Percentage of timber purchased that may be sold to other than small business 50 percent.

SCHEDULE F-EMPLOYMENT SIZE STANDARDS FOR CONCERNS PRIMARILY ENGAGED IN MINING AND MINING SERVICES

(The following size standards are to be used when determining the size status of mining and mining services concerns for the purpose of SBA business loans (or loan guarantees), displaced business loans, economic opportunity loans, and as alternate standards for sections 501 and 502 loans and Small Business Investment Company assistance.)

Collection policy.

122.22 Sale and conversion of loans.

LIQUIDATION OF LOANS AND SECURITY

122.23 Liquidation policy.

122.24 122.25

Foreclosure of collateral.

Sale of acquired collateral.

AUTHORITY: The provisions of this Part 122 issued under secs. 5, 7, 72 Stat. 385, 387, as amended; 15 U.S.C. 634, 636.

SOURCE: The provisions of this Part 122 contained in Revision 3, 32 F.R. 11699, Aug. 12, 1967, unless otherwise noted.

§ 122.1 Statutory provisions.

SEC. 7. (a) The Administration is empowered to make loans to enable small business concerns to finance plant construction, conversion, or expansion, including the acquisition of land; or to finance the acquisition of equipment, facilities, machinery, supplies, or materials; or to supply such concerns with working capital to be used in the manufacture of articles, equipment, supplies, or materials for war, defense, or civilian production or as may be necessary to insure a wellbalanced national economy; and such loans may be made or effected either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred basis. The foregoing powers shall be subject, however, to the following restrictions and limitations:

(1) No financial assistance shall be extended pursuant to this subsection unless the financial assistance applied for is not otherwise available on reasonable terms.

(2) No immediate participation may be purchased unless it is shown that a deferred participation is not available; and no loan may be made unless it is shown that a participation is not available.

(3) In agreements to participate in loans on a deferred basis under this subsection, such participation by the Administration shall not be in excess of 90 per centum of the balance of the loan outstanding at the time of disbursement.

(4) Except as provided in paragraph (5) (A), no loan under this subsection shall be made if the total amount outstanding and committed (by participation or otherwise) to the borrower from the revolving fund established by this Act would exceed $350,000; (B) the rate of interest for the Administration's share of any such loan shall be no more than 51⁄2 per centum per annum; and (C) no such loan, including renewals or extensions thereof, may be made for a period or periods exceeding 10 years except that a loan made for the purpose of constructing facilities may have a maturity of 10 years plus

such additional period as is estimated may be required to complete such construction.

(5) In the case of any loan made under this subsection to a corporation formed and capitalized by a group of small business concerns with resources provided by them for the purpose of obtaining for the use of such concerns raw materials, equipment, inventories, supplies or the benefits of research and development, or for establishing facilities for such purpose, (A) the limitation of $350,000 prescribed in paragraph (4) shall not apply, but the limit of such loan shall be $250,000 multiplied by the number of separate small businesses which formed and capitalized such corporation; (B) the rate of interest for the Administration's share of such loan shall be no less than 3 nor more than 5 per centum per annum; and (C) such loan. including renewals and extensions thereof, may not be made for a period or periods exceeding 10 years except that if such loan is made for the purpose of constructing facilities it may have a maturity of 20 years plus such additional time as is required to complete such construction.

(6) The Administrator is authorized to consult with representatives of small business concerns with a view to encouraging the formation by such concerns of the corporation referred to in paragraph (5). No act or omission to act, if requested by the Administrator pursuant to this paragraph, and if found and approved by the Administration as contributing to the needs of small business, shall be construed to be within the prohibitions of the antitrust laws or the Federal Trade Commission Act of the United States. A copy of the statement of any such finding and approval intended to be within the coverage of this section, and any modification or withdrawal thereof, shall be furnished to the Attorney General and the Chairman of the Federal Trade Commission when made, and it shall be published in the FEDERAL REGISTER. The Authority granted in this paragraph shall be exercised only (A) by the Administrator, (B) upon the condition that the Administrator consult with the Attorney General and with the Chairman of the Federal Trade Commission, and (C) upon the condition that the Administrator obtain the approval of the Attorney General before exercising such authority. Upon withdrawal of any request or finding hereunder or upon withdrawal by the Attorney General of his approval granted under the preceding sentence, the provisions of this paragraph shall not apply to any subsequent act or omission to act by reason of such finding or request. (7) All loans made under this subsection shall be of such sound value or so secured as reasonably to assure repayment.

(a) It is the intent of Congress that Government assistance should be extended only after all other possible avenues for solving a small firm's financial problems have been explored. Frequently firms do not need financial assistance but are in need most of counseling on financial management problems. In such cases SBA provides assistance through its Financial Counseling Program.

(b) In response to requests for financial assistance, consideration is given to (1) possible assistance available from local and State development corporations; (2) possible means of obtaining credit on reasonable terms from banks, other private financing sources, or from utilization of the personal credit or resources of the applicant's owners or management; (3) adequacy of accounting methods and other aspects of financial management; (4) means of increasing equity capital; (5) eligibility for V loan financing of defense contracts; (6) feasibility of obtaining advance or partial payments on contracts.

(c) All loans shall be of such sound value, or so secured as reasonably to assure repayment. Security may include, but shall not be limited to, mortgage on real or personal property, monies due on contracts, assignment of warehouse receipts, guarantees, and under certain circumstances assignment of receivables or pledge of inventories.

(d) It is the policy of the U.S. Government and of the Small Business Administration to encourage by affirmative action the elimination of discrimination because of race, creed, color, or national origin in employment opportunities created by construction contracts involving Federal financial assistance.

(1) "Construction contract" means any contract or subcontract for the alteration, rehabilitation, construction, conversion, extension, or repairing of buildings, highways, or other improvements to real property.

(2) Applicants for financial assistance are required to execute the Small Business Administration's "Applicant's Agreement of Compliance," SBA Form 601 and, as therein provided, shall cooperate with the Small Business Administration in fostering nondiscrimination in employment opportunities.

(3) All complaints alleging discrimination in construction contracts performed by or with financial assistance shall be investigated by the Small Business Administration. Complaints alleging discrimination must be filed with the Small Business Administration within 90 days of the alleged discrimination. The Small Business Administration may hold informal hearings and make findings regarding the allegation of discrimination in accord with the rules of the President's Committee on Equal Opportunity. In the event that the Small Business Administration finds discrimination to have occurred, it may cancel loans approved but not disbursed to an applicant, it may refuse to make further disbursements on account of the loan, it may accelerate the maturity of the Note between Borrower and SBA, or it may take any action of a lesser nature. Failure of the Small Business Administration to invoke or assert any of the aforesaid sanctions, or any other sanctions, shall not be construed to be a waiver of SBA's right to assert any of such sanctions.

(e) It is also the policy, as set forth in Parts 112 and 113 of this chapter, to require nondiscrimination in employment and services to the public by SBA borrowers.

(f) (1) Financial assistance as used in this part shall include direct loans made by SBA, immediate participation loans, and guaranteed loans.

(2) Financial institution as used in this part shall include, but not be limited to, banks and other concerns whose regular course of business entails the making of commercial and industrial loans.

SBA's exposure of financial assistance to a borrower, including all affiliates, may not exceed $350,000 outstanding at any one time. In assistance to Group Corporations, SBA's exposure may not exceed $250,000 for each small business concern which formed and capitalized the Group Corporation.

§ 122.6 Deferred participation loans.

(a) From and after July 1, 1963, no applications for a deferred participation loan will be accepted by this Administration. The existing provisions concerning deferred participation loans are retained in the regulations in this part so as to govern deferred participation loans made prior to July 1, 1963.

(b) Deferred participation loans are those in which a bank or other financial institution advances the capital needed, and SBA agrees to purchase, upon demand by the lending institution, an agreed portion of the unpaid balance then outstanding. SBA's participation in a deferred participation loan shall not exceed 90 percent of the principal balance of the loan outstanding at the time SBA disburses its funds.

(c) In deferred participation loans a participation charge shall be payable by the bank or other lending institution to SBA for such agreement. The participation charges shall be on a sliding scale, depending upon the percentage of the loan which SBA is obligated to purchase. Such participation charges, which shall not be charged to borrower by the participating institution, shall be as follows:

(1) For an amount not in excess of 50 percent of the loan, one-half of 1 percent per annum on the portion of the loan which SBA is obligated to purchase;

(2) For an amount in excess of 50 percent of the loan but not in excess of 75 percent of the loan, three-fourths of 1 percent per annum on the portion of the loan which SBA is obligated to purchase; and

(3) For an amount in excess of 75 percent of the loan but not in excess of 90 percent of the loan, 1 percent per annum on the portion of the loan which SBA is obligated to purchase.

(d) In deferred participation loans the interest rate on the bank's share applies to the entire loan until SBA purchases its share of such loan.

are

§ 122.7 Immediate participation loans. Immediate participation loans those where either SBA or a financial institution agrees to purchase from the other, immediately upon disbursement, and agreed percentage of each disbursement, SBA's participation shall not exceed 75 percent of the amount of the loan. Exceptions may be made in cases where the participant's legal lending limit precludes a 25-percent participation. In such cases the participant will be required to share in the loan to the extent of its legal lending limit but in no event less than 10 percent. An immediate participation loan may not be made if a guaranteed loan is available. [Rev. 3, Amdt. 2, 33 F.R. 11652, Aug. 16, 1968] § 122.8 Direct loans.

Direct loans are those made by SBA to a borrower when no participation or guaranteed loan is available.

§ 122.9 Group corporations.

(a) Limitation of financial assistance. In the case of a corporation formed and capitalized by a group of small-business concerns with resources provided by them to obtain for their own use raw materials, equipment, inventories, supplies or benefits of research and development or to establish facilities for such purposes, (1) the limitation on SBA's share of such assistance is $250,000 multiplied by the number of separate small businesses participating in the Group Corporation; and (2) such assistance, including renewals and extensions thereof, may not be made for a period or periods exceeding ten years except that, if the assistance is made for the purpose of constructing facilities, it may have a maturity of 20 years plus such additional time as is required to complete the construction.

(b) Use of proceeds. Under the provisions of paragraph (a) of this section, the raw materials, equipment, inventories or supplies, or the benefits of research and development must be primarily for the use of the concerns organizing the Group Corporation.

(c) Eligibility. The applicant corporation shall be owned by a group of small business concerns, including corporations, partnerships, individuals or any combination of the foregoing, each of which shall itself qualify as a small business concern which would be eligible for a small business loan. Each such concern shall share a need in common

with the other small business concerns forming said corporation, the satisfaction of which need is the purpose for which the Group Corporation is being organized. Such Group Corporation shall file its application in the same manner as other eligible business concerns.

(d) Antitrust exemption. In the event that such a corporation desires exemption from the prohibitions of the antitrust laws or the Federal Trade Commission laws, it may obtain such exemption by using the procedures prescribed in paragraph (e) of this section.

(e) Procedures for obtaining antitrust exemptions. (1) A Group Corporation desiring an antitrust exemption, pursuant to section 7(a) (6) of the Small Business Act, as amended, will include a specific request for such exemption in its application.

(2) On reviewing an application containing an antitrust exemption request, the Administrator of SBA will consult with the Attorney General and the Chairman of the Federal Trade Commission with respect to the exemption. Upon receipt of the written approval of the Attorney General, the Administrator may make a finding that the formation of the Group Corporation will contribute to the needs of small business, and may approve the exemption.

(3) Upon the making of any such finding and approval, a copy of the finding and approval by the Administrator shall be furnished to the Attorney General and Chairman of the Federal Trade Commission and shall be published in the FEDERAL REGISTER. No action by such Group Corporation which has been approved by the Administrator, and which act is in furtherance of the purpose approved by the findings published in the FEDERAL REGISTER, shall be construed to be within the prohibitions of the antitrust laws or Federal Trade Commission Act of the United States.

(4) Even if not requested by the applicant, SBA may request antitrust clearance if it determines that such clearance is appropriate prior to approval of the loan to the Group Corporation.

(f) Withdrawal of exemption. In the event that the Group Corporation withdraws its request for the exemption, or the Administrator withdraws his finding that the Group Corporation contributes to the needs of small business or upon the withdrawal of the approval granted by the Attorney General, the antitrust exemption shall not apply to any sub

(a) Individually guaranteed loans. (1) Individually guaranteed loans are loans made by financial institutions to small business concerns subject to a Guaranty Agreement between SBA and the lending institution which is applicable only to a specific loan to an identified small business concern. Under such a guaranty agreement SBA is obligated to purchase not more than 90 percent of the outstanding loan to the identifiable borrower, together with accrued interest, in the event the borrower has defaulted in payment for not less than 90 days after the due date.

(2) SBA shall automatically and simultaneously purchase its guaranteed share of the loan in the event of the commencement by or against borrower of any bankruptcy proceeding, receivership, dissolution or of a creditor's rights proceeding pursuant to the provisions of the Guaranty Agreement.

(3) SBA makes a charge to the financial institution as set forth in Part 120 of this chapter. Such guaranty charges shall not be charged by the financial institution to its borrower.

(4) During the time that SBA may be obligated to purchase pursuant to a Guaranty Agreement, the financial institution may exercise a liquidity privilege in the form of temporary advances from SBA not exceeding the guaranteed portion of the loan. No temporary advances may be made for less than 15 days. The total maturities of all such advances may not exceed 90 days during any 12-month period. The repayment date of any such advance may not extend beyond the maturity of the small business concern's obligation to the financial institution. Advances may be made by SBA to the financial institution only while the loan to the small business concern is not delinquent as to principal and interest.

(5) Notwithstanding any other provisions of the regulations in this part or any agreement entered into by SBA, SBA shall have the right to purchase its guaranteed percentage of the loan if SBA shall determine that such purchase is in the best interest of the Government. If SBA shall exercise such right, the financial institution shall immediately assign, transfer, and deliver to SBA the note and all instruments obtained by

the financial institution in connection with its loan.

(6) SBA shall be released from obligation to purchase its share of the guaranteed loan, unless the financial institution has substantially complied with all of the provisions of these regulations and the Guaranty Agreement, or upon the happening of any one or more of the following events:

(i) Failure of the financial institution to close and disburse the loan substantially in accord with the terms and requirements of the authorization approving the loan or the servicing of the loan in a negligent manner, either of which may result in a substantial loss on the loan; or

(ii) Payment in full of the amount due on the note; or

(iii) Receipt by SBA of written notice from the financial institution of the termination of this Agreement.

(b) Simplified blanket guaranty loans. (1) Simplified blanket guaranteed loans are loans made by financial institutions under a Guaranty Agreement between SBA and the lending institution which is applicable to future loans to small business concerns as authorized by SBA. Under such a Guaranty Agreement, SBA is obligated to purchase not more than 90 percent of the outstanding balance of each loan thereunder together with accrued interest in the event the borrower has defaulted for not less than 60 days. Any eligible loan which the lending institution would make only with the guaranty of SBA may be authorized by SBA under said Guaranty Agreement. Notification to SBA within 30 days of any default is a condition precedent to the lending institution's demand for purchase by SBA. Default means nonpayment of principal or interest on the due date, or the breach by the borrower of any loan covenant which the lending institution determines to be an adverse change in the borrower's ability to repay the loan.

(2) SBA makes a charge to the financial institution as set forth in Part 120 of this chapter. Such guaranty charges shall not be charged by the financial institution to its borrower.

(3) There is no liquidity privilege hereunder which the financial institution may exercise in the form of temporary advances from SBA.

(4) Ordinarily SBA will not purchase its guaranteed percentage of any loan until after such purchase has been re