U.S. Code of Federal Regulations

Regulations most recently checked for updates: Jun 02, 2023


§ 4290.500 - Lawful operations under the Act.

You must engage only in the activities permitted by the Act and in no other activities.

§ 4290.502 - Representations to the public.

You may not represent or imply to anyone that the Agency, the U.S. Government, or any of its agencies or officers has approved any ownership interests you have issued, obligations you have incurred, or Financings you have made. You must include a statement to this effect in any solicitation provided to investors. Example: You may not represent or imply that “USDA stands behind the RBIC” or that “Your capital is safe because the Agency's experts review proposed investments to make sure they are safe for the RBIC.”

§ 4290.503 - RBIC's adoption of an approved valuation policy.

(a) Valuation guidelines. You must prepare, document and report the valuations of your Loans and Investments in accordance with the Valuation Guidelines for SBICs issued by SBA. These guidelines may be obtained from SBA's Investment Division or at http://www.sba.gov/sites/default/files/files/inv_valuation.pdf.

(b) The Agency's approval of valuation policy. You must have a written valuation policy approved by the Agency for use in determining the value of your Loans and Investments. You must either:

(1) Adopt without change the model valuation policy set forth in section III of the Valuation Guidelines for SBICs; or

(2) Obtain the Agency's prior written approval of an alternative valuation policy.

(c) Responsibility for valuations. Your board of directors, managing member(s), or general partner(s) will be solely responsible for adopting your valuation policy and for using it to prepare valuations of your Loans and Investments for submission to the Agency. If the Agency reasonably believes that your valuations, individually or in the aggregate, are materially misstated, it reserves the right to require you to engage, at your expense, an independent third party acceptable to the Agency to substantiate the valuations.

(d) Frequency of valuations. (1) You must value your Loans and Investments at the end of the second quarter of your fiscal year, and again at the end of your fiscal year.

(2) On a case-by-case basis, the Agency may require you to perform valuations more frequently.

(3) You must report material adverse changes in valuations at least quarterly, within 30 days following the close of the quarter.

(e) Review of valuations by independent public accountant. (1) For valuations performed as of the end of your fiscal year, your independent public accountant must review your valuation procedures and the implementation of such procedures, including adequacy of documentation.

(2) The independent public accountant's report on your audited annual financial statements (SBA Form 468 or other USDA-approved form(s)) must include a statement that your valuations were prepared in accordance with your approved valuation policy.

[69 FR 32204, June 8, 2004, as amended at 76 FR 80222, Dec. 23, 2011]

§ 4290.504 - Equipment of USDA or SBA officials.

(a) Computer capability. You must have a personal computer with access to the Internet and be able to use this equipment to prepare reports and transmit such reports to the Agency. In addition, you must have the capability to send and receive electronic mail.

(b) Facsimile capability. You must be able to receive facsimile messages 24 hours per day at your primary office.

(c) Accessible office. You must maintain an office that is convenient to the public and is open for business during normal working hours.

[69 FR 32204, June 8, 2004, as amended at 76 FR 80222, Dec. 23, 2011]

§ 4290.506 - Safeguarding the RBIC's assets/Internal controls.

You must adopt a plan to safeguard your assets and monitor the reliability of your financial data, personnel, Portfolio, funds and equipment. You must provide your bank and custodian with a certified copy of your resolution or other formal document describing your control procedures.

§ 4290.507 -

The following shall constitute a violation of this part:

(a) Nonperformance. Failure to perform any of the requirements of any Debenture or of any written agreement with the Agency or SBA.

(b) False statement. In any document submitted to the Agency or SBA:

(1) Any false statement knowingly made; or

(2) Any misrepresentation of a material fact; or

(3) Any failure to state a material fact.

(4) A material fact is any fact that is necessary to make a statement not misleading in light of the circumstances under which the statement was made.

§ 4290.508 - Compliance with non-discrimination laws and regulations applicable to federally-assisted programs.

In conducting your operations and providing Assistance to your Portfolio Concerns, you must comply with Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d-1 et seq.), the Age Discrimination Act of 1975 (Pub. L. 94–135, Title III), and Title V of the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.) and the following regulations promulgated by USDA to implement and enforce such laws: 7 CFR part 15.

§ 4290.509 - Employment of USDA or SBA officials.

(a) Without the Agency's prior written approval, for a period of two years after the date of your most recent issuance of Leverage or after the receipt of any assistance as defined in paragraph (b) of this section, whichever is later, you are not permitted to employ, offer employment to, or retain for professional services, any person who:

(1) Served as an officer, attorney, agent, or employee of SBA or USDA within one year before such date; and

(2) In that capacity, occupied a position or engaged in activities which, in SBA's or the Agency's determination, involved discretion with respect to the issuing of Leverage or the granting of such assistance.

(b) For purposes of this section, “assistance” means financial, contractual, grant, managerial, or other aid, including licensing, certifications, and other eligibility determinations made by USDA or SBA, and any express decision to compromise or defer possible litigation or other adverse action.

[69 FR 32204, June 8, 2004, as amended at 76 FR 80222, Dec. 23, 2011]

§ 4290.510 - Approval of RBIC's Investment Adviser/Manager.

(a) General. You may employ an Investment Adviser/Manager who will be subject to the supervision of your board of directors, managing member(s), or general partner(s). If you have Leverage or plan to seek Leverage, you must obtain the Agency's prior written approval of the management contract. Approval of an Investment Adviser/Manager for one RBIC does not indicate approval of that manager for any other RBIC.

(b) Management contract. The contract must:

(1) Specify the services the Investment Adviser/Manager will render to you and to your Portfolio Concerns; and

(2) Indicate the basis for computing Management Expenses.

(c) Material change to approved management contract. Any proposed material change must be approved by both you and the Agency in advance. If you are uncertain whether the change is material, submit the proposed revision to the Agency.

§ 4290.520 - Management Expenses of a RBIC.

The Agency must approve your initial Management Expenses and any increases in your Management Expenses.

(a) Definition of Management Expenses. Management Expenses include:

(1) Salaries;

(2) Office expenses;

(3) Travel;

(4) Business development, including finders' fees;

(5) Office and equipment rental;

(6) Bookkeeping; and

(7) Expenses related to developing, investigating and monitoring investments.

(b) Management Expenses do not include services provided by specialized outside consultants, outside lawyers and independent public accountants, if they perform services not generally performed by a capital company.


§ 4290.530 - Restrictions on investments of idle funds by RBICs.

(a) Permitted investments of idle funds. Funds not invested in Portfolio Concerns must be maintained in:

(1) Direct obligations of, or obligations guaranteed as to principal and interest by, the United States, which mature within 15 months from the date of the investment; or

(2) Repurchase agreements with federally insured institutions, with a maturity of seven days or less. The securities underlying the repurchase agreements must be direct obligations of, or obligations guaranteed as to principal and interest by, the United States. The securities must be maintained in a custodial account at a federally insured institution; or

(3) Certificates of deposit with a maturity of one year or less, issued by a federally insured institution; or

(4) A deposit account in a federally insured institution, subject to a withdrawal restriction of one year or less; or

(5) A checking account in a federally insured institution; or

(6) A reasonable petty cash fund.

(b) Deposit of funds in excess of the insured amount—(1) General rule. You are permitted to deposit in a federally insured institution funds in excess of the institution's insured amount, but only if the institution is “well capitalized” in accordance with the definition set forth in regulations of the Federal Deposit Insurance Corporation (12 CFR 325.103).

(2) Exception. You may make a temporary deposit (not to exceed 30 days) in excess of the insured amount, in a transfer account established to facilitate the receipt and disbursement of funds or to hold funds necessary to honor Commitments issued.

(c) Deposit of funds in Associate institution. A deposit in, or a repurchase agreement with, a federally insured institution that is your Associate is not considered a Financing of such Associate under § 4290.730, provided the terms of such deposit or repurchase agreement are no less favorable than those available to the general public.


§ 4290.550 - Prior approval of secured third-party debt of RBICs.

(a) Definition. For the purposes of this section, “secured third-party debt” means any debt that is secured by any of your assets and not guaranteed by the Agency, including secured guarantees and other contingent obligations that you voluntarily assume and secured lines of credit.

(b) General rule. You must get the Agency's written approval before you incur any secured third-party debt or refinance any debt with secured third-party debt, including any renewal of a secured line of credit, increase in the maximum amount available under a secured line of credit, or expansion of the scope of a security interest or lien. For purposes of this paragraph (b), “expansion of the scope of a security interest or lien” does not include the substitution of one asset or group of assets for another, provided the asset values (as reported on your most recent annual SBA Form 468 or other USDA-approved form(s)) are comparable.

(c) Conditions for approval. As a condition of granting its approval under this section, the Agency may impose such restrictions or limitations as it deems appropriate, taking into account your historical performance, current financial position, proposed terms of the secured debt and amount of aggregate debt you will have outstanding (including Leverage). The Agency will not favorably consider any requests for approval which include a blanket lien on all your assets, or a security interest in your investor commitments in excess of 125 percent of the proposed borrowing.

(d) Thirty-day approval. Unless the Agency notifies you otherwise within 30 days after it receives your request, you may consider your request automatically approved if:

(1) You are in regulatory compliance;

(2) The security interest in your assets is limited to either those assets being acquired with the borrowed funds or an asset coverage ratio of no more than 2:1; and

(3) Your request is for approval of a secured line of credit that would not cause your total outstanding borrowings (not including Leverage) to exceed 50 percent of your Leverageable Capital.

[69 FR 32204, June 8, 2004, as amended at 76 FR 80223, Dec. 23, 2011]

§ 4290.585 - Voluntary decrease in RBIC's Regulatory Capital.

You must obtain the Agency's prior written approval to reduce your Regulatory Capital by more than two percent in any fiscal year. At all times, you must retain sufficient Regulatory Capital to meet the minimum capital requirements in the Act and § 4290.210, and sufficient Leverageable Capital to avoid having excess Leverage in violation of section 384E(d) of the Act.