[Federal Register Volume 66, Number 14 (Monday, January 22, 2001)]
[Notices]
[Pages 6729-6730]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 01-1787]
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SMALL BUSINESS ADMINISTRATION
SBA Minority Contractors Finance Pilot Loan Program
AGENCY: Small Business Administration.
ACTION: Notice of pilot program ``SBA Minority Contractors Finance
Pilot Loan Program''
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SUMMARY: The Small Business Administration (SBA) is establishing a
pilot program in which certain lenders will be permitted to use their
own documentation forms to expeditiously approve loan amounts up to
$250,000 for small business contractors and subcontractors in Rhode
Island using the Section 7(a) loan program. The program will offer a
technical assistance component provided by a Small Business Development
Center (SBDC) and additional guaranty support from non-SBA sources for
a lower risk exposure that is attractive to lenders and other
modifications to SBA's normal lending practices and procedures. This
program will be called the SBA Minority Contractors Finance Pilot Loan
Program. The purpose for this 18-month pilot program is to address the
[[Page 6730]]
difficulties that small business contractors and subcontractors
generally experience with access to capital and bonding. This loan
pilot program is a key part of an initiative that will first operate in
Rhode Island and, may be expanded to other areas of the country.
EFFECTIVE DATE: This pilot will be effective on January 22, 2001 and
will remain in effect for 18 months.
FOR FURTHER INFORMATION CONTACT: Mark Hayward, District Director, U.S.
Small Business Administration--Rhode Island District Office, 380
Westminster Mall, 5th floor, Providence, RI 02903, (401) 528-4540; FAX:
(401) 528-4539.
SUPPLEMENTARY INFORMATION: The Small Business Administration is
establishing a streamlined, user friendly loan pilot program designed
to help contractors and subcontractors more readily obtain financing
and bonding.
SBA found that small business contractors and sub-contractors
historically have not received the procurement, management, technical,
and financial assistance necessary to maintain their viability. A Rhode
Island advisory panel comprised of local lenders, contractors, bonding
agents, and state agencies examined the problem and determined that
lending to contractors and subcontractors was specialized financing and
that the local lending community was disinclined to provide the same
level of underwriting and post approval oversight on loans of $250,000
or less as they were for larger contract loans. Moreover, the interest
of the taxpayers whose funds support the SBA guaranty had to be
protected.
The principal barriers were seen as (i) too much risk and (ii)
excessive cost of monitoring. SBA concluded that if borrowers received
specialized technical assistance and the contribution of additional
guaranty support from sources outside SBA, financing might be more
forthcoming from local lenders.
To that end, the Agency has authorized the acceptance of a
supplemental guaranty on a portion (up to 90 percent) of the
unguaranteed percentage of SBA 7(a) loans, that will be offered by a
lending entity of the Rhode Island Economic Development Corporation.
The lending entity will contribute as much as $250,000 to assist
minority business enterprises.
The specialized technical assistance component will include the
utilization of a SBDC to provide the loan packaging assistance that
would help the contractors and sub-contractors prepare their commercial
loan applications. Non-SBA funds will support the hiring of an
experienced team of contracting professionals with the proper
knowledge, skills, and abilities to assist the 15-30 client contractors
expected to participate in the pilot in bidding, managing, and
completing their projects for 18 months. These professionals will be
selected by an Executive Committee consisting of SBA staff, local
lenders, contractors, bonding agents, and state agencies in a private/
state/federal partnership. The Executive Committee also will provide
guidance and oversight of the program. The non-SBA funding and resource
partners are private foundations, state agencies, banks, and
corporations who are committed to producing positive results. Finally,
as part of the technical assistance, an Advisory Board is being formed
consisting of prime contractors and state agencies to assure deal flow
and expertise.
This pilot program emphasizes collaboration and partnerships with
Federal, state and local agencies, as well as private sector partners.
The pilot program is scheduled to last 18 months, beginning January 22,
2001. Prior to the termination date, SBA will evaluate the program to
determine if it should be continued as is, expanded, or ended.
Program authority: 15 U.S.C. 636(a)(25)(b) or Section
7(a)(25)(b) of the Small Business Act.
Dated: January 11, 2001.
Charles D. Tansey,
Associate Deputy Administrator for Capital Access.
[FR Doc. 01-1787 Filed 1-19-01; 8:45 am]
BILLING CODE 8025-01-U