[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: 13CFR120.140]

[Page 219-220]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
 
PART 120--BUSINESS LOANS--Table of Contents
 
           Subpart A--Policies Applying to All Business Loans
 
Sec. 120.140  What ethical requirements apply to participants?

    Lenders, Intermediaries, CDCs, and Associate Development Companies 
(``ADCs'') (in this section, collectively referred to as 
``Participants''), must act ethically and exhibit good character. 
Ethical indiscretion of an Associate of a Participant or a member of a 
CDC will be attributed to the Participant. A Participant must promptly 
notify SBA if it obtains information concerning the unethical behavior 
of an Associate. The following are examples of such unethical behavior. 
A Participant may not:
    (a) Self-deal;
    (b) Have a real or apparent conflict of interest with a small 
business with which it is dealing (including any of its Associates or an 
Associate's Close Relatives) or SBA;
    (c) Own an equity interest in a business that has received or is 
applying to receive SBA financing (during the term of the loan or within 
6 months prior to the loan application);
    (d) Be incarcerated, on parole, or on probation;
    (e) Knowingly misrepresent or make a false statement to SBA;
    (f) Engage in conduct reflecting a lack of business integrity or 
honesty;
    (g) Be a convicted felon, or have an adverse final civil judgment 
(in a case involving fraud, breach of trust, or other conduct) that 
would cause the public to question the Participant's business integrity, 
taking into consideration such factors as the magnitude, repetition, 
harm caused, and remoteness in time of the activity or activities in 
question;
    (h) Accept funding from any source that restricts, prioritizes, or 
conditions the types of small businesses that the Participant may assist 
under an SBA program or that imposes any conditions or requirements upon 
recipients of SBA assistance inconsistent with SBA's loan programs or 
regulations;
    (i) Fail to disclose to SBA all relationships between the small 
business and its Associates (including Close Relatives of Associates), 
the Participant, and/or the lenders financing the Project of which it is 
aware or should be aware;
    (j) Fail to disclose to SBA whether the loan will:
    (1) Reduce the exposure of a Participant or an Associate of a 
Participant in a position to sustain a loss;
    (2) Directly or indirectly finance the purchase of real estate, 
personal property or services (including insurance) from the Participant 
or an Associate of the Participant;
    (3) Repay or refinance a debt due a Participant or an Associate of a 
Participant; or
    (4) Require the small business, or an Associate (including Close 
Relatives of Associates), to invest in the Participant (except for 
institutions which require an investment from all members as a condition 
of membership, such as a Production Credit Association);
    (k) Issue a real estate forward commitment to a builder or 
developer; or
    (l) Engage in any activity which taints its objective judgment in 
evaluating the loan.

[[Page 220]]

                      Credit Criteria for SBA Loans