The U.S. Small Business Administration (the “SBA”) recently issued new instructions governing the draw request (a “Draw Request”) that small business investment companies (“SBICs”) must file with the SBA to access debenture leverage. Once an SBIC has received a commitment from the SBA to reserve financial assistance on the SBIC’s behalf for the future issuance of debentures, the SBIC must file a Draw Request to access this capital and draw down leverage.1 The new Draw Request instructions are substantially similar to the previous instructions issued by the SBA, but the SBA has added certain certification requirements for SBICs utilizing Energy Saving Debentures or Early Stage Debentures and for those firms that have more than one SBIC under common control that intend to co-invest with one another.

In addition to the documentation that an SBIC is required to submit with a Draw Request for standard debentures, SBICs applying for Energy Saving Debentures or Early Stage Debentures must also provide specialized certifications. An SBIC applying for Energy Saving Debentures that was licensed after September 30, 2008 must certify which of its outstanding investments are Energy Saving Qualified Investments (as defined in the Small Business Investment Act of 1958 and the rules and regulations promulgated thereunder (the “SBIC Act”)) and their respective investment costs as well as the additional Energy Saving Qualified Investments that the SBIC proposes to make. If an SBIC was licensed as an Early Stage SBIC (as defined in the SBIC Act), it must certify (1) that at least 50% of the aggregate dollar amount of its financings will be provided to “early stage” companies (as defined in the SBIC Act), (2) for each debenture that requires periodic interest payments to the SBA during the first five years of its term, the SBIC will maintain a reserve sufficient to pay the interest and charges on such debenture for the first 21 payment dates following its issuance and (3) the SBIC will not have, incur or refinance any third party debt without the SBA’s prior written approval other than accounts payable from routine business operations.

The new Draw Request instructions also require a certification that an SBIC must make in its Draw Request application if (1) the SBIC is under Common Control (as defined in 13 CFR 107.50) with another SBIC, (2) the SBICs under Common Control have in excess of $150 million of aggregate SBA leverage (including outstanding and committed leverage), (3) the SBICs under Common Control intend to make co-investments with one another2 and (4) the subsequently formed SBIC was licensed after June 2012.3 Consistent with SBA guidance, the subsequently formed SBIC must certify that it will limit its co-investments with other SBICs under Common Control to 30% of the aggregate dollar amount of the financings of the subsequently formed SBIC.4

Draw Requests may be submitted to the SBA at any time and are still processed on the first and third Wednesdays of each month. If a Draw Request is approved, the SBA will send the SBIC an Approval Notice for each approved takedown of capital by the Wednesday following the date the Draw Request was processed. To draw the capital, the SBIC must then submit a completed Approval Notice the day prior to the SBIC’s desired receipt of capital.