The United States Treasury has announced the long-awaited terms under which banks and bank holding companies that are taxed as Subchapter S corporations and mutual institutions may apply for funds through the Small Business Lending Fund (“SBLF”).
Qualifying Subchapter S corporations and mutual institutions may issue senior securities to the Treasury through the SBLF. Unlike the SBLF plan for C Corporations, the senior securities are unsecured subordinated debentures eligible for inclusion in an institution’s Tier 2 capital and not Tier 1 capital. With respect to all distributions, the senior securities will rank senior to common stock and any other classes of equity. The interest rate payable on the senior securities will be reduced as the participating institution increases its lending to small businesses. Like the C-Corporation program, the issuer must redeem any CPP or CDCI senior securities on or prior to the date of Treasury’s investment.
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