Small Business Administration: Changes to the Disaster Loan Program


B-333569

September 27, 2021

The Honorable Ben Cardin
President
The Honorable Rand Paul

Ranking Member
Small Business and Entrepreneurship Committee
United States Senate

The Honorable Nydia M. Velázquez
President
The Honorable Blaine Luetkemeyer
Ranking Member
Small Business Committee
House of Representatives

Topic: Small Business Administration: Changes to the Disaster Loan Program

In accordance with Section 801 (a) (2) (A) of Title 5, United States Code, this is our report on a major rule promulgated by the Small Business Administration (SBA) titled “Disaster Lending Program Changes »(RIN: 3245-AH80). We received the rule on September 10, 2021. It was published in the Federal Register as an interim final rule on September 8, 2021. 86 Fed. Reg. 50214. The effective date is September 8, 2021.

The SBA said the interim final rule implements changes to the disaster loan program regulations. Specifically, the SBA said that for loan applications related to COVID-19-related economic disasters (COVID EIDL), the rule changes the definition of affiliation, the eligible uses of the loan proceeds and the application of the size standard to certain hard-hit qualifying entities, and establishes a maximum loan limit for borrowers from the same corporate group. Additionally, according to the SBA, for all disaster assistance programs, the SBA changes which SBA official can make the decision on when an appeal is appealed against a request that has been denied for the second time.

The Congressional Review Act (CRA) requires 60 days for the effective date of a major rule from the date of publication in the Federal Register or receipt of the rule by Congress, whichever is later. 5 USC § 801 (a) (3) (A). The 60-day deadline for the effective date may be waived, however, if the agency believes for good reason that the delay is impracticable, unnecessary or contrary to the public interest, and the agency incorporates a statement conclusions and its reasons in the rule. Posted. 5 USC § 808 (2). SBA said that, for good reason, it has determined that a 60-day deadline is impractical and not in the public interest. According to the SBA, an immediate effective date will give small businesses, nonprofits, qualified farm businesses and independent entrepreneurs affected by the interim final rule the maximum time to apply for loans and the SBA the maximum time to process requests before the program ends on December 31, 2021.

The SBA also said it has determined there are good reasons for waiving public notice and comment under the Administrative Procedure Act on the grounds that it would be impractical and against the public interest. . 5 USC § 553 (b) (3) (B). According to the SBA, the goal of statutory COVID financial aid programs, including the COVID EIDL program, is for the SBA to provide rapid relief to small businesses in America. The SBA further said that the continued decline in economic activity in key economic sectors compared to 2019 and the reimposition of mask requirements and other public health measures across the country due to the variants ( including Delta) of COVID-19, offers a good reason for SBA to forgo the development of notice and comment rules, which would take months.

Attached is our assessment of the SBA’s compliance with the procedural steps required by Section 801 (a) (1) (B) (i) through (iv) of Title 5 in relation to the rule. If you have any questions about this report or would like to contact the GAO officials responsible for the assessment work related to the purpose of the rule, please contact Shari Brewster, Deputy General Counsel, at (202) 512-6398.

Shirley A. Jones
Associate Legal Director

Pregnant

cc: Yvonne Walters
Legal Counsel, Office of the General Counsel
Small business management

PREGNANT

REPORT UNDER 5 USC § 801 (a) (2) (A) ON A MAJOR RULE
ISSUED BY THE
SMALL BUSINESS ADMINISTRATION
ENTITLED
“DISASTER LOAN PROGRAM CHANGES”
(RIN: 3245-AH80)

(i) Cost-benefit analysis

In its brief, the Small Business Administration (SBA) indicated that it had not prepared an analysis of the costs and benefits of this interim final rule.

(ii) Agency actions relating to the Regulatory Flexibility Act (RFA), 5 USC §§ 603-605, 607 and 609

The SBA has determined that, since this final rule is free of notice and comment, the SBA is not required to conduct a regulatory flexibility analysis.

(iii) Agency actions regarding sections 202-205 of the Unfunded Mandates Reform Act 1995, 2 USC §§ 1532-1535

In its brief, the SBA indicated that it did not consider the preparation of a written statement under the Act to be applicable.

(iv) Other relevant information or requirements under laws and decrees

Administrative Procedure Act, 5 USC §§ 551 et seq.

The SBA said it has determined there are good reasons to release this interim final rule without notice or public comment, as it would be impractical, unnecessary and contrary to the public interest. The SBA has said other SBA COVID-19 relief programs have recently ended or exhausted funding for the program, but businesses and nonprofits are still in need of support. The SBA further states that an immediate effective date will give small businesses, nonprofits, qualified farm businesses and independent entrepreneurs affected by this interim final rule the maximum time to apply for loans and The SBA the maximum time to process applications before The program ends on December 31, 2021. According to the SBA, given the short duration of this program, the SBA has determined that it is not practical and in the interest public to provide a delayed effective date.

Red Tape Reduction Act (PRA), 44 USC §§ 3501-3520

The SBA has determined that this interim final rule will require revisions to the collection of information on the COVID-19 economic disaster loan application, Office of Management and Budget (OMB) control number 3245- 0406. The SBA said it had obtained emergency approval for the revisions, including waiving notices of public comment.

Legal authorization of the rule

The SBA enacted this Interim Final Rule in accordance with various sections of Title 15, United States Code, Sections 1110 and 1114 of Public Law 116-136, and Section 331 of Public Law 116-260.

Executive Decree No. 12866 (Planning and Revision of Regulations)

SBA said the OMB has determined that this interim final rule is economically important under the order. The SBA said it was proceeding under an emergency provision of the order due to the need to act quickly to alleviate the current hardships and economic conditions resulting from the COVID-19 emergency.

Executive Decree No. 13132 (Federalism)

The SBA has determined that this interim final rule will not have substantial direct effects on states, on national government-state relations, or on the distribution of powers and responsibilities between different levels of government. Therefore, the SBA determined that the rule does not affect federalism justifying the preparation of a federalism assessment.

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