Immediate Disaster Assistance Program (IDAP)

AGENCY:

U.S. Small Business Administration (SBA).

ACTION:

Notice of IDAP loan program interest rates.

SUMMARY:

This Notice announces the maximum allowable rates for Immediate Disaster Assistance Program (IDAP) loans.

DATES:

Effective Date: The interest rate is effective October 25, 2010.

FOR FURTHER INFORMATION CONTACT:

Grady Hedgespeth, Director of Financial Assistance, at (202) 205-7562 or Grady.Hedgespeth@sba.gov.

SUPPLEMENTARY INFORMATION:

The Food, Conservation, and Energy Act of 2008 (the Farm Act), Public Law 110-246, enacted June 18, 2008, amended the Small Business Act (the Act) and authorized changes to make SBA's disaster assistance program more accessible to disaster victims. One provision included in the Farm Act requires SBA to implement an Immediate Disaster Assistance Program (IDAP) to provide interim loans to businesses affected by a disaster that meet the basic eligibility standards for a disaster loan authorized under section 7(b) of the Act. The provision authorizes SBA to provide an 85 percent guarantee on loans made by participating lenders for up to $25,000. The intent of the IDAP loan program is to provide bridge financing as quickly and as prudently as possible following a declared disaster while the business is awaiting approval for permanent financing through a direct disaster loan from SBA.

Agency regulations implementing the IDAP loan program state that the maximum interest rates an IDAP Lender may charge an IDAP Borrower during the Initial Period and Term Period will be published in the Federal Register from time to time. 13 CFR 123.703(e). This notice establishes the maximum interest rates for IDAP loans as follows:

Initial Period: The maximum interest rate an IDAP Lender may charge an IDAP Borrower during the Initial Period (as defined in 13 CFR 123.700(b)(1)) is the prime rate in effect on the first business day of the month in which SBA receives the IDAP loan application, as printed in a national financial newspaper published each business day, plus one percentage point. The interest rate must remain fixed while the IDAP loan is in the Initial Period.

Term Period: In the event that the IDAP loan enters the Term Period (as defined in 13 CFR 123.700(b)(17)), the interest rate may remain fixed at a rate not to exceed the maximum rate for the Initial Period as described above or may begin to fluctuate at a variable rate that is not more than the prime rate in effect on the first business day of the month in which the Term Period begins, as printed in a national financial newspaper published each business day, plus one percentage point. If the rate during the Term Period is a variable rate, the lender must specify in the Note the frequency at which the interest rate adjustment will occur (the “adjustment period”), and such adjustments may not occur more frequently than monthly. The lender shall adjust the interest rate on the first calendar day of each adjustment period using the prime rate in effect on the first business day of the adjustment period, plus one percentage point. The change in interest rate is effective on that day whether or not the lender gives the borrower notice of the change. The adjustment period may not be changed without the written agreement of the borrower.

Any future change to interest rates on IDAP Loans will be published in the Federal Register.

Authority: 15 U.S.C. 657n and 13 CFR § 123.703(e).