SBA Updates SOP Guidelines for 504 Program Each October, the SBA updates the SOP to reflect any changes or additions to the 504 Loan Program.
Here are the highlights of the changes taking effect next week: Fees:
• The up-front SBA guarantee fee has been reinstated at .50% of the debenture amount (previously 0%)
• The ongoing SBA guarantee has been increased to .9375% (previously .749%) Interest Rate Swap Contracts:
• These are allowed, but the SBA will not review or be party to the contract, nor will the SBA provide guidelines on their use. Any fees owed as a result of a default on behalf of the borrower will subordinate to the SBA 504 loan as a “default charge”. Definition of Small Business:
• Clarified since the Small Business Jobs Act as a tangible net worth of $15 million or less and average net income after Federal taxes for the preceding two completed fiscal years of $8.5 million or less Eligible Passive Company Rule: • If any of the project funds are used to purchase fixed assets to be held by the Operating Company, the Operating Company must be a co-borrower on the loan Leasing a Portion of a Building:
• Clarified that both commercial and residential space will be included in overall square footage of the building and allowable occupancy rules apply (51% existing, 60% new construction) to all OREO Properties: • A liquidation value appraisal is no longer required. A fair market value appraisal is still required at time of application. Appraisals:
• The CDC and SBA must be named as client or intended user of the appraisal. The bank may also be named as the client or intended user. The borrower cannot be named as the client or intended user and the appraisal cannot be ordered by or prepared for the borrower Gas Stations: The Phase I Investigation must include a determination of whether the gas stations in compliance with all state requirements pertaining to tank and equipment testing. If in compliance, no additional equipment testing is required.
The 504 loan cannot be funded until full compliance is achieved and any leaking or defective equipment is replaced or repaired