13 CFR part 123 (Disaster Loan Program; annual edition 2025)
Summary
Part 123, Disaster Loan Program, of 13 CFR Ch. I (1–1–25 Edition), the Small Business Administration rules, preceded by Appendix A to Part 121, a Paycheck Protection Program sample Addendum A for an applicant claiming a religious exemption from SBA affiliation rules. Under § 123.1 the part covers the disaster loan programs authorized under the Small Business Act, 15 U.S.C. 636(b), (d), and (f), and 15 U.S.C. 657n, and SBA reserves the right to change the rules without advance notice by publishing interim emergency regulations. The contents list subparts including Home Disaster Loans and Military Reservist Economic Injury Disaster Loans, and sections through 123.22, Severability.
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Small Business Administration Pt. 123
offerors of any waivers being applied to 123.10 What happens if I cannot use my in-
a specific acquisition, whether it is a surance proceeds to make repairs?
class waiver or a contract specific 123.11 Does SBA require collateral for any
of its disaster loans?
waiver. This notification must be pro-
123.12 Are books and records required?
vided at the time a solicitation is 123.13 What happens if my loan application
issued. If the notification is provided is denied?
after a solicitation is issued, the con- 123.14 How does the Federal Debt Collection
tracting officer must provide potential Procedures Act of 1990 apply?
offerors a reasonable amount of addi- 123.15 What if I change my mind?
tional time to respond to the solicita- 123.16 How are loans administered and serv-
tion. iced?
123.17 Do other Federal requirements apply?
(b) If a contracting officer does not 123.18 Can I request an increase in the
provide notice, and additional reason- amount of a physical disaster loan?
able time for responses when required, 123.19 May I request an increase in the
then the waiver cannot be applied to amount of an economic injury loan?
the solicitation. This applies to both 123.20 How long do I have to request an in-
class waivers and individual waivers. crease in the amount of a physical dis-
aster loan or an economic injury loan?
[81 FR 34260, May 31, 2016] 123.21 What is a mitigation measure?
123.22 Severability.
APPENDIX A TO PART 121—PAYCHECK
PROTECTION PROGRAM SAMPLE AD- Subpart B—Home Disaster Loans
DENDUM A
123.100 Am I eligible to apply for a home
[Sample] disaster loan?
123.101 When am I not eligible for a home
ADDENDUM A disaster loan?
✓ The Applicant claims an exemption from 123.102 What circumstances would justify
all SBA affiliation rules applicable to Pay- my relocating?
check Protection Program loan eligibility 123.103 What happens if I am forced to move
because the Applicant has made a reason- from my home?
able, good faith determination that the Ap- 123.104 What interest rate will I pay on my
plicant qualifies for a religious exemption home disaster loan?
under 13 CFR 121.103(b)(10), which says that 123.105 How much can I borrow with a home
‘‘[t]he relationship of a faith-based organiza- disaster loan and what limits apply on
tion to another organization is not consid- use of funds and repayment terms?
ered an affiliation with the other organiza- 123.106 What is eligible refinancing?
tion . . . if the relationship is based on a re- 123.107 How much can I borrow for post-dis-
ligious teaching or belief or otherwise con- aster mitigation for my home?
stitutes a part of the exercise of religion.’’ 123.108 How do the SBA disaster loan pro-
gram and the FEMA grant programs
[85 FR 20821, Apr. 15, 2020] interact?
PART 123—DISASTER LOAN Subpart C—Physical Disaster Business
PROGRAM Loans
123.200 Am I eligible to apply for a physical
Subpart A—Overview disaster business loan?
123.201 When am I not eligible to apply for
Sec. a physical disaster business loan?
123.1 What do these rules cover? 123.202 How much can my business borrow
123.2 What are disaster loans and disaster with a physical disaster business loan?
declarations? 123.203 What interest rate will my business
123.3 How are disaster declarations made? pay on a physical disaster business loan
123.4 What is a disaster area and why is it and what are the repayment terms?
important? 123.204 How much can your business borrow
123.5 What kinds of loans are available? for post-disaster mitigation?
123.6 What does SBA look for when consid-
ering a disaster loan applicant? Subpart D—Economic Injury Disaster Loans
123.7 Are there restrictions on how dis-
aster loans can be used? 123.300 Is my business eligible to apply for
123.8 Does SBA charge any fees for obtain- an economic injury disaster loan?
ing a disaster loan? 123.301 When would my business not be eli-
123.9 What happens if I don’t use loan pro- gible to apply for an economic injury dis-
ceeds for the intended purpose? aster loan?
453
§ 123.1 13 CFR Ch. I (1–1–25 Edition)
123.302 What is the interest rate on an eco- AUTHORITY: 15 U.S.C. 632, 634(b)(6), 636(b),
nomic injury disaster loan? 636(d), 657n, and 9009.
123.303 How can my business spend my eco-
SOURCE: 61 FR 3304, Jan. 31, 1996, unless
nomic injury disaster loan?
otherwise noted.
123.304 Is there a limit on the maximum
loan amount to a single corporate group
for COVID EIDL Loans? Subpart A—Overview
Subpart E [Reserved] § 123.1 What do these rules cover?
This part covers the disaster loan
Subpart F—Military Reservist Economic
programs authorized under the Small
Injury Disaster Loans
Business Act, 15 U.S.C. 636(b), (d), and
123.500 Definitions. (f); and 15 U.S.C. 657n. Since SBA can-
123.501 Under what circumstances is your not predict the occurrence or mag-
business eligible to be considered for a nitude of disasters, it reserves the
Military Reservist Economic Injury Dis- right to change the rules in this part,
aster Loan? without advance notice, by publishing
123.502 Under what circumstances is your
business ineligible to be considered for a
interim emergency regulations in the
Military Reservist Economic Injury Dis- FEDERAL REGISTER.
aster Loan? [61 FR 3304, Jan. 31, 1996, as amended at 75
123.503 When can you apply for a Military FR 60597, Oct. 1, 2010]
Reservist EIDL?
123.504 How do you apply for a Military Re- § 123.2 What are disaster loans and
servist EIDL? disaster declarations?
123.505 What if you are both an essential
employee and the owner of the small SBA offers low interest, fixed rate
business and you started active service loans to disaster victims, enabling
before applying for a Military Reservist them to repair or replace property
EIDL? damaged or destroyed in declared dis-
123.506 How much can you borrow under the asters. It also offers such loans to af-
Military Reservist EIDL Program? fected small businesses to help them
123.507 Under what circumstances will SBA recover from economic injury caused
consider waiving the $2 million loan
limit?
by such disasters. SBA also offers in-
123.508 How can you use Military Reservist terim guaranteed disaster loans, in
EIDL funds? participation with financial institu-
123.509 What can’t you use Military Reserv- tions, to affected small businesses
ist EIDL funds for? (‘‘IDAP loans’’). Disaster declarations
123.510 What if you don’t use your Military are official notices recognizing that
Reservist EIDL funds as authorized? specific geographic areas have been
123.511 How will SBA disburse Military Re- damaged by floods and other acts of na-
servist EIDL funds?
ture, riots, civil disorders, or industrial
123.512 What is the interest rate on a Mili-
tary Reservist EIDL? accidents such as oil spills. These dis-
123.513 Does SBA require collateral on its asters are sudden events which cause
Military Reservist EIDL? severe physical damage, and do not in-
clude slower physical occurrences such
Subpart G [Reserved] as shoreline erosion or gradual land
settling. However, for purposes of eco-
Subpart H—Immediate Disaster Assistance nomic injury disaster loans only, they do
Program include droughts and below average
123.700 What is the Immediate Disaster As- water levels in the Great Lakes or on
sistance Program? any body of water in the United States
123.701 What is the application procedure that supports commerce by small busi-
for an IDAP loan? nesses. Sudden events that cause sub-
123.702 What are the eligibility require- stantial economic injury may be disas-
ments for an IDAP loan? ters even if they do not cause physical
123.703 What are the terms of an IDAP loan? damage to a victim’s property. Past ex-
123.704 Are there restrictions on how IDAP
amples include ocean conditions caus-
loan funds may be used?
123.705 Are there any fees associated with ing significant displacement (major
IDAP loans? ocean currents) or closure (toxic algae
123.706 What are the requirements for IDAP blooms) of customary fishing waters,
lenders? as well as contamination of food or
454
Small Business Administration § 123.3
other products for human consumption (iii) The Governor of the State in
from unforeseeable and unintended which the disaster occurred submits a
events beyond the control of the vic- written request to SBA for a physical
tims. disaster declaration by SBA (OMB Ap-
[61 FR 3304, Jan. 31, 1996, as amended at 71 proval No. 3245–0121). This request
FR 75409, Dec. 15, 2007; 75 FR 60597, Oct. 1, should be delivered to the Disaster As-
2010; 81 FR 67903, Oct. 3, 2016] sistance Field Operations Center serv-
ing the jurisdiction within 60 days of
EFFECTIVE DATE NOTE: Amendments to
§ 123.2 were published at 89 FR 91538, Nov. 20, the date of the disaster. The addresses,
2024, effective Jan. 21, 2025. phone numbers, and jurisdictions
served by the field operations centers
§ 123.3 How are disaster declarations are published in the FEDERAL REG-
made? ISTER.
(a) There are seven ways in which (4) SBA makes an economic injury
disaster declarations are issued which disaster declaration in response to a
make SBA disaster loans possible: determination of a natural disaster by
(1) The President declares a Major the Secretary of Agriculture.
Disaster and authorizes Federal Assist- (5) SBA makes an economic injury
ance, including individual assistance declaration in reliance on a state cer-
(Assistance to Individuals and House- tification that at least five small busi-
holds Program). ness concerns in a disaster area have
(2) If the President declares a Major suffered substantial economic injury as
Disaster limited to public assistance a result of the disaster and are in need
only, a private nonprofit facility which of financial assistance not otherwise
provides non-critical services under available on reasonable terms. The
guidelines of the Federal Emergency state certification must be signed by
Management Agency (FEMA) must the Governor, must specify the county
first apply to SBA for disaster loan as- or counties or other political subdivi-
sistance for such non-critical services sion in which the disaster occurred,
before it could seek grant assistance and must be delivered (with supporting
from FEMA. documentation) to the Disaster Assist-
(3) SBA makes a physical disaster ance Field Operations Center serving
declaration, based on the occurrence of the jurisdiction within 120 days of the
at least a minimum amount of physical disaster occurrence. When a Governor
damage to buildings, machinery, equip- certifies with respect to a drought or
ment, inventory, homes and other to below average water levels, the sup-
property. Such damage usually must
porting documentation must include
meet the following tests:
findings which show that conditions
(i) In any county or other smaller po-
during the incident period meet or ex-
litical subdivision of a State or U.S.
ceed the U.S. Drought Monitor (USDM)
possession, at least 25 homes or 25 busi-
standard of ‘‘severe’’ (Intensity level
nesses, or a combination of at least 25
homes, businesses, or other eligible in- D–2 to D–4). The USDM may be found
stitutions, each sustain uninsured at http://drought.unl.edu/dm/monitor.
losses of 40 percent or more of the esti- With respect to below average water
mated fair replacement value or pre- levels, the supplementary information
disaster fair market value of the dam- accompanying the certification must
aged property, whichever is lower; or include findings which establish long-
(ii) In any such political subdivision, term average water levels based on re-
at least three businesses each sustain corded historical data, show that cur-
uninsured losses of 40 percent or more rent water levels are below long-term
of the estimated fair replacement value average levels, and demonstrate that
or pre-disaster fair market value of the economic injury has occurred as a di-
damaged property, whichever is lower, rect result of the low water levels. Not
and, as a direct result of such physical later than 30 days after SBA receives a
damage, 25 percent or more of the work certification by a Governor, it shall re-
force in their community would be un- spond in writing with its decision and
employed for at least 90 days; and its reasons.
455
§ 123.4 13 CFR Ch. I (1–1–25 Edition)
(6) SBA makes a physical disaster § 123.4 What is a disaster area and
declaration in a rural area (rural dis- why is it important?
aster declaration) upon request from Each disaster declaration defines the
the Governor of the State or the Chief geographical areas affected by the dis-
Executive of the Indian tribal govern- aster. Only those victims located in the
ment in which the rural area is lo- declared disaster area are eligible to
cated. Rural area means any county or apply for SBA disaster loans. When the
other political subdivision of a State, President declares a major disaster,
the District of Columbia, or a territory the Federal Emergency Management
or possession of the United States that Agency defines the disaster area. In
is designated as a rural area by the Bu- major disasters, economic injury dis-
reau of the Census. The following con- aster loans and IDAP loans may be
ditions must be met: made for victims in contiguous coun-
(i) The President has declared a ties or other political subdivisions, pro-
Major Disaster for the rural area, but vided, however that with respect to
has not authorized individual assist- major disasters which authorize public
ance; and assistance only, SBA shall not make
economic injury disaster or IDAP loans
(ii) Any home, small business con-
in counties contiguous to the disaster
cern, private nonprofit organization, or
area. Except for rural disaster declara-
small agricultural cooperative in the tions (as defined in § 123.3), disaster
rural area has incurred significant declarations issued by SBA include
damage. Significant damage means un- contiguous counties for both physical,
insured losses of 40 percent or more of economic injury and, in some cases
the estimated fair replacement value IDAP assistance. Rural disaster dec-
or pre-disaster fair market value of the larations do not include assistance for
damaged property, whichever is lower. contiguous counties. Contiguous coun-
(7) SBA makes an economic injury ties or other political subdivisions are
disaster declaration in response to a those land areas which abut the land
determination of an emergency involv- area of the declared disaster area with-
ing Federal primary responsibility by out geographic separation other than
the President. by a minor body of water, not to exceed
(b) SBA publishes notice of any dis- one mile between the land areas of
aster declaration in the FEDERAL REG- such counties. When SBA issues an eco-
ISTER. The published notice will iden- nomic injury disaster declaration in re-
tify the kinds of assistance available, sponse to a determination of an emer-
the date and nature of the disaster, and gency involving Federal primary re-
the deadline and location for filing sponsibility by the President, the dis-
aster area shall include each State or
loan applications. Additionally, SBA
subdivision thereof (including coun-
will use the local media to inform po-
ties) included in the President’s emer-
tential loan applicants where to obtain
gency determination.
loan applications and otherwise to as-
sist victims in applying for disaster [88 FR 24109, Apr. 19, 2023]
loans. SBA will accept applications EFFECTIVE DATE NOTE: Amendments to
after the announced deadline only § 123.4 were published at 89 FR 91538, Nov. 20,
when SBA determines that the late fil- 2024, effective Jan. 21, 2025.
ing resulted from substantial causes
§ 123.5 What kinds of loans are avail-
beyond the control of the applicant. able?
[61 FR 3304, Jan. 31, 1996, as amended at 64 (a) Disaster loans authorized under Sec-
FR 13667, Mar. 22, 1999; 67 FR 64518, Oct. 21, tion 7(b). SBA offers four kinds of dis-
2002; 71 FR 63676, Oct. 31, 2006; 71 FR 75409, aster loans as authorized by Section
Dec. 15, 2006; 73 FR 54675, Sept. 23, 2008; 81 FR
7(b) of the Small Business Act: Phys-
67903, Oct. 3, 2016; 88 FR 24109, Apr. 19, 2023]
ical disaster home loans, physical dis-
EFFECTIVE DATE NOTE: Amendments to aster business loans, economic injury
§ 123.3 were published at 89 FR 91538, Nov. 20, disaster business loans, and Military
2024, effective Jan. 21, 2025. Reservist EIDL loans. SBA makes
these loans directly or in participation
456
Small Business Administration § 123.9
with a financial institution. If a dis- made under Section 7(b) in participa-
aster loan authorized under Section tion with a financial institution, SBA
7(b) is made in participation with a fi- will charge a guarantee fee to the fi-
nancial institution, SBA’s share in nancial institution, which then may re-
that loan may not exceed 90 percent. cover the guarantee fee from you. SBA
(b) IDAP loans. SBA also offers IDAP does not charge a guarantee fee for an
loans as authorized by Section 42 of the IDAP loan made under Section 42.
Small Business Act. SBA makes these [75 FR 60598, Oct. 1, 2010]
interim guaranteed disaster loans to
small businesses only in participation § 123.9 What happens if I don’t use
with a financial institution. SBA’s loan proceeds for the intended pur-
share in an IDAP loan is equal to 85 pose?
percent. (a) For disaster loans authorized
[75 FR 60597, Oct. 1, 2010] under Section 7(b), when SBA approves
each application, it issues a loan au-
§ 123.6 What does SBA look for when thorization which specifies the amount
considering a disaster loan appli- of the loan, repayment terms, any col-
cant? lateral requirements, and the per-
There must be reasonable assurance mitted use of loan proceeds. If you
that you can repay your loan based on wrongfully misapply the proceeds of a
SBA’s analysis of your credit or your disaster loan authorized under Section
personal or business cash flow, and you 7(b), you will be liable to SBA for one
must also have satisfactory character. and one-half times the proceeds dis-
SBA will not make a loan to you if re- bursed to you as of the date SBA learns
payment depends upon the sale of col- of your wrongful misapplication.
lateral through foreclosure or any Wrongful misapplication means the
other disposition of assets owned by willful use of any loan proceeds with-
you. SBA is prohibited by statute from out SBA approval contrary to the loan
making a loan to you if you are en- authorization. If you fail to use loan
gaged in the production or distribution proceeds for authorized purposes for 60
of any product or service that has been days or more after receiving a loan dis-
determined to be obscene by a court. bursement check, such non-use also is
considered a wrongful misapplication
[61 FR 3304, Jan. 31, 1996, as amended at 79 of the proceeds.
FR 22862, Apr. 25, 2014] (b) If SBA learns that you may have
misapplied your loan proceeds from a
§ 123.7 Are there restrictions on how
disaster loans can be used? disaster loan authorized under Section
7(b), SBA will notify you at your last
You must use disaster loans to re- known address, by certified mail, re-
store or replace your primary home turn receipt requested. You will be
(including a mobile home used as a pri- given at least 30 days to submit to SBA
mary residence) and your personal or evidence that you have not misapplied
business property as nearly as possible the loan proceeds or that you have cor-
to their condition before the disaster rected any such misapplication. Any
occurred, and within certain limits, to failure to respond in time will be con-
protect damaged or destroyed real sidered an admission that you mis-
property from possible future disasters. applied the proceeds. If SBA finds a
[61 FR 3304, Jan. 31, 1996, as amended at 88 wrongful misapplication, it will cancel
FR 39340, June 16, 2023] any undisbursed loan proceeds, call the
loan, and begin collection measures to
§ 123.8 Does SBA charge any fees for collect your outstanding loan balance
obtaining a disaster loan? and the civil penalty.
SBA does not charge points, closing, (c) If you misapply loan proceeds of
or servicing fees on any disaster loan any disaster loan under this Part, in-
authorized under Section 7(b). You will cluding an IDAP loan, you may face
be responsible for payment of any clos- criminal prosecution or civil or admin-
ing costs owed to third parties on these istrative action.
loans, such as recording fees and title [61 FR 3304, Jan. 31, 1996, as amended at 75
insurance premiums. If your loan is FR 60598, Oct. 1, 2010]
457
§ 123.10 13 CFR Ch. I (1–1–25 Edition)
§ 123.10 What happens if I cannot use secured threshold outlined in para-
my insurance proceeds to make re- graph (a)(2) of this section and all eco-
pairs? nomic injury disaster loans to see if
If you must pay insurance proceeds they exceed $50,000.
to the holder of a recorded lien or en- (d) SBA will not decline a loan if you
cumbrance against your damaged prop- lack a particular amount of collateral
erty instead of using them to make re- as long as it is reasonably sure that
pairs, you may apply to SBA for the you can repay your loan. If you refuse
full amount needed to make such re- to pledge available collateral when re-
pairs. If you voluntarily pay insurance quested by SBA, however, SBA may de-
proceeds to a recorded lienholder, your cline or cancel your loan.
loan eligibility is reduced by the
amount of the voluntary payment. [61 FR 3304, Jan. 31, 1996, as amended at 73
FR 54675, Sept. 23, 2008; 75 FR 14332, Mar. 25,
§ 123.11 Does SBA require collateral 2010; 75 FR 60598, Oct. 1, 2010; 79 FR 22862,
for any of its disaster loans? Apr. 25, 2014; 81 FR 67903, Oct. 3, 2016; 88 FR
39340, June 16, 2023; 89 FR 59831, July 24, 2024]
(a) When collateral is not required:
(1) Economic injury disaster loans. SBA § 123.12 Are books and records re-
generally will not require the borrower quired?
to pledge collateral to secure an eco-
nomic injury disaster loan of $50,000 or You must retain complete records of
less. all transactions financed with your
(2) Physical disaster home and physical SBA loan proceeds, including copies of
disaster business loans. (i) For Major all contracts and receipts, for a period
Disasters declared under § 123.3(a)(1) or of 3 years after you receive your final
(2), SBA generally will not require the disbursement of loan proceeds. If you
borrower to pledge collateral to secure have a physical disaster business or
a physical disaster home or physical economic injury loan, you must also
disaster business loan of $50,000 or less. maintain current and accurate books
(ii) For SBA-declared disasters under of account, including financial and op-
§ 123.3(a)(3) or (6), SBA generally will erating statements, insurance policies,
not require the borrower to pledge col- and tax returns. You must retain appli-
lateral to secure a physical disaster cable books and records for 3 years
home or physical disaster business loan after your loan matures including any
of $14,000 or less. extensions, or from the date when your
(3) IDAP loans. Collateral require- loan is paid in full, whichever occurs
ments for IDAP loans are set forth in first. You must make available to SBA
Subpart H of this part. or other authorized government per-
(4) Military Reservist EIDL. For the sonnel upon request all such books and
purposes of the Military Reservist records for inspection, audit, and re-
EIDL only, as described in section production during normal business
123.513, SBA will not generally require
hours and you must also permit SBA
that you pledge collateral to secure a
and any participating financial institu-
loan of $50,000 or less.
tion to inspect and appraise your as-
(b) For loans larger than the
amounts outlined in paragraph (a) of sets. (OMB Approval No. 3245–0110.)
this section, you will be required to § 123.13 What happens if my loan ap-
provide available collateral, as deter- plication is denied?
mined by SBA, such as a lien on the
damaged or replacement property and/ (a) If SBA denies your loan applica-
or a security interest in business as- tion, SBA will notify you in writing
sets. and set forth the specific reasons for
(c) Sometimes a borrower, including the denial. Any applicant whose re-
affiliates as defined in part 121 of this quest for a loan is declined for reasons
title, will have more than one loan other than size (not being a small busi-
after a single disaster. In deciding ness) has the right to present informa-
whether collateral is required, SBA tion to overcome the reason or reasons
will add up all physical disaster loans for the decline and to request reconsid-
to see if they exceed the applicable un- eration in writing.
458
Small Business Administration § 123.15
(b) Any decline due to size can only § 123.14 How does the Federal Debt
be appealed as set forth in part 121 of Collection Procedures Act of 1990
this chapter. apply?
(c) Any request for reconsideration (a) Under the Federal Debt Collection
must be received by SBA’s Disaster As- Procedures Act of 1990 (28 U.S.C.
sistance Processing and Disbursement 3201(e)), a debtor who owns property
Center (DAPDC) within six months of which is subject to an outstanding
the date of the decline notice. After six judgment lien for a debt owed to the
months, a new loan application is re- United States generally is not eligible
quired. to receive a disaster loan. The SBA As-
(d) A request for reconsideration sociate Administrator for Disaster As-
must contain all significant new infor- sistance, or designee, may waive this
mation that you rely on to overcome restriction as to disaster loans (except
SBA’s denial of your original loan ap- IDAP loans) upon a demonstration of
plication. good cause. Good cause means a writ-
(e) If SBA declines your application a ten representation by you under oath
second time, you have the right to ap- which convinces SBA that:
peal in writing to the Director, Dis-
(1) The declared disaster was a major
aster Assistance Processing and Dis-
contributing factor to the delinquency
bursement Center (DAPDC) or the Di-
which led to the judgment lien, regard-
rector’s designee(s). All appeals must
less of when the original debt was in-
be received by the processing center
within 30 days of the decline action. curred; or
Your request must state that you are (2) The disaster directly prevented
appealing, and must give specific rea- you from fulfilling the terms of an
sons why the decline action should be agreement with SBA or any other Fed-
reversed. eral Government entity to satisfy its
(f) The decision of the Director, pre-disaster judgment lien; in this situ-
DAPDC or the Director’s designee(s), is ation, the judgment creditor must cer-
final unless: tify to SBA that you were complying
(1) The Director, DAPDC or the Di- with the agreement to satisfy the judg-
rector’s designee(s), does not have the ment lien when the disaster occurred;
authority to approve the requested or
loan; (3) Other circumstances exist which
(2) The Director, DAPDC or the Di- would justify a waiver.
rector’s designee(s), refers the matter (b) The waiver determination by the
to the SBA Associate Administrator Associate Administrator for Disaster
for Disaster Assistance (AA/DA); Assistance, or designee, is a final, non-
(3) The AA/DA, upon a showing of appealable decision. The granting of a
special circumstances, requests that waiver does not include loan approval;
the Director, DAPDC or the Director’s a waiver recipient must then follow
designee(s), forward the matter to him normal loan application procedures.
or her for final consideration; or [61 FR 3304, Jan. 31, 1996, as amended at 75
(4) The SBA Administrator, solely FR 60598, Oct. 1, 2010]
within the Administrator’s discretion,
chooses to review the matter and make § 123.15 What if I change my mind?
the final decision. Such discretionary If SBA required you to pledge collat-
authority of the Administrator does eral for your loan, you may change
not create additional rights of appeal
your mind and rescind your loan pursu-
on the part of an applicant not other-
ant to the Consumer Credit Protection
wise specified in SBA regulations.
Act, 15 U.S.C. 1601, and Regulation Z of
(g) This section does not apply to
the Federal Reserve Board, 12 CFR part
IDAP loans.
226. Your note and any collateral docu-
[61 FR 3304, Jan. 31, 1996, as amended at 71 ments signed by you will be canceled
FR 63676, Oct. 31, 2006; 75 FR 60598, Oct. 1, upon your return of all loan proceeds
2010; 81 FR 67903, Oct. 3, 2016; 86 FR 50219,
Sept. 8, 2021; 88 FR 39340, June 16, 2023]
459
§ 123.16 13 CFR Ch. I (1–1–25 Edition)
and your payment of any interest ac- original loan, you may request an in-
crued. This provision does not apply to crease in your loan amount.
IDAP loans. (b) For all disasters occurring on or
[61 FR 3304, Jan. 31, 1996, as amended at 75 after November 25, 2015, you may also
FR 60598, Oct. 1, 2010] request an increase in your loan if you
suffered substantial economic damage
§ 123.16 How are loans administered or substantial risks to health or safety
and serviced? as a result of malfeasance in connec-
(a) If you obtained your disaster loan tion with the repair or replacement of
from a participating lender, that lender real property or business machinery
is responsible for closing and servicing and equipment for which SBA made a
your loan. If you obtained your loan di- disaster loan. See § 123.105 for limits on
rectly from SBA, your loan will be home loan amounts and § 123.202 for
closed and serviced by SBA. The SBA limits on business loan amounts. Mal-
rules on servicing are found in Subpart feasance may include, but is not lim-
H of this part and part 120 of this chap- ited to, nonperformance of all or any
ter. portion of the work for which a con-
(b) If you are unable to pay your SBA tractor was paid, work that does not
loan installments in a timely manner meet acceptable standards, or use of
for reasons substantially beyond your substandard materials.
control, you may request that SBA sus- [63 FR 15072, Mar. 30, 1998, as amended at 81
pend your loan payments, extend your FR 67903, Oct. 3, 2016]
maturity, or both.
§ 123.19 May I request an increase in
[61 FR 3304, Jan. 31, 1996, as amended at 75
the amount of an economic injury
FR 60598, Oct. 1, 2010]
loan?
§ 123.17 Do other Federal require- SBA will consider your request for an
ments apply? increase in the loan amount if you can
As a condition of disbursement, you show that the increase is essential for
must be in compliance with certain re- your business to continue and is based
quirements relating to flood insurance, on events occurring after SBA ap-
earthquake hazards, coastal barrier is- proved your original loan which were
lands, and child support obligations, as beyond your control. For example,
set forth in §§ 120.170 through 120.172, delays may have occurred beyond your
120.174 and 120.175 of this chapter. control which prevent you from resum-
ing your normal business activity in a
[61 FR 3304, Jan. 31, 1996, as amended at 87 reasonable time frame. Your request
FR 38910, June 30, 2022]
for an increase in the loan amount
§ 123.18 Can I request an increase in must be related to the disaster for
the amount of a physical disaster which the SBA economic injury dis-
loan? aster loan was originally made.
(a) Generally, SBA will consider your [63 FR 15072, Mar. 30, 1998]
request for an increase in your loan if
you can show that the eligible cost of § 123.20 How long do I have to request
repair or replacement of damages in- an increase in the amount of a
creased because of events occurring physical disaster loan or an eco-
after the loan approval that were be- nomic injury loan?
yond your control. An eligible cost is (a) You should request a loan in-
one which is related to the disaster for crease as soon as possible after you dis-
which SBA issued the original loan. cover the need for the increase, but not
For example, if you discover hidden later than two years after SBA ap-
damage within a reasonable time after proved your physical disaster or eco-
SBA approved your original disaster nomic injury loan. After two years, the
loan and before repair, renovation, or SBA Associate Administrator for Dis-
reconstruction is complete, you may aster Assistance (AA/DA) may waive
request an increase. Or, if applicable this limitation after finding extraor-
building code requirements were dinary and unforeseeable cir-
changed since SBA approved your cumstances.
460
Small Business Administration § 123.101
(b) For physical disaster loan in- Subpart B—Home Disaster Loans
creases requested under § 123.18(b) as a
result of malfeasance, the request must § 123.100 Am I eligible to apply for a
be received not later than two years home disaster loan?
after the date of final disbursement. (a) You are eligible to apply for a
home disaster loan if you:
[63 FR 15073, Mar. 30, 1998, as amended at 81
FR 67903, Oct. 3, 2016]
(1) Own and occupy your primary res-
idence and have suffered a physical loss
§ 123.21 What is a mitigation measure? to your primary residence, personal
property, or both; or
A mitigation measure is something (2) Do not own your primary resi-
done for the purpose of protecting dence, but have suffered a physical loss
property and occupants against dis- to your personal property. Family
aster related damage. You may imple- members sharing a residence are eligi-
ment mitigation measures after a dis- ble if they are not dependents of the
aster occurs (post-disaster) to protect owners of the residence.
against recurring disaster related dam- (b) Losses may be claimed only by
age, or before a disaster occurs (pre- the owners of the property at the time
disaster) to protect against future dis- of the disaster, and all such losses will
aster related damage. Examples of be verified by SBA. SBA will consider
mitigation measures include building beneficial ownership as well as legal
retaining walls, sea walls, grading and title (for real or personal property) in
contouring land, elevating flood prone determining who suffered the loss.
structures, relocating utilities, con-
structing a safe room or similar storm § 123.101 When am I not eligible for a
shelter (if such safe room or similar home disaster loan?
storm shelter is constructed in accord- You are not eligible for a home dis-
ance with applicable standards issued aster loan if:
by the Federal Emergency Manage- (a) You have been convicted, during
ment Agency), or retrofitting struc- the past year, of a felony during and in
tures to protect against high winds, connection with a riot or civil disorder
earthquakes, flood, wildfires, or other or other declared disaster;
physical disasters. Section 123.107 spe- (b) You acquired voluntarily more
cifically addresses post-disaster miti- than a 50 percent ownership interest in
gation for home disaster loans, and the damaged property after the dis-
§ 123.204 specifically addresses post-dis- aster, and no contract of sale existed at
aster mitigation for businesses. the time of the disaster;
(c) Your damaged property can be re-
[67 FR 62337, Oct. 7, 2002, as amended at 81 FR paired or replaced with the proceeds of
67903, Oct. 3, 2016; 85 FR 12864, Mar. 5, 2020] insurance, gifts or other compensation,
including condemnation awards (with
§ 123.22 Severability. one exception), these amounts must ei-
Any provision of this part held to be ther be deducted from the amount of
invalid or unenforceable as applied to the claimed losses or, if received after
any person, entity, or circumstance SBA has approved and disbursed a loan,
shall be construed so as to continue to must be paid to SBA as principal pay-
give the maximum effect to such provi- ments on your loan. You must notify
sion as permitted by law, including as SBA of any such recoveries collected
applied to persons or entities not simi- after receiving an SBA disaster loan.
larly situated or to dissimilar cir- The one exception applies to amounts
cumstances, unless such holding is that received under the Individuals and
the provision of this part is invalid and Household Program of the Federal
unenforceable in all circumstances, in Emergency Management Agency solely
which event the provision shall be sev- to meet an emergency need pending
erable from the remainder of this part processing of an SBA loan. In such an
and shall not affect the remainder event, you must repay the financial as-
sistance with SBA loan proceeds if it
thereof.
was used for purposes also eligible for
[89 FR 34102, Apr. 30, 2024] an SBA loan;
461
§ 123.102 13 CFR Ch. I (1–1–25 Edition)
(d) SBA determines that you assumed area in which the disaster has occurred
the risk (for example, by not maintain- if your relocation is caused by such
ing flood insurance as required by an special or unusual circumstances as:
earlier SBA disaster loan when the cur- (a) Demonstrable risk that the busi-
rent loss is also due to flood); ness area will suffer future disasters;
(e) Your damaged property is a sec- (b) A change in employment status
ondary home (although if you rented (such as loss of job, transfer, lack of
the property out before the disaster adequate job opportunities within the
and the property would not constitute business area or scheduled retirement
a ‘‘residence’’ under the provisions of within 18 months after the disaster oc-
Section 280A of the Internal Revenue curs);
Code (26 U.S.C. 280A), you may be eligi- (c) Medical reasons; or
ble for a physical disaster business (d) Special family considerations
loan); which necessitate a move outside of
(f) Your damaged property is the type the business area.
of vehicle normally used for rec-
reational purposes, such as § 123.103 What happens if I am forced
motorhomes, aircraft, and boats; to move from my home?
(g) Your damaged property consists If you must relocate inside or outside
of cash or securities; the business area because local au-
(h) The replacement value of your thorities will not allow you to repair
damaged personal property is extraor- your damaged property, SBA considers
dinarily high and not easily verified, this to be a total loss and a mandatory
such as the value of antiques, relocation. In this case, your loan
artworks, or hobby collections; would be an amount that SBA con-
(i) You or other principal owners of siders sufficient to replace your resi-
the damaged property are currently in- dence at your new location, plus funds
carcerated, serving a sentence of im- to cover losses of personal property and
prisonment imposed upon adjudication eligible refinancing.
of guilty;
(j) Your only interest in the damaged § 123.104 What interest rate will I pay
property is in the form of a security in- on my home disaster loan?
terest, mortgage, or deed of trust; If you can obtain credit elsewhere,
(k) The damaged building, including your interest rate is set by a statutory
contents, was newly constructed or formula, but will not exceed eight (8)
substantially improved on or after Feb- percent per annum. If you cannot ob-
ruary 9, 1989, and (without a significant tain credit elsewhere, your interest
business justification) is located sea- rate is one-half the statutory rate, but
ward of mean high tide or entirely in will not exceed four (4) percent per
or over water; or annum. Generally, credit elsewhere
(l) You voluntarily decide to relocate means that SBA believes you could ob-
outside the business area in which the tain financing from non-Federal
disaster has occurred, and there are no sources on reasonable terms subse-
special or unusual circumstances lead- quent to the declaration of a disaster.
ing to your decision (business area SBA may include the use of credit
means the municipality which provides score to make this determination. If
general governmental services to your you cannot obtain credit elsewhere,
damaged home or, if not located in a you also may be able to borrow from
municipality, the county or equivalent SBA to refinance existing recorded
political entity in which your damaged liens against your damaged real prop-
home is located). erty.
[61 FR 3304, Jan. 31, 1996, as amended at 67 [89 FR 59831, July 24, 2024]
FR 64519, Oct. 21, 2002; 89 FR 34102, Apr. 30,
2024] § 123.105 How much can I borrow with
a home disaster loan and what lim-
§ 123.102 What circumstances would its apply on use of funds and repay-
justify my relocating? ment terms?
SBA may approve a loan if you in- (a) There are limits on how much
tend to relocate outside the business money you can borrow for particular
462
Small Business Administration § 123.108
purposes. The limits in effect for disas- home is totally destroyed or substan-
ters occurring on or after June 16, 2023 tially damaged if it has suffered unin-
are as follows. sured or otherwise uncompensated
(1) $100,000 for repair or replacement damage which, at the time of the dis-
of household and personal effects; aster, is either:
(2) $500,000 for repair or replacement (1) 40 percent or more of the home’s
of a primary residence (including up- market value or replacement cost at
grading in order to meet minimum the time of the disaster, including land
standards of safety and decency or cur- value, whichever is less; or
rent building code requirements); (2) 50 percent or more of its market
(3) $500,000 for eligible refinancing value or replacement cost at the time
purposes; of the disaster, not including land
(4) 20 percent of the verified loss (not value, whichever is less.
including refinancing or malfeasance), (b) Your home disaster loan for refi-
before deduction of compensation from nancing existing liens or encumbrances
other sources, up to a maximum of cannot exceed an amount equal to the
$500,000 for post-disaster mitigation lesser of $500,000, or the physical dam-
(see § 123.107); and age to your primary residence. Any re-
(5) $500,000 for eligible malfeasance, financing amount will be reduced to
pursuant to § 123.18. the extent such lien or encumbrance is
(b) You may not use loan proceeds to satisfied by insurance or otherwise.
repay any debts on personal property, [61 FR 3304, Jan. 31, 1996, as amended at 88
secured or unsecured, unless you in- FR 39341, June 16, 2023]
curred those debts as a direct result of
the disaster. § 123.107 How much can I borrow for
(c) SBA determines the loan matu- post-disaster mitigation for my
rity and repayment terms based on home?
your needs and your ability to pay. For mitigation measures imple-
Generally, you will pay monthly in- mented after a disaster has occurred,
stallments of principal and interest, you can request that the approved
beginning twelve months from the date home disaster loan amount be in-
of the initial disbursement. SBA will creased by the lesser of the cost of the
consider other payment terms if you mitigation measure, or up to 20 percent
have seasonal or fluctuating income. of the verified loss (before deducting
The maximum maturity for a home compensation from other sources), to a
disaster loan is 30 years. There is no maximum of $500,000.
penalty for prepayment of disaster
[75 FR 14332, Mar. 25, 2010, as amended at 88
loans. FR 39341, June 16, 2023]
(d) The SBA Administrator may in-
crease the home loan lending limits § 123.108 How do the SBA disaster loan
within paragraph (a) of this section program and the FEMA grant pro-
under an individual disaster declara- grams interact?
tion based on appropriate economic in- After a Presidential disaster declara-
dicators for the region(s) in which the tion is made, you may be eligible for
disaster occurred. SBA will publish any disaster assistance, including grant as-
increased lending limit for an indi- sistance, from the Federal Emergency
vidual disaster declaration in the FED- Management Agency’s (FEMA) Federal
ERAL REGISTER. Assistance to Individuals and House-
[61 FR 3304, Jan. 31, 1996, as amended at 75 holds Program (IHP). After you reg-
FR 14332, Mar. 25, 2010; 81 FR 67903, Oct. 3, ister with FEMA for disaster assist-
2016; 88 FR 39340, June 16, 2023] ance, FEMA will consider you for IHP
assistance, which includes housing as-
§ 123.106 What is eligible refinancing? sistance grants to repair or replace
(a) If your home (primary residence) your damaged primary residence and
is totally destroyed or substantially temporary housing assistance (includ-
damaged, and you do not have credit ing rental assistance) to assist you
elsewhere, SBA may allow you to bor- temporarily with a place to live, and
row money to refinance recorded liens assistance with personal property,
or encumbrances on your home. Your medical, dental and funeral expenses.
463
§ 123.200 13 CFR Ch. I (1–1–25 Edition)
FEMA may also refer you to SBA to and boats, may be repaired or replaced
apply for loan assistance to help repair with SBA loan proceeds if you can sub-
or rebuild your home and/or to replace mit evidence that the damaged vehi-
personal property destroyed during the cles were used in your business at the
disaster. If SBA is unable to approve time of the disaster.
your loan application, or if you have
damage in excess of the SBA loan § 123.201 When am I not eligible to
amount, SBA may refer you, on a time- apply for a physical disaster busi-
ly basis, to FEMA for IHP grant con- ness loan?
sideration to assist with your unmet (a) You are not eligible for a physical
personal property and transportation disaster business loan if your business
needs. If you are approved for the SBA is an agricultural enterprise or if you
disaster loan and you have received (or any principal of the business) fit
grant assistance that duplicates the into any of the categories in § 123.101.
damage covered by the SBA loan, such Agricultural enterprise means a busi-
grant assistance must be deducted ness primarily engaged in the produc-
from your loan eligibility as described tion of food and fiber, ranching and
in section 123.101(c) of the regulations. raising of livestock, aquaculture and
All grant decisions are made by FEMA. all other farming and agriculture-re-
Additionally, if additional disaster as- lated industries.
sistance is available from state, local (b) Sometimes a damaged business
or other agencies, SBA may refer you entity (whether in the form of a cor-
to the appropriate agency for consider- poration, limited liability company,
ation. partnership, or sole proprietorship) is
engaged in both agricultural enterprise
[75 FR 7546, Feb. 22, 2010]
and a non-agricultural business ven-
ture. If the agricultural enterprise part
Subpart C—Physical Disaster of your business entity has suffered a
Business Loans physical disaster, that enterprise is not
eligible for SBA physical disaster as-
§ 123.200 Am I eligible to apply for a sistance. If the non-agricultural busi-
physical disaster business loan? ness venture of your entity has suf-
(a) Almost any business concern or fered physical disaster damage, that
charitable or other non-profit entity part of your business operation would
whose real or tangible personal prop- be eligible for SBA physical disaster
erty is damaged in a declared disaster assistance. If both the agricultural en-
area is eligible to apply for a physical terprise part and the non-agricultural
disaster business loan. Your business business venture have incurred phys-
may be a sole proprietorship, partner- ical disaster damage, only the non-ag-
ship, corporation, limited liability ricultural business venture of your
company, or other legal entity recog- business entity would be eligible for
nized under State law. Your business’ SBA physical disaster assistance.
size (average annual receipts or num- (c) If your business is going to relo-
ber of employees) is not taken into cate voluntarily outside the business
consideration in determining your eli- area in which the disaster occurred,
gibility for a physical disaster business you are not eligible for a physical dis-
loan. If your damaged business occu- aster business loan. If, however, the re-
pied rented space at the time of the location is due to uncontrollable or
disaster, and the terms of your busi- compelling circumstances, SBA will
ness’ lease require you to make repairs consider the relocation to be involun-
to your business’ building, you may tary and eligible for a loan. Such cir-
have suffered a physical loss and can cumstances may include, but are not
apply for a physical business disaster limited to:
loan to repair the property. In all other (1) The elimination or substantial de-
cases, the owner of the building is the crease in the market for your products
eligible loan applicant. or services, as a consequence of the dis-
(b) Damaged vehicles, of the type aster;
normally used for recreational pur- (2) A change in the demographics of
poses, such as motorhomes, aircraft, your business area within 18 months
464
Small Business Administration § 123.202
prior to the disaster, or as a result of major source of employment is a busi-
the disaster, which makes it uneco- ness concern that has one or more loca-
nomical to continue operations in your tions in the disaster area, on or after
business area; the date of the disaster, which:
(3) A substantial change in your cost (1) Employed 10 percent or more of
of doing business, as a result of the dis- the entire work force within the com-
aster, which makes the continuation of muting area of a geographically identi-
your business in the business area not fiable community (no larger than a
economically viable; county), provided that the commuting
(4) Location of your business in a area does not extend more than 50
hazardous area such as a special flood miles from such community; or
hazard area or an earthquake-prone (2) Employed 5 percent of the work
area; force in an industry within the disaster
(5) A change in the public infrastruc- area and, if the concern is a non-manu-
ture in your business area which oc- facturing concern, employed no less
curred within 18 months or as a result than 50 employees in the disaster area,
of the disaster that would result in or if the concern is a manufacturing
substantially increased expenses for concern, employed no less than 150 em-
your business in the business area; ployees in the disaster area; or
(6) Your implementation of decisions
(3) Employed no less than 250 employ-
adopted and at least partially imple-
ees within the disaster area.
mented within 18 months prior to the
disaster to move your business out of (b) SBA will consider waiving the $2
the business area; and million loan limit for a major source of
(7) Other factors which undermine employment only if:
the economic viability of your business (1) Your damaged location or loca-
area. tions are out of business or in immi-
(d) You are not eligible if your busi- nent danger of going out of business as
ness is engaged in any illegal activity. a result of the disaster, and a loan in
(e) You are not eligible if you are a excess of $2 million is necessary to re-
government owned entity (except for a open or keep open the damaged loca-
business owned or controlled by a Na- tions in order to avoid substantial un-
tive American tribe). employment in the disaster area; and
(f) You are not eligible if your busi- (2) You have used all reasonably
ness presents live performances of a available funds from your business, its
prurient sexual nature or derives di- affiliates and its principal owners (20%
rectly or indirectly more than de mini- or greater ownership interest) and all
mis gross revenue through the sale of available credit elsewhere (as described
products or services, or the presen- in § 123.104) to alleviate your physical
tation of any depictions or displays, of damage and economic injury.
a prurient sexual nature. (c) Physical disaster business bor-
rowers may request refinancing of liens
[61 FR 3304, Jan. 31, 1996, as amended at 62
FR 35337, July 1, 1997; 63 FR 46644, Sept. 2,
on both damaged real property and ma-
1998] chinery and equipment. Such amount
shall be reduced to the extent such lien
§ 123.202 How much can my business or encumbrance is satisfied by insur-
borrow with a physical disaster ance or otherwise. Your business prop-
business loan? erty must be totally destroyed or sub-
(a) Disaster business loans, including stantially damaged, which means:
both physical disaster and economic in- (1) 40 percent or more of the aggre-
jury loans to the same borrower, to- gate value (lesser of market value or
gether with its affiliates, cannot ex- replacement cost at the time of the
ceed the lesser of the uncompensated disaster) of the damaged real property
physical loss and economic injury or $2 (including land) and damaged machin-
million. Physical disaster loans may ery and equipment; or
include amounts to meet current build- (2) 50 percent or more of the aggre-
ing code requirements. If your business gate value (lesser of market value or
is a major source of employment, SBA replacement cost at the time of the
may waive the $2 million limitation. A disaster) of the damaged real property
465
§ 123.203 13 CFR Ch. I (1–1–25 Edition)
(excluding land) and damaged machin- tion measure, or up to 20 percent of the
ery and equipment. verified loss, before deducting com-
(d) The SBA Administrator may in- pensation from other sources, to repair
crease the $2 million loan limit for dis- or replace your damaged business.
aster business physical and economic [75 FR 14333, Mar. 25, 2010]
injury loans under an individual dis-
aster declaration based on appropriate
economic indicators for the region(s) in Subpart D—Economic Injury
which the disaster occurred. SBA will Disaster Loans
publish the increased loan amount in
§ 123.300 Is my business eligible to
the FEDERAL REGISTER. apply for an economic injury dis-
[61 FR 3304, Jan. 31, 1996, as amended at 63 aster loan?
FR 46644, Sept. 2, 1998; 75 FR 14332, Mar. 25, (a) If your business is located in a de-
2010; 88 FR 39341, June 16, 2023] clared disaster area, and suffered sub-
§ 123.203 What interest rate will my stantial economic injury as a direct re-
business pay on a physical disaster sult of a declared disaster, you are eli-
business loan and what are the re- gible to apply for an economic injury
payment terms? disaster loan.
(1) Substantial economic injury is
(a) SBA will announce interest rates
such that a business concern is unable
with each disaster declaration. If your
to meet its obligations as they mature
business, together with its affiliates
or to pay its ordinary and necessary
and principal owners, has credit else-
operating expenses.
where, your interest rate is set by a
(2) Loss of anticipated profits or a
statutory formula, but will not exceed
drop in sales is not considered substan-
8 percent per annum. If you do not
tial economic injury for this purpose.
have credit elsewhere, your interest (b) Economic injury disaster loans
rate will not exceed 4 percent per are available only if you were a small
annum. The maturity of your loan de- business (as defined in part 121 of this
pends upon your repayment ability, chapter) or a private non-profit organi-
but cannot exceed seven years if you zation when the declared disaster com-
have credit elsewhere. menced, you and your affiliates and
(b) Generally, you will pay monthly principal owners (20% or more owner-
installments of principal and interest, ship interest) have used all reasonably
beginning twelve months from the date available funds, and you are unable to
of the initial disbursement. SBA will obtain credit elsewhere (see § 123.104).
consider other payment terms if you (c) Eligible businesses do not include
have seasonal or fluctuating income. agricultural enterprises, but do in-
There is no penalty for prepayment for clude—
disaster loans. (1) Small nurseries affected by a
(c) For certain disaster business drought disaster designated by the Sec-
physical and economic injury loans, an retary of Agriculture (nurseries are
additional payment, based on a per- commercial establishments deriving 50
centage of net earnings, will be re- percent or more of their annual re-
quired to reduce the balance of the ceipts from the production and sale of
loan. This additional payment will not ornamental plants and other nursery
be required until 5 years after repay- products, including, but not limited to,
ment begins. bulbs, florist greens, foliage, flowers,
[61 FR 3304, Jan. 31, 1996, as amended at 75 flower and vegetable seeds, shrubbery,
FR 14333, Mar. 25, 2010; 77 FR 12157, Feb. 29, and sod);
2012; 88 FR 39341, June 16, 2023] (2) Small agricultural cooperatives;
(3) Producer cooperatives; and
§ 123.204 How much can your business (4) Small aquaculture enterprises.
borrow for post-disaster mitigation? (d) An eligible private non-profit or-
For mitigation measures imple- ganization is a non-governmental agen-
mented after a disaster has occurred, cy or entity that currently has:
you can request an increase in the ap- (1) An effective ruling letter from the
proved physical disaster business loan U.S. Internal Revenue Service, grant-
by the lesser of the cost of the mitiga- ing tax exemption under sections
466
Small Business Administration § 123.303
510(c), (d), or (e) of the Internal Rev- principal of the business) fit into any
enue Code of 1954, or of the categories in §§ 123.101 and
(2) Satisfactory evidence from the 123.201, or if your business is:
State that the non-revenue producing (a) Engaged in lending, multi-level
organization or entity is a non-profit sales distribution, speculation, or in-
one organized or doing business under vestment (except for real estate invest-
State law. ment with property held for rental
(e) COVID–19 Economic Injury Dis- when the disaster occurred);
aster (COVID EIDL) loans are available (b) A non-profit or charitable con-
if, as of the date of application, you: cern, other than a private non-profit
(1) Are a business, including an agri- organization;
cultural cooperative, aquaculture en- (c) [Reserved]
terprise, nursery, or producer coopera- (d) Not a small business concern; or
tive (but excluding all other agricul- (e) Deriving more than one-third of
tural enterprises), that is small under gross annual revenue from legal gam-
SBA Size Standards (as defined in part bling activities;
121 of this chapter); (f) A loan packager which earns more
(2) Are an individual who operates than one-third of its gross annual rev-
under a sole proprietorship, with or enue from packaging SBA loans;
without employees, or as an inde- (g) Principally engaged in teaching,
pendent contractor; instructing, counseling, or indoctri-
(3) Are a private non-profit organiza- nating religion or religious beliefs,
tion that is a non-governmental agency whether in a religious or secular set-
or entity that currently has an effec- ting; or
tive ruling letter from the Internal (h) Primarily engaged in political or
Revenue Service (IRS) granting tax ex- lobbying activities.
emption under sections 501(c), (d), or [61 FR 3304, Jan. 31, 1996, as amended at 63
(e) of the Internal Revenue Code of FR 46644, Sept. 2, 1998; 75 FR 14333, Mar. 25,
1954, or satisfactory evidence from the 2010; 88 FR 39341, June 16, 2023]
State that the non-revenue-producing
organization or entity is a non-profit § 123.302 What is the interest rate on
one organized or doing business under an economic injury disaster loan?
State law, or a faith-based organiza- Your economic injury loan will have
tion; an interest rate of 4 percent per annum
(4) Are a business, cooperative, agri- or less.
cultural enterprise, Employee Stock
Ownership Plan (as defined in 15 U.S.C. § 123.303 How can my business spend
632), or tribal small business concern my economic injury disaster loan?
(as described in 15 U.S.C. 657a(b)(2)(C)), (a) You can only use the loan pro-
with not more than 500 employees; or ceeds for working capital necessary to
(5) Are a business that is assigned a carry your concern until resumption of
North American Industry Classifica- normal operations and for expenditures
tion System (NAICS) code beginning necessary to alleviate the specific eco-
with 61, 71, 72, 213, 3121, 315, 448, 451, 481, nomic injury, but not to exceed that
485, 487, 511, 512, 515, 532, or 812, employs which the business could have provided
not more than 500 employees per phys- had the injury not occurred. COVID
ical location, and together with affili- EIDL loan proceeds also may be used
ates has no more than 20 locations. to make debt payments including
monthly payments, payment of de-
[61 FR 3304, Jan. 31, 1996, as amended at 67
FR 11880, Mar. 15, 2002; 70 FR 72595, Dec. 6,
ferred interest, and pre-payments on
2005; 73 FR 41254, July 18, 2008; 75 FR 14333, any business debts, except pre-pay-
Mar. 25, 2010; 76 FR 63547, Oct. 12, 2011; 86 FR ments are not permitted on any loans
50219, Sept. 8, 2021] owned by a Federal agency (including
SBA) or a Small Business Investment
§ 123.301 When would my business not Company licensed under the Small
be eligible to apply for an economic Business Investment Act.
injury disaster loan? (b) Loan proceeds may not be used to:
Your business is not eligible for an (1) Refinance indebtedness which you
economic disaster loan if you (or any incurred prior to the disaster event;
467
§ 123.304 13 CFR Ch. I (1–1–25 Edition)
(2) Except for COVID EIDL loan pro- (b) Military reservist is a member of a
ceeds, make payments on loans owned reserve component of the Armed
by a Federal agency (including SBA) or Forces ordered to active service.
a Small Business Investment Company (c) Active service has the meaning
licensed under the Small Business In- given in 10 U.S.C. 101(d)(3):
vestment Act; (1) Service on active duty; or
(3) Pay, directly or indirectly, any (2) Full-time National Guard duty.
obligations resulting from a federal, (d) Principal owner is a person or enti-
state or local tax penalty as a result of ty which owns 20 percent or more of
negligence or fraud, or any non-tax the small business.
criminal fine, civil fine, or penalty for (e) Substantial economic injury means
non-compliance with a law, regulation, an economic harm to the small busi-
or order of a federal, state, regional, or ness such that it cannot:
local agency or similar matter; (1) Meet its obligations as they ma-
(4) Repair physical damage; or ture,
(5) Pay dividends or other disburse- (2) Pay its ordinary and necessary op-
ments to owners, partners, officers or erating expenses, or
stockholders, except for reasonable re-
(3) Market, produce or provide a
muneration directly related to their
product or service ordinarily mar-
performance of services for the busi-
keted, produced or provided by the
ness.
business. Loss of anticipated profits or
[61 FR 3304, Jan. 31, 1996, as amended at 86 a drop in sales is not considered sub-
FR 50219, Sept. 8, 2021] stantial economic injury for this pur-
pose.
§ 123.304 Is there a limit on the max-
imum loan amount to a single cor- [66 FR 38530, July 25, 2001, as amended at 88
porate group for COVID EIDL FR 24109, Apr. 19, 2023]
Loans?
Entities that are part of a single cor- § 123.501 Under what circumstances is
your business eligible to be consid-
porate group shall in no event receive ered for a Military Reservist Eco-
more than $10,000,000 of COVID EIDL nomic Injury Disaster Loan?
loans in the aggregate. For purposes of
this limit, entities are part of a single Your business is eligible to apply for
corporate group if they are majority a Military Reservist EIDL if:
owned, directly or indirectly, by a com- (a) It is a small business as defined in
mon parent. 13 CFR part 121 when the essential em-
ployee was called to active service,
[86 FR 50219, Sept. 8, 2021]
(b) The owner of the business is a
military reservist and an essential em-
Subpart E—[Reserved] ployee or the business employs a mili-
tary reservist who is an essential em-
Subpart F—Military Reservist ployee,
Economic Injury Disaster Loans (c) The essential employee has been
called-up to active service for a period
SOURCE: 66 FR 38530, July 25, 2001, unless of more than 30 consecutive days,
otherwise noted. (d) The business has suffered or is
likely to suffer substantial economic
§ 123.500 Definitions. injury as a result of the absence of the
The following terms have the same essential employee, and
meaning wherever they are used in this (e) You and your affiliates and prin-
subpart: cipal owners (20% or more ownership
(a) Essential employee is an individual interest) have used all reasonably
(whether or not an owner of a small available funds, and you are unable to
business) whose managerial or tech- obtain credit elsewhere (see § 123.104).
nical expertise is critical to the suc- [66 FR 38530, July 25, 2001, as amended at 67
cessful day-to-day operations of a FR 64519, Oct. 21, 2002; 88 FR 24109, Apr. 19,
small business. 2023]
468
Small Business Administration § 123.504
§ 123.502 Under what circumstances is real estate investment with property
your business ineligible to be con- held for commercial rental);
sidered for a Military Reservist (i) Your business is a non-profit or
Economic Injury Disaster Loan? charitable concern;
Your business is ineligible for a Mili- (j) [Reserved]
tary Reservist EIDL if it, together (k) Your business is not a small busi-
with its affiliates, is subject to any of ness concern;
the following conditions: (l) Your business derives more than
one-third of its gross annual revenue
(a) Any of your business’ principal
from legal gambling activities;
owners has been convicted, during the
(m) Your business is a loan packager
past year, of a felony during and in
which earns more than one-third of its
connection with a riot or civil disorder; gross annual revenue from packaging
(b) You have assumed the risk associ- SBA loans;
ated with employing the military re- (n) Your business’ principal activity
servist, as determined by SBA (for ex- is teaching, instructing, counseling, or
ample, hiring the ‘‘essential employee’’ indoctrinating religion or religious be-
after the employee has received call-up liefs, whether in a religious or secular
orders or been notified that they are setting; or
imminent); (o) Your business’ principal activity
(c) Any of your business’ principal is political or lobbying activities.
owners is currently incarcerated, serv-
[66 FR 38530, July 25, 2001, as amended at 88
ing a sentence of imprisonment im-
FR 39341, June 16, 2023; 89 FR 34102, Apr. 30,
posed upon adjudication of guilty; 2024]
(d) Your business is an agricultural
enterprise. Agricultural enterprise § 123.503 When can you apply for a
means a business primarily engaged in Military Reservist EIDL?
the production of food and fiber, ranch- Your small business can apply for a
ing and raising of livestock, aqua- Military Reservist EIDL any time be-
culture and all other farming and agri- ginning on the date your essential em-
culture-related industries. (See 13 CFR ployee receives notice of expected call-
121.107, ‘‘How does SBA determine a up and ending one year after the date
concern’s primary industry?’’) Some- the essential employee is discharged or
times a business is engaged in both ag- released from active service. The Asso-
ricultural and non-agricultural busi- ciate Administrator for Disaster As-
ness activities. If the primary business sistance (AA/DA) or designee may ex-
activity of the business is not an agri- tend the one year limit by no more
cultural enterprise, it may apply for a then one additional year after finding
Military Reservist EIDL, but loan pro- extraordinary or unforeseeable cir-
ceeds may not be used, directly or indi- cumstances.
rectly, for the benefit of the agricul-
[73 FR 54675, Sept. 23, 2008, as amended at 88
tural enterprises; FR 24110, Apr. 19, 2023]
(e) Your business is engaged in any
EFFECTIVE DATE NOTE: Amendments to
illegal activity; § 123.503 were published at 89 FR 91539, Nov.
(f) Your business is a government 20, 2024, effective Jan. 21, 2025.
owned entity (except for a business
owned or controlled by a Native Amer- § 123.504 How do you apply for a Mili-
ican tribe); tary Reservist EIDL?
(g) Your business presents live per- To apply for a Military Reservist
formances of a prurient sexual nature EIDL you must complete a SBA Mili-
or derives directly or indirectly more tary Reservist EIDL application pack-
than an insignificant gross revenue age (SBA Form 5R and supporting doc-
through the sale of products or serv- umentation can be obtained through
ices, or through the presentation of SBA’s Disaster Area Office) including:
any depictions or displays, of a pru- (a) A copy of the essential employee’s
rient sexual nature; official call-up orders for active service
(h) Your business is engaged in lend- showing the date of call-up, and, if
ing, multi-level sales distribution, known, the date of release from active
speculation, or investment (except for service. For an essential employee who
469
§ 123.505 13 CFR Ch. I (1–1–25 Edition)
expects to be called up and who has not until normal operations resume as a re-
received official call-up orders, the ap- sult of the absence of one or more es-
plication shall include the notice of the sential employees called to active serv-
expected call-up including, if known, ice, up to a maximum of $2 million.
the expected date of call-up and ex-
pected date of release from active serv- [73 FR 54675, Sept. 23, 2008, as amended at 88
FR 24110, Apr. 19, 2023]
ice;
(b) A statement from the business
§ 123.507 Under what circumstances
owner that the reservist is essential to will SBA consider waiving the $2
the successful day-to-day operations of million loan limit?
the business (detailing the employee’s
duties and responsibilities and explain- SBA will consider waiving the $2 mil-
ing why these duties and responsibil- lion limit if you can certify to the fol-
ities can’t be completed in the essen- lowing conditions and SBA approves of
tial employee’s absence); such certification based on the infor-
(c) A certification by the essential mation supplied in your application:
employee supporting that he or she (a) Your small business is a major
concurs with the business owner’s source of employment. A major source
statement as described in paragraph (b) of employment is a business concern
of this section; that, on or after the date of the dis-
(d) A written explanation and finan- aster:
cial estimate of how the call-up of the (1) Employs 10 percent or more of the
essential employee has or will result in work force within the commuting area
economic injury to your business; of the geographically identifiable com-
(e) The steps your business is taking
munity (no larger than a county) in
to alleviate the economic injury; and
which the business employing the es-
(f) The business owners’ certification
that the essential employee will be of- sential employee is located, provided
fered the same or a similar job upon that the commuting area does not ex-
the employee’s return from active serv- tend more than 50 miles from such
ice. community; or
(2) Employs 5 percent of the work
[61 FR 3304, Jan. 31, 1996, as amended at 73
force in an industry within such com-
FR 54675, Sept. 23, 2008; 88 FR 24110, Apr. 19,
2023] muting area and, if the small business
is a non-manufacturing small business,
§ 123.505 What if you are both an es- employs no less than 50 employees in
sential employee and the owner of the same commuting area, or if the
the small business and you started small business is a manufacturing
active service before applying for a
Military Reservist EIDL? small business, employs no less than
150 employees in the commuting area;
If you are both an essential employee or
and the owner of the small business (3) Employs no less than 250 employ-
and you started active service before
ees within such commuting area;
applying for an Military Reservist
(b) Your small business is in immi-
EIDL, a person who has a power of at-
torney with the authority to borrow nent danger of going out of business as
and make other related commitments a result of one or more essential em-
on your behalf, may complete and sub- ployees being called up to active serv-
mit the EIDL loan application package ice for a period of more than 30 con-
for you. secutive days, and a loan in excess of $2
million is necessary to reopen or keep
[66 FR 38530, July 25, 2001, as amended at 88
open the small business; and
FR 24110, Apr. 19, 2023]
(c) Your small business has used all
§ 123.506 How much can you borrow reasonably available funds from the
under the Military Reservist EIDL small business, its affiliates, its prin-
Program? cipal owners and all available credit
You can borrow an amount equal to elsewhere (as described in § 123.104) to
the substantial economic injury you
have suffered or are likely to suffer
470
Small Business Administration § 123.700
alleviate the small business’ economic need for disbursements under this pro-
injury. gram. Upon making such assessment,
[61 FR 3304, Jan. 31, 1996, as amended at 73
SBA will notify you of the status of fu-
FR 54675, Sept. 23, 2008; 75 FR 14333, Mar. 25, ture disbursements.
2010; 88 FR 24109, Apr. 19, 2023; 89 FR 59831, [73 FR 54675, Sept. 23, 2008, as amended at 88
July 24, 2024]
FR 24110, Apr. 19, 2023]
§ 123.508 How can you use Military Re-
servist EIDL funds? § 123.512 What is the interest rate on a
Military Reservist EIDL?
Your small business can use Military
Reservist EIDL to: The interest rate on a Military Re-
(a) Meet obligations as they mature, servist EIDL will be 4 percent per
(b) Pay ordinary and necessary oper- annum or less. SBA will publish the in-
ating expenses, or terest rate quarterly in the FEDERAL
(c) Enable the business to market, REGISTER.
produce or provide products or services
§ 123.513 Does SBA require collateral
ordinarily marketed, produced, or pro-
on its Military Reservist EIDL?
vided by the business, which cannot be
done as a result of the essential em- SBA will not generally require you to
ployee’s military call-up. pledge collateral to secure a Military
Reservist EIDL of $50,000 or less. For
§ 123.509 What can’t you use Military loans larger than $50,000, you will be
Reservist EIDL funds for? required to provide available collateral
Your small business can not use Mili- such as a lien on business property, a
tary Reservist EIDL funds for purposes security interest in personal property,
described in § 123.303(b) (See § 123.303, ‘‘ or both. SBA will not decline a loan if
How can my business spend my eco- you do not have a particular amount of
nomic injury disaster loan?’’). collateral so long as SBA is reasonably
sure that you can repay the loan. If
§ 123.510 What if you don’t use your you refuse to pledge the available col-
Military Reservist EIDL funds as lateral when requested by SBA, how-
authorized?
ever, SBA may decline or cancel your
If your small business does not use loan.
Military Reservist EIDL funds as au-
thorized by § 123.508, then § 123.9 applies [73 FR 54675, Sept. 23, 2008]
(See § 123.9, ‘‘What happens if I don’t
use loan proceeds for the intended pur- Subpart G—[Reserved]
pose?’’).
§ 123.511 How will SBA disburse Mili- Subpart H—Immediate Disaster
tary Reservist EIDL funds? Assistance Program
Funds will be disbursed only after
the essential employee has been called SOURCE: 75 FR 60598, Oct. 1, 2010, unless
to active service, and you have pro- otherwise noted.
vided a copy of the essential employ-
§ 123.700 What is the Immediate Dis-
ee’s official call-up orders for active
aster Assistance Program?
service showing the date of the call-up.
SBA will disburse your funds in quar- (a) The Immediate Disaster Assist-
terly installments (unless otherwise ance Program (IDAP) is a guaranteed
specified in your loan authorization disaster loan program for small busi-
agreement) based on a continued need nesses that have suffered physical dam-
as demonstrated by comparative finan- age or economic injury due to a De-
cial information. On or about 30 days clared Disaster. An IDAP loan is an in-
before your scheduled fund disburse- terim loan in an amount not to exceed
ment, SBA will request ordinary and $25,000 made by an IDAP Lender to
usual financial statements (including meet the immediate business needs of
balance sheets and profit and loss an IDAP Borrower while approval of
statements). Based on this informa- long-term financing from a Disaster
tion, SBA will assess your continued Loan is pending with SBA.
471
§ 123.701 13 CFR Ch. I (1–1–25 Edition)
(b) Definitions. As used in this sub- at such time, the Initial Period shall
part, the terms below are defined as not end until the IDAP loan is fully
follows: disbursed.
Contiguous Counties means the coun- Major Disaster Declaration means a
ties or other political subdivisions disaster declaration issued under
identified in the IDAP-Eligible Dis- § 123.3(a)(1) of this part.
aster Declaration as abutting the Pri- Other Recoveries are other compensa-
mary Counties. tion for disaster losses and include, but
Credit Elsewhere means that the IDAP are not limited to: Proceeds of policies
Borrower is able to address disaster of insurance or other indemnifications;
losses using available personal or busi- grants or other reimbursement (includ-
ness resources or access to nonfederal ing loans) from government agencies or
lending sources at reasonable rates and private organizations; claims for civil
terms. liability against other individuals, or-
Declared Disaster is a disaster event ganizations or governmental entities;
for which an IDAP-Eligible Disaster gifts; condemnation awards; and sal-
Declaration has been issued. vage (including any sale or re-use) of
Declared Disaster Area means the Pri- items of disaster-damaged property. If
mary Counties and the Contiguous an IDAP Borrower has voluntarily paid
Counties identified for a particular De- insurance recoveries to a recorded
clared Disaster. lienholder, the amount paid is consid-
Disaster Loan means a disaster loan ered to be Other Recoveries.
authorized by Section 7(b) of the Small Primary Counties means the counties
Business Act. or other political subdivisions identi-
IDAP Borrower is the obligor of an fied in the IDAP-Eligible Disaster Dec-
IDAP loan. laration as having been adversely af-
IDAP Lender is a financial institution fected by the disaster.
participating in the IDAP loan pro- SBA Administrative Disaster Declara-
gram, subject to the requirements of tion means a disaster declaration
this subpart. issued under § 123.3(a)(3) of this part.
IDAP Loan Program Requirements are
SBA EIDL-Only Disaster Declaration
requirements imposed upon an IDAP
means a disaster declaration issued
Lender by statute, SBA regulations,
under § 123.3(a)(5) of this part.
any agreement the IDAP Lender has
Substantial Economic Injury exists
executed with SBA, SBA SOPs, SBA
when a business concern is unable to
procedural guidance, official SBA no-
meet its obligations as they mature or
tices and forms applicable to the IDAP
to pay its ordinary and necessary oper-
loan program, and loan authorizations,
ating expenses. Loss of anticipated
as such requirements are issued and re-
profits or a drop in sales is not consid-
vised by SBA from time to time.
ered substantial economic injury.
IDAP-Eligible Disaster Declaration
means a Major Disaster Declaration, Term Period is the repayment period
SBA Administrative Disaster Declara- that begins following:
tion or SBA EIDL-Only Disaster Dec- (i) SBA notice to the IDAP Lender of
laration in which SBA has indicated decline of the IDAP Borrower’s Dis-
that IDAP loans are available. aster Loan application;
Initial Period is the IDAP loan repay- (ii) Receipt by the IDAP Lender of
ment period that begins upon the ini- partial repayment of the IDAP loan
tial disbursement of an IDAP loan and from the proceeds of the Disaster Loan;
ends upon (i) full repayment of the or
IDAP loan from the proceeds of the (iii) Final disbursement of the IDAP
IDAP Borrower’s Disaster Loan; (ii) loan, whichever is later, and ends when
SBA notice to the IDAP Lender of de- the IDAP loan is repaid in full.
cline of the IDAP Borrower’s Disaster
Loan Application; or (iii) receipt by § 123.701 What is the application pro-
the IDAP Lender of partial repayment cedure for an IDAP loan?
of the IDAP loan from the proceeds of A prospective IDAP Borrower must
the Disaster Loan; provided that if the apply to an IDAP Lender for an IDAP
IDAP loan has not been fully disbursed loan by the application deadline for
472
Small Business Administration § 123.702
prospective IDAP Borrowers estab- (5) Apply to SBA for a Disaster Loan
lished by SBA in the IDAP-Eligible within the applicable deadline and be-
Disaster Declaration. If the IDAP fore any disbursement of the IDAP
Lender approves the application, it loan; and
must submit a request for IDAP loan (6) Be creditworthy and demonstrate
approval to SBA by the application reasonable assurance of repayment of
deadline for IDAP Lenders established the IDAP loan.
by SBA in the IDAP-Eligible Disaster (b) Ineligible IDAP applicants. An ap-
Declaration. SBA will issue an ap- plicant business is not eligible for an
proval or a decline of the IDAP Lend- IDAP loan if it is:
er’s request within 36 hours of receipt (1) A non-profit or charitable con-
by SBA. A prospective IDAP Borrower cern;
will receive notice of approval or de- (2) A business that was not a small
cline of its loan application from the business concern under the size re-
IDAP Lender. Notice of decline will in- quirements of part 121 of this chapter
clude the reasons. If an IDAP loan is (including affiliates) when the Declared
approved, a loan authorization will be Disaster commenced;
issued. (3) A consumer or marketing cooper-
ative;
§ 123.702 What are the eligibility re- (4) Deriving more than one-third of
quirements for an IDAP loan? gross annual revenue from legal gam-
(a) Eligible IDAP applicants. To be eli- bling activities or a business whose
gible for an IDAP loan, an applicant purpose for being is gambling regard-
business must meet all of the require- less of its ability to meet the one-third
ments set forth below. The applicant criteria established for otherwise eligi-
business must: ble concerns;
(1) Be located within a Declared Dis- (5) A loan packager which earns more
aster Area; than one-third of its gross annual rev-
(2) Have eligible disaster losses as enue from packaging SBA loans;
follows: (6) Principally engaged in teaching,
(i) For a Major Disaster Declaration, instructing, counseling, or indoctri-
if located in a Primary County, have nating religion or religious beliefs,
sustained damage to real or business whether in a religious or secular set-
personal property in the Declared Dis- ting;
aster or, if located in a Primary or (7) Primarily engaged in political or
Contiguous County, have sustained lobbying activities;
Substantial Economic Injury as a di- (8) A private club or business that
rect result of the Declared Disaster; or limits the number of memberships for
(ii) For an SBA Administrative Dis- reasons other than capacity;
aster Declaration, have sustained dam- (9) Presents live performances of a
age to real or business personal prop- prurient sexual nature or derives di-
erty in the Declared Disaster or sus- rectly or indirectly more than de mini-
tained Substantial Economic Injury as mis gross revenue through the sale of
a direct result of the Declared Disaster; products or services, or the presen-
or tation of any depictions or displays, of
(iii) For an SBA EIDL-Only Disaster a prurient sexual nature;
Declaration, have sustained Substan- (10) Engaged in the production or dis-
tial Economic Injury as a direct result tribution of any product or service that
of the Declared Disaster; has been determined to be obscene by a
(3) Have been a small business con- court;
cern under the size requirements appli- (11) Engaged in any illegal activity;
cable to disaster loan assistance under (12) A government owned entity (ex-
part 121 of this chapter (including af- cept for a business owned or controlled
filiates) when the Declared Disaster by a Native American tribe);
commenced; (13) A business in which the IDAP
(4) Together with affiliates and prin- Lender or any of its Associates (as de-
cipal owners, not have Credit Else- fined in § 120.10) owns an equity inter-
where; est;
473
§ 123.703 13 CFR Ch. I (1–1–25 Edition)
(14) Primarily engaged in subdividing (1) is currently incarcerated, serving
real property into lots and developing a sentence of imprisonment imposed
it for resale on its own account; upon adjudication of guilty, or is pres-
(15) Engaged in lending, multi-level ently under indictment;
sales distribution, speculation, or in- (2) Is at least a 50 percent or more
vestment (except for real estate invest- owner of applicant business, and is
ment with property held for rental more than 60 days delinquent on any
when the Declared Disaster occurred); obligation to pay child support arising
(16) Delinquent on any Federal obli- under an administrative order, court
gation, including but not limited to order, repayment agreement between
any Federal loans, contracts, grants,
the holder and a custodial parent, or
student loans or taxes, or has a judg-
repayment agreement between the
ment lien for a Federal debt against its
property; holder and a state agency providing
(17) Located in a Special Flood Haz- child support enforcement services;
ard Area (SFHA), as designated by the (3) Is an undocumented (illegal)
Federal Emergency Management Agen- alien; or
cy, and has not maintained required (4) Is delinquent on any Federal obli-
flood insurance on its business prop- gation, including but not limited to
erty (regardless of the type of disaster); any Federal loans, contracts, grants,
(18) Located in a SFHA within a non- student loans or taxes.
participating community or a commu-
[75 FR 60598, Oct. 1, 2010, as amended at 89 FR
nity under sanction; 34102, Apr. 30, 2024]
(19) Located in a building that was
newly constructed or substantially im- § 123.703 What are the terms of an
proved on or after February 9, 1989, and IDAP loan?
is currently located seaward of mean
high tide or entirely in or over water; (a) Guaranty percentage. The SBA
(20) Located in a Coastal Barrier Re- guaranteed share of an IDAP loan is
source Area (COBRA); 85%.
(21) A business that had a substantial (b) Maximum loan size. (1) If the
change of ownership (more than 50 per- amount of an IDAP Borrower’s disaster
cent) after the Declared Disaster and losses is $25,000 or less, the principal
no contract of sale existed prior to that amount of an IDAP loan must not ex-
time; ceed the amount of disaster losses
(22) A business that was established minus Other Recoveries.
after the Declared Disaster; (2) If the amount of an IDAP Bor-
(23) Relocating out of the Declared rower’s disaster losses is more than
Disaster Area; $25,000, the principal amount of an
(24) Primarily engaged in the produc- IDAP loan must not exceed $25,000
tion of food and fiber, ranching and minus Other Recoveries.
raising of livestock, aquaculture and (c) Disbursement. The disbursement
all other farming and agriculture-re-
period for an IDAP loan is generally up
lated industries (except for a nursery
to 30 days from the date of SBA ap-
deriving less than 50 percent of annual
proval of the IDAP loan. If the IDAP
receipts from the production and sale
of ornamental plants and other nursery Lender is notified before disbursement
products, a small agricultural coopera- of the IDAP loan that the IDAP Bor-
tive or a small producer cooperative); rower has received Other Recoveries,
or the IDAP Lender must decrease the ap-
(25) A sole proprietorship, unincor- proved amount of the IDAP loan by the
porated association, partnership or amount of the Other Recoveries. If the
limited liability company in which a IDAP Borrower’s Disaster Loan is ap-
Member of Congress (or a household proved, SBA will contact the IDAP
member) has an ownership interest. Lender when SBA is ready to disburse
(c) Character requirements. An appli- the Disaster Loan. Upon receipt of such
cant business is not eligible for an notification by SBA, the IDAP Lender
IDAP loan if any Associate (as defined must cancel any remaining
in § 120.10) of the applicant business: undisbursed amount of the IDAP loan.
474
Small Business Administration § 123.704
(d) Repayment—(1) Initial Period. Dur- proceeds of the Disaster Loan, or final
ing the Initial Period, an IDAP Bor- disbursement of the IDAP loan, which-
rower will pay interest only on the dis- ever is later. Balloon payments are not
bursed principal balance of the IDAP permitted. The IDAP Borrower may
loan. If SBA approves the IDAP Bor- prepay all or a portion of the principal
rower’s Disaster Loan application, SBA during the life of the loan without pen-
will require that the IDAP loan be re- alty. If the IDAP Borrower receives
paid first from the proceeds of the Dis- Other Recoveries during the Term Pe-
aster Loan. If the IDAP Borrower re- riod, the IDAP Borrower must, in ac-
ceives Other Recoveries during the Ini- cordance with § 123.703(h), remit the
tial Period, the IDAP Borrower must, Other Recoveries to the IDAP Lender,
in accordance with § 123.703(h), remit and the IDAP Lender will apply the
the Other Recoveries to the IDAP Other Recoveries to the IDAP loan.
Lender, and the IDAP Lender will (e) Interest rate—(1) Initial Period. The
apply the Other Recoveries to the maximum interest rate an IDAP Lend-
IDAP loan. If the IDAP Borrower’s Dis- er may charge an IDAP Borrower dur-
aster Loan application is declined or if ing the Initial Period will be published
the amount of the approved Disaster by SBA in the FEDERAL REGISTER from
Loan is insufficient to repay the IDAP time to time. This rate must be a fixed
loan in full, the remaining balance of rate.
the IDAP loan will be repaid during the (2) Term Period. The maximum inter-
Term Period as described in paragraph est rate an IDAP Lender may charge
(2). The Initial Period ends upon (i) full an IDAP Borrower during the Term Pe-
repayment of the IDAP loan from the riod will be published in the FEDERAL
proceeds of the IDAP Borrower’s Dis- REGISTER from time to time. The IDAP
aster Loan; (ii) SBA notice to the IDAP Lender may charge either a fixed or a
Lender of decline of the IDAP Bor- variable rate during the Term Period.
rower’s Disaster Loan Application; or (f) Number of IDAP loans per small
(iii) receipt by the IDAP Lender of par- business. No small business (including
tial repayment of the IDAP loan from affiliates) may obtain more than one
the proceeds of the Disaster Loan; pro- IDAP loan per Declared Disaster. The
vided that if the IDAP loan has not provisions of § 120.151 do not apply to
been fully disbursed at such time, the IDAP loans.
Initial Period shall not end until the (g) Personal guarantees. Holders of at
IDAP loan is fully disbursed. If an least a 20 percent ownership interest in
IDAP Borrower withdraws an applica- the IDAP Borrower must guarantee the
tion for a Disaster Loan, fails to close IDAP loan.
on an approved Disaster Loan or if the (h) Agreement to remit Other Recov-
approved Disaster Loan is cancelled, eries. IDAP Borrowers must promptly
the IDAP loan is immediately due and notify the IDAP Lender of the receipt
payable by the IDAP Borrower. of Other Recoveries, and must prompt-
(2) Term Period. If SBA declines the ly remit the proceeds of Other Recov-
IDAP Borrower’s Disaster Loan appli- eries to the IDAP Lender. The IDAP
cation or the approved amount of the Lender must apply the Other Recov-
Disaster Loan is insufficient to repay eries to the IDAP loan balance. SBA
the IDAP loan in full, the IDAP Bor- does not require any additional collat-
rower must pay principal and interest eral for IDAP loans.
on the IDAP loan, with the IDAP loan
balance to be fully amortized over a pe- § 123.704 Are there restrictions on how
riod that is at least 10 years from the IDAP loan funds may be used?
date of final disbursement of the IDAP (a) IDAP loan proceeds may only be
loan, but no more than 25 years from used for the following purposes:
the date of final disbursement. The (1) For a Major Disaster Declaration:
Term Period begins in the first month (i) If the IDAP Borrower is located in
following SBA notice to the IDAP a Primary County, to restore or re-
Lender of decline of the IDAP Bor- place the IDAP Borrower’s real or busi-
rower’s Disaster Loan application, re- ness personal property to its condition
ceipt by the IDAP Lender of partial re- before the Declared Disaster occurred
payment of the IDAP loan from the and/or for working capital necessary to
475
§ 123.705 13 CFR Ch. I (1–1–25 Edition)
carry the IDAP Borrower until resump- or order of a federal, state, regional, or
tion of normal operations and for ex- local agency or similar matter;
penditures necessary to alleviate the (4) Pay dividends, bonuses or other
specific economic injury, but not to ex- disbursements to owners, partners, of-
ceed that which the IDAP Borrower ficers or stockholders, except for rea-
could have provided had the injury not sonable remuneration directly related
occurred; or to their performance of services for the
(ii) If the IDAP Borrower is located business;
in a Contiguous County, for working (5) Make repairs on a building rented
capital necessary to carry the IDAP by the IDAP Borrower if the IDAP Bor-
Borrower until resumption of normal rower’s lease does not require the IDAP
operations and for expenditures nec- Borrower to make such repairs;
essary to alleviate the specific eco- (6) Make repairs to a condominium
nomic injury, but not to exceed that unit owned by the IDAP Borrower;
which the IDAP Borrower could have (7) Replace landscaping in excess of
provided had the injury not occurred. $5,000 unless the disaster damaged
(2) For an SBA Administrative Dis- landscaping fulfilled a functional need
aster Declaration, if the IDAP Bor- or contributed toward the generation
rower is located in either a Primary of business;
County or a Contiguous County, to re- (8) Repair or replace property not lo-
store or replace the IDAP Borrower’s cated within the Declared Disaster
real or business personal property to Area at the time of the Declared Dis-
its condition before the Declared Dis- aster;
aster occurred and/or for working cap- (9) Repay stockholder/Associate
ital necessary to carry the IDAP Bor- loans, except where the funds were in-
rower until resumption of normal oper- jected on an interim basis as a result of
ations and for expenditures necessary the Declared Disaster and non-repay-
to alleviate the specific economic in- ment would cause undue hardship to
jury, but not to exceed that which the the stockholder/Associate;
IDAP Borrower could have provided (10) Expand facilities or acquire fixed
had the injury not occurred. assets, except for replacement of dis-
(3) For an SBA EIDL-Only Disaster aster-damaged fixed assets;
Declaration, if the IDAP Borrower is (11) Pay for contractor malfeasance;
located in either a Primary County or (12) Replace damaged property that
a Contiguous County, for working cap- consists of cash or securities;
ital necessary to carry the IDAP Bor- (13) Replace damaged property if the
rower until resumption of normal oper- replacement value is extraordinarily
ations and for expenditures necessary high and not easily verified, such as
to alleviate the specific economic in- the value of antiques, artworks or
jury, but not to exceed that which the hobby collections; or
IDAP Borrower could have provided (14) Repair or replace damaged prop-
had the injury not occurred. erty where the IDAP Borrower’s only
(b) IDAP loan proceeds may not be interest is in the form of a security in-
used to: terest, mortgage or deed of trust.
(1) Refinance or repay indebtedness
incurred prior to the Declared Disaster § 123.705 Are there any fees associated
(other than regularly due install- with IDAP loans?
ments); (a) IDAP Lender Fees. An IDAP Lend-
(2) Make payments on loans owned by er must not impose any fees or direct
another federal agency (including SBA) costs on an IDAP Borrower, except for
or a Small Business Investment Com- the following allowed fees or direct
pany licensed under the Small Business costs:
Investment Act; (1) The reasonable direct costs of liq-
(3) Pay, directly or indirectly, any uidation;
obligations resulting from a federal, (2) A late payment fee not to exceed
state or local tax penalty as a result of 5 percent of the scheduled IDAP loan
negligence or fraud, or any non-tax payment; and
criminal fine, civil fine, or penalty for (3) An application fee not to exceed
non-compliance with a law, regulation, $250. Notwithstanding the provisions of
476
Small Business Administration § 123.706
13 CFR 103.5, no compensation agree- edly wrongful action taken by an IDAP
ment is required for the application Lender or an employee, agent or con-
fee. If an undisbursed IDAP loan is can- tractor of an IDAP Lender.
celled pursuant to § 123.703(c), the IDAP (b) Delegated authority. An IDAP loan
Lender may retain the application fee. must be processed, serviced and liq-
(b) SBA Fees. SBA will not impose uidated under an IDAP Lender’s dele-
any guarantee fees on an IDAP Lender gated authority provided by the supple-
making an IDAP loan. mental Loan Guarantee Agreement for
(c) Prohibition on paid loan packagers, the IDAP loan program. Non-delegated
referral agents or brokers. Other than the processing is not available for the
application fee set forth in (a)(3) of this IDAP loan program. An IDAP Lender is
section, no IDAP Lender or third party responsible for all IDAP loan decisions
may charge an IDAP Borrower a fee to regarding eligibility (including size)
assist in the preparation of an IDAP and creditworthiness. In determining
loan application or application mate- creditworthiness, an IDAP Lender
rials. No third party may charge an must use the existing practices and
IDAP Borrower or an IDAP Lender a procedures that the IDAP Lender uses
referral fee or broker’s fee in connec- for its non-SBA guaranteed commer-
tion with an IDAP loan. cial loans of a similar size. The IDAP
§ 123.706 What are the requirements Lender’s existing practices and proce-
for IDAP Lenders? dures must be appropriate and gen-
erally accepted, proven and prudent
(a) IDAP Lenders. An IDAP Lender
credit evaluation processes and proce-
must be a 7(a) Lender (as defined in
dures, which may include credit scor-
§ 120.10). Notwithstanding the provi-
ing, and must ensure that there is rea-
sions of § 120.470(a), a Small Business
sonable assurance of repayment. In dis-
Lending Company (SBLC) that is a 7(a)
bursing the IDAP loan, the IDAP Lend-
Lender may make IDAP loans. An
er must use the same disbursement
IDAP Lender must sign a supplemental
procedures and documentation as it
Loan Guarantee Agreement for the
uses for its similarly sized non-SBA
IDAP loan program. An IDAP Lender
guaranteed commercial loans. An IDAP
must comply and maintain familiarity
with the IDAP Loan Program Require- Lender is also responsible for con-
ments, as such requirements are re- firming that all IDAP loan processing,
vised from time to time. IDAP Loan closing, servicing and liquidation deci-
Program Requirements in effect at the sions are correct and that all IDAP
time that an IDAP Lender takes an ac- Loan Program Requirements have been
tion in connection with a particular followed.
IDAP loan govern that specific action. (c) IDAP Lender reporting. An IDAP
With respect to their activities in the Lender must report on its IDAP loans
IDAP loan program, IDAP Lenders are in accordance with requirements estab-
subject to the requirements of §§ 120.140 lished by SBA from time to time.
(What ethical requirements apply to (d) Servicing. Each IDAP Lender must
participants?), 120.197 (Notifying SBA’s service all of its IDAP loans in accord-
Office of Inspector General of suspected ance with the existing practices and
fraud), 120.400 (Loan Guarantee Agree- procedures that the IDAP Lender uses
ments), 120.410 (Requirements for all for its non-SBA guaranteed commer-
participating Lenders), 120.411 (Pref- cial loans. In all circumstances, such
erences), 120.412 (Other services Lend- practices and procedures must be com-
ers may provide Borrowers), and 120.413 mercially reasonable and consistent
(Advertisement of relationship with with prudent lending standards and in
SBA) of this chapter. An IDAP Lender accordance with IDAP Loan Program
and its contractor(s) are independent Requirements. SBA’s prior written
contractors that are responsible for consent is required for servicing ac-
their own actions with respect to an tions that may have significant expo-
IDAP loan. SBA has no responsibility sure implications for SBA. SBA may
or liability for any claim by an IDAP require written notice of other serv-
Borrower, guarantor or other party al- icing actions it considers necessary for
leging injury as a result of any alleg- portfolio management purposes.
477
Pt. 124 13 CFR Ch. I (1–1–25 Edition)
(e) Liquidations. Each IDAP Lender Lenders in part 120, subpart I of this
must be responsible for liquidating its chapter (§§ 120.1000 through 120.1600). In
defaulted IDAP loans. IDAP loans will addition, an IDAP Lender that is an
be liquidated in accordance with the SBA Supervised Lender (as defined in
existing practices and procedures that § 120.10) is subject to the requirements
the IDAP Lender uses for its non-SBA of §§ 120.460 through 120.490, as applica-
guaranteed commercial loans. In all ble.
circumstances, such practices and pro-
cedures must be commercially reason- PART 124—8(a) BUSINESS DEVEL-
able and consistent with prudent lend- OPMENT/SMALL DISADVAN-
ing standards and in accordance with TAGED BUSINESS STATUS DETER-
IDAP Loan Program Requirements. MINATIONS
IDAP loans with de minimis value may,
at the IDAP Lender’s request and with Subpart A—8(a) Business Development
SBA’s approval, be liquidated by SBA
or its agent(s). Significant liquidation PROVISIONS OF GENERAL APPLICABILITY
actions taken on IDAP loans must be Sec.
documented. The reimbursement of 124.1 What is the purpose of the 8(a) Busi-
IDAP Lender liquidation expenses is ness Development program?
limited to the amount of the recovery 124.2 What length of time may a business
on the IDAP loan. participate in the 8(a) BD program?
(f) Purchase requests. An IDAP Lender 124.3 What definitions are important in the
8(a) BD program?
may request SBA to purchase the guar- 124.4 What restrictions apply to fees for ap-
anteed portion of an IDAP loan when plicant and Participant representatives?
there has been an uncured payment de-
fault exceeding 60 days or when the ELIGIBILITY REQUIREMENTS FOR PARTICIPA-
TION IN THE 8(a) BUSINESS DEVELOPMENT
IDAP Borrower has declared bank-
PROGRAM
ruptcy. IDAP loans are subject to the
7(a) loan program requirements of 124.101 What are the basic requirements a
§§ 120.520 (Purchase of 7(a) loan guaran- concern must meet for the 8(a) BD pro-
tees), 120.521 (What interest rate ap- gram?
124.102 What size business is eligible to par-
plies after SBA purchases its guaran- ticipate in the 8(a) BD program?
teed portion?), 120.522 (Payment of ac- 124.103 Who is socially disadvantaged?
crued interest to the Lender or Reg- 124.104 Who is economically disadvantaged?
istered Holder when SBA purchases the 124.105 What does it mean to be uncondi-
guaranteed portion), 120.523 (What is tionally owned by one or more disadvan-
the ‘‘earliest uncured payment de- taged individuals?
fault’’?), 120.524 (When is SBA released 124.106 When do disadvantaged individuals
control an applicant or Participant?
from liability on its guarantee?), 124.107 What is potential for success?
120.542 (Payment by SBA of legal fees 124.108 What other eligibility requirements
and other expenses) and 120.546 (Loan apply for individuals or businesses?
asset sales) of this chapter. 124.109 Do Indian tribes and Alaska Native
(g) Prohibition on secondary market Corporations have any special rules for
sales, securitizations, loan participations applying to and remaining eligible for
and loan sales. An IDAP Lender may the 8(a) BD program?
124.110 Do Native Hawaiian Organizations
not sell the guaranteed portion of an
(NHOs) have any special rules for apply-
IDAP loan in the secondary market, ing to and remaining eligible for the 8(a)
securitize the unguaranteed portion of BD program?
an IDAP loan, participate any portion 124.111 Do Community Development Cor-
of an IDAP loan with another lender, porations (CDCs) have any special rules
or sell all of its interest in an IDAP for applying to and remaining eligible for
loan. the 8(a) BD program?
(h) Loan pledges. An IDAP Lender 124.112 What criteria must a business meet
to remain eligible to participate in the
may pledge an IDAP loan subject to 8(a) BD program?
the 7(a) loan program requirements of
§§ 120.434 and 120.435 of this chapter. APPLYING TO THE 8(a) BD PROGRAM
(i) Oversight. All IDAP Lenders are 124.201 May any business submit an applica-
subject to the supervision and enforce- tion?
ment provisions applicable to 7(a) 124.202 How must an application be filed?
478
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