Understanding the On-going Subsidy Fee [SISMBD Loan] and Its Importance
Definition & Meaning
The On-going Subsidy Fee is an annual fee that is charged monthly, based on the outstanding balance of a Systemically Important Secondary Market Broker-Dealer (SISMBD) loan. This fee is established under section 509(F) of the Recovery Act and is intended to ensure that the cost of the direct loan remains at zero, as outlined by the Federal Credit Reform Act of 1990. The funds collected from this fee are used as a reserve to cover potential losses within the SISMBD loan program. The Small Business Administration (SBA) will announce the specific fee amount before the program begins and will provide updates as necessary.
Legal Use & context
The On-going Subsidy Fee is relevant in the context of federal business loans, specifically those offered to broker-dealers deemed systemically important. This term is primarily used in financial and business law, particularly concerning federal assistance programs. Users may find it beneficial to utilize legal templates from US Legal Forms to manage documentation related to SISMBD loans effectively.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A broker-dealer with an outstanding SISMBD loan balance of $1 million will pay a monthly On-going Subsidy Fee calculated based on that balance. If the fee is set at 0.5 percent annually, they would pay approximately $4,167 each month.
Example 2: A newly established broker-dealer applies for a SISMBD loan and is informed about the On-going Subsidy Fee structure during the application process, allowing them to budget accordingly. (hypothetical example)
Relevant laws & statutes
Key legislation includes:
- Recovery Act - Section 509(F) outlines the establishment of the On-going Subsidy Fee.
- Federal Credit Reform Act of 1990 - Provides the framework for calculating costs associated with federal loans.