predict the occurrence or mag-nitude of disasters, it reserves the right to change the rules in this part, without advance notice, by publishing
interim emergency regulations in the FEDERALREGISTER.
[61 FR 3304, Jan. 31, 1996, as amended at 75 FR 60597, Oct. 1, 2010]
§ 123.2 What are disaster loans and disaster declarations?
SBA offers low interest, fixed rate loans to disaster victims, enabling them to repair or replace property damaged or destroyed in declared dis-asters. It also offers such loans to af-fected small businesses to help them recover from economic injury caused by such disasters. SBA also offers in-terim guaranteed disaster loans, in participation with financial institu-tions, to affected small businesses (‘‘IDAP loans’’). Disaster declarations are official notices recognizing that specific geographic areas have been damaged by floods and other acts of na-ture, riots, civil disorders, or industrial accidents such as oil spills. These dis-asters are sudden events which cause severe physical damage, and do not in-clude slower physical occurrences such as shoreline erosion or gradual land settling. However, for purposes of eco-nomic injury disaster loans only, they do include droughts and below average water levels in the Great Lakes or on any body of water in the United States that supports commerce by small busi-nesses. Sudden physical events that cause substantial economic injury may be disasters even if they do not cause physical damage to a victim’s prop-erty. Past examples include ocean con-ditions causing significant displace-ment (major ocean currents) or closure (toxic algae blooms) of customary fish-ing waters, as well as contamination of food or other products for human con-sumption from unforeseeable and unin-tended events beyond the control of the victims.
[61 FR 3304, Jan. 31, 1996, as amended at 71 FR 75409, Dec. 15, 2007; 75 FR 60597, Oct. 1, 2010]
§ 123.3 How are disaster declarations made?
(a) There are five ways in which dis-aster declarations are issued which make SBA disaster loans possible:
(1) The President declares a Major Disaster, or declares an emergency,
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and authorizes Federal Assistance, in-cluding individual assistance (Assist-ance to Individuals and Households Program).(2) If the President declares a Major Disaster limited to public assistance only, a private nonprofit facility which provides non-critical services under guidelines of the Federal Emergency Management Agency (FEMA) must first apply to SBA for disaster loan as-sistance for such non-critical services before it could seek grant assistance from FEMA.
(3) SBA makes a physical disaster declaration, based on the occurrence of at least a minimum amount of physical damage to buildings, machinery, equip-ment, inventory, homes and other property. Such damage usually must meet the following tests:
(i) In any county or other smaller po-litical subdivision of a State or U.S. possession, at least 25 homes or 25 busi-nesses, or a combination of at least 25 homes, businesses, or other eligible in-stitutions, each sustain uninsured losses of 40 percent or more of the esti-mated fair replacement value or pre- disaster fair market value of the dam-aged property, whichever is lower; or
(ii) In any such political subdivision, at least three businesses each sustain uninsured losses of 40 percent or more of the estimated fair replacement value or pre-disaster fair market value of the damaged property, whichever is lower, and, as a direct result of such physical damage, 25 percent or more of the work force in their community would be un-employed for at least 90 days; and
(iii) The Governor of the State in which the disaster occurred submits a written request to SBA for a physical disaster declaration by SBA (OMB Ap-proval No. 3245–0121). This request should be delivered to the Disaster As-sistance Field Operations Center serv-ing the jurisdiction within 60 days of the date of the disaster. The addresses, phone numbers, and jurisdictions served by the field operations centers are published in the FEDERAL REG
-ISTER.
(4) SBA makes an economic injury disaster declaration in response to a determination of a natural disaster by the Secretary of Agriculture.
(5) SBA makes an economic injury declaration in reliance on a state cer-tification that at least five small busi-ness concerns in a disaster area have suffered substantial economic injury as a result of the disaster and are in need of financial assistance not otherwise available on reasonable terms. The state certification must be signed by the Governor, must specify the county or counties or other political subdivi-sion in which the disaster occurred, and must be delivered (with supporting documentation) to the Disaster Assist-ance Field Operations Center serving the jurisdiction within 120 days of the disaster occurrence. When a Governor certifies with respect to a drought or to below average water levels, the sup-porting documentation must include findings which show that conditions during the incident period meet or ex-ceed the U.S. Drought Monitor (USDM) standard of ‘‘severe’’ (Intensity level D–2 to D–4). The USDM may be found at http://drought.unl.edu/dm/monitor. With respect to below average water levels, the supplementary information accompanying the certification must include findings which establish long- term average water levels based on re-corded historical data, show that cur-rent water levels are below long-term average levels, and demonstrate that economic injury has occurred as a di-rect result of the low water levels. Not later than 30 days after SBA receives a certification by a Governor, it shall re-spond in writing with its decision and its reasons.
(b) SBA publishes notice of any dis-aster declaration in the FEDERAL REG
-ISTER. The published notice will iden-tify the kinds of assistance available, the date and nature of the disaster, and the deadline and location for filing loan applications. Additionally, SBA will use the local media to inform po-tential loan applicants where to obtain loan applications and otherwise to as-sist victims in applying for disaster loans. SBA will accept applications after the announced deadline only
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when SBA determines that the late fil-ing resulted from substantial causes beyond the control of the applicant. [61 FR 3304, Jan. 31, 1996, as amended at 64 FR 13667, Mar. 22, 1999; 67 FR 64518, Oct. 21, 2002; 71 FR 63676, Oct. 31, 2006; 71 FR 75409, Dec. 15, 2006; 73 FR 54675, Sept. 23, 2008] § 123.4 What is a disaster area andwhy is it important?
Each disaster declaration defines the geographical areas affected by the dis-aster. Only those victims located in the declared disaster area are eligible to apply for SBA disaster loans. When the President declares a major disaster, the Federal Emergency Management Agency defines the disaster area. In major disasters, economic injury dis-aster loans and IDAP loans may be made for victims in contiguous coun-ties or other political subdivisions, pro-vided, however that with respect to major disasters which authorize public assistance only, SBA shall not make economic injury disaster or IDAP loans in counties contiguous to the disaster area. Disaster declarations issued by the Administrator of SBA include con-tiguous counties for both physical, eco-nomic injury and, in some cases, IDAP assistance. Contiguous counties or other political subdivisions are those land areas which abut the land area of the declared disaster area without geo-graphic separation other than by a minor body of water, not to exceed one mile between the land areas of such counties.
[61 FR 3304, Jan. 31, 1996, as amended at 67 FR 64519, Oct. 21, 2002; 75 FR 60597, Oct. 1, 2010]
§ 123.5 What kinds of loans are avail-able?
(a) Disaster loans authorized under Sec-tion 7(b). SBA offers four kinds of dis-aster loans as authorized by Section 7(b) of the Small Business Act: Phys-ical disaster home loans, physPhys-ical dis-aster business loans, economic injury disaster business loans, and Military Reservist EIDL loans. SBA makes these loans directly or in participation with a financial institution. If a dis-aster loan authorized under Section 7(b) is made in participation with a fi-nancial institution, SBA’s share in that loan may not exceed 90 percent.
(b) IDAP loans. SBA also offers IDAP loans as authorized by Section 42 of the Small Business Act. SBA makes these interim guaranteed disaster loans to small businesses only in participation with a financial institution. SBA’s share in an IDAP loan is equal to 85 percent.
[75 FR 60597, Oct. 1, 2010]
§ 123.6 What does SBA look for when considering a disaster loan appli-cant?
There must be reasonable assurance that you can repay your loan out of your personal or business cash flow, and you must have satisfactory credit and character. SBA will not make a loan to you if repayment depends upon the sale of collateral through fore-closure or any other disposition of as-sets owned by you. SBA is prohibited by statute from making a loan to you if you are engaged in the production or distribution of any product or service that has been determined to be obscene by a court.
§ 123.7 Are there restrictions on how disaster loans can be used?
You must use disaster loans to re-store or replace your primary home (including a mobile home used as a pri-mary residence) and your personal or business property as nearly as possible to their condition before the disaster occurred, and within certain limits, to protect damaged or destroyed real property from possible future similar disasters.
§ 123.8 Does SBA charge any fees for obtaining a disaster loan?
SBA does not charge points, closing, or servicing fees on any disaster loan authorized under Section 7(b). You will be responsible for payment of any clos-ing costs owed to third parties on these loans, such as recording fees and title insurance premiums. If your loan is made under Section 7(b) in participa-tion with a financial instituparticipa-tion, SBA will charge a guarantee fee to the fi-nancial institution, which then may re-cover the guarantee fee from you. SBA does not charge a guarantee fee for an IDAP loan made under Section 42. [75 FR 60598, Oct. 1, 2010]
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§ 123.9 What happens if I don’t use loan proceeds for the intended pur-pose?
(a) For disaster loans authorized under Section 7(b), when SBA approves each application, it issues a loan au-thorization which specifies the amount of the loan, repayment terms, any col-lateral requirements, and the per-mitted use of loan proceeds. If you wrongfully misapply the proceeds of a disaster loan authorized under Section 7(b), you will be liable to SBA for one and one-half times the proceeds dis-bursed to you as of the date SBA learns of your wrongful misapplication. Wrongful misapplication means the willful use of any loan proceeds with-out SBA approval contrary to the loan authorization. If you fail to use loan proceeds for authorized purposes for 60 days or more after receiving a loan dis-bursement check, such non-use also is considered a wrongful misapplication of the proceeds.
(b) If SBA learns that you may have misapplied your loan proceeds from a disaster loan authorized under Section 7(b), SBA will notify you at your last known address, by certified mail, re-turn receipt requested. You will be given at least 30 days to submit to SBA evidence that you have not misapplied the loan proceeds or that you have cor-rected any such misapplication. Any failure to respond in time will be con-sidered an admission that you mis-applied the proceeds. If SBA finds a wrongful misapplication, it will cancel any undisbursed loan proceeds, call the loan, and begin collection measures to collect your outstanding loan balance and the civil penalty.
(c) If you misapply loan proceeds of any disaster loan under this Part, in-cluding an IDAP loan, you may face criminal prosecution or civil or admin-istrative action.
[61 FR 3304, Jan. 31, 1996, as amended at 75 FR 60598, Oct. 1, 2010]
§ 123.10 What happens if I cannot use my insurance proceeds to make re-pairs?
If you must pay insurance proceeds to the holder of a recorded lien or en-cumbrance against your damaged prop-erty instead of using them to make re-pairs, you may apply to SBA for the
full amount needed to make such re-pairs. If you voluntarily pay insurance proceeds to a recorded lienholder, your loan eligibility is reduced by the amount of the voluntary payment.
§ 123.11 Does SBA require collateral for any of its disaster loans?
Generally, SBA will not require that you pledge collateral to secure a dis-aster home loan or a physical disdis-aster business loan of $14,000 or less (or such higher amount as the Administrator determines appropriate in the event the President declares a major dis-aster), or an economic injury disaster loan of $5,000 or less. However, for the purposes of the Military Reservist EIDL only, as described in section 123.513, SBA will not generally require that you pledge collateral to secure a loan of $50,000 or less. For loans larger than these amounts, you will be re-quired to provide available collateral such as a lien on the damaged or re-placement property, a security interest in personal property, or both.
(a) Sometimes a borrower, including affiliates as defined in part 121 of this title, will have more than one loan after a single disaster. In deciding whether collateral is required, SBA will add up all physical disaster loans to see if they exceed $14,000 and all eco-nomic injury disaster loans to see if they exceed $5,000.
(b) SBA will not decline a loan if you lack a particular amount of collateral as long as it is reasonably sure that you can repay your loan. If you refuse to pledge available collateral when re-quested by SBA, however, SBA may de-cline or cancel your loan.
(c) Collateral requirements for IDAP loans are set forth in Subpart H of this part.
[61 FR 3304, Jan. 31, 1996, as amended at 73 FR 54675, Sept. 23, 2008; 75 FR 14332, Mar. 25, 2010; 75 FR 60598, Oct. 1, 2010]
§ 123.12 Are books and records re-quired?
You must retain complete records of all transactions financed with your SBA loan proceeds, including copies of all contracts and receipts, for a period of 3 years after you receive your final disbursement of loan proceeds. If you have a physical disaster business or
421
economic injury loan, you must also maintain current and accurate books of account, including financial and op-erating statements, insurance policies, and tax returns. You must retain appli-cable books and records for 3 years after your loan matures including any extensions, or from the date when your loan is paid in full, whichever occurs first. You must make available to SBA or other authorized government per-sonnel upon request all such books and records for inspection, audit, and re-production during normal business hours and you must also permit SBA and any participating financial institu-tion to inspect and appraise your as-sets. (OMB Approval No. 3245–0110.)§ 123.13 What happens if my loan ap-plication is denied?
(a) If SBA denies your loan applica-tion, SBA will notify you in writing and set forth the specific reasons for the denial. Any applicant whose re-quest for a loan is declined for reasons other than size (not being a small busi-ness) has the right to present informa-tion to overcome the reason or reasons for the decline and to request reconsid-eration in writing. (OMB Approval No. 3245–0122.)
(b) Any decline due to size can only be appealed as set forth in part 121 of this chapter.
(c) Any request for reconsideration must be received by SBA’s Disaster As-sistance Processing and Disbursement Center (DAPDC) within six months of the date of the decline notice. After six months, a new loan application is re-quired.
(d) A request for reconsideration must contain all significant new infor-mation that you rely on to overcome SBA’s denial of your original loan ap-plication. Your request for reconsider-ation of a business loan applicreconsider-ation must also be accompanied by current business financial statements.
(e) If SBA declines your application a second time, you have the right to ap-peal in writing to the Director, aster Assistance Processing and Dis-bursement Center. All appeals must be received by the processing center with-in 30 days of the declwith-ine action. Your request must state that you are
appeal-ing, and must give specific reasons why the decline action should be reversed.
(f) The decision of the Director, DAPDC, is final unless:
(1) The Director, DAPDC, does not have the authority to approve the re-quested loan;
(2) The Director, DAPDC, refers the matter to the AA/DA; or
(3) The AA/DA, upon a showing of special circumstances, requests that the Director, DAPDC, forward the mat-ter to him or her for final consider-ation. Special circumstances may in-clude, but are not limited to, policy considerations or alleged improper acts by SBA personnel or others in proc-essing the application.
(g) This section does not apply to IDAP loans.
[61 FR 3304, Jan. 31, 1996, as amended at 71 FR 63676, Oct. 31, 2006; 75 FR 60598, Oct. 1, 2010]
§ 123.14 How does the Federal Debt Collection Procedures Act of 1990 apply?
(a) Under the Federal Debt Collection Procedures Act of 1990 (28 U.S.C. 3201(e)), a debtor who owns property which is subject to an outstanding judgment lien for a debt owed to the United States generally is not eligible to receive a disaster loan. The SBA sociate Administrator for Disaster As-sistance, or designee, may waive this restriction as to disaster loans (except IDAP loans) upon a demonstration of good cause. Good cause means a writ-ten representation by you under oath which convinces SBA that:
(1) The declared disaster was a major contributing factor to the delinquency which led to the judgment lien, regard-less of when the original debt was in-curred; or
(2) The disaster directly prevented you from fulfilling the terms of an agreement with SBA or any other Fed-eral Government entity to satisfy its pre-disaster judgment lien; in this situ-ation, the judgment creditor must cer-tify to SBA that you were complying with the agreement to satisfy the judg-ment lien when the disaster occurred; or
(3) Other circumstances exist which would justify a waiver.
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(b) The waiver determination by the Associate Administrator for Disaster Assistance, or designee, is a final, non- appealable decision. The granting of a waiver does not include loan approval; a waiver recipient must then follow normal loan application procedures. [61 FR 3304, Jan. 31, 1996, as amended at 75 FR 60598, Oct. 1, 2010]§ 123.15 What if I change my mind?
If SBA required you to pledge collat-eral for your loan, you may change your mind and rescind your loan pursu-ant to the Consumer Credit Protection Act, 15 U.S.C. 1601, and Regulation Z of the Federal Reserve Board, 12 CFR part 226. Your note and any collateral docu-ments signed by you will be canceled upon your return of all loan proceeds and your payment of any interest ac-crued. This provision does not apply to IDAP loans.
[61 FR 3304, Jan. 31, 1996, as amended at 75 FR 60598, Oct. 1, 2010]
§ 123.16 How are loans administered and serviced?
(a) If you obtained your disaster loan from a participating lender, that lender is responsible for closing and servicing your loan. If you obtained your loan di-rectly from SBA, your loan will be closed and serviced by SBA. The SBA rules on servicing are found in Subpart H of this part and part 120 of this chap-ter.
(b) If you are unable to pay your SBA loan installments in a timely manner for reasons substantially beyond your control, you may request that SBA sus-pend your loan payments, extend your maturity, or both.
[61 FR 3304, Jan. 31, 1996, as amended at 75 FR 60598, Oct. 1, 2010]
§ 123.17 Do other Federal require-ments apply?
As a condition of disbursement, you must be in compliance with certain re-quirements relating to flood insurance, lead-based paint, earthquake hazards, coastal barrier islands, and child sup-port obligations, as set forth in §§ 120.170 through 120.175 of this chap-ter.
§ 123.18 Can I request an increase in the amount of a physical disaster loan?
SBA will consider your request for an increase in your loan if you can show that the eligible cost of repair or re-placement of damages increased be-cause of events occurring after the loan approval that were beyond your con-trol. An eligible cost is one which is re-lated to the disaster for which SBA issued the original loan. For example, if you discover hidden damage within a reasonable time after SBA approved your original disaster loan and before repair, renovation, or reconstruction is complete, you may request an increase. Or, if applicable building code require-ments were changed since SBA ap-proved your original loan, you may re-quest an increase in your loan amount. [63 FR 15072, Mar. 30, 1998]
§ 123.19 May I request an increase in the amount of an economic injury loan?
SBA will consider your request for an increase in the loan amount if you can show that the increase is essential for your business to continue and is based on events occurring after SBA ap-proved your original loan which were beyond your control. For example, delays may have occurred beyond your control which prevent you from resum-ing your normal business activity in a reasonable time frame. Your request for an increase in the loan amount must be related to the disaster for which the SBA economic injury dis-aster loan was originally made. [63 FR 15072, Mar. 30, 1998]
§ 123.20 How long do I have to request an increase in the amount of a physical disaster loan or an eco-nomic injury loan?
You should request a loan increase as soon as possible after you discover the need for the increase, but not later than two years after SBA approved your physical disaster or economic in-jury loan. After two years, the SBA sociate Administrator for Disaster As-sistance (AA/DA) may waive this limi-tation after finding extraordinary and unforeseeable circumstances.
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§ 123.21 What is a mitigation measure?
A mitigation measure is something done for the purpose of protecting real and personal property against disaster related damage. You may implement mitigation measures after a disaster occurs (post-disaster) to protect against recurring disaster related dam-age, or before a disaster occurs (pre- disaster) to protect against future dis-aster related damage. Examples of mitigation measures include building retaining walls, sea walls, grading and contouring land, elevating flood prone structures, relocating utilities, or ret-rofitting structures to protect against high winds, earthquakes, flood, wildfires, or other physical disasters. Section 123.107 specifically addresses post-disaster mitigation for home dis-aster loans, and § 123.204 specifically ad-dresses post-disaster mitigation for businesses. Sections 123.400 through 123.412 specifically address pre-disaster mitigation.
[67 FR 62337, Oct. 7, 2002]
Subpart B—Home Disaster Loans
§ 123.100 Am I eligible to apply for a home disaster loan?
(a) You are eligible to apply for a home disaster loan if you:
(1) Own and occupy your primary res-idence and have suffered a physical loss to your primary residence, personal property, or both; or
(2) Do not own your primary resi-dence, but have suffered a physical loss to your personal property. Family members sharing a residence are eligi-ble if they are not dependents of the owners of the residence.
(b) Losses may be claimed only by the owners of the property at the time of the disaster, and all such losses will be verified by SBA. SBA will consider beneficial ownership as well as legal title (for real or personal property) in determining who suffered the loss.
§ 123.101 When am I not eligible for a home disaster loan?
You are not eligible for a home dis-aster loan if:
(a) You have been convicted, during the past year, of a felony during and in
connection with a riot or civil disorder or other declared disaster;
(b) You acquired voluntarily more than a 50 percent ownership interest in the damaged property after the dis-aster, and no contract of sale existed at the time of the disaster;
(c) Your damaged property can be re-paired or replaced with the proceeds of insurance, gifts or other compensation, including condemnation awards (with one exception), these amounts must ei-ther be deducted from the amount of the claimed losses or, if received after SBA has approved and disbursed a loan, must be paid to SBA as principal pay-ments on your loan. You must notify SBA of any such recoveries collected after receiving an SBA disaster loan. The one exception applies to amounts received under the Individuals and Household Program of the Federal Emergency Management Agency solely to meet an emergency need pending processing of an SBA loan. In such an event, you must repay the financial as-sistance with SBA loan proceeds if it was used for purposes also eligible for an SBA loan;
(d) SBA determines that you assumed the risk (for example, by not maintain-ing flood insurance as required by an earlier SBA disaster loan when the cur-rent loss is also due to flood);
(e) Your damaged property is a sec-ondary home (although if you rented the property out before the disaster and the property would not constitute a ‘‘residence’’ under the provisions of Section 280A of the Internal Revenue Code (26 U.S.C. 280A), you may be eligi-ble for a physical disaster business loan);
(f) Your damaged property is the type of vehicle normally used for rec-reational purposes, such as motorhomes, aircraft, and boats;
(g) Your damaged property consists of cash or securities;
(h) The replacement value of your damaged personal property is extraor-dinarily high and not easily verified, such as the value of antiques, artworks, or hobby collections;
(i) You or other principal owners of the damaged property are presently in-carcerated, or on probation or parole following conviction for a serious criminal offense;
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(j) Your only interest in the damaged property is in the form of a security in-terest, mortgage, or deed of trust;(k) The damaged building, including contents, was newly constructed or substantially improved on or after Feb-ruary 9, 1989, and (without a significant business justification) is located sea-ward of mean high tide or entirely in or over water; or
(l) You voluntarily decide to relocate outside the business area in which the disaster has occurred, and there are no special or unusual circumstances lead-ing to your decision (business area means the municipality which provides general governmental services to your damaged home or, if not located in a municipality, the county or equivalent political entity in which your damaged home is located).
[61 FR 3304, Jan. 31, 1996, as amended at 67 FR 64519, Oct. 21, 2002]
§ 123.102 What circumstances would justify my relocating?
SBA may approve a loan if you in-tend to relocate outside the business area in which the disaster has occurred if your relocation is caused by such special or unusual circumstances as:
(a) Demonstrable risk that the busi-ness area will suffer future disasters;
(b) A change in employment status (such as loss of job, transfer, lack of adequate job opportunities within the business area or scheduled retirement within 18 months after the disaster oc-curs);
(c) Medical reasons; or
(d) Special family considerations which necessitate a move outside of the business area.
§ 123.103 What happens if I am forced to move from my home?
If you must relocate inside or outside the business area because local au-thorities will not allow you to repair your damaged property, SBA considers this to be a total loss and a mandatory relocation. In this case, your loan would be an amount that SBA con-siders sufficient to replace your resi-dence at your new location, plus funds to cover losses of personal property and eligible refinancing.
§ 123.104 What interest rate will I pay on my home disaster loan?
If you can obtain credit elsewhere, your interest rate is set by a statutory formula, but will not exceed 8 percent per annum. If you cannot obtain credit elsewhere, your interest rate is one- half the statutory rate, but will not ex-ceed 4 percent per annum. Credit else-where means that, with your cash flow and disposable assets, SBA believes you could obtain financing from non-fed-eral sources on reasonable terms. If you cannot obtain credit elsewhere, you also may be able to borrow from SBA to refinance existing recorded liens against your damaged real prop-erty. Under prior legislation, some SBA disaster loans had split interest rates. On any such loan, repayments of principal are applied first to that por-tion of the loan with the lowest inter-est rate.
§ 123.105 How much can I borrow with a home disaster loan and what lim-its apply on use of funds and repay-ment terms?
(a) For all disasters occurring on or after October 26, 1993, there are limits on how much money you can borrow for particular purposes:
(1) $40,000 for repair or replacement of household and personal effects;
(2) $200,000 for repair or replacement of a primary residence (including up-grading in order to meet minimum standards of safety and decency or cur-rent building code requirements). Re-pair or replacement of landscaping and/ or recreational facilities cannot exceed $5,000;
(3) $200,000 for eligible refinancing purposes; and
(4) 20 percent of the verified loss (not including refinancing), before deduc-tion compensadeduc-tion from other sources, up to a maximum of $200,000 (see § 123.107).
(b) You may not use loan proceeds to repay any debts on personal property, secured or unsecured, unless you in-curred those debts as a direct result of the disaster.
(c) SBA determines the loan matu-rity and repayment terms based on your needs and your ability to pay. Generally, you will pay equal monthly installments of principal and interest,
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beginning five months from the date of the loan, as shown on the Note secur-ing the loan. SBA will consider other payment terms if you have seasonal or fluctuating income, and SBA may allow installment payments of varying amounts over the first two years of the loan. The maximum maturity for a home disaster loan is 30 years. There is no penalty for prepayment of home dis-aster loans.[61 FR 3304, Jan. 31, 1996, as amended at 75 FR 14332, Mar. 25, 2010]
§ 123.106 What is eligible refinancing?
(a) If your home (primary residence) is totally destroyed or substantially damaged, and you do not have credit elsewhere, SBA may allow you to bor-row money to refinance recorded liens or encumbrances on your home. Your home is totally destroyed or substan-tially damaged if it has suffered unin-sured or otherwise uncompensated damage which, at the time of the dis-aster, is either:
(1) 40 percent or more of the home’s market value or replacement cost at the time of the disaster, including land value, whichever is less; or
(2) 50 percent or more of its market value or replacement cost at the time of the disaster, not including land value, whichever is less.
(b) Your home disaster loan for refi-nancing existing liens or encumbrances cannot exceed an amount equal to the lesser of $200,000, or the physical dam-age to your primary residence after ductions for any insurance or other re-covery.
§ 123.107 How much can I borrow for post-disaster mitigation for my home?
For mitigation measures imple-mented after a disaster has occurred, you can request that the approved home disaster loan amount be in-creased by the lesser of the cost of the mitigation measure, or up to 20 percent of the verified loss (before deducting compensation from other sources), to a maximum of $200,000.
[75 FR 14332, Mar. 25, 2010]
§ 123.108 How do the SBA disaster loan program and the FEMA grant pro-grams interact?
After a Presidential disaster declara-tion is made, you may be eligible for disaster assistance, including grant as-sistance, from the Federal Emergency Management Agency’s (FEMA) Federal Assistance to Individuals and House-holds Program (IHP). After you reg-ister with FEMA for disaster assist-ance, FEMA will consider you for IHP assistance, which includes housing as-sistance grants to repair or replace your damaged primary residence and temporary housing assistance (includ-ing rental assistance) to assist you temporarily with a place to live, and assistance with personal property, medical, dental and funeral expenses. FEMA may also refer you to SBA to apply for loan assistance to help repair or rebuild your home and/or to replace personal property destroyed during the disaster. If SBA is unable to approve your loan application, or if you have damage in excess of the SBA loan amount, SBA may refer you, on a time-ly basis, to FEMA for IHP grant con-sideration to assist with your unmet personal property and transportation needs. If you are approved for the SBA disaster loan and you have received grant assistance that duplicates the damage covered by the SBA loan, such grant assistance must be deducted from your loan eligibility as described in section 123.101(c) of the regulations. All grant decisions are made by FEMA. Additionally, if additional disaster as-sistance is available from state, local or other agencies, SBA may refer you to the appropriate agency for consider-ation.
[75 FR 7546, Feb. 22, 2010]
Subpart C—Physical Disaster
Business Loans
§ 123.200 Am I eligible to apply for a physical disaster business loan?
(a) Almost any business concern or charitable or other non-profit entity whose real or tangible personal prop-erty is damaged in a declared disaster area is eligible to apply for a physical disaster business loan. Your business
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may be a sole proprietorship, partner-ship, corporation, limited liability company, or other legal entity recog-nized under State law. Your business’ size (average annual receipts or num-ber of employees) is not taken into consideration in determining your eli-gibility for a physical disaster business loan. If your damaged business occu-pied rented space at the time of the disaster, and the terms of your busi-ness’ lease require you to make repairs to your business’ building, you may have suffered a physical loss and can apply for a physical business disaster loan to repair the property. In all other cases, the owner of the building is the eligible loan applicant.(b) Damaged vehicles, of the type normally used for recreational pur-poses, such as motorhomes, aircraft, and boats, may be repaired or replaced with SBA loan proceeds if you can sub-mit evidence that the damaged vehi-cles were used in your business at the time of the disaster.
§ 123.201 When am I not eligible to apply for a physical disaster busi-ness loan?
(a) You are not eligible for a physical disaster business loan if your business is an agricultural enterprise or if you (or any principal of the business) fit into any of the categories in § 123.101. Agricultural enterprise means a busi-ness primarily engaged in the produc-tion of food and fiber, ranching and raising of livestock, aquaculture and all other farming and agriculture-re-lated industries.
(b) Sometimes a damaged business entity (whether in the form of a cor-poration, limited liability company, partnership, or sole proprietorship) is engaged in both agricultural enterprise and a non-agricultural business ven-ture. If the agricultural enterprise part of your business entity has suffered a physical disaster, that enterprise is not eligible for SBA physical disaster as-sistance. If the non-agricultural busi-ness venture of your entity has suf-fered physical disaster damage, that part of your business operation would be eligible for SBA physical disaster assistance. If both the agricultural en-terprise part and the non-agricultural business venture have incurred
phys-ical disaster damage, only the non-ag-ricultural business venture of your business entity would be eligible for SBA physical disaster assistance.
(c) If your business is going to relo-cate voluntarily outside the business area in which the disaster occurred, you are not eligible for a physical dis-aster business loan. If, however, the re-location is due to uncontrollable or compelling circumstances, SBA will consider the relocation to be involun-tary and eligible for a loan. Such cir-cumstances may include, but are not limited to:
(1) The elimination or substantial de-crease in the market for your products or services, as a consequence of the dis-aster;
(2) A change in the demographics of your business area within 18 months prior to the disaster, or as a result of the disaster, which makes it uneco-nomical to continue operations in your business area;
(3) A substantial change in your cost of doing business, as a result of the dis-aster, which makes the continuation of your business in the business area not economically viable;
(4) Location of your business in a hazardous area such as a special flood hazard area or an earthquake-prone area;
(5) A change in the public infrastruc-ture in your business area which oc-curred within 18 months or as a result of the disaster that would result in substantially increased expenses for your business in the business area;
(6) Your implementation of decisions adopted and at least partially imple-mented within 18 months prior to the disaster to move your business out of the business area; and
(7) Other factors which undermine the economic viability of your business area.
(d) You are not eligible if your busi-ness is engaged in any illegal activity.
(e) You are not eligible if you are a government owned entity (except for a business owned or controlled by a Na-tive American tribe).
(f) You are not eligible if your busi-ness presents live performances of a prurient sexual nature or derives di-rectly or indidi-rectly more than de mini-mis gross revenue through the sale of
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products or services, or the presen-tation of any depictions or displays, of a prurient sexual nature.[61 FR 3304, Jan. 31, 1996, as amended at 62 FR 35337, July 1, 1997; 63 FR 46644, Sept. 2, 1998]
§ 123.202 How much can my business borrow with a physical disaster business loan?
(a) Disaster business loans, including both physical disaster and economic in-jury loans to the same borrower, to-gether with its affiliates, cannot ex-ceed the lesser of the uncompensated physical loss and economic injury or $2 million. Physical disaster loans may include amounts to meet current build-ing code requirements. If your business is a major source of employment, SBA may waive the $2 million limitation. A major source of employment is a busi-ness concern that has one or more loca-tions in the disaster area, on or after the date of the disaster, which:
(1) Employed 10 percent or more of the entire work force within the com-muting area of a geographically identi-fiable community (no larger than a county), provided that the commuting area does not extend more than 50 miles from such community; or
(2) Employed 5 percent of the work force in an industry within the disaster area and, if the concern is a non-manu-facturing concern, employed no less than 50 employees in the disaster area, or if the concern is a manufacturing concern, employed no less than 150 em-ployees in the disaster area; or
(3) Employed no less than 250 employ-ees within the disaster area.
(b) SBA will consider waiving the $2 million loan limit for a major source of employment only if:
(1) Your damaged location or loca-tions are out of business or in immi-nent danger of going out of business as a result of the disaster, and a loan in excess of $2 million is necessary to re-open or keep re-open the damaged loca-tions in order to avoid substantial un-employment in the disaster area; and
(2) You have used all reasonably available funds from your business, its affiliates and its principal owners (20% or greater ownership interest) and all available credit elsewhere (as described
in § 123.104) to alleviate your physical damage and economic injury.
(c) Physical disaster business bor-rowers may request refinancing of liens on both damaged real property and ma-chinery and equipment, but for an amount reduced by insurance or other compensation. To do so, your business property must be totally destroyed or substantially damaged, which means:
(1) 40 percent or more of the aggre-gate value (lesser of market value or replacement cost at the time of the disaster) of the damaged real property (including land) and damaged machin-ery and equipment; or
(2) 50 percent or more of the aggre-gate value (lesser of market value or replacement cost at the time of the disaster) of the damaged real property (excluding land) and damaged machin-ery and equipment.
(d) Loan funds allocated for repair or replacement of landscaping or rec-reational facilities may not exceed $5,000 unless the landscaping or rec-reational facilities fulfilled a func-tional need or contributed to the gen-eration of business.
(e) The SBA Administrator may in-crease the $2 million loan limit for dis-aster business physical and economic injury loans under an individual dis-aster declaration based on appropriate economic indicators for the region(s) in which the disaster occurred. SBA will publish the increased loan amount in the FEDERALREGISTER.
[61 FR 3304, Jan. 31, 1996, as amended at 63 FR 46644, Sept. 2, 1998; 75 FR 14332, Mar. 25, 2010]
§ 123.203 What interest rate will my business pay on a physical disaster business loan and what are the re-payment terms?
(a) SBA will announce interest rates with each disaster declaration. If your business, together with its affiliates and principal owners, has credit else-where, your interest rate is set by a statutory formula, but will not exceed 8 percent per annum. If you do not have credit elsewhere, your interest rate will not exceed 4 percent per annum. The maturity of your loan de-pends upon your repayment ability, but cannot exceed 3 years if you have
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credit elsewhere. Otherwise, the max-imum maturity is 30 years.(b) Generally, you must pay equal monthly installments, of principal and interest, beginning five months from the date of the loan as shown on the Note. SBA will consider other payment terms if you have seasonal or fluc-tuating income, and SBA may allow in-stallment payments of varying amounts over the first two years of the loan. There is no penalty for prepay-ment for disaster loans.
(c) For certain disaster business physical and economic injury loans, an additional payment, based on a per-centage of net earnings, will be re-quired to reduce the balance of the loan. This additional payment will not be required until 5 years after repay-ment begins.
[61 FR 3304, Jan. 31, 1996, as amended at 75 FR 14333, Mar. 25, 2010]
§ 123.204 How much can your business borrow for post-disaster mitigation?
For mitigation measures imple-mented after a disaster has occurred, you can request an increase in the ap-proved physical disaster business loan by the lesser of the cost of the mitiga-tion measure, or up to 20 percent of the verified loss, before deducting com-pensation from other sources, to repair or replace your damaged business. [75 FR 14333, Mar. 25, 2010]
Subpart D—Economic Injury
Disaster Loans
§ 123.300 Is my business eligible to apply for an economic injury dis-aster loan?
(a) If your business is located in a de-clared disaster area, and suffered sub-stantial economic injury as a direct re-sult of a declared disaster, you are eli-gible to apply for an economic injury disaster loan.
(1) Substantial economic injury is such that a business concern is unable to meet its obligations as they mature or to pay its ordinary and necessary operating expenses.
(2) Loss of anticipated profits or a drop in sales is not considered substan-tial economic injury for this purpose.
(b) Economic injury disaster loans are available only if you were a small business (as defined in part 121 of this chapter) or a private non-profit organi-zation when the declared disaster com-menced, you and your affiliates and principal owners (20% or more owner-ship interest) have used all reasonably available funds, and you are unable to obtain credit elsewhere (see § 123.104).
(c) Eligible businesses do not include agricultural enterprises, but do in-clude—
(1) Small nurseries affected by a drought disaster designated by the Sec-retary of Agriculture (nurseries are commercial establishments deriving 50 percent or more of their annual re-ceipts from the production and sale of ornamental plants and other nursery products, including, but not limited to, bulbs, florist greens, foliage, flowers, flower and vegetable seeds, shrubbery, and sod);
(2) Small agricultural cooperatives; (3) Producer cooperatives; and (4) Small aquaculture enterprises. (d) An eligible private non-profit or-ganization is a non-governmental agen-cy or entity that currently has:
(1) An effective ruling letter from the U.S. Internal Revenue Service, grant-ing tax exemption under sections 510(c), (d), or (e) of the Internal Rev-enue Code of 1954, or
(2) Satisfactory evidence from the State that the non-revenue producing organization or entity is a non-profit one organized or doing business under State law.
[61 FR 3304, Jan. 31, 1996, as amended at 67 FR 11880, Mar. 15, 2002; 70 FR 72595, Dec. 6, 2005; 73 FR 41254, July 18, 2008; 75 FR 14333, Mar. 25, 2010; 76 FR 63547, Oct. 12, 2011] § 123.301 When would my business not
be eligible to apply for an economic injury disaster loan?
Your business is not eligible for an economic disaster loan if you (or any principal of the business) fit into any of the categories in §§ 123.101 and 123.201, or if your business is:
(a) Engaged in lending, multi-level sales distribution, speculation, or in-vestment (except for real estate invest-ment with property held for rental when the disaster occurred);
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(b) A non-profit or charitable con-cern, other than a private non-profit organization;(c) A consumer or marketing cooper-ative;
(d) Not a small business concern; or (e) Deriving more than one-third of gross annual revenue from legal gam-bling activities;
(f) A loan packager which earns more than one-third of its gross annual rev-enue from packaging SBA loans;
(g) Principally engaged in teaching, instructing, counseling, or indoctri-nating religion or religious beliefs, whether in a religious or secular set-ting; or
(h) Primarily engaged in political or lobbying activities.
[61 FR 3304, Jan. 31, 1996, as amended at 63 FR 46644, Sept. 2, 1998; 75 FR 14333, Mar. 25, 2010]
§ 123.302 What is the interest rate on an economic injury disaster loan?
Your economic injury loan will have an interest rate of 4 percent per annum or less.
§ 123.303 How can my business spend my economic injury disaster loan?
(a) You can only use the loan pro-ceeds for working capital necessary to carry your concern until resumption of normal operations and for expenditures necessary to alleviate the specific eco-nomic injury, but not to exceed that which the business could have provided had the injury not occurred.
(b) Loan proceeds may not be used to: (1) Refinance indebtedness which you incurred prior to the disaster event;
(2) Make payments on loans owned by another federal agency (including SBA) or a Small Business Investment Com-pany licensed under the Small Business Investment Act;
(3) Pay, directly or indirectly, any obligations resulting from a federal, state or local tax penalty as a result of negligence or fraud, or any non-tax criminal fine, civil fine, or penalty for non-compliance with a law, regulation, or order of a federal, state, regional, or local agency or similar matter;
(4) Repair physical damage; or (5) Pay dividends or other disburse-ments to owners, partners, officers or stockholders, except for reasonable
re-muneration directly related to their performance of services for the busi-ness.
Subpart E—Pre-Disaster Mitigation
Loans
SOURCE: 67 FR 62337, Oct. 7, 2002, unless otherwise noted.
§ 123.400 What is the Pre-Disaster Miti-gation Loan Program?
The Pre-Disaster Mitigation Loan Program allows SBA to make low in-terest, fixed rate loans to small busi-nesses for the purpose of implementing mitigation measures to protect their commercial real property (building) or leasehold improvements or contents from disaster related damage. This pro-gram supports the Federal Emergency Management Agency (FEMA’s) Pre- Disaster Mitigation Program. This pilot program is authorized for 5 fiscal years (October—September), from 2000 through 2004, and has only been ap-proved for limited funding. Therefore, approved loan requests are funded on a first come, first served basis up to the limit of program funds available (see § 123.411).
§ 123.401 What types of mitigation measures can your business include in an application for a pre-disaster mitigation loan?
To be included in a pre-disaster miti-gation loan application, each of your business’ mitigation measures must satisfy the following criteria:
(a) The mitigation measure, as de-scribed in the application, must serve the purpose of protecting your com-mercial real property (building) or leasehold improvements or contents from damage that may be caused by fu-ture disasters; and
(b) The mitigation measure must conform to the priorities and goals of the State or local government’s miti-gation plan for the community in which the business subject to the meas-ure is located. To show that this factor is satisfied your business must submit to SBA, as a part of your complete ap-plication, a written statement from a State or local emergency management coordinator confirming this fact (see § 123.408). Contact your regional FEMA
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office for a list of your State’s emer-gency management coordinators or visit the FEMA Web site at http:// www.fema.gov.§ 123.402 Can your business include its relocation as a mitigation measure in an application for a pre-disaster mitigation loan?
Yes, you may request a pre-disaster mitigation loan for the relocation of your business if:
(a) Your commercial real property (building) is located in a SFHA (Spe-cial Flood Hazard Area); and
(b) Your business relocates outside the SFHA but remains in the same par-ticipating pre-disaster mitigation com-munity. Contact your regional FEMA office for a listing of communities par-ticipating in the Pre-Disaster Mitiga-tion Program and SFHAs or visit the FEMA Web site at http://www.fema.gov.
§ 123.403 When is your business eligi-ble to apply for a pre-disaster miti-gation loan?
To be eligible to apply for a pre-dis-aster mitigation loan your business must meet each of the following cri-teria:
(a) Your business, which is the sub-ject of the pre-disaster mitigation measure, must be located in a partici-pating pre-disaster mitigation commu-nity. Each State, the District of Co-lumbia, Puerto Rico, and the Virgin Is-lands have at least one participating pre-disaster mitigation community. Contact your regional FEMA office to find out the locations of participating pre-disaster mitigation communities or visit the FEMA Web site at http:// www.fema.gov.;
(b) If your business is proposing a mitigation measure that protects against a flood hazard, the location of your business which is the subject of the mitigation measure must be lo-cated in a Special Flood Hazard Area (SFHA). Contact your FEMA regional office to find out the locations of SFHAs or visit the FEMA Web site at http://www.fema.gov.;
(c) As of the date your business sub-mits a complete Pre-Disaster Mitiga-tion Small Business Loan ApplicaMitiga-tion to SBA (see § 123.408 for what SBA’s considers to be a complete applica-tion), your business, along with its
af-filiates, must be a small business con-cern as defined in part 121 of this chap-ter. The definition of small business concern encompasses sole proprietor-ships, partnerproprietor-ships, corporations, lim-ited liability entities, and other legal entities recognized under State law;
(d) Your business, which is the sub-ject of the mitigation measure, must have operated as a business in its present location for at least one year before submitting its application;
(e) Your business, along with its af-filiates and owners, must not have the financial resources to fund the pro-posed mitigation measures without undue hardship. SBA makes this deter-mination based on the information your business submits as a part of its application; and
(f) If your business is owning and leasing out real property, the mitiga-tion measures must be for protecmitiga-tion of a building leased primarily for com-mercial rather than residential pur-poses (SBA will determine this based upon a comparative square footage basis).
§ 123.404 When is your business ineli-gible to apply for a pre-disaster mitigation loan?
Your business is ineligible to apply for a pre-disaster mitigation loan if your business (including its affiliates) satisfies any of the following condi-tions:
(a) Any of your business’ principal owners is presently incarcerated, or on probation or parole following convic-tion of a serious criminal offense, or has been indicted for a felony or a crime of moral turpitude;
(b) Your business’ only interest in the business property is in the form of a security interest, mortgage, or deed of trust;
(c) The building, which is the subject of the mitigation measure, was newly constructed or substantially improved on or after February 9, 1989, and (with-out significant business justification) is located seaward of mean high tide or entirely in or over water;
(d) Your business is an agricultural enterprise. Agricultural enterprise means a business primarily engaged (see § 121.107 of this chapter) in the pro-duction of food and fiber, ranching and
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raising of livestock, aquaculture and all other farming and agriculture-re-lated industries. Sometimes a business is engaged in both agricultural and non-agricultural business activities. If the primary business activity of your business is not an agricultural enter-prise, it may apply for a pre-disaster mitigation loan, but loan proceeds may not be used, directly or indirectly, for the benefit of the agricultural activi-ties;(e) Your business is engaged in any illegal activity;
(f) Your business is a government owned entity (except for a business owned or controlled by a Native Amer-ican tribe);
(g) Your business presents live per-formances of a prurient sexual nature or derives directly or indirectly more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or dis-plays, of a prurient sexual nature;
(h) Your business engages in lending, multi-level sales distribution, specula-tion, or investment (except for real es-tate investment with property held for commercial rental);
(i) Your business is a non-profit or charitable concern;
(j) Your business is a consumer or marketing cooperative;
(k) Your business derives more than one-third of its gross annual revenue from legal gambling activities;
(l) Your business is a loan packager that earns more than one-third of its gross annual revenue from packaging SBA loans;
(m) Your business principally en-gages in teaching, instructing, coun-seling, or indoctrinating religion or re-ligious beliefs, whether in a rere-ligious or secular setting; or
(n) Your business is primarily en-gaged in political or lobbying activi-ties.
§ 123.405 How much can your business borrow with a pre-disaster mitiga-tion loan?
Your business, together with its af-filiates, may borrow up to $50,000 each fiscal year. This loan amount may be used to fund only those projects that were a part of your business’ approved loan request. SBA will consider
mitiga-tion measures costing more than $50,000 per year if your business can identify, as a part of its Pre-Disaster Mitigation Small Business Loan Appli-cation, sources that will fund the cost above $50,000.
§ 123.406 What is the interest rate on a pre-disaster mitigation loan?
The interest rate on a pre-disaster mitigation loan will be fixed at 4 per-cent per annum or less. The exact in-terest rate will be stated in the FED
-ERALREGISTERnotice announcing each filing period (see § 123.407).
§ 123.407 When does your business apply for a pre-disaster mitigation loan and where does your business get an application?
SBA will publish a notice in the FED
-ERAL REGISTER announcing the avail-ability of pre-disaster mitigation loans. The notice will designate a 30- day application filing period with a specific opening date and filing dead-line, as well as the locations for obtain-ing and filobtain-ing loan applications. In ad-dition to the FEDERAL REGISTER, SBA will coordinate with FEMA, and will issue press releases to the local media to inform potential loan applicants where to obtain loan applications. SBA will not accept any applications post-marked after the filing deadline; how-ever, SBA may announce additional ap-plication periods each year depending on the availability of program funds.
§ 123.408 How does your business apply for a pre-disaster mitigation loan?
To apply for a pre-disaster mitiga-tion loan your business must submit a complete Pre-Disaster Mitigation Small Business Loan Application (ap-plication) within the announced filing period. Complete applications mailed to SBA and postmarked within the an-nounced filing period will be accepted. The complete application serves as your business’ loan request. A com-plete application supplies all of the fil-ing requirements specified on the ap-plication form including a written statement from the local or State coor-dinator confirming:
(a) The business that is the subject of the mitigation measure is located