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Federal Register / Vol. 86, No. 171 / Wednesday, September 8, 2021 / Rules and Regulations
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complete the affiliation analysis and to expand the number of entities that will be eligible for COVID EIDL loans, SBA
will align the definition of affiliation for COVID EIDL with the definition of affiliated business set forth in section 5003 of the ARPA for the Restaurant Revitalization Fund RRF. Like the RRF
program, COVID EIDL is a program where an applicant applies directly to SBA, without an intermediary lender to explain program rules and ensure compliance. In SBAs regular Business Loan Programs, the applicant relies on the lender intermediary to correctly interpret and apply the affiliation rules at 13 CFR 121.301, which require an applicant to consider affiliation based on ownership, stock options, convertible securities, agreements to merge, management, identity of interest, and franchise and license agreements.
Congress mandated more simple affiliation rules in ARPA for RRF. Given the lack of intermediaries in the COVID
EIDL program, SBA has determined that it is appropriate to use the same affiliation rules that Congress mandated for RRF.
Therefore, SBA is revising 13 CFR
121.301, What size standards and affiliation principles are applicable to financial assistance programs?, to add a new paragraph g to state that for COVID EIDL loans, an affiliated business or affiliate is a business in which an eligible entity has an equity interest or right to profit distributions of not less than 50 percent, or in which an eligible entity has the contractual authority to control the direction of the business, provided that such affiliation shall be determined as of any arrangements or agreements in existence as of January 31, 2020. The new paragraph g also will include a cross reference to the exceptions to affiliation set forth in 13 CFR 121.103b, which continue to apply to COVID EIDL loans.
In addition to simplifying the program requirements for COVID EIDL loans, this change will streamline the application process for SBA and facilitate the review of such applications prior to the deadline of December 31, 2021. This streamlining will expand the flow of funds to businesses and nonprofit organizations that still need relief from the COVID19 pandemic.
2. Second Decline of Loan Application The regulation at 13 CFR 123.13, What happens if my loan application is denied?, requires that applicants appeal a second decline of a loan application directly to the Director, Disaster Assistance Processing and Disbursement Center DAPDC. To enable timely consideration of appeals,
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SBA is changing the appeals process to allow the Director, DAPDC, or the Directors designees, to make the decision on appeals for all Disaster Loan Program loans. In addition, SBA is revising the regulation to clarify that the Administrator, solely within the Administrators discretion, has the authority to review the matter and make the final decision.
Therefore, SBA is revising the regulation at 13 CFR 123.13, paragraphs e and f, to state that, if SBA declines an application a second time, the Director, DAPDC, or the Directors designees, will make the decision.
Further, SBA is revising the regulation to state that the Administrator, solely within the Administrators discretion, may choose to review the matter and make the final decision. Such discretionary authority of the Administrator does not create additional rights of appeal on the part of an applicant not otherwise specified in SBA regulations. The changes to this regulation apply to all SBA Disaster Loan Programs.
3. Eligible Entities for COVID EIDL
Loans The Administrator has determined that, due to the extended duration and scope of the COVID19 pandemic, as well as due to mandatory Federal, state, and local shut down and social distancing orders, businesses in certain sectors of the North American Industry Classification System NAICS continue to suffer from significant economic hardship. Specifically, the NAICS
sectors and subsectors identified in Section 1112 of the CARES Act, as amended by section 325 of the Economic Aid Act, continue to need substantial help. These include Sector 61, Educational Services; Sector 71, Arts, Entertainment and Recreation;
Sector 72, Accommodation and Food Services; Subsector 213, Support Activities for Mining; Subsector 315, Apparel Manufacturing; Subsector 448, Clothing and Clothing Accessories Stores; Subsector 451, Sporting Good, Hobby, Book, and Music Stores;
Subsector 481, Air Transportation;
Subsector 485, Transit and Ground Passenger Transportation; Subsector 487, Scenic and Sightseeing Transportation; Subsector 511, Publishing Industries except internet;
Subsector 512, Motion Picture and Sound Recording Industries; Subsector 515, Broadcasting except internet;
Subsector 532, Rental and Leasing Services; and Subsector 812, Personal and Laundry Services.
Additionally, certain industries were identified in Section 5003a4 of the
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ARPA for additional assistance but may not have received funding due to program deadlines or the exhaustion of funds. As stated previously, the Restaurant Revitalization Fund RRF
was unable to provide help to all eligible applicants due to a lack of funding, and many small businesses in that industry continue to suffer economic hardships caused by the pandemic. Most businesses eligible for RRF are in NAICS sector 72, Accommodation and Food Services;
however, beverage manufacturers in NAICS Industry Group 3121, such as breweries, wineries, and distilleries were also eligible for RRF funding.
Based on publicly available industry research and input from industry trade groups, SBA believes these beverage manufacturers continue to require additional help.
Under Section 1110 of the CARES
Act, COVID EIDL loans are available to small business concerns, private nonprofit organizations, and small agricultural cooperatives, as defined in SBAs size standards in 13 CFR 121.201, or businesses that have 500 or fewer employees. To provide assistance to a greater number of businesses in the hard-hit industries described above, SBA is defining small business concern for purposes of the COVID
EIDL program to extend eligibility to businesses in those industries that have 500 or fewer employees per physical location. SBA is revising 13 CFR
123.300, Is my business eligible to apply for an economic injury disaster loan?, by adding a new paragraph e to state that certain hard-hit businesses identified by specific NAICS
classifications will be able to qualify as eligible small business concerns for COVID EIDL loans based on the number of employees per physical location.
Consistent with the standard in RRF, businesses using the per-physical location eligibility standard must, together with affiliates, have no more than 20 locations.
This rule merely provides an added basis of eligibility for COVID EIDL
assistance. It does not make any entity that is eligible for COVID EIDL
assistance on another basis ineligible for such assistance. For example, a business that has more than 20 business locations, but has fewer than 500
employees in the aggregate of all of its business locations is currently eligible for COVID EIDL loans because it meets the 500-employee size standard.
Although this rule allows a business concern to be eligible for COVID EIDL
assistance if it employs not more than 500 employees per physical location as long as it together with its affiliates has
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