SBA Publishes Procedural Updates, Effective Immediately
December 10, 2024
Delaney Sexton
Contributing Editor
SBA Publishes Procedural Updates, Effective Immediately
On Monday, SBA published a procedural notice with a variety of updates for the 7(a) and 504 programs. The changes primarily focus on the SOP 50 10 7.1, but there are changes to look out for that apply to the SOP 50 55. All changes in the notice are effective immediately.
Here are a few of the updates:
Signature of a Non-Owner Spouse on the Owner’s Personal Financial Statement
This update aligns SBA’s policy with the requirements of the SOP 50 10 7. Since the personal resources test is no longer required, non-owner spouses or supplemental guarantors no longer must disclose their personal financial resources, except to the extent that such personal financial resources are co-owned with the borrowing spouse. In summary, spouses with no degree of ownership do not have to sign a personal financial statement or disclose assets.
Refinance of Debt – 7(a)
SBA clarifies that merchant cash advances, factoring agreements, and non-amortizing credit facilities may be refinanced. Since it can be difficult to determine the interest rate that is being charged or the monthly payment, SBA is giving borrowers a way out. Further, these loans do not have to meet SBA’s requirement for a ten percent improvement in installment payment amounts because these loans are presumed not to be made on reasonable terms.
SBA is adding a new paragraph to address this:
“h. For refinancing merchant cash advances, factoring agreements, and non-amortizing credit facilities, in lieu of proving that the debt being refinanced is and has been current for at least the last 12 months or for the life of the loan, whichever is less:
- The Lender may accept a statement obtained from the credit provider that the debt is current.
- If Lender is unable to obtain a statement from the credit provider that the debt is current, Lender may obtain bank statements from the applicant for 12 months or for the life of the loan, whichever is less, evidencing that periodic ACH debits, initiated by the creditor, have occurred each month. Lender must review documentation for any evidence of late payments or penalties.
- If there are late payments or penalties, Lender must explain in the credit memorandum why the Lender believes the Borrower will be able to make payments on the new 7(a) loan in a timely manner, and these loans must be processed by SBA under non-delegated procedures.
- The credit facility and any security interests must be terminated with the refinance. Lender’s credit memorandum must include detailed analysis describing the terms (including verifying the right of repurchase) and effect of the proposed repayment of such merchant cash advances, factoring agreements, and non-amortizing credit facilities on the future cash flow of the Borrower.
- The above subparagraphs i.-iv., as applicable, must be documented in the Lender’s credit memorandum.”
Join Coleman’s webinar on December 18 to Master the 2025 7(a) and 504 Loan Program Changes.