Chapter 14B, Subchapter III, Part A—, Section 683, Subsection (b) · 15 U.S.C. Chapter 14B — SMALL BUSINESS INVESTMENT PROGRAM

Contents

(b)To encourage the formation and growth of small business investment companies the Administration is authorized when authorized in appropriation Acts, to purchase, or to guarantee the timely payment of all principal and interest as scheduled on, debentures or participating securities issued by such companies. Such purchases or guarantees may be made by the Administration on such terms and conditions as it deems appropriate, pursuant to regulations issued by the Administration. The full faith and credit of the United States is pledged to the payment of all amounts which may be required to be paid under any guarantee under this subsection. Debentures purchased or guaranteed by the Administration under this subsection shall be subordinate to any other debenture bonds, promissory notes, or other debts and obligations of such companies, unless the Administration in its exercise of reasonable investment prudence and in considering the financial soundness of such company determines otherwise. Such debentures may be issued for a term of not to exceed fifteen years and shall bear interest at a rate not less than a rate determined by the Secretary of the Treasury taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities on such debentures, adjusted to the nearest one-eighth of 1 percent, plus, for debentures obligated after September 30, 2001, an additional charge, in an amount established annually by the Administration, as necessary to reduce to zero the cost (as defined in section 661a of title 2) to the Administration of purchasing and guaranteeing debentures under this chapter, which amount may not exceed 1.38 percent per year, and which shall be paid to and retained by the Administration. The debentures or participating securities shall also contain such other terms as the Administration may fix, and shall be subject to the following restrictions and limitations:

(1)The total amount of debentures and participating securities that may be guaranteed by the Administration and outstanding from a company licensed under section 681(c) of this title shall not exceed 300 per centum of the private capital of such company: Provided, That nothing in this paragraph shall require any such company that on March 31, 1993, has outstanding debentures in excess of 300 per centum of its private capital to prepay such excess: And provided further, That any such company may apply for an additional debenture guarantee or participating security guarantee with the proceeds to be used solely to pay the amount due on such maturing debenture, but the maturity of the new debenture or security shall be not later than September 30, 2002.

(2)

(A)The maximum amount of outstanding leverage made available to any one company licensed under section 681(c) of this title may not exceed the lesser of—

(i)200 percent of such company’s private capital; or

(ii)

(I)with respect to such a company that makes quarterly or semiannual interest payments $250,000,000; or

(II)$175,000,000 with respect to any other company licensed under section 681(c) of this title.

(B)The maximum amount of outstanding leverage made available to two or more companies licensed under section 681(c) of this title that are commonly controlled (as determined by the Administrator) and not under capital impairment may not exceed—

(i)with respect to such companies that are commonly controlled and that make quarterly or semiannual interest payments, $475,000,000; or

(ii)$350,000,000 with respect to any other companies licensed under section 681(c) of this title that are commonly controlled.

(C)

(i)Except as provided in clause (iii), in calculating the outstanding leverage of a company or companies for the purposes of subparagraphs (A) and (B), the Administrator shall not include the amount of the cost basis of any investment made by the company or companies in—

(I)a small business concern located in a low-income geographic area (as defined in section 689 of this title) or in a rural area (as defined in section 1991(a)(13) of title 7);

(II)a small business concern operating primarily in a covered technology category (as defined in section 149(e) of title 10); or

(III)a small manufacturer (as defined in section 695(e)(6) of this title).

(ii)While maintaining the limitation of subparagraph (A)(i) and consistent with a leverage determination ratio issued pursuant to section 681(c) of this title, the aggregate amount excluded for a company or companies under clause (i) from the calculation of the outstanding leverage such company or companies for the purposes of subparagraphs (A) and (B) may not exceed the lesser of 50 percent of the private capital of such company or companies or $125,000,000.

(iii)An investment by a licensee is eligible for exclusion from the calculation of outstanding leverage under clause (i) only if such investment is made by such licensee after May 19, 2026.

(D)

(i)Subject to clause (ii), in calculating the outstanding leverage of a company for purposes of subparagraph (A), the Administrator shall exclude the amount of the cost basis of any Energy Saving qualified investment in a smaller enterprise made in the first fiscal year after December 19, 2007, or any fiscal year thereafter by a company licensed in the applicable fiscal year.

(ii)

(I)The amount excluded under clause (i) for a company shall not exceed 33 percent of the private capital of that company.

(II)A company shall not make an Energy Saving qualified investment in any one entity in an amount equal to more than 20 percent of the private capital of that company.

(III)The exclusion of amounts under clause (i) shall be subject to such terms as the Administrator may impose to ensure that there is no cost (as that term is defined in section 661a of title 2) with respect to purchasing or guaranteeing any debenture involved.

(3)Subject to the foregoing dollar and percentage limits, a company licensed under section 681(c) of this title may issue and have outstanding both guaranteed debentures and participating securities: Provided, That the total amount of participating securities outstanding shall not exceed 200 per centum of private capital.

For purposes of this subsection, the term “venture capital” includes such common stock, preferred stock, or other financing with subordination or nonamortization characteristics as the Administration determines to be substantially similar to equity financing.

United States Government work; public domain under 17 U.S.C. § 105.

Defined terms · 60

Show every defined term

Administration
means the Small Business Administration;
Administrator
means the Administrator of the Small Business Administration;
articles
means articles of incorporation for an incorporated body and means the functional equivalent or other similar documents specified by the Administrator for other business entities;
bid bond
means a bond conditioned upon the bidder on a contract entering into the contract, if he receives the award thereof, and furnishing the prescribed payment bond and performance bond.
borrower
means a small business concern that submits an application to a development company for financing under this subparagraph;
calendar quarter
means—
combined capital
means the aggregate amount of private capital and outstanding leverage and (B) the term “management expenses” includes salaries, office expenses, travel, business development, office and equipment rental, bookkeeping and the development, investigation and monitoring of investments, but does not include the cost of services provided by specialized outside consultants, outside lawyers and outside auditors, who perform services not generally expected of a venture capital company nor does such term include the cost of services provided by any affiliate of the company which are not part of the normal process of making and monitoring venture capital investments.
covered New Markets Venture Capital company
means a New Markets Venture Capital company—
development companies
means enterprises incorporated under State law with the authority to promote and assist the growth and development of small-business concerns in the areas covered by their operations;
developmental venture capital
means capital in the form of equity capital investments in businesses made with a primary objective of fostering economic development in low-income geographic areas.
eligible calendar quarter
means—
eligible fixed asset
means tangible property relating to which the Administrator may provide financing under this section;
Energy Saving debenture
means a deferred interest debenture that—
Energy Saving qualified investment
means investment in a small business concern that is primarily engaged in researching, manufacturing, developing, or providing products, goods, or services that reduce the use or consumption of non-renewable energy resources;
equity capital
means common or preferred stock or a similar instrument, including subordinated debt with equity features which is not amortized and which provides for interest payments from appropriate sources, as determined by the Administration.
Federal banking regulator appraisal threshold
means the lesser of the threshold amounts set by the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation for when a federally related transaction that is a commercial real estate transaction requires an appraisal prepared by a State licensed or certified appraiser.
interest
includes only the maximum mandatory sum, expressed in dollars or as a percentage rate, that is payable with respect to the business loan amount received by the small business concern, and does not include the value, if any, of contingent obligations, including warrants, royalty, or conversion rights, granting the small business investment company an ownership interest in the equity or increased future revenue of the small business concern receiving the business loan.
issuer
means—
leverage
includes—
license
means a license issued by the Administration as provided in section 681 of this title;
limited liability company
means a business entity that is organized and operating in accordance with a State limited liability company statute approved by the Administration;
low-income geographic area
means—
low-income individual
means an individual whose income (adjusted for family size) does not exceed—
management expenses
includes salaries, office expenses, travel, business development, office and equipment rental, bookkeeping and the development, investigation and monitoring of investments, but does not include the cost of services provided by specialized outside consultants, outside lawyers and outside auditors, who perform services not generally expected of a venture capital company nor does such term include the cost of services provided by any affiliate of the company which are not part of the normal process of making and monitoring venture capital investments.
management official
means an officer, director, general partner, manager, employee, agent, or other participant in the management or conduct of the affairs of a licensee.
maximum tax liability
means the amount of income allocated to each partner, shareholder, or member (including an allocation to the Administration as if it were a taxpayer) for Federal income tax purposes in the income tax return filed or to be filed by the company with respect to the fiscal year of the company immediately preceding such distribution, multiplied by the highest combined marginal Federal and State income tax rates for corporations or individuals, whichever is higher, on each type of income included in such return.
member
means, with respect to a licensee that is a limited liability company, a holder of an ownership interest or a person otherwise admitted to membership in the limited liability company;
New Markets Venture Capital company
means a company that—
obligee
means (A) in the case of a bid bond, the person requesting bids for the performance of a contract, or (B) in the case of a payment bond or performance bond, the person who has contracted with a principal for the completion of the contract and to whom the obligation of the surety runs in the event of a breach by the principal of the conditions of a payment bond or performance bond.
operational assistance
means management, marketing, and other technical assistance that assists a small business concern with business development.
participating securities
includes preferred stock, a preferred limited partnership interest or a similar instrument, including debentures under the terms of which interest is payable only to the extent of earnings and (B) the term “prioritized payments” includes dividends on stock, interest on qualifying debentures, or priority returns on preferred limited partnership interests which are paid only to the extent of earnings.
participation agreement
means an agreement, between the Administrator and a company granted final approval under section 690c(e) of this title, that—
payment bond
means a bond conditioned upon the payment by the principal of money to persons under contract with him.
performance bond
means a bond conditioned upon the completion by the principal of a contract in accordance with its terms.
person
includes corporations, companies, associations, firms, partnerships, societies, joint stock companies, States, territories, and possessions of the United States, or subdivisions of any of the foregoing, and the District of Columbia, as well as individuals.
pollution control facilities
means such property (both real and personal) as the Administration in its discretion determines is likely to help prevent, reduce, abate, or control noise, air or water pollution or contamination by removing, altering, disposing or storing pollutants, contaminants, wastes, or heat, and such property (both real and personal) as the Administration determines will be used for the collection, storage, treatment, utilization, processing, or final disposal of solid or liquid waste.
prime contractor
means the person with whom the obligee has contracted to perform the contract.
principal
means (A) in the case of a bid bond, a person bidding for the award of a contract, or (B) the person primarily liable to complete a contract for the obligee, or to make payments to other persons in respect of such contract, and for whose performance of his obligation the surety is bound under the terms of a payment or performance bond.
prioritized payments
includes dividends on stock, interest on qualifying debentures, or priority returns on preferred limited partnership interests which are paid only to the extent of earnings.
qualified contract
means a lease, sublease, loan agreement, installment sales contract, or similar instrument, entered into between a small business concern and any person.
qualified debt
means indebtedness—
qualified high loss reserve PCL
means, with respect to any calendar year, any premier certified lender designated by the Administrator as a qualified high loss reserve PCL for such year.
qualified independent auditor
means any auditor who—
qualified nonprivate funds
means any—
qualified State or local development company
has the meaning given the term in section 697(e) of this title.
renewable energy
means energy derived from resources that are regenerative or that cannot be depleted, including solar, wind, ethanol, and biodiesel fuels.
Renewable Fuel Capital Investment company
means a company—
small business concern
means a business concern that meets the size standard for the primary industry in which such business concern, and the affiliates of such business concern, is engaged, as determined by the Administrator in accordance with the North American Industry Classification System.
small manufacturer
means a small business concern—
smaller enterprise
means any small business concern that, together with its affiliates—
specialized small business investment company
means any small business investment company that—
specified risk management benchmarks
means the following rates, as determined by the Administrator:
State
includes the several States, the territories and possessions of the United States, the Commonwealth of Puerto Rico, and the District of Columbia;
State income tax
means the income tax of the State where the company’s principal place of business is located.
subcontractor
means a person who has contracted with a prime contractor or with another subcontractor to perform a contract.
surety
means the person who (A) under the terms of a bid bond, undertakes to pay a sum of money to the obligee in the event the principal breaches the conditions of the bond, (B) under the terms of a performance bond, undertakes to incur the cost of fulfilling the terms of a contract in the event the principal breaches the conditions of the contract, (C) under the terms of a payment bond, undertakes to make payment to all persons supplying labor and material in the prosecution of the work provided for in the contract if the principal fails to make prompt payment, or (D) is an agent, independent agent, underwriter, or any other company or individual empowered to act on behalf of such person.
third party debt
means any indebtedness for borrowed money, other than indebtedness owed to the Administration;
trustee
means a person who is knowledgeable about and proficient in the marketing of thinly traded securities.
underlicensed State
means a State in which the number of licensees per capita is less than the median number of licensees per capita for all States, as calculated by the Administrator.
venture capital
includes such common stock, preferred stock, or other financing with subordination or nonamortization characteristics as the Administration determines to be substantially similar to equity financing.