SBA proposed to remove provisions that currently make faith-based organizations ineligible for certain SBA disaster loans and other loan eligibility issues determined to violate the Free Exercise Clause of the First Amendment to the Constitution.

FAQ#: 442 published 8-10-2021

Background SBA Disaster Loans:

Intermediary Lending Pilot Program ("ILP"). The Intermediary Lending Pilot ("ILP") program was established as a pilot program authorized by the Small Business Jobs Act of 2010, Public Law 111-240 (2010), to provide loans of up to $1,000,000 to nonprofit intermediaries for the purpose of providing loans to small businesses. The program authorized SBA to select up to 20 nonprofit intermediaries each year to receive loans of up to $1,000,000, subject to the availability of funds. Selected ILP intermediaries, in turn, use the funds to make loans of up to $200,000 to eligible startup, newly established, or growing small businesses. ILP Intermediaries continue to relend a portion of the payments received on small business loans made under the program until they have fully repaid their loans to SBA.

Economic Injury Disaster Loan Program ("EIDL"). The Economic Injury Disaster Loan ("EIDL") program provides economic relief to eligible small businesses and private nonprofit organizations that experience substantial economic injury as a direct result of a declared disaster. Substantial economic injury is such that a business concern is unable to meet its obligations as they mature or to pay its ordinary and necessary operating expenses. EIDL loan proceeds may be used only for working capital necessary to carry on the business concern until resumption of normal operations and for expenditures necessary to alleviate the specific economic injury, but not to exceed that which the business concern could have provided had the injury not occurred.

Immediate Disaster Assistance Program ("IDAP"). The Immediate Disaster Assistance Program ("IDAP") is a guaranteed disaster loan program for small businesses that have suffered physical damage or economic injury due to a declared disaster. An IDAP loan is an interim loan in an amount not to exceed $25,000 made by an IDAP lender to meet the immediate business needs of an IDAP borrower while approval of long-term financing from a disaster loan is pending with SBA. Currently, there is no funding available for IDAP loans (8-10-2021).

Background Resource: Proposed Rule Ensuring Equal Treatment for Faith-Based Organizations in SBA's Loan and Disaster Assistance Programs Posted by the Small Business Administration on Jan 18, 2021.

The five subject provisions that are found to be inconsistent with the Free Exercise Clause of the First Amendment as construed by the Supreme Court in Trinity Lutheran and Espinoza.

Note: Typical time for review and approval for changes are 6 to 12 months from our estimates. Once the changes are approved then the SBA will update it's SOP and have the Office of Management and Budget review and approve the changes suggested and made by the SBA. It's a long process and will require all interested parties to continue to push for this change. It really will only take 2 of you and a logical argument.

TITLE 13 - Business Credit and Assistance

  1. Section 109.400(b)(11)
  2. Section 120.110(k)
  3. Section 123.301(g)
  4. Section 123.502(n)
  5. Section 123.702(b)(6)

1. Section 109.400 - Eligible Small Business Concerns (read on ecfr.gov)

The SBA is proposing to amend this section by removing paragraphs (b)(11) and (b)(12) and then modifying the "types of businesses" that "are not eligible to receive a loan from the ILP Intermediary under" the ILP.

SBA reason, "This exclusion based on religious status violates the Free Exercise Clause of the First Amendment to the Constitution."

2. Section 120.110 - What businesses are ineligible for SBA business loans? (read on ecfr.gov)

The SBA is proposing to amend this section by removing paragraphs (k) and (l) and then updating the following. 13 CFR 120.110 (linked above) will remove 13 CFR 120.110(k), "[b]usinesses principally engaged in teaching, instructing, counseling or indoctrinating religion or religious beliefs, whether in a religious or secular setting[.]"

SBA reason, "This exclusion based on religious status violates the Free Exercise Clause of the First Amendment to the Constitution."

3. Section 123.301 - When would my business not be eligible to apply for an Economic Injury Disaster Loan? (read on ecfr.gov)

The SBA is proposing to amend this section by removing paragraph (g). "Included in this list is 13 CFR 123.301(g), businesses that are "[p]rincipally engaged in teaching, instructing, counseling or indoctrinating religion or religious beliefs, whether in a religious or secular setting[.]"

SBA reason, "This exclusion based on religious status violates the Free Exercise Clause of the First Amendment to the Constitution."

4. Section 123.502 - Under what circumstances is your business ineligible to be considered for a Military Reservist Economic Injury Disaster loan? (read on ecfr.gov)

The SBA is proposing to amend this section by removing paragraph (n). "[p]rincipal activity is teaching, instructing, counseling or indoctrinating religion or religious beliefs, whether in a religious or secular setting[.]"

SBA reason, "This exclusion based on religious status violates the Free Exercise Clause of the First Amendment to the Constitution."

5. Section 123.702 - What are the eligibility requirements for an IDAP loan? (read on ecfr.gov)

The SBA is proposing to amend this section by removing paragraph (b)(6). "[p]rincipally engaged in teaching, instructing, counseling or indoctrinating religion or religious beliefs, whether in a religious or secular setting[.]"

SBA reason, "This exclusion based on religious status violates the Free Exercise Clause of the First Amendment to the Constitution."

Note: Their should be a pilot program then a review period. Then a SBA OIG report may be filed if any issue with policy or procedure is found or identified.

Public comments for "Ensuring Equal Treatment for Faith-Based Organizations in SBA's Loan and Disaster Assistance Programs" can be viewed online at Regulations.gov Comment on FR Doc # 2021-00446 Agency Small Business Administration Posted Mar 3, 2021 ID SBA-2021-0007-xxxx

 

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