Regulation 13 CFR 926

Small Business Administration

§ 120.931

default due under the Third Party
Loan.
(f) Escalation upon default. A ThirdParty Lender may not escalate the
rate of interest upon default to a rate
greater than the maximum rate set
forth in paragraph (b) of this section.
Regarding any Project that SBA approved after September 30, 1996, SBA
will only pay the interest rate on the
note in effect before the date of the
Borrower’s default.

§ 120.926

[61 FR 3235, Jan. 31, 1996, as amended at 64
FR 2118, Jan. 13, 1999]

[68 FR 57988, Oct. 7, 2003]

Referral fee.

The CDC can receive a reasonable referral fee from the Third Party Lender
if the CDC secured the Third Party
Lender for the Borrower under a written contract between the CDC and the
Third Party Lender. Both the CDC and
the Third Party Lender are prohibited
from charging this fee to the Borrower.
If a CDC charges a referral fee, the CDC
will be construed as a Referral Agent
under part 103 of this chapter.

504 LOANS AND DEBENTURES
§ 120.922 Pre-existing
Project Property.

debt

on

the

In addition to its share of Project
cost, a Third-Party Loan may include
consolidation of existing debt on the
Project Property. The consolidation
must not improve the lien position of
the Lender on the pre-existing debt,
unless the debt is a previous ThirdParty Loan.
§ 120.923

Policies on subordination.

(a) Financing provided by the seller
of Project Property must be subordinate to the 504 loan. SBA may waive
the subordination requirement if the
property is classified as ‘‘other real estate owned’’ by a national bank or
other Federally regulated lender and
SBA considers the property to be of
sufficient value to support the 504 loan.
(b) A Borrower is eligible for a 504
loan even if part of the Project financing is tax-exempt. SBA’s lien position
must not be subordinate to loans made
from the proceeds of the tax-exempt
obligation.
(c) The Borrower must not prepay
any Project financing subordinate to
the 504 loan without SBA’s prior written consent.
[61 FR 3235, Jan. 31, 1996, as amended at 68
FR 57988, Oct. 7, 2003]

ehiers on DSK2VPTVN1PROD with CFR

§ 120.925

Preferences.

No Third Party Lender shall establish a Preference. (See § 120.10 for a definition of Preference.)
[61 FR 3235, Jan. 31, 1996, as amended at 68
FR 57988, Oct. 7, 2003]

§ 120.930

Amount.

(a) Generally, a 504 loan may not exceed 40 percent of total Project cost
plus 100 percent of eligible administrative costs. For good cause shown, SBA
may authorize an increase in the percentage of Project costs covered up to
50 percent. No more than 50 percent of
eligible Project costs can be from Federal sources, whether received directly
or indirectly through an intermediary.
(b) A 504 loan must not be less than
$25,000.
(c) Upon completion of the Project,
the Debenture amount will be reduced
by the amount that the unused contingency reserve exceeds 2 percent of the
anticipated Debenture.
[61 FR 3235, Jan. 31, 1996, as amended at 68
FR 57988, Oct. 7, 2003]

§ 120.931

504 Lending limits.

504 loan amounts shall be limited to:
(a) An outstanding balance of
$5,000,000 for each Borrower and its affiliates if the loan proceeds will not be
directed towards a Project in paragraph (c) of this section,
(b) An outstanding balance of
$5,000,000 for each Borrower and its affiliates if one or more of the public policy goals enumerated in § 120.862(b) applies to the Project; and
(c) $5,500,000 for each Project for:
(1) Small Manufacturers (NAICS
Codes 31–33) with all production facilities located in the United States;
(2) Reduction of the Borrower’s, or if
the Borrower is an Eligible Passive
Company, the Operating Company’s energy consumption by at least 10%; or

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