September 13, 2013
SBA recently issued Procedural Notice 2000-840 to its employees effective on August 22, 2013, providing new guidance on how to properly identify franchise loans. SBA has determined that lenders in the loan application process did not correctly identify many loans to franchises. It is important to SBA that franchise loans be identified correctly because the Agency tracks and reports performance of loans to franchises.
Beginning October 1, 2013, SBA will be using a new coding system to identify each franchise called the FRANdata Unique Numbering System (FRUNS). The FRUNS number will replace the “franchise codes” previously used by SBA. The requirement to identify whether any loan is to a franchise should be contained in the SBA application documentation. For loans submitted electronically, E-Tran will continue to prompt the lender to provide the necessary information. E-Tran has been updated to include the appropriate prompts to find the correct FRUNS number for the franchise applicant.
If the lender is unable to find the correct franchise name and FRUNS number provided in the ETran generated list, the lender is asked to contact FRANdata at www.franchiseregistry.com/signup.fruns to request a valid FRUNS number for the particular franchise. A review of the franchise agreement and/or franchise disclosure document should identify the correct name to be used. If a valid FRUNS number has been issued, but is not available in E-Tran, the lender will need to contact the E-Tran support team for assistance.
Franchise eligibility is governed by SBA regulations and the lender is responsible for properly documenting the eligibility of each loan, regardless of whether a FRUNS number has been assigned. Be sure to obtain the proper eligibility documentation to substantiate the eligibility decision, such as a copy of the franchise agreement (analyzed appropriately) and/or the proper documentation required from the franchise registry. Be sure to include the lender’s franchise eligibility analysis in the loan file for future review by SBA.
Read More about SBAComplete at SBAComplete.com