# 107.1505 Liquidity requirements for Licensees issuing Participating Securities.
If you have outstanding Participating Securities, you must maintain sufficient liquidity to avoid a condition of Liquidity Impairment. Such a condition will constitute noncompliance with the terms of your Leverage under § 107.1820(e).
(a) *Definition of Liquidity Impairment.* A condition of Liquidity Impairment exists when your Liquidity Ratio, as determined in paragraph (b) of this section, is less than 1.20. You are responsible for calculating whether you have a condition of Liquidity Impairment:
(1) As of the close of your fiscal year;
(2) At the time you apply for Leverage, unless SBA permits otherwise; and
(3) At such time as you contemplate making any Distribution.
(b) *Computation of Liquidity Ratio.* Your Liquidity Ratio equals your Total Current Funds Available (A) divided by your Total Current Funds Required (B), as determined in the following table:
Calculation of Liquidity Ratio
| Financial account | Amount reportedon SBA form 468 | Weight | Weighted amount |
| --- | --- | --- | --- |
| (1) Cash and invested idle funds | | × 1.00 | |
| (2) Commitments from investors | | × 1.00 | |
| (3) Current maturities | | × 0.50 | |
| (4) Other current assets | | × 1.00 | |
| (5) Publicly Traded and Marketable Securities | | × 1.00 | |
| (6) Anticipated operating revenue for next 12 months | | × 1.00 | |
| (7) Total Current Funds Available | | | A |
| (8) Current liabilities | | × 1.00 | |
| (9) Commitments to Small Businesses | | × 0.75 | |
| (10) Anticipated operating expense for next 12 months | | × 1.00 | |
| (11) Anticipated interest expense for next 12 months | | × 1.00 | |
| (12) Contingent liabilities (guarantees) | | × 0.25 | |
| (13) Total Current Funds Required | | | B |
| As determined by Licensee's management under its business plan. | | | |
[61 FR 3189, Jan. 31, 1996, as amended at 63 FR 5869, Feb. 5, 1998]