U.S. Code of Federal Regulations
Regulations most recently checked for updates: Apr 01, 2023
§ 4290.1700 - Agency's transfer of interest in a RBIC's Leverage security.
Upon such conditions and for such consideration as it deems reasonable, the Agency may sell, assign, transfer, or otherwise dispose of any Debenture held by or on behalf of the Agency. Upon notice by the Agency, a RBIC will make all payments of principal and interest as shall be directed by the Agency. A RBIC will be liable for all damage or loss which the Agency may sustain by reason of the RBIC's failure to follow such payment instructions, up to the amount of the RBIC's liability under such security, plus court costs and reasonable attorney's fees incurred by the Agency.
§ 4290.1710 - Agency's authority to collect or compromise claims.
The Agency may, upon such conditions and for such consideration as it deems reasonable, collect or compromise all claims relating to obligations it holds or has guaranteed, and all legal or equitable rights accruing to it.
§ 4290.1720 - Characteristics of Agency's guarantee.
If the Agency agrees to guarantee a RBIC's Debentures, such guarantee will be unconditional, irrespective of the validity, regularity or enforceability of the Debentures or any other circumstances that might constitute a legal or equitable discharge or defense of a guarantor. Pursuant to its guarantee, the Agency will make timely payments of principal and interest on the Debentures.
§ 4290.1100 - Type of Leverage and application procedures.
(a) Type of Leverage available. You may apply for Leverage from the Agency in the form of a guarantee of your Debentures.
(b) Applying for Leverage. The Leverage application process has two parts. You must first apply for the Agency's conditional commitment to reserve a specific amount of Leverage for your future use. You may then apply to draw down Leverage against the commitment. See §§ 4290.1200 through 4290.1240.
(c) Where to send your application. Send all Leverage draw-down applications to Funding Control Officer, Investment Division, U.S. Small Business Administration, 409 Third Street, SW., Suite 6300, Mail Code 7050, Washington, DC 20416.
§ 4290.1120 - General eligibility requirements for Leverage.
To be eligible for Leverage, you must be in compliance with the Act, the regulations in this part, and your Participation Agreement.
§ 4290.1130 - Leverage fees payable by RBIC.
(a) Leverage fee. You must pay the Agency a non-refundable leverage fee for each issuance of a Debenture. The fee is 3 percent of the face amount of the Debenture issued, and will be deducted from the proceeds remitted to you.
(b) Additional charge. You must pay the Agency an additional annual charge of 1 percent of the outstanding amount of your Debenture.
(c) Other Leverage fees. The Agency may establish a fee structure for services performed by the Central Registration Agent (CRA). The Agency will not collect any fee for its guarantee of TCs.
§ 4290.1140 - RBIC's acceptance of remedies under § 4290.1810.
If you issue Leverage, you automatically agree to the terms and conditions in § 4290.1810 as it exists at the time of issuance. The effect of these terms and conditions is the same as if they were fully incorporated in the terms of your Leverage.
§ 4290.1150 - Maximum amount of Leverage for a RBIC.
The face amount of a RBIC's outstanding Debentures may not exceed the lesser of 200 percent of its Leverageable Capital or $105,000,000.
§ 4290.1200 - Leverage commitment to a RBIC—application procedure, amount, and term.
(a) General. Under the provisions in §§ 4290.1200 through 4290.1240, you may apply for the Agency's conditional commitment to reserve a specific amount of Leverage and type of Debenture (standard or discounted) for your future use. You may then apply to draw down Leverage against the commitment.
(b) Applying for a Leverage commitment. The Agency will notify you when requests for Leverage commitments are being accepted, and upon receipt of your request, will send you a complete application package.
(c) Limitations on the amount of a Leverage commitment. The amount of a Leverage commitment must be a multiple of $5,000. The Agency in its discretion may determine a minimum dollar amount for Leverage commitments. Any such minimum amounts will be published in Notices in the
(d) Term of Leverage commitment. Your Leverage commitment will automatically lapse on the expiration date stated in the commitment letter issued to you by the Agency. The Agency's Leverage commitment will be included in the Participation Agreement at the time of your licensing as a RBIC, under § 4290.390.
§ 4290.1220 - Requirement for RBIC to file financial statements at the time of request for a draw.
(a) If you submit a request for a draw against your Leverage commitment more than 90 days following your submission of an annual SBA Form 468 or a SBA Form 468 (Short Form) or other USDA-approved form(s), you must:
(1) Give the Agency a financial statement on Form 468 (Short Form) or other USDA-approved form(s), and
(2) File a statement of no material adverse change in your financial condition since your last filing of SBA Form 468 or other USDA-approved form(s).
(b) You will not be eligible for a draw if you are not in compliance with this § 4290.1220.
§ 4290.1230 - Draw-downs by RBIC under Leverage commitment.
(a) RBIC's authorization of the Agency to guarantee securities. By submitting a request for a draw against the Leverage commitment, you authorize the Agency, or the Agency's designated agent or trustee, to guarantee your Debenture and to sell it with the Agency's guarantee.
(b) Limitations on amount of draw. The amount of a draw must be a multiple of $5,000. The Agency, in its discretion, may determine a minimum dollar amount for draws against Leverage commitments. Any such minimum amounts will be published in Notices in the
(c) Effect of regulatory violations on RBIC's eligibility for draws—(1) General rule. You are eligible to make a draw against your Leverage commitment only if you are in compliance with all applicable provisions of the Act and this part (i.e., no unresolved statutory or regulatory violations) and your Participation Agreement.
(2) Exception to general rule. If you are not in compliance, you may still be eligible for draws if:
(i) The Agency determines that your outstanding violations are of non-substantive provisions of the Act or this part or your Participation Agreement and that you have not repeatedly violated any non-substantive provisions; or
(ii) You have agreed with the Agency in writing on a course of action to resolve your violations and such agreement does not prevent you from issuing Leverage.
(d) Procedures for funding draws. You may request a draw at any time during the term of the commitment. With each request, submit the following documentation:
(1) A statement certifying that there has been no material adverse change in your financial condition since your last filing of SBA Form 468 or other USDA-approved form(s) (see also § 4290.1220 for filing requirements).
(2) If your request is submitted more than 30 days following the end of your fiscal year, but before you have submitted your annual filing of SBA Form 468 or other USDA-approved form(s) in accordance with § 4290.630(a), a preliminary unaudited annual financial statement on SBA Form 468 (Short Form) or other USDA-approved form(s).
(3) A statement certifying that to the best of your knowledge and belief, you are in compliance with all provisions of the Act and this part (i.e., no unresolved regulatory or statutory violations) and your Participation Agreement, or a statement listing any specific violations you are aware of. Either statement must be executed by one of the following:
(i) An officer of the RBIC;
(ii) An officer of a corporate general partner or managing member of the RBIC;
(iii) An individual who is authorized to act as or for a general partner of the RBIC; or
(iv) An individual who is authorized to act as or for a managing member of the RBIC.
(4) A statement that the proceeds are needed to fund one or more particular Enterprises or to provide liquidity for your operations. If required by the Agency, the statement must include the name and address of each Enterprise, and the amount and anticipated closing date of each proposed Financing.
(e) Reporting requirements after drawing funds. (1) Within 30 calendar days after the actual closing date of each Financing funded with the proceeds of your draw, you must file an SBA Form 1031 or other USDA-approved form(s) confirming the closing of the transaction.
(2) If the Agency required you to provide information concerning a specific planned Financing under paragraph (d)(4) of this section, and such Financing has not closed within 60 calendar days after the anticipated closing date, you must provide a written explanation of the failure to close.
(3) If you do not comply with this paragraph (e), you will not be eligible for additional draws. The Agency may also determine that you are not in compliance with the terms of your Leverage under § 4290.1810.
§ 4290.1240 - Funding of RBIC's draw request through sale to third-party.
(a) RBIC's authorization of the Agency to arrange sale of Debentures to third-party. By submitting a request for a draw of Debenture Leverage, you authorize the Agency, or any agent or trustee the Agency designates, to enter into any agreements (and to bind you to such agreements) necessary to accomplish:
(1) The sale of your Debenture to a third-party at a price approved by the Agency; and
(2) The purchase of your Debenture from the third-party and the pooling of your Debenture with other Debentures with the same maturity date.
(b) Sale of Debentures to a third-party. If the Agency arranges for the sale of your Debenture to a third-party, the sale price may be an amount discounted from the face amount of the Debenture.
§ 4290.1500 - Restrictions on distributions to RBIC investors while RBIC has outstanding Leverage.
(a) Restriction on distribution. If you have outstanding Leverage, whenever you make a distribution to your investors you must make, at the same time, a prepayment to or for the benefit of the third-party holder of the Debenture sold pursuant to § 4290.1240 of this part, accrued unpaid interest and the principal, in whole or in part, of one or more of your Debentures outstanding as of the date of the distribution (subject to the terms of such Debentures).
(b) Amount of prepayment. You must calculate the amount due the third-party holder by multiplying the total amount you intend to distribute by a fraction whose numerator is the outstanding principal of your Debenture(s) immediately preceding your distribution, and whose denominator is the sum of your Leverageable Capital as of that time plus the outstanding principal amount of your Debentures. For purposes of the preceding sentence “principal” means both the net proceeds and interest accrued to date of a discounted Debenture. The amount of any payment received under this section will be credited first against unpaid interest accrued to the date of distribution and then to the principal in whole or in part of the first Debenture you select to prepay and then to the interest and principal in whole or in part of such other Debenture(s) as you select to prepay. You may elect to prepay in whole any discounted Debenture under this section only within five years of its maturity date. Payments under this section must be made on the next occurring March 1 or September 1.
(c) Effect of prepayment. Subject to the terms of the Debenture(s), you may voluntarily prepay additional principal, but neither mandatory nor voluntary prepayment will increase your future Leverage eligibility.
§ 4290.1600 - Agency's authority to issue and guarantee Trust Certificates.
(a) Authorization. Section 384F of the Act authorizes the Agency to issue TCs and to guarantee the timely payment of the principal and interest thereon. Any such guarantee of such TC is limited to the principal and interest due on the Debentures in any Trust or Pool backing such TC. The full faith and credit of the United States is pledged to the payment of all amounts due under the guarantee of any TC.
(b) Authority to arrange public or private fundings of Leverage. The Agency in its discretion may arrange for public or private financing under its guarantee authority. Such financing may be accomplished by the sale of individual Debentures, aggregations of Debentures, or Pools or Trusts of Debentures.
(c) Pass-through provisions. TCs shall provide for a pass-through to their holders of all amounts of principal and interest paid on the Debentures in the Pool or Trust against which they are issued.
(d) Formation of a Pool or Trust holding Leverage Securities. The Agency shall approve the formation of each Pool or Trust. The Agency may, in its discretion, establish the size of the Pools and their composition, the interest rate on the TCs issued against Trusts or Pools, discounts, premiums and other charges made in connection with the Pools, Trusts, and TCs, and any other characteristics of a Pool or Trust it deems appropriate. Notwithstanding § 4290.1130(c), any agent of the Agency may collect a fee for the functions described in 7 U.S.C. 2009cc–5(e)(2) that does not exceed $500.
§ 4290.1610 - Effect of prepayment or early redemption of Leverage on a Trust Certificate.
(a) The rights, if any, of a RBIC to prepay any Debenture is established by the terms of such security, and no such right is created or denied by the regulations in this part.
(b) The Agency's rights to purchase or prepay any Debenture without premium are established by the terms of the Guaranty Agreement relating to the Debenture.
(c) Any prepayment of a Debenture pursuant to the terms of the Guaranty Agreement relating to such security shall reduce the Agency's guarantee of timely payment of principal and interest on a TC in proportion to the amount of principal that such prepaid Debenture represents in the Trust or Pool backing such TC.
(d) The Agency shall be discharged from its guarantee obligation to the holder or holders of any TC, or any successor or transferee of such holder, to the extent of any such prepayment, whether or not such successor or transferee shall have notice of any such prepayment.
(e) Interest on prepaid Debentures shall accrue only through the date of prepayment.
(f) In the event that all Debentures constituting a Trust or Pool are prepaid, the TCs backed by such Trust or Pool shall be redeemed by payment of the unpaid principal and interest on the TCs; provided, however, that in the case of the prepayment of a Debenture pursuant to the provisions of the Guaranty Agreement relating to the Debenture, the Central Registration Agent (CRA) shall pass through pro rata to the holders of the TCs any such prepayments including any prepayment penalty paid by the obligor RBIC pursuant to the terms of the Debenture.
§ 4290.1620 - Functions of agents, including Central Registration Agent, Selling Agent and Fiscal Agent.
(a) Agents. The Agency may appoint or cause to be appointed agent(s) to perform functions necessary to market and service Debentures or TCs pursuant to this part.
(1) Selling Agent. As a condition of guaranteeing a Debenture, the Agency may cause each RBIC to appoint a Selling Agent to perform functions that include, but are not limited to:
(i) Selecting qualified entities to become pool or Trust assemblers (“Poolers”).
(ii) Receiving guaranteed Debentures as well as negotiating the terms and conditions of sales or periodic offerings of Debentures and/or TCs on behalf of RBICs.
(iii) Directing and coordinating periodic sales of Debentures and/or TCs.
(iv) Arranging for the production of Offering Circulars, certificates, and such other documents as may be required from time to time.
(2) Fiscal Agent. The Agency shall appoint a Fiscal Agent to:
(i) Establish performance criteria for Poolers.
(ii) Monitor and evaluate the financial markets to determine those factors that will minimize or reduce the cost of funding Debentures.
(iii) Monitor the performance of the Selling Agent, Poolers, CRA, and the Trustee.
(iv) Perform such other functions as the Agency, from time to time, may prescribe.
(3) Central Registration Agent. Pursuant to a contract entered into with the Agency, the CRA, as the Agency's agent, will do the following with respect to the Pools or Trust Certificates for the Debentures:
(i) Form an approved Pool or Trust;
(ii) Issue the TCs in the prescribed form;
(iii) Transfer the TCs upon the sale of original issue TCs in any secondary market transaction;
(iv) Receive payments from RBICs;
(v) Make periodic payments as scheduled or required by the terms of the TCs, and pay all amounts required to be paid upon prepayment of Debentures;
(vi) Hold, safeguard, and release all Debentures constituting Trusts or Pools upon instructions from the Agency;
(vii) Remain custodian of such other documentation as the Agency shall direct by written instructions;
(viii) Provide for the registration of all pooled Debentures, all Pools and Trusts, and all TCs; and
(ix) Perform such other functions as the Agency may deem necessary to implement the provisions of this section.
(b) Functions. Either the Agency or an agent appointed by the Agency may perform the function of locating purchasers, and negotiating and closing the sale of Debentures and TCs. Nothing in the regulations in this part shall be interpreted to prevent the CRA from acting as the Agency's agent for this purpose.
§ 4290.1630 - Regulation of Brokers and Dealers and disclosure to purchasers of Leverage or Trust Certificates.
(a) Brokers and Dealers. Each broker, dealer, and Pool or Trust assembler approved by the Agency pursuant to these regulations shall either be regulated by a Federal financial regulatory agency, or be a member of the National Association of Securities Dealers (NASD), and shall be in good standing in respect to compliance with the financial, ethical, and reporting requirements of such body. It also shall be in good standing with the Agency as determined by the SBA official with delegated authority to made this determination (see paragraph (c) of this section) and shall provide a fidelity bond or insurance in such amount as the Agency may require.
(b) Suspension and/or termination of Broker or Dealer. The Agency shall exclude from the sale and all other dealings in Debentures or TCs any broker or dealer:
(1) If such broker's or dealer's authority to engage in the securities business has been revoked or suspended by a supervisory agency. When such authority has been suspended, the Agency will suspend such broker or dealer for the duration of such suspension by the supervisory agency.
(2) If such broker or dealer has been indicted or otherwise formally charged with a misdemeanor or felony bearing on its fitness, such broker or dealer may be suspended while the charge is pending. Upon conviction, participation may be terminated.
(3) If such broker or dealer has suffered an adverse final civil judgment holding that such broker or dealer has committed a breach of trust or violation of law or regulation protecting the integrity of business transactions or relationships, participation in the market for Debentures or TCs may be terminated.
(c) Termination/suspension proceedings. A broker's or dealer's participation in the market for Debentures or TCs will be conducted in accordance with 7 CFR part 11. The Agency may, for any of the reasons stated in paragraphs (b)(1) through (3) of this section, suspend the privilege of any broker or dealer to participate in this market. The Agency shall give written notice at least ten business days prior to the effective date of such suspension. Such notice shall inform the broker or dealer of the opportunity for a hearing pursuant to 7 CFR part 11.
§ 4290.1640 - Agency's access to records of the CRA, Brokers, Dealers and Pool or Trust assemblers.
The CRA and any broker, dealer and Pool or Trust assembler operating under the regulations in this part shall make all books, records and related materials associated with Debentures and TCs available to the Agency for review and copying purposes. Such access shall be at such party's primary place of business during normal business hours.