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15 U.S.C. § 697 — Development company debentures
Federal law — U.S. Code and appendices · legal_authorities
**(a) Guarantees; Administration authority; regulatory terms and conditions; full faith and credit; subordination of debentures**
(1) Except as provided in subsection (b), the Administration may guarantee the timely payment of all principal and interest as scheduled on any debenture issued by any qualified State or local development company.
(2) Such guarantees may be made on such terms and conditions as the Administration may be regulation determine to be appropriate: Provided, That the Administration shall not decline to issue such guarantee when the ownership interests of the small business concern and the ownership interests of the property to be financed with the proceeds of a loan made pursuant to subsection (b)(1) are not identical because one or more of the following classes of relatives have an ownership interest in either the small business concern or the property: father, mother, son, daughter, wife, husband, brother, or sister: Provided further, That the Administrator or his designee has determined on a case-by-case basis that such ownership interest, such guarantee, and the proceeds of such loan, will substantially benefit the small business concern.
(3) The full faith and credit of the United States in pledged to the payment of all amounts guaranteed under this subsection.
(4) Any debenture issued by any State or local development company with respect to which a guarantee is made under this subsection, may be subordinated by the Administration to any other debenture, promissory note, or other debt or obligation of such company.
**(b) Statutory terms and conditions** No guarantee may be made with respect to any debenture under subsection (a) unless—
(1) such debenture is issued for the purpose of making one or more loans to small business concerns, th
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Source file: Laws/federal/codes/united-states-code/title-15/section-697-development-company-debentures--a5ef126787.md
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Source location: Title 15, Chapter 14B, § 697; chapter-14b-small-business-investment-program.md
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**(a) Guarantees; Administration authority; regulatory terms and conditions; full faith and credit; subordination of debentures**
(1) Except as provided in subsection (b), the Administration may guarantee the timely payment of all principal and interest as scheduled on any debenture issued by any qualified State or local development company.
(2) Such guarantees may be made on such terms and conditions as the Administration may be regulation determine to be appropriate: Provided, That the Administration shall not decline to issue such guarantee when the ownership interests of the small business concern and the ownership interests of the property to be financed with the proceeds of a loan made pursuant to subsection (b)(1) are not identical because one or more of the following classes of relatives have an ownership interest in either the small business concern or the property: father, mother, son, daughter, wife, husband, brother, or sister: Provided further, That the Administrator or his designee has determined on a case-by-case basis that such ownership interest, such guarantee, and the proceeds of such loan, will substantially benefit the small business concern.
(3) The full faith and credit of the United States in pledged to the payment of all amounts guaranteed under this subsection.
(4) Any debenture issued by any State or local development company with respect to which a guarantee is made under this subsection, may be subordinated by the Administration to any other debenture, promissory note, or other debt or obligation of such company.
**(b) Statutory terms and conditions** No guarantee may be made with respect to any debenture under subsection (a) unless—
(1) such debenture is issued for the purpose of making one or more loans to small business concerns, the proceeds of which shall be used by such concern for the purposes set forth in [section 696 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section696&num=0&edition=prelim);
(2) necessary funds for making such loans are not available to such company from private sources on reasonable terms;
(3) the interest rate on such debenture is not less than the rate of interest determined by the Secretary of the Treasury for purposes of [section 683(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section683/b&num=0&edition=prelim);
(4) the aggregate amount of such debenture does not exceed the amount of loans to be made from the proceeds of such debenture (other than any excess attributable to the administrative costs of such loans);
(5) the amount of any loan to be made from such proceeds does not exceed an amount equal to 50 percent of the cost of the project with respect to which such loan is made;
(6) the Administration approves each loan to be made from such proceeds; and
(7) with respect to each loan made from the proceeds of such debenture, the Administration—
(A) assesses and collects a fee, which shall be payable by the borrower, in an amount established annually by the Administration, which amount shall not exceed—
(i) the lesser of—
(I) 0.9375 percent per year of the outstanding balance of the loan; and
(II) the minimum amount necessary to reduce the cost (as defined in [section 661a of title 2](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title2-section661a&num=0&edition=prelim)) to the Administration of purchasing and guaranteeing debentures under this chapter to zero; and
(ii) 50 percent of the amount established under clause (i) in the case of a loan made during the 2-year period beginning on October 1, 2002, for the life of the loan; and
(B) uses the proceeds of such fee to offset the cost (as such term is defined in [section 661a of title 2](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title2-section661a&num=0&edition=prelim)) to the Administration of making guarantees under subsection (a).
**(c) Commercial loan interest rate**
(1) The purpose of this subsection is to facilitate the orderly and necessary flow of long-term loans from certified development companies to small business concerns.
(2) Notwithstanding the provisions of the constitution or laws of any State limiting the rate or amount of interest which may be charged, taken, received, or reserved, the maximum legal rate of interest on any commercial loan which funds any portion of the cost of the project financed pursuant to this section or [section 697a of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697a&num=0&edition=prelim) which is not funded by a debenture guaranteed under this section shall be a rate which is established by the Administrator of the Small Business Administration under the authority of this section.
(3) The Administrator is authorized and directed to establish and publish quarterly a maximum legal interest rate for any commercial loan which funds any portion of the cost of the project financed pursuant to this section or [section 697a of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697a&num=0&edition=prelim) which is not funded by a debenture guaranteed under this section.
**(d) Charges for Administration expenses**
(1) **Level of charges** — The Administration may impose an additional charge for administrative expenses with respect to each debenture for which payment of principal and interest is guaranteed under subsection (a).
(2) **Participation fee** — The Administration shall collect a one-time fee in an amount equal to 50 basis points on the total participation in any project of any institution described in subclause (I), (II), or (III) of [section 696(3)(B)(i) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section696/3/B/i&num=0&edition=prelim). Such fee shall be imposed only when the participation of the institution will occupy a senior credit position to that of the development company. All proceeds of the fee shall be used to offset the cost (as that term is defined in [section 661a of title 2](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title2-section661a&num=0&edition=prelim)) to the Administration of making guarantees under subsection (a).
(3) **Development company fee** — The Administration shall collect annually from each development company a fee of 0.125 percent of the outstanding principal balance of any guaranteed debenture authorized by the Administration after September 30, 1996. Such fee shall be derived from the servicing fees collected by the development company pursuant to regulation, and shall not be derived from any additional fees imposed on small business concerns. All proceeds of the fee shall be used to offset the cost (as that term is defined in [section 661a of title 2](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title2-section661a&num=0&edition=prelim)) to the Administration of making guarantees under subsection (a).
**(e) “Qualified State or local development company” defined; exception for rural company; authority**
(1) For purposes of this section, the term “qualified State or local development company” means any State or local development company which, as determined by the Administration, has—
(A) a full-time professional staff;
(B) professional management ability (including adequate accounting, legal, and business-servicing abilities); and
(C) a board of directors, or membership, which meets on a regular basis to make management decisions for such company, including decisions relating to the making and servicing of loans by such company.
(2) A company in a rural area shall be deemed to have satisfied the requirements of a full-time professional staff and professional management ability if it contracts with another certified development company which has such staff and management ability and which is located in the same general area to provide such services.
(3) Notwithstanding any other provision of law, qualified State or local development companies shall be authorized to prepare applications for deferred participation loans under [section 636(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section636/a&num=0&edition=prelim), to service such loans and to charge a reasonable fee for servicing such loans.
**(f) Effective date** The fees authorized by subsections (b) and (d) shall apply to financings approved by the Administration on or after October 1, 1996.
**(g) Calculation of subsidy rate** All fees, interest, and profits received and retained by the Administration under this section shall be included in the calculations made by the Director of the Office of Management and Budget to offset the cost (as that term is defined in [section 661a of title 2](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title2-section661a&num=0&edition=prelim)) to the Administration of purchasing and guaranteeing debentures under this chapter.
**(h) Required actions upon default**
(1) **Initial actions** — Not later than the 45th day after the date on which a payment on a loan funded through a debenture guaranteed under this section is due and not received, the Administration shall—
(A) take all necessary steps to bring such a loan current; or
(B) implement a formal written deferral agreement.
(2) **Purchase or acceleration of debenture** — Not later than the 65th day after the date on which a payment on a loan described in paragraph (1) is due and not received, and absent a formal written deferral agreement, the administration 11 So in original. Probably should be capitalized. shall take all necessary steps to purchase or accelerate the debenture.
(3) **Prepayment penalties** — With respect to the portion of any project derived from funds set forth in [section 696(3) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section696/3&num=0&edition=prelim), the Administration—
(A) shall negotiate the elimination of any prepayment penalties or late fees on defaulted loans made prior to September 30, 1996;
(B) shall not pay any prepayment penalty or late fee on the default based purchase of loans issued after September 30, 1996; and
(C) for any project financed after September 30, 1996, shall not pay any default interest rate higher than the interest rate on the note prior to the date of default.
**(i) Two-year waiver of fees** The Administration may not assess or collect any up front guarantee fee with respect to loans made under this subchapter during the 2-year period beginning on October 1, 2002.
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Federal law — U.S. Code and appendices · legal_authorities
At the written request of a Senator, the Director shall, to the extent practicable, prepare an estimate of the direct costs of a Federal intergovernmental mandate contained in an amendment of such Senator.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Seal; appointment and compensation of personnel; use of other services and facilities** The Administration shall have power to adopt, alter, and use a seal, which shall be judicially noticed. The Administrator is authorized, subject to the civil service and classification laws, to select, employ, appoint, and fix the compensation of such officers, employees, attorneys, and agents as shall be necessary to carry out the provisions of this chapter; to define their authority and duties; and to pay the costs of qualification of certain of them as notaries public. The Administration, with the consent of any board, commission, independent establishment, or executive department of the Government, may avail itself on a reimbursable or nonreimbursable basis of the use of information, services, facilities (including any field service thereof), officers, and employees thereof, in carrying out the provisions of this chapter.
**(b) Powers of Administrator** In the performance of, and with respect to, the functions, powers, and duties vested in him by this chapter the Administrator may—
(1) sue and be sued in any court of record of a State having general jurisdiction, or in any United States district court, and jurisdiction is conferred upon such district court to determine such controversies without regard to the amount in controversy; but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Administrator or his property;
(2) under regulations prescribed by him, assign or sell at public or private sale, or otherwise dispose of for cash or credit, in his discretion and upon such terms and conditions and for such consideration as the Administrator shall determine to be reasonable, any evidence of debt, contract, claim, p
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Congressional finding and declaration of purpose** The Congress hereby finds and declares that the purpose of this subchapter is to foster economic development and to create or preserve job opportunities in both urban and rural areas by providing long-term financing for small business concerns through the development company program authorized by this subchapter.
**(b) Loans; obligations of development companies** The Administration is authorized to make loans to State development companies to assist in carrying out the purposes of this chapter. Any funds advanced under this subsection shall be in exchange for obligations of the development company which bear interest at such rate, and contain such other terms, as the Administration may fix, and funds may be so advanced without regard to the use and investment by the development company of funds secured by it from other sources.
**(c) Maximum loans to development companies** The total amount of obligations purchased and outstanding at any one time by the Administration under this section from any one State development company shall not exceed the total amount borrowed by it from all other sources. Funds advanced to a State development company under this section shall be treated on an equal basis with those funds borrowed by such company after August 21, 1958, regardless of source, which have the highest priority, except when this requirement is waived by the Administrator.
**(d) Eligibility for assistance** In order to qualify for assistance under this subchapter, the development company must demonstrate that the project to be funded is directed toward at least one of the following economic development objectives—
(1) the creation of job opportunities within two years of the completion of the project or the pr
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Federal law — U.S. Code and appendices · legal_authorities
It is declared to be the policy of the Congress and the purpose of this chapter to improve and stimulate the national economy in general and the small-business segment thereof in particular by establishing a program to stimulate and supplement the flow of private equity capital and long-term loan funds which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply: Provided, however, That this policy shall be carried out in such manner as to insure the maximum participation of private financing sources.
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Federal law — U.S. Code and appendices · legal_authorities
**(a)** Notwithstanding any other law, rule, or regulation, the Administration shall sell to investors, either publicly or by private placement, debentures pursuant to [section 697 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697&num=0&edition=prelim) as follows:
(1) Of the program levels otherwise authorized by law for fiscal year 1986, an amount not to exceed $200,000,000.
(2) Of the program levels otherwise authorized by law for each of fiscal years 1987 and 1988, an amount not to exceed $425,000,000.
(3) All of the program levels authorized for fiscal year 1989 and subsequent fiscal years.
**(b)** Nothing in any provision of law shall be construed to authorize the Federal Financing Bank to acquire—
(1) any obligation the payment of principal or interest on which at any time has been guaranteed in whole or in part under [section 697 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697&num=0&edition=prelim) and which is being sold pursuant to the provisions of the program authorized in this section;
(2) any obligation which is an interest in any obligation described in paragraph (1); or
(3) any obligation which is secured by, or substantially all of the value of which is attributable to, any obligation described in paragraph (1) or (2).
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Aid, counsel, assistance, etc., to small business concerns** The essence of the American economic system of private enterprise is free competition. Only through full and free competition can free markets, free entry into business, and opportunities for the expression and growth of personal initiative and individual judgment be assured. The preservation and expansion of such competition is basic not only to the economic well-being but to the security of this Nation. Such security and well-being cannot be realized unless the actual and potential capacity of small business is encouraged and developed. It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation.
**(b) Assistance to compete in international markets**
(1) It is the declared policy of the Congress that the Federal Government, through the Administrator of the Small Business Administration, acting through the Associate Administrator for International Trade, and in cooperation with the Department of Commerce and other relevant State and Federal agencies, should aid and assist small businesses, as defined under this chapter, to increase their ability to compete in international markets by—
(A) enhancing their abil
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Creation; principal, branch, and regional offices** In order to carry out the policies of this chapter there is created an agency under the name “Small Business Administration” (herein referred to as the Administration), which Administration shall be under the general direction and supervision of the President and shall not be affiliated with or be within any other agency or department of the Federal Government. The principal office of the Administration shall be located in the District of Columbia. The Administration may establish such branch and regional offices in other places in the United States as may be determined by the Administrator of the Administration. As used in this chapter, the term “United States” includes the several States, the Territories and possessions of the United States, the Commonwealth of Puerto Rico, the Trust Territory of the Pacific Islands, and the District of Columbia.
**(b) Appointment of Administrator, Deputy Administrator, and Associate Administrators; duties of Administrator: preparation of data base and publication of economic indices and annual report; risk management database; computer security and education program**
(1) The management of the Administration shall be vested in an Administrator who shall be appointed from civilian life by the President, by and with the advice and consent of the Senate, and who shall be a person of outstanding qualifications known to be familiar and sympathetic with small-business needs and problems. The Administrator shall not engage in any other business, vocation, or employment than that of serving as Administrator. In carrying out the programs administered by the Small Business Administration including its lending and guaranteeing functions, the Administrator shall not discriminate on the
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Loans to small business concerns; allowable purposes; qualified business; restrictions and limitations** The Administration is empowered to the extent and in such amounts as provided in advance in appropriation Acts to make loans for plant acquisition, construction, conversion, or expansion, including the acquisition of land, material, supplies, equipment, and working capital, and to make loans to any qualified small business concern, including those owned by qualified Indian tribes, for purposes of this chapter. Such financings may be made either directly or in cooperation with banks or other financial institutions through agreements to participate on an immediate or deferred (guaranteed) basis. These powers shall be subject, however, to the following restrictions, limitations, and provisions:
(1) **In general.—**
(A) *Credit elsewhere.—*
(i) *In general.—* — The Administrator has the authority to direct, and conduct oversight for, the methods by which lenders determine whether a borrower is able to obtain credit elsewhere. No financial assistance shall be extended pursuant to this subsection if the applicant can obtain credit elsewhere. No immediate participation may be purchased unless it is shown that a deferred participation is not available; and no direct financing may be made unless it is shown that a participation is not available.
(ii) *Liquidity.—* — On and after October 1, 2015, the Administrator may not guarantee a loan under this subsection if the lender determines that the borrower is unable to obtain credit elsewhere solely because the liquidity of the lender depends upon the guaranteed portion of the loan being sold on the secondary market.
(B) *Background checks.—* — Prior to the approval of any loan made pursuant to this subsecti
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Federal law — U.S. Code and appendices · legal_authorities
The Administration may, in addition to its authority under [section 695 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section695&num=0&edition=prelim), make loans for plant acquisition, construction, conversion or expansion, including the acquisition of land, to State and local development companies, and such loans may be made or effected either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred basis: Provided, however, That the foregoing powers shall be subject to the following restrictions and limitations:
(1) **Use of proceeds.—** — The proceeds of any such loan shall be used solely by the borrower to assist 1 or more identifiable small business concerns and for a sound business purpose approved by the Administration.
(2) **Maximum amount.—**
(A) *In general.—* — Loans made by the Administration under this section shall be limited to—
(i) $5,000,000 for each small business concern if the loan proceeds will not be directed toward a goal or project described in clause (ii), (iii), (iv), or (v);
(ii) $5,000,000 for each small business concern if the loan proceeds will be directed toward 1 or more of the public policy goals described under [section 695(d)(3) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section695/d/3&num=0&edition=prelim);
(iii) $5,500,000 for each project of a small manufacturer;
(iv) $5,500,000 for each project that reduces the borrower’s energy consumption by at least 10 percent; and
(v) $5,500,000 for each project that generates renewable energy or renewable fuels, such as biodiesel or ethanol production.
(B) *Definition.—* — As used in this paragraph, the term “s
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Federal law — U.S. Code and appendices · legal_authorities
**(a) In general**
(1) **Prepayment authorized** — Subject to the requirements set forth in subsection (b), an issuer of a debenture purchased by the Federal Financing Bank and guaranteed by the Administration under this chapter may, at the election of the borrower (in the case of a loan under [section 697 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697&num=0&edition=prelim)) or the issuer (in the case of a small business investment company) and with the approval of the Administration, prepay such debenture in accordance with the provisions of this section.
(2) **Procedure**
(A) *In general* — In making a prepayment under paragraph (1)—
(i) the borrower (in the case of a loan under [section 697 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697&num=0&edition=prelim)) or the issuer (in the case of a small business investment company) shall pay to the Federal Financing Bank an amount that is equal to the sum of the unpaid principal balance due on the debenture as of the date of the prepayment (plus accrued interest at the coupon rate on the debenture) and the amount of the repurchase premium described in subparagraph (B); and
(ii) the Administration shall pay to the Federal Financing Bank the difference between the repurchase premium paid by the borrower under this subsection and the repurchase premium that the Federal Financing Bank would otherwise have received.
(B) *Repurchase premium*
(i) *In general* — For purposes of subparagraph (A)(i), the repurchase premium is the amount equal to the product of—
(I) the unpaid principal balance due on the debenture on the date of prepayment; and
(II) the applicable percentage rate, as determined in accor
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