SBA Information Notice: Issuance of SOP 50 10 6
Summary
SBA Information Notice, Control No. 5000-20043, effective August 28, 2020, to SBA employees, 7(a) lenders and certified development companies. It announces the issuance of Standard Operating Procedure (SOP) 50 10 6, Lender and Development Company Loan Programs, effective October 1, 2020. It states that the update provides additional guidance and incorporates revisions to conform to changes in SBA regulations and loan program requirements, and it lists those changes.
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SBA Information Notice
TO: All SBA Employees, 7(a) Lenders, and CONTROL NO.: 5000-20043
Certified Development Companies
EFFECTIVE: August 28, 2020
SUBJECT: Issuance of SOP 50 10 6
The purpose of this Notice is to inform 7(a) Lenders, Certified Development Companies (CDCs),
together known as “SBA Lenders,” and SBA employees of the issuance of Standard Operating
Procedure (SOP) 50 10 6, Lender and Development Company Loan Programs, effective
October 1, 2020. This update to the SOP provides additional guidance and incorporates
revisions to conform to changes in SBA regulations and loan program requirements including,
but not limited to:
• The Final Rule on Streamlining and Modernizing Certified Development Company
Program (504 Loan Program) Corporate Governance Requirements dated
December 4, 2019 (84 FR 66287);
• Policy changes published in SBA Policy Notice 5000-19007, dated March 26, 2019,
including changes to 7(a) and 504 loan program appraisal requirements;
• Procedural changes published in SBA Procedural Notice 5000-19014, dated
July 25, 2019, that expedite the FBI fingerprint review process for SBA Business Loan
Programs;
• Guidance published in SBA Information Notice 5000-19005, dated March 12, 2019, on
revised Internal Revenue Service (IRS) Form 4506-T, “Request for Transcript of Tax
Return;”
• Guidance published in SBA Information Notice 5000-19016, dated September 10, 2019,
on revised SBA Form 750, Loan Guaranty Agreement (Deferred Participation); and
• Reduction and streamlining of forms: Elimination of SBA Form 912, “Statement of
Personal History,” formerly used in connection with, for 7(a), SBA Form 1919, “SBA
7(a) Borrower Information Form,” and for 504, SBA Form 1244, “Application for
Section 504 Loans.” For the Export Working Capital Program (EWCP), the use of SBA
Forms 1919/1920 for all EWCP loan applications due to ExIm Bank’s decision to convert
the EIB-SBA Joint Form 84-1 to a form for use by ExIm Bank only. In addition, for the
504 loan program, retirement of SBA Forms 2234 (Parts A, B, and C), “Premier Certified
Lenders Program (PCLP) Guarantee Request,” and SBA Form 2450, “504 Eligibility
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Must be accompanied by SBA Form 58
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Checklist (non-PCLP),” and incorporating, as necessary, the information of both forms
into SBA Form 1244.
Users are advised to fully read SOP 50 10 6 to ensure understanding of all changes.
The SOP 50 10 6 will become effective October 1, 2020 and will apply to all applications
received by SBA on or after that date. Participants must continue to use SOP 50 10 5(K) for SBA
7(a) and 504 applications submitted through September 30, 2020.
The significant changes to the SOP include the following:
FORMAT UPDATE:
The format of the SOP has been reorganized to emphasize core 7(a) and 504 Loan Program
Requirements and to consolidate guidance based on loan delivery methods and procedural
requirements.
The SOP is divided into two parts:
Part 1 (formerly known as Subpart A): Contains SBA Lender participation and portfolio
requirements including: criteria for becoming an SBA Lender; delegated authorities; a brief
overview of how SBA conducts oversight of SBA Lenders; and processes for loan reporting, loan
transfers, secondary market transactions, and securitization.
Part 2 (formerly known as Subparts B and C): Is divided into three sections.
Section A: Core Requirements for all 7(a) and 504 loans
Section B: 7(a) Loan program specific requirements
Section C: 504 Loan program specific requirements
NEW NAVIGATION FEATURES:
The SOP contains bookmarks, built-in style headings, and a navigation pane (accessible by typing
“control f” and then selecting Headings) to easily locate and view information.
SIGNIFICANT PROCEDURAL UPDATES:
While we cannot include all changes to the document in this Notice, some particularly significant
procedural updates include:
Part 1, Participating in the SBA 7(a) and 504 Loan Programs
1) SBA has made the following changes that impact only 7(a) Lenders:
a. Increased required Lender qualifications for initial consideration in the Preferred
Lenders Program (PLP). The Lender must demonstrate that it has processed and
disbursed at least 10 SBA loans within the past 24 months. Acquired loans do not
count towards the threshold.
b. Updated guidance on completing SBA Form 750, “Loan Guaranty Agreement.”
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c. Incorporated the contents of the application for a state-chartered credit union to
apply to participate as a 7(a) Lender.
d. Moved the guidance related to loan reporting, loan transfers, secondary market
transactions, and securitizations to this Part of the SOP, rather than after the 7(a)
Loan Program specific requirements.
2) SBA has made the following changes that impacts only 504 Certified Development
Companies (CDCs):
a. Updated guidance to reflect regulatory changes published in the
December 4, 2019, Final Rule on Streamlining and Modernizing Certified
Development Company Program (504 Loan Program) Corporate Governance
Requirements (84 FR 66287).
b. Revised the guidance for fingerprint background checks in connection with
submission of SBA Form 1081 to incorporate electronic processing.
3) SBA has made the following change that impacts both 7(a) Lenders and CDCs:
Introduced a new defined term “Lead District Office” that will be used in both the 7(a)
and 504 Loan Programs to provide SBA Lenders with more clarity as to which local SBA
office they should contact for particular actions.
a. For the 7(a) Loan program, the “Lead District Office” is the SBA district office or
branch office serving the geographic area where the Lender’s principal office is
located.
b. For the 504 Loan Program, the “Lead District Office” is the Lead SBA Office as
defined in 13 CFR 120.802: “The SBA District Office designated by SBA as the
primary liaison between SBA and a CDC and with responsibility for managing
SBA’s relationship with that CDC.”
Part 2, SBA Business Loan Requirements: Section A – Core Requirements for all 7(a) and
504 Loans
For 7(a) and 504 loans, SBA has:
1) Included in one section all of the core requirements that apply to both the 7(a) and 504
loan programs including eligibility; uses of loan proceeds; ethics, fees, and use of Agents;
guaranties; IRS Tax Transcripts and verification of financial information; insurance
requirements; guidance on historic properties; and environmental policies and
procedures.
2) Added a chapter with guidance for special transaction structures such as Eligible Passive
Company/Operating Company, Employee Stock Ownership Plans, cooperatives, and
401(k) plans including Rollover as Business Start-ups (ROBS) plans.
3) Included additional guidance on the eligibility of businesses with activities related to
hemp and/or cannabidiol (CBD).
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4) Clarified that, when determining whether credit is available elsewhere, SBA Lenders may
not cite the Applicant’s inability to meet the SBA Lender’s or Third Party Lender’s
conventional credit score policy as the sole reason that credit is not available elsewhere.
5) Updated the eligibility of businesses owned by non-U.S. citizens. These businesses may
be eligible only if the business is at least 51 percent owned and controlled by U.S.
citizens or those who have Lawful Permanent Residence status from U.S. Citizenship and
Immigration Services.
6) Clarified the requirement that all SBA Lenders are responsible for consulting the System
for Awards Management’s (SAM) Excluded Parties List System for each loan to
determine if any Agents involved with the application or the Applicant or its Associates
have been suspended, debarred, revoked, or otherwise excluded by SBA or another
Federal agency. Evidence of the SAM search is only required once for each of the
following: SBA Lender’s employees, including Lender Service Providers (LSP) and LSP
employees; and 504 professional services contractors who are providing services to the
CDC under an SBA-approved professional services contract in accordance with 13 CFR
120.824.
7) Clarified the guidance related to Prior Loss to the Government and Delinquent Federal
Debt by separating the requirements into two paragraphs and revised both paragraphs for
additional clarity. Specifically, clarified that the Prior Loss rule only applies to debt
incurred by a business and not loans to individuals (e.g., student loan debt).
8) Provided additional guidance on the character determination process and FBI fingerprint
background checks.
9) To reduce process time for historic property reviews, revised the guidance and process
for complying with Section 106 of the National Historic Preservation Act for properties
and sites that are listed or eligible to be listed on the National Register of Historic Places.
The revised process includes the introduction of new SBA Form 2481, “Historic Property
Borrower Certification,” which allows the Borrower, Co-Borrower, and/or Operating
Company, as applicable, to self-certify for projects involving property or site acquisition
where the Borrower, Co-Borrower, and/or Operating Company has no intention of
altering, renovating, rehabilitating, restoring, and/or demolishing any part of the property
or site.
10) Increased from $150,000 to $250,000 the threshold loan amount to determine whether the
Environmental Investigation must begin with an Environmental Questionnaire or a
Records Search with Risk Assessment for loans where there is not a North American
Industry Classification System (NAICS) code match to an environmentally sensitive
industry.
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Part 2, SBA Loan Requirements: Section B – 7(a) Loan Program Specific Requirements1
For 7(a) loans, SBA has:
1) Defined the terms Standard 7(a) Loan and 7(a) Small Loan to include loans processed
under either Preferred Lender Program authority or non-delegated authority.
2) Defined the term Basic 7(a) Loan to include Standard 7(a) Loans and 7(a) Small Loans.
3) Updated guidance for all 7(a) loans to remind Lenders that working capital loan proceeds
may not be used to refinance existing debt or finance any ineligible purpose.
4) Updated guidance for all Standard 7(a) loans; 7(a) Small loans; and International Trade
loans to clarify that when 50 percent or more of the loan proceeds will be used for
working capital, the Lender must explain in its credit memorandum why this level of
working capital is necessary and appropriate for the subject business.
5) Updated guidance for 7(a) Small loans: As of the effective date of this SOP, the
minimum acceptable Small Business Scoring Service Score (SBSS) is increased to 155.
Loans with an SBSS score lower than 155 must be fully underwritten and submitted
under Standard 7(a) procedures.
6) Updated guidance for SBA Express loans:
a. At time of closing, if the appraised value is less than 90 percent of the estimated
value, SBA Express Lenders are permitted to close the loan but must include a
written justification as part of its file that may be reviewed by SBA at time of
guaranty purchase or when SBA is reviewing the Lender. The justification must
include a thorough analysis by the Lender of the reasons for the appraisal being low
and an explanation as to what steps the Lender took to offset the risk to SBA from
the low appraisal such as additional equity or additional collateral.
b. A business credit scoring model may only be used in addition to the Lender’s
appropriate, prudent, and generally accepted industry credit analysis and procedures.
7) Clarified guidance for loan terms for all 7(a) loans.
a. Generally, equipment, fixtures, or furniture loans should not exceed 10 years.
However, the term may be up to 15 years if the IRS asset class useful life supports the
term.
b. For loans to farm enterprises, clarified that:
i. Where land and structures (including poultry houses) for farming comprise
51 percent or more of the use of proceeds, the maximum maturity is 20 years.
ii. Where machinery and equipment comprise 51 percent or more of the use of
proceeds, the maximum maturity is the useful life of the machinery and
1
Because Paycheck Protection Program (PPP) loans authorized under § 7(a)(36) of the Small Business Act are 7(a)
loans, this SOP applies to the making of PPP loans, to the extent that the SOP is not superseded by or in conflict
with PPP-specific requirements.
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equipment, not to exceed 15 years, plus an additional period reasonably necessary
for installation, which may not exceed 12 months.
8) Incorporated guidance provided in SBA Policy Notice 5000-19007 that increased the
loan size from $250,000 to $500,000 as the threshold that triggers the requirement of
appraisals on collateral secured by commercial real property.
9) Added guidance on the phase-out of the London Inter-Bank Offered Rate (LIBOR) and
the use of the LIBOR base rate as an option for the calculation of the maximum allowable
variable interest rate.
10) Included a separate chapter for Export Express, EWCP, and International Trade loans.
a. Clarified the eligibility requirements for the limited circumstances when changes of
ownership may be financed with Export Express and International Trade loans.
b. Clarified guidance that small businesses in the following NAICS Industry Subsector
Codes cannot be financed using Export Express, EWCP, and International Trade
loans, but may be financed using other SBA financial assistance:
i. NAICS Industry Subsector Code 721 (Accommodation); and
ii. NAICS Industry Subsector Code 447 (Gasoline Stations).
Part 2, SBA Loan Requirements: Section C – 504 Loan Program Specific Requirements
For 504 loans, SBA has:
1) Updated guidance to reflect regulatory changes published in the December 4, 2019, Final
Rule on Streamlining and Modernizing Certified Development Company Program (504
Loan Program) Corporate Governance Requirements (84 FR 66287).
2) Incorporated guidance provided in SBA Policy Notice 5000-19007 that increased the
estimated value of the Project Property from $250,000 to $500,000 as the threshold that
triggers the requirement for appraisals on collateral secured by commercial real property.
3) Revised guidance for statements of no adverse changes. Each CDC must issue a written
opinion, which is based upon financial statements current within 120 calendar days from
the published Central Servicing Agent Cut-Off Date for the applicable Debenture
Funding Date, that there has been no unremedied substantial adverse change in the
Applicant’s ability to repay the 504 loan since its submission of the loan application to
SBA.
4) Added guidance:
a. In the credit standards section for the analysis and discussion that must be included in
the CDC’s credit memorandum for general 504 Projects as well as for 504 Projects
involving debt refinancing with or without expansion;
b. Regarding the certification that the Third Party Lender must make in its commitment
letter with respect to projects involving debt refinancing with or without expansion;
c. On life insurance for calculating amount of insurance and term required; and
d. On the processing methods and submission of application to SBA.
PAGE 6 of 7 EXPIRES: 8-1-21
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Appendices: SBA has added new appendices and revised the order accordingly:
1) New Appendix 1, Forms and Related SOPs, with form names and hyperlinks to form
download pages when available.
2) New Appendix 2, Acronyms.
3) New Appendix 3, Definitions, with hyperlinks to regulatory citations when applicable.
4) New Appendix 11, Record Retention Requirements, for the 7(a) and 504 loan programs;
Updated guidance for the 504 loan program to reduce record retention requirements for
paid off and liquidated loans to 6 years.
5) New Appendix 12, SBA Email Addresses, for sending notices and requests for SBA
action.
Questions:
SBA has established a new email account to provide support and answer questions on the new
SOP: SOP50106@sba.gov.
Questions concerning this Notice may be directed to the Lender Relations Specialist in the local
SBA Field Office. Local SBA Field Offices can be found at https://www.sba.gov/tools/local-
assistance/districtoffices.
Loan Program Questions may also be submitted to 7aQuestions@sba.gov or
504Questions@sba.gov.
Dianna L. Seaborn
Director
Office of Financial Assistance
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