SOP 50 10 5 (J)

An In-Depth Outline of Changes within the Latest

Standard Operating Procedures

The SBA issued its revised SOP (50 10 5 (J)) just prior to NADCO’s Annual Meeting which did not allow the NADCO team sufficient time to digest the large volume of changes prior to the event. The SBA’s purpose in this release of the SOP is to incorporate the changes from the “Catch-All Regulation,” and provide additional guidance. In addition to the changes from the “Catch-All Regulation,” there are significant changes in the SOP that are new. SBA has declined to issue a red-lined version or track changes version of the new SOP. Therefore, the purpose of this document is to provide a list of SOP changes to NADCO members to assist you in processing and closing 504 loans, as well as CDC administration. We have attempted to identify all of the changes so that you can assess whether you need to make alterations to your CDC’s current practices. NADCO is aware of many member concerns regarding certain elements of the Catch All Regulation and has been in active conversations with SBA on behalf of the membership. New items are being added to that list from the additional SOP changes. NADCO is always mindful of how difficult it is for our members to balance borrowers, bankers, and the SBA. We are working diligently on your behalf.

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Outline of Changes for Members

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SOP SOP NADCO

Page Paragraph Topic Doc Page

SubPart A - Participation Requirements

45 5 b General Changes 1

45 5 b Director Expertise 1

45 5 g Board Responsibility 1

45 5 j Voting Directors Location 1

45 5 l CDC Board Member Other Service 1

45 5 m CDC Affiliation 1

46 5 n, xiv Board Certifications 2

47 6 b 1 a Loan Committees 2

47 7 a i Staff Waiver Language 2

48 7 a ii Rural CDC Staffing 2

48 7 b Liquidation Staff 2

48 8 Professional Service Contracts 2

48 8 a, b, c, d Contract Approval Process 2

49 8 d x Contract Provisions 2-3

50 8 d xi Director Resolutions (Contracts) 3

50 8 e Independent Contractor Pre-Approval 3

50 B Operating, Reporting & Ethical Requirements 3

52 4 c Annual Reports 3-4

53 6 b, d Standards of Conduct 4

54 8 a Adequate Staff Requirement 4

55 9 CDC Loan Files 4

56 C 1 a CDC Operational Changes Requiring Pre-Approval 4-5

57 C 2, 3 Changes to Report w/in 30 days 5

57 C 2 Litigation or Other Legal Proceedings 5

58 III Applying to Become a CDC 5

63 B 3 a iii OCRM In-Depth Reviews 5

63 C Supervisory and Enforcement Actions 5

65 5 CDC Mergers 6

66 6 Voluntary Surrender 6

69 4 iii Designated Attorney Insurance 6

71 B ALP Status 6

74 C PCLP Status 6

78 VI A Case by Case Expansions 6

78 VI B LEA Expansions 7

81 VI C Multi-State Expansion 7

SubPart C - Section 504 CDC Loan Program

254 II B 6 Credit Standards 7

255 P Definition of a New Business 7

257 A 3, 6 TPL Loan 7

258 A 8 Inter-creditor Agreement 7

259 C Borrower's Contribution 7-8

259 C 1 c List of Limited or Special Use Properties 8

261 E Historic Rehabilitation Tax Credits 8

NADCO

SOP 50 10 5 (J) Member Analysis

Table of Contents

SOP SOP NADCO

Page Paragraph Topic Doc Page

263 I Eligibility 8

265 D 7 Size Determination & Affiliation 8-9

266 D 8 Franchise, License, Dealer, Jobber & Similar Agmts 9-10

272 D 8 j Management Agreements 10

273 E Credit Elsewhere 10

275 A 3 Passive Businesses 10-11

276 A 4 Life Insurance Companies 11

277 h Non-US Citizen Business Owners 11

(see also P. 13 of this document)

277 A 7 Legal Gambling Activities 11

277 A 8 Illegal Activities 11

277 A 9 Restricting Patronage 11

278 A 11 Businesses Promoting Religion 11

278 I Cooperatives 11

279 A 12 Loan Packagers/LSPs 11

279 A 13 912 Processes 12

282 A 15 b ii Businesses Providing Prurient Sexual Material 12

284 A 16 e, f, g Waivers for Delinquent Fed. Debt or Prior Loss 12

285 A 18 c Eligible Non-Speculative Businesses 12

285 B 1 Businesses Owned by Non-US Citizens 12

287 B 3 Businesses Owned by Non-Immigrants 13

287 B 4 Asylees and Refugees 13

288 6 a SBA Form 912 for "Aliens" 13

290 8 a ii Eligibility of Non-citizen Owned Businesses 13

290 C EPC Rule 13

(See also Change of Ownership at P. 15)

291 C 4 Number of EPCs 13

291 C 5 d v Rent Payments 14

291 C 5 e EPCs and Spousal Guarantees 14

(see also Guarantees at P. 15)

293 C 6 d ii Beneficiaries of Trusts 14

293 C 7 d EPC Business Activity 14

294 D National Historic Register Properties 14

295 2 a,b, c Energy Public Policy Goals 14

(see also P. 18 Aggregate Financing)

297 D j Do-it-Yourself Construction 14

297 E Refinance without Expansion 14

302 F a-l Expansion Debt Refinancing 15

306 J 2 vi, vii Leasing Part of a Project Building 15

306 J 2 d Residential Space 15

307 K 2 Change of Ownership 15

(see also EPC Rule at P. 13)

308 A SBA's Collateral Policy 15

308 B 4 Arbitration Clause in Title Policy 15

309 E c i Guarantees 15

(See also EPC Spousal Guarantees at P. 14) 15

SOP SOP NADCO

Page Paragraph Topic Doc Page

311 3 Appraisals 15

312 9 LTV 16

312 10 d Advance Appraisal Submission 16

312 8 Equipment Appraisal 16

317 4 c No Further Action Letter 16

318 4 i Other Environmental Factors 16

318 H Environmental for Dry Cleaning Locations 16

319 l Release of Rights of Indemnification 16

321 III Application Submission 16

320 C ASM Submission List 16

322 D 3 Transactions Not Eligible for ASM 16

325 D 3 a Flood Insurance 17

326 D 3 e Flood Insurance Amounts 17

326 4 Life Insurance on Borrowers 17

328 G 2 Assignment of Lease/Landlord's Waiver 17

330 I Authorization Franchise Language 17

331 E 327 Actions 17

333 B Real Estate Lien Instruments 17

333 A 3 No Adverse Change 17-18

335 B 9 Interim Lender Document Release 18

337 b, c, d Aggregate Funding for Each SBC 18

341 B CAIP 18

344 6 B 4 Fees to Agents 18

345 IV Agents 18

353 Appendix 2 Phase I ESA 18

357 Appendix 2 Record Search with Risk Assessment 19

357 Appendix 2 Reliance Letter 19

357 Appendix 2 SBA Environmental Indemnification Agmt 19

360 Appendix 4 List of Environmentally Sensitive Industries 19

362 Appendix 5 Requirements Pertaining to Gas Stations 19

393 Appendix 9 SBA Addendum to Franchise Agmt 19

397 Appendix 10 Annual Franchisor Certification 19

400 Appendix 11 Requirements for Electronic Signatures 19

Explanation of Changes to SOP 50 10 5 (J) General Changes – reflected in several places consistently

Professional Service Contracts: When the CDC is applying for or renewing its status (i.e., ALP or PCL), expansion requests, and for the SBA Annual Report, the CDC must submit the Professional Services Contract and the SBA pre-approval as part of the required documentation (see page 3 and 4 of this document for details on changes to the professional services contract approval process). CDC Management Report and Commentary: For applications for various statuses, renewal of that status, expansions, etc. SBA eliminated the requirement that the CDC provide explanations related to data on the CDC Management Report. That report is no longer available, and SBA is relying on the SMART report. Loan Committee Fingerprint Cards: In addition to Board and ALL Staff, SBA Form 1081 and fingerprint cards must now be supplied to SBA for Loan Committee members; SBA must receive and clear ALL 1081’s IN ADVANCE of the individual’s participation in the CDC.

SUBPART A – Participation Requirements Chapter 3 – CDCs

Director Expertise: The wording has been ordered differently and changed slightly. Board expertise must now include: commercial lending, internal controls, financial risk management, legal issues related to commercial lending, and corporate governance. Directors who are retired may represent the field they retired from or may represent the community. Citation: P. 45, Item 5 b

Board Responsibility: Section has been reworded to state that the Board is responsible for “corporate actions and business of the CDC including any committee established by the Board.” Citation: P.45 Item 5 g

Voting Directors Location: Directors voting on loan approvals or servicing actions must live or work in the Area of Operations of the CDC. Citation: P. 45, Item 5 j

CDC Board Member Other Service: CDC Board Members may serve on the Boards of civic, charitable, or comparable organizations; Board members may not serve on the Board of another CDC. Citation: P. 45, Item 5 l

CDC Affiliation: The new language states the following: “A CDC must be independent and must not be affiliated with any other entity, except as authorized under 13 CFR § 120.820. Affiliation is determined in accordance with 13 CFR § 121.103 and may arise, for example, where the CDC and the other entity have common board members.” Citation: P. 45, Item 5 m

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Board Certifications: The SOP now states that the Annual Certifications of Directors that they have read and understand 120.823 MUST be included with the CDCs Annual Report. Citation: P. 46, Item 5 n, xiv

Loan Committees: New experience requirements are: backgrounds in financial risk management, commercial lending, legal issues related to commercial lending; must not be associated with another CDC. Loan Committee members do not have to be members of the CDC, the CDC Board, or shareholders. Citation: P. 47, Item 6 b I a

Staff Waiver Language: Language was added regarding the waiver for full-time management. The other non-profit entity providing management may work on and operate that entity’s economic development programs, but must be available to the 504 small business applicants and existing borrowers. Citation: P. 47, Item 7 a i

Rural CDC Staffing: New language allows for the rural CDC to contract with a CDC located in the same general area (same SBA Region) or a state contiguous to the rural CDC’s state. SBA has sole discretion to grant the waiver. The factors they consider include the number of CDCs for which the CDC is providing assistance. The contracting CDC can cover both CDCs’ economic development programs but must be available during regular business hours for the rural CDC’s 504 applicants and existing borrowers. Citation: P. 48, Item 7 a ii

Liquidation Staff: If the CDC is authorized by SBA to liquidate, they must have qualified staff for that function. Citation: P. 48, Item 7 b

Professional Service Contracts: Contracts that do not require SBA approval have been changed to: accounting, legal (except loan liquidation or litigation), information technology, and independent loan review. Citation: P. 48, Item 8

Contract Approval Process: Item 8a): Information must be submitted directly to OFA (as opposed to a CDC’s District Office) via e-mail at 504requests@sba.gov at least 60 days prior to the start of the contract. Include a request for review with draft materials including both the unsigned draft contract and a letter from the CDC Board explaining the need. Item 8 b): You MAY NOT submit requests for contract approvals with your SBA Annual Report. Only previously approved contracts are to be submitted with the Annual Report. Item 8 c): Renewals must be re-submitted at least 60 days prior to renewal date (including any option periods). Item 8d): Contracts must have a term which may not be longer than five years including renewals. Contracts must have a transition phase leading to contract termination. Citation: P. 48, Item 8 a, 8 b, 8 c, and 8 d

Contract Provisions: The old contract provisions section was deleted and has been replaced with this section. The requirements in this section include the following:

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Description of services

(NEW) Resume of each individual providing services

(NEW) SBA Form 1081 and fingerprint card for each individual providing services

Breakdown of compensation by individual, if more than one

Hourly rate of compensation for all parts of the contract except servicing which may be percentage based not to exceed 13 CFR 120.971(a)(3)

(NEW) Determination that fees are reasonable and customary

Statement that additional compensation from CDC income in the form of multipliers or bonuses is not permitted

Previous statements that the compensation is paid by the CDC, the contractor cannot also charge the borrower, a 30-60 day termination provision must be included, and the contractor is prohibited from requiring the applicant or borrower to purchase other services HAS NOT CHANGED.

Citation: P. 49, Item 8 d x

Director Resolution (Contracts): The resolution must state the following:

The contract complies with 13 CFR 120.823, 120.824 and 120.825 and 504 Loan Program Requirements

Contract is subject to pre-approval by SBA as well as at any renewal

Approved contracts are subject to yearly review by SBA with the CDC Annual Report Citation: P. 50, Item 8 d xi

Independent Contractor Pre-Approval: ENGAGING A CONTRACTOR WITHOUT SBA PRE-APPROVAL WILL RESULT IN PROBLEMS. The CDC will be reported to OCRM, and appropriate actions may be taken including DELAYING any 504 applications processed by the contractor. Citation: P. 50, Item 8 e

Operating, Reporting & Ethical Requirements:

CDCs must comply with SBA 504 Loan Program requirements in effect at the time the CDC takes an action; i.e., CDC must follow closing requirements in effect at the time the loan is closed, and must follow liquidation requirements in effect at the time a loan is liquidated.

CDCs must consult SAM’s Excluded Parties List System (EPLS) to assure that none of its employees or Agents are on the list of suspended/debarred persons.

CDCs must check SBA’s Agent list to assure they are not doing business with Agents who have been excluded from doing business with SBA.

CDCs must supply SBA with current and accurate information on all certification and operational requirements plus maintain all records, policies, procedures, and reports required by SBA.

Citation: P. 50, Item B

Annual Reports: CDCs must submit Annual Reports electronically to the CDC’s lead Field Office with a copy to OCRM at CDCAnnualReport@sba.gov. Non-compliance with the submission of timely and complete Annual Reports will cause OFA to refer the CDC to OCRM for potential supervisory or enforcement action. CDCs MUST follow SBA Form 1253 in preparing their Annual Report. The Compensation Report must include former officers, directors, and key employees even in cases where compensation is less than $100,000, and the report must include details of deferred compensation packages where applicable. The report on investment in economic development in

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each State must include an EXPLANATION of each investment by type and amount. CDCs may no longer include initial requests for ALP, PCLP, an LEA expansion, a multi-state expansion, or a new professional services contract request with their Annual Report, but they may still include an ALP or PCLP renewal request. Citation: P. 52, Item 4 c

Standards of Conduct: SBA Employees and Members of Congress involved in small business applicants require special attention. The list of interests in an Applicant has been revised to include general partners and managing members in addition to the other previously cited ownership types. Item d) GS-13 or Higher Gov. Employee: ownership list has also been amended to include general partners and managing members. Citation: P. 53, Item 6 b and d

Adequate Staff Requirement: A CDC must have “adequate staff during regular business hours.” That is now defined as “at least one qualified professional staff member available full-time as described in IIA.7.” Citation: P. 54, Item 8 a

CDC Loan Files: CDCs must maintain the “original SBA Application (including SBA Form 912), Personal Financial Statements, and SBA Form 159.” Hard copies of the original signatures must be retained for all documents on which original signatures are required. Electronic signatures and files are acceptable if they meet the applicable standards for electronic signatures (see Appendix 11). Citation: P. 55, Item 9

CDC Operational Changes Requiring Pre-Approval:

Changes in CDC Staff, Board of Directors or Loan Committees: now include loan committee members and contracted staff in addition to officers, directors, board members, and professional staff; all changes must be approved in writing by OFA (previously CDC notified Lead SBA District Office not later than 30 days after the change took place); SBA Form 1081 and a fingerprint card (FD 258) required for all NEW officers, directors, board members, loan committee members and professional staff (including contractors); fingerprint card required REGARDLESS of the answers on the Form 1081. Citation: P. 56, Item C 1 a

CDC Name Changes: clarifies approval process to send written request to OFA electronically at 504requests@sba.gov; include new name, the reason for the change, a Board resolution authorizing the change, and a draft of the amended Articles of Incorporation; if SBA conditionally approves, the CDC files all appropriate documentation with its state of incorporation and then submits all State-approved documentation to OFA for final SBA approval. OFA will notify CDC in writing of final approval; send notification of name change to SLPC, appropriate SBA CLSC, and appropriate SBA Field Office(s); update all SBA systems; and notify the CSA. Citation: P. 56, Item C 1 b

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CDC Operational Changes to Report Within 30 Days:

Changes in CDC Governing Documents: changes in by-laws or articles of incorporation must now be approved by OFA not Lead SBA District Office

Changes to CDC Contact Information: changes in all CDC contact information now approved by OFA not Lead SBA District Office

All changes reported to OFA electronically via 504requests@sba.gov or by mail to SBA HQ Citation: P. 57, Item C 2 and 3

Litigation or Other Legal Proceedings: CDC must still notify SBA within 10 business days of becoming a party to any litigation or other legal proceedings. However, CDC must now notify local SBA counsel, OFA, and OCRM (previously CDC’s Lead SBA District Office and all appropriate SBA field offices.) Citation: P. 57, Item C 2 Applying to Become a CDC: This now requires an SBA Form 1081 and fingerprint card for all Loan Committee members and a plan for investment in economic development in the Area of Operations in addition to all previous requirements. Projections must now be “detailed” and include assumptions. The CDC may not be allowed to begin operations until all SBA Form 1081s and fingerprint cards have been cleared. The CDC applicant may appeal a decline by the SBA Field Office, but there is no appeal to a decline by D/FA. The CDC may reapply after a six-month waiting period. During its two-year probationary period, the CDC may not receive delegated authority, request expansions, receive portfolio transfers, or merge. The CDC must apply for permanent status or a one year extension of the probationary period at least 90 days before the end of its probationary period. Citation: P. 58, Item III

OCRM In-Depth Reviews: Information regarding in-depth reviews is available in: 13CFR120.1050-1060, SBA Policy Notice 5000-1348: Revised Risk-Based Review Protocol for CDCs (8/5/15), SBA Information Notice 5000-1398: Updated SMART Methodology for Oversight of CDCs (11/9/16) and SBA’s SOP 51 00. Removed references to “on-site” and “off-site” reviews. Citation: P. 63, Item B 3 a) iii

Supervisory and Enforcement Actions (New): If SBA determines an enforcement action is warranted, SBA may apply to federal court for the appointment of a receiver. SBA states this is a remedy of last resort and is only one of several enforcement actions. The scope of the receivership is limited to the CDC’s assets related to the SBA loan program(s) except where the CDC’s business is almost exclusively SBA related. SBA also states that they will only seek a receivership under these circumstances: “the existence of fraud or false statements or the CDC has refused to cooperate with SBA enforcement action instructions or orders. The CDC consents to SBA’s right to seek a receivership once the CDC processes an approval of a 504 loan after Oct. 20, 2017 (SBA is extending this date until Jan. 1, 2018 to coincide with the effective date of the SOP). This “consent” does not prevent the CDC from contesting the SBA’s action nor does it require SBA to seek a receivership in any particular enforcement action.” Citation: P. 63, Item C

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CDC Mergers: CDCs with permanent status and the same Area of Operations may merge. CDCs may not merge across state lines unless the surviving CDC has multi-state authority to operate in both states. LEA status is not eligible for mergers across state lines. CDCs must notify SBA of their intent to merge PRIOR to taking any legal action. New items to be submitted for consideration include the proposed Board and proposed staff indicating the CDC they previously served. New SBA Form 1081s and fingerprint cards are required along with staff resumes. All staff must be cleared before any merger approval will be granted. SBA may decline the request if SBA determines that the staff has insufficient 504 Loan Program experience. A Plan of Operations must also be included demonstrating how “enhanced service” will be provided. SBA will issue a conditional approval subject to the final legal steps and SBA’s receipt, review, and approval of the merger documents. Citation: P. 65, Item 5

Voluntary Surrender: If a CDC surrenders its certification, SBA will direct the transfer of the CDC’s loan portfolio. A Voluntary Withdrawal Agreement satisfactory to SBA must be executed. The SBA Field Office will recommend how the portfolio should be distributed and should consider all CDCs in the state. A Multi-state CDC may be considered to receive a portfolio outside its primary Area of Operations if there are no CDCs or no capable CDCs or CDCs with sufficient capacity in the withdrawing CDC’s Area of Operations. Comments will be considered from SLPC, District Counsel, and the loan servicing center. Citation: P. 66, Item 6

Designated Attorney Insurance: Firms with three or fewer attorneys may request a hardship exemption with respect to the malpractice insurance policy limits. The General Counsel will consider: number and dollar of 504 loan closings in the past 12 months and the overall quality of the loan packages. Personal financial statements are required for each attorney seeking designated status with a hardship exemption (this information must also be submitted for extensions of the hardship exemption). Designated attorneys must maintain continued membership and good standing in the bar(s) of all states in which they are approved as a Designated Attorney by SBA. Citation: P. 69, Item 4 iii

ALP Status: CDC must now meet requirements of a Priority CDC. New submission requirements include: Director list with areas of expertise of each Director, current list of Executive and Loan Committees, and information on staff experience. A new evaluation factor is the number of 504 loans approved in the last three years along with the size of the CDC’s outstanding portfolio. Citation: P. 71, Item B

PCLP Status: New application requirements include summary of experience of the CDC’s processing, closing, servicing, and liquidation staff with significant authority, as well as for the Designated Attorney(s). References to the ALLR (Alternative Loan Loss Reserve) have been eliminated since that method is no longer available. Citation: P. 74, Item C

Case by Case Expansions: The CDC now applies to SLPC rather than the Field Office to make a loan outside its Area of Operations. The CDC may now assist an affiliate of a business they previously assisted to obtain a 504 loan outside their area of operations. Citation: P. 78, Item VI A

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LEA Expansions: If the expanded area across the state line being requested is not part of an MSA, the CDC must provide justification as to how the county has shared commerce with the CDC’s state of incorporation so that SBA may consider it part of a local trade area. New items on the LEA checklist for submission are: proposed registration as foreign corporation (or letter from attorney that it is not required). The application package is sent electronically to 504requests@sba.gov. Citation: P 78, Item VI B

Multi-State Expansion: There are two minor changes. The CDC must provide a proposed registration as a foreign corporation (or statement from an attorney that it is not required) and SBA Form 1081 and fingerprint cards for Loan Committee members. Any professional services contracts must be pre-approved by SBA. Other requirements are the same. Citation: P. 81, Item VI C

SUBPART C Section 504 CDC Loan Program

Credit Standards: Added “The Applicant must be current on all federal, state and local taxes, including but not limited to income taxes, payroll taxes, real estate taxes and sales taxes. Citation: P. 254, II B 6 Definition of a New Business: Added “Operations are deemed to begin when the business begins generating revenue from its intended operations.” Citation: P. 255, Item P

TPL Loan:

Required Participation – previously only in regulation at 13 CFR 120.920; SBA has now added this language to SOP – TPL Loan must be at least as much as the net debenture and must be at least 50% of the Project costs if the business is a start-up or the property is special use. While this is not new and is covered in the regulations, SBA added this language to the section on the TPL Loan as well as to the section on Borrower’s Contribution (P. 259).

Citation: P. 257, Item A 3

Additional Collateral Securing TPL Loan: “The 504 loan is usually collateralized by a second lien on the Project Property.” SBA added this opening sentence to the paragraph regarding “Additional Collateral” securing the TPL Loan.

Citation: P. 257, Item A 6

Inter-creditor Agreement: The CDC must not enter into any inter-creditor agreement with the TPL, other than SBA Form 2287, Third Party Lender Agreement, without SBA’s prior written consent. Citation: P. 258, Item A 8

Borrower’s Contribution: Clarified sources of Borrower Contribution – cash (or property acceptable to SBA obtained with the cash) or land (that is part of the Project Property). If a borrower (including

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affiliates) has more than one Project that is a limited or special use asset, the borrower must contribute 20% for each project after the first one. Citation: P. 259, Item C

List of Limited or Special Purpose Properties: Reduced the list to 6 property types, but SBA states the list is NOT intended to all-inclusive! The current list includes:

Car Wash business

Gas stations

Hotels, motels, and other lodging facilities

Hospitals, nursing homes, and assisted living centers

Marinas

Farms, including livestock and dairy facilities Citation: P. 259, Item C 1 c

Financing with Historic Rehabilitation Tax Credits: Entire new section has been added. SBA may participate in such a project if the following conditions are met:

The Borrower is the owner of the property eligible for the historic rehabilitation tax credits, the Borrower leases the property to the Tax Credit Investor, and the property is simultaneously subleased back from the Tax Credit Investor to the Borrower. The term of the sublease must be equal to the term of the lease.

The transfer of the tax credits from the Borrower to the Tax Credit Investor must comply with all applicable IRS requirements.

Copies of the lease and sublease that will be executed by the Borrower and the Tax Credit Investor must be submitted with the 504 application. The executed copies of both leases must be submitted to District Counsel for review prior to closing. This review is limited to assuring that the term of the two leases is equal. SBA’s lien on the Project Property must not be subordinate to the lease between the Borrower and the Tax Credit Investor.

The loan may NOT be structured as an EPC/OC loan.

CDCs should consult with District Counsel and OCA for additional guidance. SBA may also participate in similar transactions where the Borrower transfers State rehabilitation tax credits if the project satisfies all applicable State requirements along with the requirements above.

Citation: P. 261, Item E

Eligibility: SBA has re-organized and reworded the Introduction and Eligibility Requirements. The Applicant must meet all eligibility requirements at the time of application and at the time of closing and disbursement, except the size standard, which must only be met at time of application. The SBA loan programs qualify as “Special-Purpose Credit Programs” under the Equal Credit Opportunity Act (ECOA) regulation which allows the CDC to collect appropriate personal information and to obtain signatures of spouses or other persons on an application or credit instrument if it is required by Federal or State Law. This is repeated in several sections of the SOP. Citation: P. 263, Item I

Size Determination and Affiliation: New language was added regarding affiliation. Affiliation based on management has been clarified to state that if the officers, managing members or partners who control the management (or the Board of Directors) of the Applicant also control the management (or Board of Directors) of one or more concerns, affiliation arises. Management control can also

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arise through a management agreement. Management agreements that give the management company sole discretion over business operations with minimal oversight of the decision-making by the Applicant create affiliation between the management company and the Applicant business. However, affiliation does not exist if the management agreement includes meaningful oversight by the Applicant business over the management company’s activities.

Meaningful oversight includes all of the following:

Approve the annual operating budget,

Approve any capital expenditures or operating expenses over a significant dollar threshold,

Have control over the bank accounts, and

Have oversight over the employees operating the business (employees must be the Applicant’s employees).

Citation: P. 265, Item D 7

Franchise, License, Dealer, Jobber and Similar Agreements: SBA has issued new guidance and procedures in SOP 50-10-5(J) and SBA Notice 5000-1709, Revisions to Franchise Review Process dated Oct. 13, 2017 for approving agreements and relationships that meet the FTC definition of a “franchise” –

FTC definition – “Franchise” means any continuing commercial relationship or arrangement, whatever it may be called, in which the terms of the offer or contract specify, or the franchise seller promises or represents, orally or in writing, that:

The franchisee will obtain the right to operate a business that is identified or associated with the franchisor's trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or associated with the franchisor's trademark;

The franchisor will exert or has authority to exert a significant degree of control over the franchisee's method of operation, or provide significant assistance in the franchisee's method of operation; and

As a condition of obtaining or commencing operation of the franchise, the franchisee makes a required payment or commits to make a required payment to the franchisor or its affiliate.

(All three criteria above must be met to be defined as a Franchise) SBA also includes all agreements and relationships covered by the Petroleum Marketing Practices Act (PMPA), (e.g., gas stations, dealer/jobber agreements). SBA also now includes dealer agreements with new car manufacturers.

SBA has defined a brand as a “franchise” if it meets the FTC definition of a franchise. The SBA Franchise Directory: Generally, SBA will publish on its website a Directory of eligible franchises along with information on whether an addendum is required and whether any other issues must be addressed. CDCs may rely on the Directory and no longer need to review franchise or other brand documentation for affiliation or eligibility. If the brand is on the Directory, the CDC may proceed with processing the application. If the brand is not on the Directory, the CDC MAY NOT process the application, and the

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franchisor must follow SBA procedures to add its brand to the Directory. Franchisors are recertified either annually by SBA and when an updated franchise agreement is implemented. To process an application with a brand on the Directory, the CDC must identify the Franchise Name and SBA Franchise Code. No other documentation needs to be submitted with the application. The CDC must document for its file that the brand is on the Directory. If the applicant has multiple brands, the CDC must verify and document that all brands “critical to operations” are on the Directory (provide a list in the credit memo) but would include only the Franchise Name and Franchise Code for the brand responsible for the largest amount of revenue on the application document to SBA. “Critical” to operations is defined as more than 50% of the Applicant’s revenue. Examples are provided in the SOP. Prior to closing, the CDC must obtain the executed agreement, the executed SBA Form 2462, or the SBA Negotiated Addendum and submit those documents to SLPC. Citation: P. 266, Item D 8

Management Agreements: Management agreements must be submitted to SLPC to determine if they create affiliation. If the loan is processed PCLP, the CDC must review the management agreement to determine if it creates affiliation between the Applicant and the management company, and retain it in its file. Information about Management Agreements is covered under this franchise section as a reminder to CDCs that the management agreement review and approval process extends to Applicants that are operate under franchise agreements that may also choose to utilize the services of a management company. Both relationships require SBA review and approval. Also see Size Determination and Affiliation on P. 9. Citation: P. 272, Item D 8 j

Credit Elsewhere: SBA has expanded the credit elsewhere test. The prior test was limited to Applicant’s ability to obtain a loan on reasonable terms without a Federal government guaranty, and Applicant’s ability to obtain funds from the resources of the applicant business. The new SOP expands these into two broad categories –

“Sources related to the Applicant” which now includes the liquidity of owners, spouses, guarantors, Associates, and the Applicant business; and

“Sources unrelated to the Applicant” which includes conventional lenders or other sources of credit (i.e. a commitment from a franchisor)

Substantiation that credit is not available elsewhere by discussing weaknesses in the credit must include specific reasons why Applicant does not meet the TPL’s conventional loan policy requirements. The 4 specific acceptable factors remain unchanged. Meeting CRA requirements continues to be an unacceptable factor. SBA added two additional unacceptable factors that could not be the sole basis for the TPL’s determination that credit is not available elsewhere – the liquidity of the TPL depends on the guaranteed portion of the loan being sold on the secondary market and the SBA guaranty will allow the TPL to exceed its legal lending limit. Both of these were specific to the 7(a) loan program and were eliminated by H.R. 2499 which was incorporated into SBA 50-10-5(H) effective 10/1/2015. It appears that 7a language was inadvertently put in the 504 section. NADCO will seek clarification from SBA on these two items. Citation: P. 273, Item E

Passive Businesses: Examples of passive businesses now includes salon suites and similar business models that generate income by renting space to accommodate independent businesses that provide the personal services. Businesses that have entered into a management agreement that

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gives the third-party management company sole discretion to manage the operations of the business are considered passive and not eligible. The wording has been changed on businesses engaged in leasing equipment, household goods or other items from “are” eligible to “may be” eligible. The same change from “are” eligible to “may be” eligible has been made for barber shops, hair salons, nail salons, and similar types of businesses. Citation: P. 275, Item A 3

Life Insurance Companies: Part of the language for determining eligibility has been changed to read: “The insurance agent is not subject to the control or direction of another agent in conjunction with the sale and servicing of life insurance, with full discretion over the means and method for rendering service.” The intention of the language seems to be the same as the prior SOP. Citation: P. 276, Item A 4

Non-US Citizen Business Owners: Direction on businesses owned by non-US citizens has been moved to IIIB. Citation: P. 277, Item h

Legal Gambling Activities: SOP clarifies that businesses engaged in legal gambling ARE NOT eligible except for those receiving commissions from the sale of official State lottery ticket sales under a State license or gambling activities licensed and supervised by a State authority (these exceptions are unchanged) and MAY be eligible. Citation: P. 277, Item A 7

Illegal Activities: SOP clarifies that SBA does not make loans to businesses engaged in activities that are illegal under federal, state or local law. Citation: P. 277, Item A 8

Restricting Patronage: SOP clarifies that businesses that restrict patronage for any reason other than capacity are not eligible, even if the business is a franchise. Citation: P. 277, Item A 9

Businesses Promoting Religion: SBA has issued a new Form 1971 Religious Eligibility Worksheet (Appendix 8 to the SOP). PCLP CDCs must submit SBA’s Form 1971 and any supporting documentation to SLPC for a pre-determination before processing the loan under its delegated authority. Citation: P. 278, Item A 11

Cooperatives: The section on ineligible cooperatives has been eliminated as they are now included as eligible business types at Paragraph IIIA. Citation: P. 278, Item l

Loan Packagers: Lender Service Providers that received more than 1/3 of its gross annual revenue from packaging SBA loans are not eligible. Citation: P. 279, Item A 12

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912 Processes: The SOP has been updated to reflect the new 912 processes. Item 13 1) and 2) clarify that SBA cannot make loans to (1) individuals incarcerated, on probation, on parole, on deferred prosecution or (2) if the individual is subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought by in any jurisdiction. The character evaluation process begins with the 1244 XIX questions. If the answers to questions 1, 2 and 3 are “no,” the application is processed without an SBA Form 912. If the answer to Q. 1 is “yes,” the loan is not eligible. If the answer to Q. 3 indicates the individual is subject to (1) or (2) above, the loan is not eligible. If the individual answers “yes” to Q. 2 or Q. 3, an SBA Form 912 must be completed (must be signed within 90 days of application to SBA) along with a detailed explanation. Two items have been added to the required explanation list: iv (a): any fines imposed, specifying whether the fines were paid or remain unpaid and iv (e): if sentencing and other conditions of the court have not been met, the Applicant is not eligible. Item 13 e) allows the CDC to retain all the proper documentation (912, court documentation, explanation) and process the application IF there is only one or more misdemeanors whose conditions were met more than 6 months ago (and the convictions were not for crimes against a minor). Item f) states that a background investigation must be completed by SBA if the individual discloses a felony conviction, misdemeanor within 6 months of loan application, or the conviction involves crimes against a minor. The executed SBA Form 912, the detailed explanation, and the court documents must be submitted to SLPC along with the fingerprint card and a cover sheet from the CDC identifying the CDC’s contact information. Unless using Electronic Fingerprint Cards, original fingerprint cards must be submitted. Explanation is provided regarding the FBI process. CDCs will receive a decision in writing from SBA, and the CDC must retain that determination in their loan file. If the decision is a decline, an appeal may be considered and the circumstances are itemized. Citation: P. 279, Item A 13:

Businesses Providing Prurient Sexual Material: PCLP CDCs must now submit its analysis and supporting documentation to SLPC at PSMReviews@sba.gov prior to processing the loan under its delegated authority. The PCLP CDC must retain its analysis, supporting documentation, and SBA’s approval in its loan file. Citation: P. 282, Item A 15 b ii

Waivers for Delinquent Federal Debt or Prior Loss: Waiver requests may now be sent to SLPC for a pre-application eligibility determination. CDCs must inform Applicants that a default and loss to SBA will result in the names of the small business and the guarantors being listed on CAIVRS and impact their eligibility for further financial assistance. Citation: P. 284, Item A 16 e, f, and g

Non-Speculative Businesses that may be Eligible: The wording has been changed from “are” eligible to “may be” eligible for non-speculative businesses. The listing of non-speculative businesses has not changed. Citation: Page 285, Item A 18 c

Businesses Owned by Non-US Citizens: Significant new information has been provided about the documentation that LPRs receive from the USCIS, what status it denotes, and when or if it expires. Please read this section in detail when processing an application for an Applicant who is an LPR. Citation: P. 285, Item B 1

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Businesses Owned by Non-Immigrants: Specific information is provided about the types of visas and what is required for the non-immigrant to live and work in the US legally. Please read this section in detail when processing an application for an Applicant who is a non-immigrant. The following classes of non-immigrant aliens may be eligible for SBA assistance – USCIS Entrepreneur guide non-immigrant visa categories:

B-1 Business Visitor

F-1/OPT Optional Practical Training

H-1B Specialty Occupation

E-2 Treaty Investor

L-1 Intracompany Transferee If applicant is a class of non-immigrant visa that CDC believes may be eligible it needs to contact Office of Financial Assistance for additional guidance. CDCs must consider the period of stay afforded by each non-immigrant visa category (along with possible extensions) relative to loan term proposed. Citation: P. 287, Item B 3

Asylees and Refugees: Specific information is provided about the types of USCIS documentation that must be held by asylees and refugees. Please read this section in detail when processing an application. Citation: P. 287, Item B 4

SBA Form 912 for “Aliens”: A non-US citizen who completes a 912 Form must include their alien registration number. If they do not reside or work in the US, they will not have been assigned an alien registration number. If an individual does not have an alien registration number, an I-94 card may be provided. Citation: P. 288, Item 6 a

Eligibility of Non-Citizen Owned Businesses: The personal guaranty of management is now required. Citation: P. 290, Item 8 a ii

EPC Rule: The opening paragraph has been reworded. The significant change is the ability to finance the change of ownership between existing owners of an EPC as long as the real estate has been held by the entity for at least 36 months. Also, the loan proceeds may be used to finance a stock or ownership purchase if the underlying assets are limited to real estate and/or other eligible long-term fixed assets. Ineligible assets (such as escrow accounts, replacement reserves, etc.) must be directly related to the eligible long-term fixed assets, must be de minimis, and may not be included in the Project Financing. P. 309, Item K indicates that the CDC must justify that jobs would be lost without the change in ownership. P. 325, B 2: Real estate must have a remaining useful life of 20 years or a weighted average remaining useful life between 10 and 20 years for mixed collateral projects. Citation: P. 290, Item C

EPCs: There may be multiple OCs separately owned; however, only one EPC is permitted per transaction. Citation: Page 291, Item C 4

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Rent Payments: The language has been changed to clarify that the rent payment between the EPC and OC cannot exceed the debt service payments on the TPL loan, the 504 loan, and the EPC’s “direct” expenses of holding the property such as “routine” maintenance, insurance, and property taxes. “Lease payments may not include accelerated payments on the TPL loan.” Citation: P. 291, Item C 5 d v

EPCs and Spousal Guarantees: The language has been changed related to spousal guarantees. If the combined ownership of spouses in the EPC or OC totals 20% or more, both spouses must guarantee. The 5 percent minimum ownership by one spouse has been eliminated in this section but still remains in the Collateral Section (P. 310) which we believe is an oversight by SBA. CDCs are reminded that appropriate guarantees can be required without regard to ownership. Citation: P. 291, Item C 5 e

Beneficiaries of Trusts: The wording has been changed to state that if a beneficiary has any control over the actions of the Trust, the beneficiary must guarantee the loan. Citation: P. 293, Item C 6 d ii

EPC Business Activity: This has been reworded. A trust may now be an active business while any other EPC form may not engage in business activity other than leasing the property to the OC. Citation: P. 293, Item C 7 d

National Historic Register Properties: The SBA process for meeting its requirements under Section 106 of the National Historic Preservation Act is outlined. The first step for a CDC with a project either on the National Historic Register or eligible to be on the Register is to consult with the CDC’s local SBA counsel. SBA counsel will determine if further consultation is required with the State Historic Preservation Officer. Once a no adverse determination has been made by SBA, the CDC can process the application. Please read this section before processing a project with historic significance. Citation: P. 294, Item D

Energy Public Policy Goals: Additional guidance regarding energy public policy goals has been moved to Chapter 7. Citation: P. 295, Item 2 a, b, and c

DIY Construction: DIY construction has been expanded to include renovations, including carpet installation or painting. Citation: P. 297, Item D j

Refinance without Expansion: This is a new SOP section to provide guidance to replace guidance that was previously provided in issued notices (5000-1382 & 5000-1939). New in the SOP: Eligible Business Expenses limitation has been dropped from 25% to 20%; “Other Secured Debt” is no longer eligible to be included in the refinancing project. It is eligible to allow the refinance of credit card debt if the card is issued in the name of the business, the applicant certifies to the eligible business charges, and the applicant identifies and deducts any personal charges from balance to be retired. The definition of a start-up business is now consistent with the regular 504 loan program definition. Citation: P. 297, Item E

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Expansion Debt Refinancing: The conditions that must be met for a Project to qualify have been listed in a new order; however, the content is unchanged. Citation: P. 302, Item F a-l

Leasing Part of the Project Building: The SOP clarifies that loan proceeds may not be used to renovate any of the property rented to a third party. NEW: The Borrower may NOT lease any of the property to any business engaged in any activity that is illegal under federal, state or local law (i.e., a marijuana dispensary) during the life of the loan. Citation: P. 306, Item J 2 vi and vii

Residential Space: The residential space may be occupied by the business owner or leased to a third party. Occupancy by the business owner does NOT constitute business occupancy unless it meets the “essential to the business” test in Item f. Citation: P. 306, Item J 2 d

Change of Ownership: This section repeats some of the information under the EPC change of ownership. Business ownership can be purchased with a 504 loan if the Applicant is purchasing the real estate other eligible long-term fixed assets used in the Applicant’s operations. If the value exceeds the value of the eligible fixed assets, that value cannot be included in the financing, and it must be de minimis. The ownership purchase must result in the Applicant owning 100% of the business, and the seller may not be retained as an officer, director, stockholder or key employee. Citation: P. 307, Item K 2

SBA’s Collateral Policy: SBA added the following note to the section of deed restrictions - certain deed restrictions pertaining to the use of the property, which are intended to protect the health and safety of occupants, may be acceptable, e.g., deed restrictions based upon environmental concerns including restrictions on residential use, use as a day care center for children or seniors, use as a school, or use as a hospital. Citation: P. 308, Item A

Arbitration Clause in Title Policy: If a title policy requires both parties to agree to arbitration, no endorsement is necessary. If the clause allows either party to demand arbitration, an endorsement must be obtained to remove that condition. Citation: P. 308, Item B 4

Guarantees: SBA again reminds CDCs that appropriate guarantees must be taken regardless of ownership. Other guaranty provisions remain the same; however, as noted above, in the EPC section on P. 291, SBA changed the wording in that section to state that if the combined ownership of spouses in the EPC or OC totals 20% or more, both spouses must guarantee. The 5 percent minimum ownership by one spouse was been eliminated in the EPC section, but not this section. Citation: P. 309, Item E c i

Appraisals: SBA clarified that the appraisal must be dated no more than 12 months prior to the date of application. Citation: P. 311. Item 3

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Appraisals (LTV): SBA increased the threshold for an acceptable minimum appraised value from 90% to 95% of estimated value without requiring a reduction in the debenture, additional collateral, or additional investment from the borrower. Citation: P. 312, Item 9

Advance Appraisal Submission: Appraisals must be submitted to SLPC with the application in several circumstances. Added in this SOP change: when the seller of the property is taking back a note that is part of the borrower’s equity, the appraisal must be submitted with the application. Citation: P. 312, Item 10 d

Equipment Appraisal: This is new language clarifying SBA’s practice of requiring an equipment appraisal when used equipment is part of the Project and is not being purchased from an equipment dealer or is being refinanced. The appraiser must be independent, experienced, and must inspect the equipment. The appraisal must be dated no more than 12 months prior to the application date. Citation: P. 312, Item B

No Further Action Letter: The state equivalent of a “no further action letter” may be used. A state equivalent of a closure letter includes a written determination from a licensed professional in those jurisdictions that delegate authority to such professionals for site closures. Citation: P. 317, Item 4 c

Other Factors: Environmental insurance “that is already in place and is already paying remediation costs” and “brownsfields agreements” have been added to the list of factors that may lead to approval or disbursement. Citation: P. 318, Item 4 i

Loans for Former Dry-Cleaning Locations: Any location that currently or historically had a dry-cleaning operation using chlorinated and/or petroleum based solvents must provide a Phase II environmental study. Previously, SBA only required a Phase II if the dry-cleaning operation had been there for more than five years. Citation: P. 318, Item H

Release of Rights to Indemnification: If a person has a right to indemnification from subsequent property owners (i.e., SBA in a foreclosure), special documents are required. Please read this section in detail. Citation: P. 319, Item I

Application Submission: The SOP reviews the process for electronic filing of applications. Citation: P. 321, Item III

ASM: The ASM required submission has been updated to include a Management Agreement if applicable. Citation: P. 320, Item C

ASM Submissions: Change of ownership transactions and transactions between close family members cannot be submitted via ASM. Citation: P. 322, Item D 3

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Flood Insurance: The CDC may use a copy of the FEMA Form 086-0-32 obtained by the Interim or TPL. Citation: P. 325, Item D 3 a

Flood Insurance Amounts: The required coverage must now be the lesser of outstanding principal balance of the loan or the maximum coverage available. Citation: P. 326, Item D 3 e

Life Insurance: A CDC must assess whether the viability of the business is tied to an individual or individual(s). Life insurance is required for all sole proprietorships, single member LLCs, or for businesses otherwise dependent on one owner’s active participation. (NEW) Amount and type of collateral available to repay the loan may be considered in determining the appropriate amount of life insurance. If the principal is uninsurable, CDC must obtain written evidence from a licensed insurer. Citation: P. 326, Item 4

Assignment of Lease and Landlord’s Waiver: When the Project is leasehold improvements or equipment located in leased premises, SBA now requires the Assignment of Leases with a lease term that equals or exceeds the term of the loan with options exercisable “only by the lessee.” The Landlord’s Waiver must now provide written notice of default, a reasonable opportunity to cure, and waive the landlord’s right to the collateral in addition to the original requirements. Citation: P. 328, Item G 2

Manual Insertion of Franchise Language into the Authorization: SLPC will insert this paragraph into the Authorization for all franchise transactions for non-PCL CDCs. PCL CDCs must insert the language themselves. Citation: P. 330, Item I

327 Actions: CDCs may use unilateral authority to submit 327 actions via ETRAN. Those include:

504 cancellation prior to disbursement

Post-Debenture Purchase maturity extension (if new maturity is under 48 months – PCL ONLY)

Borrower, EPC or OC mailing address (CDC may NOT change the Project Property address with unilateral authority)

Borrower, EPC or OC phone numbers or email addresses

Principal or guarantor mailing address

Principal or guarantor phone number and email address Citation: P. 331, Item E

Real Estate Lien Instruments: All real estate lien instruments must contain a due on sale clause; SBA Forms 928 and 930 are expired and must not be used. Citation: P. 333, Item B

No Adverse Change: SBA has provided specific guidance on the CDC opinion of no adverse change. It must be done no earlier than 14 days before closing; it must be supported by financial statements dated no earlier than 120 days from the date of closing. The date of loan closing is the date by

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which the closing package for a loan must be submitted to District Counsel for the upcoming bond sale. If the loan does not fund in the anticipated bond sale, the NAC must be redone to comply with the 14-day requirement. Citation: P. 333, Item A 3

Interim Lender Documents: CDC must ensure within 90 days of funding that all recorded interim lender documents are cancelled on record. If a loan is closed but not funded, the CDC must ensure that all recorded documents are cancelled. Citation: P. 335, Item B 9

Aggregate Financing for Each Small Business Concern: The guidance for Energy Public Policy Goals has been moved here. It clarifies that to be eligible for the 10% energy reduction goal; the project must be a new facility that is replacing an existing facility or a retrofit of an existing facility. A renewable energy project must generate at least 10% of the energy used by the Applicant at the Project. Small manufacturers (Applicant and affiliates) may receive up to $5.5 million in 504 funding per project with no limit on the total dollars available. Renewable energy and 10% energy savings projects may receive $5.5 million per Project not to exceed $16.5 million in the aggregate. These amounts are NOT reduced by any other outstanding SBA financing (7a, Community Advantage, regular 504). The regular 504 limit of $5 million remains available as well. The outstanding 504 lending authority used under regular or alternative energy public policy does reduce lending authority under 7a or Community Advantage. Citation: P. 337, Item b, c, d

CAIP: The SOP language about CAIP has been deleted because the program still exists, but it has no funding. Citation: P. 341, Item B

Fees to Agents: The CDC must inform the Applicant in writing that the Applicant does not have to employ an Agent to assist with the loan application. Citation: P. 344, 6, Item B 4

Fees to Agents: SBA Form 159 must be submitted for payment of fees including: packaging fee charged to the Applicant by the CDC or fees paid by CDCs to Agents (i.e., referral fee). See SBA Form 1253, Annual Report Guide for submitting this information in the CDC’s Annual Report. CDCs must retain original signatures on Form 159. Citation: P. 345, Item 6

Agents: SBA requires CDCs to have prudent oversight of third party vendors and written policies governing these relationships. OCRM will look for evidence of due diligence and oversight when reviewing the CDC. Citation: P. 345, Item IV

Phase I Environmental Site Assessment (Phase I ESA): SBA will accept Phase I reports up to one year old from the date of submission to SLPC for review. Citation: P. 353, Appendix 2

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Records Search with Risk Assessment: Historical records should identify the property back to the earlier of its first developed use or 1940. All database reports and historical records relied upon must be included. Citation: P. 357, Appendix 2

Reliance Letter: CDCs may not alter SBA’s standard reliance letter or enter into any agreement that alters the terms of SBA’s standard reliance letter. Citation: P. 357, Appendix 2

SBA Environmental Indemnification Agreement: The language in this agreement may not be modified. Citation: P. 357, Appendix 2

List of Environmentally Sensitive Industries: Changes have been made to the list and CDCs should use the new list when determining the correct level of environmental report needed. Citation: P 360, Appendix 4

Requirements Pertaining to Gas Station Loans: Please review this appendix when considering a gas station loan to assure the CDC can provide the necessary environmental due diligence Citation: P. 362, Appendix 5

SBA Addendum to Franchise Agreement (Form 2462) and Instructions: SBA has issued a new Form 2462. Please read the instructions for completing and using the form. Citation: P. 393, Appendix 9

Annual Franchisor Certification (SBA Form 2464): This is also a new form, but SBA will work with Franchisors to obtain this annual certification. Citation: P. 397, Appendix 10

Requirements for Electronic Signatures: Please review this Appendix to ensure any documents that are required to have original signatures are captured electronically correctly. Citation: P. 400, Appendix 11

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