SOP 50 10 5(H)

SOP 50 10 5(H)

Lender and Development Company Loan Programs

U.S. Small Business Administration Office of Financial Assistance

SOP 50 10 5(H)

Subpart A

TABLE OF CONTENTS

SUBPART A................................................................................................................................... 6 PURPOSE OF THIS SUBPART ............................................................................................. 6 Chapter 1: 7(a) Lenders .............................................................................................................. 7 THE 7(A) LOAN PROGRAM ............................................................................................... 7 BECOMING A 7(A) LENDER .............................................................................................. 7 HOW SBA OVERSEES 7(A) LENDERS ........................................................................... 14 TYPES OF 7(A) LENDERS WITH DELEGATED AUTHORITY .................................... 17

CHAPTER 2: SMALL BUSINESS LENDING COMPANIES................................................... 39 A SMALL BUSINESS LENDING COMPANY ................................................................. 39 PROCESS FOR ACQUIRING AN SBLC ........................................................................... 39

CHAPTER 3: CERTIFIED DEVELOPMENT COMPANIES ................................................ 42 SUBPART B................................................................................................................................. 73

PURPOSE OF THIS SUBPART ........................................................................................... 73 Chapter 1: GENERAL DESCRIPTION OF THE 7(a) LOAN PROGRAMS.......................... 74

VARIOUS DELIVERY METHODS ................................................................................... 74 USE OF LOAN PROCEEDS ............................................................................................... 74 SPECIAL PURPOSE LOANS ............................................................................................. 75 DEFINITIONS APPLICABLE TO THE 7(A) LOAN PROGRAMS.................................. 76 CHAPTER 2: ELIGIBILITY FOR 7(A) GUARANTY LOAN PROGRAM .......................... 77 INTRODUCTION ................................................................................................................ 77 SUMMARY OF ELIGIBLITY REQUIREMENTS............................................................. 77 ELIGIBILITY REQUIREMENTS ....................................................................................... 78 The Small Business Must be Organized for Profit. .................................................................. 78 The Applicant Must Be Small Under SBA Size Requirements................................................ 78 The Small Business Applicant Must Demonstrate a Need for a Guaranty on the Loan........... 87 Ineligible Types Of Businesses................................................................................................. 88 Businesses Owned by Non-US Citizens ................................................................................. 101 The Eligible Passive Company (EPC) Rule............................................................................ 104 Special Requirements For Loans Where Collateral May Be Included In The National Register Of Historic Places ................................................................................................................... 107 Additional Eligibility Requirement For SBLCs ..................................................................... 107 Additional Eligibility Requirement For EWCP ...................................................................... 109 Additional Eligibility Requirements For CAPLines............................................................... 109 ELIGIBLE USES OF LOAN PROCEEDS ........................................................................ 110 CHAPTER 3: LOAN TERMS AND CONDITIONS............................................................. 125 MAXIMUM LOAN AMOUNTS ....................................................................................... 125 MAXIMUM GUARANTY AMOUNTS............................................................................ 128 LOAN MATURITIES ........................................................................................................ 130 INTEREST RATES ............................................................................................................ 134 SBA GUARANTY FEES ................................................................................................... 141 OTHER FEES ..................................................................................................................... 145 PROHIBITED FEES .......................................................................................................... 151 DISCLOSURE OF FEES AND LENDER EXPENSES .................................................... 151 AGENTS............................................................................................................................. 152

Effective Date: May 1, 2015

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SOP 50 10 5(H)

Subpart A

WHO MAY CONDUCT BUSINESS WITH SBA ............................................................ 155 CHAPTER 4: CREDIT STANDARDS, COLLATERAL AND ENVIRONMENTAL POLICIES ............................................................................................................................... 158

CREDITWORTHINESS/CREDIT UNDERWRITING..................................................... 158 COLLATERAL .................................................................................................................. 165 ENVIRONMENTAL POLICIES AND PROCEDURES................................................... 175 CHAPTER 5: LOAN AUTHORIZATION ............................................................................ 183 BASIC LOAN CONDITIONS ........................................................................................... 183 INSURANCE REQUIREMENTS...................................................................................... 184 IRS TAX TRANSCRIPT/VERIFICATION OF FINANCIAL INFORMATION ............. 186 STANDBY AGREEMENTS.............................................................................................. 188 ASSIGNMENT OF LEASE AND LANDLORD'S WAIVER .......................................... 188 CONSTRUCTION LOAN PROVISIONS ......................................................................... 189 SPECIAL PROVISIONS FOR FRANCHISES ................................................................. 191 CERTIFICATION REGARDING CHILD SUPPORT ...................................................... 191 SPECIAL PROVISION FOR CAPLINES ......................................................................... 192 MODIFYING THE AUTHORIZATION ....................................................................... 192 CHAPTER 6: SUBMISSION OF APPLICATION FOR GUARANTY ............................... 193 CONTENTS OF LENDER'S APPLICATION FOR GUARANTY.................................. 193 WHERE TO SUBMIT APPLICATION FOR GUARANTY ............................................ 199 CHAPTER 7: POST-APPROVAL MODIFICATIONS, LOAN CLOSING & DISBURSEMENT .................................................................................................................. 203 POST APPROVAL/PRE-DISBURSEMENT REQUESTS FOR CHANGES .................. 203 TRANSFER OF GUARANTY BETWEEN PARTICIPATING LENDERS .................... 204 PAYMENT OF GUARANTY FEE.................................................................................... 204 LOAN CLOSING AND DISBURSEMENT...................................................................... 204 CHAPTER 8: POST-DISBURSEMENT, SECONDARY MARKET, SECURITIZATION AND LENDER REPORTING (SBA FORM 1502) ............................................................... 225 POST-DISBURSEMENT CHANGES ............................................................................... 225 SECONDARY MARKET FOR SBA GUARANTEED LOANS ...................................... 225 SECURITIZATION AND OTHER CONVEYANCES ..................................................... 225 LENDER REPORTING ..................................................................................................... 226 SUBPART C............................................................................................................................... 234 PURPOSE OF THIS SUBPART ......................................................................................... 234 CHAPTER 1: GENERAL PROVISIONS .............................................................................. 234 PURPOSE OF THE 504 CERTIFIED DEVELOPMENT COMPANY LOAN PROGRAM ............................................................................................................................................. 234 CREDIT STANDARDS ..................................................................................................... 234 Definitions........................................................................................................................... 235 HOW A 504 PROJECT IS FINANCED ............................................................................ 236 CHAPTER 2: ELIGIBILITY.................................................................................................. 241 INTRODUCTION .............................................................................................................. 241 SUMMARY OF ELIGIBLITY REQUIREMENTS........................................................... 242 ELIGIBILITY REQUIREMENTS ..................................................................................... 243 The Small Business Must Be Organized for Profit................................................................. 243

Effective Date: May 1, 2015

3

SOP 50 10 5(H)

Subpart A

The Applicant Must Be Small Under SBA Size Requirements Applicable to 504 Financial Assistance ............................................................................................................................... 243 The Small Business Applicant Must Demonstrate a Need for the 504 Loan ......................... 251 Ineligible Types of Businesses................................................................................................ 252 Businesses Owned by Non-US Citizens ................................................................................. 264 The Eligible Passive Company Rule....................................................................................... 268 Special Requirements for Loans Where Collateral May Be Included in the National Register of Historic Places .................................................................................................................... 270 504 Program-Specific Eligibility Factors ............................................................................... 271 CHAPTER 3: COLLATERAL, APPRAISALS AND ENVIRONMENTAL POLICIES ..... 282

COLLATERAL .................................................................................................................. 282 APPRAISAL REQUIREMENTS ....................................................................................... 284 ENVIRONMENTAL POLICIES AND PROCEDURES................................................... 286 CHAPTER 4: LOAN APPLICATION PROCEDURES AND CONTROLS ........................ 294 CDC'S 504 APPLICATION............................................................................................... 294 MINIMUM DEBENTURE AMOUNT .............................................................................. 294 SUBMITTING THE APPLICATION ................................................................................ 294 CHAPTER 5: LOAN CONDITIONS/AUTHORIZATION REQUIREMENTS................... 297 AUTHORIZATION BOILERPLATE/WIZARD............................................................... 297 MODIFYING THE AUTHORIZATION ........................................................................... 305 CHAPTER 6: CLOSINGS...................................................................................................... 306 RESPONSIBILITY FOR CLOSING THE 504 LOAN AND DEBENTURE ................... 306 THE CLOSING PACKAGE............................................................................................... 306 SPECIFIC RESPONSIBILITIES AND PROCEDURES FOR CLOSING AND POSTCLOSING ACTIVITIES .................................................................................................... 307 USE OF CONSTRUCTION ESCROW ACCOUNT ......................................................... 310 CHAPTER 7: DEBENTURE PRICING & FUNDING ......................................................... 311 PRICING A 504 DEBENTURE ......................................................................................... 311 FUNDING THE DEBENTURE ......................................................................................... 314 CHAPTER 8: ALLOWABLE FEES ...................................................................................... 316 ALLOWABLE FEES THAT A 504 BORROWER MAY BE CHARGED ...................... 316 FEES FOR OTHER SERVICES ........................................................................................ 317 DISCLOSURE OF FEES AND EXPENSES ..................................................................... 318 AGENTS............................................................................................................................. 319 WHO MAY CONDUCT BUSINESS WITH SBA ............................................................ 320 CHAPTER 9: BORROWER'S DEPOSIT, DEBENTURE POOLS AND ............................ 322 RULES GOVERNING THE BORROWER'S DEPOSIT.................................................. 322 DEBENTURE POOLS ....................................................................................................... 322 MISCELLANEOUS ........................................................................................................... 322 POST-DISBURSEMENT ISSUES .................................................................................... 322 APPENDIX 1: RESTRICTIONS ON FOREIGN CONTROLLED ENTERPRISES................ 324 APPENDIX 2: DEFINITIONS................................................................................................... 327 APPENDIX 3: RELIANCE LETTER ........................................................................................ 333 APPENDIX 4: NAICS CODES OF ENVIRONMENTALLY SENSITIVE INDUSTRIES ..... 335 APPENDIX 5: REQUIREMENTS PERTAINING TO GAS STATION LOANS .................... 337 APPENDIX 6: SBA ENVIRONMENTAL INDEMNIFICATION AGREEMENT ................. 339

Effective Date: May 1, 2015

4

SOP 50 10 5(H)

Subpart A

I. RECITALS .................................................................................................................... 339 II. DEFINITIONS ............................................................................................................. 339 III. REPRESENTATIONS AND WARRANTIES ........................................................ 342 IV. COVENANTS ............................................................................................................. 344 V. REMEDIATION ......................................................................................................... 345 VI. INDEMNIFICATION ................................................................................................ 346 VII. THIRD PARTY INDEMNITOR'S ELECTION TO PAY LOAN BALANCE .. 348 VIII. RELEASE AND WAIVER..................................................................................... 348 IX. SUBORDINATION .................................................................................................... 348 X. LOAN DEFAULT ........................................................................................................ 349 XI. GENERAL PROVISIONS ........................................................................................ 349 APPENDIX 7 ? CAPLINES PROGRAM DOCUMENTS ........................................................ 359 APPENDIX 8 ? Religious ELIGIBILITY Worksheet ............................................................... 366

Effective Date: May 1, 2015

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