---
kind: "section"
citation: "15 U.S.C. § 697g"
title: "15"
title_heading: "Commerce and Trade"
number: "697g"
heading: "Foreclosure and liquidation of loans"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/15/697g"
units:
  - "Chapter 14B — Small Business Investment Program"
  - "Subchapter V — Loans to State and Local Development Companies"
---

# §697g. Foreclosure and liquidation of loans

- (a) **Delegation of authority—** In accordance with this section, the [Administration](/usc/15/662.md?p=1) shall delegate to any qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) (as defined in [section 697(e) of this title](/usc/15/697.md?p=e)) that meets the eligibility requirements of [subsection (b)(1)](#b-1) the authority to foreclose and liquidate, or to otherwise treat in accordance with this section, defaulted loans in its portfolio that are funded with the proceeds of debentures guaranteed by the [Administration](/usc/15/662.md?p=1) under [section 697 of this title](/usc/15/697.md).
- (b) **Eligibility for delegation—**
  - (1) **Requirements—** A qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) shall be eligible for a delegation of authority under [subsection (a)](#a) if—
    - (A) the [company](/usc/15/662.md?p=3)—
      - (i) has participated in the loan liquidation pilot program established by the Small Business Programs Improvement Act of 1996 ([15 U.S.C. 695](/usc/15/695.md) note), as in effect on the day before promulgation of final regulations by the [Administration](/usc/15/662.md?p=1) implementing this section;
      - (ii) is participating in the Premier Certified Lenders Program under [section 697e of this title](/usc/15/697e.md); or
      - (iii) during the 3 fiscal years immediately prior to seeking such a delegation, has made an average of not less than 10 loans per year that are funded with the proceeds of debentures guaranteed under [section 697 of this title](/usc/15/697.md); and
    - (B) the [company](/usc/15/662.md?p=3)—
      - (i) has one or more employees—
        - (I) with not less than 2 years of substantive, decision-making experience in administering the liquidation and workout of problem loans secured in a manner substantially similar to loans funded with the proceeds of debentures guaranteed under [section 697 of this title](/usc/15/697.md); and
        - (II) who have completed a training program on loan liquidation developed by the [Administration](/usc/15/662.md?p=1) in conjunction with qualified [State](/usc/15/662.md?p=4) and local [development companies](/usc/15/662.md?p=6) that meet the requirements of this paragraph; or
      - (ii) submits to the [Administration](/usc/15/662.md?p=1) documentation demonstrating that the [company](/usc/15/662.md?p=3) has contracted with a qualified third-party to perform any liquidation activities and secures the approval of the contract by the [Administration](/usc/15/662.md?p=1) with respect to the qualifications of the contractor and the terms and conditions of liquidation activities.
  - (2) **Confirmation—** On request the [Administration](/usc/15/662.md?p=1) shall examine the qualifications of any [company](/usc/15/662.md?p=3) described in [subsection (a)](#a) to determine if such [company](/usc/15/662.md?p=3) is eligible for the delegation of authority under this section. If the [Administration](/usc/15/662.md?p=1) determines that a [company](/usc/15/662.md?p=3) is not eligible, the [Administration](/usc/15/662.md?p=1) shall provide the [company](/usc/15/662.md?p=3) with the reasons for such ineligibility.
- (c) **Scope of delegated authority—**
  - (1) **In general—** Each qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) to which the [Administration](/usc/15/662.md?p=1) delegates authority under section[^1] (a) may with respect to any loan described in [subsection (a)](#a)—
    - (A) perform all liquidation and foreclosure functions, including the purchase in accordance with this subsection of any other indebtedness secured by the property securing the loan, in a reasonable and sound manner according to commercially accepted practices, pursuant to a liquidation plan approved in advance by the [Administration](/usc/15/662.md?p=1) under [paragraph (2)(A)](#c-2-A);
    - (B) litigate any matter relating to the performance of the functions described in [subparagraph (A)](#c-1-A), except that the [Administration](/usc/15/662.md?p=1) may—
      - (i) defend or bring any claim if—
        - (I) the outcome of the litigation may adversely affect the [Administration](/usc/15/662.md?p=1)’s management of the loan program established under [section 696 of this title](/usc/15/696.md); or
        - (II) the [Administration](/usc/15/662.md?p=1) is entitled to legal remedies not available to a qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) and such remedies will benefit either the [Administration](/usc/15/662.md?p=1) or the qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3); or
      - (ii) oversee the conduct of any such litigation; and
    - (C) take other appropriate actions to mitigate loan losses in lieu of total liquidation or foreclosures, including the restructuring of a loan in accordance with prudent loan servicing practices and pursuant to a workout plan approved in advance by the [Administration](/usc/15/662.md?p=1) under [paragraph (2)(C)](#c-2-C).
  - (2) **Administration approval—**
    - (A) **Liquidation plan—**
      - (i) **In general—** Before carrying out functions described in [paragraph (1)(A)](#c-1-A), a qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) shall submit to the [Administration](/usc/15/662.md?p=1) a proposed liquidation plan.
      - (ii) **Administration action on plan—**
        - (I) **Timing—** Not later than 15 business days after a liquidation plan is received by the [Administration](/usc/15/662.md?p=1) under [clause (i)](#c-2-A-i), the [Administration](/usc/15/662.md?p=1) shall approve or reject the plan.
        - (II) **Notice of no decision—** With respect to any plan that cannot be approved or denied within the 15-day period required by [subclause (I)](#c-2-A-ii-I), the [Administration](/usc/15/662.md?p=1) shall within such period provide in accordance with [subparagraph (E)](#c-2-E) notice to the [company](/usc/15/662.md?p=3) that submitted the plan.
      - (iii) **Routine actions—** In carrying out functions described in [paragraph (1)(A)](#c-1-A), a qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) may undertake routine actions not addressed in a liquidation plan without obtaining additional approval from the [Administration](/usc/15/662.md?p=1).
    - (B) **Purchase of indebtedness—**
      - (i) **In general—** In carrying out functions described in [paragraph (1)(A)](#c-1-A), a qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) shall submit to the [Administration](/usc/15/662.md?p=1) a request for written approval before committing the [Administration](/usc/15/662.md?p=1) to the purchase of any other indebtedness secured by the property securing a defaulted loan.
      - (ii) **Administration action on request—**
        - (I) **Timing—** Not later than 15 business days after receiving a request under [clause (i)](#c-2-B-i), the [Administration](/usc/15/662.md?p=1) shall approve or deny the request.
        - (II) **Notice of no decision—** With respect to any request that cannot be approved or denied within the 15-day period required by [subclause (I)](#c-2-B-ii-I), the [Administration](/usc/15/662.md?p=1) shall within such period provide in accordance with [subparagraph (E)](#c-2-E) notice to the [company](/usc/15/662.md?p=3) that submitted the request.
    - (C) **Workout plan—**
      - (i) **In general—** In carrying out functions described in [paragraph (1)(C)](#c-1-C), a qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) shall submit to the [Administration](/usc/15/662.md?p=1) a proposed workout plan.
      - (ii) **Administration action on plan—**
        - (I) **Timing—** Not later than 15 business days after a workout plan is received by the [Administration](/usc/15/662.md?p=1) under [clause (i)](#c-2-C-i), the [Administration](/usc/15/662.md?p=1) shall approve or reject the plan.
        - (II) **Notice of no decision—** With respect to any workout plan that cannot be approved or denied within the 15-day period required by [subclause (I)](#c-2-C-ii-I), the [Administration](/usc/15/662.md?p=1) shall within such period provide in accordance with [subparagraph (E)](#c-2-E) notice to the [company](/usc/15/662.md?p=3) that submitted the plan.
    - (D) **Compromise of indebtedness—** In carrying out functions described in [paragraph (1)(A)](#c-1-A), a qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) may—
      - (i) consider an offer made by an obligor to compromise the debt for less than the full amount owing; and
      - (ii) pursuant to such an offer, release any obligor or other party contingently liable, if the [company](/usc/15/662.md?p=3) secures the written approval of the [Administration](/usc/15/662.md?p=1).
    - (E) **Contents of notice of no decision—** Any notice provided by the [Administration](/usc/15/662.md?p=1) under subparagraph [(A)(ii)(II)](#c-2-A-ii-II), [(B)(ii)(II)](#c-2-B-ii-II), or [(C)(ii)(II)](#c-2-C-ii-II)—
      - (i) shall be in writing;
      - (ii) shall [state](/usc/15/662.md?p=4) the specific reason for the [Administration](/usc/15/662.md?p=1)’s inability to act on a plan or request;
      - (iii) shall include an estimate of the additional time required by the [Administration](/usc/15/662.md?p=1) to act on the plan or request; and
      - (iv) if the [Administration](/usc/15/662.md?p=1) cannot act because insufficient information or documentation was provided by the [company](/usc/15/662.md?p=3) submitting the plan or request, shall specify the nature of such additional information or documentation.
  - (3) **Conflict of interest—** In carrying out functions described in [paragraph (1)](#c-1), a qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) shall take no action that would result in an actual or apparent conflict of interest between the [company](/usc/15/662.md?p=3) (or any employee of the [company](/usc/15/662.md?p=3)) and any third party lender, associate of a third party lender, or any other [person](/usc/15/7a.md?p=6) participating in a liquidation, foreclosure, or loss mitigation action.
- (d) **Suspension or revocation of authority—** The [Administration](/usc/15/662.md?p=1) may revoke or suspend a delegation of authority under this section to any qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3), if the [Administration](/usc/15/662.md?p=1) determines that the [company](/usc/15/662.md?p=3)—
  - (1) does not meet the requirements of [subsection (b)(1)](#b-1);
  - (2) has violated any applicable rule or regulation of the [Administration](/usc/15/662.md?p=1) or any other applicable law; or
  - (3) fails to comply with any reporting requirement that may be established by the [Administration](/usc/15/662.md?p=1) relating to carrying out of functions described in [paragraph (1)](#d-1).
- (e) **Report—**
  - (1) **In general—** Based on information provided by qualified [State](/usc/15/662.md?p=4) and local [development companies](/usc/15/662.md?p=6) and the [Administration](/usc/15/662.md?p=1), the [Administration](/usc/15/662.md?p=1) shall annually submit to the Committees on Small Business of the House of Representatives and of the Senate a report on the results of delegation of authority under this section.
  - (2) **Contents—** Each report submitted under [paragraph (1)](#e-1) shall include the following information:
    - (A) With respect to each loan foreclosed or liquidated by a qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) under this section, or for which losses were otherwise mitigated by the [company](/usc/15/662.md?p=3) pursuant to a workout plan under this section—
      - (i) the total cost of the project financed with the loan;
      - (ii) the total original dollar amount guaranteed by the [Administration](/usc/15/662.md?p=1);
      - (iii) the total dollar amount of the loan at the time of liquidation, foreclosure, or mitigation of loss;
      - (iv) the total dollar losses resulting from the liquidation, foreclosure, or mitigation of loss; and
      - (v) the total recoveries resulting from the liquidation, foreclosure, or mitigation of loss, both as a percentage of the amount guaranteed and the total cost of the project financed.
    - (B) With respect to each qualified [State](/usc/15/662.md?p=4) or local development [company](/usc/15/662.md?p=3) to which authority is delegated under this section, the totals of each of the amounts described in clauses [(i)](#e-2-A-i) through [(v)](#e-2-A-v) of subparagraph (A).
    - (C) With respect to all loans subject to foreclosure, liquidation, or mitigation under this section, the totals of each of the amounts described in clauses [(i)](#e-2-A-i) through [(v)](#e-2-A-v) of subparagraph (A).
    - (D) A comparison between—
      - (i) the information provided under [subparagraph (C)](#e-2-C) with respect to the 12-month period preceding the date on which the report is submitted; and
      - (ii) the same information with respect to loans foreclosed and liquidated, or otherwise treated, by the [Administration](/usc/15/662.md?p=1) during the same period.
    - (E) The number of times that the [Administration](/usc/15/662.md?p=1) has failed to approve or reject a liquidation plan in accordance with [subparagraph (A)(i)](#e-2-A-i), a workout plan in accordance with subparagraph (C)(i), or to approve or deny a request for purchase of indebtedness under subparagraph (B)(i), including specific information regarding the reasons for the [Administration](/usc/15/662.md?p=1)’s failure and any delays that resulted.

## Footnotes

[^1]: So in original. Probably should be “subsection”.

## Source credit

(Pub. L. 85–699, title V, § 510, as added Pub. L. 106–554, § 1(a)(9) [title III, § 307(a)], Dec. 21, 2000, 114 Stat. 2763, 2763A–685.)

## Notes

### Editorial Notes

### References in Text

The Small Business Programs Improvement Act of 1996, referred to in subsec. (b)(1)(A)(i), is Pub. L. 104–208, div. D, Sept. 30, 1996, 110 Stat. 3009–724. Provisions relating to loan liquidation pilot program are contained in section 204 of title II of div. D of Pub. L. 104–208, which is set out as a note under section 695 of this title. For complete classification of this Act to the Code, see Short Title of 1996 Amendment note set out under section 631 of this title and Tables.

### Statutory Notes and Related Subsidiaries

### Change of Name

Committee on Small Business of Senate changed to Committee on Small Business and Entrepreneurship of Senate. See Senate Resolution No. 123, One Hundred Seventh Congress, June 29, 2001.

### Regulations

Pub. L. 106–554, § 1(a)(9) [title III, § 307(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–689, provided that: In general.—Not later than 150 days after the date of the enactment of this Act [Dec. 21, 2000], the Administrator shall issue such regulations as may be necessary to carry out section 510 of the Small Business Investment Act of 1958 [15 U.S.C. 697g], as added by subsection (a) of this section. Termination of pilot program.—Beginning on the date on which final regulations are issued under paragraph (1), section 204 of the Small Business Programs Improvement Act of 1996 [Pub. L. 104–208, div. D] (15 U.S.C. 695 note) shall cease to have effect.”