Section
208
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Amends the Small Business Investment Act of 1958 to provide that an investment in a small business by a venture capital firm, investment company, employee welfare or pension plan, or tax-exempt organization shall be disregarded in the determination of the size of the small business under the Act. Includes as a small business investment company (SBIC) a limited liability company organized and operated in accordance with a State statute approved by the SBA. Requires each SBIC license applicant to apply to the Administrator. Requires the Administrator to provide a status report to such applicant within 90 days and to act on such application within a reasonable time.
Specifies matters to be considered.
Provides application approval procedures for certain applicants with private capital of not less than $3 million.
Repeals a provision authorizing the organization and chartering of SBICs formed to provide financing to socially or economically disadvantaged persons.
Increases the private capital requirement of SBICs to:
(1) $5 million; or
(2) $10 million for applicants seeking authority to issue participating securities to be purchased or guaranteed by the SBA (with an exception in special circumstances and for good cause).
Requires the Administrator to determine the adequacy of the private capital of each licensee.
Authorizes the Administrator to approve leverage for licensees:
(1) with private capital of not less than $2.5 million;
(2) that certify that at least 50 percent of its available financing will be provided to smaller enterprises; and
(3) when such action would not create or otherwise contribute to an unreasonable risk of default or loss for the Government. Directs the Administrator to ensure that the management of each licensee licensed after the enactment of this Act is sufficiently diversified from, and unaffiliated with, licensee ownership.
Requires the Administrator to:
(1) prohibit a licensee having outstanding leverage (debentures or securities guaranteed by the SBA) from incurring third party debt that creates or contributes to an unreasonable risk of default or loss to the Government; and
(2) permit such licensees to incur third party debt only on established terms and conditions.
Directs the Administrator:
(1) to require each licensee, as a condition of approval of an application for leverage, to certify that not less than 20 percent of its financing will be provided to smaller enterprises; and
(2) before approving such applications, to determine to what extent the applicant's private capital has been impaired.
Provides, with respect to SBIC debentures or securities purchased and guaranteed by the SBA, for:
(1) a revised equity investment requirement;
(2) a leverage fee; and
(3) calculation of the appropriate subsidy rate.
Allows qualified private sector entities to assist the Investment Division of the SBA in the examination of SBICs. Requires each SBIC licensee to submit semiannual evaluations of its loans and investments, except that licensees with no outstanding leverage shall submit such valuations annually.
Requires the licensee to notify the Administrator quarterly of any material adverse changes in its loans, investments, or operations.
Provides independent certification and audit requirements for SBICs. Requires valuation criteria to be established or approved by the Administrator. Directs the Administrator to submit to the small business committees a detailed plan to expedite the orderly liquidation of all licensee assets held in liquidation, including those held in receivership or trust by the SBA. Authorizes the Administrator, with respect to deferred participation loans, to allow participating lending institutions to take actions relating to loan servicing on behalf of the Administrator. Increases to $300 million the amount of guarantees of debentures the Administrator is authorized to make for SBIC programs in FY 1997.