---
kind: "section"
citation: "49 C.F.R. § 26.70"
title: "49"
number: "26.70"
heading: "Debt-financed investments."
url: "https://uscodex.org/cfr/49/26.70"
---

# §26.70. Debt-financed investments.

- (a) Subject to the other provisions of this subpart, a SEDO may borrow money to finance a [§ 26.69(c)](/cfr/49/26.69.md?p=c) investment entirely or partially if the SEDO has paid, on a net basis, at least 15 percent of the total value of the investment by the time the firm applies for certification.
  - (1) The SEDO pays the net 15 percent portion of the investment to Seller or Applicant (as the case may be) from her own, not borrowed, money.
  - (2) Money that the SEDO receives as a [§ 26.69(e)](/cfr/49/26.69.md?p=e) gift is her own money.
  - (3) The firm, whether Applicant or DBE, does not finance any part of the investment, directly or indirectly.
- (b) The loan is real, enforceable, not in default, not offset by another agreement, and on standard commercial, arm's length terms. The following conditions also apply.
  - (1) **The SEDO is the sole debtor.**
  - (2) **The firm is not party to the loan in any capacity, including as a guarantor.**
  - (3) The SEDO does not rely on the company's credit or other resources to repay any part of the debt or otherwise to finance any part of her investment.
  - (4) The loan agreement requires level, regularly recurring payments of principal and interest, according to a standard amortization schedule, at least until the SEDO satisfies requirements in [paragraph (a)](#a) of this section.
  - (5) **The loan agreement permits prepayments, including by refinancing.**
- (c) If the creditor forgives or cancels all or part of the debt, or the SEDO defaults, the entire debt-financed portion of the SEDO's purchase or capital contribution is no longer an investment.
- (d) [Paragraph (c)](#c) of the section does not prohibit refinancing with debt that meets the requirements of this section or preclude prompt curation under [§ 26.69(f)](/cfr/49/26.69.md?p=f).

## Notes

### Amendments

[89 FR 24973, Apr. 9, 2024]

### Authority

Authority: 23 U.S.C. 304 and 324; 42 U.S.C. 2000d, et seq.; 49 U.S.C. 47113, 47123; Sec. 1101(b), Pub. L. 114-94, 129 Stat. 1312, 1324 (23 U.S.C. 101 note); Sec. 150, Pub. L. 115-254, 132 Stat. 3215 (23 U.S.C. 101 note); Pub. L. 117-58, 135 Stat. 429 (23 U.S.C. 101 note).

### Source

Source: 64 FR 5126, Feb. 2, 1999, unless otherwise noted.

### Amendments

[89 FR 24973, Apr. 9, 2024]