SBA Updates Leverage Commitment Application Guidance for SBICs – Corporate and Company Law

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On November 1, 2022, the United States Small Business Administration (the “SBA”) announced that it had revised the application process by which a Small Business Investment Company (“SBIC”) may apply for a Commitment of Debentures to the SBA (an “Undertaking Request”). Changes to the Undertaking Request are as follows1:

  • E-mail submission of the undertaking request. Completed undertaking applications should be submitted to SBA by email to [email protected] The SBA has required undertaking applications to be submitted in this manner since March 2020 as part of its COVID-19 procedures, and has now made this requirement permanent.

  • Signature Requirements. All pages of an undertaking application that require a signature must be scanned pages, including a handwritten signature of a person authorized to sign on behalf of the SBIC. Electronic signatures are not accepted.

  • Engagement Increments. The debenture commitment requested must be in increments of $5,000.

  • Certification of Form 468. As part of their undertaking application, an SBIC must certify that they have submitted an SBA Form 4682 to the SBA via the SSA web portal, SBIC-Web. Previously, the SBA required that an SBA Form 468 be included with the undertaking application.

  • Protect bank identification. The undertaking request requires that bank account information be included. SBA recommends that the SBIC transmit its undertaking request in a secure manner to protect this information.

  • Provisional interest rates. The short-term interest rate on SBA debentures is now calculated based on the Federal Home Loan Bank of Chicago advance rate. Previously, this short-term interest rate was based on LIBOR (London Inter-Bank Offered Rate). Long-term interest rates on SBA debentures will continue to be set at the 10-year Treasury rate plus a spread based on market conditions

If you have any questions about undertaking applications or the SBIC program in general, please contact your SBIC attorney at Winston & Strawn LLP.

Footnotes

1 Complete SBA instructions for completing the Commitment Application are available at www.sba.gov/sites/default/files/2022-11/Commitment-Application-Instructions.pdf.

2 SBA Form 468 is a financial report that SBICs provide to the SBA.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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