Standard 7(a) Loan Closing and Funding 2015 · Review of Available Materials • PowerPoint slides • National 7(a) Authorization Boilerplate, ver. 2011 dated September 15, 2011

U.S. Small Business Administration

Standard 7(a)

Loan Closing and

Funding

2015

Training Objectives

• Focus: The non-delegated, Standard 7(a) Loan

• To help you establish an effective and efficient

loan closing process and checklist

• Effective

• Compliance with SBA Regulations

• Closing in accordance with the SBA Loan Authorization

• Proper funding of the loan

• Efficient

• Managing expectations

• A timely close

• To Protect the Guarantee

Review of Available Materials

• PowerPoint slides

• National 7(a) Authorization Boilerplate, ver.

2011 dated September 15, 2011

• SOP 50 10 5(G). Eff. 1/1/14

https://www.sba.gov/lender-documentation-tool/sops?tid=7595

• 7(A) Lender Matrix

http://www.sba.gov/content/servicing-and-liquidation-actions-7a-lender-matrix

• SBA Webpage: http://www.sba.gov/category/lender-navigation/steps-sba-lending/7a-loans/closing



















http://www.sba.gov/category/lender-navigation/steps-sba-lending/7a-loans/closing










When the lender requests SBA to honor its guarantee after

a loan loss or default, the three most common deficiencies

leading SBA to recommend a cancellation of the

guarantee, or denial or repair of SBA’s guaranty happen at

loan closing: 1) Unauthorized, improper, uncontrolled, or undocumented

disbursement of loan proceeds

2) Failure to obtain or adequately document a required

equity injection

3) Failure to obtain required collateral or properly perfect

lien position

AND: Closing is the last time the Lender has the

opportunity to discover eligibility and credit

problems before the Lender disburses the loan.

Overview of the SBA Loan Process

7(a) Application

Loan Approval

Loan Closing & Funding

Servicing

Liquidation when

required

Guarantee Purchase

in cases of default

After the Loan Approval

• SBA loan center issues a loan number and

sends the Loan Authorization to lender

(electronically)

• Lender starts reporting the loan on the

monthly 1502 Report

• Lender pays Guarantee Fee

• Lender closes and funds the loan

• Lender services & liquidates as required

Loan Modifications

• Make sure and fully review the Loan Authorization upon receipt

• If changes occur as loan terms or conditions, borrowers, collateral, lien

positions, etc. either before closing or after refer to the 7(A) Lender Matrix

to determine whether SBA must be notified or if the change requires SBA

approval.

• http://www.sba.gov/content/servicing-and-liquidation-actions-7a-lender-

matrix

• Post approval prior to FINAL disbursement: SOP 50-10-5(G) Subpart

B, Chapter 7, page 199

• Email [email protected] or fax 916-735-1975

• After final disbursement: Little Rock Servicing Center (LRSC). Use

Form 2237

• Document all Changes to the Authorization

• Lender is responsible for full compliance with SBA regulations on

modifications

• DOCUMENT, DOCUMENT, DOCUMENT!














mailto:[email protected]

Sensitive Issues That Cause

Closing Delays

• Tax Return verifications

• 912 Personal History clearance

• Changes or verification of form of organization

• Obtaining required insurance (don’t forget)

• Clear title to collateral. Make sure lien issues,

zoning, easements, setbacks, restrictive covenant

issues are addressed and resolved.

• Environmental issues

• Appraisals

• Construction requirements

• Verification of status from U.S. Citizenship and

Immigration Services - See SOP 50 10 5(G) beginning at

page 98.

Manage Expectations

The 7(a) Authorization

10

• Two party agreement between SBA and lender

• A contract, not a commitment

• Establishes the specific terms and conditions of the

SBA Guaranty for an individual loan

• Prepared with 7a Wizard – no changes allowed to

standard language without SBA approval

• Individual provisions may be modified:

“327” Change” –whether unilateral or w/SBA’s approval

• Lender may prepare an additional Loan Agreement

between lender and borrower

The 7(a) Authorization

Boilerplate Outline

Loan Information

Section A) Guarantee Fee

Section B) On-going Servicing Fee

Section C) Lenders Responsibilities

Section D) Required Forms

Section E) Contingencies

Section F) Note Terms

Section G) Use of Proceeds

Section H) Collateral Conditions

Section I) Additional Conditions

Signature Block

Appendix A – Standard Collateral Conditions

Appendix B – State-specific Options for Collateral

Appendix C – Frequently Asked Questions (FAQ’s – 7a)

Appendix D – Loan Agreement & Borrower’s Certification Sample

Loan Information

• SBA Loan Number provided with approval

• SBA Loan Name (choose the first available)

– dba of the Operating Company (OC)

– Name of the Operating Company

– dba of the Borrower

– Name of the Borrower

• Approval Date

• Lender’s Name

• Borrower and Operating Company Information

Section A – Guarantee Fee

• Stated in a dollar amount in Authorization

• Paid by lender to SBA in 90 days from

approval date on loans over 1 year in term

• Paid prior to signing the Authorization for

loans 1 year or less in term

• If escrow closing is used, Lender may not

collect fee from borrower until all funds

have been disbursed from escrow account

Sections A&B – Guarantee Fee

Ongoing Lender Servicing Fee

• On loans $150,000 or less, lender retains 25% of Guaranty fee

• Guarantee withdrawn if fee not paid as required

• Full rebate of fee if loan does not close

– Lender must cancel Loan and request refund

• No refund of fee with first loan disbursement

• Cannot make a disbursement just to pay fee

• Fees on multiple loans within 90 days are calculated as if one

loan (7a Boilerplate, page 3)

• Presently 0.519% (51.9 basis points)

• Paid monthly by lender through 1502 Report

• Remains the same for life of the loan term

• If loan is sold in secondary market:

– Fee paid by Investor through FTA(7a Boilerplate, page 4)

Section C –

Lenders Responsibilities

• Close loan in accordance with terms &

conditions of Authorization

• Obtain valid and enforceable loan documents

to include spousal interest in collateral

• Retain all loan closing documents

7a Boilerplate, page 4

Section D - Required SBA Forms

• SBA Form 147 – Note

• SBA Form 1050 – Settlement Sheet

• SBA Form 159 (7a) – Fee Disclosure Form and

Compensation Agreement

• SBA Form 722 – Equal Opportunity Poster

When Applicable:

• SBA Form 148 – Unconditional Guarantee

• SBA Form 148L – Unconditional Limited Guarantee

• SBA Form 601 – Agreement of Compliance

Lender may use computer-generated versions of mandatory SBA

Forms, as long as the text is identical 7a Boilerplate, page 4

SOP 50 10 5(G), Subpart B

Section D – SBA Forms

There are other various review actions during loan

application which may require specific forms such as the

IRS 4506-T, the FEMA Form 86-0-32 (previously 81-93),

or the SBA Form 1846, Statement Regarding Lobbying

(signed by the Lender).

See SOP 50-10-5(G) Subpart B, Chapter 6

• SBA forms and instructions can be found at

www.sba.gov/for-lenders , then click on “Forms Loan

Package Tool” listed under “Forms, Notices, and SOPs”

towards the bottom of the page to see a listing of all

forms.

http://www.sba.gov/for-lenders



Optional SBA Closing

Forms

SBA Numbered Forms –

• Standby Creditors Agreement – SBA Form 155

• Resolution of Board of Directors – SBA Form 160

• Resolution of Partners – SBA Form 160A

• Security Agreement – SBA Form 1059

Note – SBA Form 147

The Information Grid:

• SBA Loan Number and Name from Authorization

• Date – the date the Note is signed

• Loan Amount – the principal amount • Numeric, NOT written out here

• Interest Rate – actual rate i.e “8%” or

variable rate i.e. “Prime plus 2%”

• Borrower – insert all borrowers names • From Authorization - No DBAs

• Operating Company – only if EPC structure

• Lender – accurate full name of lender

Note – SBA Form 147

Variable Text Information Sections of the Note:

1. Written amount of the Note

3. Payment Terms – include all required by the

Authorization, Section F

11.State Specific Provisions for SC– write “NONE”

12.Signature Block – the legal name of the

individual(s) or entity(s) signing the Note - Where applicable the name and title of the authorized

representative

- No dba

- Consult with your attorney to verify a complete and

enforceable signature block

Interest Accrual

On SBA Notes, interest accrues through

“payment received date”

not “payment due date”

Settlement Sheet

SBA Form 1050

• As of 8/30/08, one Form 1050 at 1st disbursement

• Attach full documentation for all disbursements to

the original Form 1050 (who, when, $, itemized)

• Joint payee checks, copies of receipts, deposit slips,

electronic funds transfer, bills of sale, paid invoices,

etc. – copies front & back

• Retained in your file

• A Purchase requirement – Tab 5

Critical Concept

Disbursements must match up with identified Use of

Proceeds in the Loan Authorization, Section G

SOP 50 10 5(G), page 203

Settlement Sheet SBA Form 1050

Completing the Form:

• SBA Loan Number

• Loan Approval Amount

• SBA Loan Name

• Lender Name & Address

• Borrower Name

• Typewritten name of Lender AND Lenders

signature required

• Typewritten name of Borrower AND Borrower

signature required

Lender and Borrower Both Sign SBA Form 1050

Fee Disclosure and Compensation Agreement – Form 159

• Has been updated; use version found online on SBA’s

webpage www.sba.gov

• USE: If applicant has or will pay an Agent who is

employed to conduct business with SBA or the 7(a)

Lender or if Lender has or will pay a referral fee

• See SOP 50 10 5(G), Subpart B, Chapter 3, VIII, page

148 for when the 159 is NOT required

• Itemization is required if fee exceeds $1,000 (or $ 300

for loans < $ 15,000)

• Fees must be reasonable for services

• Lender sends copy to FTS & retains forms

• Agent, Borrower and Lender signs the Form

A separate 159 form required for each Agent

http://www.sba.gov/

Fee Disclosure and Compensation

Agreement – Form 159

• A Purchase requirement - Tab 10

• If no fees are paid – mark zero and both

lender and borrower sign the form and retain

• See SBA Procedural Notices 5000-976,

10/2005 & 5000-1200, 03/04/2011

• Fax or email all 159 forms to FTS after initial

disbursement

• Read this form . . . there are certifications

• A new SBA Form 159 is online now SOP 50 10 5(G), pages 147-151

Equal Opportunity Poster Form 722

• Form must be provided to every borrower

• Notice of Non-Discrimination

• Poster must be visible to employees,

applicants for employment, and the public

SOP 50 10 5(G)

Unconditional Guarantee - Form 148

Unconditional Limited Guarantee – 148L

• If Guarantee is required, SBA Form 148/148L is

a MANDATORY form

• Form 148 required on all owners of 20% or more 148/148L not required if individuals are co-borrowers

• One form per Guarantor

– husband/wife may sign one form

• At least one individual must be the borrower or

unconditionally guarantee even if no 20% owner

• Guarantee may be required of other parties if

necessary for credit reasons

Unconditional Guarantee – Form 148

Unconditional Limited Guarantee – 148L

• If combined ownership of spouses equals 20% or

more, generally both fully guarantee debt

• If non-owner spouse – Guarantee may be limited

to spousal interest and signature required on all

appropriate collateral documents

• ESOPs and 401(k) Accounts – guarantee not

required BUT:

– Beneficiary(ies) must give Unconditional Guarantee

– Borrower cannot be an EPC when ESOP/401 involved

Unconditional Guarantee – Form 148

Unconditional Limited Guarantee –148L

• Completing the Form: – SBA Loan # and SBA Loan Name

Same as what is selected in Loan Authorization

– Guarantor Name must match signature block

Avoid titles with names unless it is a legal entity

– Borrower Insert all borrower’s name from Authorization

No DBAs

– Date Date Guarantee is signed

– Note Amount Principal amount using #’s only

Agreement of Compliance –

Form 601

• Required SBA Form if construction costs

exceed $10,000

• Must be executed prior to construction by

borrower and the general contractor

• Contractor agrees not to discriminate in

employment and meet other requirements of

the Equal Employment Act

SOP 50 10 5(G), pages 186-187

Section E - Contingencies

• Complying with Loan Guarantee Agreement

– SBA 750, 750B, 750EX

• Having paid the full Guarantee Fee

• Complying with current SBA Standard

Operating Procedures (SOP)

• Completing disbursements within 48 months

• Confirming no adverse changes since

application

• Satisfying all conditions of the Authorization


Section F – Note Terms

• Maturity

• Interest Rate Options (7 options)

• Payment Term Options

– Interest Only (2 options)

– Other Payment Options (7 options)

– Options for Variable or Split Rate Loans (2 options)

– Loan Prepayment

– Additional Repayment Options

• Subsidy Recoupment Fee – loans 15 years or longer

– State specific Language 7a Boilerplate, pages 6-14

Section G – Use of Proceeds

21 Options -

• Purchase Land

• Purchase Land &

Improvements

• Purchase Improvements

• Construct a building

• Add addition to a building

• Make renovations

• Payoff interim construction

loan

• Payoff interim loan

• Make leasehold

improvements

• Purchase equipment

• Purchase fixtures

• Purchase inventory

• Pay Accounts Payable

• Pay Notes Payable

• Pay outstanding debt

• Purchase a business

(identify intangible assets)

• Purchase all outstanding

stock

• Pay SBA Loan number

• For Working Capital

• Pay Guarantee Fee t

• To/for write your own

7a Boilerplate, pages 15-16

Section G – Use of Proceeds

• Ineligible Uses of Proceeds

– Payments to a Principal or Associate of the

business

– Refinance debt owed to a SBIC

– Purchase of assets for speculation

– Payment of delinquent taxes (fiduciary in nature)

Section H – Collateral Conditions

• Refer to Appendix A for full Boilerplate text of collateral conditions

• You may also write your own conditions

• EPC required Collateral Condition – Assignment of Rents (or Mineral Rights, if

applicable) from EPC

• Required language must appear in all lien instruments including Mortgages, Deeds of Trust and Security Agreements – See 7a Boilerplate, page 19 for required text

7a Boilerplate, page 17 -21

7a Boilerplate, Appendix A

RECORDING AND PERFECTING

LIENS and INTERESTS

Real estate and fixtures - Mortgages

Non real estate collateral - UCCs and

possession

Assignments of interests

Section H – Collateral Conditions

• Guarantee Agreement, SBA Form 148/148L – If it is a limited guarantee, the limiting provisions or

language should mirror the limiting language in the Authorization

– See the Authorization for possible mandatory language if the guarantor is a resident of another state

– Lender Must Obtain the Proper Lien Positions Identified in the 7a Loan Authorization

• Purchase money interest required

• Lien is for the full amount of the loan

• Provide a list of equipment & fixtures valued at $5,000+

• Purchase Tab 4 requirement 7a Boilerplate, page 21 & Appendix A

Document Examples #18-22

Section I – Additional Conditions

• Insurance

• Environmental

Requirements

• Borrower, Guarantor

& Operating

Company Documents

• Operating Information

• Lease

• Agreement of

Franchisor

• Injection

• Standby Agreements

• Appraisals

• Construction Provisions

• Non-Citizens

• Certifications &

Agreements 7a Boilerplate, page 19

SOP 50 10 5(G),

Hazard and Flood Insurance

• Flood Insurance

– Based upon the Standard Flood Hazard

Determination, FEMA Form 86-0-32 (formerly81-93)

• Mandatory if building is in flood hazard area

• Required on Personal Property collateral located in a

building in a flood hazard area that is collateral

• Personal Property collateral in non-collateral building

– Check Boilerplate for possible waiver, page 19


Hazard and Flood Insurance

• Real Estate Hazard Insurance Full replacement cost or if not available, maximum insurable value- Document if not at full replacement cost

• Personal Property Hazard Insurance Mandatory for all assets pledged & full replacement cost For all hazard and flood insurance do not just rely on the ACORD Certificate. Get copies of the policies. Policies must provide for a 10 day prior written notice to the Lender of policy cancellation (or whatever notice the Authorization requires). Policy must contain Mortgagee Clause/Lender’s Loss Payable Clause stating, “This clause must provide that any action or failure to act by the debtor or owner of the insured property will not invalidate the interest of Lender and SBA”


Insurance

• Full Marine Insurance – Identified vessels with Lender designated as

“Mortgagee”

– See Boilerplate for Clause requirements to include Protection & Indemnity, Breach of Warranty, and Pollution coverage

• Life Insurance – May be required if business viability is tied to

individual

– Lender must obtain collateral assignment on each policy and acknowledgment of assignment from Home Office of the Insurer

– Lender must assure Borrower pays premium 7a Boilerplate, page 23

Insurance

• Lender must include any other insurance appropriate to the loan, including but not limited to: – Liability Insurance

– Product Liability Insurance

– Dram Shop/Host Liquor Liability Insurance

– Malpractice Insurance

– Disability Insurance

– Workers’ Compensation Insurance

– Any State Specific Insurance requirement


SOP 10 50 5(G)

Environmental Requirements

• Lender may not disburse the Loan until: – Completed review for potential environmental

contamination required in SOP 50 10 5(G) on each commercial real property taken as collateral

– Sufficiently minimized the risk from any adverse environmental findings discovered in the Environmental Investigation (EI)

• Lender must submit the EI results to SBA for SBA approval prior to disbursement

• Submit the report to [email protected] or via Send This File at www.sba.gov.



http://www.sba.gov/


SOP Resources:

SOP 50 10 5(G), Subpart B Chapter 4, page

171

Appendix 2 – Definitions

Appendix 3 – Reliance Letter

Appendix 4 – NAICS Codes of Environmentally

Sensitive Industries

Appendix 5 – Requirements Pertaining to Gas

Station Loans

Appendix 6 – SBA Environmental

Indemnification Agreement


• Gas Station Loans – Appendix 5

– Special requirements apply to all loans secured

by real or personal property currently or formerly

associated with the operation of a gas station –

NO Exceptions

• Site assessment begins with a Phase I ESA

• Equipment Testing

– Review SOP 50 10 5(G), Appendix 5 ____________________________________________________________________

A copy of a Fuel Supply Agreement or Jobber

Agreement is a Purchase Tab 3 requirement.

The agreements should have been approved by

SBA at time of loan application.

Borrower, Guarantor & OC

Documents

• Prior to closing, lender must obtain documents

based upon form of ownership: • Corporate Documents

• Limited Liability Company (LLC) Documents

• General Partnership Documents

• Limited Partnership Documents

• Limited Liability Partnership (LLP) Documents

• Trust Certification

• Trade Name

• Verify and document no change in form of

ownership from application


Borrower,Guarantor & OC

Documents

• Optional Documents that may be required: • Purchase-Sale Agreement (Application item)

• Bulk Sales or Transfer

• Non-Compete

• Consideration for Stock Purchase

• Subordinate Funding

• Other Funding (Loan)

• Other Funding (Grant or Gift)

• Other Funding (Line of Credit)

– If identified in Authorization, you must get it

• Gift • Gift Letter, verification of funds and funding source


Operating Information

• Verification of Tax Returns – IRS 4506-T – Potential carry-over requirement from the

Application process to loan closing

• Required on Applicants

• Lender may close loan 10 days following submission of form to IRS

– BUT lender must document follow-up requests to the IRS

– AND document the verification of the IRS transcript to submitted Tax Returns

SOP 50 10 5(G)

Loan Authorization, page 26

Operating Information

• Note: If applicant filed extension, lender must get a copy of the extension along with evidence of payment of estimated taxes

• Authority to Conduct Business – EIN, all insurance, licenses and required permits

• Flood Hazard Determination • FEMA Form. Don’t just rely on a copy of a flood map you have

laying around.


Lease

• Lease • Assignment of Lease

• A Landlord’s Waiver

• EPC/OC form allowed, get a copy of the lease

– If proceeds finance improvements on leasehold interest

in land, ground lease must include:

• Tenant’s right to encumber leasehold estate

• No modification or cancellation of lease without lender’s

approval

• Lender’s right to acquire the leasehold at foreclosure sale and

reassign leasehold estate with options

• Sublease

• Hazard insurance coverage on leasehold improvements

• Share in condemnation proceeds SOP 50 10 5(G)

Agreement of Franchisor

• Franchise eligibility should have been verified with

the application process; 1 of 3 documents is

required plus any addendums

1. A Certificate of No Change or Non-Material Change confirms no changes

2. A Certificate of Material Change

3. A Certificate of Franchise Documents

• Franchise term should match loan term

• Name and form of organization of franchisee should

match borrower on Note (not Guarantor)

• Watch for Addendums, Exhibits and Schedules

Agreement of Franchisor cont.

• Optional Loan Authorization language:

– Lender and SBA to have access to Franchisor books

– Upon loan default, to defer payment of franchise fees

__________________________________________________________________

Requirements for franchises also apply to dealerships

or any other type of franchise which requires an

agreement


Equity Injection

• Lender must verify equity injection prior to

disbursing loan proceeds and maintain

evidence of verification in loan files

• Loan Authorization will identify amount and

type of Equity Injection required for loan:

– Cash Injection (that is not borrowed)

– Standby Debt Injection (Full or partial standby)

• No payments permitted and covered by a Standby

Agreement substantially equivalent to SBA Form 155

– Equity Injection / Standby Debt Injection

– Asset Injection with identified fair market value

• Appraisal by independent 3rd party recommended 7a Boilerplate, page 28

Stand-by Agreements

• Lender may use SBA Form 155 or its own Stand-by Agreement form

• Stand-by creditor must subordinate any lien rights in collateral and take no action without lender’s consent

• Full Stand-by Debt (No payments allowed) may be considered acceptable equity by SBA

• Partial Stand-by Debt (interest payments only) may be considered equity when adequate historical business cash flow shows total debt repayment


Appraisals

• SBA requires a real estate appraisal on loans

greater that $250,000 AND collateralized by

commercial real property

• Lender follows its own regulator’s requirements

for real estate appraisals for loans $250,000 or

less

• Must conform with Uniform Standards of

Professional Appraisal Practice (USPAP) • A self-contained appraisal report, or

• A summary appraisal report

– To identify the scope of work, appraisal must be

requested by and prepared for the lender 7a Boilerplate, page 29

Appraisals

• New construction or substantial renovations – • Appraisal must estimate market value at completion

• Appraiser must confirm “as built” value to original appraisal

– In writing: document, document, document –

• Existing building appraised on an as-is basis

• On Business Valuations • Appraisal must break-out land, building, equipment and

business (blue-sky) or other significant components

• Applications may be submitted with estimates

subject to appraisals at close • If appraisal comes in 90% or more, lender may close but

document why appraisal is less than estimate

• If appraisal is less that 90% of estimate, SBA prior written

permission is required to close the loan

Appraisals

• Real estate securing a personal Guaranty • No specific SBA requirements, lender follows own policy

• Other Fixed Assets • Independent appraisal required if asset value is greater than

depreciated value to support higher valuation

• Change of Ownership • If amount financed minus appraised value of RE and/or

equipment is $250,000 or less – lender may perform valuation

• If above $250,000 or there is a close relationship between

buyer and seller – independent business valuation required

from qualified source

• Lender may not use a business valuation provided by seller or

the buyer to meet these requirements

SOP 50 10 5(G), page 191

Construction Provisions

• Construction of a new building or addition to

an existing building, lender:

– Building Standards

– Obtain evidence of compliance with the National

Earthquake Hazards Reduction Program (NEHRP)

– May charge borrower a one-time fee for extra

service relating to construction not to exceed 2%

– Prior to closing, if “as completed” appraisal was

obtained then lender must obtain a statement from

the appraiser that the building was built with only

minor deviations or appraisal adjustment to reflect

substantial changes 7a Boilerplate, page 30


• If Construction is less than $350,000

– Lender must obtain SBA Form 601, Applicant’s

Agreement of Compliance, where construction

costs exceed $10,000

• Construction safeguards

– Lender must take all normal construction loan

safeguards appropriate for the loan

– Reviewing plans, specifications, cost breakdowns,

bonds, contracts and builder’s controls, and

imposing necessary changes or requirements


SOP 50 10 5(G), Chapter 5, Section VI


• If Construction is more than $350,000

– Evidence of Contractor

• 100% performance Bond and Labor & Materials Payment Bond

• Builder’s Risk and Workmen Compensation Insurance

– Evidence of Borrower’s injection prior to 1st disbursement

– Copy of final plans and specifications

– Copy of Construction Contract with:

• Acceptable contractor at a specified price

• Provision that Borrower will not order or permit material changes

prior to written consent of lender and Surety providing bonds



• If Construction is more than $350,000 continued

– Lender must:

• Obtain evidence of Borrower’s ability to pay cost overruns

– SBA and lender are not obligated to increase loan for cost overruns

• Make interim and final inspections

• Obtain evidence that building when completed will comply with all

codes, licensing and permit requirement

• Obtain SBA Form 601, Applicant’s Agreement of Compliance

• Obtain all Lien Waivers

• Take all normal construction loan safeguards

– Some waiver of Performance Bonds allowed when a

construction management services firm is used


• Do-it-yourself Construction

– May be permitted if Lender can justify and

document in the loan file that:

• The Borrower/contractor is experienced in the type of

construction and has all appropriate licenses

• The cost is the same as, or less than, what an unaffiliated

contractor would charge as evidenced by 2 bids on the

work; and

• The borrower/contractor will not earn a profit on the

construction

Non-Citizens

• Prior to first disbursement – Lender must

verify with US Citizenship and Immigration

Services, using Form G-845 that:

– A Non-Citizen with 50% or more ownership of a

OC or EPC and or a Guarantor has Lawful

Permanent Resident status

– A Non-Citizen with 20% to 49% ownership in an

OC or EPC and or a Guarantor has Lawful

Permanent Resident status or legal alien status

for the term of the loan SOP 50 10 5(G), page 120


Certifications and Agreements

Borrower and OC will:

• Additional Financing provided

by “Pari Passu” Lender

• Receipt of Authorization

• Adverse Change

• Child Support

• Immigration Laws

• Current Taxes

• Environmental

• Business Related Credit Card

• Reimbursable Expenses

• Books, Records and Reports

• Equal Opportunity

• American-made Products

Borrower and OC will not:

• Taxes

• Occupancy

• Distribution

• Ownership Change

• Transfer of Assets

• Fixed Asset Limitation

• Location Limitation

• Limitation on Compensation

Each borrower initials and signs

the Borrower’s Certification

7a Boilerplate, Appendix D –

Borrower’s Certification

Sample Documents

Signature Block

Borrower(s), Operating Company(ies) and

Eligible Passive Company(ies) listed in the

SBA Authorization on page one sign

required forms

– Full individual names and the correct name and

verified organizational structures with

appropriate Officers, Partners or Members and

signatures are required

– Consult with your bank’s Legal Counsel to

confirm binding signature formats

Appendix A –

Standard Collateral Conditions

• This Appendix is a listing of the standard

collateral conditions and the text that will

appear in the Authorization for the listed

collateral if it secures the loan

• It is an additional resource to understand

different SBA provisions that may apply to

certain types of collateral

• Collateral on SBA Guaranteed loans is not

limited to this listing. At the lenders option,

additional collateral classes may secure the

loan.

Appendix B – State-specific Options

on Standard Collateral Conditions

If collateral is located in a state other than GA,

make sure the state-specific requirements

are included on collateral documents for that

state (i.e. deeds of trust, mortgages,

guaranties, UCCs)

Appendix C - FAQs

FAQs raise issues that the lender

may not think about

Although you may be near death presently, for

your sake and the sake of time we will not

review the FAQs now but we recommend that

you take a look at them when you recover

7a National Boilerplate, Appendix C

Appendix D – Loan Agreement and

Borrower’s Certification Sample

Examples of a Loan Agreement and

a Borrower’s Certification

Be sure to match up the Certifications required in the loan

specific Authorization and have the borrower initial each

Not all Certifications on the sample

will or may be required in an Authorization

In Summary

• Reasonable and customary commercial lending

should always guide you in SBA lending

• Document in accordance with your and SBA’s

loan Policies and Procedures

• The 7a Loan Authorization is the specific guide

on individual loans

___________________

SBA Points of Contact

Georgia District Office

(404)331-0100

Lender Relations

Rosemarie Drake (404) 331- 0100

ext. 702

[email protected]

Legal

Carlissa Carson (404) 331-0100

ext. 303

[email protected]

Standard 7a Loan

Processing Center

262 Black Gold Blvd

Hazard, KY 41701

606-436-0801

Fax 606-435-2400

Email:

[email protected]

Little Rock Service Center

2120 Riverfront Dr, 100

Little Rock, AR 72202-1794

501-324-5871

Fax 202-481-6481

[email protected]



QUESTIONS?

Is it in the Loan

Authorization?

What form

do I use?

Did I get all of the

collateral listed in

the Loan

Authorization?

Did I disburse

according to the

Use of

Proceeds?