ion of the nonvoting member of the Washington Board of Survey and with the concurrence of the General Counsel: (1) A new precedent or a new point of law is involved; or

(2) A question of policy is or may be involved; or

(3) The United States is or may be entitled to indemnity or contribution from a third party and the Administration is unable to adjust the third party claim; or

(4) The compromise of a particular claim, as a practical matter, will or may control the disposition of a related claim in which the amount to be paid may exceed $25,000.

(c) An administrative claim may be adjusted, determined, compromised, or settled by the Administration under the Federal Tort Claims Act only after consultation with the Department of Justice when the Administration is informed or is otherwise aware that the United States or an employee, agent, or cost-plus contractor of the United States is involved in litigation based on a claim arising out of the same incident or transaction. § 114.108 Referral to Department of Justice.

When Department of Justice approval or consultation is required under § 114.107, or the advice of the Department of Justice is otherwise to be requested, the referral or request shall be sent to the Assistant Attorney General, Civil Division, Department of Justice, in writing and shall contain (a) a short and concise statement of the facts and of the reasons for the referral or request, (b) copies of relevant portions of the Administration's claim file, and (c) a statement of the recommendations or views of the Administration. Such referrals may be made any time after the presentment of a claim to the Administration, and shall be transmitted by the General Counsel or his designee. § 114.109

Examination.

The Administration may request any other Federal agency to conduct a physical examination of a claimant and provide a report of the physical examination. Where reimbursement for such services is authorized or required by statute or regulation, the Administration may reimburse any Federal agency which conditions its compliance with the Administration's request upon such reimbursement.

Final denial of an administrative claim shall be in writing and sent to the claimant, his attorney, or legal representative by certified or registered mail. The notification of final denial may include a statement of the reasons for the denial and shall include a statement that, if the claimant is dissatisfied with the agency action, he may file a suit in an appropriate U.S. District Court not later than 6 months after the date of mailing of the notification.

§ 114.111 Action on approved claim.

(a) Payment of a claim approved under this part is contingent upon the claimant's or his duly authorized agent's or legal representative's executing the requisite copies of Standard Form 95, Standard Form 1145, and Standard Form 1145A. When a claimant is represented by an attorney, the voucher shall designate both the claimant and his attorney as payees. The check shall be delivered to the attorney, whose address shall appear on Standard Form 1145, voucher for payment of a claim under the Federal Tort Claims Act.

(b) Acceptance by the claimant, his agent, or legal representative, of any award, compromise, or settlement made pursuant to the Federal Tort Claims Act shall be final and conclusive on the claimant, his agent or legal representative and any other person on whose behalf or for whose benefit the claim has been presented, and shall constitute a complete release of any claim against the United States and against any employee of the Government whose act or omission gave rise to the claim, by reason of the same subject matter.

AUTHORITY: The provisions of this Part 119 are issued under 78 Stat. 526, 527; 42 U.S.C. 2901, et seq.

SOURCE: The provisions of this Part 119 contained in Revision 1, 33 F.R. 18276, Dec. 10, 1968, unless otherwise noted.

GENERAL

§ 119.1 Statutory provisions.

STATEMENT OF PURPOSE

SEC. 401. It is the purpose of this title to assist in the establishment, preservation, and strengthening of small business concerns and improve the managerial skills employed in such enterprises, with special attention to small business concerns (1) located in urban or rural areas with high proportions of unemployed or low-income individuals, or (2) owned by low-income individuals; and to mobilize for these objectives private as well as public managerial skills and resources.

LOANS, PARTICIPATIONS, AND GUARANTIES SEC. 402. (a) The Administrator of the Small Business Administration is authorized to make, participate (on an immediate basis) in, or guarantee loans, repayable in not more than 15 years, to any small business concern (as defined in section 3 of the Small Business Act (15 U.S.C. 632) and regulations issued thereunder), or to any qualified person seeking to establish such a concern, when he determines that such loans will assist in carrying out the purposes of this title, with particular emphasis on the preservation or establishment of small business concerns located in urban or rural areas with high proportions of unemployed or lowincome individuals or owned by low-income individuals: Provided, however, That no such loans shall be made, participated in, or guaranteed if the total of such Federal assistance to a single borrower outstanding at any one time would exceed $25,000. The Administrator of the Small Business Administration may defer payments on the principal of such loans for a grace period and use such other methods as he deems necessary and appropriate to assure the successful establishment and operation of such concern. The Administrator of the Small Business Administration may, in his discretion, as a condition of such financial assistance, require that the borrower take steps to improve his management skills by participating in a management training program approved by the Administrator of the Small Business Administration: Provided, however, That any management training program so approved must be of sufficient scope and duration to provide reasonable opportunity for the individuals served to develop entrepreneurial and managerial selfsufficiency. The Administrator of the Small Business Administration shall encourage, as far as possible, the participation of the private business community in the program of

assistance to such concerns, and shall seek to stimulate new private lending activities to such concerns through the use of the loan guaranties, participations in loans, and pooling arrangements authorized by this section.

(b) To the extent necessary or appropriate to carry out the programs provided for in this title the Administrator of the Small Business Administration shall have the same powers as are conferred upon the Director by section 602 of this Act. To insure an equitable distribution between urban and rural areas for loans between $3,500 and $25,000 made under this title, the Administrator is authorized to use the agencies and agreements and delegations developed under title III of the Act as he shall determine necessary.

(c) The Administrator shall provide for the continuing evaluation of programs under this section, including full information on the location, income characteristics, and types of businesses and individuals assisted, and on new private lending activity stimulated, and the results of such evaluation together with recommendations shall be included in the report required by section 608. LOAN TERMS AND CONDITIONS

SEC. 403. Loans made pursuant to section 402 (including immediate participation in and guaranties of such loans) shall have such terms and conditions as the Administrator of the Small Business Administration shall determine, subject to the following limitations

(a) There is reasonable assurance of repayment of the loan;

(b) The financial assistance is not otherwise available on reasonable terms from private sources or other Federal, State or local programs;

(c) The amount of the loan, together with other funds available, is adequate to assure completion of the project or achievement of the purposes for which the loan is made;

(d) The loan bears interest at a rate not less than (1) a rate determined by the Secretary of the Treasury, taking into consideration the average market yield on outstanding Treasury obligations of comparable maturity, plus (2) such additional charge, if any, toward covering other costs of the program as the Administrator of the Small Business Administration may determine to be consistent with its purposes: Provided, however, That the rate of interest charged on loans made in redevelopment areas designated under the Area Redevelopment Act (42 U.S.C. 2501 et seq.) shall not exceed the rate currently applicable to new loans made under section 6 of that Act (42 U.S.C. 2505); and

(e) Fees not in excess of amounts necessary to cover administrative expenses and probable losses may be required on loan guaranties.

DISTRIBUTION OF FINANCIAL ASSISTANCE

SEC. 404. The Administrator of the Small Business Administration shall take such steps as may be necessary to insure that, in any fiscal year, at least 50 per centum of the amounts loaned or guaranteed pursuant to this part are allotted to small business concerns located in urban areas identified by the Director, after consideration of any recommendations of the Administrator of the Small Business Administration, as having high concentration of unemployed or low-income individuals or to small business concerns owned by low-income individual. The Administrator of the small Business Administration, after consideration of any recommendations of the Director, shall define the meaning of low income as it applies to owners of small business concerns eligible to be assisted under this part, and such definition need not correspond to the definition of low income as used elsewhere in this Act.

LIMITATION ON FINANCIAL ASSISTANCE

SEC. 405. No financial assistance shall be extended pursuant to this title where the Administrator of the Small Business Administration determines that the assistance will be used in relocating establishments from one area to another if such relocation would result in an increase in unemployment in the area of original location.

§ 119.2 Program objectives.

(a) The principal purpose of the Economic Opportunity Loan Program is to make funds available on reasonable terms and maturities to small business concerns located in areas with high proportions of unemployment or low-income individuals, or small business concerns owned by or to be established by persons with low incomes; and to provide management assistance to such persons.

(b) Particular emphasis will be placed on the preservation or establishment of small business concerns located in urban and rural areas with high proportions of unemployed or low-income individuals or owned by low-income individuals or those, who due to social or economic disadvantage, have been denied the opportunity to acquire adequate business financing through normal lending channels on reasonable terms. At least 50 percent of these loans will be made in each fiscal year in certain designated urban areas and to low-income individuals in urban or rural areas.

(c) Although certain of the credit standards used in the regular business loan program have been modified for the Economic Opportunity Loan Program, there must be a reasonable assurance of

(e) The "Act" means the Economic Opportunity Act of 1964, as amended.

(f) "Economic Opportunity Loans" (EOL) means a loan authorized under section 402(a) of the Economic Opportunity Act of 1964, as amended.

ECONOMIC OPPORTUNITY LOANS

§ 119.21 Eligibility.

(a) In order to be eligible to apply for an EOL, a business must qualify under Parts 120 and 121 of this chapter, except where inconsistent with specific provisions in this part.

(b) The applicant must be at least 50 percent owned by a person or persons who either (1) has or have individual annual family income (s) (other than welfare) which is not sufficient to satisfy the basic need of each such individual family, or (2) has or have been denied the opportunity to have access to adequate financing on reasonable terms, through normal lending channels because of economic or social disadvantage. Businesses located in urban or rural areas with a high proportion of unemployed or low income individuals may be considered economically disadvantaged.

(c) Financial assistance may be used to effect a change in ownership of a business where such a change will further the objectives of the EOL program, the provisions of § 120.1(d) (2) of this chapter notwithstanding.

(d) A cooperative association is eligible provided that its members are eligible small business concerns. Consumer co ́operatives are not eligible.

(e) Financial assistance shall not be extended when it is determined that the

loan funds will be used in relocatiing establishments from one area to another if the relocation would result in an increase in unemployment in the area of original location. (Relocation within a community or local area shall not be considered relocation from one area to another.)

(f) Financial assistance shall not be extended if funds are otherwise available on reasonable terms from private sources or other Federal, State, or local programs. The applicant's bank of account, if any, will be contacted to determine its willingness to finance the applicant independently, to participate with SBA, or to make a loan with a guaranty by SBA. New private lending activity should be sought.

§ 119.31 Terms and conditions.

(a) An EOL shall not be made, participated in, or guaranteed if the total amount of the Government's share of such assistance to a single borrower at any one time exceeds a total outstanding of $25,000. The $25,000 loan limit applies collectively to all EOL loans to business entities owned or controlled by affiliated ownership.

(b) Repayment will be required at the earliest feasible date giving consideration to the use to be made of the funds and indicated ability to repay. Working capital loans will be limited to 10 years. Longer terms up to 15 years may be provided where the proceeds are for acquisition of realty or other fixed assets. Where a combination of purposes is involved, the period for repayment will be adjusted accordingly. When deemed necessary, grace periods for payments of principal may be provided up to 13 months from date of note. Interest payments will be required during such grace period. A fluctuating repayment schedule may be established for seasonal businesses.

(c) (1) Interest on direct loans shall be at the rate of 5% percent per annum.

(2) On immediate participation loans, the interest rate shall be 5% percent per annum on SBA's share, and shall be a legal and reasonable rate, but not in excess of 8 percent per annum on the participant's share.

(3) The interest rate on guaranteed loans, subject to the approval of SBA, may be established by the participating financial institution at a rate that shall be legal and reasonable. When purchased

by SBA, the rate of interest to the borrower on SBA's share of the loan shall be the SBA rate on direct loans (currently 5% percent) at the time the guaranteed loan was approved. When SBA purchases its guaranteed share, its payment to the guaranteed participant of accrued interest to the date of purchase shall be at the interest rate established by participant but shall not exceed an effective rate of interest of 8 percent per annum, and without any future adjustment for any unpaid accrued interest in excess of 8 percent per annum.

(4) The interest rate on SBA's share of EOL loans is based on a formula determined by the Secretary of the Treasury and can vary from time to time.

(d) There are not statutory requirements with respect to collateral for loans. Inadequate collateral shall not be used as a reason to decline unless the applicant refuses to pledge whatever worthwhile collateral is available.

[Rev. 1, 33 F.R. 18276, Dec. 10, 1968, as amended by Amdt. 1, 34 F.R. 1945, Feb. 11, 1969]

An application must meet certain practical credit requirements established by SBA. Principal requirements are as follows:

(a) An applicant must be of good character as determined by SBA.

(b) There must be evidence of ability to operate the business successfully. When, in the opinion of SBA, an applicant requires management assistance to attain, supplement or improve such ability, SBA may require that the applicant accept such management assistance as SBA may prescribe, as a condition of the loan.

(c) As required by the Act, there must be reasonable assurance of repayment of the loan.

(d) There must be evidence that the loan proceeds, together with other funds available to the applicant, are adequate to assure completion or achievement of the purposes for the loan.

(e) The purposes of the financial assistance must be consistent with the intent of the Economic Opportunity Act of 1964, as amended.

§ 119.61 Application procedure.

(a) An applicant desiring to obtain an EOL shall apply to the regional office serving the area in which the applicant resides. If another SBA office is closer, he may obtain counseling or advice from it. Addresses of regional offices may be obtained from SBA.

(b) If, following a preliminary review of the applicant's case, the SBA finds the applicant's request worthy of further consideration, an SBA loan officer will assist the applicant in the preparation of necessary application forms and supporting documents.

(c) After a loan application has been submitted to SBA and has been approved or declined, the regional office will send a letter of notification to the applicant. In cases of decline, the reasons will be stated. When a bank is participating, the applicant and the bank will be notified at the same time by SBA.

§ 119.71 Applicability of other SBA regulations.

All applicable provisions of Parts 120 and 122 of this Chapter shall apply to EOLS except where other provision is made in this part.

§ 119.81 Technical assistance and management training.

(a) A management evaluation guide will be prepared for all direct EOL applicants before approving the loan.

(b) Where public or private nonprofit organizations render management guidance, training, and counseling, SBA will cooperate with such organizations in providing both financial and management assistance.

Sec.

PART 120-LOAN POLICY

Introduction.

120.1 120.2 120.3 120.4 Disaster loans for physical property loss, or for substantial economic injury as a result of major or natural disasters, or inability to process or market a product because of diseases or toxicity through natural or undetermined causes. 120.5 Displaced business and coal mine health and safety loans.

Business loans and guarantees.

Terms and conditions of business loans and guarantees.

AUTHORITY: The provisions of this Part 120 issued under 72 Stat. 387, as amended, 15 U.S.C. 636; sec. 5, 72 Stat. 385, 15 U.S.C. 634(b)(6).

SOURCE: The provisions of this Part 120 contained in Revision 4, 35 F.R. 16163 Oct. 15, 1970, unless otherwise noted.

(a) This part is established by the SBA to set forth principles and policies which will be followed in the granting and denial of financial assistance. Financial assistance includes business loans and guarantees to small business concerns and loans and guarantees for disaster relief to small business concerns and individuals. It is not intended that this general statement of policy provide answers to all questions which may arise in connection with specific applications. (b) "Financial assistance" as used in this part shall include direct loans made by SBA, immediate participation loans, and guaranteed loans.

(c) "Financial institution" as used in this part shall include, but not be limited to, banks and other concerns whose regular course of business entails the making of commercial and industrial loans to the general public.

§ 120.2 Business loans and guarantees.

Basic principles governing the granting and denial of applications for financial assistance:

(a) Applications for financial assistance may be considered only when there is evidence that the desired credit is not otherwise available on reasonable terms. The financial assistance applied for shall be deemed to be otherwise available on reasonable terms, unless it is satisfactorily demonstrated that:

(1) Proof of refusal of the required financial assistance has been obtained from