Rule2025-22055
Small Business Investment Company (SBIC) Accrual Regulatory Amendments
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 5, 2025
Effective
January 20, 2026
Issuing agencies
Small Business Administration
Abstract
The U.S. Small Business Administration ("SBA" or "Agency") is publishing this direct final rule (DFR) to modify regulations to provide for a clarification in the Annual Charges assessed for Leverage between SBIC licenses and Accrual SBIC licenses.
Full Text
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<title>Federal Register, Volume 90 Issue 232 (Friday, December 5, 2025)</title>
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[Federal Register Volume 90, Number 232 (Friday, December 5, 2025)]
[Rules and Regulations]
[Pages 55997-55999]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-22055]
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Rules and Regulations
Federal Register
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having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 90, No. 232 / Friday, December 5, 2025 /
Rules and Regulations
[[Page 55997]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 107
RIN 3245-AI28
Small Business Investment Company (SBIC) Accrual Regulatory
Amendments
AGENCY: U.S. Small Business Administration.
ACTION: Direct final rule.
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SUMMARY: The U.S. Small Business Administration (``SBA'' or ``Agency'')
is publishing this direct final rule (DFR) to modify regulations to
provide for a clarification in the Annual Charges assessed for Leverage
between SBIC licenses and Accrual SBIC licenses.
DATES: Effective on January 20, 2026, without further action, unless
significant adverse comment is received no later than January 5, 2026.
If significant adverse comment is received, SBA will publish a timely
withdrawal of the rule in the Federal Register.
ADDRESSES: You may submit comments, identified by RIN: 3245-AI28, by
any of the following methods:
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions for submitting comments for Docket Number SBA-
2025-0168 or RIN 3245-AI28.
<bullet> Mail or Hand Delivery/Courier: Joshua Carter, Associate
Administrator for the Office of Investment and Innovation, U.S. Small
Business Administration, 409 Third Street SW, Washington, DC 20416.
SBA will post all comments on <a href="https://www.regulations.gov">https://www.regulations.gov</a>. If you
wish to submit confidential business information (``CBI''), as defined
in the User Notice at <a href="https://www.regulations.gov">https://www.regulations.gov</a>, please submit the
information to Paul Van Eyl, Director of Financial Policy, Office of
Investment and Innovation, Small Business Administration, 409 Third
Street SW, Washington, DC 20416, or send an email to <a href="/cdn-cgi/l/email-protection#d7b8bebef9a7b8bbbeb4ae97a4b5b6f9b0b8a1"><span class="__cf_email__" data-cfemail="4e212727603e2122272d370e3d2c2f60292138">[email protected]</span></a>
with ``RIN 3245-AI28 Direct Final Rule'' in the subject heading.
Highlight the information that you consider to be CBI and explain why
you believe SBA should hold this information as confidential. SBA will
review the information and make the final determination on whether it
will publish the information.
In accordance with 5 U.S.C. 553(b)(4), a summary of this rule may
be found <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT:
Policy: Joshua Carter, Associate Administrator of the Office of
Investment and Innovation, U.S. Small Business Administration,
<a href="/cdn-cgi/l/email-protection#e38c8a8acd938c8f8a809aa3908182cd848c95"><span class="__cf_email__" data-cfemail="5a353333742a35363339231a29383b743d352c">[email protected]</span></a>, 202-205-7159. This phone number may also be reached
by individuals who are deaf or hard of hearing, or who have speech
disabilities, through the Federal Communications Commission's TTY-Based
Telecommunications Relay Service teletype service at 711.
Regulatory Comments/Federal Register Docket: Paul Van Eyl, Director
of Financial Policy, Office of Investment and Innovation, U.S. Small
Business Administration, <a href="/cdn-cgi/l/email-protection#06696f6f2876696a6f657f4675646728616970"><span class="__cf_email__" data-cfemail="0e616767207e6162676d774e7d6c6f20696178">[email protected]</span></a>, 202-257-5955. This phone
number can also be reached by individuals who are deaf or hard of
hearing, or who have speech disabilities, through the Federal
Communications Commission's TTY-Based Telecommunications Relay Service
teletype service at 711.
SUPPLEMENTARY INFORMATION:
I. Background Information
A. Small Business Investment Company Program
SBA's small business investment company (``SBIC'') program is
designed to enhance small business access to capital by stimulating and
supplementing ``the flow of private equity capital and long-term loan
funds which small-business concerns need for the sound financing of
their business operations and for their growth, expansion, and
modernization, and which are not available in adequate supply.'' Small
Business Investment Act of 1958, as amended, 15 U.S.C. 661, et seq.
(the ``Act''). SBICs are privately owned and managed investment funds,
licensed and regulated by SBA, that use capital raised from private
investors to make equity and debt investments in qualifying small
businesses. SBICs pursue investments in a broad range of industries,
geographic areas, and stages of investment. SBA licenses SBICs to issue
SBA-guaranteed debentures (``Debentures''), typically with a ten year
term, the repayment of which is guaranteed by SBA using the full faith
and credit of the United States.
On July 18, 2023, SBA issued a final rule (88 FR 46012)
implementing a new and distinct type of Debenture (``Accrual
Debenture'') designed to align with the cash flows of long-term,
equity-oriented funds (``Accrual SBICs''). The issuance of Accrual
Debentures is currently limited only to those SBICs approved as an
Accrual SBIC and/or a Reinvestor SBIC. To be eligible for an Accrual
SBIC license, an SBIC applicant must, among other things, demonstrate
an investment strategy that is equity oriented. There are currently
three types of Debentures available for investment funds that have
received an SBIC license: a ``Standard'' Debenture, a ``Discount''
Debenture and an ``Accrual'' Debenture, each of which have different
and distinct terms and conditions.
As required by the Act and pursuant to 13 CFR 107.1130(d), in
addition to a three percent (3%) Leverage fee (split between a Leverage
commitment and a Leverage draw) SBICs are also required to pay an
additional charge (``Annual Charge'') that is payable on the same terms
and conditions as interest applicable to such Debentures.
SBA is clarifying that SBICs issuing a standard Debenture or
Discount Debenture and SBICs issuing an Accrual Debenture may be
subject to separate Annual Charges within the permitted Annual Charge
ceiling and floor as published in the existing regulations and subject
to publication in the Federal Credit Supplement for each fiscal year.
The Annual Charge for SBA Leverage (as defined in the Act) has been
broken out by the type of instrument utilized (e.g., Debentures,
Participating Securities, etc.). Under this rulemaking, Annual Charges
for different types of Debentures issued may differ as terms and
conditions are different and distinct. The calculations of the Annual
Charge are made to keep the SBIC program budget neutral and are
included in the annually published Federal Credit Supplement which
provides detailed information on federal loan programs, subsidy rates,
and budgetary implications for federal credit activities.
[[Page 55998]]
SBA publishes the Annual Charges on its website for each federal
fiscal year of leverage commitments obligated to SBICs based on the
type of Debenture issued. The Annual Charge is calculated on an annual
basis to keep the SBIC program budget neutral and are subject to a
ceiling not to exceed 1.38 percent per annum and a floor set pursuant
to section 303(b) of the Act and 13 CFR 107.1130(d)(1).
SBA is modifying 13 CFR 107.1130(d) to further clarify that SBICs
issuing Accrual Debentures may be subject to an Annual Charge that may
differ from SBICs issuing standard Debentures or Discount Debentures in
order to keep the SBIC program budget neutral. SBA notes this will be
consistent with the calculations performed and are included in the
annual Federal Credit Supplement.
II. Justification for Publication as Direct Final Rule
In general, SBA publishes a rule for public comment before issuing
a final rule in accordance with the Administrative Procedure Act. 5
U.S.C. 553. The Administrative Procedure Act provides an exception to
this standard rulemaking process, however, where an agency finds good
cause to adopt a rule without prior public participation. 5 U.S.C.
553(b)(B). The good cause requirement is satisfied when prior public
participation is impracticable, unnecessary, or contrary to the public
interest.
SBA is publishing this rule as a direct final rule because public
participation is unnecessary. SBA has determined this rulemaking as
non-controversial as it provides clarification on the Annual Charge
applicable to different Debenture types which have differing terms and
conditions.
This rule will be effective on the date shown in the DATES section
unless SBA receives significant adverse comment on or before the
deadline for comments. Significant adverse comments are comments that
provide strong justifications for why the rule should not be adopted or
for changing the rule. SBA does not expect to receive any significant
adverse comments because the accrual debenture program focuses on long-
duration, equity- oriented investment strategies which differ than
investment strategies implemented with standard licensed SBICs. SBA
discussed the potential of distinct charges between accrual debenture
and standard debenture instruments with existing licensed Accrual
SBICs, which did not provide negative feedback. If SBA receives any
significant adverse comments, it will publish a document in the Federal
Register withdrawing this rule before the effective date. If SBA
receives no significant adverse comments, the rule will be effective 45
days after publication without further notice.
As such, this rule is being implemented as a direct final rule.
III. Section by Section Analysis
A. Section 107.1130--Leverage Fees and Annual Charges
This regulation identifies the fees and other charges associated
with SBA-guaranteed Leverage. Paragraph (d) of 13 CFR 107.1130
identifies the Annual Charge (as defined in 13 CFR 107.50) applicable
to SBICs with outstanding Debentures. SBA is modifying paragraph (d) of
13 CFR 107.1130 to clarify that SBA may calculate Annual Charges based
on the type of Debentures issued (e.g., Accrual Debentures and other
Debentures). The Annual Charge rates by type of Debenture are designed
to be fiscally neutral in the aggregate, offsetting reductions and
increases across licensee categories without increasing total program
cost and keep the SBIC program budget neutral in line with the overall
rate and components of the subsidy rate as calculated and reported
annually in the Federal Credit Supplement.
IV. Compliance With Executive Orders 12866, 12988, and 13132, the
Paperwork Reduction Act (44 U.S.C., Ch. 35), the Congressional Review
Act (5 U.S.C. 801-808) and the Regulatory Flexibility Act (5 U.S.C.
601-612)
A. Executive Order 12866
The Office of Management and Budget (``OMB'') has determined that
this rule is not a ``significant regulatory action'' under Executive
Order 12866. The modification to section 13 CFR 107.1130 is not a
material change to existing regulations and is only being clarified in
this rulemaking to expressly state Annual Charge calculations are
assessed individually between Accrual Debentures and other Debentures
as has been SBA's historical practice. Further, less than 4% of
currently licensed SBICs are Accrual Debenture SBICs, accordingly, the
direct final rule would not have a significant effect on the overall
number of active licensed SBICs and would not have an annual effect on
the U.S. economy of more than $100 million nor have an adverse effect
on the U.S. economy in any material way. The direct final rule also
will not have a material effect on employment levels, competition,
productivity, innovation, public health, safety, the environment, or
state, local, or tribal governments or communities. Lastly, as this
direct final rule is a clarification of existing obligations in
accordance with historical practices, it does not create new
obligations, rescind existing rights, or establish novel policy
directions.
B. Executive Order 14192
This direct final rule is not an Executive Order 14192 regulatory
action because it is not significant under Executive Order 12866.
C. Executive Order 12988
This action meets applicable standards set forth in Sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. The action does not
have a retroactive or preemptive effect.
D. Executive Order 13132
This direct final rule does not have federalism implications as
defined in Executive Order 13132. It would not have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government, as specified
in the Executive Order. As such it does not warrant the preparation of
a Federalism Assessment. Additionally, the rule will not require new
compliance activities or reporting by state, local, or tribal
governments.
E. Paperwork Reduction Act, 44 U.S.C., Ch. 35
SBA has determined that this direct final rule does not affect any
existing collection of information and does not propose any new
collection of information.
F. Congressional Review Act, 5 U.S.C. 801-808
Subtitle E of the Small Business Regulatory Enforcement Fairness
Act of 1996, also known as the Congressional Review Act, 5 U.S.C. 801
et seq., provides that before a rule may take effect, the agency
promulgating the rule must submit a rule report, which includes a copy
of the rule, to each House of the Congress and to the Comptroller
General of the United States. SBA will submit a report containing this
rulemaking and other required information to the U.S. Senate, the U.S.
House of Representatives, and the Comptroller General of the United
States. This rulemaking has been reviewed and determined not to meet
the criteria set forth in 5 U.S.C. 804(2).
[[Page 55999]]
G. Regulatory Flexibility Act, 5 U.S.C. 601-612
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires
administrative agencies to consider the effect of their actions on
small entities, small nonprofit enterprises, and small local
governments. Pursuant to the RFA, when an agency issues a rulemaking,
the agency must prepare a regulatory flexibility analysis which
describes the impact of the rule on small entities. However, the RFA
requires such analysis only where notice and comment rulemaking is
required. As discussed above, SBA has found good cause that notice and
public comment are impracticable, unnecessary, or contrary to the
public interest. Accordingly, SBA is not required to conduct a
regulatory flexibility analysis and is publishing this rule as a direct
final rule without advance notice and public comment. The narrow
applicability and clarifying nature of the amendments ensure that no
substantial number of small entities will experience a material impact
from this rule.
List of Subjects in 13 CFR Part 107
Investment companies, Loan programs-business, Reporting and
recordkeeping requirements, Small businesses.
Accordingly, for the reasons stated in the preamble, SBA amends 13
CFR part 107 as follows:
PART 107--SMALL BUSINESS INVESTMENT COMPANIES
0
1. The authority citation for part 107 continues to read as follows:
Authority: 15 U.S.C. 662, 681-687, 687b-h, 687k-m.
0
2. Amend Sec. 107.1130 by revising paragraph (d)(1) to read as
follows:
Sec. 107.1130 Leverage fees and Annual Charges.
* * * * *
(d) * * *
(1) Debentures. You must pay to SBA an Annual Charge, not to exceed
1.38 percent per annum, on the outstanding principal amount of your
Debentures (including both Accrual Debentures and standard Debentures),
payable under the same terms and conditions as the interest on the
applicable Debentures. SBA may establish and publish an Annual Charge
for Accrual Debentures at a different rate than the Annual Charge
established for other Debentures. Unless otherwise determined by SBA,
for Leverage issued pursuant to Leverage commitments relating to any
Debentures (including both Accrual Debentures and standard Debentures),
the Annual Charge, established and published, shall not be less than
0.25 percent per annum, subject to the following provisions:
(i) For Leverage issued pursuant to Leverage commitments approved
on or after October 1, 2026, the Annual Charge, established and
published, shall not be less than 0.30 percent per annum.
(ii) For Leverage issued pursuant to Leverage commitments approved
on or after October 1, 2027, the Annual Charge, established and
published annually, shall not be less than 0.35 percent per annum.
(iii) For Leverage issued pursuant to Leverage commitments approved
on or after October 1, 2028, the Annual Charge, established and
published annually, shall not be less than 0.40 percent per annum.
* * * * *
Kelly Loeffler,
Administrator.
[FR Doc. 2025-22055 Filed 12-4-25; 8:45 am]
BILLING CODE 8026-09-P
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