---
kind: "section"
citation: "13 C.F.R. § 107.1560"
title: "13"
number: "107.1560"
heading: "Distributions by Licensee—required Distributions to private investors and SBA."
url: "https://uscodex.org/cfr/13/107.1560"
---

# §107.1560. Distributions by Licensee—required Distributions to private investors and SBA.


You must make Distributions under this § 107.1560 if you have outstanding Participating Securities or Earmarked Assets and you satisfy the conditions in [paragraph (a)](#a) of this section. Distributions under this section are determined as of the end of each fiscal year. You must notify SBA of any planned distribution under this [section 10](/cfr/13/10.md) business days before the distribution date, unless SBA permits otherwise.

- (a) **Conditions for making Distributions.** Distributions under this section are subject to the following conditions:
  - (1) You must have paid all Prioritized Payments, Adjustments and Charges, so that the balance in both your Distribution Account and your Accumulation Account is zero (see §§ [107.1520](/cfr/13/107.1520.md) and [107.1540](/cfr/13/107.1540.md)).
  - (2) You must have made any permitted tax Distribution that you choose to make under [§ 107.1550](/cfr/13/107.1550.md).
  - (3) You must satisfy the liquidity requirement in [§ 107.1505](/cfr/13/107.1505.md).
  - (4) The amount you distribute under this section must not exceed your remaining Retained Earnings Available for Distribution.
- (b) **Total amount you must distribute.** Unless SBA permits otherwise, the total amount you must distribute equals the result (if greater than zero) of the following computation:
  - (1) Your Retained Earnings Available for Distribution as of the end of your fiscal year, after giving effect to any Distribution under §§ [107.1540](/cfr/13/107.1540.md) and [107.1550](/cfr/13/107.1550.md); minus
  - (2) All previous Distributions under this section and [§ 107.1570(a)](/cfr/13/107.1570.md?p=a) that were applied as redemptions or repayments of Leverage; plus
  - (3) All previous Distributions under [§ 107.1570(b)](/cfr/13/107.1570.md?p=b) that reduced your Retained Earnings Available for Distribution.
- (c) **When you must make Distributions.** You must make the required Distributions on either the first or second Payment Date following the end of your fiscal year.
- (d) **Effect of Distributions on Retained Earnings Available for Distribution.** Distributions under this § 107.1560 have the following effect on your Retained Earnings Available for Distribution:
  - (1) **All Distributions to private investors reduce Retained Earnings Available for Distribution.**
  - (2) Distributions to SBA, or its designated agent or Trustee, reduce Retained Earnings Available for Distribution if they are applied as payments of Profit Participation (see [paragraph (g)](#g) of this section).
  - (3) Distributions to SBA, or its designated agent or Trustee, do not reduce Retained Earnings Available for Distribution if they are applied as a repayment or redemption of Leverage (see [paragraph (g)](#g) of this section).
- (e) **SBA's share of the total Distribution.** Use the following table to determine the percentage share of the total Distribution (from [paragraph (b)](#b) of this section) that goes to SBA (or its designated agent or Trustee):
- (f) **Exceptions to the Distribution requirement.**
  - (1) With SBA's prior written approval, you may withhold from distribution reasonable reserves necessary to protect your investments or relative position in Loans and Investments and to meet contingent liabilities.
    - (i) If you submit a written request for SBA approval, you may consider it approved unless SBA notifies you otherwise within 30 days from receipt.
    - (ii) Reserves that you withhold from distribution may not be used to make investments in additional portfolio companies.
    - (iii) Withholding of reserves under this [paragraph (f)(1)](#f-1) is not a “payment failure” in violation of [§ 107.1820(e)(6)](/cfr/13/107.1820.md?p=e-6).
  - (2) SBA may restrict Distributions under this § 107.1560 if SBA determines that the value of your assets is materially overstated. SBA must give you notice of such a determination in advance of your proposed Distribution.
- (g) **How SBA will apply your Distributions.** Your Distributions to SBA (or its designated agent or Trustee) under this § 107.1560 will be applied in the following order:
  - (1) First, to Profit Participation;
  - (2) Second, as a redemption of Participating Securities in order of issue; and
  - (3) Third, as the repayment of principal of any outstanding Debentures, with such repayment to be made into escrow on terms and conditions SBA determines.

## Notes

### Amendments

[61 FR 3189, Jan. 31, 1996, as amended at 63 FR 5872, Feb. 5, 1998; 91 FR 9, Jan. 2, 2026]

### Authority

Authority: 15 U.S.C. 662, 681-687, 687b-h, 687k-m.

### Source

Source: 61 FR 3189, Jan. 31, 1996, unless otherwise noted.

### Amendments

[61 FR 3189, Jan. 31, 1996, as amended at 63 FR 5872, Feb. 5, 1998; 91 FR 9, Jan. 2, 2026]