SBA Changes Debenture Repayment Procedures

By David Gerogosian, PEF Services

SBA has changed the procedures and timing of repayment of SBA issued debentures beginning with the upcoming September 2013 payment date.  While SBA has made it more clear how to make prepayments of outstanding debentures held by SBICs, this process will also affect how maturing debentures are to be repaid as well.  The new procedures place the onus on the Fund to make sure all steps are taken. The good news is that it’s clear what must be done.

Notification:

You must notify SBA not less than 5 business days prior to the payment date of your intention to prepay any outstanding debenture.

For example, this upcoming September 1, 2013 payment date requires that the parties below receive notice no later than August 26, 2013.

You must notify the following parties:
SBA: SBICFunding@sba.gov
BNY: catherine.cerilles@bnymellon.com
Colson: samuelj@colsonservices.com
Please also copy your SBA analyst as well as PEF Services.

TIP:   Email with both a delivery and read receipt so that you know it’s been received and read!

Payment:

You must wire the funds for any prepayment or maturing debentures.  SBA will no longer collect anything other than interest on the March and September payment dates via ACH Debit from your account.

Combine all principal payments into one wire. Send the wire on or before the semi-annual payment date or by no later than the next business day, if the payment date falls on a weekend or holiday.  Since September 1, 2013 falls on a weekend, this current payment is due on September 3.

Please note that debentures must be repaid in full. SBA will not accept partial payments of debentures.

Remember, Colson will continue to collect the interest using the same procedure (so nothing has to be changed).  Just be sure that the account has sufficient cash to cover the principal that you are repaying and all interest owed through the payment date for all debentures including those that you are paying off.  The amortization schedules you received when the pooling was completed will tell you the exact amount due.

Please contact David Gerogosian at david@pefundservices.com if you require wiring information.

Below is a sample email notification:

To whom it may concern,

This email serves as notice that NAME OF FUND (LICENSE #) intends to repay the following debentures on Tuesday, 9/3/2013:

Pool Series

ID Control #

Principal Amount

Maturity Date

Kind regards,

xxxxxxxxxxxx