SBA Procedural Notice: 504 Certifications of No Adverse Change for April, May and June, 2020
Summary
SBA Procedural Notice, Control No. 5000-20010, effective 03/25/2020, to SBA employees and certified development companies (CDCs), on 504 certifications of No Adverse Change for the April, May and June, 2020 debenture sales during the COVID-19 emergency. It states that for a loan to be included in the April 15, 2020 debenture sale, a CDC that has already submitted a closing package must comply with the notice's additional procedures by noon on Friday, April 3, 2020. Otherwise the debenture issuance is deferred to the May 13, 2020 sale, with an April 23, 2020 deadline. It cites the certifications required under 13 CFR 120.892.
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SBA Procedural Notice
TO: All SBA Employees and Certified CONTROL NO.: 5000-20010
Development Companies
EFFECTIVE: 03/25/2020
SUBJECT:504 Certifications of No Adverse
Change for April, May and June, 2020
Debenture Sales during the COVID-19
Emergency
On March 13, 2020, President Trump declared the ongoing Coronavirus Disease 2019 (COVID-
19) pandemic of sufficient severity and magnitude to warrant an emergency declaration for all
States, Territories, and the District of Columbia. The purpose of this Notice is to provide
guidance to Certified Development Companies (CDCs) during the COVID-19 emergency with
respect to the certifications of No Adverse Change that are required before 504 debenture sales.
This Notice applies to the debenture sales scheduled for April, May and June, 2020. For a loan
to be included in the April 15, 2020 debenture sale, a CDC that has already submitted a
debenture closing package to SBA must comply with the additional procedures in this
Notice by noon on Friday, April 3, 2020. Otherwise, the debenture issuance will be deferred
until the May 13, 2020 debenture sale, and the CDC will have until April 23, 2020 (the May CSA
Cut-Off Date) to comply.
Under 13 CFR 120.892, the following certifications are required before a 504 loan closing:
• The Borrower (and Operating Company if Borrower is an Eligible Passive Company (EPC))
must certify to the CDC that there has been no unremedied substantial adverse change in its
financial condition or its ability to repay the 504 loan since the date of application. This
certification is made by the Borrower (and Operating Company) in SBA Form 2289.
• The Interim Lender must certify to the CDC that it has no knowledge of any unremedied
substantial adverse change in the condition of the small business since the application to the
Interim Lender. This certification is made by the Interim Lender in SBA Form 2288.
• The CDC must opine and certify, before the 504 loan closing, that to the best of its
knowledge there has been no unremedied substantial adverse change in the Borrower’s (or
Operating Company’s) ability to repay the 504 loan since its submission of the loan
application to SBA. This certification is made by the CDC in SBA Form 2101.
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SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58
Federal Recycling Program Printed on Recycled Paper
With the COVID-19 emergency, the Borrower’s (or Operating Company’s) financial condition or
its ability to repay the 504 loan may be experiencing a substantial adverse change as a direct
result of the Federal, State and local public health measures that are being taken to minimize the
public’s exposure to the virus. These measures, some of which are government-mandated, are
being implemented nation-wide and include the closures of restaurants, bars, and gyms. In
addition, based on the advice of public health officials, other measures, such as keeping a safe
distance from others or even sheltering-in-place, are being implemented, resulting in a dramatic
decrease in economic activity as the public avoids malls, retail stores and other businesses. This
unexpected and sudden change in national economic conditions, which is beyond the Borrower’s
control, presents a unique circumstance and one which SBA hopes will be only a temporary
challenge for all SBA Borrowers, including approved 504 applicants who have not yet closed on
their 504 loan.
Accordingly, SBA has determined that, for the April, May and June, 2020 debenture sales for
504 loans where the Authorization was issued prior to March 1, 2020, CDCs may proceed with
the debenture sale under the following conditions and requirements:
1) No Substantial Adverse Change. Based on the certifications by the Interim Lender and the
Borrower (and Operating Company if Borrower is an EPC), and based on its own
consideration, the CDC must determine for each loan before the debenture sale whether the
COVID-19 emergency is the immediate and direct cause of a substantial adverse change in
the Borrower’s (or Operating Company’s) ability to repay the 504 loan since the submission
of the loan application to SBA. If the CDC concludes there is no substantial adverse change
as a result of the COVID-19 emergency, the CDC would complete SBA Form 2101 with no
changes (assuming that there has been no unremedied substantial adverse change in the
Borrower’s ability to repay for any other reason), and must document and retain its
determination in its loan file.
2) Substantial Adverse Change. If the CDC concludes that the COVID-19 emergency is the
immediate and direct cause of a substantial adverse change in the Borrower’s ability to repay
the 504 loan, the CDC, the Interim Lender, the Third Party Lender and the Borrower (and
Operating Company, if applicable) may continue with the 504 debenture sale, provided that
the CDC, the Interim Lender, the Third Party Lender, and the Borrower (and Operating
Company, if applicable) execute the attached COVID-19 Substantial Adverse Change
Remedy Certification and Agreement (COVID-19 Agreement), in addition to SBA Forms
2101, 2287, 2288 and 2289.
The COVID-19 Agreement contains certifications and agreements by all parties regarding,
among other things, the remedial measures that must be taken to address the Borrower’s
substantial adverse change as a result of the COVID-19 emergency, including required
deferments of the 504 loan and the Third Party Loan, that will assist the Borrower (and Operating
Company, if applicable) in improving its cash flow so that it will be able to make its payments on
the 504 loan after the required deferments described below end. These remedial measures must
include:
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SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58
Federal Recycling Program Printed on Recycled Paper
(a) Immediately following the debenture sale, the CDC must grant a deferment on the 504
loan of all principal and interest for at least 90 days and up to 6 months;
(b) Immediately following the debenture sale, the Third Party Lender must grant a deferment
to the Borrower on the Third Party Loan of all principal and interest for at least as long as
the period of deferment granted by the CDC on the 504 loan;
(c) The Interim Lender, Third Party Lender and the CDC must agree to make a good faith
effort to assist the Borrower with additional remedial measures, including, but not limited
to, assisting the Borrower with locating and applying for other forms of financial
assistance, including, but not limited to, SBA Economic Injury Disaster Loans (EIDL)
and other loans or grants available from Federal, State or local government agencies and
entities; and
(d) The Borrower (and Operating Company, if applicable) must agree to use its best efforts to
seek out, apply for, and obtain available sources of financial assistance, as necessary to
continue to operate.
The form of COVID-19 Agreement is attached to this Notice. A copy of the fully-executed
COVID-19 Agreement must be submitted to the appropriate SBA District Counsel for review
with the closing package. For the April 15, 2020 debenture sale, the Agreement must be
submitted to SBA District Counsel for review by noon on Friday, April 3, 2020. This Notice
does not extend the March 26, 2020 CSA Cut-Off Date for the submission of all other closing
documents for the April sale. For the April sale, scanned signatures on the COVID-19
Agreement are acceptable and the Agreement may be signed in counterparts.
Questions on this Notice may be directed to the Lender Relations Specialist in the local SBA
Field office. The local SBA Field office may be found at https://www.sba.gov/tools/local-
assistance/districtoffices.
__________________________________________
William M. Manger
Associate Administrator for Capital Access
Office of Capital Access
Attachment
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SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58
Federal Recycling Program Printed on Recycled Paper
COVID-19 SUBSTANTIAL ADVERSE CHANGE REMEDY CERTIFICATION AND
AGREEMENT
In connection with SBA 504 Loan Number ______________, the Certified Development Company
(CDC), Interim Lender, Third Party Lender, Borrower, and Operating Company (if applicable)
listed below certify and agree as follows:
1. The parties have signed SBA form certifications and agreements in connection with this 504
loan closing, including certifications regarding whether there has been an unremedied
substantial adverse change in the financial condition of the Borrower (and Operating
Company, if applicable). See SBA Forms 2288 (Interim Lender Certification), SBA Form
2287 (Third Party Lender Agreement), SBA Form 2289 (Borrower and Operating Company
Certification), and SBA Form 2101 (CDC Certification). This document amends those
certifications and agreements.
2. The CDC has concluded that the national emergency arising from the ongoing Coronavirus
Disease 2019 (COVID-19) pandemic is the immediate and direct cause of a substantial
adverse change in the Borrower’s (and/or Operating Company’s, if applicable) ability to
repay the 504 loan, and remedial measures are necessary to address the substantial adverse
change.
3. Immediately following the debenture sale, CDC agrees to provide the Borrower (and
Operating Company, if applicable) with a deferment of the 504 loan, including all principal
and interest, for at least 90 days and up to 6 months after the debenture sale to assist the
Borrower (and Operating Company, if applicable) in improving its cash flow so that it will be
able to make payments on the 504 loan after the period of deferment ends.
4. Immediately following the debenture sale, the Third Party Lender agrees to provide the
Borrower (and Operating Company, if applicable) with a deferment on the Third Party Loan,
including all principal and interest, for at least as long as the period of deferment granted by
the CDC on the 504 loan. The Third Party Lender agrees that the Borrower’s failure to make
any payment under the Third Party Loan during the period of deferment shall not constitute a
default (or Event of Default) under the Third Party Loan documents or applicable law and the
Third Party Lender agrees not to exercise any rights or remedies that may otherwise be
available as a result of the failure to make any such payments during the deferment period.
Notwithstanding the foregoing, all other terms and conditions under the Third Party Loan
documents and the Third Party Lender Agreement shall remain in full force and effect.
5. The CDC, Interim Lender and Third Party Lender agree to make a good faith effort to assist
the Borrower (and Operating Company, if applicable) with additional remedial measures
including, but not limited to, assisting the Borrower (and Operating Company, if applicable)
with locating and applying for other forms of financial assistance, including, but not limited
to, an SBA Economic Injury Disaster Loan (EIDL) and other loans or grants available from
Federal, State or local government agencies and entities.
PAGE 4 of 6 EXPIRES: 3/1/21
SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58
Federal Recycling Program Printed on Recycled Paper
6. Borrower (and Operating Company, if applicable) agree to use its best efforts to seek out,
apply for, and obtain available sources of financial assistance, as necessary to continue to
operate.
7. Borrower (and Operating Company, if applicable) has not filed a bankruptcy petition or any
other insolvency proceeding as of the date of this agreement.
8. Interim Lender certifies that the Borrower (and Operating Company, if applicable) are current
on their payments to the Interim Lender and not otherwise in default on the Interim Loan.
9. This document may be signed in counterparts.
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SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58
Federal Recycling Program Printed on Recycled Paper
INTERIM LENDER
________________________
________________________ _________________________
By: Date
Title:
THIRD PARTY LENDER
________________________
________________________ _________________________
By: Date
Title:
BORROWER: OPERATING COMPANY:
________________________ ____________________________________
BY: ____________________ BY: ________________________________
TITLE: TITLE:
DATE: DATE:
CERTIFIED DEVELOPMENT COMPANY
_________________________________
_________________________________
BY:
TITLE:
DATE:
PAGE 6 of 6 EXPIRES: 3/1/21
SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58
Federal Recycling Program Printed on Recycled Paper
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