13 C.F.R. § 120.710 What is the Loan Loss Reserve Fund?
Title 13 - Business Credit and Assistance
(a) General. The Loan Loss Reserve Fund (“LLRF”) is an interest-bearing Deposit Account which an Intermediary must establish to pay any shortage in the MRF caused by delinquencies or losses on Microloans. An Intermediary must maintain the LLRF until it has repaid all obligations it owes SBA. (b) Level of Loan Loss Reserve Fund. Until it is in the Microloan program for at least five years, an Intermediary must maintain a balance on deposit in its LLRF equal to 15 percent of the outstanding balance of the notes receivable owed to it by its Microloan borrowers (“Portfolio”). (c) SBA review of Loan Loss Reserve Fund. After an Intermediary has been in the Microloan program for five years, it may request SBA's Associate Administrator for Financial Assistance (“AA/FA”) to reduce the percentage of its Portfolio which it must maintain in its LLRF to an amount equal to the actual average loan loss rate during the preceding five-year period. Upon receipt of such request, the AA/FA will review the Intermediary's annual loss rate for the most recent five-year period preceding the request. (d) Reduction of Loan Loss Reserve Fund. The AA/FA has the authority to reduce the percentage of an Intermediary's Portfolio that it must maintain in its LLRF to an amount equal to the actual average loan loss rate during the preceding five-year period. The AA/FA can not reduce the LLRF to less than ten percent of the Portfolio. (e) What must an intermediary demonstrate to get a reduction in Loan Loss Reserve Fund? To get a reduction in its LLRF, an Intermediary must demonstrate to the satisfaction of the AA/FA that: (1) Its average annual loss rate during the preceding five years is less than fifteen percent, and (2) No other factors exist that may impair the Intermediary's ability to repay all obligations which it owes to the SBA under the Microloan program. [61 FR 3235, Jan. 31, 1996, as amended at 65 FR 17439, Apr. 3, 2000]
Title 13: Business Credit and Assistance
PART 120—BUSINESS LOANS
Subpart G—Microloan Program
§ 120.710 What is the Loan Loss Reserve Fund?
