CFR > Title 13 - Business Credit and Assistance > CHAPTER I—SMALL BUSINESS ADMINISTRATION > PART 107—SMALL BUSINESS INVESTMENT COMPANIES > SUBPART E—Managing the Operations of a Licensee (§107.500 to §107.590) > 107.570—Restrictions on third-party debt of issuers of Participating Securities.

107.570—Restrictions on third-party debt of issuers of Participating Securities.

(a) General. Temporary Debt is the only debt (other than Leverage) that you are permitted to incur if you have applied to issue Participating Securities or if you have outstanding Participating Securities. For additional rules governing secured Temporary Debt, see § 107.550.
(b) Definition of Temporary Debt. Temporary Debt means your short-term borrowings if:
(1) Such borrowings are for the purpose of maintaining your operating liquidity or providing funds for a particular Financing of a Small Business;
(2) The funds are borrowed from a regulated financial institution or a regulated credit company (or, if approved by SBA on a case-by-case basis, from non-regulated lenders including shareholders or partners);
(3) Your total outstanding borrowings (not including Leverage) do not exceed 50 percent of your Leverageable Capital; and
(4) All such borrowings are fully paid off for at least 30 consecutive days during your fiscal year so that you have no outstanding third-party debt for 30 days.