[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR107.550]

[Page 46]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
 
PART 107--SMALL BUSINESS INVESTMENT COMPANIES--Table of Contents
 
            Subpart E--Managing the Operations of a Licensee
 
Sec. 107.550  Prior approval of secured third-party debt of leveraged Licensees.

    (a) Definition. In this Sec. 107.550, ``secured third-party debt'' 
means any non-SBA debt secured by any of your assets, including secured 
guarantees and other contingent obligations that you voluntarily assume, 
secured lines of credit, and secured Temporary Debt of a Licensee with 
outstanding Participating Securities.
    (b) General rule. If you have outstanding Leverage, you must get 
SBA'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 Form 468) are comparable.
    (c) Additional rule for secured lines of credit in existence on 
April 8, 1994. If you have outstanding Leverage and you have a secured 
line of credit that was created on or before April 8, 1994, you must 
receive SBA's written approval of the line before you increase the 
amounts outstanding thereunder.
    (d) Conditions for SBA approval. As a condition of granting its 
approval under this Sec. 107.550, SBA 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). SBA 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.
    (e) Thirty day approval. Unless SBA 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;
    (3) Your Leverage does not exceed 150 percent of your Leverageable 
Capital; and
    (4) 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.