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15 U.S.C. § 697f — Prepayment of development company debentures

Federal law — U.S. Code and appendices · legal_authorities

15 U.S.C. § 697f — Prepayment of development company debentures

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Source file: Laws/federal/codes/united-states-code/title-15/section-697f-prepayment-of-development-company-debentures--43f8c8f618.md
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Source location: Title 15, Chapter 14B, § 697f; chapter-14b-small-business-investment-program.md

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**(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 accordance with clauses (ii) and (iii). (ii) *Applicable percentage rate* — For purposes of clause (i)(II), the applicable percentage rate means— (I) with respect to a 10-year term loan, 8.5 percent; (II) with respect to a 15-year term loan, 9.5 percent; (III) with respect to a 20-year term loan, 10.5 percent; and (IV) with respect to a 25-year term loan, 11.5 percent. (iii) *Adjustments to applicable percentage rate* — The percentage rates described in clause (ii) shall be increased or decreased by the Administration by a factor not to exceed one-third, if the same factor is applied in each case and if the Administration determines that an adjustment is necessary, based on the number of borrowers having given notice of their intent to participate, in order to make the program (including the amounts appropriated for this purpose under Public Law 103–317) result in no substantial net gain or loss of revenue to the Federal Financing Bank or to the Administration. Amounts collected in excess of the amount necessary to ensure revenue neutrality shall be refunded to the borrowers. **(b) Requirements** For purposes of subsection (a), the requirements of this subsection are that— (1) the debenture is outstanding and neither the loan that secures the debenture, if any, nor the debenture is in default on the date on which the prepayment is made; (2) State, local, or personal funds, or the proceeds of a refinancing in accordance with subsection (d) under the programs authorized by this subchapter, are used to prepay or roll over the debenture; and (3) with respect to a debenture issued under [section 697 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697&num=0&edition=prelim), the issuer certifies that the benefits, net of fees and expenses authorized herein, associated with prepayment of the debenture are entirely passed through to the borrower. **(c) No prepayment fees or penalties** No fees or penalties other than those specified in this section may be imposed on the issuer, the borrower, the Administration, or any fund or account administered by the Administration as the result of a prepayment under this section. **(d) Refinancing limitations** (1) **In general** — The refinancing of a debenture under sections 697a and 697b of this title, in accordance with subsection (b)(2)— (A) shall not exceed the amount necessary to prepay existing debentures, including all costs associated with the refinancing and any applicable prepayment penalty or repurchase premium; and (B) except as provided in paragraphs (2) and (3), shall be subject to the provisions of sections 697a and 697b of this title and the rules and regulations promulgated thereunder, including rules and regulations governing payment of authorized expenses, commissions, fees, and discounts to brokers and dealers in trust certificates issued pursuant to [section 697b of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697b&num=0&edition=prelim). (2) **Job creation** — An applicant for refinancing under [section 697a of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697a&num=0&edition=prelim) of a loan made pursuant to [section 697 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697&num=0&edition=prelim) shall not be required to demonstrate that a requisite number of jobs will be created with the proceeds of a refinancing. (3) **Loan processing fee** — To cover the cost of loan packaging, processing, and other administrative functions, a development company that provides refinancing under subsection (b)(2) may impose a one-time loan processing fee, not to exceed 0.5 percent of the principal amount of the loan. (4) **New debentures** — Issuers of debentures under subchapter III may issue new debentures in accordance with such subchapter in order to prepay existing debentures as authorized in this section. (5) **Preliminary notice** (A) *In general* — The Administration shall use certified mail and other reasonable means to notify each eligible borrower of the prepayment program provided in this subchapter. Each preliminary notice shall specify the range and dollar amount of repurchase premiums which could be required of that borrower in order to participate in the program. In carrying out this program, the Administration shall provide a period of not less than 45 days following the receipt of such notice by the borrower during which the borrower must notify the Administration of the borrower’s intent to participate in the program. The Administration shall require that a borrower who gives notice of its intent to participate to make an earnest money deposit of $1,000 which shall not be refundable but which shall be credited toward the final repurchase premium. (B) *“Borrower” defined* — For purposes of this paragraph, the term “borrower”, in the case of a small business investment company or a specialized small business investment company, means “issuer”. (6) **Final notice** — Based upon the response to the preliminary notice under paragraph (5), the Administration shall make a final computation of the necessary prepayment premiums and shall notify each qualified respondent of the results of such computation. Each qualified respondent shall be afforded not less than 4 months to complete the prepayment. **(e) Definitions** For purposes of this section— (1) the term “issuer” means— (A) the qualified State or local development company that issued a debenture pursuant to [section 697 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697&num=0&edition=prelim), which has been purchased by the Federal Financing Bank; and (B) a small business investment company licensed pursuant to [section 681 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section681&num=0&edition=prelim); or (2) the term “borrower” means a small business concern whose loan secures a debenture issued pursuant to [section 697 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section697&num=0&edition=prelim). **(f) Regulations** Not later than 30 days after October 22, 1994, the Administration shall promulgate such regulations as may be necessary to carry out this section. **(g) Authorization** There are authorized to be appropriated $30,000,000 to carry out the provisions of The Small Business Prepayment Penalty Relief Act of 1994.

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Federal law — U.S. Code and appendices · legal_authorities

15 U.S.C. § 681 — Organization

**(a) Incorporation and charter under State law, period of succession; area of operations** A small business investment company shall be an incorporated body, a limited liability company, or a limited partnership organized and chartered or otherwise existing under State law solely for the purpose of performing the functions and conducting the activities contemplated under this subchapter, which, if incorporated, has succession for a period of not less than thirty years unless sooner dissolved by its shareholders, and if a limited partnership, has succession for a period of not less than ten years, and possesses the powers reasonably necessary to perform such functions and conduct such activities. The area in which the company is to conduct its operations, and the establishment of branch offices or agencies (if authorized by the articles), shall be subject to the approval of the Administration. **(b) Articles of incorporation; approval** The articles of any small business investment company shall specify in general terms the objects for which the company is formed, the name assumed by such company, the area or areas in which its operations are to be carried on, the place where its principal office is to be located, and the amount and classes of its shares of capital stock. Such articles may contain any other provisions not inconsistent with this chapter that the company may see fit to adopt for the regulation of its business and the conduct of its affairs. Such articles and any amendments thereto adopted from time to time shall be subject to the approval of the Administration. **(c) Issuance of license** (1) **Submission of application** — Each applicant for a license to operate as a small business investment company under this chapter shall submit to the Administrato

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15 U.S.C. § 683 — Borrowing operations

**(a) Authority to issue obligations** Each small business investment company shall have authority to borrow money and to issue its securities, promissory notes, or other obligations under such general conditions and subject to such limitations and regulations as the Administration may prescribe. **(b) Debentures and participating securities** To encourage the formation and growth of small business investment companies the Administration is authorized when authorized in appropriation Acts, to purchase, or to guarantee the timely payment of all principal and interest as scheduled on, debentures or participating securities issued by such companies. Such purchases or guarantees may be made by the Administration on such terms and conditions as it deems appropriate, pursuant to regulations issued by the Administration. The full faith and credit of the United States is pledged to the payment of all amounts which may be required to be paid under any guarantee under this subsection. Debentures purchased or guaranteed by the Administration under this subsection shall be subordinate to any other debenture bonds, promissory notes, or other debts and obligations of such companies, unless the Administration in its exercise of reasonable investment prudence and in considering the financial soundness of such company determines otherwise. Such debentures may be issued for a term of not to exceed fifteen years and shall bear interest at a rate not less than a rate determined by the Secretary of the Treasury taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities on such debentures, adjusted to the nearest one-eighth of 1 percent, plus, for debentures obl

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Federal law — U.S. Code and appendices · legal_authorities

15 U.S.C. § 697 — Development company debentures

**(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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Federal law — U.S. Code and appendices · legal_authorities

15 U.S.C. § 697b — Pooling of debentures

**(a) Issuance; debentures composing trust or pool** The Administration is authorized to issue trust certificates representing ownership of all or a fractional part of debentures issued by State or local development companies and guaranteed by the Administration under this chapter: Provided, That such trust certificates shall be based on and backed by a trust or pool approved by the Administration and composed solely of guaranteed debentures. **(b) Terms and conditions of guarantee; payment of principal and interest** The Administration is authorized, upon such terms and conditions as are deemed appropriate, to guarantee the timely payment of the principal of and interest on trust certificates issued by the Administration or its agent for purposes of this section. Such guarantee shall be limited to the extent of principal and interest on the guaranteed debentures which compose the trust or pool. In the event that a debenture in such trust or pool is prepaid, either voluntarily or in the event of default, the guarantee of timely payment of principal and interest on the trust certificates shall be reduced in proportion to the amount of principal and interest such prepaid debenture represents in the trust or pool. Interest on prepaid or defaulted debentures shall accrue and be guaranteed by the Administration only through the date of payment on the guarantee. During the term of the trust certificate, it may be called for redemption due to prepayment or default of all debentures constituting the pool. **(c) Full faith and credit of United States** The full faith and credit of the United States is pledged to the payment of all amounts which may be required to be paid under any guarantee of such trust certificates issued by the Administration or its agent pursuant to this s

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15 U.S.C. § 661 — Congressional declaration of policy

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

15 U.S.C. § 697a — Private debenture sales

**(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

15 U.S.C. § 697f — Prepayment of development company de-

Page 1150 TITLE 15—COMMERCE AND TRADE § 697f Subsec. (b)(3). Pub. L. 105–135, § 223(a)(2)(B), added par. (3). Subsec. (c). Pub. L. 105–135, § 223(a)(3), added subsec. (c) and struck out heading and text of former subsec. (c). Text read as follows: ‘‘(1) ESTABLISHMENT.—A company designated as a pre- mier certified lender shall establish a loss reserve for financings approved pursuant to this section. ‘‘(2) AMOUNT.—The amount of the loss reserve shall be based upon the greater of— ‘‘(A) the historic loss rate on debentures issued by such company; or ‘‘(B) 10 percent of the amount of the company’s ex- posure as determined under subsection (b)(2)(C) of this section. ‘‘(3) ASSETS.—The loss reserve shall be comprised of segregated assets of the company which shall be securitized in favor of the Administration. ‘‘(4) CONTRIBUTIONS.—The company shall make con- tributions to the loss reserve in the following amounts and at the following intervals: ‘‘(A) 50 percent when a debenture is closed. ‘‘(B) 25 percent not later than 1 year after a deben- ture is closed. ‘‘(C) 25 percent not later than 2 years after a deben- ture is closed.’’ Subsec. (d)(1). Pub. L. 105–135, § 223(a)(4), substituted ‘‘to approve, authorize, close, service, foreclose, liti- gate (except that the Administration may monitor the conduct of any such litigation to which a premier cer- tified lender is a party), and liquidate loans’’ for ‘‘to approve loans’’. Subsec. (f). Pub. L. 105–135, § 223(a)(5), substituted ‘‘certified development company’’ for ‘‘State or local development company’’ in introductory provisions. Subsec. (g). Pub. L. 105–135, § 223(a)(6), substituted ‘‘revocation’’ for ‘‘designation’’ in heading. Subsec. (h). Pub. L. 105–135, § 223(a)(7), added subsec. (h) and str

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