Understanding the Trust Certificate Rate: A Comprehensive Guide
Definition & Meaning
The term Trust Certificate Rate refers to a fixed interest rate established by the Secretary of the Treasury when pooling Participating Securities or Debentures. This rate is calculated based on the average market yield of existing marketable U.S. obligations that have similar maturities to the Trust Certificates being guaranteed by the Small Business Administration (SBA). The rate is typically rounded to the nearest one-eighth of one percent.
Legal Use & context
The Trust Certificate Rate is primarily used in the context of financial instruments related to small business financing. It plays a crucial role in the issuance of SBA-backed securities, which are utilized by small businesses to secure funding. Understanding this rate is important for legal professionals working in finance, business law, and securities regulation, as it affects the cost of borrowing for small businesses. Users can manage related forms and procedures through legal templates available from US Legal Forms.
Real-world examples
Here are a couple of examples of abatement:
For instance, if the Secretary of the Treasury determines that the average yield on similar U.S. obligations is 3.25%, the Trust Certificate Rate might be set at 3.25% or rounded to 3.25% if it falls within the rounding criteria.
(Hypothetical example) A small business seeking to issue SBA-backed securities could find that the Trust Certificate Rate is favorable, making it an attractive option for financing.