[Federal Register: October 7, 2009 (Volume 74, Number 193)]
[Proposed Rules]
[Page 51713-51731]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07oc09-27]
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Part III
Department of Agriculture
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Rural Business--Cooperative Service
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7 CFR Part 4280
Rural Microentrepreneur Assistance Program; Proposed Rule
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DEPARTMENT OF AGRICULTURE
Rural Business--Cooperative Service
7 CFR Part 4280
RIN 0570-AA71
Rural Microentrepreneur Assistance Program
AGENCY: Rural Business-Cooperative Service, USDA.
ACTION: Proposed rule.
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SUMMARY: The Food, Conservation, and Energy Act of 2008 (the Act),
which amends Section 6022 of the Farm Security and Rural Investment Act
of 2002, established the Rural Microentrepreneur Assistance Program.
The program will provide technical and financial assistance in the form
of loans and grants to qualified Microenterprise Development
Organizations to support microentrepreneurs in the development and
ongoing success of rural microenterprises. The Agency proposes to
implement the program to meet the goals and requirements of the Act.
DATES: Comments on the proposed rule must be received on or before
November 23, 2009 to be assured of consideration. The comment period
for the information collection under the Paperwork Reduction Act of
1995 continues through December 7, 2009.
ADDRESSES: You may submit comments to this proposed rule by any of the
following methods:
Federal eRulemaking Portal: Go to http://
www.regulations.gov. Follow the instructions for submitting comments
electronically.
Mail: Submit your written comments via the U.S. Postal
Service to the Branch Chief, Regulations and Paperwork Management
Branch, U.S. Department of Agriculture, Stop 0742, 1400 Independence
Avenue, SW., Washington, DC 20250-0742.
Hand Delivery/Courier: Submit your written comments via
Federal Express mail, or other courier service requiring a street
address, to the Branch Chief, Regulations and Paperwork Management
Branch, U.S. Department of Agriculture, 300 7th Street, SW., 7th Floor,
Washington, DC 20024.
All written comments will be available for public inspection during
regular work hours at the 300 7th Street, SW., 7th Floor address listed
above.
FOR FURTHER INFORMATION CONTACT: Lori Washington, Loan Specialist,
Business Programs, Specialty Programs Division, USDA, Rural
Development, Rural Business--Cooperative Service, Room 6868, South
Agriculture Building, Stop 3225, 1400 Independence Avenue, SW.,
Washington, DC 20250-3225, Telephone: (202) 720-9815, E-mail:
lori.washington@wdc.usda.gov.
SUPPLEMENTARY INFORMATION: The information presented in this preamble
is organized as follows:
I. Background
A. Statutory Authority
B. Nature of the Program
II. Discussion of Public Meeting and Request for Comments
III. Discussion of the Proposed Rule
A. Purpose and Scope
B. Definitions and Abbreviations
C. Exception Authority
D. Review or Appeal Rights
E. Compliance With Other Federal Laws
F. Program Requirements for Microenterprise Development
Organizations
G. Loan Provisions for Agency Loans to MDOs
H. Grant Provisions
I. MDO Application and Submission Information
J. Application Scoring
K. Selection of Applications for Funding
L. Grant Administration
M. Loan and Grant Servicing
N. Loans From the MDOs to Microentrepreneurs and
Microenterprises
O. Ineligible Microloan Purposes
IV. Administrative Requirements
A. Executive Order 12866
B. Unfunded Mandates Reform Act
C. Environmental Impact Statement
D. Executive Order 12988, Civil Justice Reform
E. Executive Order 13132, Federalism
F. Regulatory Flexibility Act
G. Executive Order 12372, Intergovernmental Review of Federal
Program
H. Executive Order 13175, Consultation and Coordination With
Indian Tribal Governments
I. Programs Affected
J. Paperwork Reduction Act
K. E-Government Act Compliance
I. Background
A. Statutory Authority
Title VI, Section 6022 of the Food, Conservation, and Energy Act of
2008 (Pub. L. 110-246 established the Rural Microentrepreneur
Assistance Program (RMAP). The Act mandates that the Secretary of
Agriculture establish a program to make loans and grants to
microenterprise development organizations (MDOs) to support
microentrepreneurs in the development and ongoing success of rural
microenterprises. The Act further mandates that, under this program,
MDOs will use funds borrowed from the Agency to make fixed interest
rate microloans of not more than $50,000 to microentrepreneurs for
startup and growing rural microenterprises.
The Secretary shall also make annual grants to borrower MDOs to
provide marketing management and other technical assistance (TA) to
microentrepreneurs that have received or are seeking a microloan from
an MDO under this program. Such grants will be in an amount equal to
not more than 25 percent of the total outstanding balance of microloans
made by the MDO, under this program, as of the date the grant is
awarded or $100,000, whichever is less.
The Secretary shall also make grants to MDOs to provide training or
other operational enhancement activities or services for MDOs that
serve rural microentrepreneurs. Maximum grant amounts for these
enhancement grants will be announced annually and will be based on
appropriations and consideration of program needs. In all cases, the
maximum enhancement grant funding awarded to a single MDO will not
exceed $25,000 or ten percent of the available funding, whichever is
less, in any given year.
In making loans to MDOs, the Act requires the Agency to make direct
loans to MDOs to provide fixed rate microloans for startup and growing
microenterprises. In making grants to MDOs, the Act requires the Agency
to place an emphasis on MDOs serving microentrepreneurs located in
rural areas that have suffered significant outmigration. The Agency
shall also ensure, to the maximum extent practicable, that grant
recipients include MDOs of varying sizes and that serve racially and
ethnically diverse populations. MDOs will be eligible to receive TA
grants to provide assistance to microentrepreneurs who have received,
or are seeking, a microloan from the MDO under this program.
The following section describes the proposed RMAP.
B. Nature of the Program
This subpart contains the provisions and procedures by which the
Agency will administer the Rural Microenterprise Assistance Program
(RMAP). The purpose of the program is to support the development and
ongoing success of rural microentrepreneurs and microenterprises
(businesses generally with ten employees or fewer and in need of
financing in the amount of $50,000 or less). To meet this purpose, the
program will make financial assistance, business based training, and
technical assistance available to startup and growing microenterprises
in rural areas, including agricultural producers that meet the
definition of a microenterprise. Loans and training will be delivered
to microenterprises via a
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network of microenterprise development organizations (MDOs).
An MDO is an organization that provides access to capital and
business-based training services to very small (micro) businesses. A
microentrepreneur is an owner and operator, or prospective owner and
operator, of a rural business with not more than 10 full-time
equivalent employees who is unable to obtain sufficient training,
technical assistance, or credit. The definition of a Mircoenterprise
Development Organization and a mircoentrepreneur is included in the
rule at Sec. 4280.302.
In addition to assisting microenterprises, MDOs may also receive
grant funding to improve their own capabilities for providing services
to their microborrowers.
Microenterprises will not receive funds directly from the
government. Rather, microlenders (i.e., MDOs that have been approved
for participation in this program) will receive direct loans and
grants. Direct loans will be used to capitalize rural revolving loan
funds for the exclusive purposes of making microloans in rural areas,
accepting payments from microborrowers, and repaying the Agency as
required in their loan agreements. Grants will be used to fund
business-based training and technical assistance, which will be
provided to microenterprises by or in concert with the microlender that
has provided one or more microloans to the microborrower seeking
training.
In following these guidelines, the Agency hopes to help build
stronger rural communities by supporting rural microentrepreneurship,
keeping and creating jobs, lessening outmigration, and working toward
universal inclusion in the business sector.
The Act provides mandatory funding for the program during years
2009 through 2011 in the amount of $4 million dollars per fiscal year
and also provides for $3 million of mandatory funding for FY 2012, plus
such other funding as may be appropriated. During any of those years,
additional funding may be appropriated. The number of loans and grants
will vary from year to year, based on availability of funds and the
quality of applications. The maximum annual loan and grant amounts a
microlender may receive in any given year will also vary based on the
availability of funds and will be announced annually in the Federal
Register. The maximum loan amount to any one microlender will never
exceed $500,000.
Neither TA grant funds nor enhancements grant funds can be used by
microlenders to repay their Agency loans.
MDOs seeking to become microlenders under this program will submit
application materials to USDA Rural Development through their local or
state Rural Development Business Programs office. Microenterprises
seeking financial or technical assistance under this program will
submit application materials directly to their local microlender.
A list of local microlenders will be made available at the State
Rural Development, Business Programs office and will be made available
on the USDA Rural Development Web site.
II. Discussion on Public Meeting and Request for Comments
Prior to the development of this proposed rule, USDA published in
the Federal Register a notice of public meeting [January 21, 2009, 74
FR 3550] inviting interested parties to attend and present their ideas
and opinions regarding the proposed program. The meeting was held on
January 26, 2009 in Washington, DC. Eight speakers presented comments
on the authorizing provisions of the Act regarding program development
and operation. USDA considered that input when developing this proposed
rule. The comments received during the meeting will be included with
those received during the public comment period for proposed rule. All
comments and USDA's responses to those comments will be summarized and
considered during the development of the final rule.
As a part of today's proposed rulemaking, the Agency is requesting
comments on the program being proposed. The Agency is specifically
seeking input in the following areas:
1. The scoring section as it applies to administrative funds.
2. The provisions for a maximum loan amount to any one single
microlender and a maximum cap of $2.5 million over time as provided in
Sec. 4280.311(e)(1).
The Agency will balance comments, where possible, with the need to
establish requirements that meet the goals and rules of the program.
Applicants and the Agency must meet all applicable laws,
regulations and executive orders. Applicants must provide the Agency
with appropriate information so that all compliance issues can be
evaluated in a fair and objective process.
Submit comments to the Agency as indicated in the DATES and
ADDRESSES sections above. The Agency will consider all comments during
development of the final rule.
III. Discussion of the Proposed Rule
The following paragraphs present a discussion of the provisions of
each section of the proposed rule in the order that they appear.
A. Purpose and Scope (Sec. 4280.301)
This section describes the purpose, scope and applicability of the
program and applies to all potential MDO applicants. An MDO selected to
receive a direct loan will be automatically eligible to receive a TA
grant. As such, RMAP applications will include all information
necessary to make a loan and grant determination. Grant dollars will be
disbursed as microloans are distributed. The amount of a TA grant may
be equal to no more than 25 percent of the total outstanding balance of
microloans made by an MDO under this program or $100,000, whichever is
less.
B. Definitions and Abbreviations (Sec. 4280.302)
This section presents program specific definitions. Some of these
definitions are included in the statute. Others are proposed for use by
the Agency to more clearly implement the program.
Statutorily defined terms. The Act defines several terms that are
used in this document. Because the terms are defined by statute, the
Agency cannot change the definitions. These terms are:
Indian tribe,
Microenterprise development organization,
Microentrepreneur,
Microloan,
Program, and
Rural microenterprise.
For the purposes of this rule, rural microentrepreneur and
microentrepreneur are synonymous.
Proposed non-statutory terms herein include:
Administrative expenses,
Agency personnel,
Award,
Business incubator,
Default,
Delinquency,
Enhancement grant,
Facilitation of capital,
Indian tribal government employee,
Loan loss reserve fund,
Microlender,
Military personnel,
Rural microloan revolving fund,
Rural or rural area,
Significant outmigration,
Technical assistance and training, and
Technical assistance grant.
With regard to the definition of Agency personnel, the Agency is
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proposing the following definition: ``Individuals employed by the
United States Department of Agriculture-Rural Development Agency, who
are more than 6 months from separating from the Agency.'' While the
Agency does not want to allow the program to provide assistance to
Agency personnel, the Agency at the same time wants to ensure that that
a person retiring or leaving the Agency and wishing to pursue self
employment can obtain the services he or she needs to be ready for self
employment at the time of separation. Therefore, the Agency is
proposing that the definition of Agency personnel ends at 6 months
prior to the expected date of separation in order to allow for pre-
separation preparation and to allow these individuals to be considered
as non-agency personnel. The Agency is also proposing a similar
condition for the definition of military personnel.
C. Exception Authority (Sec. 4280.303)
This section explains the Administrator's limited authority to make
exceptions to regulatory requirements, or provisions. It specifically
excludes permissions to make exceptions for applicant or project
eligibility, the rural area definition, to accept applicants that would
not score at an acceptable level, and to accept applicants that have
not successfully completed. Further, it requires that any exceptions be
in the best financial interest of the Federal government and that
exceptions not be in conflict with any applicable laws.
D. Review or Appeal Rights and Administrative Concerns (Sec. 4280.304)
This section provides the legal basis by which an unsuccessful
applicant may request an Agency review or file an appeal with the USDA
National Appeals Division, in accordance with 7 CFR part 11. This
section also provides contact information for microborrowers that have
any concerns over the implementation of this program.
E. Compliance With Other Federal Laws (Sec. 4280.305)
Applicants and the Agency must meet all applicable laws,
regulations and executive orders including, but not limited to, the
Equal Employment Opportunities Act of 1972, the Americans with
Disabilities Act, the Equal Credit Opportunity Act, and the Civil
Rights Act of 1964. Applicants must provide the Agency with appropriate
information so that all compliance issues can be evaluated in a fair
and objective process.
This section also presents USDA's policy of prohibiting
discrimination in all its programs and activities.
F. Program Requirements for Microenterprise Development Organizations
(Sec. 4280.310)
This section explains the basic criteria for applicant eligibility
that apply to all applicants. Requirements specific to direct loan
applicants (potential microlenders), grants to enhance the capabilities
of the microlender (referred to as enhancement grants) and grants to
assist microentrepreneurs (TA grants to microlenders) are also
explained. This section also describes eligibility issues, and
application qualification issues.
G. Loan Provisions for Agency Loans to MDOs (Sec. 4280.311)
This section explains, in detail, provisions specific to the direct
loan program, including loan purposes; eligible and ineligible
activities; the requirement for making microloans and loan terms and
conditions for MDO borrowers. Loan funds must be used to capitalize
rural microloan revolving funds. The account containing the funds may
only be used to make microloans to rural microentrepreneurs and rural
microenterprises; to accept repayments from those borrowers, and to
repay the Agency. The Agency will require MDOs to report regularly on
the status of their microloan portfolios using aging reports and
narrative information. Sanctions may be imposed on non-performing
lenders deemed to be in either performance or financial default under
the program to include loan funds being called immediately due and
payable and grant funds being held. Interest rates may be raised on
funding that has not been disbursed to microborrowers. Restrictions
regarding limitations on microloans are discussed in Sec. 4280.322.
Loan funding limitations are defined in this section. The minimum
loan amount from the Agency to any microlender will be $50,000. The
maximum loan amount to any microlender will be announced annually based
on the availability of funds, but will never exceed $500,000. The
Agency believes that setting minimum and maximum loan amounts will best
serve rural communities and allow for greater program participation.
Loans made to microlenders must be fully supported by the ability to
relend the money in accordance with Sec. 4280.311 and with the ability
to repay the loan over an 18-year amortization. Because the minimum
loan to a microlender is equal to the maximum loan amount for a
microloan, and to ensure that rural microloan revolving funds are not
exposed to danger of collapse based on a single microloan, no microloan
will be made for an amount that is equal to more than $50,000 or 20
percent of the amount loaned to the microlender under a single
capitalization, whichever is less.
This section also discusses protection against losses, presenting
loan loss reserve fund (LLRF) requirements and Agency oversight. The
Agency is requiring quarterly reporting and provision of evidence that
the sum of the unexpended amount in the RMRF, plus the amount in the
LLRF, plus debt owed by the microborrowers is equal to or greater than
105 percent of the amount owed by the MDO to the Agency. The Agency
will hold first lien position on the RMRF account, the LLRF, and all
notes receivable from microloans.
H. Grant Provisions (Sec. 4280.312)
This section presents the requirements for technical assistance and
microlender enhancement grants. General provisions include cost share
and matching requirements. The Federal share of the cost of any project
under this program will not exceed 75 percent. Oversight includes
quarterly reporting. To help ensure that MDOs can cover the cost of
administering this program, and to ensure that Agency grant funds are
used to support rural microenterprise development, the Agency allows
each MDO to utilize up to 10 percent of any TA grant received to be
used to pay administrative expenses, consistent with the statute.
However, the Agency is reserving the right to deny the 10 percent and
to fund administrative expenses at a lower percentage. No part of an
enhancement grant will be used for administrative expenses. The purpose
of these grants is to assist the microlender with obtaining training to
improve internal organizational efficiency, lending and training
capacity, and skills to better serve microentreprenuers and
microenterprises. Because the enhancement grants do not directly assist
these clients, no lending or training administrative costs are
associated with the grant.
Ineligible grant purposes include application costs, project costs
incurred prior to application date, and those purposes prohibited by
law.
In this section, we also describe the purposes, selection criteria
and award amounts for grants, which must be used to support rural
microenterprise development through the provision of training or other
operational improvement services to MDOs. Microlender enhancement
grants are to
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be used to allow MDOs to seek out training and other enhancement
services to strengthen their own organizations.
To the extent practicable, the Agency will place an emphasis on
providing financial assistance to MDOs of various sizes, that serve
microentrepreneurs in rural areas suffering significant outmigration;
and that serve racially and ethnically diverse populations.
Maximum amounts for enhancement grants will be determined and
announced annually by the Agency based on program needs and the
availability of funds. In all cases, the maximum enhancement grant
funding awarded to a single MDO will not exceed $25,000 or ten percent
of the available funding, whichever is less, in any given year.
The statute requires the Agency to make technical assistance (TA)
grants to MDOs to provide marketing, management and other technical
assistance to microentrepreneurs that have received a loan from the MDO
under this program. Applicant MDOs seeking a direct loan under this
program must submit Standard Forms 424, ``Application for Federal
Assistance''; 424A, ``Budget Information--Non-construction Programs'';
and 424B, ``Assurances--Non-construction Programs'' as a part of the
application. An organization selected to become a microlender will be
eligible to receive a TA grant in an amount less than or equal to 25
percent of the total outstanding balance of program funded microloans
made by that organization or $100,000, whichever is less.
This section also discusses grant administration issues such as
determination of grant amount and grant disbursement.
I. MDO Application and Submission Information (Sec. 4280.315)
This section explains those loan application requirements that will
be regulatory. Submission details such as dates, times, and locations
will be announced annually in the Federal Register. Forms that are
required to be submitted with each application are listed in this
section of the proposed rule. Form submissions may vary based on the
type of assistance being sought.
J. Application Scoring (Sec. 4280.316)
This section discusses documentation that applicants must provide
to meet eligibility requirements for loans and grants. Applicants must
clearly indicate the category of funding for which they are applying.
These categories are microlenders with 3 or more years experience,
microlenders with less than 3 year experience, and MDOs seeking
enhancement grant funding. Scoring requirements vary for each category.
This section also provides details regarding the scoring criteria,
which is divided into four subsections. Subsection (a) applies to all
applicants. Subsections (b) and (c) apply to MDOs seeking to be
microlenders depending on the number of years of their experience.
Subsection (b) describes the additional information that will be scored
for MDOs with three or more years experience, while subsection (c)
describes the additional information that will be scored for MDOs with
less than three years experience.
Because a successful microlending program integrates training and
technical assistance prior to, during, and after the loan making
process, MDOs selected to participate as microlenders must include in
their applications, along with other required documentation, a
description of their technical assistance and training program. This
information, along with the applicable Standard Form 424, will be
considered the grant application so that a separate application package
will not be required for the TA grant. While the maximum TA grant
amount is 25 percent of the loan amount or $100,000, whichever is less,
grant amounts may be adjusted downward based on information provided in
the application.
Subsection (d) describes the additional criteria by which any MDO
seeking funding for enhancement grants will be scored. Additionally,
the dollar amount of TA grants will be based on the loan amount made to
the MDO, in accordance with the statute, and the program microloan
portfolio owed to the MDO.
Lastly, subsection (e) describes optional application provisions
for microlenders who have participated in this program for at least
five years. The optional application provisions reduce the amount of
paperwork required to apply for future funding under this program.
K. Selection of Applications for Funding (Sec. 4280.317)
This section further explains the selection process by which funds
will be awarded. Applications from microlenders with 3 or more years
experience and applications from microlenders with less than 3 years
experience will be ranked together. Enhancement grant applications will
be ranked separately from the microlender applications. Subject to the
availability of funds, the highest scoring applications will be funded
in descending order.
Given the current funding level, during the initial year of
operations, applications will be submitted to the State Offices for
initial review, intergovernmental review, and comments. The
applications will be submitted by the Rural Development State Offices
to the Rural Development National Office for final scoring and
selection. Applications will be accepted in the National Office on a
quarterly basis using Federal Fiscal Quarters. The Agency reserves the
right, as funding for the program increases, to update this method of
program administration in future years, including managing the program
through Rural Development's state offices.
L. Grant Administration (Sec. 4280.320)
Discusses the quarterly reporting, site visits, and inspection of
records that the Agency will utilize to provide oversight of any
organization receiving a grant under this program. Also explains that
the Agency will make grant payments not more often than on a quarterly
basis.
M. Loan and Grant Servicing (Sec. 4280.321)
Presents a listing of other regulations that will be applicable for
servicing loans and grants made to MDOs.
N. Loans From the MDOs to the Microentrepreneurs and Microenterprises
(Sec. 4280.322)
Discusses requirements for microloans from the MDO to the
microborrowers. Presents information on the maximum microloan amounts,
terms and conditions, insurance requirements, the appeal of MDO lending
decisions, and eligible microloan purposes.
O. Ineligible Microloan Purposes (Sec. 4280.323)
Describes those activities for which Agency microloan funds may not
be used.
IV. Administrative Requirements
A. Executive Order 12866
This proposed rule has been reviewed under Executive Order (EO)
12866 and has been determined significant by the Office of Management
and Budget. The EO defines a ``significant regulatory action'' as one
that is likely to result in a rule that may: (1) Have an annual effect
on the economy of $100 million or more or adversely affect, in a
material way, the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local, or tribal governments or communities; (2) create a serious
inconsistency or otherwise
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interfere with an action taken or planned by another agency; (3)
materially alter the budgetary impact of entitlements, grants, user
fees, or loan programs or the rights and obligations of recipients
thereof; or (4) raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
this EO.
The Agency conducted a cost-benefit analysis to fulfill the
requirements of Executive Order 12866. The Agency has identified
potential benefits to prospective program participants and the Agency
that are associated with improving the availability of microlevel
business capital, business-based training and technical assistance, and
enhancing the ability of microlenders to service the microentrepreneurs
to whom they are making their microloans.
B. Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA,
Rural Development must prepare, to the extent practicable, a written
statement, including a cost-benefit analysis, for proposed and final
rules with ``Federal mandates'' that may result in expenditures to
State, local, or tribal governments, in the aggregate, or to the
private sector, of $100 million or more in any one year. With certain
exceptions, section 205 of UMRA requires Rural Development to identify
and consider a reasonable number of regulatory alternatives and adopt
the least costly, most cost-effective, or least burdensome alternative
that achieves the objectives of the rule.
This proposed rule contains no Federal mandates (under the
regulatory provisions of Title II of the UMRA) for State, local, and
tribal governments or the private sector. Thus, this rule is not
subject to the requirements of sections 202 and 205 of the UMRA.
C. Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' Rural Development has determined
that this action does not constitute a major Federal action
significantly affecting the quality of the human environment and, in
accordance with the National Environmental Policy Act (NEPA) of 1969,
42 U.S.C. 4321 et seq., an Environmental Impact Statement is not
required.
D. Executive Order 12988, Civil Justice Reform
This rule has been reviewed in accordance with Executive Order
12988, Civil Justice Reform. Except where specified, all State and
local laws and regulations that are in direct conflict with this rule
will be preempted. Federal funds carry Federal requirements. No person
is required to apply for funding under this program, but if they do
apply and are selected for funding, they must comply with the
requirements applicable to the Federal program funds. This rule is not
retroactive. It will not affect agreements entered into prior to the
effective date of the rule. Before any judicial action may be brought
regarding the provisions of this rule, the administrative appeal
provisions of 7 CFR parts 11 and 780 must be exhausted.
E. Executive Order 13132, Federalism
It has been determined, under Executive Order 13132, Federalism,
that this proposed rule does not have sufficient Federalism
implications to warrant the preparation of a Federalism Assessment. The
provisions contained in the proposed rule will not have a substantial
direct effect on States or their political subdivisions or on the
distribution of power and responsibilities among the various government
levels.
F. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601-602) generally
requires an agency to prepare a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements under the
Administrative Procedure Act or any other statute. If an agency
certifies that the rule will not have a significant economic impact on
a substantial number of small entities, this analysis is not required.
Small entities include small businesses, small organizations, and small
governmental jurisdictions.
In compliance with the RFA, Rural Development has determined that
this action will not have a significant economic impact on a
substantial number of small entities for the reasons discussed below.
While, the majority of MDOs expected to participate in this Program
will be small businesses, the average cost to an MDO is estimated to be
approximately 1 percent of the total mandatory funding available to the
program in fiscal years 2009 through 2012. Rural Development estimates
that most of the administrative costs incurred by MDOs participating in
the program will be covered by the interest rate spread between the one
percent loan from Rural Development and the interest rate on loans made
to the microentrepreneur by the MDO. Further, this regulation only
affects MDOs that choose to participate in the program.
G. Executive Order 12372, Intergovernmental Review of Federal Programs
This program is subject to Executive Order 12372, which requires
intergovernmental consultation with State and local officials.
Intergovernmental consultation will occur for the assistance to MDOs in
accordance with the process and procedures outlined in 7 CFR part 3015,
subpart V. Assistance to rural microenterprises will not require
intergovernmental review.
Rural Development will conduct intergovernmental consultation using
RD Instruction 1940-J, ``Intergovernmental Review of Rural Development
Programs and Activities,'' available in any Rural Development office,
on the Internet at http://www.rurdev.usda.gov/regs, and in 7 CFR part
3015, subpart V. Note that not all States have chosen to participate in
the intergovernmental review process. A list of participating States is
available at the following Web site: http://www.whitehouse.gov/omb/
grants/spoc.html.
H. Executive Order 13175, Consultation and Coordination With Indian
Tribal Governments
This executive order imposes requirements on Rural Development in
the development of regulatory policies that have tribal implications or
preempt tribal laws. Rural Development has determined that the proposed
rule does not have a substantial direct effect on one or more Indian
tribe(s) or on either the relationship or the distribution of powers
and responsibilities between the Federal Government and the Indian
tribes. Thus, the proposed rule is not subject to the requirements of
Executive Order 13175.
I. Programs Affected
Catalog of Federal Domestic Assistance (CFDA) Number. This program
is listed in the Catalog of Federal Domestic Assistance under Number
10.870.
J. Paperwork Reduction Act
The collection of information requirements contained in this
proposed rule have been submitted to the Office of Management and
Budget (OMB) for clearance. In accordance with the
[[Page 51719]]
Paperwork Reduction Act of 1995, USDA Rural Development will seek
standard OMB approval of the reporting requirements contained in this
proposed rule and hereby opens a 60-day public comment period.
Title: Rural Microentrepreneur Assistance Program.
Type of Request: New Collection.
Abstract: The collection of information is vital to Rural
Development to make decisions regarding the eligibility of projects and
loan and grant recipients in order to ensure compliance with the
regulations and to ensure that the funds obtained from the Government
are being used for the purposes for which they were awarded.
Microdevelopment organizations seeking funding under this program will
have to submit applications that include specified information,
certifications, and agreements. This information will be used to
determine applicant eligibility and to ensure that funds are used for
authorized purposes. Applications for continued participation in the
program will include primarily any needed updates to the information
submitted with the initial application.
Once an MDO has been approved for participation in the program, it
must submit additional documents, reports, and certifications to the
Agency. For MDOs receiving loans, the necessary documents are required
around loan closing. For MDOs receiving grant funds, the MDO must
submit a financial status report and request for advancement or
reimbursement. In addition, all MDOs that are awarded funds under this
program must submit quarterly reports to the Agency to provide
information on their performance. Some grantees will also be required
to submit other reports on occasion in the event of poor performance or
other such occurrences that require more than the usual set of
reporting information. Lastly, grantees that plan to spend technical
assistance grant funds on administrative expenses must submit an annual
budget of proposed administrative expenses for Agency approval.
In summary, this collection of information is necessary in order to
implement this program.
The following estimates are based on the anticipated average over
the first three years the program is in place.
Estimate of Burden: Public reporting for this collection of
information is estimated to average 2 hours per response.
Respondents: Microenterprise development organizations (nonprofit
entities, Indian tribes, and public institutions of higher education).
Estimated Number of Respondents: 66.
Estimated Number of Responses per Respondent: 36.
Estimated Number of Responses: 2,379.
Estimated Total Annual Burden (Hours) on Respondents: 4,462.
Copies of this information collection can be obtained from Cheryl
Thompson, Regulations and Paperwork Management Branch at (202) 692-
0043.
Comments
Comments are invited regarding: (a) Whether the proposed collection
of information is necessary for the proper performance of the functions
of Rural Development, including whether the information will have
practical utility; (b) the accuracy of Rural Development's estimate of
the burden of the proposed collection of information including the
validity of the methodology and assumptions used; (c) ways to enhance
the quality, utility and clarity of the information to be collected;
and (d) ways to minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology. Comments may be
sent to Cheryl Thompson, Regulations and Paperwork Management Branch,
Support Services Division, U.S. Department of Agriculture, Rural
Development, Stop 0742, 1400 Independence Ave., SW., Washington, DC
20250-0742. All responses to this proposed rule will be summarized and
included in the request for OMB approval. All comments will also become
a matter of public record.
K. E-Government Act Compliance
USDA is committed to complying with the E-Government Act of 2002
(Pub. L. 107-347, December 17, 2002), to promote the use of the
Internet and other information technologies to provide increased
opportunities for citizen access to government information and
services, and for other purposes.
List of Subjects in 7 CFR 4280
Business programs, Grant programs, Loan programs, Microenterprise
development organization, Microentrepreneur, Rural development, Small
business, Rural areas.
For the reasons set forth in the preamble, part 4280 of title 7 of
the Code of Federal Regulations is proposed to be amended as follows:
PART 4280--LOANS AND GRANTS
1. The authority citation for part 4280 is revised to read as
follows:
Authority: 7 U.S.C. 1989(a), 7 U.S.C. 2009s.
2. Part 4280 is amended by adding a new subpart D to read as
follows:
Subpart D--Rural Microentrepreneur Assistance Program
Sec.
4280.301 Purpose and scope.
4280.302 Definitions and abbreviations.
4280.303 Exception authority.
4280.304 Review or appeal rights and administrative concerns.
4280.305 Nondiscrimnation and compliance with other Federal laws.
4280.306-4280.309 [Reserved]
4280.310 Program requirements for MDOs.
4280.311 Loan provisions for Agency loans to microlenders.
4280.312 Grant provisions.
4280.313-4280.314 [Reserved]
4280.315 MDO application and submission information.
4280.316 Application scoring.
4280.317 Selection of applications for funding.
4280.318-4280.319 [Reserved]
4280.320 Grant administration.
4280.321 Loan and grant servicing.
4280.322 Loans from the microlenders to the microentrepreneurs and
microenterprises.
4280.323 Ineligible microloan purposes.
4280.324-4280.400 [Reserved]
Subpart D--Rural Microentrepreneur Assistance Program
Sec. 4280.301 Purpose and scope.
(a) This subpart contains the provisions and procedures by which
the Agency will administer the Rural Microenterprise Assistance Program
(RMAP). The purpose of the program is to support the development and
ongoing success of rural microentrepreneurs and microenterprises
(businesses generally with ten employees or fewer and in need of
financing in the amount of $50,000 or less). To meet this purpose, the
program will make financial assistance, business based training, and
technical assistance available to microenterprises in rural areas and
will deliver direct loans and technical assistance (TA) grants to
Microenterprise Development Organizations (MDOs). These funds will be
used by MDOs to assist microentrepreneurs by provision of integrated
financial assistance, business training, and technical support. The
program will also provide enhancement grants to enhance the
capabilities of MDOs to support rural microenterprise development. In
addition, program funds will be used to support other such activities
as deemed appropriate by the
[[Page 51720]]
Secretary to ensure the development and ongoing success of rural
microenterprises.
(b) The Agency will make direct loans to microlenders, as defined
in Sec. 4280.302, to capitalize microloan revolving funds to provide
fixed interest rate microloans to microentrepreneurs for startup and
growing microenterprises. Technical assistance grants will be awarded
to microlenders to provide technical assistance to microentrepreneurs
who have received one or more microloans from the MDO under this
program.
(c) To ensure that MDOs are able to provide appropriate training to
microentrepreneurs, operate efficiently, and stay up-to-date on
business training practices, the Agency will make enhancement grants to
microlenders that have successfully completed the application scoring
process for such grants, whether or not they receive other funding
under this program, to enhance their ability to provide training,
operational support, business planning, market development assistance,
and other related services to rural microentrepreneurs.
Sec. 4280.302 Definitions and abbreviations.
(a) General definitions. The following definitions apply to the
terms used in this subpart.
Administrative expenses. Those expenses incurred by an MDO for the
operation of services under this program. Not more than 10 percent of
TA grant funding may be used for such expenses.
Agency. USDA Rural Development, Rural Business-Cooperative Service
or its successor organization.
Agency personnel. Individuals employed by the United States
Department of Agriculture-Rural Development Agency, who are more than 6
months from separating from the Agency.
Applicant. The eligible legal entity, also referred to as a
microenterprise development organization or MDO, submitting the
application.
Application. The forms and documentation submitted by an MDO for
acceptance into the program.
Award. The written documentation, executed by the Agency after the
application is approved, containing the terms and conditions for
provision of financial assistance to the applicant. Financial
assistance may constitute a loan or a grant or both.
Business incubator. An organization that provides temporary
premises, and also provides technical assistance, advice, use of
equipment, and may provide access to capital, or other facilities or
services to microentrepreneurs and microenterprises starting or growing
a business.
Default. Default may be monetary or performance based.
(i) Monetary default is failure by a participating MDO to meet any
financial obligation or term of a loan or grant. An MDO will be
considered in monetary default if it fails to make 3 or more scheduled
loan payments in a row; if it misuses grant funding; or if it has less
than a total of 105 percent of the dollars lent to it under this
program and still owed to the Agency in a combination of the Rural
Microloan Revolving Fund (RMRF), the Loan Loss Reserve Fund (LLRF), and
the total outstanding balance of microloans made.
(ii) Performance default is failure by a participating MDO to meet
any regulatory requirement or any requirement in program guidance.
Delinquency. Failure by an MDO to make a scheduled loan payment by
the due date or within any grace period as stipulated in the promissory
note and loan agreement.
Enhancement grant. A grant whose funds are used to improve the
internal operations of a microlender participating under this program
in a manner that allows the microlender to improve their capabilities
in delivering training, operational support, business planning, market
development assistance, and other related services to rural
microentrepreneurs
Facilitation of capital. For purposes of this program, facilitation
of capital means assisting a technical assistance client in obtaining a
microloan whether or not the microloan is wholly or partially
capitalized by funds provided under this program.
Fiscal year (FY). Fiscal year means the 12-month period beginning
October 1 of any given year and ending on September 30 of the following
year.
Full-time equivalent employee (FTE). The Agency uses the Bureau of
Labor Statistics definition of full-time jobs as its standard
definition. For purposes of this program, a full-time job is a job that
has at least 35 hours in a work week. As such, one full-time job with
at least 35 hours in a work week equals one FTE; two part-time jobs
with combined hours of at least 35 hours in a work week equals one FTE,
and three seasonal jobs equals one FTE. If an FTE calculation results
in a fraction, it should be rounded up to the next whole number.
Indian tribal government employee. An individual currently employed
by its Indian tribal government with more than 6 months remaining in
his/her contract or other agreement to remain a paid, full-time
employee of the tribal government. If no written agreement exists, then
there must be an understanding with the tribe that the employee is
expected to remain employed on a full-time basis with the tribe for 6
months or more.
Indian tribe. The term ``Indian tribe'' as defined in the Indian
Self-Determination and Education Assistance Act (25 U.S.C. 450b)--means
``any Indian tribe, band, nation, or other organized group or
community, including any Alaska Native village or regional or village
corporation as defined in or established pursuant to the Alaska Native
Claims Settlement Act (85 Stat. 688) [43 U.S.C. 1601 et seq.], which is
recognized as eligible for the special programs and services provided
by the United States to Indians because of their status as Indians.''
Loan loss reserve fund (LLRF). An interest-bearing deposit account
an MDO must establish to pay any shortage in the rural microloan
revolving fund caused by delinquencies or losses on microloans. The
LLRF account must be maintained in an amount equal to at least 5
percent of the outstanding balance of funds owed to the Agency by the
MDO under this program. The Agency will hold a security interest in the
account and all funds therein, until the MDO has repaid its debt to the
Agency under this program.
Microenterprise development organization (MDO). An organization
that:
(i) Is a non-profit entity; an Indian tribe (the government of
which tribe certifies that no MDO serves the tribe and no RMAP exists
under the jurisdiction of the Indian tribe); or a public institution of
higher education; and
(ii) Provides training and technical assistance to rural
microentrepreneurs; and
(iii) Facilitates access to capital or another related service; and
(iv) Has a demonstrated record of delivering services to rural
microentrepreneurs, or an effective plan to develop a program to
deliver such services.
Microentrepreneur. An owner and operator, or prospective owner and
operator, of a rural microenterprise who is unable to obtain sufficient
training, technical assistance, or credit other than under this
section, as determined by the Secretary. For purposes of this
regulation, rural microentrepreneur and microentrepreneur are
synonymous. All microentrepreneurs assisted under this regulation must
be located in rural areas. Microenterprises include businesses
employing 10 people or
[[Page 51721]]
fewer that are in need of $50,000 or less in business financing and/or
in need of business based technical assistance and training. Such
businesses may include any type of legal business that meets local
standards of decency. Business types may also include agricultural
producers provided they meet the stipulations in this definition.
Microlender. An MDO that has been approved by the Agency for
participation under this subpart.
Microloan. A business loan of not more than $50,000 with a fixed
interest rate that is provided to a rural microentrepreneur for startup
and growing rural microenterprises.
Military personnel. Individuals, regardless of rank, currently
enlisted in active military service with more than 6 months remaining
in their service requirement.
Nonprofit entity. An entity, determined by State Law, to be
conducting business so as to be defined as a nonprofit entity and that
has applied for or received such designation from the U.S. Internal
Revenue Service.
Program. The Rural Microentrepreneur Assistance Program (RMAP).
Rural microenterprise. The term `rural microenterprise' means:
(i) A sole proprietorship located in a rural area; or
(ii) A business entity with not more than 10 full-time-equivalent
employees located in a rural area.
Rural microloan revolving fund (RMRF). An interest-bearing account
into which an MDO shall deposit loan funds received from the Agency,
from which loans shall be made by the MDO to microentrepreneurs, and
from which repayments to the Agency shall be made. The Agency will hold
a security interest in the RMRF account and on any funds therein until
such time as the MDO repays its debt to the Agency under this program.
Rural or rural area. For the purposes of this program, the terms
`rural' and `rural area' are defined as any area of a State not in a
city or town that has a population of more than 50,000 inhabitants,
according to the latest decennial census of the United States; and the
contiguous and adjacent urbanized area.
(i) For purposes of this definition, cities and towns are
incorporated population centers with definite boundaries, local self-
government, and legal powers set forth in a charter granted by the
State.
(ii) Notwithstanding any other provision of this paragraph, within
the areas of the County of Honolulu, Hawaii, and the Commonwealth of
Puerto Rico, the Secretary may designate any part of the areas as a
rural area if the Secretary determines that the part is not urban in
character, other than any area included in the Honolulu census
designated place (CDP) or the San Juan CDP.
Significant outmigration. The movement of population, other than
migrant worker populations, away from a defined area at a rate of 15
percent or higher based on the three most recent decennial censuses as
demonstrated by data supplied by the U.S. Census Bureau.
Technical assistance and training. The provision of education,
guidance, or instruction to one or more microentrepreneur(s) to prepare
them for self-employment; to improve the state of their current
microbusiness; to increase their capacity in a specific technical
aspect of the subject business; and, to assist the microentrepreneur(s)
in achieving a degree of business preparedness and/or functioning that
will allow them to obtain, or have the ability to obtain, one or more
microloans of $50,000 or less whether or not from program funds.
Technical assistance grant. A grant whose funds are used to provide
technical assistance and training, as defined in this section.
(b) Abbreviations. The following abbreviations apply to the terms
used in this subpart:
FTE--Full-time employee.
LLRF--Loan loss reserve fund.
MDO--Microenterprise development organization.
RMAP--Rural microentrepreneur assistance program.
RMRF--Rural microloan revolving fund.
TA--Technical assistance.
Sec. 4280.303 Exception authority.
The Administrator may make limited exceptions to the requirements
or provisions of this subpart. Such exceptions must be in the best
financial interest of the Federal government, such as agreeing to the
terms of a new repayment agreement to ensure repayment by a defaulted
microlender. No exceptions may be made regarding applicant eligibility,
project eligibility, or the rural area definition. In addition,
exceptions may not be made:
(a) To accept an applicant into the program that would not normally
be accepted under the scoring system;
(b) To fund an interested party that has not successfully competed
for funding in accordance with the regulations.
Sec. 4280.304 Review or appeal rights and administrative concerns.
(a) Review or appeal rights. An applicant MDO may seek a review of
an Agency decision under this subpart from the appropriate Agency
official that oversees the program in question, or appeal to the
National Appeals Division in accordance with 7 CFR part 11.
(b) Administrative concerns. If a microborrower has any questions
or concerns regarding the administration of the program, including
action of the microlender, contact: Business Programs, Specialty
Programs Division, USDA, Rural Development, Rural Business--Cooperative
Service, Room 6868, South Agriculture Building, Stop 3225, 1400
Independence Avenue, SW., Washington, DC 20250-3225 or the USDA Rural
Development State Office in the State in which the microborrower is
located.
Sec. 4280.305 Nondiscrimination and compliance with other Federal
laws.
(a) Applicants must comply with other applicable Federal laws,
including the Equal Employment Opportunities Act of 1972, the Americans
with Disabilities Act, the Equal Credit Opportunity Act, the Civil
Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, the
Age Discrimination Act of 1975, and 7 CFR part 1901-E.
(b) The U.S. Department of Agriculture (USDA) prohibits
discrimination in all its programs and activities on the basis of race,
color, national origin, age, disability, and where applicable, sex,
marital status, familial status, parental status, religion, sexual
orientation, genetic information, political beliefs, reprisal, or
because all or part of an individual's income is derived from any
public assistance program. (Not all prohibited bases apply to all
programs.) Persons with disabilities who require alternative means for
communication of program information (Braille, large print, audiotape,
etc.) should contact USDA's TARGET Center at (202) 720-2600 (voice and
TDD). Any applicant that believes it has been discriminated against as
a result of applying for funds under this program should contact: USDA,
Director, Office of Adjudication and Compliance, 1400 Independence
Avenue, SW., Washington, DC 20250-9410, or call (800) 795-3272 (voice)
or (202) 720-6382 (TDD) for information and instructions regarding the
filing of a Civil Rights complaint. USDA is an equal opportunity
provider, employer, and lender.
(c) A pre-award compliance review will take place at the time of
application
[[Page 51722]]
when the applicant completes Form RD 400-8, ``Compliance Review'' (or
successor form). Post award compliance reviews will take place once
every three years after the beginning of participation in the program
and until such time as a microlender leaves the program.
Sec. Sec. 4280.306-4280.309 [Reserved]
Sec. 4280.310 Program requirements for MDOs.
(a) Eligibility requirements for applicant MDOs. To be eligible for
a direct loan or grant award under RMAP, an applicant must meet each of
the criteria set forth in paragraphs (a)(1) through (8) of this
section, as applicable.
(1) Type of applicant. The applicant must meet the definition of an
MDO under this program.
(2) Citizenship. To be eligible to apply for status as an MDO, the
applicant must be at least 51 percent controlled by persons who are
either:
(i) Citizens of the United States, the Republic of Palau, the
Federated States of Micronesia, the Republic of the Marshall Islands,
American Samoa, or the Commonwealth of Puerto Rico; or
(ii) Legally admitted permanent residents residing in the U.S.
(3) Legal authority and responsibility. The applicant must have the
legal authority necessary to carry out the purpose of the award.
(4) Direct loans. The applicant will be considered for a direct
loan to capitalize a revolving loan fund if it submits an application
that scores sufficiently to indicate that the applicant is
appropriately qualified to perform under this program and will use
program funding exclusively for making and administering a microloan
revolving fund in one or more rural areas; and
(i) Has demonstrated experience in the management of a revolving
loan fund; or
(ii) Certifies that it, or its employees, have received education
and training from a qualified microenterprise development training
entity to the extent that it has the capacity to manage such a
revolving loan fund; or
(iii) Is actively and successfully participating as an intermediary
lender in good standing under the U.S. Small Business Administration
(SBA) Microloan Program or other similar loan programs as determined by
the Administrator.
(5) Grants to support rural microenterprise development
(enhancement grants). Any microlender participating in the program will
be considered eligible to apply for an enhancement grant. Such grants
must be used to improve the internal operations of the microlender so
that they can improve their ability to deliver training, operational
support, business planning, market development assistance, and other
related services to rural microentrepreneurs. Other related services
include improvement in the microlender's ability to make and service
loans, arrive at sound lending decisions, improve operational
efficiency, improve their marketing strategies so as to reach an
increased number of potential microborrowers, enhance record keeping
and data gathering, and penetrating new markets as they develop such as
sustainable small farming, the greening of existing businesses,
development of new green businesses, and other sectors yet to be
developed. Any microlender that receives an enhancement grant to pursue
an internal enhancement project must enter into an agreement with a
trainer/service provider within 90 days of notification of the grant
award. If the microlender does not enter into such agreement within
these 90 days, the enhancement grant will be forfeited.
(6) Grants to support microentrepreneurs (TA grants). The capacity
of the applicant MDO to provide an integrated program of microlending
and technical assistance will be evaluated during the scoring process.
Therefore, an applicant MDO will be considered eligible to receive TA
grant funding if it receives funding to provide microloans under this
program, and agrees to use TA grant funding exclusively for providing
technical assistance and training to eligible microentrepreneurs, with
the exception that up to 10 percent of the grant funds may be used to
cover administrative expenses, except as may be reduced as provided
under Sec. 4280.312(a)(5). The following limitations will apply to TA
grant funding:
(i) Administrative expenses should be kept to a minimum. As such,
the applicant MDO is required, in the application materials, to provide
an administrative budget plan indicating the amount of funding it will
need for administrative purposes.
(ii) While operating the program, the selected microlender will be
expected to adhere to the estimates it provides in the application. If
for any reason, the microlender cannot meet the expectations of the
application, it must contact the Agency in writing to request a budget
adjustment.
(iii) Budget adjustments will be considered and approved on a case
by case basis.
(7) Ineligible applicants. An applicant will be considered
ineligible if it does not meet the definition of an MDO as provided in
Sec. 4280.302; if it is debarred, suspended or otherwise excluded
from, or ineligible for, participation in Federal assistance programs.
The applicant will also be considered ineligible if it has an
outstanding judgment against it, obtained by the United States in a
Federal Court (other than U.S. Tax Court), is delinquent in meeting
U.S. Internal Revenue Service (IRS) requirements, or cannot meet the
requirements of paragraph (a)(6) of this section.
(8) Delinquencies. No applicant will be eligible to receive a loan
if it is delinquent on a Federal debt. (Note: See 31 U.S.C. 3720B, an
applicant is still eligible for a grant if they are delinquent on a
Federal debt; however, see 28 U.S.C. 3201, Federal judgment debtors
(other than tax debts) are ineligible for Federal loans and grants).
(b) Application eligibility. An application will be considered
eligible for funding if it is submitted by an eligible MDO and will
qualify for funding based on the results of review, scoring, and other
procedures as indicated in this subpart, and will either:
(1) Establish, or add capital to, an RMRF originally capitalized
under this program; or
(2) Establish or continue a training and TA program for rural
microentrepreneurs as defined.
(c) Business incubators. Because the purpose of a business
incubator is to provide business-based technical assistance and an
environment in which micro-level, very small, and small businesses may
thrive, a microlender that owns and operates a small business
incubator, as described, will be considered eligible to apply. In
addition, a business incubator selected to participate as a microlender
may use RMAP funding to lend to an eligible microenterprise tenant,
without imposing a conflict of interest on itself.
Sec. 4280.311 Loan provisions for Agency loans to microlenders.
(a) Purpose of the loan. Loans will be made to eligible and
qualified microlenders to capitalize RMRFs. An RMRF will be an
exclusive account, from which fixed interest rate microloans will be
made to microentrepreneurs and microenterprises; into which payments
from microborrowers and reimbursements from the LLRF will be deposited;
and from which payments will be made by the microlender to the Agency.
Interest earnings accrued by the RMRF will become part of the RMRF and
may be used only for the purposes
[[Page 51723]]
stated above. However, with advance written approval by the Agency, the
microlender may increase the funding in its LLRF with interest earnings
from the RMRF. The Agency will hold first lien position on the RMRF
account, the LLRF, and all notes receivable from microloans.
(b) Eligible activities. Microlenders may make microloans for
qualified business activities as specified in Sec. 4280.322 and may
use Agency loan funds only for the purposes stated in Sec. 4280.322.
(c) Ineligible activities. Microlenders may not use Agency loan
funds for administrative costs or expenses and may not make microloans
under this program for ineligible purposes as specified in Sec.
4280.323.
(d) Loan terms and conditions for microlenders. Loans will be made
to microlenders under the following terms and conditions:
(1) Funds received from the Agency will be deposited into an
interest bearing account that will be the RMRF account.
(2) The RMRF account may be used to make microloans, to accept
repayments from microborrowers, to repay the Agency and, with the
advance written approval of the Agency, to supplement the LLRF with
interest earnings from the RMRF. The Agency will only approve the use
of interest earning the RMPF account to supplement the LLRF in those
cases where the microlender's portfolio is highly performing, where the
RMRF account is at an appropriate level to guarantee the ability to
repay, and the microlender's repayment history has been highly
satisfactory.
(3) The term of a loan made to a microlender will not exceed 20
years and may be less, as determined by the Agency.
(4) Loan repayments will be made in equal monthly installments to
the Agency beginning on the last day of the 24th month of the life of
the loan.
(5) A microlender may make partial or full repayment of its debt to
the Agency at any time without penalty.
(6) The microlender is responsible for full repayment of its loan
to the Agency regardless of the performance of its microloan portfolio.
(7) The Agency may call the entire loan due and payable prior to
the end of the 20-year period, due to non-performance, delinquency, or
default.
(8) Each loan made to a microlender will automatically receive a 2-
year deferral during which time no repayment will be due to the Agency.
(i) Interest will accrue during the deferral period on funds drawn
down from (disbursed by) the Agency.
(ii) The deferral period will begin on the day the loan to the
microlender is closed.
(9) Loan closing between the microlender and the Agency must take
place within 60 days of loan approval or funds will be forfeited.
(10) Microlenders will be eligible to receive a disbursement of up
to 25 percent of the total loan amount at the time of loan closing.
Interest will accrue on all funds disbursed to the microlender
beginning on the date of disbursement.
(11) A microlender must make one or more microloans within 30 days
of any disbursement it receives from the Agency.
(12) Microlenders may receive additional disbursements not more
than quarterly, until the full amount of the loan to the microlender is
disbursed, or until the end of the thirty sixth month of the loan,
whichever occurs first. To ensure that microleners utilize their
funding in an appropriate manner, requests for disbursement must be
accompanied by a description of the incoming microloan pipeline.
Requests for funding should generally be in the amount of the incoming
pipeline plus 20 percent of that amount. Requests in excess of that
amount must be explained.
(13) Each loan made to a microlender will bear an interest rate
equal to the rate applicable to five-year obligations of the United
States treasury, adjusted to the nearest one-eighth percent, subject
to:
(i) A minimum interest rate of at least 1 percent, and
(ii) An adjustment as provided in paragraph (d) (17) of this
section
(14) Each loan to a microlender will accrue interest at a rate of 1
percent during the initial deferral period. Interest accrued during
this period will be capitalized as described in paragraph (d)(15) of
this section.
(15) On the first day of the twenty-second month of the initial
deferral period, the microlender's debt to the Agency will be
calculated and amortized over an 18-year period. The first payment will
be due to the Agency on the last day of the twenty-fourth month of the
life of the loan. Interest accrued during the deferral period will be
calculated into the payment and repaid over the 18-year payment period.
(i) A microlender requesting disbursements after the repayment
calculation may inadvertently subject itself to negative amortization.
Such a microlender may request to have the loan expeditiously re-
amortized by the Agency.
(ii) All loans to microlenders will be automatically re-amortized
at the end of the thirty-fourth month of the life of the loan.
(16) Funds not disbursed to the microlender by the end of the
thirty-fourth month of the loan from the Agency will be de-obligated.
(17) All loans will receive an evaluation during the thirty-fourth
month of the loan, so that:
(i) A microlender that has re-loaned all of its Agency funding to
microentrepreneurs will adjust to the rate provided in paragraph
(d)(13) of this section less 200 basis points for the life of the loan.
(ii) A microlender that has not fully re-loaned all of its Agency
funding to microentrepreneurs, as of month twenty-four, will adjust to
the rate provided in paragraph (d)(13) less 100 basis points for the
life of the loan.
(18) The Agency will hold first lien position on the RMRF account,
the LLRF, and all notes receivable from microloans.
(19) If a microlender makes a withdrawal from the RMRF for any
purpose other than to make a microloan, repay the Agency, or, with
advance written approval, transfer an appropriate amount of non-Federal
funds to the LLRF, the Agency may impose a lien on the account,
restricting further access to withdrawals from the account by the
microlender O.
(20) In the event a microlender fails to meet its obligations to
the Agency, the Agency may:
(i) Take possession of the RMRF and/or any microloans outstanding,
and/or the LLRF; or
(ii) Call the loan due and payable in full; or
(iii) Enter into a workout agreement acceptable to the Agency,
which may or may not include transfer or sale of the portfolio to
another microlender (whether or not funded under this program) deemed
acceptable to the Agency; or
(iv) Pursue any combination of actions specified in paragraphs
(d)(20)(i) through (iii) on this section.
(e) Loan funding limitations. (1) Minimum and maximum loan amounts.
The minimum loan amount a microlender may borrow under this program
will be $50,000 (fifty thousand dollars). The maximum any microlender
may borrow in a single funding under this program will be $500,000
provided certain limitations are met. In no case will the aggregate
debt owed to the program by any single microlender exceed $2,500,000.
(2) Use of funds. Loans must be used only to establish an RMRF out
of which
[[Page 51724]]
microloans will be made, into which microloan payments will be
deposited, and from which repayment will be made to the Agency.
Interest earned by the microlender on these funds may, with advance
written authorization from the Agency, be used to help fund the LLRF.
(f) Loan loss reserve fund. Each microlender that receives one or
more loans under this program will be required to establish an LLRF.
(1) Purpose. The purpose of the LLRF is to protect the microlender
and the Agency against losses that may occur as the result of the
failure of one or more microentrepreneurs to repay their loans on a
timely basis.
(2) Capitalization and maintenance. The LLRF must:
(i) Be held in a Federally-insured deposit account separate and
distinct from any other fund owned by the microlender; and
(ii) Be maintained in an amount equal to not less than 5 percent of
the amount owed by the microlender to the Agency under this program;
and
(iii) Be capitalized using non-Federal funding; and
(iv) Remain open, appropriately capitalized, and active until such
time as:
(A) All obligations owed to the Agency by the microlender under
this program are paid in full; or
(B) It is used to assist with full repayment/prepayment of the
microlender's debt.
(3) Use of LLRF funds. The LLRF must be used only to:
(i) Recapitalize the RMRF in the event of the loss and write-off of
a microloan; that is, when a loss has been paid to the RMRF, from the
LLRF, the microlender must refresh the LLRF to the required level from
its own funding; and
(ii) Accept non-Federal deposits as required for maintenance of the
fund at a level equal to 5 percent or more of the outstanding microloan
balance; and
(iii) Accrue interest; interest earnings accrued by the LLRF will
become part of the LLRF and may be used only for eligible purposes; and
(iv) Prepay or repay the Agency.
(4) LLRF funded in advance. The LLRF account must be established
and partially funded by the microlender prior to the closing of the
loan from the agency. Such funds must come from private sector sources.
Federal funds will not be accepted as appropriate for the LLRF. At all
times, the microlender must maintain the LLRF at a minimum of 5 percent
of the total amount owed by the microlender, under this program, to the
Agency. In the event of exhibited weaknesses on the part of a
microlender, the Agency may require additional funding be put into the
LLRF; however, the Agency may never require an LLRF of more than 10
percent of the total amount owed to the microlender.
(g) Loan approval and obligating funds. The loan will be considered
approved on the date the signed copy of Form RD 1940-1, ``Request for
Obligation of Funds,'' (or successor form(s)) is mailed to the
microlender. Form RD 1940-1 authorizes funds to be obligated and may be
executed by the loan approving official provided the microlender has
the legal authority to contract for a loan, and to enter into required
agreements, including an Agency-approved loan agreement, and has signed
Form RD 1940-1.
(h) Loan closing. (1) Prior to loan closing, microlenders providing
microloans must provide evidence that the RMRF and LLRF bank accounts
have been set up and 5 percent of the initial disbursement has been
deposited. USDA will have a first lien on these accounts. The evidence
shall consist of:
(i) A pre-authorized debit form allowing the agency to withdraw
payments from the RMRF account, and in the event of a repayment
workout, from the LLRF account;
(ii) An Agency-approved automatic deposit authorization form from
the depository institution providing the Agency with the RMRF account
number into which funds may be deposited at time of disbursement to the
microlender; and
(iii) A statement from the depository institution as to the amount
of cash in the LLRF account.
(2) At loan closing, the microlender must certify that:
(i) All requirements of the letter of conditions have been met and
(ii) There have been no material adverse change(s) in the
microlender or its financial condition since the issuance of the letter
of conditions. If one or more adverse changes have occurred, the
microlender must explain the change(s) and the Agency must review the
changes to determine that the microlender remains eligible and
qualified to participate as an MDO.
(iii) An Agency-approved promissory note must be executed at loan
closing or prior to disbursement of funds.
(3) Agency personnel will not sign any documents other than those
specifically provided for in this subpart.
(4) Upon reviewing the conditions and requirements in the letter of
conditions, the applicant must complete, sign, and return Form RD 1942-
46, ``Letter of Intent to Meet Conditions,'' (or successor form) to the
Agency; or if certain conditions cannot be met, the applicant may
propose alternate conditions. The processing officer will review any
requests for changes to the letter of conditions. The processing
officer will approve only minor changes that do not materially affect
the microlender. Changes in legal entities or where tax considerations
are the reason for the change will not be approved.
(5) The microlender will provide sufficient evidence to enable the
Agency to ascertain that no claim or liens of laborers, materials,
contractors, subcontractors, suppliers of machinery and equipment, or
other parties are against the security of the microlender, and that no
suits are pending or threatened that would adversely affect the
security of the microlender when the security instruments are filed.
(i) Recordkeeping, reporting, and oversight. Microlenders must
maintain all records applicable to the program, to be made available to
the Agency upon request, and must submit quarterly reports as specified
in paragraphs (i)(1) through (4) of this section.
(1) On a quarterly basis, within 30 days of the end of the calendar
quarter, each microlender that has an outstanding loan under this
section must provide to the Agency:
(i) Quarterly reports, using an Agency-approved form, containing
such information as the Agency may require, and in accordance with OMB
circulars and guidance, to ensure that funds provided are being used
for the purposes for which the loan to the microlender was made. At a
minimum, these reports should include a discussion reconciling the
microlender's actual results for the period against its goals,
milestones, and objectives as previously communicated to the Agency;
(ii) SF-269, ``Financial Status report (or successor form)''; and
(iii) SF-270, ``Request for Advance or Reimbursement'' (or
successor form).
(2) Microlenders must provide evidence that the sum of the
unexpended amount in the RMRF, plus the amount in the LLRF, plus debt
owed by the microborrowers is equal to a minimum of 105 percent of the
amount owed by the microlender to the Agency unless the Agency has
established a higher LLRF reserve requirement for a specific
microlender.
(3) If a microlender has more than one loan from the Agency, a
separate report must be made for each unless the Agency has given
authorization for the microlender to combine its RMRF accounts. The
Agency will give authorization to combine RMRF accounts only if (1) the
underlying loans
[[Page 51725]]
have the same terms and conditions and (2) if the combined report
allows the Agency to effectively administer the program, including
providing the same level of transparency and information for each loan
as if separate reports had been prepared.
(4) The quarterly loan reports will include RD Form 1951-4,
``Report of RMAP/RMRF Lending Activity,'' (or successor form(s)) as
well as a discussion of any delinquent loans and the steps being taken
to cure the delinquencies. Other reports may be required from time to
time in the event of poor performance, one or more work out agreements
or other such occurrences that require more than the usual set of
reporting information.
(5) Because microloans made by microlenders to microborrowers are
not underwritten by the Agency prior to loan making, the Agency may, at
any time, choose to visit the microlender and inspect its files to
ensure that program requirements are being met.
Sec. 4280.312 Grant provisions.
(a) General. The following provisions apply to both TA and
enhancement grants, unless otherwise specified.
(1) Grant amounts. Maximum grant amounts for enhancement grants
will be determined and announced annually based on the availability of
funds. The maximum enhancement grant funding awarded to a single
microlender will not exceed $25,000 or ten percent of the available
funding, whichever is less, in any given year. The maximum TA grant
amount is 25 percent of the loan amount or $100,000, whichever is less.
The Agency may adjust the maximum TA grant amount downward based on
information provided in the application.
(2) Cost share. The Federal share of the cost of a grant (technical
assistance or enhancement) provided under this section will not exceed
75 percent.
(3) Matching requirement. Microlenders must provide a 10 percent
non-Federal cash matching contribution against any grant awarded under
this program. Microlenders must also provide a 15 percent non-Federal
cash or in-kind contribution against any grant awarded under this
program. The total matching requirement is 25 percent of the amount of
the grant. The non-Federal match against a grant is separate and
distinct from the funds required to be deposited in the LLRF. RD will
be able to monitor this match based on the SF 270 which is the Request
for Advance or Reimbursement form. The first disbursement will require
a match of that disbursement. Using the SF 270, no second grant
disbursement would be made unless the matching funds were accounted for
in advance.
(4) Oversight. Microlenders receiving a grant must submit reports,
as specified in paragraphs (a)(4)(i) through (iv) of this section.
(i) On a quarterly basis, within 30 days after the end of the
fiscal calendar quarter, a microlender that receives a grant will
provide to the Agency an Agency-approved quarterly report containing
such information as the Agency may require to ensure that funds
provided are being used for the purposes for which the grant was made,
including SF-269 or SF-272, ``Federal Cash Transaction Report,'' (or
successor form(s)), as appropriate, SF-270 (or successor form) if
requesting grant funding at the time of reporting, and narrative
reporting information as required by OMB circulars.
(ii) If a microlender has more than one grant from the Agency, a
separate report must be made for each.
(iii) The reports will include Standard Form 270 and Standard Form
272 (or successor forms) along with a narrative report as required in
OMB Circulars A-102 and A-110. This report will include information on
the microlender's technical assistance, training, and/or enhancement
activity, and grant expenses, milestones met, or unmet, explanation of
difficulties, observations and other such information.
(iv) Other reports may be required by the Agency from time to time
in the event of poor performance or other such occurrences that require
more than the usual set of reporting information.
(5) Administrative expenses. Not more than 10 percent of a TA grant
received by a microlender for a fiscal year (FY) may be used to pay
administrative expenses. Microlenders must submit an annual budget of
proposed administrative expenses for Agency approval. The Agency has
the right to deny the 10 percent and to fund administration expenses at
a lower level.
(6) Ineligible grant purposes. Grant funds may not be used for:
(i) Grant application preparation costs;
(ii) In the case of a TA grant, any costs incurred prior to the
application date of the first microloan funded;
(iii) In the case of a enhancement grant, costs incurred prior to
the obligation date of the grant and capital improvements;
(iv) Political or lobbying activities;
(v) Assistance to any ineligible entity;
(vi) Payment of any judgment or debt owed to the United States; and
(vii) Payment of any costs other than those allowed in paragraphs
(b)(1) and (c)(1) of this section.
(b) Grants to enhance a microlender capabilities (Enhancement
Grants). (1) Purpose. The Agency will make enhancement grants to
microlenders to carry out projects and activities that enhances the
microlender's capabilities to provide training, operational support,
business and strategic planning, and market development assistance, and
other related services to assist the microlender in its ability to
deliver services to rural microentrepreneurs.
(2) Grant amounts. The maximum enhancement grant amount will be
announced annually based on the availability of funds. The maximum
enhancement grant funding awarded to a single microlender will not
exceed $25,000 or ten percent of the available funding, whichever is
less, in any given year. Funds cannot be used to pay off any loan
amount.
(c) Grants to assist microentrepreneurs (Technical Assistance (TA)
Grants). (1) Purpose. The Agency shall make TA grants to microlenders
to assist them in providing marketing, management, and other technical
assistance to microentrepreneurs that have received one or more
microloans from the microlender.
(2) Grant amounts. TA grants will be limited to an amount equal to
not more than 25 percent of the total outstanding balance of microloans
made and active by the microlender as of the date the grant is awarded
or $100,000, whichever is less. However, the minimum TA grant amount
will be no less than 15 percent of the outstanding balance of
microloans owed to the microlender. Funds cannot be used to pay off the
loans. During the first year of operation, the percentage will be
determined based on the amount of the loan to the microlender, but will
be disbursed on a quarterly basis based on the amount of microloans
made. Any grant dollars obligated, but not spent, from the initial
grant, will be subtracted from the subsequent year grant to ensure that
obligations cover only microloans made and active.
(d) Grant agreement. The Agency will notify the approved applicant
in writing, using an Agency-approved form (RD 4280-3, ``Rural Economic
Development Grant Agreement,'' or successor form), setting out the
conditions under which the grant will be made. The form will include
those matters necessary to ensure that the proposed grant is completed
in accordance with the proposed project and budget, that grant funds
are expended for authorized purposes, and
[[Page 51726]]
that the applicable requirements prescribed in the relevant Department
regulations are complied with.
Sec. Sec. 4280.313-314 [Reserved]
Sec. 4280.315 MDO application and submission information.
(a) Initial and subsequent applications. Applications shall be
submitted in accordance with the provisions of this subpart unless
adjusted by the Agency in an annual Notice for Solicitation of
Applications (NOSA) or a Notice of Funding Availability (NOFA),
depending on the availability of funds at the time of publication.
(b) Content and form of submission. Content and form requirements
will differ based on the nature of the application. All applicants must
provide the information specified in Sec. 4280.316(a).
(1) An applicant with 3 or more years experience as an MDO seeking
participation as a microlender must provide the additional information
specified in Sec. 4280.316(b). Such an applicant will be applying for
a loan to capitalize an RMRF to be accompanied by a TA grant.
(2) An applicant with less than 3 years experience as an MDO
seeking participation as a microlender must provide the additional
information specified in Sec. 4280.316(c). Such an applicant will also
be applying for a loan to capitalize an RMRF to be accompanied by a TA
grant.
(3) An applicant seeking enhancement grant funding for a specific
enhancement project, internal to its organization, must provide the
additional information specified in Sec. 4280.316(d).
(c) Application submission requirements. All applicants must submit
the following forms (or their successor forms) and information in order
to be considered:
(1) Standard Form-424, ``Application for Federal Assistance.''
(2) Standard Form-424A, ``Budget Information--Non-construction
Programs.''
(3) Standard Form-424B, ``Assurances--Non-construction Programs.''
(4) For entities that are applying for more than $150,000 in loan
funds and/or more than $100,000 in grant funds, only, SF LLL,
``Disclosure of Lobbying Activities.''
(5) AD 1047, ``Certification Regarding Debarment, Suspension, and
other Responsibility Matters--Primary Covered Transaction.''
(6) Form RD 1910-11, ``Certification of No Federal Debt.'' Note
that this form is only required for loan applicants.
(7) Evidence that the applicant organization meets the citizenship
requirements.
(8) Form RD 400-8, ``Compliance Review.''
(d) Additional documentation. The information required in this
section is necessary for an application to be considered complete.
(1) Eligibility to apply. In addition to the forms and information
required above, each applicant must demonstrate that it is eligible to
apply to participate in this program by submitting documentation that
the applicant is an MDO as defined in Sec. 4280.302, as follows:
(i) Copies of the applicant's IRS designation indicating that the
applicant is legally considered a non-profit organization; or
(ii) Evidence that the applicant is a Federally recognized Indian
tribe, and that the tribe neither operates, nor is served by an
existing MDO; or
(iii) Evidence that the applicant is a public institution of higher
education.
(iv) A Certificate of Good Standing from the applicant's home
state's Office of the Secretary of State.
(2) Separate applications. Applicants must submit separate
applications for loan funding and for enhancement grant funding.
(i) An entity applying for loan funding as a Microlender will be an
MDO, eligible to apply based on the documentation provided under
paragraph (b) of this section, that has a demonstrated history of
providing microloans and technical assistance and training to rural
microentrepreneurs, if it has 3 or more years of experience as an MDO
or has an effective plan to develop a program for delivering services
to rural microentreprenuers if it has less than 3 years experience as
an MDO. Microlenders will apply for loan funds to capitalize an RMRF,
and, if selected, will automatically be eligible, though may not
receive, a grant for provision of technical assistance and training to
rural microentrepreneurs. It will depend on the applicant's score and
the number and scores of the other applicant's who apply.
(ii) An entity applying for an enhancement grant must be a
microlender participating in this program and must be selected through
a separate application process based on the applicant's score and the
number and scores of other microlenders applying for enhancement
grants.
(e) Completed applications. Applications that fulfill the
requirements specified in paragraphs (a) through (d) of this section
will be fully reviewed, scored, and ranked in accordance with the
provisions of Sec. 4280.316. Scoring requirements will vary based on
the level of the applicant's experience as an MDO and on the type of
funding sought.
Sec. 4280.316 Application scoring.
Applications will be scored based on the criteria specified in this
section using the information submitted in the application. The total
available points per application are 100. Points will be awarded as
shown in paragraphs (a) through (e) of this section. Awards will be
based on the ranking, with the highest ranking applications funded
first subject to available funding.
(a) Application requirements for all loan applications. All
applicants for a loan must submit the information specified in
paragraphs (a)(1) through (7) of this section. This information
provides a baseline for determination of capacity. Additional
information are specified depending on whether the applicant has 3 or
more years of experience or less than 3 years of experience. The
maximum points available in this paragraph (a) is 45. All applicants
must submit:
(1) An organizational chart clearly showing the positions and
naming the individuals in those positions. Of particular interest to
the Agency are management positions and those positions essential to
the operation of microlending and TA programming. Up to 5 points will
be awarded.
(2) Information indicating an understanding of microlending. For
all applicants, this must be those parts of your policy and procedures
manual that deal with the provision of loans, management of loan funds,
and provision of technical assistance. Up to 5 points will be awarded.
(3) A succession plan to be followed in the event of the departure
of personnel key to the operation of the applicant's RMAP activities.
Up to 5 points will be awarded.
(4) Resumes for each of the individuals shown on the organizational
chart and indicated as key to the operation of the activities to be
funded under this program. Points will be awarded based on the quality
of the resumes and on the ability of the key personnel to administer
the program. Up to 5 points will be awarded.
(5) Copies of the applicant's most recent, and two years previous,
financial statements. Points will be awarded based on the demonstrated
ability of the applicant to maintain or grow its bottom line fund
balance, its ability to manage
[[Page 51727]]
one or more Federal programs, and its capacity to manage multiple
funding sources, restricted and non-restricted funding sources, income,
earnings, and expenditures. Up to 10 points will be awarded.
(6) A copy of the applicant's organizational mission statement. The
mission statement will be rated based on its relative connectivity to
microenterprise development and general economic development. The
mission statement may or may not be a part of a larger statement. Up to
5 points will be awarded.
(7) Information regarding the geographic service area to be served.
Describe the service area. State the number of counties or other
jurisdictions to be served. Describe the demographics of the service
area and whether or not it is rural, as defined; suffering from
significant outmigration as defined; and enjoying a diverse population.
Note that you will not be scored on the size of the service area but on
the perceived ability to fully cover the service area as described as
well as the needs of the service area. Up to 10 points will be awarded.
(b) Application requirements for microlenders with 3 or more years
experience seeking loans only. In addition to the information specified
in paragraph (a) of this section, applicants with 3 or more years
experience as an MDO seeking a loan must provide the information
specified in paragraphs (b)(1) through (4) of this section. The total
number of points available under this paragraph, in addition to the up
to 45 points available in paragraph (a) of this section, is 55, for a
total of 100.
(1) History of provision of microloans. Provide data regarding your
history of making microloans for the three years previous to your
application by answering the questions in paragraphs (b)(1)(i) through
(vi) of this section. This information should be provided clearly and
concisely in numerical format as the data will be used to calculate
points as noted. Figure 1 presents an example of the format and data
required. The total number of available points regarding history is 23.
Figure 1--Example of Format and Data Requirements
----------------------------------------------------------------------------------------------------------------
Data item FY2006 FY2007 FY2008 Total
----------------------------------------------------------------------------------------------------------------
Total of Microloans Made. ......... ......... ......... .........
Total $ Amount of Microloans Made. ......... ......... ......... .........
of Microloans Made in Rural Areas. ......... ......... ......... .........
Total $ Amount of Microloans Made in Rural Areas. ......... ......... ......... .........
of Microloans Made to [enter demographic group A]. ......... ......... ......... .........
of Microloans Made to [enter demongraphic group B]. ......... ......... ......... .........
of Microloans Made to [enter demographic groupd C]. ......... ......... ......... .........
of Microloans Made in Areas of Outmigration. ......... ......... ......... .........
----------------------------------------------------------------------------------------------------------------
(i) Number and amount of microloans made during each of the three
previous FYs. Do not include current year information. If you would
like, please include a narrative as a separate attachment; not in the
body of the table.
(ii) Number and amount of microloans made in rural areas. From the
data provided above, please indicate the number and amount of
microloans made in rural areas in each of those years. If the history
of providing microloans in rural areas shows:
(A) More than the three consecutive years immediately prior to this
application, 4 points will be awarded;
(B) At least two of the years but not more than the three
consecutive years immediately prior to this application, 2 points will
be awarded;
(C) Less than the one year immediately prior to this application, 1
point will be awarded.
(iii) Percentage of number of loans made in rural areas. Calculate
and enter the percentage of the total portfolio of microloans that have
made in rural areas for the past three FYs. If the percentage of the
total portfolio of microloans made in rural areas is:
(A) 75 percent or more, 4 points will be awarded;
(B) At least 50 percent but less than 75 percent, 2 points will be
awarded;
(C) At least 25 but less than 50 percent, 1 point will be awarded.
(iv) Percent of dollar amount of loans made in rural areas. Enter
the dollar amount of the total portfolio of microloans you have made in
rural areas in the previous three FYs. If the dollar amount of the
microloans you made in rural areas is:
(A) 75 percent or more of the total amount, 4 points will be
awarded;
(B) At least 50 percent but less than 75 percent, 2 points will be
awarded;
(C) At least 25 percent but less than 50 percent, 1 point will be
awarded.
(v) Diversity of microloan portfolio. Each MDO shall compare the
diversity of its microloan portfolio to the demographic makeup of its
service area (as determined by the U.S. Census found in the latest
decennial census) based on the number of microloans made to
microentrepreneurs during the three years preceding applying for a loan
under this program. Demographic groups shall include gender, race,
ethnicity, disability, and socio-economic status. Points will be
awarded on the basis of how close the MDO's microloan portfolio matches
the demographic makeup of its service area. A maximum of 7 points will
be awarded.
(A) If at least one loan is made to each demographic group and if
the percentage of loans made to each demographic group is each within 5
or fewer percentage points of the demographic makeup, 7 points will be
awarded.
(B) If at least one loan is made to each demographic group and if
the percentage of loans made to each demographic group is each within
10 or fewer percentage points of the demographic makeup, 4 points will
be awarded.
(C) If at least one loan is made to each demographic group and if
the percentage of loans made to one or more of the demographic groups
is greater than 10 percentage points of the demographic makeup OR if no
loans are made to one of the demographic groups and if the percentage
of loans made to each of the other demographic groups is each within 10
or fewer percentage points of the demographic makeup, 2 points will be
awarded..
(D) If no loans have been made to two or more demographic groups,
no points will be awarded.
(vi) Percentage of the total portfolio of microloans made to
microentrepreneurs in areas of outmigration for the previous three FYs.
If the percentage of the total portfolio of microloans made to
microentrepreneurs in areas of outmigration is:
(A) 75 percent or more, 4 points will be awarded;
(B) At least 50 percent but less than 75 percent, 2 points will be
awarded;
(C) At least 25 percent but less than 50 percent, 1 point will be
awarded.
(2) Portfolio management. Each applicant's ability to manage its
portfolio will be determined based on
[[Page 51728]]
the data provided in response to paragraphs (b)(2)(i) and (ii) of this
section and scored accordingly. Total available points will be 8.
(i) Enter the total number of your microloans paying on time for
the three previous FYs. If the total number of microloans paying on
time at the end of each year over the prior three FYs is:
(A) 95 percent or more, 4 points will be awarded;
(B) At least 85 percent but less than 95 percent, 2 points will be
awarded;
(C) Less than 85 percent, 0 points will be awarded.
(ii) Enter the total number of microloans 30 to 90 days in arrears
or that have been written off at year end for the three previous FYs.
If the total number of these microloans is:
(A) 5 percent or less of the total portfolio, 4 points will be
awarded;
(B) More than 5 percent, 0 points will be awarded.
(3) History of provision of technical assistance to
microentrepreneurs. Each applicant's history of provision of technical
assistance to microentrepreneurs and/or microborrowers, and their
ability to reach diverse communities and microborrowers, will be scored
based on the data specified in paragraphs (b)(3)(i) through (vi) of
this section. The maximum number of points available will be 15.
(i) Provide the total number of rural microentrepreneurs that
received both microloans and TA services for each of the previous three
FYs.
(ii) Provide the percentage of the total number of rural
microentrepreneurs that received both microloans and TA services for
each of the previous three FYs (calculate this as the total number of
rural microloans made divided by the total number of loans made during
the past three FYs). If provision of both microloans and technical
assistance to rural microentrepreneurs is demonstrated at a rate of:
(A) 75 percent or more, 4 points will be awarded;
(B) At least 50 percent but less than 75 percent, 2 points will be
awarded;
(C) At least 25 percent but less than 50 percent, 1 point will be
awarded.
(iii) Provide the percentage of the total number of rural minority,
socially-disadvantaged, or disabled microentreprenuers that received
both microloans and TA services for each of the previous 3 FYs. If the
demonstrated provision of microloans and technical assistance to these
rural microentrepreneurs is at a rate of:
(A) 75 percent or more, 7 points will be awarded;
(B) At least 50 percent but less than 75 percent, 4 points will be
awarded;
(C) At least 25 percent but less than 50 percent, 1 point will be
awarded.
(iv) Enter the percentage of the total number of microentrepreneurs
that received both microloans and TA services, for each of the previous
three FYs, who were located in areas of outmigration. Demonstration of
provision of microloans and technical assistance to microentrepreneurs
located in areas of outmigration at a rate of:
(A) 75 percent or more, 4 points will be awarded;
(B) At least 50 percent but less than 75, 2 points will be awarded;
(C) At least 25 percent but less than 50 percent, 1 point will be
awarded.
(4) Ability to provide technical assistance to microentrepreneurs.
In addition to providing a statistical history of their provision of
technical assistance to microentrepreneurs and microborrowers,
applicants must provide a narrative of not more than five pages
describing the teaching and training method(s) used by the applicant
organization and discussing the outcomes of their endeavors. Technical
assistance is defined in Sec. 4280.302. The narrative will be scored
as specified in paragraphs (b)(4)(i) through (iv) of this section and
the maximum number of points available will be 5 and:
(i) Applicants that have used more than one method of training and
technical assistance (such as classroom training, peer-to-peer
discussion groups, individual assistance, distance learning) will be
awarded 2 points.
(ii) Applicants that provide success stories to demonstrate the
effects of technical assistance on their clients will be awarded 1
point.
(iii) Applicants that provide evidence that they require
evaluations by the clients of their training programs and indicate that
the level of evaluation scores is ``good'' or higher will be awarded 1
point.
(iv) Applicants that present their narrative information clearly
and at a level expected by trainers and teachers will be awarded 1
point.
(5) Proposed administrative expenses to be spent from TA grant
funds. The maximum total number of points under this criterion is 4. If
the percentage of grant funds to be used for administrative purposes
is:
(i) Less than 5 percent of the TA grant funding, 4 points will be
awarded;
(ii) Between 5 percent and 8 percent, but not including 8 percent,
2 points will be awarded; and
(iii) Between 8 percent up to and including 10 percent, 0 points
will be awarded.
(c) Application requirements for microlenders with less than 3
years experience seeking loans only. In addition to the information
required under paragraph (a) of this section, an applicant with less
than 3 years experience as an MDO seeking a loan must submit the
information specified in paragraphs (c)(1) through (7) of this section.
The total number of points available under this paragraph, in addition
to the up to 45 points available in paragraph (a) of this section, is
55, for a total of 100.
(1) The applicant must provide a narrative work plan that clearly
indicates its intention for the use of funding. Provide goals and
milestones for planned activities. In relation to the information
requested in paragraph (a) of this section, the applicant must describe
how it will incorporate its mission statement, utilize its employees,
and maximize its human and capital assets to meet the goals of this
program. The applicant must provide its strategic plan and
organizational development goals and clearly indicate its lending goals
for the five years after the date of application. The narrative work
plan should be not more than 7 pages in length. Up to 13 points will be
awarded.
(2) The applicant will provide the date that it opened its doors
for business as an MDO or other provider of business education and/or
facilitator of capital. ``In business'' means licensed to do business,
in good standing with the Secretary of State in which it is registered
to do business, and having regular paid staff to conduct business on a
daily basis. If you have been in business for:
(i) More than 2 years but less than 3 years, 4 points will be
awarded;
(ii) At least 1 year, but not more than 2 years, 2 points will be
awarded;
(iii) At least 6 months, but not more than 1 year, 1 point will be
awarded;
(iv) Less than 6 months, or more than 3 full years, 0 points will
be awarded.
(3) The applicant must describe in detail any microenterprise
development organization training received by it as a whole, or its
employees as individuals, to date. The training received will be rated
on its topical variety, the quality of the description, and its
relative value to the narrative requested above, and to the
organization's strategic plan. Do not submit training brochures or
conference announcements. Up to 9 points will be awarded.
(4) The applicant must indicate its current number of employees,
those that concentrate on microentrepreneurial development, and the
current average caseload for each.
[[Page 51729]]
Indicate how the caseload ratio does or does not optimize the
ability to perform the services described in the work plan and how
Agency funding will be used to assist with program delivery. Up to 4
points will be awarded.
(5) The applicant must indicate any training organizations with
which it has a working relationship. Provide contact information which
will be used as references regarding the applicant's capacity to
perform the work plan provided. If the recommendations received from
references are:
(i) Generally excellent, 9 points will be awarded;
(ii) Generally above average, 6 points will be awarded;
(iii) Generally average, 3 points will be awarded;
(iv) Generally less than average, 0 points will be awarded.
(6) Describe any plans for continuing training relationship(s),
including ongoing or future training plans and goals, and the timeline
for same. Up to 4 points will be awarded.
(7) The applicant will describe its internal benchmarking system
for determining client success, reporting on client success, and
following client success for up to 5 years after completion of a
training relationship. Up to 9 points will be awarded.
(8) The application will identify their proposed administrative
expenses to be spent from TA grant funds. The maximum total number of
points under this criterion is 4. If the percentage of grant funds to
be used for administrative purposes is:
(i) Less than 5 percent of the TA grant funding, 4 points will be
awarded;
(ii) Between 5 percent and 8 percent, but not including 8 percent,
2 points will be awarded; and
(iii) Between 8 percent up to and including 10 percent, 0 points
will be awarded.
(d) Application requirements for microlenders seeking enhancement
grants only. Enhancement grants may be provided to microlenders seeking
assistance with specific or general operational issues based on the
strength of the application and the availability of funds. An applicant
seeking an enhancement grant must submit the information specified in
paragraphs (d)(1) through (8) of this section. The total number of
points available is 100.
(1) A fully completed Standard Form (SF)424 with attachments as
appropriate. If the form and attachments are satisfactorily completed,
5 points will be awarded.
(2) A discussion of the internal self-evaluation plan that led the
microlender to determine that external assistance would be helpful. Up
to 15 points will be awarded.
(3) A statement of the internal issue(s) to be overcome, why grant
funding is necessary, and the ultimate goal of the enhancement project.
Up to 15 points will be awarded.
(4) A project description statement of how the grant will be used
to overcome the issue. Such statement must include the names of the
potential trainers or service providers that will be used by the
microlender for the described project. Up to 15 points will be awarded.
(5) A clear benchmarking plan delineating progress expectations, an
anticipated timeline, and an anticipated completion date. Up to 15
points will be awarded.
(6) A discussion of how the trainer/service provider will be or has
been selected. Up to 15 points will be awarded.
(7) A discussion of which employees will be directly involved in
the project and how they fit into the microlender organization. Up to
10 points will be awarded.
(8) A letter, if available from the potential trainer/service
provider describing their role in helping the microlender reach its
enhancement goals. Up to 10 points will be awarded based on the
description. If no letter is submitted, 0 points will be awarded.
(e) Application requirements for microlenders with more than 5
years experience as an MDO under this program. (1) Generally,
microlenders develop success patterns over time which will be evidenced
in the submitted quarterly reports. To take advantage of these
patterns, to fully utilize the data available, to help ensure
efficiency, and to ensure that any paperwork burden for the microlender
is kept to a minimum, microlender applicants with more than 5 years of
experience as an MDO under this program may choose to submit a
shortened loan/grant application. For these microlenders to apply for
subsequent funding, they will be required to submit:
(i) A letter of request for funding stating the amount needed,
(ii) An indication of the loan and grant amounts being requested
accompanied by a completed SF 424 and any pertinent attachments,
(iii) An indication of the number of businesses to which loans were
made that have been made that remained in business for two years or
more after loan repayment, and
(iv) A recent resolution of the applicant's Board of Directors
approving the application for debt.
(2) The Agency, using this request, and data available in the
reports submitted under previous fundings, will review the overall
program performance of the applicant to determine its eligibility for
subsequent funding. Benchmarks will include:
(i) A default rate of 5 percent or less over the previous 5 years,
(ii) A pattern of delinquencies of 10 percent or less,
(iii) A pattern of successful use of TA dollars,
(iv) A pattern of long term success of program microborrowers (two
years or more) after loan repayment,
(v) A pattern of appropriate reporting, and
(vi) Other such issues as deemed appropriate.
(3) Abridged applications will be rated on a pass or fail basis.
Passing scores will be assigned a score of 90 percent and will be
ranked accordingly in the quarterly competitions.
Sec. 4280.317 Selection of applications for funding.
All applications received will be scored using the scoring criteria
specified in Sec. 4280.316. Applications from microlenders with 3 or
more year experience and applications from microlenders will less than
3 years experience will be ranked together. Enhancement grant
applications will be ranked separately from the microlender
applications. Subject to the availability of funds, the highest scoring
applications will be funded in descending order.
(a) Availability of funds. If an application is received, scored,
and ranked, but insufficient funds remain to fully fund it, the Agency
may elect to fund an application requesting a smaller amount that has a
lower score. Before this occurs, the Agency, as applicable, will
provide the higher scoring applicant the opportunity to reduce the
amount of its request to the amount of funds available. If the
applicant agrees to lower its request, it must certify that the
purposes of the project can be met, and the Agency must determine that
the project is financially feasible at the lower amount.
(b) Applicant notification. The National Office will be responsible
for notifying the appropriate State Offices of the outcome of the
competition. State Offices will be responsible for notification of
applicants regarding selection or non-selection, provision of appeal
rights, closing the loans and grants to awardees, and notifying the
National Office for obligation purposes.
(c) Regarding successful applications. The National Office will
transfer funds
[[Page 51730]]
to the appropriate State office for obligation of successful awards.
Awardees unable to complete closing for obligation within the stated
timeframe will forfeit their funding. Such funding will revert back to
the Agency for later use.
(d) Regarding unsuccessful applications. If your application is
unsuccessful, the National Office will provide a copy of the final
score sheet to the appropriate State Office for inclusion in the
notification of non-selection. The National Office may use the score
sheet to provide a debriefing to any unsuccessful applicant.
(e) Regarding the timing and submission of applications. (1) All
applications must be submitted as a complete application, in one
package.
(2) Applications will be accepted on a quarterly basis using
Federal Fiscal Quarters. Deadlines and specific instructions will be
published annually.
(3) Applications received will be reviewed, scored, and ranked
quarterly. The Agency will retain unsuccessful applications for
consideration in subsequent reviews, through a total of four quarterly
reviews.
Sec. Sec. 4280.318-319 [Reserved]
Sec. 4280.320 Grant administration.
(a) Oversight. Any organization receiving a grant under this
program is subject to oversight. Quarterly reporting as described in
Sec. 4 280.312(a)(5) and in accordance with OMB circular A-102 and A-
110 will be required. That is, on a quarterly basis, each grantee will
submit SF 269 and/or 272 (or successor forms) as appropriate and other
information as required in Sec. 4280.312(a)(5). Accompanying the
Standard Forms will be a narrative report discussing milestones and
benchmarks; whether or not they were met; if not, why not; successes,
and concerns. Site visits and inspection of records will occur at the
discretion of the Agency.
(b) Payments. The Agency will make grant payments not more often
than on a quarterly basis. The first payment may be made in advance and
will equal no more than one fourth of the grant award. Payment requests
must be submitted on an SF270 and will only be paid if reports are up
to date and approved.
Sec. 4280.321 Loan and grant servicing.
In addition to the ongoing servicing in regard to oversight of the
microlender:
(a) Grants. Grants will be serviced in accordance with:
(1) Department of Agriculture regulations including, but not
limited to 7 CFR, Part 1951, Subparts E and O,
(2) Department of Agriculture regulations including but not limited
to 7 CFR Parts 3015, 3016, 3017, 3018, 3019, and 3052; and
(3) Office of Management and Budget regulations including, but not
limited to, 2 CFR 215, 220, 230, and Circulars A-110 and A-133.
(b) Loans. Revolving loan funds will be serviced in accordance with
the following:
(1) Department of Agriculture regulations 7 CFR Part 1951, Subparts
E, R, and O, and
(2) Other Department of Agriculture regulations as may be
applicable,
(3) Office of Management and Budget Circular A-129.
Sec. 4280.322 Loans from the microlenders to the microentrepreneurs
and microenterprises.
The primary purpose of making a loan to a microlender is to enable
that microlender to make microloans, as defined, to end user
microentrepreneurs and microenterprises. It is the responsibility of
each microborrower to repay the microlender in accordance with the
terms and conditions agreed to with the microlender. It is the
responsibility of each microlender to make microloans in such a fashion
that the terms and conditions of the microloan will support success for
microborrowers while enabling the microlenderto repay the Federal
Government.
(a) Maximum microloan amount. The maximum amount of a microloan
made under this program will be $50,000.
(b) Microloan terms and conditions. The terms and conditions for
microloans made by microlenders will be negotiated by the microborrower
and the microlender, with the following limitations:
(1) The maximum margin a microlender may impose on a microborrowers
is 7.5 percent over the microlender's cost of funds;
(2) The cost of funds to the microborrower will be established at
the closing of the loan from the Agency to the microlender; and
(3) No microloan may have a term of more than 10 years.
(c) Microloan insurance requirements. The requirement of hazard,
key personnel, and other insurance will be at the discretion of the
microlender except that no insurance requirement should be of a nature
to make the payment, combined with the microloan payment, or the
coverage excessive.
(d) Credit elsewhere test. Microborrowers will be subject to
``credit elsewhere'' test so that the microlender will make loans only
to those borrowers that cannot obtain business funding of $50,000 or
less at affordable rates and on acceptable terms. Each microborrower
file must contain evidence that the microborrower has sought credit
elsewhere and has been turned down (e.g., a turn down letter) or that
the rates and terms available within the community at the time were
outside the range of the microborrower's ability to be a successful
borrower from another source of funding (e.g., a comparison of rates
for other funding sources compared to the microlender rates offered to
the microborrower). It is not the intent to require denial letters from
other lenders. It is the intent to ensure that program funds are loaned
in a way to ensure that funds go to those businesses traditionally
lacking in access to capital.
(e) Fair credit requirements. To ensure fairness, microlenders must
publicize their rates and terms on a regular basis. Microlenders are
also subject to Fair Credit lending laws as discussed in Sec.
4280.305.
(f) Eligible microloan purposes. Microlenders may make microloans
under this program for qualified business activities including:
(1) Working capital,
(2) The purchase of furniture, fixtures, supplies, inventory or
equipment, and
(3) The purchase or lease of real estate that is already improved
and will be used for the location of the subject business only,
provided no demolition or construction will be accomplished with
program funding. Interior decorating is not considered to be demolition
or construction.
Sec. 4280.323 Ineligible microloan purposes.
Agency loan funds may not be used for the payment of administrative
costs or expenses and microlenders may not make microloans under this
program for any of purposes identified as ineligible in paragraphs (a)
through (g) of this section.
(a) Construction costs.
(b) Any amount in excess of that needed by the microborrower to
accomplish the immediate business goal.
(c) Assistance that will cause a conflict of interest or the
appearance of a conflict of interest including but not limited to:
(1) Financial assistance to principals, directors, officers, or
employees of the microlender, or their families (including parents,
children, sisters, brothers, aunts, uncles, first cousins, or
grandparents),
(2) Financial assistance to any entity the result of which would
appear to
[[Page 51731]]
benefit the microlender or its principals, directors, or employees, in
any way other than the normal repayment of debt.
(d) Distribution or payment to the microentrepreneur or his/her
family members when such will use any portion of the microloan for
other than the purpose for which it was intended.
(e) Charitable institutions not gaining revenue from sales or fees
to support the operation and repay the microloan.
(f) Fraternal organizations.
(g) Any microloan to an applicant that has an RMAP funded microloan
application pending with another microlender or that has an RMAP-funded
microloan outstanding with another microlender that would cause the
applicant to owe more than $50,000 under this program.
(h) Assistance to USDA Rural Development (Agency) employees, or
their families.
(i) Assistance to military personnel, except that a microloan may
be made by a microlender to any otherwise qualified microenterprise
owned in whole or in part by one or more members of the National Guard
or the reserve services who are not on active duty with longer than 6
months until their anticipated termination of active duty status, or
members of the regular service, who are within 6 months of their
anticipated separation date and who are, or plan to be, small business
owners. This provides microlenders the opportunity to make microloans
to:
(1) Any microenterprise owned in whole or in part by one or more
individuals, regardless of rank; and
(i) Who are enlisted in the National Guard or reserve services, or
are non-Agency employees or their families; and
(ii) That have recently been deactivated from regular service, but
are considered to be in reserve in the event of national need or
emergency.
(2) Military personnel who plan to leave active military service
within 6 months and who, upon leaving, plan to be self-employed and are
in need of business continuation, expansion, or startup capital or of
technical assistance.
(j) Assistance to employees of Native American tribal governments
when the employer is the tribal government MDO from which the
microentrepreneur is seeking funding except that, a microloan may be
made to such employee without danger of a conflict of interest when the
tribal government employee:
(1) Is a part-time employee with reasonable expectation of capacity
to operate a successful microenterprise while working part-time, and
(2) Does not have access to another lending MDO, and
(3) Is the person who will operate the funded business, and
(4) Will be required by the tribal government MDO to participate in
technical assistance and training to help ensure the success of the
business, and
(5) Due to an impending change of tribal government leaders, can
expect to leave his or her job within six months of applying for the
microloan.
(k) Any illegal activity.
(l) Any project that is in violation of either a Federal, State, or
local environmental protection law, regulation, or enforceable land use
restriction unless the microloan will result in curing or removing the
violation.
(m) Lending and investment institutions and insurance companies.
(n) Golf courses, race tracks, gambling facilities or swimming
pools.
(o) Any purpose deemed to be of a prurient sexual nature as
determined by local standards,
(p) Any purpose, not already stated, that would contribute to a
conflict of interest or the appearance of a conflict of interest.
(q) Any lobbying activities as described in 7 CFR 3018.
Sec. Sec. 4280.324-4280.400 [Reserved]
Dated: September 30, 2009.
Judith A. Canales,
Administrator, Rural Business--Cooperative Service.
[FR Doc. E9-24025 Filed 10-6-09; 8:45 am]
BILLING CODE 3410-XY-P