[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: 13CFR107.560]

[Page 46-47]
 
                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. 107.560  Subordination of SBA's creditor position.

    (a) Debentures purchased or guaranteed on or before July 1, 1991. 
Under the terms of any Debenture purchased or guaranteed by SBA on or 
before July 1, 1991, SBA's unsecured claims against you, as a Debenture-
holder or as subrogee, are subordinated in favor of all your other 
creditors, except to the extent that such claims may be subject to 
equitable subordination in SBA's favor.
    (b) Debentures purchased or guaranteed after July 1, 1991, including 
refinancings of Debentures previously purchased or guaranteed. (1) Under 
the terms of any

[[Page 47]]

Debenture purchased or guaranteed by SBA after July 1, 1991, SBA's 
unsecured claims against you, as a Debenture-holder or as subrogee, are 
subordinated only in favor of non-Associate lenders; and, to the extent 
that your indebtedness to such lenders exceeds the lesser of $10,000,000 
or 200 percent of your Regulatory Capital (determined as of the date 
your Debentures were purchased or guaranteed), SBA's unsecured claims 
enjoy parity with those of other unsecured creditors, except with 
respect to indebtedness created on or before July 1, 1991.
    (2) In order to induce others to lend you money after your Debenture 
has been purchased or guaranteed, SBA may agree in writing on a case-by-
case basis to subordinate its unsecured claims, on such terms as it may 
determine, in favor of one or more of your Associates, or in favor of 
other lenders in excess of the amounts mentioned in paragraph (b)(1) of 
this section.
    (3) SBA reserves the authority to refuse to subordinate its claims 
if it determines, at the time you request your Debenture be purchased or 
guaranteed, that the exercise of reasonable investment prudence and your 
financial condition warrant such refusal.