Wow! Total surprise!! Since our LSA eBulletin1 came out, requests are pouring in for copies of the List, along with some questions. I’m loving the popularity. But more importantly, I’m loving the opportunity to provide this information to CDCs, SBA lenders and now, CA SBLCs. Fact is, I was an SBA lender for 10 years before I discovered Lender Service Areas. I thought I’d found the Dead Sea Scrolls. To recap:
Each year, effective October 1, the U.S. Department of Labor issues its list of Labor Surplus Areas: states, counties or municipalities with a two-year average unemployment rate in excess of 6% or in excess of the national unemployment rate. For Fiscal Year 2024 it’s 6%, unchanged from FY 2023. If an area is an LSA, it’s on the list. If not, it’s not. And it’s all in the name of a Public Policy Objective: Economic Development. Now, the Q&A:
Q. I never knew about LSA’s. So what does that mean for a loan in a city or county listed as an LSA?
A. If you have a project in an LSA, you get quite a few benefits:
- The eligible size standard increases by 25%. So instead of a $15 million ceiling for tangible net worth and average net income the prior two full fiscal years of $5 million, you can provide 504 financing for the area’s qualified businesses with a tangible net worth of $18.75 million and average net income of $6.25 million.
- Because your project meets a Public Policy goal, it doesn’t have to create or retain jobs, or export or manufacture. Financing a business in an LSA is its own reward.
- For purposes of your annual report, projects in an LSA are segregated from the rest of your portfolio and thus have no impact on your portfolio dollars-per job.
- Ta Da! Your CDC’s name goes up in lights!! “Local CDC Project Smashes SBA Ceilings!!!”
Q. The LSA determination is established each October 1. Suppose on October 1, 2023, my project is in an LSA. The loan is approved. But before the loan closes, another fiscal year has gone by. And guess what? My community is no longer on the LSA List. What now?
A. First, the determination that your project is in an LSA is irreversible. So suppose the day after SBA approves the loan, some big old manufacturer moves to your community and creates a zillion new jobs. That’s nice, and it has no impact on your loan approval. You needn’t look back. You’re approved. Hooray! Now, an opposite problem:
Q. When the list of LSA’s was published, my community wasn’t on the List, as our unemployment was low. Then our town’s biggest furniture manufacturer closed its doors and we lost jobs big time. Do I have to wait for a new two-year average unemployment rate?
A. No need. Events like natural disasters and adverse economic changes−like a major plant closing−within a civil jurisdiction or metropolitan area allow a State Workforce Agency to ask for inclusion on the LSA list. Even after the list is published, an area can be added to the List if that area’s unemployment rate was below the threshold rate for at least 6% for each of the three most recent months, or projected to be below the threshold for each of the next 12 months because of an event.2
And no need to wait until the unemployment rate exceeds the threshold. You may qualify if your area’s unemployment rate will be greater than or equal to the Labor Surplus Area qualifying unemployment rate for each of the three most recent months or projected to be greater for each of the next 12 months.3
Q. When the List says “Balance of County,” what does it mean?
A. Let’s use San Bernardino County, California as an example. Cities in San Bernardino County such as Rialto City, Chino City, Redlands, Rancho Cucamonga, et al are on the List. Each city is an LSA. “Balance of County” means that not only is each listed city an LSA, but so is the rest of San Bernardino County. So “Balance of County” means the entire county, less any component cities and townships separately identified.4
Send me an email for a copy of the FY 2024 LSA List. I’m standing by.
2 State Workforce Agencies may submit petitions in electronic format to firstname.lastname@example.org, or in hard copy to the U.S. Department of Labor, Employment and Training Administration, Office of Workforce Investment, 200 Constitution Ave NW, Room
S-4231, Washington, DC 20210. Attention: Samuel Wright.
3 U.S. Department of Labor, Employment and Training Administration, Labor Surplus Area, Frequently Asked Questions
4 Reference: FR Doc. 2022-21885