LOAN FUNDING AND SERVICING AGREEMENT



         THIS AMENDMENT NO. 4 TO LOAN FUNDING AND SERVICING AGREEMENT, dated as

of June 16, 2000 (this "AMENDMENT"), is entered into by and among ACS FUNDING

TRUST I ("BORROWER"), as Borrower, AMERICAN CAPITAL STRATEGIES, LTD.

("SERVICER"), as Servicer, certain INVESTORS, VARIABLE FUNDING CAPITAL

CORPORATION ("VFCC"), as a Lender, FIRST UNION SECURITIES, INC.

(successor-in-interest to First Union Capital Markets Corp.), as Deal Agent,

FIRST UNION NATIONAL BANK ("FIRST UNION"), as a Lender and as Liquidity Agent,

and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Collateral Custodian and

the Backup Servicer. Capitalized terms used and not otherwise defined herein are

used as defined in the Agreement (as defined below).



         WHEREAS, the parties hereto entered into that certain Loan Funding and

Servicing Agreement, dated as of March 31, 1999, as amended by Amendment No. 1,

dated as of June 30, 1999, Amendment No. 2, dated as of September 24, 1999, and

Amendment No. 3, dated as of December 14, 1999 (as amended, the "AGREEMENT");



         WHEREAS, the parties hereto desire to amend the Agreement in certain

respects as provided herein;



         NOW THEREFORE, in consideration of the premises and the other mutual

covenants contained herein, the parties hereto agree as follows:



         SECTION 1. AMENDMENTS.



         (a) The definition of "LARGE LOAN LIMIT" contained in SECTION 1.1 of

the Agreement is hereby amended and restated to read in its entirety as follows:



                  "LARGE LOAN LIMIT: With respect to each Obligor, the aggregate

                  Outstanding Loan Balance of all Loans to such Obligor shall

                  not exceed the Large Loan Limit then in effect as follows: (i)

                  $10,000,000.00, provided the Aggregate Outstanding Loan

                  Balance is less than $200,000,000.00; (ii) $13,000,000.00,

                  provided the Aggregate Outstanding Loan Balance is at least

                  $200,000,000.00 but less than $300,000,000.00; (iii)

                  $15,000,000.00, provided the Aggregate Outstanding Loan

                  Balance is at least $300,000,000.00 but less than

                  $325,000,000.00; (iv) $17,000,000.00, provided the Aggregate

                  Outstanding Loan Balance is at least $325,000,000.00 but less

                  than $350,000,000.00; and (v) $20,000,000.00, provided the

                  Aggregate Outstanding Loan Balance is equal to or greater than

                  $350,000,000.00."







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         (b) The definition of "ELIGIBLE OBLIGOR" contained in SECTION 1.1 of

the Agreement is hereby amended as follows:



                  (1) the word "and" at the end of SUBSECTION (ix) is deleted;



                  (2) the period at the end of SUBSECTION (x) is replaced with

         "; and"; and



                  (3) a new SUBSECTION (xi) shall be added as follows:



                           "(xi) such Obligor is in compliance with the Large

                           Loan Limit with respect to the aggregate Outstanding

                           Loan Balance of all Loans to such Obligor."



         (c) SECTION 6.10(c) is hereby amended by adding the following sentence

to the end thereof:



                  "Notwithstanding anything contained in this SECTION 6.10(c) to

                  the contrary, in no event shall the Collateral Custodian

                  release any Loan File or part thereof to the Servicer for any

                  reason without the Deal Agent's prior written consent."



         (d) SECTION 7.1(o) is hereby amended by adding the following clause to

the end thereof prior to the semi-colon:



                  ", and such failure continues unremedied for a period of ten

                  (10) consecutive days".



         (e) EXHIBIT L is amended and replaced in its entirety with the new

Exhibit L attached hereto.



         SECTION 2. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as

specifically amended hereby, the Agreement shall remain in full force and

effect. All references to the Agreement shall be deemed to mean the Agreement as

modified hereby. This Amendment shall not constitute a novation of the

Agreement, but shall constitute an amendment thereof. The parties hereto agree

to be bound by the terms and conditions of the Agreement, as amended by this

Agreement, as though such terms and conditions were set forth herein.



         SECTION 3. REPRESENTATIONS. Each of the Borrower and Servicer represent

and warrant as of the date of this Amendment as follows:



                  (i) it is duly incorporated or organized, validly existing and

         in good standing under the laws of its jurisdiction of incorporation or

         organization;





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                  (ii) the execution, delivery and performance by it of this

         Amendment are within its powers, have been duly authorized, and do not

         contravene (A) its charter, by-laws, or other organizational documents,

         or (B) any Applicable Law;



                  (iii) no consent, license, permit, approval or authorization

         of, or registration, filing or declaration with any governmental

         authority, is required in connection with the execution, delivery,

         performance, validity or enforceability of this Amendment by or against

         it;



                  (iv) this Amendment has been duly executed and delivered by

         it;



                  (v) this Amendment constitutes its legal, valid and binding

         obligation enforceable against it in accordance with its terms, except

         as enforceability may be limited by applicable bankruptcy, insolvency,

         reorganization, moratorium or similar laws affecting the enforcement of

         creditors' rights generally or by general principles of equity;



                  (vi) it is not in default under the Agreement; and



                  (vii) there is no Termination Event, Unmatured Termination

         Event or Servicer Termination Event;



         SECTION 4. EXPENSES. In connection with the execution of this

Amendment, the Borrower agrees to pay all reasonable and actual costs and

expenses (including without limitation the reasonable fees and expenses of legal

counsel) of Canadian Imperial Bank of Commerce ("CIBC") and VFCC, respectively,

incurred in connection with the review and negotiation of this Amendment.



         SECTION 5. CONDITIONS PRECEDENT. The effectiveness of this Amendment is

subject to the following conditions precedent: (i) delivery to the Deal Agent

and CIBC of a copy of this Amendment duly executed by each of the parties

hereto; (ii) delivery to the Deal Agent and CIBC (in a form acceptable to the

Deal Agent) of a due authorization, execution and enforceability opinion with

respect to this Amendment; and (iii) such other documents, agreements,

certifications, or legal opinions as the Deal Agent may reasonably require.



         SECTION 6. MISCELLANEOUS.



         (a) This Amendment may be executed in any number of counterparts, and

by the different parties hereto on the same or separate counterparts, each of

which shall be deemed to be an original instrument but all of which together

shall constitute one and the same agreement.



         (b) The descriptive headings of the various sections of this Amendment

are inserted for convenience of reference only and shall not be deemed to affect

the meaning or construction of any of the provisions hereof.





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         (c) This Amendment may not be amended or otherwise modified except as

provided in the Agreement.



         (d) First Union certifies by execution hereof that it is an Investor

with Commitments in excess of 66-2/3% of the Facility Amount, and therefore is a

Required Investor pursuant to the Agreement.



         (e) The failure or unenforceability of any provision hereof shall not

affect the other provisions of this Amendment.



         (f) Whenever the context and construction so require, all words used in

the singular number herein shall be deemed to have been used in the plural, and

vice versa, and the masculine gender shall include the feminine and neuter and

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