
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-100 Section 2(a)]
[Document affected by Public Law 107-100 Section 2(b)]
[CITE: 15USC683]

 
                      TITLE 15--COMMERCE AND TRADE
 
             CHAPTER 14B--SMALL BUSINESS INVESTMENT PROGRAM
 
              SUBCHAPTER III--INVESTMENT DIVISION PROGRAMS
 
               Part A--Small Business Investment Companies
 
Sec. 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 obligated after 
September 30, 2000, an additional charge, in an amount established 
annually by the Administration, of not more than 1 percent per year as 
necessary to reduce to zero the cost (as defined in section 661a of 
title 2) to the Administration of purchasing and guaranteeing debentures 
under this chapter, which shall be paid to and retained by the 
Administration. The debentures or participating securities shall also 
contain such other terms as the Administration may fix, and shall be 
subject to the following restrictions and limitations:
        (1) The total amount of debentures and participating securities 
    that may be guaranteed by the Administration and outstanding from a 
    company licensed under section 681(c) of this title shall not exceed 
    300 per centum of the private capital of such company: Provided, 
    That nothing in this paragraph shall require any such company that 
    on March 31, 1993, has outstanding debentures in excess of 300 per 
    centum of its private capital to prepay such excess: And provided 
    further, That any such company may apply for an additional debenture 
    guarantee or participating security guarantee with the proceeds to 
    be used solely to pay the amount due on such maturing debenture, but 
    the maturity of the new debenture or security shall be not later 
    than September 30, 2002.
        (2) Maximum leverage.--
            (A) In general.--After March 31, 1993, the maximum amount of 
        outstanding leverage made available to a company licensed under 
        section 681(c) of this title shall be determined by the amount 
        of such company's private capital--
                (i) if the company has private capital of not more than 
            $15,000,000, the total amount of leverage shall not exceed 
            300 percent of private capital;
                (ii) if the company has private capital of more than 
            $15,000,000 but not more than $30,000,000, the total amount 
            of leverage shall not exceed $45,000,000 plus 200 percent of 
            the amount of private capital over $15,000,000; and
                (iii) if the company has private capital of more than 
            $30,000,000, the total amount of leverage shall not exceed 
            $75,000,000 plus 100 percent of the amount of private 
            capital over $30,000,000 but not to exceed an additional 
            $15,000,000.

            (B) Adjustments.--
                (i) In general.--The dollar amounts in clauses (i), 
            (ii), and (iii) of subparagraph (A) shall be adjusted 
            annually to reflect increases in the Consumer Price Index 
            established by the Bureau of Labor Statistics of the 
            Department of Labor.
                (ii) Initial adjustments.--The initial adjustments made 
            under this subparagraph after December 2, 1997,\1\ shall 
            reflect only increases from March 31, 1993.
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    \1\ See Codification note below.

            (C) Investments in low-income geographic areas.--In 
        calculating the outstanding leverage of a company for the 
        purposes of subparagraph (A), the Administrator shall not 
        include the amount of the cost basis of any equity investment 
        made by the company in a smaller enterprise located in a low-
        income geographic area (as defined in section 689 of this 
        title), to the extent that the total of such amounts does not 
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        exceed 50 percent of the company's private capital.

        (3) Subject to the foregoing dollar and percentage limits, a 
    company licensed under section 681(c) of this title may issue and 
    have outstanding both guaranteed debentures and participating 
    securities: Provided, That the total amount of participating 
    securities outstanding shall not exceed 200 per centum of private 
    capital.
        (4) Maximum aggregate amount of leverage.--
            (A) In general.--Except as provided in subparagraph (B), the 
        aggregate amount of outstanding leverage issued to any company 
        or companies that are commonly controlled (as determined by the 
        Administrator) may not exceed $90,000,000, as adjusted annually 
        for increases in the Consumer Price Index.
            (B) Exceptions.--The Administrator may, on a case-by-case 
        basis--
                (i) approve an amount of leverage that exceeds the 
            amount described in subparagraph (A) for companies under 
            common control; and
                (ii) impose such additional terms and conditions as the 
            Administrator determines to be appropriate to minimize the 
            risk of loss to the Administration in the event of default.

            (C) Applicability of other provisions.--Any leverage that is 
        issued to a company or companies commonly controlled in an 
        amount that exceeds $90,000,000, whether as a result of an 
        increase in the Consumer Price Index or a decision of the 
        Administrator, is subject to subsection (d) of this section.
            (D) Investments in low-income geographic areas.--In 
        calculating the aggregate outstanding leverage of a company for 
        the purposes of subparagraph (A), the Administrator shall not 
        include the amount of the cost basis of any equity investment 
        made by the company in a smaller enterprise located in a low-
        income geographic area (as defined in section 689 of this 
        title), to the extent that the total of such amounts does not 
        exceed 50 percent of the company's private capital.

For purposes of this subsection, the term ``venture capital'' includes 
such common stock, preferred stock, or other financing with 
subordination or nonamortization characteristics as the Administration 
determines to be substantially similar to equity financing.

(c) Third party debt

    The Administrator--
        (1) shall not permit a licensee having outstanding leverage to 
    incur third party debt that would create or contribute to an 
    unreasonable risk of default or loss to the Federal Government; and
        (2) shall permit such licensees to incur third party debt only 
    on such terms and subject to such conditions as may be established 
    by the Administrator, by regulation or otherwise.

(d) Required certifications

                           (1) In general

        The Administrator shall require each licensee, as a condition of 
    approval of an application for leverage, to certify in writing--
            (A) for licensees with leverage less than or equal to 
        $90,000,000, that not less than 20 percent of the licensee's 
        aggregate dollar amount of financings will be provided to 
        smaller enterprises; and
            (B) for licensees with leverage in excess of $90,000,000, 
        that, in addition to satisfying the requirements of subparagraph 
        (A), 100 percent of the licensee's aggregate dollar amount of 
        financings made in whole or in part with leverage in excess of 
        $90,000,000 will be provided to smaller enterprises (as defined 
        in section 662(12) of this title).

                       (2) Multiple licensees

        Multiple licensees under common control (as determined by the 
    Administrator) shall be considered to be a single licensee for 
    purposes of determining both the applicability of and compliance 
    with the investment percentage requirements of this subsection.

(e) Capital impairment

    Before approving any application for leverage submitted by a 
licensee under this chapter, the Administrator--
        (1) shall determine that the private capital of the licensee 
    meets the requirements of section 682(a) of this title; and
        (2) shall determine, taking into account the nature of the 
    assets of the licensee, the amount and terms of any third party debt 
    owed by such licensee, and any other factors determined to be 
    relevant by the Administrator, that the private capital of the 
    licensee has not been impaired to such an extent that the issuance 
    of additional leverage would create or otherwise contribute to an 
    unreasonable risk of default or loss to the Federal Government.

(f) Redemption or repurchase of preferred stock

    Notwithstanding any other provision of law--
        (1) the Administrator may allow the issuer of any preferred 
    stock sold to the Administration before November 1, 1989 to redeem 
    or repurchase such stock, upon the payment to the Administration of 
    an amount less than the par value of such stock, for a repurchase 
    price determined by the Administrator after consideration of all 
    relevant factors, including--
            (A) the market value of the stock;
            (B) the value of benefits provided and anticipated to accrue 
        to the issuer;
            (C) the amount of dividends paid, accrued, and anticipated; 
        and
            (D) the estimate of the Administrator of any anticipated 
        redemption; and

        (2) any moneys received by the Administration from the 
    repurchase of preferred stock shall be available solely to provide 
    debenture leverage to licensees having 50 percent or more in 
    aggregate dollar amount of their financings invested in smaller 
    enterprises.

(g) Guarantee of payment of and authority to purchase participating 
        securities

    In order to encourage small business investment companies to provide 
equity capital to small businesses, the Administration is authorized to 
guarantee the payment of the redemption price and prioritized payments 
on participating securities issued by such companies which are licensed 
pursuant to section 681(c) of this title, and a trust or a pool acting 
on behalf of the Administration is authorized to purchase such 
securities. Such guarantees and purchases shall be made on such terms 
and conditions as the Administration shall establish by regulation. For 
purposes of this section, (A) the term ``participating securities'' 
includes preferred stock, a preferred limited partnership interest or a 
similar instrument, including debentures under the terms of which 
interest is payable only to the extent of earnings and (B) the term 
``prioritized payments'' includes dividends on stock, interest on 
qualifying debentures, or priority returns on preferred limited 
partnership interests which are paid only to the extent of earnings. 
Participating securities guaranteed under this subsection shall be 
subject to the following restrictions and limitations, in addition to 
such other restrictions and limitations as the Administration may 
determine:
        (1) Participating securities shall be redeemed not later than 15 
    years after their date of issuance for an amount equal to 100 per 
    centum of the original issue price plus the amount of any accrued 
    prioritized payment: Provided, That if, at the time the securities 
    are redeemed, whether as scheduled or in advance, the issuing 
    company (A) has not paid all accrued prioritized payments in full as 
    provided in paragraph (2) below and (B) has not sold or otherwise 
    disposed of all investments subject to profit distributions pursuant 
    to paragraph (11), the company's obligation to pay accrued and 
    unpaid prioritized payments shall continue and payment shall be made 
    from the realized gain, if any, on the disposition of such 
    investments, but if on disposition there is no realized gain, the 
    obligation to pay accrued and unpaid prioritized payments shall be 
    extinguished: Provided further, That in the interim, the company 
    shall not make any in-kind distributions of such investments unless 
    it pays to the Administration such sums, up to the amount of the 
    unrealized appreciation on such investments, as may be necessary to 
    pay in full the accrued prioritized payments.
        (2) Prioritized payments on participating securities shall be 
    preferred and cumulative and payable out of the retained earnings 
    available for distribution, as defined by the Administration, of the 
    issuing company at 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 securities, adjusted to the nearest one-eighth of 1 percent, 
    plus, for participating securities obligated after September 30, 
    2000, an additional charge, in an amount established annually by the 
    Administration, of not more than 1 percent per year as necessary to 
    reduce to zero the cost (as defined in section 661a of title 2) to 
    the Administration of purchasing and guaranteeing participating 
    securities under this chapter, which shall be paid to and retained 
    by the Administration.
        (3) In the event of liquidation of the company, participating 
    securities shall be senior in priority for all purposes to all other 
    equity interests in the issuing company, whenever created.
        (4) Any company issuing a participating security under this 
    subsection shall commit to invest or shall invest an amount equal to 
    the outstanding face value of such security solely in equity 
    capital. As used in this subsection, ``equity capital'' means common 
    or preferred stock or a similar instrument, including subordinated 
    debt with equity features which is not amortized and which provides 
    for interest payments contingent upon and limited to the extent of 
    earnings.
        (5) The only debt (other than leverage obtained in accordance 
    with this subchapter) which any company issuing a participating 
    security under this subsection may have outstanding shall be 
    temporary debt in amounts limited to not more than 50 per centum of 
    private capital.
        (6) The Administration may permit the proceeds of a 
    participating security to be used to pay the principal amount due on 
    outstanding debentures guaranteed by the Administration, if (A) the 
    company has outstanding equity capital invested in an amount equal 
    to the amount of the debentures being refinanced and (B) the 
    Administration receives profit participation on such terms and 
    conditions as it may determine, but not to exceed the per centums 
    specified in paragraph (11).
        (7) For purposes of computing profit participation under 
    paragraph (11), except as otherwise determined by the 
    Administration, the management expenses of any company which issues 
    participating securities shall not be greater than 2.5 per centum 
    per annum of the combined capital of the company, plus $125,000 if 
    the company's combined capital is less than $20,000,000. For 
    purposes of this paragraph, (A) the term ``combined capital'' means 
    the aggregate amount of private capital and outstanding leverage and 
    (B) the term ``management expenses'' includes salaries, office 
    expenses, travel, business development, office and equipment rental, 
    bookkeeping and the development, investigation and monitoring of 
    investments, but does not include the cost of services provided by 
    specialized outside consultants, outside lawyers and outside 
    auditors, who perform services not generally expected of a venture 
    capital company nor does such term include the cost of services 
    provided by any affiliate of the company which are not part of the 
    normal process of making and monitoring venture capital investments.
        (8) Notwithstanding paragraph (9), if a company is operating as 
    a limited partnership or as a subchapter S corporation or an 
    equivalent pass-through entity for tax purposes and if there are no 
    accumulated and unpaid prioritized payments, the company may make 
    annual distributions to the partners, shareholders, or members in 
    amounts not greater than each partner's, shareholder's, or member's 
    maximum tax liability. For purposes of this paragraph, the term 
    ``maximum tax liability'' means the amount of income allocated to 
    each partner, shareholder, or member (including an allocation to the 
    Administration as if it were a taxpayer) for Federal income tax 
    purposes in the income tax return filed or to be filed by the 
    company with respect to the fiscal year of the company immediately 
    preceding such distribution, multiplied by the highest combined 
    marginal Federal and State income tax rates for corporations or 
    individuals, whichever is higher, on each type of income included in 
    such return. For purposes of this paragraph, the term ``State income 
    tax'' means the income tax of the State where the company's 
    principal place of business is located. A company may also elect to 
    make a distribution under this paragraph at any time during any 
    calendar quarter based on an estimate of the maximum tax liability. 
    If a company makes 1 or more interim distributions for a calendar 
    year, and the aggregate amount of those distributions exceeds the 
    maximum amount that the company could have distributed based on a 
    single annual computation, any subsequent distribution by the 
    company under this paragraph shall be reduced by an amount equal to 
    the excess amount distributed.
        (9) After making any distributions as provided in paragraph (8), 
    a company with participating securities outstanding may distribute 
    the balance of income to its investors, specifically including the 
    Administration, in the per centums specified in paragraph (11), if 
    there are no accumulated and unpaid prioritized payments and if all 
    amounts due the Administration pursuant to paragraph (11) have been 
    paid in full, subject to the following conditions:
            (A) As of the date of the proposed distribution, if the 
        amount of leverage outstanding is more than 200 per centum of 
        the amount of private capital, any amounts distributed shall be 
        made to private investors and to the Administration in the ratio 
        of leverage to private capital.
            (B) As of the date of the proposed distribution, if the 
        amount of leverage outstanding is more than 100 per centum but 
        not more than 200 per centum of the amount of private capital, 
        50 per centum of any amounts distributed shall be made to the 
        Administration and 50 per centum shall be made to the private 
        investors.
            (C) If the amount of leverage outstanding is 100 per centum, 
        or less, of the amount of private capital, the ratio shall be 
        that for distribution of profits as provided in paragraph (11).
            (D) Any amounts received by the Administration under 
        subparagraph (A) or (B) shall be applied first as profit 
        participation as provided in paragraph (11) and any remainder 
        shall be applied as a prepayment of the principal amount of the 
        participating securities or debentures.

        (10) After making any distributions pursuant to paragraph (8), a 
    company with participating securities outstanding may return capital 
    to its investors, specifically including the Administration, if 
    there are no accumulated and unpaid prioritized payments and if all 
    amounts due the Administration pursuant to paragraph (11) have been 
    paid in full. Any distributions under this paragraph shall be made 
    to private investors and to the Administration in the ratio of 
    private capital to leverage as of the date of the proposed 
    distribution: Provided, That if the amount of leverage outstanding 
    is less than 50 per centum of the amount of private capital or 
    $10,000,000, whichever is less, no distribution shall be required to 
    be made to the Administration unless the Administration determines, 
    on a case by case basis, to require distributions to the 
    Administration to reduce the amount of outstanding leverage to an 
    amount less than $10,000,000.
        (11)(A) A company which issues participating securities shall 
    agree to allocate to the Administration a share of its profits 
    determined by the relationship of its private capital to the amount 
    of participating securities guaranteed by the Administration in 
    accordance with the following:
            (i) If the total amount of participating securities is 100 
        per centum of private capital or less, the company shall 
        allocate to the Administration a per centum share computed as 
        follows: the amount of participating securities divided by 
        private capital times 9 per centum.
            (ii) If the total amount of participating securities is more 
        than 100 per centum but not greater than 200 per centum of 
        private capital, the company shall allocate to the 
        Administration a per centum share computed as follows:
                (I) 9 per centum, plus
                (II) 3 per centum of the amount of participating 
            securities minus private capital divided by private capital.

        (B) Notwithstanding any other provision of this paragraph--
            (i) in no event shall the total per centum required by this 
        paragraph exceed 12 per centum, unless required pursuant to the 
        provisions of (ii) below,
            (ii) if, on the date the participating securities are 
        marketed, the interest rate on Treasury bonds with a maturity of 
        10 years is a rate other than 8 per centum, the Administration 
        shall adjust the rate specified in paragraph (A) above, either 
        higher or lower, by the same per centum by which the Treasury 
        bond rate is higher or lower than 8 per centum, and
            (iii) this paragraph shall not be construed to create any 
        ownership interest of the Administration in the company.

        (12) A company may elect to make an in-kind distribution of 
    securities only if such securities are publicly traded and 
    marketable. The company shall deposit the Administration's share of 
    such securities for disposition with a trustee designated by the 
    Administration or, at its option and with the agreement of the 
    company, the Administration may direct the company to retain the 
    Administration's share. If the company retains the Administration's 
    share, it shall sell the Administration's share and promptly remit 
    the proceeds to the Administration. As used in this paragraph, the 
    term ``trustee'' means a person who is knowledgeable about and 
    proficient in the marketing of thinly traded securities.

(h) Computation of amounts due under participating securities

    The computation of amounts due the Administration under 
participating securities shall be subject to the following terms and 
conditions:
        (1) The formula in subsection (g)(11) of this section shall be 
    computed annually and the Administration shall receive distributions 
    of its profit participation at the same time as other investors in 
    the company.
        (2) The formula shall not be modified due to an increase in the 
    private capital unless the increase is provided for in a proposed 
    business plan submitted to and approved by the Administration.
        (3) After distributions have been made, the Administration's 
    share of such distributions shall not be recomputed or reduced.
        (4) If the company prepays or repays the participating 
    securities, the Administration shall receive the requisite 
    participation upon the distribution of profits due to any 
    investments held by the company on the date of the repayment or 
    prepayment.
        (5) If a company is licensed on or before March 31, 1993, it may 
    elect to exclude from profit participation all investments held on 
    that date and in such case the Administration shall determine the 
    amount of the future expenses attributable to such prior investment: 
    Provided, That if the company issues participating securities to 
    refinance debentures as authorized in subsection (g)(6) of this 
    section, it may not elect to exclude profits on existing investments 
    under this paragraph.

(i) Leverage fee

    With respect to leverage granted by the Administration to a 
licensee, the Administration shall collect from the licensee a 
nonrefundable fee in an amount equal to 3 percent of the face amount of 
leverage granted to the licensee in the following manner: 1 percent upon 
the date on which the Administration enters into any commitment for such 
leverage with the licensee, and the balance of 2 percent (or 3 percent 
if no commitment has been entered into by the Administration) on the 
date on which the leverage is drawn by the licensee.

(j) 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) to the 
Administration of purchasing and guaranteeing debentures and 
participating securities under this chapter.

(Pub. L. 85-699, title III, Sec. 303, Aug. 21, 1958, 72 Stat. 692; Pub. 
L. 87-341, Sec. 4, Oct. 3, 1961, 75 Stat. 752; Pub. L. 88-273, Sec. 3, 
Feb. 28, 1964, 78 Stat. 146; Pub. L. 90-104, title II, Sec. 205, Oct. 
11, 1967, 81 Stat. 270; Pub. L. 92-213, Sec. 10, Dec. 22, 1971, 85 Stat. 
776; Pub. L. 92-595, Sec. 2(c), (d), Oct. 27, 1972, 86 Stat. 1314; Pub. 
L. 94-305, title I, Sec. 104, June 4, 1976, 90 Stat. 665; Pub. L. 95-
507, title I, Sec. 101, Oct. 24, 1978, 92 Stat. 1757; Pub. L. 101-162, 
title V, (4), Nov. 21, 1989, 103 Stat. 1025; Pub. L. 101-574, title II, 
Sec. 215(a)(1), (b), Nov. 15, 1990, 104 Stat. 2822; Pub. L. 102-366, 
title IV, Secs. 402, 403, 412, 413, Sept. 4, 1992, 106 Stat. 1008, 1009, 
1018; Pub. L. 103-403, title II, Sec. 215, Oct. 22, 1994, 108 Stat. 
4184; Pub. L. 104-208, div. D, title II, Sec. 208(d)(1)-(4)(A), (5), 
(6), (h)(1)(A), Sept. 30, 1996, 110 Stat. 3009-743, 3009-744, 3009-746; 
Pub. L. 105-135, title II, Sec. 215(b)-(d), Dec. 2, 1997, 111 Stat. 
2602, 2603; Pub. L. 106-9, Sec. 2(d)(1), Apr. 5, 1999, 113 Stat. 18; 
Pub. L. 106-554, Sec. 1(a)(8) [Sec. 1(d)], Sec. 1(a)(9) [title IV, 
Secs. 404, 405], Dec. 21, 2000, 114 Stat. 2763, 2763A-664, 2763A-690, 
2763A-691.)

                       References in Text

    For definition of ``this chapter'', referred to in subsecs. (b), 
(e), (g)(2), and (j), see References in Text note set out under section 
661 of this title.

                          Codification

    December 2, 1997, referred to in subsec. (b)(2)(B)(ii), was in the 
original ``the date of the enactment of the Small Business 
Reauthorization Act of 1937'' which was translated as meaning the date 
of enactment of the Small Business Reauthorization Act of 1997, Pub. L. 
105-135, as the probable intent of Congress.


                               Amendments

    2000--Subsec. (b). Pub. L. 106-554, Sec. 1(a)(9) [title IV, 
Sec. 404(a)], in introductory provisions, substituted ``plus, for 
debentures obligated after September 30, 2000, an additional charge, in 
an amount established annually by the Administration, of not more than 1 
percent per year as necessary to reduce to zero the cost (as defined in 
section 661a of title 2) to the Administration of purchasing and 
guaranteeing debentures under this chapter, which shall be paid to and 
retained by the Administration'' for ``plus an additional charge of 1 
percent per annum which shall be paid to and retained by the 
Administration''.
    Subsec. (b)(2). Pub. L. 106-554, Sec. 1(a)(8) [Sec. 1(d)(1)], 
amended par. (2) generally, revising structure of par. from one 
consisting of introductory provisions and subpars. (A) to (D) to one 
consisting of subpars. (A) and (B), and adding subpar. (C).
    Subsec. (b)(4)(D). Pub. L. 106-554, Sec. 1(a)(8) [Sec. 1(d)(2)], 
added subpar. (D).
    Subsec. (g)(2). Pub. L. 106-554, Sec. 1(a)(9) [title IV, 
Sec. 404(b)], substituted ``plus, for participating securities obligated 
after September 30, 2000, an additional charge, in an amount established 
annually by the Administration, of not more than 1 percent per year as 
necessary to reduce to zero the cost (as defined in section 661a of 
title 2) to the Administration of purchasing and guaranteeing 
participating securities under this chapter, which shall be paid to and 
retained by the Administration'' for ``plus an additional charge of 1 
percent per annum which shall be paid to and retained by the 
Administration''.
    Subsec. (g)(8). Pub. L. 106-554, Sec. 1(a)(9) [title IV, Sec. 405], 
substituted ``subchapter S corporation'' for ``subchapter s 
corporation'', ``any time during any calendar quarter based on an'' for 
``the end of any calendar quarter based on a quarterly'', and ``interim 
distributions for a calendar year,'' for ``quarterly distributions for a 
calendar year,''.
    1999--Subsec. (g)(13). Pub. L. 106-9 struck out heading and text of 
par. (13). Text read as follows:
    ``(A) In general.--Subject to the provisions of subparagraph (B), of 
the amount of the annual program level of participating securities 
approved in appropriations Acts, 50 percent shall be reserved for 
funding small business investment companies with private capital of not 
more than $20,000,000.
    ``(B) Exception.--During the last quarter of each fiscal year, if 
the Administrator determines that there is a lack of qualified 
applicants with private capital of not more than $20,000,000, the 
Administrator may utilize all or any part of the program level for 
securities reserved under subparagraph (A) for qualified applicants with 
private capital of more than $20,000,000.''
    1997--Subsec. (b)(2)(D). Pub. L. 105-135, Sec. 215(b)(1)(A), added 
subpar. (D).
    Subsec. (b)(4). Pub. L. 105-135, Sec. 215(b)(1)(B), added par. (4) 
and struck out former par. (4) which read as follows: ``In no event 
shall the aggregate amount of outstanding leverage of any such company 
or companies which are commonly controlled as determined by the 
Administration exceed $90,000,000, unless the Administration determines 
on a case by case basis to permit a higher amount for companies under 
common control and imposes such additional terms and conditions as it 
determines appropriate to minimize the risk of loss to the 
Administration in the event of default.''
    Subsec. (d). Pub. L. 105-135, Sec. 215(b)(2), added subsec. (d) and 
struck out heading and text of former subsec. (d). Text read as follows: 
``The Administrator shall require each licensee, as a condition of 
approval of an application for leverage, to certify in writing that not 
less than 20 percent of the aggregate dollar amount of the financings of 
the licensee will be provided to smaller enterprises.''
    Subsec. (g)(8). Pub. L. 105-135, Sec. 215(c), inserted at end ``A 
company may also elect to make a distribution under this paragraph at 
the end of any calendar quarter based on a quarterly estimate of the 
maximum tax liability. If a company makes 1 or more quarterly 
distributions for a calendar year, and the aggregate amount of those 
distributions exceeds the maximum amount that the company could have 
distributed based on a single annual computation, any subsequent 
distribution by the company under this paragraph shall be reduced by an 
amount equal to the excess amount distributed.''
    Subsec. (i). Pub. L. 105-135, Sec. 215(d), substituted ``in the 
following manner: 1 percent upon the date on which the Administration 
enters into any commitment for such leverage with the licensee, and the 
balance of 2 percent (or 3 percent if no commitment has been entered 
into by the Administration) on the date on which the leverage is drawn 
by the licensee'' for ``, payable upon the earlier of the date of entry 
into any commitment for such leverage or the date on which the leverage 
is drawn by the licensee'' before period at end.
    1996--Subsec. (a). Pub. L. 104-208, Sec. 208(h)(1)(A)(i), 
substituted ``securities,'' for ``debenture bonds,''.
    Subsec. (b). Pub. L. 104-208, Sec. 208(d)(1), (6)(A), in first 
sentence struck out ``(but only to the extent that the necessary funds 
are not available to said company from private sources on reasonable 
terms)'' after ``is authorized'' and in fifth sentence substituted ``1 
percent, plus an additional charge of 1 percent per annum which shall be 
paid to and retained by the Administration'' for ``1 per centum, plus 
such additional charge, if any, toward covering other costs of the 
program as the Administration may determine to be consistent with its 
purposes''.
    Subsec. (c). Pub. L. 104-208, Sec. 208(d)(2), inserted heading and 
amended text of subsec. (c) generally. Prior to amendment, text 
consisted of 7 pars. which authorized the Administration to purchase 
securities and to purchase or guarantee payments on debentures issued by 
small business investment companies operating under section 681(d) of 
this title.
    Subsec. (d). Pub. L. 104-208, Sec. 208(d)(3), inserted heading and 
amended text of subsec. (d) generally. Prior to amendment, text read as 
follows: ``If the Administration guarantees debentures issued by a small 
business investment company operating under authority of section 681(d) 
of this title, it shall make, on behalf of the company payments in such 
amounts as will reduce the effective rate of interest to be paid by the 
company during the first five years of the term of such debentures to a 
rate of interest 3 points below the market rate of interest determined 
pursuant to section 687l of this title. Such payments shall be made by 
the Administration to the holder of the debenture, its agents or 
assigns, or to the appropriate central registration agent, if any. The 
authority to reduce interest rates as provided in this subsection shall 
be limited to amounts provided in advance in appropriations Acts, and 
the total amount shall be reserved within the business loan and 
investment fund to pay an amount equal to the amount of the reduction as 
it becomes due.''
    Subsec. (e). Pub. L. 104-208, Sec. 208(d)(4)(A), inserted heading 
and amended text of subsec. (e) generally. Prior to amendment, text read 
as follows: ``In determining the private capital of a small business 
investment company licensed under section 681(d) of this title and 
notwithstanding section 662(9) of this title, Federal, State, or local 
government funds received from sources other than the Administration 
shall be included solely for regulatory purposes, and not for the 
purpose of obtaining financial assistance from or licensing by the 
Administration, providing such funds were invested to November 21, 1989: 
Provided, That such companies may include in private capital for any 
purpose funds indirectly obtained from State or local governments. As 
used in this subsection, the term `capital indirectly obtained' includes 
income generated by a State financing authority or similar State 
institution or agency or from the investment of State or local money or 
amounts originally provided to nonprofit institutions or corporations 
which such institutions or corporations, in their discretion, determine 
to invest in a company licensed under section 681(d) of this title.''
    Subsec. (f). Pub. L. 104-208, Sec. 208(h)(1)(A)(ii), added subsec. 
(f) and struck out former subsec. (f) which read as follows: 
``Notwithstanding the provisions of any other law, rule, or regulation, 
the Administration is authorized to allow the issuer of any preferred 
stock heretofore sold to the Administration to redeem or repurchase such 
stock upon the payment to the Administration of an amount less than the 
par value of such stock. The Administration, in its sole discretion, 
shall determine the repurchase price after considering factors 
including, but not limited to, the market value of the stock, the value 
of benefits previously provided and anticipated to accrue to the issuer, 
the amount of dividends previously paid, accrued, and anticipated, and 
the Administration's estimate of any anticipated redemption. The 
Administration may guarantee debentures as provided in paragraph (5) of 
subsection (c) of this section and allow the issuer to use the proceeds 
to make the payments authorized herein. Any monies received by the 
Administration from the repurchase of preferred stock shall be deposited 
in the business loan and investment fund and shall be available solely 
to provide assistance to companies operating under the authority of 
section 681(d) of this title, to the extent and in the amounts provided 
in advance in appropriations Acts.''
    Subsec. (g)(2). Pub. L. 104-208, Sec. 208(d)(6)(B), substituted ``1 
percent, plus an additional charge of 1 percent per annum which shall be 
paid to and retained by the Administration'' for ``1 per centum, plus, 
at the time the guarantee is issued, such additional charge, if any, 
toward covering other costs of the program as the Administration may 
determine to be consistent with its purposes, but not to exceed 2 per 
centum''.
    Subsec. (g)(4). Pub. L. 104-208, Sec. 208(d)(5), struck out ``and 
maintain'' after ``shall invest''.
    Subsec. (g)(8). Pub. L. 104-208, Sec. 208(h)(1)(A)(iii), substituted 
``partners, shareholders, or members'' for ``partners or shareholders'', 
``partner's, shareholder's, or member's'' for ``partner's or 
shareholder's'', and ``partner, shareholder, or member'' for ``partner 
or shareholder''.
    Subsecs. (i), (j). Pub. L. 104-208, Sec. 208(d)(6)(C), added 
subsecs. (i) and (j).
    1994--Subsec. (g)(13). Pub. L. 103-403 added par. (13).
    1992--Subsec. (b). Pub. L. 102-366, Sec. 402(1), inserted ``or 
participating securities'' after ``debentures'' in first and sixth 
sentences.
    Subsec. (b)(1) to (4). Pub. L. 102-366, Sec. 402(2), added pars. (1) 
to (4) and struck out former pars. (1) to (3) which read as follows:
    ``(1) The total amount of debentures purchased or guaranteed and 
outstanding at any one time from a company which does not qualify under 
the terms of paragraph (2) of this subsection, shall not exceed 300 
percent of the combined private paid-in capital and paid-in surplus of 
such company. In no event shall the debentures guaranteed and 
outstanding under this subchapter of any such company or companies which 
are commonly controlled as determined by the Administration exceed 
$35,000,000.
    ``(2) The total amount of debentures which may be purchased or 
guaranteed and outstanding at any one time from a company not complying 
with section 681(d) of this title, which has investments or legal 
commitments of 65 per centum or more of its total funds available for 
investment in small business concerns invested or committed in venture 
capital, and which has combined private paid-in capital and paid-in 
surplus of $500,000 or more shall not exceed 400 per centum of its 
combined private paid-in capital and paid-in surplus. In no event shall 
the debentures of any such company purchased or guaranteed and 
outstanding under this paragraph exceed $35,000,000. Such additional 
purchases or guarantees which the Administration makes under this 
paragraph shall contain conditions to insure appropriate maintenance by 
the company receiving such assistance of the described ratio during the 
period in which debentures under this paragraph are outstanding.
    ``(3) Outstanding amounts of financial assistance provided to a 
company by the Administration prior to the effective date of the Small 
Business Investment Act Amendments of 1967 shall be deducted from the 
maximum amount of debentures which the Administration would otherwise be 
authorized to purchase or guarantee under this subsection.''
    Subsec. (c). Pub. L. 102-366, Sec. 412(1), (2), struck out 
``preferred'' before ``securities'' in first sentence and inserted at 
end ``As used in this subsection, the term `securities' means shares of 
nonvoting stock or other corporate securities or limited partnership 
interests which have similar characteristics.''
    Subsec. (c)(1). Pub. L. 102-366, Sec. 412(3), in introductory 
provisions substituted ``such securities'' for ``shares of nonvoting 
stock (or other corporate securities having similar characteristics)''.
    Subsec. (c)(6). Pub. L. 102-366, Sec. 402(3), inserted before period 
at end ``, except as provided in paragraph (7)''.
    Subsec. (c)(7). Pub. L. 102-366, Sec. 402(4), added par. (7).
    Subsec. (e). Pub. L. 102-366, Sec. 413, inserted ``licensed under 
section 681(d) of this title and notwithstanding section 662(9) of this 
title'' after ``company'' and substituted ``to November 21, 1989: 
Provided, That such companies may include in private capital for any 
purpose funds indirectly obtained from State or local governments. As 
used in this subsection, the term `capital indirectly obtained' includes 
income generated by a State financing authority or similar State 
institution or agency or from the investment of State or local money or 
amounts originally provided to nonprofit institutions or corporations 
which such institutions or corporations, in their discretion, determine 
to invest in a company licensed under section 681(d) of this title.'' 
for ``prior to November 21, 1989.''
    Subsecs. (g), (h). Pub. L. 102-366, Sec. 403, added subsecs. (g) and 
(h).
    1990--Subsec. (b)(1). Pub. L. 101-574, Sec. 215(a)(1), amended last 
sentence generally. Prior to amendment, last sentence read as follows: 
``In no event shall the debentures of any such company purchased or 
guaranteed and outstanding under this paragraph exceed $35,000,000.''
    Subsec. (c)(6). Pub. L. 101-574, Sec. 215(b)(1), inserted ``under 
the provisions of this subchapter,'' after ``debentures or securities''.
    Subsec. (d). Pub. L. 101-574, Sec. 215(b)(2), struck out after 
second sentence ``The aggregate amount of debentures with interest rate 
reductions as provided in this subsection or as provided in section 687i 
of this title which may be outstanding at any time from any such company 
shall not exceed 200 per centum of the private paid-in capital and paid-
in surplus of such company.''
    1989--Subsec. (c). Pub. L. 101-162 added subsec. (c) and struck out 
former subsec. (c) which contained provisions substantially similar to 
introductory provisions and pars. (1) to (4).
    Subsecs. (d) to (f). Pub. L. 101-162 added subsecs. (d) to (f).
    1978--Subsec. (c)(1). Pub. L. 95-507 increased the amount of 
preferred stock small business investment companies were authorized to 
sell to the Administration so long as such preferred stock leverage did 
not exceed 200 per centum of the qualified paid-in capital and so long 
as the amount of such stock purchased by the Administration was not 
greater in amount than the investment companies' outstanding equity 
investments and inserted definition of ``equity securities''.
    1976--Subsec. (b)(1). Pub. L. 94-305, Sec. 104(a), substituted 
``300'' for ``200'' and ``$35,000,000'' for ``$15,000,000''.
    Subsec. (b)(2). Pub. L. 94-305, Sec. 104(b), substituted ``400'' for 
``300'' and ``$35,000,000'' for ``$20,000,000''.
    Subsec. (c)(2)(iii). Pub. L. 94-305, Sec. 104(c), substituted 
``400'' for ``300'' and ``300'' for ``200''.
    Subsec. (c)(4). Pub. L. 94-305, Sec. 104(c)(2), substituted ``300'' 
for ``200''.
    1972--Subsec. (b)(1). Pub. L. 92-595, Sec. 2(c)(1), (2), substituted 
``combined private paid-in capital'' for ``combined paid-in capital'' 
and ``$15,000,000'' for ``$7,500,000''.
    Subsec. (b)(2). Pub. L. 92-595, Sec. 2(c)(3), substituted provisions 
relating to the purchase of debentures from companies not complying with 
section 681(d) of this title having investments or legal commitments of 
65 per cent or more and whose combined private paid-in capital and paid-
in surplus is $500,000 or more for provisions relating to such purchase 
from companies having investments or legal commitments of 65 per cent or 
more and whose combined paid-in capital and paid-in surplus is 
$1,000,000 or more, and increased the maximum amount of outstanding 
debentures from $10,000,000 to $20,000,000.
    Subsec. (c). Pub. L. 92-595, Sec. 2(d), added subsec. (c).
    1971--Subsec. (b). Pub. L. 92-213 inserted provision for a guaranty 
authority for the Administration and inserted requirement that such 
guaranty authority of the Administration be exercised only when 
authorized in appropriation Acts, authorized the purchase or guaranty on 
such terms as the Administration deems appropriate pursuant to 
regulations issued by the Administration, pledged the full faith and 
credit of the United States to the payment of amounts required to be 
paid in full under such guaranty, and struck out provision authorizing 
Administration cooperation with banks or other lending institutions in 
the purchase of debentures.
    1967--Subsec. (b). Pub. L. 90-104 substituted purchase of debenture 
provisions of former section 682(a) of this title for former provision 
for loans (eliminating participation on deferred (standby) basis), 
incorporated subordination provision of such former section 682(a) 
(inserting provision for Administration exercise of reasonable 
investment prudence and for consideration of financial soundness of the 
company), provided for maximum term of fifteen years, substituted rate 
of interest taking into consideration current average market yield on 
outstanding marketable Treasury obligations with remaining periods to 
maturity comparable to average maturities on such debentures, as 
adjusted plus charge toward cost of programs, for rate of interest not 
lower than average investment yield on marketable Treasury obligations 
outstanding at time of loan involved, and added pars. (1) to (3) and 
definition of venture capital, former par. (1) limiting Administration 
purchases of company obligations to 50 per centum of paid-in capital and 
surplus or $4,000,000, whichever is less, and par. (2) requiring loans 
to be of such sound value as reasonably to assure repayment.
    1964--Subsec. (b). Pub. L. 88-273 provided for participation loans 
by Administration with lending institutions on an immediate or deferred 
basis and for a minimum interest rate measured by the average investment 
yield on marketable obligations of the United States outstanding at the 
time of the loan involved, and designated existing provisions as clauses 
(1) and (2).
    1961--Subsec. (b). Pub. L. 87-341 limited the Administration's 
authorization to lend funds to the extent that the funds are not 
available to the company involved from private sources on reasonable 
terms, and the total amount of obligations, including commitments to 
purchase such obligations, which can be purchased in any one company to 
not more than 50 percent of the paid-in capital and surplus or 
$4,000,000, whichever is less, and inserted ``All loans made by the 
Administration under this subsection shall be of such sound value as 
reasonably to assure repayment.''


                    Effective Date of 1997 Amendment

    Amendment by Pub. L. 105-135 effective Oct. 1, 1997, see section 3 
of Pub. L. 105-135, set out as a note under section 631 of this title.


                    Effective Date of 1990 Amendment

    Section 215(a)(2) of Pub. L. 101-574, as amended by Pub. L. 102-140, 
title VI, Sec. 609(c), Oct. 28, 1991, 105 Stat. 825, provided that: 
``The amendments made by paragraph (1) [amending this section] shall 
become effective on July 1, 1992.''


                    Effective Date of 1967 Amendment

    Amendment by Pub. L. 90-104 effective 90 days after Oct. 11, 1967, 
see section 211 of Pub. L. 90-104, set out as a note under section 681 
of this title.


                               Regulations

    Section 208(d)(4)(B) of div. D of Pub. L. 104-208 provided that:
    ``(i) Uniform applicability.--Any regulation issued by the 
Administration to implement section 303(e) of the Small Business 
Investment Act of 1958 [15 U.S.C. 683(e)] that applies to any licensee 
with outstanding leverage obtained before the effective date of that 
regulation, shall apply uniformly to all licensees with outstanding 
leverage obtained before that effective date.
    ``(ii) Definitions.--For purposes of this subparagraph, the terms 
`Administration', `leverage' and `licensee' have the same meanings as in 
section 103 of the Small Business Investment Act of 1958 [15 U.S.C. 
662].''


 Effect of Small Business Equity Enhancement Act of 1992 on Securities 
                                  Laws

    Nothing in amendment by Pub. L. 102-366 to be construed to affect 
applicability of securities laws or to otherwise supersede or limit 
jurisdiction of Securities and Exchange Commission, see section 418 of 
Pub. L. 102-366, set out as a note under section 661 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 687l, 687m, 689, 697 of this 
title; title 42 section 9815.
