On January 1, 2014, SBA’s new SOP (Standard Operating Procedure) 50 10(F) became effective for all loans approved on or after that date. Below we have summarized some of the more important changes. Many of the new policies are still being “tweaked” and SBA is working on issuance of further guidance concerning interpretation and implementation. As always we will continue to keep you informed as information is made available. To all of our clients, you can rest assured that we have already implemented these new rules into our processes and the handling of your loans.
· E-Tran System-All 7(a) loans are now required to be submitted for approval through SBA’s E-Tran system. This system has historically been used for only very small loans and by PLP lenders. E-Tran submission is now a requirement for all loans. Small Business Resource Associates has been approved to use this system for all of our client banks.
· $350,000 and less loan amounts-SBA now requires that these smaller loans be credit scored through the E-Tran system. If the loan receives a passing score, it can be further processed through E-Tran. If the loans fails it can still be sent through the normal approval channels. There are specific requirements that the lender’s credit analysis must contain for the file, which we will help you with on a case by case basis.
· Spousal Pledge of Real Estate-A non-owner spouse will no longer be required to pledge collateral that is held solely in their name provided there was no transfer of assets within the last 6 months of the application date.
· Other Collateral Requirements-Liens on stocks, bonds, CDs are no longer required.
· Life Insurance-For loans over $350,000 lenders can use their own internal guidelines on when to require coverage if the loan is fully secured. If the loan is not fully secured life insurance is still required on principals of sole proprietorships, single member LLCs, or other businesses dependent on one owner’s active participation.
· Application Forms-Forms 1919 and 1920 will take the place of Forms 4 and 4I. These forms are still being revised by SBA.
· Business Financial Statements-must now be dated within 180 days of submission. Personal financials remain at 90 days.
· Colson Report Form 1502-Must be submitted electronically.
· DUNS Numbers-A Dun and Bradstreet number will be requested for all loans, however the SBA has removed this as a strict requirement. A DUNS Number can easily be obtained without cost by the borrower.
· Franchise Requirements-If the lender disburses the proceeds without obtaining the necessary executed franchise documents, including any amendments and/or addendums, SBA may deny liability of guaranty.
· Business Credit Reporting-required for all SBA loans
· Affiliation and Personal Resource Rules-still under review and revision.