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Main Street Monday — SBA Issues New SBA SOP 5010 J

October 16, 2017

Main Street Monday — SBA Issues New SBA SOP 5010 J

By Bob Coleman
Editor, Main Street Monday

Access the link for the new SOP 5010 (J) effective January 1, 2018

Be sure to register for Coleman’s webinar to learn about all the new changes in proper context and importance.

MANAGEMENT ISSUES, COMPLIANCE & LENDER RESPONSIBILITY
Updated guidance on Agents, including Lender Service Providers
Added the process for obtaining SBA’s prior written consent on portfolio transfers and loan participations
Added the process for obtaining SBA’s prior written consent to secured credit and SBA securitization transactions, including a description of the basic conditions that a Lender must meet in order to securitize and minimum elements that SBA requires for securitizations
CAIVRS Disclosure to Applicants

ELIGIBILITY
New procedures for determining franchise eligibility
New guidance regarding affiliation control based on management agreements
New procedures for businesses with a religious affiliation
Revised procedures for businesses with an associate with poor character/912 issues
New rules for consumer and marketing cooperatives
Revised rules for businesses providing prurient sexual material
New guidance for non-US citizens
Finance change of ownership with EPCs

UNDERWRITING
Added minimum equity requirements for certain 7(a) loans — Start-Up businesses and Changes of ownership
Removed the requirement for 25% equity injection when intangibles exceed $500,000 in change of ownership loans.
Provided direction that SBA and/or the Lender, for loans processed using delegated authority, may require a personal guaranty, regardless of ownership interest, if any, when deemed necessary for credit or other reasons
Clarified that Lenders must consider seller debt as debt in all applications
Increased the percentage of loan proceeds that may be used to purchase land from 20 percent to 33 percent for the Builder’s CAPLine.
Clarified the eligible uses of loan proceeds for farm enterprises.
Expanded EWCP credit underwriting standards
Updated EWCP collateral requirements
Revised policies regarding debt refinancing for SBA Express, Export Express, and EWCP Lenders.
Clarified the Loan Program Requirements for change of ownership loans involving Employee Stock Ownership Plans or equivalent trusts.
Updated eligible uses of proceeds for Export Express.
Clarified guidance regarding maximum guaranty amounts for combination of 7(a) and 504 loans.
Revised the requirements for SBA Express Revolving loans to include a term-out period.
Clarified EWCP maturities for Single Transaction-Specific loans.
Clarified that the Note terms for variable interest rate loans must include the first adjustment date by either stating a specific date, or using the final disbursement date to determine the timing.
Clarified the guidance regarding allowable fees for packaging and other services.
Updated the guidance concerning disclosure of fees and Lender expenses, including SBA Form 159
Updated environmental policy guidance to reflect current federal requirements and added guidance related to the release of rights to indemnification from SBA/Lender
Changed standard for business financial statements to be dated within 120 days of submission to SBA

COLLATERAL
Guidance when collateral is listed in the National Register of Historic Places

CLOSING
Revised the guidance on how and when the guaranty fee must be paid for loans with short term maturities and the circumstances under which a refund will be provided to the Lender.
Consolidated and simplified the guidance on the fees a Lender may charge an Applicant to conform to regulatory changes made in the Final Rule
Added guidance on the process for selling loans in the Secondary Market

SERVICING
Expanded the list of actions that do not require prior approval by SBA. Lender may use E-Tran Servicing to notify SBA of those actions
Added guidance that Lenders are required to report information to the appropriate credit reporting agencies whenever they extend credit through an SBA loan
Added guidance that SBA and the PLP-EWCP lender may determine certain requirements for foreign accounts receivable, including advance rates and/or use of control accounts for asset based EWCP loans

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