13 C.F.R. § 107.1830

Licensee's Capital Impairment—definition and general requirements

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(a) Applicability of this section. This section applies to Leverage issued on or after April 25, 1994. For Leverage issued before April 25, 1994, you must comply with paragraphs (e) and (f) of this section and the Capital Impairment regulations in this part in effect when you issued your Leverage. For all Leverage issued, you must also comply with any contractual provisions to which you have agreed.

(b) Significance of Capital Impairment condition. If you have a condition of Capital Impairment, you are not in compliance with the terms of your Leverage. As a result, SBA has the right to impose the applicable remedies for noncompliance in §§ 107.1810(g) and 107.1820(f).

(c) Definition of Capital Impairment condition. You have a condition of Capital Impairment if your Capital Impairment Percentage, as computed in § 107.1840, exceeds:

(1) For Section 301(d) Licensees, 75 percent.

(2) For Section 301(c) Licensees, the appropriate percentage from the following table:

Maximum Permitted Capital Impairment Percentages for Section 301(c) Licensees
If the percentage of equity capital investments (at cost) in your portfolio is:	And your ratio of outstanding leverage to leverageable capital is:	Then your maximum permitted capital impairment percentage is:
67%	100% or less	70
	Over 100% but not over 200%	60
	Over 200%	50
At least 40% but under 67%	100% or less	55
	Over 100% but not over 200%	50
	Over 200%	40
Under 40%	100% or less	45
	Over 100% but not over 200%	40
	Over 200%	35

(d) Phase-in of maximum permitted Capital Impairment Percentages for Section 301(c) Licensees. If you are a Section 301(c) Licensee, regardless of your maximum permitted Capital Impairment Percentage under paragraph (c) of this section, you will not have a condition of Capital Impairment if:

(1) Your Capital Impairment Percentage does not exceed 50 percent; and

(2) You have not reached your first fiscal year end occurring after April 25, 1995.

(e) Quarterly computation requirement and procedure. SBA will determine whether you have a condition of Capital Impairment as of the end of each fiscal quarter. If SBA finds you capitally impaired, they will notify you.

(f) SBA's right to determine Licensee's Capital Impairment condition. SBA may make its own determination of your Capital Impairment condition at any time.

[61 FR 3189, Jan. 31, 1996, as amended at 63 FR 5873, Feb. 5, 1998; 88 FR 46012, July 18, 2023]

Notes of Decisions

Cited in 4 cases, 2005–2018 · leading case: Elk Assocs. Funding Corp. v. United States Small Bus. Admin., 858 F. Supp. 2d 1 (D.D.C. 2012).

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Elk Assocs. Funding Corp. v. United States Small Bus. Admin., 858 F. Supp. 2d 1 (D.D.C. 2012). · cites it 2× “” 13 C.F.R. § 107.1830 (e). Consistent with this, the dates referenced in the entry correspond with the date the SBA’s Office of SBIC Examinations issued a report finding that ELK failed to report its capital impairment in a timely manner (January 6, 2011) and the date the…”

U.S. Small Bus. Admin. Funding Corp. v. Feinsod, 347 F. Supp. 3d 147 (E.D.N.Y 2018). “) Second, on February 24, 2012, the SBA informed Elk by telephone that, as a result of Elk's "capital impairment" (as defined in 13 C.F.R. § 107.1830 ), the SBA was transferring Elk to its Office of Liquidation.”

United States v. ECC Partners, L.P., 820 F. Supp. 2d 654 (D. Maryland 2011). · cites it 2× “Among other things, a licensee is not allowed to have a condition of capital impairment greater than that allowed under 13 C.F.R. § 107.1830 (c) and, if it does, the SBA indisputably has the right to re-determine the management fee.”

United States v. Marathon Inv. Partners, LP, 399 F. Supp. 2d 1 (D. Mass. 2005). “Under the Regulations at 13 C.F.R. § 107.1830 (c), a licensee, such as Marathon, is considered to have a condition of “capital impairment” if its capital impairment percentage is greater than 45%.”

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