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Federal Register / Vol. 86, No. 92 / Friday, May 14, 2021 / Rules and Regulations
Comment: The limited 20-year loan term should include a restructure provision that would permit extending beyond the initial 20-year limit. The deferral period should be 3 years and annual payments rather than monthly be utilized.
Agency response: The Agency retains its monthly loan payment requirement as a change to annual payments would reduce the amount of program funding available. The 20-year loan limitation and the 2-year deferral period are statutory requirements and cannot be changed.
Comment: USDA should use its current Intermediary Relending Program and Rural Business Enterprise Grant regulations which have been very successful to manage technical assistance grants and the Intermediary relending of monies through a revolving fund for many years now.
Agencys response: The RMAP
program does utilize the technical assistance models utilized by other programs and requires MDO reporting to ensure that the program requirements are being met.
Comment: USDA is placing too much funding in the loan portion of the RMAP
and insufficient funding for the grant portion of the program to ensure its success.
Agencys response: The Agency did not agree with this comment. The Agency takes into account, on a year to year basis, the needs of the stakeholders of the RMAP program based on funds available for that fiscal year.
Comment: USDA should relinquish its first lien position on all funds in the Rural Microentrepreneur Revolving Fund RMRF except those derived from the Rural Microenterprise loan itself.
Agency response: The Agency did not agree with this comment. The Agency must adhere to prudent lending practices which would require a first lien position on all assets in the revolving loan fund. An MDO is prohibited from co-mingling other entity funds with funds on deposit in its RMAP revolving loan account 4280.311e1.
Comment: It was Congress intent to permit the 5 percent LLRF funding requirement to be met using loan funds.
Agency response: Agency disagreed.
The LLRF is intended to protect the Microenterprise Development Organizations MDO fund by maintaining the value of the fund as required by the servicing regulation, 7
CFR. Part 1951 Subpart R. If loan funds were used to capitalize the LLRF, and consequently were distributed to cover losses either by loan payments to the Agency or to cover liquidation costs
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of the microloan, the longevity of the fund might be in question. This stress would be enhanced if multiple loans required liquidation before the interest earned could rebuild the LLRF.
Comment: The 2 percent interest rate was double the 1 percent minimum rate set by Congress.
Agency response: The Agency disagreed. The current cost to maintain the program requires an interest rate of 2 percent. Microlenders in the Program for more than 5 years have the opportunity to borrow Agency funds at 1 percent when making an application for additional loan funds. Section 4280.311e4 It is the Agencys position that the interest rate cost of funds to the MDO should be incorporated into the structure of their microloans.
Comment: The loan making process is too restrictive for a microloan program.
Agency response: The loan application process is used to ensure that program funds are awarded to entities with experience in managing revolving loan funds and technical assistance programs.
Comment: The $2.5 million MDO debt limitation was arbitrary, not in the law, and may unduly restrict an MDOs ability to meet demand.
Agency response: The Agency disagrees that the limit restricts an MDOs ability to make microloans. The $50,000 limitation to one microborrower would allow an MDO to have 50 or more loans outstanding at any time.
MDOs with significant loan activity are also eligible to apply for IRP program awards for their revolving loan funds.
Comment: All the mandatory grants should be funded at the authorized 25
percent of the loan balances.
Agency response: The 2018 Farm Bill amended Section 379E of the Con Act to require that grant amounts to MDOs be in an amount equal to not less than 20 percent and not more than 25 percent of the total outstanding balance of microloans made by MDOs.
Comment: The current methodology of calculating the annual MDO grant based on the amount of outstanding loan balances is inadequate.
Agency response: The Agency disagrees with this comment as technical assistance funds are to be used for existing and potential microborrowers and offers no alternative methodology to determining the amount of technical assistance provided.
Comment: The Agency should accept collaborative applications stating that MDOs often partner to leverage areas of expertise, expand service areas, and lower costs.

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Agency response: The Agency understands that entities will use collaborative resources to administer their programs and does allow for such in the applicants scope of work and program management, including microborrower application reviews.
Comment: There are many reasons for communities to be considered underserved including but not limited to loss of major employer, natural disasters, chronic low income, and they suggested that the TA training grants be targeted to underserved communities.
Agency response: The Agency agrees that there are many reasons for a community to be considered underserved and elected not to define or limit the requirements for an underserved community as this is best applied by local knowledge.
Comment: The definition of microentrepreneur needs to be clarified to include the number of employees, ability to obtain conventional financing, and the maximum dollars needed for the project.
Agency response: An eligible microentrepreneur must meet the definition of a microenterprise, which is defined as an entity with 10 or fewer employees. The definition of microenterprise provides that business types may also include agricultural producers provided they meet the stipulations in this definition. The microentrepreneur is subject to a credit elsewhere test in Section 4280.322d.
The maximum loan amount for a project is the lesser of $50,000 or 75 percent of the project cost as stated in the regulation.
Comment: Several comments on the cost structure of projects. One commenter suggested utilizing the IRP
regulation; two groups suggested that a microborrowers equity in its business be allowed to be considered for the 25
percent non-federal portion of the project. And, finally two groups of commenters point out that the 75
percent federal fund limitations do not apply to a micro borrowers project.
Agency Response: The Agency did not agree. The 25 percent non-federal funds requirement is to meet project equity and also for program leverage to protect the MDO from credit losses. This generally cannot be met by allowing only balance sheet equity.
Comment: The value of matching funds serves no purpose.
Agency response: The Agency did not agree as program leverage is used as a credit enhancement to the microborrowers project costs and protects the MDO from increased credit losses.

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