[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: 13CFR314.6]

[Page 638]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
CHAPTER III--ECONOMIC DEVELOPMENT ADMINISTRATION, DEPARTMENT OF COMMERCE
 
PART 314_PROPERTY--Table of Contents
 
                            Subpart A_General
 
Sec.  314.6  Encumbrances.

    (a) General. Except as provided in paragraph (b) of this section or 
as otherwise authorized by EDA, Recipient-owned Property acquired or 
improved in whole or in part with Investment Assistance must not be used 
to secure a mortgage or deed of trust or in any way collateralized or 
otherwise encumbered, except to secure a grant or loan made by a Federal 
Agency or State agency or other public body participating in the same 
Project. An encumbrance includes but is not limited to easements, 
rights-of-way or other restrictions on the use of any Property.
    (b) Exceptions. Subject to EDA's approval, which will not be 
unreasonably withheld or unduly delayed, paragraph (a) of this section 
does not apply to:
    (1) Recipient-owned Property that is subject to an encumbrance at 
the time EDA approves the Project, where EDA determines that the 
requirements of Sec.  314.7(b) are met;
    (2) Encumbrances arising solely from the requirements of a pre-
existing water or sewer facility or other utility encumbrances, which by 
their terms extend to additional Property connected to such facilities; 
and
    (3) Encumbrances in cases where all of the following are met:
    (i) EDA, in its sole discretion, determines that there is good cause 
for a waiver of paragraph (a) of this section;
    (ii) All proceeds secured by the encumbrance on the Property shall 
be available only to the Recipient and shall be used only for the 
Project for which the Investment Assistance applies or for related 
activities of which the Project is an essential part;
    (iii) A grantor/lender will not provide funds without the security 
of a lien on the Property; and
    (iv) There is a reasonable expectation, as determined by EDA, that 
the Recipient will not default on its obligations.
    (c) Encumbering Recipient-owned Property, other than as permitted in 
this section, is an Unauthorized Use of the Property under Sec.  314.4.