You may acquire assets in full or partial liquidation of a Small Business's obligation to you under the conditions permitted by this §107.880. The assets may be acquired from the Small Business, a guarantor of its obligation, or another party.

(a) Timely disposition of assets. You must dispose of assets acquired in liquidation of a Portfolio security within a reasonable period of time.

(b) Permitted expenditures to preserve assets.

(1) You may incur reasonably necessary expenditures to maintain and preserve assets acquired.

(2) You may incur reasonably necessary expenditures for improvements to render such assets saleable.

(3) You may make payments of mortgage principal and interest (including amounts in arrears when you acquired the asset), pay taxes when due, and pay for necessary insurance coverage.

(c) SBA approval of expenditures. This paragraph (c) applies if you have outstanding Leverage or are applying for Leverage. Any application for SBA approval under this paragraph must specify all expenses estimated to be necessary pending disposal of the assets. Without SBA's prior written approval:

(1) Your total expenditures under paragraphs (b)(1) and (b)(2) of this section plus your total Financing(s) to the Small Business must not exceed your overline limit under §107.740; and

(2) Your total expenditures under paragraph (b) of this section plus your total Financing(s) to the Small Business must not exceed 35 percent of your Regulatory Capital.