108 STAT. 2210 PUBLIC LAW 103-325—SEPT. 23, 1994 f (B) is an early loan, such payment shall not be deemed fully to satisfy the claim of the participating financial institution, and at such time as the remaining balance of the claim does not exceed 75 percent of the balance in the reserve fund, the participating State shall, upon the request of the participating financial institution, pay any remaining amount of the claim. (n) DENIAL OF CLAIMS.—^A participating State may deny a claim if a representation or warranty made by the participating financial institution to the participating State at the time that the loan was filed for enrollment or at the time that the claim was submitted was known by the participating financial institution to be false. (o) SUBSEQUENT RECOVERY OF CLAIM AMOUNT.— I f, subsequent to payment of a claim by the participating State, a participating financial institution recovers from a borrower any amount for which payment of the claim was made, the participating financial institution shall promptly pay to the participating State for deposit into the reserve fund the amount recovered, less any expenses incurred by the institution in collection of such amount. (p) PARTICIPATION AGREEMENT TERMS.— (1) IN GENERAL.—In connection with the filing of a loan for enrollment in the Program, the participation agreement— (A) shall require the participating financial institution to obtain an assurance from each borrower that— (i) the proceeds of the loan will be used for a business purpose; (ii) the loan will not be used to finance passive real estate ownership; and (iii) the borrower is not— (I) an executive officer, director, or principal shareholder of the participating financial institution; (II) a member of the immediate family of an executive officer, director, or principal shareholder of the participating financial institution; or (III) a related interest of any such executive officer, director, principal shareholder, or member of the immediate family; (B) shall require the participating financial institution to provide assurances to the participating State that the loan has not been made in order to place under the protection of the Program prior debt that is not covered under the Program and that is or was owed by the borrower to the participating financial institution or to an affiliate of the participating financial institution; (C) may provide that if— (i) a participating financial institution makes a loan to a borrower that is a refinancing of a loan previously made to the borrower by the participating financial institution or an affiliate of the participating financial institution; (ii) such prior loan was not enrolled in the Program; and (iii) additional or new financing is extended by the participating financial institution as part of the refinancing.
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