SOP 50 10 5(F)

1 SOP 50 10 5(F). Lender and Development Company Loan Programs Small Business Administration Office of Financial Assistance SOP 50 10 5(F). TABLE OF CONTENTS. SUBPART 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 .. 40. A SMALL BUSINESS LENDING COMPANY .. 40. PROCESS FOR ACQUIRING AN SBLC .. 40. CHAPTER 3: CERTIFIED DEVELOPMENT COMPANIES .. 43. SUBPART B .. 70. PURPOSE OF THIS SUBPART .. 70. Chapter 1: GENERAL DESCRIPTION OF THE 7(a) LOAN PROGRAMS .. 71. VARIOUS DELIVERY METHODS .. 71. USE OF LOAN PROCEEDS .. 71. SPECIAL PURPOSE LOANS .. 72. DEFINITIONS APPLICABLE TO THE 7(A) LOAN PROGRAMS .. 73. CHAPTER 2: ELIGIBILITY FOR 7(A) GUARANTY LOAN PROGRAM .. 74. INTRODUCTION .. 74. SUMMARY OF ELIGIBLITY REQUIREMENTS.

2 74. ELIGIBILITY REQUIREMENTS .. 75. The Small Business Must be Organized for Profit.. 75. The Applicant Must Be Small Under SBA Size Requirements .. 76. The Small Business Applicant Must Demonstrate a Need for a Guaranty on the Loan.. 84. Ineligible Types Of Businesses .. 87. Businesses Owned by Non-US Citizens .. 100. The Eligible Passive Company (EPC) 104. Special Requirements For Loans Where Collateral May Be Included In The National Register Of Historic Places .. 106. Additional Eligibility Requirement For SBLCs .. 107. Additional Eligibility Requirement For EWCP .. 108. Additional Eligibility Requirements For CAPL ines .. 108. ELIGIBLE USES OF LOAN PROCEEDS .. 109. CHAPTER 3: LOAN TERMS AND CONDITIONS .. 124. MAXIMUM LOAN AMOUNTS .. 124. MAXIMUM GUARANTY AMOUNTS .. 127. LOAN MATURITIES .. 129. INTEREST RATES .. 133. SBA GUARANTY FEES .. 139. OTHER FEES .. 144. PROHIBITED FEES .. 149.

3 DISCLOSURE OF FEES AND LENDER EXPENSES .. 150. AGENTS .. 151. Effective Date: January 1, 2014 2. SOP 50 10 5(F). WHO MAY CONDUCT BUSINESS WITH SBA .. 153. CHAPTER 4: CREDIT STANDARDS, COLLATERAL AND ENVIRONMENTAL. POLICIES .. 157. CREDITWORTHINESS/CREDIT UNDERWRITING .. 157. COLLATERAL .. 164. ENVIRONMENTAL POLICIES AND procedures .. 174. CHAPTER 5: LOAN AUTHORIZATION .. 182. BASIC LOAN CONDITIONS .. 182. INSURANCE REQUIREMENTS .. 183. IRS TAX TRANSCRIPT/VERIFICATION OF FINANCIAL INFORMATION .. 185. STANDBY AGREEMENTS .. 187. ASSIGNMENT OF LEASE AND LANDLORD'S WAIVER .. 187. CONSTRUCTION LOAN PROVISIONS .. 188. SPECIAL PROVISIONS FOR FRANCHISES .. 190. CERTIFICATION REGARDING CHILD SUPPORT .. 190. SPECIAL PROVISION FOR CAPLINES .. 190. MODIFYING THE AUTHORIZATION .. 190. CHAPTER 6: SUBMISSION OF APPLICATION FOR GUARANTY .. 192. CONTENTS OF LENDER'S APPLICATION FOR GUARANTY .. 192. WHERE TO SUBMIT APPLICATION FOR GUARANTY.

4 198. CHAPTER 7: POST-APPROVAL MODIFICATIONS, LOAN CLOSING &. DISBURSEMENT .. 202. POST APPROVAL/PRE-DISBURSEMENT REQUESTS FOR CHANGES .. 202. TRANSFER OF GUARANTY BETWEEN PARTICIPATING LENDERS .. 203. PAYMENT OF GUARANTY 203. LOAN CLOSING AND DISBURSEMENT .. 203. CHAPTER 8: POST-DISBURSEMENT, SECONDARY MARKET, SECURITIZATION. AND LENDER REPORTING (SBA FORM 1502) .. 224. POST-DISBURSEMENT CHANGES .. 224. SECONDARY MARKET FOR SBA GUARANTEED LOANS .. 224. SECURITIZATION AND OTHER CONVEYANCES .. 224. LENDER REPORTING .. 225. SUBPART C .. 233. PURPOSE OF THIS SUBPART .. 233. CHAPTER 1: GENERAL PROVISIONS .. 233. PURPOSE OF THE 504 CERTIFIED DEVELOPMENT COMPANY LOAN PROGRAM.. 233. CREDIT STANDARDS .. 233. 234. HOW A 504 PROJECT IS FINANCED .. 235. CHAPTER 2: ELIGIBILITY .. 241. INTRODUCTION .. 241. SUMMARY OF ELIGIBLITY REQUIREMENTS .. 241. ELIGIBILITY REQUIREMENTS .. 242. The Small Business Must Be Organized for Profit.

5 242. Effective Date: January 1, 2014 3. SOP 50 10 5(F). The Applicant Must Be Small Under SBA Size Requirements Applicable to 504 Financial Assistance .. 242. The Small Business Applicant Must Demonstrate a Need for the 504 Loan .. 250. Ineligible Types of 253. Businesses Owned by Non-US Citizens .. 266. The Eligible Passive Company 269. Special Requirements for Loans Where Collateral May Be Included in the National Register of Historic Places .. 272. 504 Program-Specific Eligibility Factors .. 272. CHAPTER 3: COLLATERAL, APPRAISALS AND ENVIRONMENTAL POLICIES .. 284. COLLATERAL .. 284. APPRAISAL REQUIREMENTS .. 286. ENVIRONMENTAL POLICIES AND procedures .. 288. CHAPTER 4: LOAN APPLICATION procedures AND CONTROLS .. 295. CDC'S 504 295. MINIMUM DEBENTURE AMOUNT .. 295. SUBMITTING THE APPLICATION .. 295. CHAPTER 5: LOAN CONDITIONS/AUTHORIZATION REQUIREMENTS .. 298. AUTHORIZATION BOILERPLATE/WIZARD.

6 298. MODIFYING THE AUTHORIZATION .. 305. CHAPTER 6: CLOSINGS .. 307. RESPONSIBILITY FOR CLOSING THE 504 LOAN AND DEBENTURE .. 307. THE CLOSING 307. SPECIFIC RESPONSIBILITIES AND procedures FOR CLOSING AND POST- CLOSING ACTIVITIES .. 308. USE OF CONSTRUCTION ESCROW ACCOUNT .. 311. CHAPTER 7: DEBENTURE PRICING & FUNDING .. 312. PRICING A 504 DEBENTURE .. 312. FUNDING THE DEBENTURE .. 315. CHAPTER 8: ALLOWABLE FEES .. 317. ALLOWABLE FEES THAT A 504 BORROWER MAY BE CHARGED .. 317. FEES FOR OTHER SERVICES .. 318. DISCLOSURE OF FEES AND EXPENSES .. 319. AGENTS .. 320. WHO MAY CONDUCT BUSINESS WITH SBA .. 321. CHAPTER 9: BORROWER'S DEPOSIT, DEBENTURE POOLS AND .. 323. RULES GOVERNING THE BORROWER'S DEPOSIT .. 323. DEBENTURE POOLS .. 323. MISCELLANEOUS .. 323. POST-DISBURSEMENT ISSUES .. 323. APPENDIX 1: RESTRICTIONS ON FOREIGN CONTROLLED 325. APPENDIX 2: DEFINITIONS .. 328. APPENDIX 3: RELIANCE LETTER.

7 334. APPENDIX 4: NAICS CODES OF ENVIRONMENTALLY SENSITIVE INDUSTRIES .. 336. APPENDIX 5: REQUIREMENTS PERTAINING TO GAS STATION LOANS .. 338. APPENDIX 6: SBA ENVIRONMENTAL INDEMNIFICATION AGREEMENT .. 340. Effective Date: January 1, 2014 4. SOP 50 10 5(F). I. RECITALS .. 340. II. DEFINITIONS .. 340. III. REPRESENTATIONS AND WARRANTIES .. 343. IV. COVENANTS .. 345. V. REMEDIATION .. 346. VI. INDEMNIFICATION .. 347. VII. THIRD PARTY INDEMNITOR'S ELECTION TO PAY LOAN BALANCE .. 349. VIII. RELEASE AND WAIVER .. 349. IX. SUBORDINATION .. 349. X. LOAN DEFAULT .. 350. XI. GENERAL PROVISIONS .. 350. APPENDIX 7 CAPLINES PROGRAM DOCUMENTS .. 360. APPENDIX 8 Religious ELIGIBILITY Worksheet .. 367. Effective Date: January 1, 2014 5. SOP 50 10 5(F). SUBPART A. SBA LENDER AND CERTIFIED DEVELOPMENT COMPANY. PARTICIPATION REQUIREMENTS. PURPOSE OF THIS SUBPART. This subpart contains the requirements for lenders and Certified Development Companies (CDCs) to participate in SBA lending programs.

8 This subpart also explains the different levels of delegated status SBA grants to lenders and CDCs, as well as how lenders and CDCs maintain their participating status with SBA. Finally, this subpart gives a brief overview of how SBA oversees its participating lenders and CDCs. When the policy set forth in this Subpart does not adequately address the unique circumstances regarding a particular matter, an exception to policy may be approved by the Director of the Office of Financial Assistance (D/FA). For Export Working Capital Program (EWCP) and International Trade (ITL) loans, an exception to policy may be approved by the Director, International Trade Finance (D/ITF). For Export Express loans, an exception to policy may be approved by the D/ITF with the concurrence of the Director, Office of Credit Risk Management (D/OCRM). The D/FA or D/ITF may not approve an exception to policy if such exception would be inconsistent with a statute or regulation.

9 A request for an exception to policy must be submitted to the Loan Guaranty Processing Center (LGPC) for 7(a) applications, including EWCP, ITL and Export Express loan applications, and to the Sacramento Loan Processing Center (SLPC) for 504 applications. The processing center will analyze the request and make a recommendation to the D/FA or D/ITF, as applicable or an individual acting in that capacity, who will make the final decision (with the concurrence of the D/OCRM for Export Express loans). The decision must be documented in the appropriate Agency loan file. This procedure may only be used in situations where a minor deviation from standard policy is necessary for the specific situation. Exceptions to policy will be considered on a case-by-case basis and the decision will only apply to the specific request. Effective Date: January 1, 2014 6. SOP 50 10 5(F). CHAPTER 1: 7(A) LENDERS.

10 I. THE 7(A) LOAN PROGRAM. A. The 7(a) Loan Program is authorized by section 7(a) of the Small Business Act and is governed by the regulations outlined in Part 120 of Title 13 of the Code of Federal Regulations (CFR). B. This multi-purpose business loan program is administered as a deferred participation program where SBA guarantees a portion of the loan made by a Lender. The Lender initiates the loan to a small business and, if the SBA agrees to guaranty the loan, the Lender funds and services the loan. In the event of default, the lender conducts the work-out or the liquidation efforts and the Lender and SBA. share in the loss, if any, in accordance with the percentage guaranteed by the SBA. C. Definitions applicable to this subpart can be found in 13 CFR , , , and II. BECOMING A 7(A) LENDER. A. The following lenders may apply to participate with SBA as a 7(a) lender: 1. Federally Regulated Lenders, including those lenders regulated by Federal Financial Institution Regulators ( , the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration, and the Farm Credit Administration); and 2.