and the District of Columbia, as well as individuals.

Processing and

administrative fee means a fee payable to SBA to defray processing and administrative expenses connected with each application (see § 111.7 (c) and (e) of this part).

Qualified contract means a lease, sublease, loan agreement, installment sales contract, or similar instrument, meeting the requirements of §111.8, entered into between a Small Concern and any person.

SBA means the Small Business Administration.

Small Concern, including its affiliates (as defined in §121.3-2(a) of this chapter), means a concern which qualifies as a small business under § 121.3-16 of this chapter. The usage of the singular Small Concern includes the plural.

Sponsor (if any) means a commercial bank (usually the bank of account of the Small Concern) which assists the Small Concern in preparing its application for SBA assistance. The sponsor reviews and analyzes the credit and financial data of the Small Concern and issues an opinion (1) on the Small Concern's creditw rthiness in accordance with its and SBA's established credit criteria and requirements, and (2) as to the operational or financing disadvantage of the Small Concern for the financing required.

Trustee (when industrial revenue bond financing is used) means the trustee under an indenture between the issuer and such trustee relating to the issuer's bonds.

[43 FR 33232, July 31, 1978, as amended at 45 FR 6406, Jan. 28, 1980; 45 FR 39497, June 11, 1980]

§ 111.4 Eligibility.

In order to be eligible for a guarantee under this part the Small Concern must:

(a) Be independently owned and operated and not dominant in its field and must be eligible under SBA loan policy, as defined in part 120 of this chapter.

(b) Together with its affiliates (as defined in §121.3-2(a) of this chapter) qualify as a small business as defined in § 121.3-16 of this chapter.

(c) Be at an operational or financial disadvantage with other business con

cerns with respect to the planning, design, or installation of pollution control facilities, or the obtaining of flnancing therefor, or likely to suffer such disadvantage;

(d) Have been in operation for at least five years, and have a history of profitable operations during any three of the last five years preceding the date of the application, or provide evidence to support a determination by SBA that the equivalent of such operation exists.

(e) Provide evidence from a local, State or Federal environmental regulatory authority that the Facility meets the terms of the definition above.

[45 FR 39497, June 11, 1980]

§ 111.5 Procedure for guarantee applications.

(a) Form: An application for guarantee shall be made on SBA form 1136 and shall include all pertinent information required in supporting schedules and exhibits.

(b) Place of filing: The application shall be submitted to the Sponsor (if any) in triplicate, for transmission to SBA. Applications involving industrial revenue bond financing shall be filed at SBA's Central Office (1441 L Street! NW., Washington, DC 20416). Other applications shall be filed at the SBA field office having jurisdiction over the principal place of business of the applicant Small Concern.

(c) Approval or denial of applications: No application for guarantee shall be approved unless the following conditions are met to SBA's satisfaction:

(1) Each application must be accompanied by a legible copy of the qualified contract (including supporting material).

(2) There is a reasonable expectation that the Small Concern will perform all the terms, covenants, and conditions of the qualified contract.

(3) The terms, covenants, and condi- | tions of the qualified contract have been approved by SBA.

(4) SBA will not guarantee or participate in any guarantee when the sponsor or any participant, or an associate (as defined in § 120.1(d) of this chapter) of either, has a direct or indirect interest in the Small Concern.

(5) SBA will not guarantee or participate in guaranteeing any obligation under a qualified contract for the purpose of financing, directly or indirectly, the purchase of real or personal property or of services from any participant or sponsor or any of their associates, unless SBA shall have first made a written determination that the purchase of the property or services is in the best interests of the Small Concern.

(6) SBA will not guarantee or participate in the guarantee of the refinancing of an existing obligation relating to a facility unless SBA shall have first made a written determination that the terms of the existing obligation are causing an operational or financing disadvantage to the Small Concern, that refinancing on the terms proposed will relieve such disadvantage and will not violate §120.2(d)(1) of this chapter and that the refinancing is not available without SBA's guarantee or participation.

$111.6 Participation agreement.

SBA may enter into a participation agreement with a qualified surety company or other qualified company to share in the risk of loss under the guarantee.

$111.7 Terms of guarantee and fee.

(a) The repayment period will be in accordance with the applicant's ability to repay, but shall not exceed 30 years. (b) The required financing to be guaranteed shall not exceed $5,000,000 in principal.

(c) The processing and administrative fee relating to industrial revenue bond financing will be computed as follows: $550+ ($30 × number of years of Qualified contract). Each application shall be accompanied by $250 of the processing and administrative fee which is not refundable. The balance of the processing and administrative fee is payable to SBA upon issuance of its guarantee. If the application is approved, SBA may issue a commitment to guarantee which shall expire not later than 24 months from the date of the commitment.

(d) The guarantee fee shall be 31⁄2 percent of the minimum annual guaranteed payments under the qualified con

tract and shall be payable to SBA upon the issuance of the guarantee. The fee of 31⁄2 percent shall not be computed on escrowed funds. The guarantee fee will be computed as follows: (total amount of payments (principal and interest) less: one-fourth of the average annual payments (escrow)) × 3.5 percent.

(e) The processing and administrative fee for the guarantee of financing, other than industrial revenue bond-related financing, shall be established and published in the future, but in no event shall the fee be less than $250. [43 FR 33232, July 31, 1978, as amended at 45 FR 6406, Jan. 28, 1980]

111.8 Qualified contract.

To be qualified, a contract shall provide: (a) For the acquisition, installation, planning, design, or financing of a facility.

(b) For any lien or security interest in the facility that may be determined necessary by SBA.

(c) Identification of the parties; description and location of the facility, the principal basic indebtedness therefor to be guaranteed (exclusive of those costs or expenses listed in paragraph (d) of this section), the rate of interest thereon and the number, amount and time of payments, which shall be in substantially equal amounts not less frequently than quarterly.

(d) That the Small Concern shall pay all costs related to the use, operation, maintenance, repair of, taxes, or other liens on the facility, licenses, insurance of any kind, or any expenses in connection with additions, substitutions, or modifications of the facility or any part thereof, in order that the payments to be guaranteed shall be net of the aforesaid expenses.

(e) That costs or expenses exceeding the estimated costs or expenses set forth in the application shall be borne by the Small Concern.

(f) That all available manufacturer's warranties shall vest in the Small Concern upon its acquisition of possession or title to the facility or any part thereof.

(g) That the Small Concern pay to the trustee (if any), or an escrow agent selected jointly by SBA and the Small Concern, an amount equal to onefourth of the average annual guaran

teed payments which shall be held in escrow by the escrow agent and invested in direct obligations of, or obligations guaranteed as to principal and interest by, the United States, or in insured savings accounts (up to the amount of the insurance) in any institution the accounts of which are insured by the Federal Savings and Loan Insurance Corporation. Escrowed funds not so invested shall be deposited in a bank insured by the Federal Deposit Insurance Corporation or may be (a) invested in time certificates of deposit maturing within 1 year or less, issued by any bank which is so insured, or (b) deposited in a savings account of such bank. Such escrow amount plus interest thereon, if any, shall be drawn upon to meet any payments on which the Small Concern is in default, or if no default occurs, for application toward final payments. Any withdrawals which cure defaults shall be replenished by the Small Concern. In the case of applications which are not related to industrial revenue bond financing, SBA may require the applicant to make a cash down payment.

(h) That the obligations of the Small Concern to make the payments are absolute and unconditional; that the Small Concern shall have no legal right of setoff, recoupment or counterclaim against any person; that the obligation shall continue absolute and unconditional in the event of total or partial condemnation of the facility or the use thereof, or total or partial destruction of the facility by fire or other hazard.

(i) Clauses setting forth events of default and their consequences, including acceleration of the due date of the payments in the aggregate.

(j) The consent of the Small Concern to SBA's succession to the rights of the person providing the facilities for the purpose of collecting from the Small Concern in default, payments which are in arrears and with respect to which such person has received payments under the guarantee. Any collateral hypothecated as security to such person shall immediately vest in SBA as security for its payment or payments.

(k) An agreement by the Small Conto keep the facility insured

cern

against such perils in such amounts as is customary and usual for other businesses insuring similar property.

(1) A statement that the instrument contains the entire agreement of the parties, and stipulation of the governing law.

[43 FR 33232, July 31, 1978, as amended at 45 FR 6406, Jan. 28, 1980]

§ 111.9 Minimization of losses.

Based on the useful life of the facility, its identity as an assembled or identifiable unit of real or personal property and such other factors as may be appropriate, SBA shall determine during the processing of the application whether the person (or trustee) relying upon the guarantee shall mitigate losses caused by uncured defaults in the qualified contracts. Provided SBA has made an affirmative determination that losses shall be mitigated, upon the occurrence of a default in payment under the qualified contract, the person (or trustee) relying upon the guarantee shall, as a condition precedent to enforcing any claim under the guarantee, utilize the entire period, for which there are funds available in escrow, in reasonably diligent efforts to eliminate or minimize losses and no claim shall be made or paid under the guarantee until such effort has been made and such escrow funds have been exhausted. Generally, reasonably diligent efforts will consist of such actions as the person (or trustee) would take if the payments were not guaranteed, and may consist of advertising the facility for sale, lease, or rent or the retention of agents or brokers to salvage the value of the property for application of the proceeds on the amount guaranteed.

$111.10 Payments of installments in default.

After the escrow, if any, and interest thereon, if any, has been utilized to meet payments on which the small concern is in default, the person (or trustee) relying upon the guarantee shall file a claim with SBA for each additional payment in default thereafter. SBA will pay the defaulted payments 15 days prior to the due date of interest payment specified in the industrial revenue bonds (if any), or in the quali

fied contract if no industrial revenue bond is involved, until maturity, or until the resumption of full payments by the small concern, or its successor or, if the default is cause for acceleration of the indebtedness in the qualified contract, SBA may elect to pay the aggregate amount guaranteed and repossess the facility or cause it to be repossessed for use in mitigating losses. The small concern shall repay SBA for all payments made under the Pollution Control Guarantee at a rate of interest determined by the Secretary of the Treasury taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the then remaining maturity of the small concern's defaulted obligation.

(Sec. 308(c) of the Small Business Investment Act, as amended, 15 U.S.C. 687(c))

[43 FR 33232, July 31, 1978, as amended at 46 FR 24931, May 4, 1981]

person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under any financial assistance activities of the Small Business Administration to which the Act applies.

§112.2 Application of this part.

(a) This part applies to all recipients of assistance under programs administered by the Small Business Administration. (See appendix A)

(b) The term Federal financial assistance includes: (1) Grants and loans of Federal funds; (2) the grant or donation of Federal property and interests in property; (3) the detail of Federal personnel; (4) the sale and lease of, and the permission to use (on other than a casual or transient basis), Federal property or any interest in such property without consideration, or at a nominal consideration, or at a consideration which is reduced for the purpose of assisting the recipient, or in recognition of the public interest to be served by such sale or lease to the recipient; and (5) any Federal agreement, arrangement, or other contract which has as one of its purposes the provision of as

sistance.

(c) This part does not apply to financial assistance extended by way of insurance or guarantee.

(d) The terms applicant and recipient mean, respectively, one who applies for and one who receives any of the financial assistance under any of the statutes referred to in paragraph (a) of this section. The term recipient also shall be deemed to include subrecipients of SBA financial assistance, i.e., concerns which secondarily receive financial assistance from the primary recipients of such financial assistance.

[30 FR 298, Jan. 9, 1965, as amended at 38 FR 17934, July 5, 1973; 50 FR 1441 Jan. 11, 1985]

§ 112.3 Discrimination prohibited.

(a) General. To the extent that this part applies, no person in the United States shall, on the ground of race, color or national origin be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination by any business or other activity.

(b) Specific discriminatory actions prohibited. (1) To the extent that this part applies, a business or other activity may not, directly or through contractual or other arrangements, on ground of race, color or national origin:

(i) Deny an individual any services, financial aid or other benefit provided by the business or other activity;

(ii) Provide any service, financial aid or other benefit to an individual which is different or is provided in a different manner, from that provided to others by the business or other activity;

(iii) Subject an individual to segregation or separate treatment in any manner related to his receipt of any service, financial aid or other benefit from the business or other activity;

(iv) Restrict an individual in any way in the enjoyment of any advantage or privilege enjoyed by others receiving any service, financial aid or other benefit from the business or other activity;

(v) Treat an individual differently from others in determining whether he satisfies any admission, enrollment, quota, eligibility, membership or other requirement or condition which individuals must meet in order to be provided any service, financial aid or other benefit provided by the business or other activity.

(2) The enumeration of specific forms of prohibited discrimination in this paragraph does not limit the generality of the prohibition in paragraph (a) of this section.

(3) This regulation does not prohibit the consideration of race, color, or national origin if the purpose and effect are to remove or overcome the consequences of practices or impediments which have restricted the availability of, or participation in, the program or activity receiving Federal financial assistance, on the grounds of race, color, or national origin. Where previous discriminatory practice or usage tends, on the grounds of race, color, or national origin, to exclude individuals from participation in, to deny them the benefits of, or to subject them to discrimination under any program or activity to which this regulation applies, the applicant or recipient has an obligation to take reasonable action to remove or overcome the consequences of the prior

discriminatory practice or usage, and to accomplish the purposes of the Act. [30 FR 298, Jan. 9, 1965, as amended at 38 FR 17934, July 5, 1973]

§ 112.4 Discrimination in employment.

Small business concerns and development companies which apply for or receive any financial assistance of the kind described in §112.2(a) (1) and (2), including concerns which are identifiable beneficiaries of loans made under §112.2(a)(2), may not discriminate on the grounds of race, color, or national origin in their employment practices. Such assistance is deemed to have as a primary objective the providing of employment. Where a primary objective of the Federal financial assistance is not to provide employment, but discrimination on the grounds of race, color, or national origin in the employment practices of the recipient or other persons subject to the regulation tends, on the grounds of race, color, or national origin, to exclude individuals from participation in, to deny them the benefits of, or to subject them to discrimination under any program to which this regulation applies, the provisions of §112.7(a) shall apply to the employment practices of the recipient or other persons subject to the regulation, to the extent necessary to assure equality of opportunity and nondiscriminatory treatment.

[38 FR 17934, July 5, 1973]

§ 112.5 Discrimination in providing financial assistance.

Development companies and small business investment companies which apply for or receive any of the financial assistance described in §112.2(a) may not discriminate, on the ground of race, color or national origin, in providing financial assistance to small business concerns.

§ 112.6 Discrimination in accommodations or services.

Small business concerns which apply for or receive any financial assistance of the kind described in §112.2(a)(1), concerns which are identifiable beneficiaries of loans made under §112.2(a)(2), and physicians, hospitals, schools, libraries, and other individuals