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13 CFR Ch. I (1–1–15 Edition)

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13 CFR Ch. I (1–1–15 Edition) § 107.550 13 CFR Ch. I (1–1–15 Edition) insured amount, but only if the institu- have outstanding Leverage and you tion is ‘‘well capitalized’’ in accordance have a secured line of credit that was with the definition set forth in regula- created on or before April 8, 1994, you tions of the Federal Deposit Insurance must receive SBA’s written approval of Corporation, as amended (12 CFR the line before you increase the 325.103). amounts outstanding thereunder. (2) Exception: You may make a tem- (d) Conditions for SBA approval. As a porary deposit (not to exceed 30 days) condition of granting its approval in excess of the insured amount, in a under this § 107.550, SBA may impose transfer account established to facili- such restrictions or limitations as it tate the receipt and disbursement of deems appropriate, taking into account funds or to hold funds necessary to your historical performance, current honor Commitments issued. financial position, proposed terms of (d) Deposit of funds in Associate insti- the secured debt and amount of aggre- tution. A deposit in, or a repurchase gate debt you will have outstanding agreement with, a federally insured in- (including Leverage). SBA will not fa- stitution that is your Associate is not vorably consider any requests for ap- considered a Financing of such Asso- proval which include a blanket lien on ciate under § 107.730, provided the terms all your assets, or a security interest of such deposit or repurchase agree- in your investor commitments in ex- ment are no less favorable than those cess of 125 percent of the proposed bor- available to the general public. rowing. (e) Thirty day approval. Unless SBA [61 FR 3189, Jan. 31, 1996, as amended at 77 FR 20294, Apr. 4, 2012] notifies you otherwise within 30 days after it receives your request, you may BORROWING BY LICENSEES FROM NON- consider your request automatically SBA SOURCES approved if: (1) You are in regulatory compliance; § 107.550 Prior approval of secured (2) The security interest in your as- third-party debt of leveraged Li- sets is limited to either those assets censees. being acquired with the borrowed funds (a) Definition. In this § 107.550, ‘‘se- or an asset coverage ratio of no more cured third-party debt’’ means any than 2:1; non-SBA debt secured by any of your (3) Your Leverage does not exceed 150 assets, including secured guarantees percent of your Leverageable Capital; and other contingent obligations that and you voluntarily assume, secured lines (4) Your request is for approval of a of credit, and secured Temporary Debt secured line of credit that would not of a Licensee with outstanding Partici- cause your total outstanding bor- pating Securities. rowings (not including Leverage) to ex- (b) General rule. If you have out- ceed 50 percent of your Leverageable standing Leverage, you must get SBA’s Capital. written approval before you incur any secured third-party debt or refinance § 107.560 Subordination of SBA’s cred- any debt with secured third-party debt, itor position. including any renewal of a secured line (a) Debentures purchased or guaranteed of credit, increase in the maximum on or before July 1, 1991. Under the amount available under a secured line terms of any Debenture purchased or of credit, or expansion of the scope of a guaranteed by SBA on or before July 1, security interest or lien. For purposes 1991, SBA’s unsecured claims against of this paragraph (b), ‘‘expansion of the you, as a Debenture-holder or as scope of a security interest or lien’’ subrogee, are subordinated in favor of does not include the substitution of all your other creditors, except to the one asset or group of assets for an- extent that such claims may be subject other, provided the asset values (as re- to equitable subordination in SBA’s ported on your most recent annual favor. Form 468) are comparable. (b) Debentures purchased or guaranteed (c) Additional rule for secured lines of after July 1, 1991, including refinancings credit in existence on April 8, 1994. If you of Debentures previously purchased or 62 VerDate Sep<11>2014 12:23 Mar 16, 2015 Jkt 235045 PO 00000 Frm 00072 Fmt 8010 Sfmt 8010 Q:\13\13V1.TXT 31 Small Business Administration § 107.590 guaranteed. (1) Under the terms of any (1) Such borrowings are for the pur- Debenture purchased or guaranteed by pose of maintaining your operating li- SBA after July 1, 1991, SBA’s unsecured quidity or providing funds for a par- claims against you, as a Debenture- ticular Financing of a Small Business; holder or as subrogee, are subordinated (2) The funds are borrowed from a only in favor of non-Associate lenders; regulated financial institution or a reg- and, to the extent that your indebted- ulated credit company (or, if approved ness to such lenders exceeds the lesser by SBA on a case-by-case basis, from of $10,000,000 or 200 percent of your Reg- non-regulated lenders including share- ulatory Capital (determined as of the holders or partners); date your Debentures were purchased (3) Your total outstanding bor- or guaranteed), SBA’s unsecured rowings (not including Leverage) do claims enjoy parity with those of other not exceed 50 percent of your unsecured creditors, except with re- Leverageable Capital; and spect to indebtedness created on or be- (4) All such borrowings are fully paid fore July 1, 1991. off for at least 30 consecutive days dur- (2) In order to induce others to lend ing your fiscal year so that you have you money after your Debenture has no outstanding third-party debt for 30 been purchased or guaranteed, SBA days. may agree in writing on a case-by-case basis to subordinate its unsecured VOLUNTARY DECREASE IN LICENSEE’S claims, on such terms as it may deter- REGULATORY CAPITAL mine, in favor of one or more of your Associates, or in favor of other lenders § 107.585 Voluntary decrease in Li- in excess of the amounts mentioned in censee’s Regulatory Capital. paragraph (b)(1) of this section. You must obtain SBA’s prior written (3) SBA reserves the authority to approval to reduce your Regulatory refuse to subordinate its claims if it de- Capital by more than two percent in termines, at the time you request your any fiscal year, unless otherwise per- Debenture be purchased or guaranteed, mitted under §§ 107.1560 and 107.1570, that the exercise of reasonable invest- provided however, that if you are an ment prudence and your financial con- Early Stage SBIC, you must obtain dition warrant such refusal. SBA’s prior written approval for any reduction of your Regulatory Capital, § 107.565 Restrictions on third-party including any reduction pursuant to a debt of Early Stage SBICs. Distribution under § 107.1180 of this If you are an Early Stage SBIC and part. At all times, you must retain suf- you have outstanding Leverage or a ficient Regulatory Capital to meet the Leverage commitment, you must get minimum capital requirements in the SBA’s prior written approval to have, Act and § 107.210, and sufficient incur, or refinance any third-party Leverageable Capital to avoid having debt other than accounts payable from excess Leverage in violation of section routine business operations. 303 of the Act and §§ 107.1150 through [77 FR 25052, Apr. 27, 2012] 107.1170. [61 FR 3189, Jan. 31, 1996, as amended at 77 § 107.570 Restrictions on third-party FR 25052, Apr. 27, 2012] debt of issuers of Participating Se- curities. REQUIREMENT TO CONDUCT ACTIVE (a) General. Temporary Debt is the INVESTMENT OPERATIONS only debt (other than Leverage) that you are permitted to incur if you have § 107.590 Licensee’s requirement to applied to issue Participating Securi- maintain active operations. ties or if you have outstanding Partici- (a) Activity test. You must conduct ac- pating Securities. For additional rules tive operations, as determined under governing secured Temporary Debt, see this § 107.590, as a condition of your li- § 107.550. cense. You will be considered active if: (b) Definition of Temporary Debt. Tem- (1) During the eighteen months pre- porary Debt means your short-term ceding your most recent fiscal year borrowings if: end, you made Financings totaling at 63 VerDate Sep<11>2014 12:23 Mar 16, 2015 Jkt 235045 PO 00000 Frm 00073 Fmt 8010 Sfmt 8010 Q:\13\13V1.TXT 31.
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