Appendix 13: 7(a) Manufacturers' Access to Revolving Credit (MARC) Loans

Summary

Appendix 13 sets out procedures for 7(a) Manufacturers' Access to Revolving Credit (MARC) loans, a 7(a) loan delivery method for businesses engaged in manufacturing (NAICS sectors 31-33). Proceeds may only support the working capital needs of the applicant business; non-working capital debt refinance, changes of ownership, delinquent withholding taxes and floor plan financing are listed as ineligible uses. The maximum loan amount is $5,000,000 and the maximum guaranty amount is $3,750,000, with a guaranty percentage of 85% for loans of $150,000 or less and 75% for loans over $150,000. Loans may be term or revolving; term loans have a maximum maturity of 10 years and revolving loans 20 years. The appendix also covers interest rates, underwriting and debt service coverage, post-closing requirements for revolving loans and servicing options.

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Appendix 13: 7(a) MANUFACTURERS' ACCESS TO REVOLVING CREDIT (MARC)
The following procedures are for 7(a) Manufacturers’ Access to Revolving Credit (MARC) loans. 7(a) MARC loans are a new 7(a) loan delivery method and not a modification of the existing 7(a) Working Capital CAPLines in SOP 50 10 8, Section B, Ch. 3.
7(a) Manufacturers’ Access to Revolving Credit (MARC) loans.
Except as stated here otherwise, all 7(a) Loan Program Requirements, and in particular, SOPs 50 56, “Lender Participation Requirements,” 50 10, “Lender and Development Company Loan Programs,” and 50 57, “7(a) Loan Servicing and Liquidation,” and the Servicing and Liquidation Actions 7(a) Lender Matrix apply to 7(a) MARC loans. Lenders must always start by reviewing the contents of SOP 50 10 8, Section A, Core Requirements for all 7(a) and 504 loans.
Eligibility
Eligible small businesses are those that meet the eligibility requirements in SOP 50 10 8, Section A, and are engaged in manufacturing (NAICS sectors 31-33, where 31, 32, or 33 are the first 2 digits of the business’s primary 6-digit NAICS code). NAICS codes can be found at 13 CFR § 121.201, and a searchable database of industries and NAICS codes is located at North American Industry Classification System (NAICS) U.S. Census Bureau or NAICS.com. To determine the Applicant’s primary NAICS code, see 13 § CFR 121.107.
Eligible Uses of Proceeds
Borrowers may only use the loan proceeds to support the working capital needs of the Applicant business.
Ineligible Uses of Proceeds
Proceeds must not be used for non-working capital debt refinance, changes of ownership, to pay delinquent withholding taxes or similar funds held in trust (e.g., state or local sales taxes), or for floor plan financing. MARC loan proceeds may not be used to pay a creditor in a position to sustain a loss.
Although 7(a) MARC loans may not be used to fund a change of ownership, a 7(a) MARC loan may be made to a business at the same time as the change of ownership to support the manufacturer’s working capital needs.
Loan Terms and Conditions
Maximum Loan Amount is $5,000,000.
To determine the maximum loan amount, the Lender must ensure the Borrower meets the debt service coverage requirements in the Underwriting section.
Maximum Loans to Businesses with Affiliates.
13 CFR § 120.151 Lenders must determine whether the Applicant has any affiliates and document the results in their credit analysis. If affiliation exists, SBA’s loan maximums apply to the Applicant, including all Affiliates, as if all were a single business.
Term or Revolving Structure
The loan may be term or revolving.
Term loans: Lenders have the option of structuring the term loan with a period of interest-only payments following the initial disbursement of the loan. When the interest-only period ends (or when there are one to two months remaining of interest-only payments), the Lender may sell the loan on the secondary market.
Revolving loans: May not be sold on the secondary market.
Revolving MARC loans must contain a provision that allows the lender to begin amortizing the loan in the event that the Borrower does not meet the program requirements in Paragraph i. Post-Closing Requirements for Revolving Loans.
Disbursements
It is up to the Lender to determine how to administer disbursements. This includes the Lender allowing for an open and revolving line of credit, tiering the availability on an annual basis, or administering the facility using a borrowing base certificate. For example, if the Lender anticipates a lower capital need in year 1, the Lender may set a cap at the total amount the Borrower may draw for that period. The Lender may place additional controls over the disbursements, so long as the rules are documented in the loan agreement. Lenders may also request a loan increase after an annual review, if the annual review supports a higher loan amount (additional guaranty fees may be due, and the request for the loan increase must be made in accordance with the Servicing and Liquidation Actions 7(a) Lender Matrix).
Maximum Guaranty Amounts and Percentages
The maximum dollar amount outstanding of SBA’s guaranty to any one business and its affiliates must not exceed $3,750,000 (13 CFR § 121.151). SBA considers an EPC and an OC to be “one business” for this purpose. When calculating the maximum guaranty percentage available to a Borrower and its affiliates, the Lender must include the approved loan amount and any existing 7(a) or 504 loans, including revolving lines of credit.
The maximum guaranty amount is $3,750,000.
The maximum guaranty percentage is:
85% for loans of $150,000 or less.
75% for loans over $150,000.
Combination of 7(a) and 504 loans.
When an Applicant applies for any combination of 7(a) and 504 loans, the order in which the loans are approved determines the maximum loan and guaranty amount available. Because the 7(a) loan has a lower maximum guaranteed amount, the 7(a) loan should be processed and approved first.
Lenders must advise the SBA processing centers that there is a companion 504 application to ensure the 7(a) loan is processed and approved prior to the 504 loan application being processed and approved.
Maximum Guaranty Percentage for Multiple 7(a) Loans (13 CFR § 120.210).
For multiple 7(a) loans approved within 90 days of each other, the gross dollar amounts of the loans are combined.
Zero Percent Guaranty Cannot be Provided for Ineligible Purposes:
A 7(a) loan cannot include proceeds for an ineligible purpose or have any portion of the loan made to an ineligible business and no part of an SBA 7(a) loan may be guaranteed at zero percent.
Loan Maturities
13 CFR § 120.212
7(a) loans must have a stated maturity.
Term loans have a maximum maturity of 10 years.
Revolving loans:
Revolving loans have a maximum maturity of 20 years.
Revolving loans of more than 12 months must be structured with a term-out period that is at least as long as the draw period, with no draws permitted during the term-out period.
Revolving loans may not revolve for more than 10 years. At the end of the revolving period, the loan must be converted to a fully amortizing loan with a maximum additional repayment term of up to 10 years.
Revolving loans may be established as renewable each year, provided they do not exceed the maximum revolving period of 10 years. If the original maturity was for 12 months or less, and the new maturity exceeds 12 months, an additional guaranty fee will be due.
Revolving loans with maturities of 12 months or less may be initially structured without a term-out; however, if the loan is renewed or the maturity extended beyond 12 months, the requirements above will apply.
Interest Rates
See SOP 50 10 8, Section A, Ch. 1, Para. B.4 for more information on interest rate requirements. SBA Quick Reference Chart:
Product Working Capital CAPLines for Manufacturers | Interest Rate The maximum allowable fixed rate is available on SBA’s Wiki page. Maximum variable rates are:
Loans $50,000 or less | Cannot exceed Prime or SBA Optional Peg Rate + 6.5%
Loans $50,001 up to and including $250,000 | Cannot exceed Prime or SBA Optional Peg Rate + 6.0%
Loans $250,001 up to and including $350,000 | Cannot exceed Prime or SBA Optional Peg Rate + 4.5%
Loans $350,001 and greater | Cannot exceed Prime or SBA Optional Peg Rate + 3.0%
Credit Standards
The policies that make up SBA’s credit standards begin with the requirements outlined in 13 CFR §§ 120.101 and 120.150. This section provides procedural guidance as to what the Lender should or must consider when analyzing any request for financial assistance that will be guaranteed by SBA.
A Lender must analyze each application in a commercially reasonable manner, consistent with prudent lending standards. The cash flow of the Applicant is the primary source of repayment, not any expected recovery from the liquidation of collateral. Thus, if the Lender’s financial analysis indicates that the Applicant lacks reasonable assurance of repayment in a timely manner from the business's cash flow, the loan request must be declined, regardless of the collateral available or outside sources of repayment.
Processing Methods
Non-delegated – When a Lender submits a 7(a) MARC loan guaranty request under the non-delegated processing method, the Lender submits the application and supporting documents to SBA via E-Tran. SBA will make the final determination regarding the eligibility and creditworthiness of the Applicant, including approval of the uses of proceeds, the adequacy of the collateral being pledged, the structure of the loan, and any equity contribution required from the Applicant.
PLP – When a Lender submits a 7(a) MARC loan guaranty request under the Lender’s PLP authority, the Agency does not review the Lender’s analysis of the credit or structure of the loan or line of credit prior to issuing a loan number. The Lender must analyze creditworthiness in accordance with SBA Loan Program Requirements and properly document its file. The PLP Lender’s analysis is subject to SBA’s review and determination of adequacy when the Lender requests SBA to purchase its guaranty or when SBA is conducting lender oversight activities.
Underwriting
Lender’s Credit Analysis:
The Lender’s credit memorandum and analysis must address the Applicant’s ability and likelihood to repay the loan from the cash flow of the business and past performance by documenting the following:
A description and history of the business, including:
Nature of the manufacturing business, including NAICS code;
Length of time in business under current management;
Depth of management experience in the industry or a related industry;
Brief description of the business’s management team, including the principal’s involvement in the daily onsite management of the business or how the daily operations will be managed if the principals are not there on a daily basis.
If the daily operations will be handled under a management agreement, Lenders must obtain a copy of the management agreement (unless the management agreement is part of the franchise disclosure documents for a brand listed on the Franchise Directory), review it to determine if it results in an ineligible passive business, and retain in their loan file.
Financial analysis of repayment ability:
For existing businesses based on the three most recent years of historical financial information (tax returns or balance sheet with debt schedule and income statement), plus an interim financial statement. (13 CFR § 120.191)
For start-ups, new businesses, changes of ownership, and other applications based on projections, include detailed projections, including supporting assumptions that reflect a debt service coverage equal to or greater than 1:1 within 2 years from first loan disbursement. The debt service coverage calculation must be made assuming a fully amortizing loan and using the maximum loan amount approved and the maximum loan maturity approved and must include the total debt load of the business as affected by the project.
The financial analysis for all Applicants must address the following as applicable:
Historical cash flow for existing businesses that demonstrate total debt service coverage after the SBA loan; if the historical cash flow from the most recent full year and the interim financial statements do not show debt service coverage of at least 1:1, Lender must obtain from the Applicant and analyze 2 years of detailed projections including the supporting assumptions that reflect a debt service coverage equal to or greater than 1:1 within 2 years from first disbursement. The supporting assumptions must justify relying on projections instead of historical performance. The debt service coverage calculation must be made assuming a fully amortizing loan and using the maximum loan amount approved and the maximum loan maturity approved and must include the total debt load of the business as affected by the project;
Calculation of operating cash flow (OCF) defined as earnings before interest, taxes, depreciation, and amortization (EBITDA);
Justification for additions and subtractions to cash flow such as the following:
Unfunded capital expenditures;
Non-recurring income or expenses;
Expenses and distributions;
Distributions for S-Corp taxes;
Rent payments;
Owner’s Draw; and/or
Global cash flow analysis that includes assessment of impact on cash flow to/from any affiliate business. Anticipated cash flow from rental income from the Project Property may be included in the global cash flow analysis;
The effect any affiliates may have on the ultimate repayment ability of the Applicant.
Debt Service (DS). The Applicant’s debt service coverage ratio (OCF/DS) must be equal to or greater than 1:1 on a historical basis, or if relying on projections, must be equal to or greater than 1:1 within 2 years from first disbursement. The supporting assumptions must justify relying on projections instead of historical performance. Global debt service coverage must be at least 1:1. If the Applicant is relying on projections to meet these requirements, the Applicant must provide a monthly cash flow analysis for a period of at least 12 months. To perform a complete analysis of debt service, it is important for a Lender to obtain a current debt schedule prepared by the Applicant, including any shareholder debt.
For cash flow projections, the Lender must calculate the debt service coverage and provide the assumptions supporting the projected cash flow coverage, including, as applicable:
Justification for revenue growth, i.e., new product lines, sales channels, and new production facilities;
Justification for any reduction in expenses; and
A comparison to current industry trends.
Spread of pro-forma Business Balance Sheet (current business balance sheet adjusted for all changes in assets and liabilities as a result of the SBA loan, other debt, any required equity injection, and use of loan proceeds);
Ratio calculations (based on the pro-forma Balance Sheet and historical and projected Income Statements) for the following financial ratio benchmarks: Current Ratio, Debt/Tangible Net Worth, Debt Service Coverage, and any other ratios the Lender considers significant for the business/ industry (e.g., inventory turnover, receivables turnover, and payables turnover, etc.) including discussion of Lender’s comparison to industry trends;
Analysis of Borrower’s working capital adequacy.
Assessment of collateral adequacy in accordance with the section on Collateral below.
Insurance Requirements, including:
Life Insurance – on whom and how much. If life insurance will not be required, provide justification.
Business hazard & liability insurances.
Lender’s rationale for recommending approval, including a discussion and analysis of the following:
The factors demonstrating the Applicant does not have credit available elsewhere on reasonable commercial terms from non-Federal, non-State, non-local government sources in accordance with SOP 50 10 8, Section A, Ch. 1, Para. H.
Competition;
Seller financing;
Stand-by agreements;
90+ day delinquencies;
Trade disputes and/or;
Federal, State, or local citations which would preclude the Applicant from normal business operations;
Discussion of any liens, judgments, bankruptcy filings, or pending litigation, including divorce proceedings;
If the application involves a franchise (as defined by FTC), the Lender must review any credit information provided, such as the number of failed franchisees and cash flow projections provided by the franchisor).
Discussion of other relevant information.
Equity requirements (13 CFR § 120.150):
Depending on whether the loan is processed on a non-delegated or PLP basis, the Lender or SBA must determine that there is sufficient invested equity. To do this, the Lender (for PLP loans) or SBA (for non-delegated loans) must determine if the equity position and the pro forma debt-to-worth are acceptable based on the factors related to the type of business, experience of management, and the level of competition in the market area. The Lender must include in its credit memorandum a detailed discussion of the equity position (net worth) and any required equity injection. Unlike Standard 7(a) and 7(a) Small loans, 7(a) MARC loans do not have a minimum required equity injection based on use of proceeds.
Collateral
See SOP 50 10 8, Section A, Ch. 5, Para. A. for guaranty requirements.
Lenders must use commercially reasonable and prudent practices to identify collateral that conforms to procedures at least as thorough as those used for their similarly-sized non-SBA guaranteed commercial loans. Decisions regarding what collateral must be taken to secure a loan are based on the circumstances of the individual loan, including size, and must meet the minimum requirements in this section. At a minimum, Lender must place a lien on all assets of the business (including titled equipment and real estate) with the following exceptions:
SBA does not require the Lender to place a lien on vehicles that already have a lien or unless the value of the vehicle (as reported by any of the following: an independent third party (e.g., orderly liquidation value from an appraisal, independent vehicle valuation company or website), or the purchase price allocable to such a vehicle if a loan is being used to purchase the vehicle) is greater than $20,000 at the time the SBA loan number is assigned by SBA. For the purpose of determining whether the Lender must place a lien on a vehicle, Lender must document whether the vehicle already had a lien on it, or the source and dollar amount of the vehicle valuation in the credit memorandum.
SBA leaves it up to the discretion of the Lender to decide whether to take a security interest in trading assets (e.g., accounts receivable or inventory) when structuring the MARC as a term loan in the event that they are being pledged as collateral for a separate revolving line of credit.
When structuring the MARC as a revolving line of credit, the lender must have a lien on the trading assets.
Adequacy of Collateral.
A Lender may not take any action in connection with an SBA-guaranteed loan that establishes a preference in favor of the Lender (13 CFR § 120.411). The Lender must not have a 7(a) loan in a “piggyback” structure.
Piggyback financing occurs when one or more lenders provide more than one loan to a single Borrower at or about the same time, financing the same or similar purpose, and where the SBA-guaranteed loan is secured with a junior lien position or no lien position on the collateral securing the non-guaranteed loan(s). SBA considers “at or about the same time” to mean loans approved within 90 days of each other.
SBA does not consider a scenario where both the SBA-guaranteed loan and the non-SBA guaranteed loan are for working capital and the non-SBA guaranteed loan is secured only by working/trading assets to be a piggyback structure.
SBA does not consider a shared lien position with the lender (pari passu) to be a piggyback structure when the maturity of the non-SBA guaranteed loan is not shorter than the maturity of the SBA-guaranteed loan.
A loan request is not to be declined solely on the basis of inadequate collateral. In fact, one of the primary reasons Lenders use the SBA-guaranteed program is for those Applicants that demonstrate repayment ability but lack adequate collateral to repay the loan in full in the event of default. However, SBA does not permit its guaranty to be a substitute for available collateral.
When assessing the adequacy of collateral, the Lender must consider the impact that covenants and other restrictions recorded against the collateral may have on its value and marketability. The Lender must document this analysis in the file. Examples of items to review include:
Deed restrictions, covenants, easement provisions, reversionary interests, subordinations, leases and options, and other provisions that restrict the use of the property for the benefit of a third party (note: certain deed restrictions pertaining to the use of the property, which are intended to protect the health and safety of occupants, may be acceptable, e.g., deed restrictions based upon environmental concerns including restrictions on residential use, use as a day care center for children or seniors, use as a school, or use as a hospital); and
Engineering Controls that require the Applicant or subsequent owners to install costly devices or structures such as extraction wells or subsurface barrier walls prior to constructing a building, remodeling, or otherwise improving the property.
Environmental Indemnification Provisions that run with the land are not eligible and must be removed or waived as to the Federal Government.
Fees that the Lender Charge the Borrower
See SOP 50 10 8, Ch. 4 for requirements for ethics, fees, and Agents.
In addition to the fees in SOP 50 10 8, Ch. 4, Para. C.2, on MARC loans that are revolving, at the time of the annual review, the Lender may charge an extraordinary servicing fee of up to 50 basis points based on the maximum loan amount. Note: Lenders may not charge the 50 basis point fee on loans that are not revolving (i.e., term loans and revolving loans that have been termed out).
Asset-based lines: Lenders may administer MARC loans as an asset-based line (e.g., similar to the 7(a) Working Capital CAPLines program or based on the Lender’s policies for its similarly-sized non-SBA guaranteed asset-based lines). When administering the MARC loan as an asset-based line, the Lender may charge an annual extraordinary servicing fee not to exceed 2% of the outstanding balance. For MARC Loans, the Lender may assess this extraordinary servicing fee independent of fees that may or may not be charged on similarly sized lines of credit by the institution.
For asset-based lines, the Lender may only charge one category of extraordinary servicing fee, either the traditional extraordinary service fee not to exceed 2% or the 50 basis point fee calculated on the maximum loan amount.
For all MARC loans, SBA has granted a blanket waiver on the Lender’s requirement to seek prior written approval when assessing either category of the extraordinary service fee outlined in this section.
Designating 7(a) MARC Loans in E-Tran
Lenders must indicate that these loans are 7(a) MARC loans when entering the application into E-Tran.
Submission of Application for Guaranty
Lenders that do not have delegated PLP authority: Must submit applications to SBA via E-Tran for SBA approval under non-delegated procedures.
Lenders with PLP delegated authority: Lenders with PLP delegated authority are required to process 7(a) MARC loans using their PLP authority. Lenders with PLP delegated authority:
Must process all loan applications using their delegated authority.
May submit questions on a specific loan application, including the names of the principals, the address of the project, loan amount, and delivery method to 7aDelegatedLoanApps@sba.gov. Lender must provide sufficient information on the specific application to avoid delays in responses. Lender is to provide a summary of the facts – SBA will not be reviewing the entire case file or multiple attachments.
Must make a request for an exception for any type of 7(a) loan to 7aDelegatedLoanApps@sba.gov, providing detailed information about the application including the names of the principals, address of the project, and a discussion of the policy for which the exception is being requested along with an explanation why the exception to policy should be granted. If SBA approves the exception, the Lender will receive an email confirming the approval, and the Lender must proceed to process the application under delegated authority. The Lender must retain the approval email in the loan file. Exceptions to policy will be considered on a case-by-case basis, and the decision will only apply to the specific request. The decision must be documented in the appropriate loan file. Lender is to provide a summary of the facts – SBA will not be reviewing the entire case file or multiple attachments.
The 7aDelegatedLoanApps@sba.gov email account is only for Lenders with delegated authority that have questions about a specific loan application and is not to be used for general policy questions, which should be sent to 7aQuestions@sba.gov.
The contents of the Lender’s application for guaranty vary depending on the size of the loan and the method of processing chosen by the Lender, but in all cases, Lender must maintain any and all documents that the Lender collects to support the guaranty request in their loan files.
Lender must list in E-Tran 100% of the total direct and indirect ownership of the Applicant. The ownership percentage of married spouses and minor children must be combined. Minor children may be owners as long as each minor child’s ownership interest (direct and indirect) is less than 20%.
SBA Form 1919 includes information on the number of existing employees at the time of application and the number of jobs to be created and/or retained as a result of the loan.
Number of existing employees at the time of application is calculated in accordance with 13 CFR § 121.106, which states in part that SBA counts all individuals employed on a full-time, part-time, or other basis (i.e., jobs are not converted to full-time equivalents).
Jobs “created” means the number of full-time (or equivalent) employees that the small business expects to hire as a result of the loan.
Jobs “retained” means the number of full-time (or equivalent) employees on the payroll of the business at the time of application that will be lost if the loan is not approved.
“Employees” does not include contractors reported via IRS Form 1099.
Program forms can be found at www.sba.gov/document.
Centralized 7(a) Loan Submission Instructions can be found at the 7(a) Loan Guaranty Processing Center (“LGPC”) website along with other forms, telephone numbers and fax numbers: www.sba.gov/CitrusHeightsLGPC.
Contents of Lender’s Application for Guaranty & Submission to SBA
Regardless of the processing method (delegated or non-delegated), all 7(a) loan files must include the forms and information the Lender requires in order to make an informed credit decision. Any application form obtained by the Lender from the Applicant must be certified by the Applicant as true and complete.
For all loans submitted using the Lender’s PLP delegated authority, Lender must submit the information required in SBA Form 1919 and the loan terms and conditions into E-Tran.
For all loans submitted using the non-delegated process through the LGPC, the Lender must submit applications for guaranty and all attachments via E-Tran to SBA. SBA will make the final determination as to the eligibility and creditworthiness of the Applicant, including approving the uses of proceeds, the adequacy of the collateral being pledged, the structure of the loan, and any equity contribution to be required from the Applicant. SBA will either approve or decline the loan in E-Tran. The Lender must obtain and retain in its file all documentation listed below. In addition, Lender must submit as part of the application for guaranty those items below emphasized in bold.
Lender must submit to E-Tran all terms and conditions required by E-Tran data fields.
SBA Form 1919: A separate SBA Form 1919 for each Co-Borrower must be completed and signed by the authorized representative of the Applicant and submitted to the Lender. The aggregate amounts of the “Purpose of the loan” sections across all SBA Forms 1919 should equal the total amount of the loan request. Only the information required on SBA Form 1919, and not the form itself, must be submitted into E-Tran, although the Lender must obtain and retain the signed form in its file.
Lender’s Credit Memorandum must address all requirements detailed in Paragraph 1.d, Credit Standards, above.
Owner Financial Statement (business or personal, as applicable) signed and dated within 120 days of submission to SBA, for all owners of 20% or more (including the assets of the owner’s spouse and minor children), and proposed guarantors, except Supplemental Guarantors. Lenders may use SBA Form 413 or their own equivalent form.
Tax transcripts in accordance with SOP 50 10 8, Section A, Ch. 5, Para. B, IRS Tax Transcript/Verification of Financial Information and either business financial statements or tax returns for the last 3 years and interim financial statements for the Applicant and any affiliates. For start-ups, new businesses, changes of ownership, and other applications based on projections include detailed projections, including the supporting assumptions that reflect a debt service coverage equal to or greater than 1.1 within 2 years from loan funding or, for construction projects, within 2 years from the end of construction. Interim financial statements must be dated within 120 days prior to submission to SBA. The following information must be provided:
Year End Balance Sheet for the last 3 years, including detailed debt schedule;
Year End Profit & Loss Statements for the last 3 years;
Interim Balance Sheet, including a detailed debt schedule, and interim Profit & Loss Statements.
Copy of Lease, if applicable;
A detailed listing of all collateral;
Franchise: For any Applicant operating under a franchise, license or similar agreement, refer to SOP 50 10 8, Section A, Ch. 1, Para. G., “Franchises.”
Documentation of U.S. National and/or LPR/USCIS status verification in accordance with SOP 50 10 8, Section A, Ch. 1, Para. F, “Businesses Owned by Non-U.S. Citizens”. Lenders must receive verification of the status of each alien required to submit USCIS documents prior to submission of the application or request for loan number to SBA. Lenders may submit a copy of the verification received from USCIS or SBA-SLPC or confirm in its credit memorandum that verification has been obtained. Lender must retain documentation stating that the Lender has reviewed a U.S. National’s status (birth certificate and/or passport) in the loan file.
Management agreements, if applicable, and if the management agreement is not part of the franchise disclosure documents for a brand listed on the Franchise Directory. See SOP 50 10 8, Section A, Ch. 1, Para. E.3.e. on management agreements.
Where to Submit Applications for Guaranty
Non-delegated applications – Lenders submitting applications using non-delegated procedures must submit applications for guaranty and all attachments via E-Tran to the LGPC. Documents greater than 250MB must be separated into multiple documents. The system does not support uploads greater than 250MB.
PLP applications – Lenders submitting applications using their PLP authority must submit guaranty applications via E-Tran, retaining all required documentation in the Lender’s loan file.
Reconsideration of Declined non-delegated Applications (13 CFR § 120.193):
If the Lender believes the reason(s) for decline have been overcome, a request for reconsideration may be submitted along with a detailed written explanation of how the Applicant has overcome the reason(s) for decline. Lender must submit a request for reconsideration to the LGPC within 6 months of the date of decline. Any request submitted more than 120 days after the date of decline must include current financial statements.
If a request for reconsideration is declined by the LGPC, a second reconsideration may be requested from the D/FA or designee, whose decision is final. The request to the D/FA or designee must be submitted to the LGPC and must include a copy of the Center’s decline letter and include additional information that specifically addresses the reason(s) identified for decline and how the Applicant has overcome those reason(s). The LGPC will forward the request to the D/FA or designee for a final decision.
See SOP 50 10 8, Section B, Chapter 5, E-Tran Terms and Conditions through Disbursement for all 7(a) Loans, for SBA requirements for the E-Tran Terms and Conditions, post-approval and pre-disbursement requests for changes, transfer of guaranty between participating Lenders, and loan closing and disbursement.
Post-Closing Requirements for Revolving Loans
Beginning no later than the end of the second year (24 months from approval):
For revolving loans, Lenders must conduct an annual review of business financials to determine whether the line may continue to revolve for an additional year or whether the facility should be termed out. This review must include an analysis of the previous year-end financial performance and the most recent interim statement available. This review may coincide with the Lender’s annual renewal process for the loan.
The Lender must use a combination of factors for the decision consistent with its similarly-sized, non-SBA guaranteed commercial lines of credit, or, if the Lender does not make similarly-sized non-guaranteed loans, consistent with prudent lending standards. The Lender’s analysis must assume full use of the revolving line of credit and must include at a minimum;
Cash flow analysis to determine the adequacy, duration, and dependability of cash flow;
Owner/Guarantor analysis, except Supplemental Guarantors;
Documentation that the Borrower:
Can support a debt service coverage ratio of at least 1:1. Debt service coverage calculation must be based on the full debt service of the business, except that the calculation may be based on interest-only payments on the 7(a) MARC loan.
Has no bankruptcy filings against the company.
Is current at the time of the review (meaning total interest due to date has been paid), and
Maintains sufficient collateral as described in the Collateral section.
If each of the above requirements are met, the line may continue to revolve.
If the above requirements are not met, the line must be converted to a fully amortizing term loan with a zero balance at loan maturity.
The Lender may require the line to convert to a fully amortizing term loan at any point, if the Lender deems it necessary, based on prudent lending criteria.
Once the loan has been converted to a term loan, the Lender may not make further disbursements on the line.
In the event that the Lender discovers that proceeds were used to acquire fixed assets under the revolving portion of the loan, Lender must refinance the portion of the line used to acquire the fixed asset into an appropriate term facility (which may be a 7(a) term loan) no later than 90 days after the discovery.
Disbursements: See the Disbursements section above.
Servicing Options
Lenders must follow SOP 50 57 and the Servicing and Liquidation Actions 7(a) Lender Matrix for servicing and liquidation requirements. Additionally, Lenders may extend the loan maturity by up to 10 years to help a Borrower remain current or, if a Borrower becomes delinquent, to help the Borrower regain currency. In such cases, the loan must be converted to a fully amortizing loan with a zero balance at loan maturity.
Lenders may also defer payments.
Revolving loans may be deferred for up to 6 months.
Term loans. If the loan is a term loan sold on the secondary market, payments may be deferred for up to 3 months – other changes in terms are subject to investor approval (See SBA Form 1086).

File and source

File: 2025-09_Appendix-13-7-a-Manufacturers-Access-to-Revolving-Credit-MARC-_0.docx
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Our copy: 2025-09_Appendix-13-7-a-Manufacturers-Access-to-Revolving-Credit-MARC-_0.docx
Original: www.sba.gov