You are using an unsupported browser. This web site is designed for the current versions of Microsoft Edge, Google Chrome, Mozilla Firefox, or Safari.
The Office of the Federal Register publishes documents on behalf of Federal agencies but does not have any authority over their programs. We recommend you directly contact the agency associated with the content in question.
If you have comments or suggestions on how to improve the www.ecfr.gov website or have questions about using www.ecfr.gov, please choose the 'Website Feedback' button below.
If you would like to comment on the current content, please use the 'Content Feedback' button below for instructions on contacting the issuing agency
Enhanced content is provided to the user to provide additional context.
This content is from the eCFR and is authoritative but unofficial.
Navigate by entering citations or phrases (eg: 1 CFR 1.1 49 CFR 172.101 Organization and Purpose 1/1.1 Regulation Y FAR).
Choosing an item from citations and headings will bring you directly to the content. Choosing an item from full text search results will bring you to those results. Pressing enter in the search box will also bring you to search results.
Background and more details are available in the Search & Navigation guide.
The in-page Table of Contents is available only when multiple sections are being viewed.
Use the navigation links in the gray bar above to view the table of contents that this content belongs to.
61 FR 67648, Dec. 23, 1996, unless otherwise noted.
81 FR 36020, June 3, 2016, unless otherwise noted.
This content is from the eCFR and may include recent changes applied to the CFR. The official, published CFR, is updated annually and available below under "Published Edition". You can learn more about the process here.
The eCFR is displayed with paragraphs split and indented to follow the hierarchy of the document. This is an automated process for user convenience only and is not intended to alter agency intent or existing codification.
A separate drafting site is available with paragraph structure matching the official CFR formatting. If you work for a Federal agency, use this drafting site when drafting amendatory language for Federal regulations: switch to eCFR drafting site.
Subscribe to: 7 CFR 4287.113
View the most recent official publication:
These links go to the official, published CFR, which is updated annually. As a result, it may not include the most recent changes applied to the CFR. Learn more.
This document is available in the following developer friendly formats:
Information and documentation can be found in our developer resources.
The Code of Federal Regulations (CFR) is the official legal print publication containing the codification of the general and permanent rules published in the Federal Register by the departments and agencies of the Federal Government. The Electronic Code of Federal Regulations (eCFR) is a continuously updated online version of the CFR. It is not an official legal edition of the CFR.
Learn more about the eCFR, its status, and the editorial process.
(a) Within the parameters of paragraph (c) of this section, lenders may, over the life of the loan, release collateral (other than personal and corporate guarantees) without Agency concurrence if the proceeds generated are used to pay down debt in order of lien priority, reduce the guaranteed loan or to acquire replacement collateral. Working assets, such as accounts receivable, inventory, and work-in-progress that are routinely depleted or sold and proceeds used for the normal course of business operations may be used in and released for routine business purposes without prior concurrence of the Agency as long as the loan is not in monetary default or liquidation.
(b) If a release of collateral does not meet the requirements of paragraph (a) of this section, the lender must complete a written evaluation to justify the release and obtain written Agency concurrence in advance of the release.
(c) Collateral must remain sufficient to provide for adequate collateral coverage for the outstanding guaranteed loan(s). For a release of collateral request when the Borrower is not in monetary default or liquidation, the lender must support all releases of chattel collateral with a value exceeding $250,000 and real estate collateral with a value exceeding $500,000 with a current appraisal on the collateral being released and otherwise meets the requirements of § 4279.144 of this chapter. All other release of collateral requests must meet the appraisal requirements of § 4279.144 of this chapter. The cost of this appraisal will not be paid for by the Agency. The Agency may, at its discretion, require an appraisal of the remaining collateral in cases where it has been determined that the Agency may be adversely affected by the release of collateral. The sale or release of the collateral must be based on an arm's length transaction, and there must be adequate consideration for the release of collateral. Such consideration may include, but is not limited to:
(1) Application of the net proceeds from the sale of collateral to the borrower's debts in order of their lien priority against the sold collateral;
(2) Use of the net proceeds from the sale of collateral to purchase other collateral of equal or greater value for which the lender will obtain as security for the benefit of the guaranteed loan with a lien position equal or superior to the position previously held;
(3) Application of the net proceeds from the sale of collateral to the borrower's business operation in such a manner that a significant improvement to the borrower's debt service ability will be clearly demonstrated. The lender's written request must detail how the borrower's debt service ability will be improved; or
(4) Assurance that the release of collateral is essential for the success of the business, thereby furthering the goals of the program. Such assurance must be supported by written documentation from the lender acceptable to the Agency.
[81 FR 36020, June 3, 2016, as amended at 87 FR 58021, Sept. 23, 2022]