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13 C.F.R. § 314.6   Encumbrances.

Title 13 - Business Credit and Assistance

Title 13: Business Credit and Assistance
PART 314—PROPERTY
Subpart A—General

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§ 314.6   Encumbrances.

(a) General. Except as provided in paragraph (b) of this section or as otherwise authorized by EDA, Recipient-owned Property acquired or improved in whole or in part with Investment Assistance must not be used to secure a mortgage or deed of trust or in any way collateralized or otherwise encumbered (collectively, an “Encumbrance” or to “Encumber”). An Encumbrance includes but is not limited to easements, rights-of-way or other restrictions on the use of any Property.

(b) Exceptions. Subject to EDA's approval, which will not be unreasonably withheld or unduly delayed, paragraph (a) of this section does not apply to:

(1) The use of Recipient-owned Property to secure a grant or loan made by a federal or State agency or other public body participating in the same Project;

(2) Recipient-owned Property that is subject to an Encumbrance at the time EDA approves the Project, where EDA determines that the requirements of §314.7(b) are met;

(3) Encumbrances arising solely from the requirements of a pre-existing water or sewer facility or other utility Encumbrances, which by their terms extend to additional Property connected to such facilities; and

(4) Encumbrances in cases where all of the following are met:

(i) EDA, in its sole discretion, determines that there is good cause for a waiver of paragraph (a) of this section;

(ii) All proceeds secured by the Encumbrance on the Property shall be available only to the Recipient and shall be used only for the Project for which the Investment Assistance applies or for related activities of which the Project is an essential part;

(iii) A grantor/lender will not provide funds without the security of a lien on the Property; and

(iv) There is a reasonable expectation, as determined by EDA, that the Recipient will not default on its obligations.

(c) Encumbering Recipient-owned Property, other than as permitted in this section, is an Unauthorized Use of the Property under §314.4.

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