[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR108.550]

[Page 121-122]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
 
PART 108_NEW MARKETS VENTURE CAPITAL (``NMVC'') PROGRAM--Table of Contents
 
           Subpart G_Managing the Operations of a NMVC Company
 
Sec.  108.550  Prior approval of secured third-party debt of NMVC companies.

    (a) Definition. In this section, ``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 
and secured lines of credit.
    (b) General rule. 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

[[Page 122]]

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) Conditions for SBA approval. As a condition of granting its 
approval under this section, 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.
    (d) 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 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.

                Voluntary Decrease in Regulatory Capital