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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: October 10, 2000

FROM: Barry McVay, CPCM

SUBJECT: Small Business Administration; Program for Investment in Microentrepreneurs Act

SOURCE: Federal Register, October 10, 2000, Vol. 65, No. 196, page 60225

AGENCIES: Small Business Administration (SBA)

ACTION: Notice Proposed Rulemaking

SYNOPSIS: SBA is proposing to add new regulations to implement the Program for Investment in Microentrepreneurs (PRIME) Act which was created November 12, 1999, with the enactment of Title VII of the Gramm-Leach-Bliley Act (Public Law 106-102). The program is intended to provide training and technical assistance to disadvantaged microentrepreneurs through grants to qualified Microenterprise Development Organizations (MDOs).

EDITOR'S NOTE: The SBA's regulations are in Title 13 of the Code of Federal Regulations (CFR).

DATES: Comments must be submitted by November 9, 2000.

ADDRESSES: Send your comments to Jane Palsgrove Butler, Associate Administrator, Microenterprise Development Branch, Office of Financial Assistance (OFA), U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416, 202-205-6497.

FOR FURTHER INFORMATION CONTACT: Jody Raskind, Chief, Microenterprise Development Branch, 202-205-6485.

SUPPLEMENTAL INFORMATION: With the enactment of the PRIME Act, Congress recognized that many disadvantaged microentrepreneurs (low and very-low income businesses) need training and technical assistance to start, operate, strengthen, or expand their businesses. The PRIME Act intends to achieve this with the award of PRIME grants to qualified MDOs to help them meet the training and technical assistance needs for disadvantaged microentrepreneurs, which will encourage entrepreneurship and capital formation at the community level.

To implement the provisions of the PRIME Act, SBA proposes to amend Title 13 of the CFR by adding Part 119, Program for Investment in Microentrepreneurs ("PRIME" or "the Act"). The following are the main provisions of the proposed Part 119:

• Section 119.1, What is the Program for Investment in Microentrepreneurs ("PRIME" or "the Act")?, states that the PRIME Act authorizes grants to MDOs to "fund training and technical assistance for disadvantaged entrepreneurs [referred to as a "Technical Assistance Grant" in Section 119.4, What services or activities may PRIME grant funds be used for?], build these organizations' own capacity to give training and technical assistance ["Capacity Building Grant"], fund research and development of 'best practices' in microenterprise development and technical assistance programs for disadvantaged microentrepreneurs ["Research and Development Grant"], and to fund other undertakings the [SBA] Administrator or designee deems consistent with these purposes ["Discretionary Grant"]."
  
  
• Section 119.2, Definitions, provides the following definitions:
  
  
  • "Low-income person" is a person with "an income, adjusted for family size, of not more than (1) for metropolitan areas, 80% of the median income; and (2) for non-metropolitan areas, the greater of (i) 80% of the area median income; or (ii) 80% of the statewide non-metropolitan area median income."
    
    
  • "Microenterprise" means "a sole proprietorship, partnership or corporation that (1) has fewer than 5 employees, including the owner; and (2) generally lacks access to conventional loans, equity, or other banking services."
    
    
  • "Microenterprise development organization" means "a nonprofit entity, or a program administered by such an entity, including community development corporations or other nonprofit development organizations and social service organizations, that provides services to disadvantaged microentrepreneurs."
    
    
  • "Very low income person" means a person with "an income adjusted for family size of not more than 150% of the poverty line..."
  
  
• Section 119.5, How are PRIME grant awards allocated?, states that "not less than 50% of the number of grant awards made under this part will be awarded to qualified organizations benefiting very low-income persons, including those residing on Indian reservations." It goes on to allocate the funding as follows: "(1) a minimum of 75% for Technical Assistance Grants; (2) a minimum of 15% for Capacity Building Grants; and (3) the remaining 10% or less may be allocated by SBA, in its sole discretion to be used for (i) Research and Development Grants; or (ii) Discretionary Grants."
  
  
• Section 119.6, What are the minimum and maximum amounts for an award?, states that "the minimum grant award for Technical Assistance and Capacity Building Grants will be $50,000...there is no minimum grant award for Research and Development or Discretionary Grants. The maximum amount that an individual grant recipient may receive in any fiscal year from a single award or multiple awards...may not exceed $250,000 or 10% of the total grant funds available for award in that fiscal year, whichever is less."
  
  
• Section 119.7, How long will grant funding be available to a single grantee?, states that funding will be available for one year plus four option years, but that "funding for any option years will be in declining amounts as follows: (1) 80% of initial grant amount in first option year; (2) 60% of initial grant amount in second option year; (3) 40% of initial grant amount in third option year; and (4) 20% of initial grant amount in fourth option year."
  
  
• Section 119.8, Are there matching requirements for grantees?, requires applicants and grantees to "match federal assistance with funds from sources other than the federal government in an amount not less than 50% of the grant amount awarded each year." However, "for an applicant or grantee with severe constraints on available sources of matching funds, the Administrator or designee may reduce or eliminate the matching requirements."
  
  
• Section 119.9, How will a qualified organization apply for PRIME grant awards?, states that "SBA will issue Program Announcements specifying the terms, conditions, and evaluation criteria for each potential set of awards. Program Announcements will summarize the purpose of the available funds; will advise potential applicants regarding how to obtain an application packet; and will provide summary information regarding deadlines and other requirements."
  
  
• Section 119.10, Will SBA give preferential consideration to other SBA program participants?, states that SBA not prefer Microloan Program participants (Section 7(m)) over non-participants or former participants in that program.
  
  
• Section 119.12, What criteria will SBA use to evaluate applications for funding under the PRIME program?, states that "SBA will give special consideration to organizations located in and serving areas of, or with a history of successful outreach to, low-income and very low-income persons..."

The rest of the proposed Part 119 section address the making of subgrants, limitations on the use of program income, carryover procedures from one fiscal year to the next of unexpended federal funds, SBA reporting and record keeping requirements, SBA oversight unctions, restrictions against lobbying, fundraising costs, and conflict of interests.

In addition, this proposed rule includes three separate Program Announcements, one for each category of grants except Discretionary Grants. These Program Announcements will not appear in the regulations, but are published so interested parties may comment on their contents and format. Essentially, each reiterates the requirements and provisions contained in proposed 13 CFR Part 119.

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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