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

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. 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. The full faith and credit of the United States in pledged to the payment of all amounts guaranteed under this subsection. 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. 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 ; necessary funds for making such loans are not available to such company from private sources on reasonable terms; 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 ; 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); 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; the Administration approves each loan to be made from such proceeds; and 0.9375 percent per year of the outstanding balance of the loan; and the minimum amount necessary to reduce the cost (as defined in section 661a of title 2 ) to the Administration of purchasing and guaranteeing debentures under this chapter to zero; and 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 uses the proceeds of such fee to offset the cost (as such term is defined in section 661a of title 2 ) to the Administration of making guarantees under subsection (a). 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. 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 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. 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 which is not funded by a debenture guaranteed under this section. 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). 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 . 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 ) to the Administration of making guarantees under subsection (a). 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 ) to the Administration of making guarantees under subsection (a). a full-time professional staff; professional management ability (including adequate accounting, legal, and business-servicing abilities); and 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. 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. 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 , to service such loans and to charge a reasonable fee for servicing such loans. The fees authorized by subsections (b) and (d) shall apply to financings approved by the Administration on or after October 1, 1996 . 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 ) to the Administration of purchasing and guaranteeing debentures under this chapter. take all necessary steps to bring such a loan current; or implement a formal written deferral agreement. 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 1 shall take all necessary steps to purchase or accelerate the debenture. 1 So in original. Probably should be capitalized. shall negotiate the elimination of any prepayment penalties or late fees on defaulted loans made prior to September 30, 1996 ; shall not pay any prepayment penalty or late fee on the default based purchase of loans issued after September 30, 1996 ; and 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. 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 . The amendments made by this section to section 503 of the Small Business Investment Act of 1958 [ 15 U.S.C. 697 ], shall be effective only to the extent that funds are made available under appropriations Acts, which funds shall be utilized by the Administrator to offset the cost (as such term is defined in section 502 of the Federal Credit Reform Act of 1990 [ 2 U.S.C. 661a ]) of such amendments. The amendments made by this section [amending this section and section 636 of this title ] shall become effective on October 1, 2002 .” the Administrator shall, in lieu of the fee otherwise applicable under section 503(d)(2) of the Small Business Investment Act of 1958 ( 15 U.S.C. 697(d)(2) ), collect no fee; and a development company shall, in lieu of the processing fee under section 120.971(a)(1) of title 13, Code of Federal Regulations (relating to fees paid by borrowers), or any successor regulation, collect no fee. To the extent that the cost of such payments is offset by appropriations, the Administrator shall reimburse each development company that does not collect a processing fee pursuant to paragraph (1)(B). The payment to a development company under clause (i) shall be in an amount equal to 1.5 percent of the net debenture proceeds for which the development company does not collect a processing fee pursuant to paragraph (1)(B).”