82 FR 47958 - Express Bridge Loan Pilot Program; Modification of Lending Criteria

SMALL BUSINESS ADMINISTRATION

Federal Register Volume 82, Issue 198 (October 16, 2017)

The U.S. Small Business Administration (SBA) announces SBA's Express Bridge Loan Pilot Program (Express Bridge Pilot), as described in this document, and its impact on an Agency regulation relating to loan underwriting for loans made under the Express Bridge Pilot. This pilot will provide expedited guaranteed bridge loan financing for disaster-related purposes to small businesses located in communities impacted by a Presidentially-declared disaster, while those small businesses apply for and await long-term financing (including through SBA's direct disaster loan program, if eligible). The modification of the lending criteria will minimize the burden on businesses applying for loans through the Express Bridge Pilot and provide an incentive for SBA Express lenders to participate in the pilot.

[Federal Register Volume 82, Number 198 (Monday, October 16, 2017)]
[Rules and Regulations]
[Pages 47958-47959]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-22385]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120


Express Bridge Loan Pilot Program; Modification of Lending 
Criteria

AGENCY: U.S. Small Business Administration.

ACTION: Notification of Express Bridge Loan Pilot Program and impact on 
regulatory provision.

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SUMMARY: The U.S. Small Business Administration (SBA) announces SBA's 
Express Bridge Loan Pilot Program (Express Bridge Pilot), as described 
in this document, and its impact on an Agency regulation relating to 
loan underwriting for loans made under the Express Bridge Pilot. This 
pilot will provide expedited guaranteed bridge loan financing for 
disaster-related purposes to small businesses located in communities 
impacted by a Presidentially-declared disaster, while those small 
businesses apply for and await long-term financing (including through 
SBA's direct disaster loan program, if eligible). The modification of 
the lending criteria will minimize the burden on businesses applying 
for loans through the Express Bridge Pilot and provide an incentive for 
SBA Express lenders to participate in the pilot.

DATES: The Express Bridge Pilot, including the modification of lending 
criteria under 13 CFR 120.150, will be available from October 16, 2017, 
through September 30, 2020.

FOR FURTHER INFORMATION CONTACT: Dianna Seaborn, Director, Office of 
Financial Assistance, U.S. Small Business Administration, 409 Third 
Street SW., Washington, DC 20416; Telephone (202) 205-3645; email 
address: [email protected].

SUPPLEMENTARY INFORMATION: Pursuant to its authority under the Small 
Business Act, SBA provides assistance to small businesses located in 
the communities affected by Presidentially-declared disasters. The 
Agency has announced an initiative called the Express Bridge Pilot, 
which is designed to supplement the Agency's disaster response 
capabilities. The Express Bridge Pilot will authorize the Agency's 7(a) 
Lenders with SBA Express lending authority to deliver expedited SBA-
guaranteed financing on an emergency basis for disaster-related 
purposes to small businesses located in these communities while the 
businesses apply for and await long-term financing (including through 
SBA's direct disaster loan program, if eligible).
    The Express Bridge Pilot will apply the policies and procedures in 
place for the Agency's SBA Express program, except as outlined in this 
document, and include the following:
    (1) The maximum loan amount under the pilot is $25,000 and the 
loans will carry a 50 percent guaranty from the Agency.
    (2) Express Bridge Pilot loans in a particular disaster area can 
only be made by SBA Express lenders that were participants in the SBA 
Express program as of the date of the applicable disaster.
    (3) Eligible small businesses are those that were located, as of 
the date of the applicable disaster, in the counties that have been 
Presidentially-declared as disaster areas, plus any contiguous 
counties.
    (4) SBA Express lenders may make loans under the Express Bridge 
Pilot only to eligible small businesses that had an existing banking 
relationship with the SBA Express lender as of the date of the 
applicable disaster. A relationship with any of the SBA Express 
lender's affiliates will not satisfy this requirement.
    (5) SBA Express lenders must certify to SBA, for each Express 
Bridge Pilot loan, that the loan funds will be used to support the 
survival and/or reopening of the small business within the affected 
counties.
    (6) The maximum maturity for an Express Bridge Pilot loan is seven 
years. The SBA Express lender may require a borrower to pay down or pay 
off the Express Bridge Pilot loan if the borrower is approved for long-
term disaster financing (including an SBA direct disaster loan) that 
allows proceeds to be used for Express Bridge Pilot loan reimbursement.
    (7) Express Bridge Pilot loans cannot be sold in SBA's secondary 
market. Express Bridge Pilot loans are intended to be interim loans, 
thus SBA has determined pursuant to 13 CFR 120.612(a)(3) that the sale 
of such loans in SBA's secondary market would not be conducive to the 
successful operation of the secondary market program.
    (8) Loans under the Express Bridge Pilot in a particular disaster 
area can only be made up to six months after the date of the applicable 
Presidential disaster declaration.
    (9) The Express Bridge Pilot will be available for use starting 
October 16, 2017, and will expire on September 30, 2020. Express Bridge 
Pilot loans must be approved on or before such date, as evidenced by 
the issuance of an SBA loan number.
    To maximize the effectiveness of the Express Bridge Pilot, SBA is 
modifying an Agency regulation (13 CFR 120.150) that applies to loans 
made in the 7(a) Business Loan Program. (SBA uses the term ``modify'' 
as contemplated under 13 CFR 120.3.) This modification will also 
minimize the burdens on the businesses applying for loans through the 
Express Bridge Pilot and expand the opportunities for SBA Express 
lenders to participate in the pilot.
    Under Sec.  120.150 of SBA's regulations, a small business 
applicant must be creditworthy and loans must be so sound as to 
reasonably assure repayment. In making this determination, character, 
reputation, credit history of the applicant and guarantors, past 
earnings, projected cash flow, and future prospects, among other 
things, must be considered. Currently, SBA Express lenders are 
authorized to make the credit decision using credit analysis processes 
and procedures (which may include credit scoring) that are consistent 
with those used for their similarly-sized non-SBA guaranteed commercial 
loans.
    In order to streamline the loan underwriting process for the 
Express Bridge Pilot, SBA is modifying the requirements of 13 CFR 
120.150 to allow SBA Express lenders to underwrite Express Bridge Pilot 
loans by considering only the following:
    (1) A minimum acceptable credit score of 130 for the applicant 
issued by E-Tran upon submission of the loan application for screening;
    (2) a personal credit score for each guarantor; and
    (3) Lender must obtain a signed IRS Form 4506-T and an IRS tax 
transcript. For businesses in operation prior to the disaster but not 
long enough to have been required to file a tax return, Lender must 
provide an alternative to verify existence of the business.
    The screening credit score is a FICO[supreg] Small Business Scoring 
Service\SM\ Score. SBA may adjust the minimum acceptable credit score 
up or down from time to time during the pilot, and will post any such 
adjusted score on its Web site at www.sba.gov/for-lenders.

[[Page 47959]]

    The modification of this regulation will allow SBA Express lenders 
to expedite the processing of these small guaranteed loans in order to 
provide immediate cash to assist the small business with rebuilding and 
continuing or restarting its operations while awaiting long-term 
disaster financing. Because an Express Bridge Pilot loan applicant must 
have had an existing banking relationship with the SBA Express lender, 
SBA expects this will help mitigate the risk associated with the 
modification of 13 CFR 120.150. SBA Express lenders are cautioned that 
the provisions of 13 CFR 120.140 (``What ethical requirements apply to 
participants?'') continue to apply to the Express Bridge Pilot.
    SBA's modification of 13 CFR 120.150 is authorized by 13 CFR 120.3 
of its regulations, which provides that the SBA Administrator may 
suspend, modify or waive rules for a limited period of time to test new 
programs or ideas. This modification applies only to those loans made 
under the Express Bridge Pilot and will last only for the duration of 
the pilot, which expires September 30, 2020. As part of the Express 
Bridge Pilot, this modification applies only to those small businesses 
that were located, as of the date of the applicable disaster, in 
counties that have been Presidentially-declared as disaster areas, plus 
any contiguous counties. A listing of Presidentially-declared disaster 
declarations, including primary and contiguous counties can be located 
at www.sba.gov/disaster.
    Not more than ten percent of the total number of 7(a) loans 
guaranteed by SBA in any fiscal year may be made under the Express 
Bridge Pilot. 15 U.S.C. 636(a)(25). While SBA does not expect the 
number of Express Bridge Pilot loans to reach that limit, SBA will 
provide public notice of the need to suspend lending under the pilot 
for the remainder of the fiscal year if SBA determines that the number 
of pilot loans is approaching the limit.
    SBA will be using the following criteria to evaluate the Express 
Bridge Pilot to determine how well it is achieving its objectives and 
other aspects of performance: (1) The measurable objectives to be 
achieved through the Express Bridge Pilot, including the number of 
small business concerns served, the percentage of Express Bridge Pilot 
loans made that were paid off or paid down using lower fixed rate 
disaster loans versus those that are held to term, and the default rate 
on the Express Bridge Pilot loans compared to regular SBA Express loans 
of similar size in the 7(a) portfolio; and (2) the costs and standards 
of performance which, in order to be acceptable, must not impact the 
subsidy model for the 7(a) Loan Program. The following method for data 
collection will be used: All loans will be entered directly using E-
Tran or SBA One, which track eligibility by the county in which the 
small business is located, and which will facilitate tracking of 
performance on these loans.

    Authority: 15 U.S.C. 636(a)(25); 13 CFR 120.3.

    Dated: October 6, 2017.
Linda E. McMahon,
Administrator.
[FR Doc. 2017-22385 Filed 10-13-17; 8:45 am]
 BILLING CODE 8025-01-P