DATE: October 7, 2002

SUBJECT: Small Business Administration; Pre-Disaster Mitigation Loans

SOURCE: Federal Register, October 7, 2002, Vol. 67, No. 194, page 62335

AGENCIES: Small Business Administration (SBA)

ACTION: Final Rule

SUMMARY: SBA is clarifying its regulations on the Pre-Disaster Mitigation Loan Program, which is a five-year pilot program authorized in 1999 which allows SBA to make low interest, fixed rate loans to small businesses for the purpose of implementing mitigation measures to protect their property from disaster-related damage.

EDITOR'S NOTE: The SBA's regulations being amended are in Title 13 of the Code of Federal Regulations (CFR), Business and Credit Administration; Chapter 1, Small Business Administration; Part 123, Disaster Loan Program.

For more on the proposed rule, see the June 14, 2000, FEDERAL CONTRACTS DISPATCH "Small Business Administration; Pre-Disaster Mitigation Loans."

EFFECTIVE DATE: November 6, 2002.

FOR FURTHER INFORMATION CONTACT: Herbert L. Mitchell, Associate Administrator, Office of Disaster Assistance, 202-205-6734.

SUPPLEMENTAL INFORMATION: The Pre-Disaster Mitigation Loan Program is a pilot program authorized by Congress for five fiscal years, from Fiscal Years 2000 through 2004, at $15 million a year. The program allows SBA to make low interest (4% or less) fixed rate loans of no more than $50,000 per year to small businesses to implement mitigation measures (such as retaining walls, sea walls, grading, and relocating utilities) that will protect the small business from disaster related damage. The program was developed in support of "Project Impact," a formal mitigation program established by the Federal Emergency Management Agency (FEMA), which emphasizes prevention rather than relying solely on a response and recovery approach to emergency management.

SBA's current program rules went into effect on October 1, 1999, but SBA has not made any loans under these rules. SBA is required by statute to "use mitigation techniques in support of a formal mitigation program established by the [FEMA]..." However, in 1999, FEMA had not yet completely established its Project Impact program, so SBA had to wait. Once FEMA completely established the program, communities had to apply to FEMA to be accepted as a pre-disaster mitigation eligible community, and this took time (the locations of participating pre-disaster mitigation communities is available at http://www.fema.gov). Then, FEMA's pre-disaster mitigation program was placed on hold, pending appropriations in the Fiscal Year 2002 Departments of Veterans Affairs, Housing and Urban Development and Independent Agencies Appropriations Act. On November 26, 2001, the appropriations act was enacted, and it provided $25 million to FEMA for its pre-disaster mitigation grant program. Nevertheless, FEMA is now reevaluating, revisiting and revamping its pre-disaster program.

While SBA was waiting for FEMA, it published a proposed rule on June 14, 2000, to clarify the program's application and loan approval processes. SBA received one comment, from FEMA, which suggested several minor changes. SBA has decided to finalize the proposed rule with several of FEMA's suggested changes, including calling the program a "community based initiative" instead of "Project Impact." Also, SBA has made several other editorial changes to further clarify the regulations.

The final rule explains the program, defines "mitigation measure," and provides the purpose of pre-disaster mitigation loans. Also, the final rule explains how to apply for the loans, the maximum amount and interest rate of the loans, how SBA makes program funding decisions, and what happens if program funds run out or an application is denied.

The revised and added regulations are as follows:

     123.400,What is the Pre-Disaster Mitigation Loan Program?
     123.401,What types of mitigating measures can your business include in an application for a pre-disaster mitigation loan?
     123.402,Can your business include its relocation as a mitigation measure in an application 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 Sec. 123.409 but SBA is unable to fund it because SBA has already allocated all program funds?
     123.412,What happens if SBA declines your business' pre-disaster loan request?

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2002 by Panoptic Enterprises. All Rights Reserved.

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