One of the things the Small Business Administration may be best known for is its small business loan programs, such as the section 7(a) and 504 Loan Programs. These programs have been a staple of the small business landscape for quite some time. Unsurprisingly though, there are multiple rules associated with them. Among these myriad rules and requirements, is the determination as to whether a loan applicant is a small business. One of the things that can affect whether a business is small is affiliation with other businesses push that company over the size limit. In a new proposed rule, it appears the SBA plans to dramatically scale back the ways that a business may be seen as affiliated, by practically getting rid of affiliation through “control”–only for for loan purposes, not procurement purposes. As this presents quite a shift in operations, all of us here at SmallGovCon wanted to make sure we have provided you, our readers, a breakdown of these proposed changes to a cornerstone of the SBA…
Before getting into the meat of the loan program rules related to affiliation, it is important to note that any changes to affiliation regulations for SBA loans DO NOT change affiliation rules related to procurements. For information about that form of affiliation, check out our two part series on affiliation here, and here. Now, let’s get back to our chat about the SBA’s new proposed changes to its loan programs’ affiliation rules.
SBA’s loan programs look at affiliation based on 13 C.F.R. § 121.301, to determine if a business is “small” for 7(a) and 504 loans (as well as other loans such as PPP). These rules historically would determine if there were shared ownership, or “control” between businesses (such as shared management). If there was shared ownership or control, meeting the standards of 13 C.F.R. § 121.301, the applicant business would be combined in SBA’s eyes with the affiliate business as one business, and SBA’s determination of whether the business was “small” would be based on the combined receipts or employees of the businesses. Well, with the newly published proposed rule, the SBA is stating that they plan to basically do away with “control” between two businesses as an affiliation factor, seemingly focusing on ownership as the determining factor… Read the full article here.
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