{"id":4671,"date":"2023-10-04T16:08:24","date_gmt":"2023-10-04T16:08:24","guid":{"rendered":"https:\/\/listselfstorage.com\/us\/industry-insights\/?p=4671"},"modified":"2023-11-15T14:44:25","modified_gmt":"2023-11-15T14:44:25","slug":"changes-to-sba-sop-rulebook","status":"publish","type":"post","link":"https:\/\/listselfstorage.com\/us\/industry-insights\/changes-to-sba-sop-rulebook\/","title":{"rendered":"Changes to SBA SOP Rulebook"},"content":{"rendered":"

<\/p>\n

Changes to SBA Rulebook<\/b><\/u><\/span><\/span><\/span><\/span><\/p>\n

Summary of Key Changes<\/b><\/u><\/span><\/span>:<\/b><\/span><\/span><\/span><\/span><\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
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Key Improvement<\/b><\/span><\/span><\/span><\/span><\/span><\/p>\n<\/td>\n

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Prior to August 1, 2023<\/b><\/span><\/span><\/u><\/span><\/span><\/p>\n<\/td>\n

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As of August 1, 2023<\/b><\/span><\/span><\/u><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n<\/thead>\n

SBA Eligibility Determination
\n7(a) & 504<\/span><\/span><\/span><\/td>\n		\n
    \n
  • Lenders were responsible for determining program eligibility under delegated authority; SBA could repair or deny a guaranty purchase request for eligibility<\/span><\/span><\/span><\/li>\n
  • SBA was responsible for determining eligibility for non-delegated loans<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • SBA is responsible for determining eligibility for all loans based on ETRAN data submissions, and SBA will not repair or deny a guaranty purchase request for eligibility if SBA determined the borrower eligible<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
Affiliation
\n7(a) & 504<\/span><\/span><\/span><\/td>\n		\n
    \n
  • When applying SBA size standards, affiliation included both ownership and the subjective concept of \u201ccontrol\u201d<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
\n
    \n
  • When applying SBA sizes, which includes regulations related to affiliation, affiliation focuses only on ownership considerations. SBA will check and confirm compliance with SBA affiliation regulations as a component of the overall eligibility determination<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
Fraud Check
\n7(a) & 504<\/span><\/span><\/span><\/td>\n		\n
    \n
  • Lender complied with FinCen BSA\/KYC requirements<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
\n
    \n
  • Lender must continue to comply with FinCen BSA\/KYC requirements<\/span><\/span><\/span><\/li>\n
  • SBA conducts fraud reviews on every loan application<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
Loan Authorization
\n7(a) & 504<\/span><\/span><\/span><\/td>\n		\n
    \n
  • Lenders\/SBA used the\u00a0Authorization Wizard<\/i>\u00a0to re-enter information to generate the Loan Authorization<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • Lenders can automatically generate a \u201cTerms and Conditions (Ts&Cs)\u201d sheet with one click using information already entered in ETRAN. The Ts&Cs sheet can be downloaded, printed, emailed, etc.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
Criminal Background Checks\/Character Determinations
\n7(a) & 504<\/span><\/span><\/span><\/td>\n		\n
    \n
  • Applicant had to answer three questions regarding prior criminal background of its owners<\/span><\/span><\/span><\/li>\n
  • Owners could be required to complete a lengthy character determination process, which included fingerprints and an FBI background check<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • Applicant has to answer one question regarding prior criminal background of its owners with no requirement for a criminal background check or fingerprints<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
Credit Not Available Elsewhere
\n7(a) & 504<\/span><\/span><\/span><\/td>\n		\n
    \n
  • An applicant\u2019s personal resources could impact the credit not available elsewhere determination<\/span><\/span><\/span><\/li>\n
  • Many lenders included a narrative\/discussion in their credit memo describing why credit was not available elsewhere<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • An applicant\u2019s personal resources do not impact the \u201ccredit not available elsewhere\u201d determination<\/span><\/span><\/span><\/li>\n
  • Lenders can document why credit is not available elsewhere by selecting one of the following common reasons:<\/span><\/span><\/span>\n
      \n
    1. Inadequate collateral<\/span><\/span><\/span><\/li>\n
    2. Inability to meet lender\u2019s conventional credit score policy<\/span><\/span><\/span><\/li>\n
    3. StartUp business<\/span><\/span><\/span><\/li>\n
    4. Business needs longer maturity<\/span><\/span><\/span><\/li>\n
    5. Loan exceeds lenders policy limit it can lend to one customer (cannot be sole selection)<\/span><\/span><\/span><\/li>\n
    6. Other<\/span><\/span><\/span><\/li>\n<\/ol>\n<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) SBSS Score<\/span><\/span><\/span><\/td>\n\n
    \n
  • SBA will provide FICO Small Business Scoring Service scores (SBSS scores) for 7(a) loans under $350,000, except SBA Express, CAPLines, and export loans<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • SBA will provide SBSS scores for all 7(a) loans under $500,000, except SBA Express, CAPLines, and export loans<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) Underwriting Requirements $500K or Less<\/span><\/span><\/span><\/td>\n\n
    \n
  • For loans that did not receive an acceptable SBSS score and were over $350,000, SBA required lenders to use a standard, 9-point underwriting criteria<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • Beginning May 2023, simplified underwriting can be used for loans $500,000 or less, including:<\/span><\/span><\/span>\n
      \n
    1. Through an acceptable SBSS score, currently 155 and above<\/span><\/span><\/span><\/li>\n
    2. Through cashflow analysis<\/span><\/span><\/span><\/li>\n
    3. Through the lender\u2019s same policies and processes they use for similar-sized non-SBA guaranteed loans, including use of credit scoring models<\/span><\/span><\/span><\/li>\n
    4. Through the standard, 9-point underwriting criteria used for 7(a) Standard loans over $500,000<\/span><\/span><\/span><\/li>\n<\/ol>\n<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) Partial Change of Ownership<\/span><\/span><\/span><\/td>\n\n
    \n
  • Not permitted<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • Beginning May 2023, permitted<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) Tax Return Transcripts<\/span><\/span><\/span><\/td>\n\n
    \n
  • For most loans, lenders had to obtain copies of the applicant’s tax return transcripts and reconcile with the financial information provided in the application<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • For loans $500,000 and less, lenders have additional options \u2013 they can follow their business financial information verification practices and at least collect tax returns to verify tax filing, a standard used in similarly situated private sector loans<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) Fees for Applicants<\/span><\/span><\/span><\/td>\n\n
    \n
  • SBA capped fees that lenders could charge applicants<\/span><\/span><\/span><\/li>\n
  • Lenders were prohibited from charging flat fees and completed Form 159 for all loans<\/span><\/span><\/span><\/li>\n
  • Lenders were not clear on incorporating technology service fees<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • SBA continues to cap fees that lenders can charge applicants<\/span><\/span><\/span><\/li>\n
  • Lenders may charge a flat servicing and packaging fee of $2,500 without completing Form 159<\/span><\/span><\/span><\/li>\n
  • Lenders may charge certain technology service fees<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) Collateral<\/span><\/span><\/span><\/td>\n\n
    \n
  • Not required for loans of $25,000 and less<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • Not required for loans of $50,000 and less (personal guarantees remain)<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) Lender Request for SBA Purchase of Guaranty<\/span><\/span><\/span><\/td>\n\n
    \n
  • Depending on the 7(a) loan delivery method and loan size, lenders used different purchase packages<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • Lenders use a Universal Purchase Package (UPP) for all 7(a) loans, regardless of delivery type or loan size<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) Equity Injection $500K or Less<\/span><\/span><\/span><\/td>\n\n
    \n
  • A 10% equity injection was required for start-up businesses and complete changes of ownership, except for Express<\/span><\/span><\/span><\/li>\n
  • For changes of ownership between existing owners, the applicant\u2019s debt to worth ratio must not exceed 9:1<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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    \n
  • Equity injection is not required, lenders can follow their policies for similarly situated private sector loans<\/span><\/span><\/span><\/li>\n
  • No debt to worth ratio requirement<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) Equity Injection Above $500K<\/span><\/span><\/span><\/td>\n\n
    \n
  • A 10% equity injection was required for start-up businesses and complete changes of ownership<\/span><\/span><\/span><\/li>\n
  • For changes of ownership between existing owners, the applicant\u2019s debt to worth ratio must not exceed 9:1<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
\n
    \n
  • A 10% equity injection is required for complete changes of ownership<\/span><\/span><\/span><\/li>\n
  • For changes of ownership between existing owners and partial changes of ownership, the applicant\u2019s debt to worth ratio must not exceed 9:1<\/span><\/span><\/span><\/li>\n
  • Except for changes in ownership, an equity injection is not required, lenders can follow their policies for similarly situated private sector loans<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) Equity Injection Verification<\/span><\/span><\/span><\/td>\n\n
    \n
  • SBA had specific requirements for verification of equity injection<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
\n
    \n
  • Requirement for verification of equity injection is flexible, lenders can follow their policies for similarly situated private sector loans<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) Debt Refinance<\/span><\/span><\/span><\/td>\n\n
    \n
  • SBA had different requirements for each 7(a) delivery method<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
\n
    \n
  • SBA synched the debt refinance requirements across most of the 7(a) delivery methods and streamlined the requirements<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
7(a) Same Institution Debt Refinance<\/span><\/span><\/span><\/td>\n\n
    \n
  • Required to be processed non-delegated through SBA\u2019s loan processing center<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n
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