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Substitution of Collateral Requirement Letter

Summary

Requirements letter from the U.S. Small Business Administration's COVID EIDL Servicing Center (CESC) listing what borrowers and guarantors must provide for SBA to consider a full or partial Substitution of Collateral request on a COVID EIDL loan. It states that the letter is not a commitment by the SBA and that approval may be conditioned on curing defaults, correcting collateral deficiencies or payment of material monetary consideration. It says SBA generally considers a substitution only where its equity position stays the same or improves and the net sale proceeds of current collateral go to buying the substitute collateral or to a principal reduction on the EIDL. The letter then lists the documentation required.

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Full text

                         U.S. SMALL BUSINESS ADMINISTRATION
                            COVID EIDL SERVICING CENTER

                           CESC SUBSTITUTION OF COLLATERAL
                                REQUEST REQUIREMENTS
ATTENTION:
This requirements letter is not a commitment by the SBA. Any commitment made by the SBA will be provided
separately in writing. Approval of any request may be conditioned on curing defaults, correcting any collateral
deficiencies or issues with loan documents and/or payment of material monetary consideration.

Generally, the SBA will only consider a Substitution of Collateral in those instances where the SBA’s equity
position remains the same or is improved and the net proceeds from the sale of any current collateral are applied
to the purchase of the proposed substitute collateral or applied as a principal reduction payment to the EIDL.

All Borrowers and/or Guarantors are required to provide the following for all applicable sections. Additional
documentation may be required for thorough analysis.

For the U.S. Small Business Administration (SBA) to consider a Substitution of Collateral request, Full or
Partial Release, the below documentation must be provided.


GENERAL REQUIREMENTS:

    1. A detailed letter from the borrower(s) or guarantor(s) (if any) detailing the request.
    2. Completed, signed and dated Consent to Verify Information and 3rd Party Authorization (Borrower
        Authorization) for all SBA borrower(s) and/or guarantor(s) (if any). (hyperlink to fillable PDF)
    3. Copy of the Agreement (Purchase Agreement, Sale Agreement, Bill of Sale, etc.), if applicable.
    4. Copies of previous two years Federal Tax Returns for the business.
    5. Most recent YTD Profit and Loss Statement of the business.
    6. Amended Organizational Documents of the business, if applicable.
    7. Proof of Hazard Insurance as required by the SBA Loan Authorization and Agreement.
    8. Current Appraisals for collateral offered for substitution and collateral to be released.
    9. Current Title Report for the collateral offered for substitution and collateral to be released.
    10. Payoff letters for all prior liens on collateral offered for substitution and collateral to be released.
    11. If substituted property is not within a Special Flood Hazard Area (SFHA), provide written verification
        (i.e., appraisal, insurance company provided confirmation, and map).
    12. If substituted property is within a Special Flood Hazard Area, you are required to provide Flood
        Insurance naming SBA as Mortgagee, with coverage amount equal to the lesser of the amount of this
        Loan, the maximum coverage available, or the fair market value of the property.
             • Mortgagee Clause:
                      U.S. Small Business Administration
                      14925 Kingsport Rd
                      Fort Worth, TX 76155-2243

    13. Settlement Statement indicating purchase price, fees, new lender info, etc. on property offered as
        substitution, if applicable.
    14. Settlement Statement indicating sale price, fees and intended disbursement of sale proceeds on collateral
        to be released, if applicable.
Please submit the above required information to the US Small Business Administration at the Covid EIDL
Servicing Center as shown below. Complete information packages may be emailed may be emailed to
Covideidlservicing@SBA.gov .


Covid EIDL Servicing Center
E-mail: Covideidlservicing@SBA.gov
Box.com: Box.com - Upload files to Covid EIDL Servicing Center
Toll Free Phone: (833) 853-5638
Fax: (202) 481-5799

File and source

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2025-05_CESC-Substitution-of-Collateral-4.2025-V1.pdf
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259,444 bytes
SHA-256
86aea63030881fff9e3968f0a6495d4ce7585dbb1083545daf2e86a275593149
Our copy
2025-05_CESC-Substitution-of-Collateral-4.2025-V1.pdf
Original
www.sba.gov
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