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B-149685 1 (1978-04-27)

handle is hein.gao/gaobadtns0001 and id is 1 raw text is: 947 COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON, D.C. 20548 PR 2 7 1978 B-149685 The Yonorable Gaylord Nelson Chairman, Select Committee on Small Business Uuited States Senate Dear Mr. Chairman: This is in response to your request for an opinion from our Office on the eligibility of small business investment companies (SBICs) to participate as non-guaranteed lenders in loan programs administered by the Farmers home Administration (FMEW). As you know, our decision of February 3, 1977, 56 Comp. Cen. 323 held that SBICs are not eligible to participate as guaranteed lenders in either SBA's 7(a) loan program or FmHA'a Business and Industrial loan program. However, as indicated in your submission, that decision did not specifically address the question of whether SBICs could participate in FmHA's loan programs as non-guaranteed lenders. The specific question you have asked us to resolve is whether an SBIC can finance the non-guaranteed portion of an PmHA- loan in participation with another qualified lender that supplies the proceeds for the guaranteed portion of a loan. In such a situation, you state, FmHA in no way would reimburse the SBIC on its exposure in the event of a default. For the following reasons, it is our view that SBICs do not have. authority to participate in FmHA's loan programs as non-guaranteed lenders. As stated in our decision of February 3, 1977, FmHA is authorized to guarantee loans made to eligible borrowers pursuant to section 310B of the Consolidated Farm and Rural Development Act, as amended, 7 U.S.C. 0 1932 (1976). In its Business and Industrial Loan program authorized by this provision, FmHA guarantees up to 90 percent of loans made and serviced by eligible lenders. Our February 3, 1977, decision reaffirmed the position we had taken earlier in 49 Comp. Gen. 32 (1969), in which we concluded that SBICs could not participate with SBA in making loans to small business concerns under section 7(a) of the Small Business Act, 15 U.S.C. I 636(a)(1976). In both of those decisions, we relied heavily

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