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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: November 17, 2000

FROM: Barry McVay, CPCM

SUBJECT: Small Business Administration (SBA); Small Business Investment Companies

SOURCE: Federal Register, November 17, 2000, Vol. 65, No. 223, page 69431

AGENCIES: Small Business Administration (SBA)

ACTION: Final Rule

SYNOPSIS: SBA is amending its regulations to implement a provision of the Small Business Investment Improvement Act of 1999 (Public Law 106-9) that excludes certain types of consideration paid to a small business investment company (SBIC) by a small business from "cost of money" limitations.

EDITOR'S NOTE: The SBA's regulations being amended are in Title 13 of the Code of Federal Regulations (CFR), Business and Credit Administration; Chapter 1, Small Business Administration; Part 107, Small Business Investment Companies.

For more on the proposed rule, see the June 20, 2000, FEDERAL CONTRACTS DISPATCH "Small Business Administration; Small Business Investment Companies."

EFFECTIVE DATE: December 18, 2000.

FOR FURTHER INFORMATION CONTACT: Leonard W. Fagan, Investment Division, 202-205-7583.

SUPPLEMENTAL INFORMATION: Public Law 106-9, enacted April 5, 1999, amended Section 308(i)(2) of the Small Business Investment Act of 1958 to provide that certain types of consideration paid to an SBIC by a small business are excluded from the regulatory limitations on "cost of money" established by the SBA -- specifically, any consideration consisting of "contingent obligations" which grant the SBIC an interest in the "equity or increased future revenue" of the small business.

On June 20, 2000, SBA published a proposed rule that would implement this change by revising Section 107.855, Interest Rate Ceiling and Limitations on Fees Charged to Small Businesses ("Cost of Money"). No comments were received, so the proposed rule is finalized without change.

This final rule revises Section 107.855 as follows:

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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