Pub. L. 90-104, tit. II, sec. 205

Sec. 205. Section 303(b) of the Small Business Investment Act of 1958 is amended to read as follows: “(b) To encourage the formation and growth of small business investment companies the Administration is authorized (but only to the extent that the necessary funds are not available to the company involved from private sources on reasonable terms) to purchase, either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate basis, the debentures of any such company. Debentures purchased by the Administration under this subsection shall be subordinate to any other debenture bonds, promissory notes, or other debts and obligations of such companies, unless the Administration in its exercise of reasonable investment prudence and in considering the financial soundness of such company determines otherwise. Such debentures may be issued for a term of not to exceed fifteen years and shall bear interest at a rate not less than a rate determined by the Secretary of the Treasury taking into consideration the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities on such debentures, adjusted to the nearest one-eighth of 1 per centum, plus such additional charge, if any, toward covering other costs of the program as the Administration may determine to be consistent with its purposes. The debentures shall also contain such other terms as the Administration may fix, and shall be subject to the following restrictions and limitations: “(1) The total amount of debentures purchased and outstanding at any one time from a company which does not qualify under the terms of paragraph (2) of this subsection, shall not exceed 200 percent of the combined paid-in capital and paid-in surplus of such company. In no event shall the debentures of any such company purchased and outstanding under this paragraph exceed $7,500,000. “(2) The total amount of debentures which may be purchased and outstanding at any one time from a company which (A) has a combined paid-in capital and paid-in surplus of $1,000,000 or more and (B) has investments or legally binding commitments of 65 percent or more of its total funds available for investment in small business concerns invested or committed in venture capital, shall not exceed $2,000,000 plus 300 percent of that portion of the company’s paid-in capital and paid-in surplus which exceeds $1,000,000. In no event shall the debentures of any such company purchased and outstanding under this paragraph exceed $10,-000,000. Such additional purchases which the Administration makes under this paragraph shall contain conditions to insure 81 Stat. 271appropriate maintenance by the company receiving such assistance of the described ratio during the period in which debentures under this paragraph are outstanding. “(3) Outstanding amounts of financial assistance provided to a company by the Administration prior to the effective date of the Small Business Investment Act Amendments of 1967 shall be deducted from the maximum amount of debentures which the Administration would otherwise be authorized to purchase under this subsection. For purposes of this subsection, the term ‘venture capital’ includes such common stock, preferred stock, or other financing with subordination or nonamortization characteristics as the Administration determines to be substantially similar to equity financing.”