83_FR_55693 83 FR 55478 - Maximum Allowable 7(a) Fixed Interest Rates

83 FR 55478 - Maximum Allowable 7(a) Fixed Interest Rates

SMALL BUSINESS ADMINISTRATION

Federal Register Volume 83, Issue 215 (November 6, 2018)

Page Range55478-55479
FR Document2018-24258

This document announces the maximum allowable fixed interest rates for 7(a) guaranteed loans.

Federal Register, Volume 83 Issue 215 (Tuesday, November 6, 2018) 
[Federal Register Volume 83, Number 215 (Tuesday, November 6, 2018)]
[Rules and Regulations]
[Pages 55478-55479]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-24258]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 120


Maximum Allowable 7(a) Fixed Interest Rates

AGENCY: U.S. Small Business Administration.

ACTION: Notification announcing the maximum allowable fixed interest 
rates.

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SUMMARY: This document announces the maximum allowable fixed interest 
rates for 7(a) guaranteed loans.

DATES: This announcement of interest rates is effective November 6, 
2018.

FOR FURTHER INFORMATION CONTACT: Robert Carpenter, Acting Chief, 7(a) 
Loan Program and Policy Branch, Office of Financial Assistance, U.S. 
Small Business Administration, 409 Third Street SW, Washington, DC 
20416; telephone: (202) 205-7654; email: [email protected]; or 
the Lender Relations Specialist in the local Small Business 
Administration (SBA) District Office. The local SBA District Office may 
be found at https://www.sba.gov/tools/local-assistance/districtoffices.

SUPPLEMENTARY INFORMATION: 
    Agency regulations at 13 CFR 120.213(a), Fixed Rates for Guaranteed 
Loans, state that ``[a] loan may have a reasonable fixed interest rate. 
SBA periodically publishes the maximum allowable rate in the Federal 
Register.''
    On September 30, 2009, SBA published a Federal Register Notice (74 
FR 50263) establishing the use of the London Interbank Offered Rate 
(LIBOR) (as defined in 13 CFR 120.214(c)), plus 300 basis points, plus 
the average of the 5-year and 10-year LIBOR swap rates, as the SBA 
``Fixed Base Rate.'' According to the September 30, 2009 Notice, the 
maximum allowable fixed interest rate for 7(a) loans (other than SBA 
Express and Export Express loans) was the Fixed Base Rate, plus a 
maximum allowable spread based on the term of the loan, plus an 
additional spread for very small loans.
    On July 27, 2017, the U.K. Financial Conduct Authority announced 
that it would phase-out LIBOR by the end of 2021. No generally accepted 
replacement for LIBOR has been identified. To address the approaching 
sunset of LIBOR and the need for a new benchmark for the calculation of 
the maximum allowable fixed interest rate for a 7(a) loan, SBA will use 
the prime rate (Prime), as described in 13 CFR 120.214(c), as the base 
rate for determining the maximum allowable fixed interest rate for 7(a) 
loans (including SBA Express and Export Express loans).
    SBA reviewed and compared the interest rate difference between the 
Fixed Base Rate and Prime from October 1, 2009 through August 1, 2018. 
The Fixed Base Rate was, on average, approximately 200 basis points 
higher than Prime during this period and, as of August 2018, the Fixed 
Base Rate was approximately 300 basis points higher than Prime. To 
address this difference, SBA is increasing the maximum allowable spread 
as follows: For 7(a) fixed rate loans of $250,000 or less, SBA is 
setting the maximum allowable spread over Prime at 6% (plus the 
additional spread permitted under 13 CFR 120.215 for very small loans). 
For 7(a) fixed rate loans over $250,000, SBA is setting the maximum 
allowable spread over Prime at 5%. The maximum allowable spread will no 
longer depend on the term of the loan.
    The increase in the maximum allowable spread neutralizes the impact 
of replacing the Fixed Base Rate with Prime. A new fixed rate maximum 
also provides greater opportunity for Lenders to make loans using fixed 
rates and may offset the cost of underwriting, disbursing, and 
servicing loans of $250,000 or less. SBA notes that the higher maximum 
interest rates permitted under 13 CFR 120.215 for very small loans 
(i.e., loans under $50,000) continue to apply.
    The interest rates set forth in this Notice are applicable to all 
7(a) fixed rate loans (including fixed rate SBA Express and Export 
Express loans \1\), with the exception of the Export Working Capital 
Program \2\ (EWCP) loans and Community Advantage loans. This Notice 
does not affect the allowable base rates used for variable rate loans 
as described in 13 CFR 120.214(c). SBA will address the variable rate 
bases, including a replacement for the LIBOR base rate, in a future 
rulemaking.
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    \1\ It should be noted that SBA's recently published proposed 
rule for the Express loan programs contemplates certain maximum 
fixed interest rates for SBA Express and Export Express loans. See 
83 FR 49001 (September 28, 2018). Notwithstanding the proposed rule, 
today's Notice regarding Maximum Allowable 7(a) Fixed Interest Rates 
sets the maximum allowable fixed interest rates for SBA Express and 
Export Express loans at the same levels as the maximum fixed rates 
allowable for 7(a) loans generally. SBA will reflect any necessary 
changes when it finalizes the proposed rule.
    \2\ In accordance with 13 CFR 120.344(c), ``SBA does not 
prescribe the interest rates for the EWCP, but will monitor these 
rates for reasonableness.''
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    Effective November 6, 2018, for any complete 7(a) loan application 
received by SBA or any request for an SBA Loan Number submitted by a 
Lender with delegated authority (including fixed rate SBA Express and 
Export Express loans and excluding EWCP loans and Community Advantage 
loans), the maximum allowable fixed interest rate will be the Prime 
rate in effect on the first business day of the month plus:
    (i) 600 basis points for loans of $25,000 or less, plus the 200 
basis points permitted by 13 CFR 120.215;
    (ii) 600 basis points for loans over $25,000 but not exceeding 
$50,000, plus the 100 basis points permitted by 13 CFR 120.215;
    (iii) 600 basis points for loans greater than $50,000, up to and 
including $250,000; or
    (iv) 500 basis points for loans over $250,000.
    The following examples compare the maximum fixed rate that was in 
effect during August 2018 with the maximum fixed rate established by 
this Notice, had it been in effect at that time:
    Example 1: For a 7(a) loan (other than SBA Express or Export 
Express) in the amount of $200,000 with a 7-year maturity, the maximum 
allowable fixed interest rate was 10.88% [8.13% (SBA Fixed Base Rate 
for August 2018 based on LIBOR) + 2.75% (SBA maximum spread for loans 
over $50,000 with a maturity of 7 years or longer)].
    The new maximum allowable fixed rate for the same loan would be 
11.00% [5.00% (Prime rate for August 2018) + 6.00% (maximum spread over 
Prime for a fixed rate loan greater than $50,000, but less than 
$250,000, regardless of the maturity)].
    Example 2: For an SBA Express or Export Express loan in the amount 
of $200,000, the maximum allowable fixed interest rate was 9.5% [5.00% 
(Prime rate for August 2018) + 4.5% (maximum spread over Prime for an 
SBA Express or Export Express loan over $50,000, regardless of 
maturity)].
    The new maximum allowable fixed rate for the same loan would be 
11.00% [5.00% (Prime rate for August 2018) + 6.00% (maximum spread over 
Prime for a fixed rate loan greater than $50,000, but less than 
$250,000, regardless of the maturity)].
    Example 3: For a 7(a) loan (other than SBA Express or Export 
Express) in the amount of $350,000 with less than a 7-year maturity, 
the maximum allowable fixed interest rate was 10.38% [8.13%

[[Page 55479]]

(SBA Fixed Base Rate for August 2018 based on LIBOR) + 2.25% (maximum 
spread for loans over $50,000 with a maturity less than 7 years)].
    The new maximum allowable fixed rate for the same loan would be 
10.00% [5.00% (Prime rate for August 2018) + 5.00% (maximum spread over 
Prime for a fixed rate loan greater than $250,000, regardless of the 
maturity)].
    Example 4: For an SBA Express or Export Express loan in the amount 
of $35,000, the maximum allowable fixed interest rate was 11.5% [5.00% 
(Prime rate for August 2018) + 6.5% (maximum spread over Prime for an 
SBA Express or Export Express loan of $50,000 or less, regardless of 
maturity)].
    The new maximum allowable fixed rate for the same loan would be 12% 
[5.00% (Prime rate for August 2018) + 7.00% (maximum spread over Prime 
for a fixed rate loan greater than $25,000, but less than $50,000, 
regardless of the maturity)].
    The maximum allowable fixed interest rate for 7(a) guaranteed loans 
will be published periodically by SBA in the Federal Register and 
posted monthly on SBA's website at https://caweb.sba.gov/cls/dsp_login.cfm.

    Authority: 15 U.S.C. 636(a)(4)(A) and 13 CFR 120.213.

William M. Manger,
Associate Administrator, Office of Capital Access.
[FR Doc. 2018-24258 Filed 11-5-18; 8:45 am]
 BILLING CODE 8025-01-P

55478 Federal Register / Vol. 83, No. 215 / Tuesday, November 6, 2018 / Rules and Regulations § 702.103 [Amended] identified. To address the approaching rate loans as described in 13 CFR ■ 2. Amend § 702.103 by removing the sunset of LIBOR and the need for a new 120.214(c). SBA will address the words ‘‘one hundred million dollars benchmark for the calculation of the variable rate bases, including a ($100,000,000)’’ and adding in their maximum allowable fixed interest rate replacement for the LIBOR base rate, in place ‘‘five hundred million dollars for a 7(a) loan, SBA will use the prime a future rulemaking. ($500,000,000).’’ rate (Prime), as described in 13 CFR Effective November 6, 2018, for any 120.214(c), as the base rate for complete 7(a) loan application received [FR Doc. 2018–24171 Filed 11–5–18; 8:45 am] determining the maximum allowable by SBA or any request for an SBA Loan BILLING CODE 7535–01–P fixed interest rate for 7(a) loans Number submitted by a Lender with (including SBA Express and Export delegated authority (including fixed rate Express loans). SBA Express and Export Express loans SMALL BUSINESS ADMINISTRATION SBA reviewed and compared the and excluding EWCP loans and interest rate difference between the Community Advantage loans), the 13 CFR Part 120 Fixed Base Rate and Prime from October maximum allowable fixed interest rate Maximum Allowable 7(a) Fixed Interest 1, 2009 through August 1, 2018. The will be the Prime rate in effect on the Rates Fixed Base Rate was, on average, first business day of the month plus: approximately 200 basis points higher (i) 600 basis points for loans of AGENCY: U.S. Small Business than Prime during this period and, as of $25,000 or less, plus the 200 basis Administration. August 2018, the Fixed Base Rate was points permitted by 13 CFR 120.215; ACTION: Notification announcing the approximately 300 basis points higher (ii) 600 basis points for loans over maximum allowable fixed interest rates. than Prime. To address this difference, $25,000 but not exceeding $50,000, plus SBA is increasing the maximum the 100 basis points permitted by 13 SUMMARY: This document announces the allowable spread as follows: For 7(a) CFR 120.215; maximum allowable fixed interest rates fixed rate loans of $250,000 or less, SBA (iii) 600 basis points for loans greater for 7(a) guaranteed loans. is setting the maximum allowable than $50,000, up to and including DATES: This announcement of interest spread over Prime at 6% (plus the $250,000; or rates is effective November 6, 2018. additional spread permitted under 13 (iv) 500 basis points for loans over CFR 120.215 for very small loans). For $250,000. FOR FURTHER INFORMATION CONTACT: 7(a) fixed rate loans over $250,000, SBA The following examples compare the Robert Carpenter, Acting Chief, 7(a) is setting the maximum allowable maximum fixed rate that was in effect Loan Program and Policy Branch, Office spread over Prime at 5%. The maximum during August 2018 with the maximum of Financial Assistance, U.S. Small allowable spread will no longer depend fixed rate established by this Notice, Business Administration, 409 Third on the term of the loan. had it been in effect at that time: Street SW, Washington, DC 20416; Example 1: For a 7(a) loan (other than telephone: (202) 205–7654; email: The increase in the maximum SBA Express or Export Express) in the robert.carpenter@sba.gov; or the Lender allowable spread neutralizes the impact amount of $200,000 with a 7-year Relations Specialist in the local Small of replacing the Fixed Base Rate with maturity, the maximum allowable fixed Business Administration (SBA) District Prime. A new fixed rate maximum also interest rate was 10.88% [8.13% (SBA Office. The local SBA District Office provides greater opportunity for Lenders Fixed Base Rate for August 2018 based may be found at https://www.sba.gov/ to make loans using fixed rates and may on LIBOR) + 2.75% (SBA maximum tools/local-assistance/districtoffices. offset the cost of underwriting, spread for loans over $50,000 with a SUPPLEMENTARY INFORMATION: disbursing, and servicing loans of maturity of 7 years or longer)]. Agency regulations at 13 CFR $250,000 or less. SBA notes that the The new maximum allowable fixed 120.213(a), Fixed Rates for Guaranteed higher maximum interest rates rate for the same loan would be 11.00% Loans, state that ‘‘[a] loan may have a permitted under 13 CFR 120.215 for [5.00% (Prime rate for August 2018) + reasonable fixed interest rate. SBA very small loans (i.e., loans under 6.00% (maximum spread over Prime for periodically publishes the maximum $50,000) continue to apply. a fixed rate loan greater than $50,000, allowable rate in the Federal Register.’’ The interest rates set forth in this but less than $250,000, regardless of the On September 30, 2009, SBA Notice are applicable to all 7(a) fixed maturity)]. published a Federal Register Notice (74 rate loans (including fixed rate SBA Example 2: For an SBA Express or FR 50263) establishing the use of the Express and Export Express loans 1), Export Express loan in the amount of London Interbank Offered Rate (LIBOR) with the exception of the Export $200,000, the maximum allowable fixed (as defined in 13 CFR 120.214(c)), plus Working Capital Program 2 (EWCP) interest rate was 9.5% [5.00% (Prime 300 basis points, plus the average of the loans and Community Advantage loans. rate for August 2018) + 4.5% (maximum 5-year and 10-year LIBOR swap rates, as This Notice does not affect the spread over Prime for an SBA Express the SBA ‘‘Fixed Base Rate.’’ According allowable base rates used for variable or Export Express loan over $50,000, to the September 30, 2009 Notice, the regardless of maturity)]. 1 It should be noted that SBA’s recently published maximum allowable fixed interest rate The new maximum allowable fixed proposed rule for the Express loan programs for 7(a) loans (other than SBA Express contemplates certain maximum fixed interest rates rate for the same loan would be 11.00% and Export Express loans) was the Fixed for SBA Express and Export Express loans. See 83 [5.00% (Prime rate for August 2018) + Base Rate, plus a maximum allowable FR 49001 (September 28, 2018). Notwithstanding 6.00% (maximum spread over Prime for spread based on the term of the loan, the proposed rule, today’s Notice regarding a fixed rate loan greater than $50,000, khammond on DSK30JT082PROD with RULES Maximum Allowable 7(a) Fixed Interest Rates sets plus an additional spread for very small the maximum allowable fixed interest rates for SBA but less than $250,000, regardless of the loans. Express and Export Express loans at the same levels maturity)]. On July 27, 2017, the U.K. Financial as the maximum fixed rates allowable for 7(a) loans Example 3: For a 7(a) loan (other than Conduct Authority announced that it generally. SBA will reflect any necessary changes SBA Express or Export Express) in the when it finalizes the proposed rule. would phase-out LIBOR by the end of 2 In accordance with 13 CFR 120.344(c), ‘‘SBA amount of $350,000 with less than a 7- 2021. No generally accepted does not prescribe the interest rates for the EWCP, year maturity, the maximum allowable replacement for LIBOR has been but will monitor these rates for reasonableness.’’ fixed interest rate was 10.38% [8.13% VerDate Sep<11>2014 16:14 Nov 05, 2018 Jkt 247001 PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 E:\FR\FM\06NOR1.SGM 06NOR1

Federal Register / Vol. 83, No. 215 / Tuesday, November 6, 2018 / Rules and Regulations 55479 (SBA Fixed Base Rate for August 2018 Title 1 CFR part 51, subject to the incorporates these rules into the current based on LIBOR) + 2.25% (maximum annual revision of FAA Order 7400.11 FAA Order 7400.11C. spread for loans over $50,000 with a and publication of conforming Accordingly, as this is an maturity less than 7 years)]. amendments. administrative correction to update final The new maximum allowable fixed ADDRESSES: FAA Order 7400.11C, rule amendments into FAA Order rate for the same loan would be 10.00% Airspace Designations and Reporting 7400.11C, notice and public procedure [5.00% (Prime rate for August 2018) + Points, and subsequent amendments can under 5 U.S.C. 553(b) are unnecessary. 5.00% (maximum spread over Prime for be viewed on line at http:// Also, to bring these rules and legal a fixed rate loan greater than $250,000, www.faa.gov/airtraffic/publications/. descriptions current, I find that good regardless of the maturity)]. For further information, you can contact cause exists, under 5 U.S.C. 553(d), for Example 4: For an SBA Express or the Airspace Policy Group, Federal making this amendment effective in less Export Express loan in the amount of Aviation Administration, 800 than 30 days. $35,000, the maximum allowable fixed Independence Avenue SW, Washington, Availability and Summary of interest rate was 11.5% [5.00% (Prime DC 20591; telephone: (202) 267–8783. Documents for Incorporation by rate for August 2018) + 6.5% (maximum The Order is also available for Reference spread over Prime for an SBA Express inspection at the National Archives and or Export Express loan of $50,000 or This document amends FAA Order Records Administration (NARA). For 7400.11C, Airspace Designations and less, regardless of maturity)]. information on the availability of FAA The new maximum allowable fixed Reporting Points, dated August 13, Order 7400.11C at NARA, call (202) 2018, and effective September 15, 2018. rate for the same loan would be 12% 741–6030, or go to https:// [5.00% (Prime rate for August 2018) + FAA Order 7400.11C is publicly www.archives.gov/federal-register/cfr/ available as listed in the ADDRESSES 7.00% (maximum spread over Prime for ibr-locations.html. a fixed rate loan greater than $25,000, section of this document. FAA Order FAA Order 7400.11, Airspace but less than $50,000, regardless of the 7400.11C lists Class A, B, C, D, and E Designations and Reporting Points, is maturity)]. airspace areas, air traffic service routes, published yearly and effective on The maximum allowable fixed and reporting points. September 15. interest rate for 7(a) guaranteed loans FOR FURTHER INFORMATION CONTACT: The Rule will be published periodically by SBA Sarah A. Combs, Airspace Policy Group, This action amends title 14 Code of in the Federal Register and posted Office of Airspace Services, Federal Federal Regulations (14 CFR) part 71 by monthly on SBA’s website at https:// Aviation Administration, 800 incorporating certain final rules into the caweb.sba.gov/cls/dsp_login.cfm. Independence Avenue SW, Washington, current FAA Order 7400.11C, Airspace Authority: 15 U.S.C. 636(a)(4)(A) and 13 DC 20591; telephone: (202) 267–8783. Designations and Reporting Points, CFR 120.213. SUPPLEMENTARY INFORMATION dated August 13, 2018, and effective William M. Manger, September 15, 2018, which are depicted Authority for This Rulemaking Associate Administrator, Office of Capital on aeronautical charts. Access. The FAA’s authority to issue rules regarding aviation safety is found in Regulatory Notices and Analyses [FR Doc. 2018–24258 Filed 11–5–18; 8:45 am] Title 49 of the United States Code. The FAA has determined that this BILLING CODE 8025–01–P Subtitle I, Section 106 describes the regulation only involves an established authority of the FAA Administrator. body of technical regulations for which Subtitle VII, Aviation Programs, frequent and routine amendments are DEPARTMENT OF TRANSPORTATION describes in more detail the scope of the necessary to keep them operationally agency’s authority. This rulemaking is current. It, therefore: (1) Is not a Federal Aviation Administration promulgated under the authority ‘‘significant regulatory action’’ under described in Subtitle VII, Part A, Executive Order 12866; (2) is not a 14 CFR Part 71 Subpart I, Section 40103. Under that ‘‘significant rule’’ under DOT [Docket No. FAA–2018–0770; Amendment section, the FAA is charged with Regulatory Policies and Procedures (44 No. 71–50] prescribing regulations to assign the use FR 11034; February 26, 1979); and (3) RIN 2120–AA66 of the airspace necessary to ensure the does not warrant preparation of a safety of aircraft and the efficient use of regulatory evaluation as the anticipated Airspace Designations; Incorporation airspace. This regulation is within the impact is so minimal. Since this is a by Reference Amendments scope of that authority as it makes the routine matter that only affects air traffic necessary updates for airspace areas procedures and air navigation, it is AGENCY: Federal Aviation within the National Airspace System. certified that this rule, when Administration (FAA), DOT. promulgated, does not have a significant ACTION: Final rule, administrative History economic impact on a substantial correction. Federal Aviation Administration number of small entities under the Airspace Order 7400.11, Airspace criteria of the Regulatory Flexibility Act. SUMMARY: This action incorporates Designations and Reporting Points, certain airspace designation incorporated by reference in 14 CFR Corrections amendments into FAA Order 7400.11C, 71.1, is published yearly. Amendments ■ 1. For Docket No. FAA–2018–0291; khammond on DSK30JT082PROD with RULES dated August 13, 2018, and effective referred to as ‘‘effective date straddling Airspace Docket No. 18–AGL–10 (83 FR September 15, 2018, for incorporation amendments’’ were published under 35540; July 27, 2018) by reference. Order 7400.11B (dated August 3, 2017, DATES: Effective date 0901 UTC and effective September 15, 2017), but Correction November 6, 2018. The Director of the became effective under Order 7400.11C ■ a. On page 35540, column 1, line 32, Federal Register approves this (dated August 13, 2018, and effective and line 45, under ADDRESSES, ‘‘. . . incorporation by reference action under September 15, 2018). This action FAA Order 7400.11B . . .’’ is corrected VerDate Sep<11>2014 16:14 Nov 05, 2018 Jkt 247001 PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 E:\FR\FM\06NOR1.SGM 06NOR1


Document Created: 2018-11-06 00:18:14
Document Modified: 2018-11-06 00:18:14
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionNotification announcing the maximum allowable fixed interest rates.
DatesThis announcement of interest rates is effective November 6, 2018.
ContactRobert Carpenter, Acting Chief, 7(a) Loan Program and Policy Branch, Office of Financial Assistance, U.S. Small Business Administration, 409 Third Street SW, Washington, DC 20416; telephone: (202) 205-7654; email: [email protected]; or the Lender Relations Specialist in the local Small Business Administration (SBA) District Office. The local SBA District Office may be found at https://www.sba.gov/tools/local-assistance/districtoffices.
FR Citation83 FR 55478 
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