1. Office of Capital Access
504 Quarterly Connect Call
Office of Capital Access
September 12, 2017

2. Agenda
Bill Manger – Welcome, Loan Activity Dianna Seaborn – OFA Updates Susan Streich – OCRM Updates Stephen Kucharski – OPSM Updates Jihoon Kim – OFPO Updates Chris Webb – OEO Updates Jennifer Bledsoe & Tamara Murray – OSG Updates

3. Office of Capital Access
William Manger, Associate Administrator

4. Year to Date 7(a) and 504
as of 8/31/17

5. Year to Date – 7(a) Small Dollar Loans
as of 8/31/17

6. Office of Financial Assistance
Dianna Seaborn, Director

7. SBA Fees effective October 1, 2017, per Policy Notice 5000-1954:
For 504 loans approved during FY 18:
The upfront guaranty fee for 504 borrowers will continue to be zero in FY18. The annual service fee is reduced to 0.642% (64.2 basis points) of the outstanding balance of the loan.
For 504 Debt Refinance loans (without expansion) approved during FY 18:
The upfront guaranty fee for 504 borrowers will continue to be zero in FY18. The annual service fee is reduced to 0.642% plus 0.04%, for a total of .682% (64.2 basis points plus 4 basis points) of the outstanding balance of the loan.

8. “Catch-All” Final Rule – published 8/21/17
The changes become effective 9/20/2017 with the exception of the changes to § which are effective 10/20/2017.
CDC Board requirements updated:
§ CDC Board of Directors
Removed “Board Overlap” issue - CDC Board members may serve on other Boards (but not on another CDC’s Board)
Loan Committee Members no longer have to be chosen from Board, membership, or stockholders, but must be qualified.

9. “Catch-All” Rule (cont.)
Eligible Passive Company rule changes:
§ What conditions must an Eligible Passive Company satisfy?
EPC owner(s) can sell to remaining EPC owners.
Limitation of OC Lease payment to EPC.
Guaranties of owners with < 5% interest.
“Lender” becomes “SBA Lender”.
SBA amended § to permit loan proceeds to be used to finance a change of ownership between existing owners of the Eligible Passive Company (EPC). SBA does not intend for this regulation to be used to finance a change of ownership in an EPC that has only been in existence for a limited period of time. This regulatory change is intended to assist with the preservation of a business that might otherwise cease operations due to the departure of an owner, as opposed to simply facilitating the withdrawal of capital out of the business. SBA is including in SOP (J) further guidance on when an EPC may use loan proceeds to finance a change of ownership between existing owners.
SBA also amended §  (a)(3) to clarify that rent or lease payments made by the OC to the EPC cannot exceed the amount necessary to make the loan payment to the lender, and additional amounts to cover the EPC's direct expenses of holding the property, such as maintenance, insurance and property taxes. SBA still prohibits the financing of real estate for investors or landlords. While SBA permits eligible EPCs to hold certain assets financed for the benefit of the OC, it is not the intent of SBA to permit the EPC to profit from its relationship with the OC. It is SBA's positon that routine maintenance costs, Project debt payments, and repairs are already included in the permissible direct expenses of holding the property and as such would be permissible under the regulation. Additional guidance on this issue will be placed in SOP (J).
SBA added language to §  (a)(6) to provide the Agency may, in its discretion and in consultation with the SBA Lender, require the guaranty of individuals or entities with less than 20 percent ownership of the EPC or the OC when circumstances warrant. In 2010, the Small Business Jobs Act of 2010, Public Law , 124 Stat (September 27, 2010) (the “2010 Jobs Act”) increased the maximum loan size for 7(a) and 504 Loans. SBA now receives more loan requests from applicants with multiple owners who may hold less than 20 percent of the company regardless of managerial responsibilities, corporate titles or ownership interest, if any.
It is prudent for SBA to require a lender to obtain a guaranty when one or more individuals or entities have the authority and responsibility to manage operations regardless of their ownership interest in the applicant business. SBA will generally not require individuals or entities with less than 20 percent ownership of the applicant business to guarantee the loan when the lender obtains a guaranty from those with 20 percent or more ownership interest. SBA considered and accepted the recommendation of commenters to include the authority for delegated lenders to obtain full or limited guaranties from appropriate individuals or entities regardless of their ownership interest in the EPC or the OC, and is modifying the rule to state that SBA and, for loans processed under a SBA Lender's delegated authority, the SBA Lender, may determine when credit or other reasons make it necessary to obtain a full or limited guaranty from appropriate individuals or entities. SBA will provide additional guidance on the guaranty requirements in SBA SOP (J). In addition, as stated above, SBA is modifying §  (a)(6) to replace the term “Lender” with “SBA Lender” to permit CDC’s to require an individual with <5% ownership interest if they determine that individual is key to the Project or is managing the EPC or OC.

10. SBA Form 1244/SBA Form 912
Revised SBA Form 1244 published August 8, 2017
SBA has permitted a 90-day grace period to transition to new form/allow applications which were already begun on previous version(s) of the form to be processed
New applications should use the current version of the form.
Submissions of SBA Form 912 have decreased – thank you!
Training materials on form/process changes available! Contact your District Office or NADCO.

11. IRS Form 4506T IRS has issued a new version of its Form 4506T
SBA logo has no effect on cost or processing time of Form 4506T
CDCs should use the most current version published by IRS.

12. 504 Loan Program Features Regular 504 Loans: 504 Debt Refinancing:
Multi-use – Land/Building/Equipment – up to $5 M
Special-use – additional 5% equity
Start-ups – additional 5% equity
Energy Efficiency – 10% reduction or alternate – up to $5.5 M
Manufacturing – up to $5.5 M
504 Debt Refinancing:
Refi without expansion – up to $5 M
Refi with expansion – up to $5M

13. Office of Credit Risk Management Update
Susan Streich, Director (Acting)

14. Office of Financial Program Operations
Jihoon Kim, Director (Acting)
Susan Suckfiel, Supervisory Financial Analyst
Hien Nguyen, Director, SLPC

15. Office of Performance Management Systems
Stephen Kucharski, Director

16. Office of Economic Opportunity
Chris Webb, Acting Chief, Community Advantage

17. Office of Economic Opportunity The Symbiotic Lending Products for Mission Lending

18. Office of Economic Opportunity (OEO) Overview
Loan Guaranty – up to $250K – Mission-Driven Lenders
Community Advantage (CA)
Direct Loans – up to $50K – Non-profit Lenders
Technical Assistance Grants
Microloan Program
Grants up to $250K
Technical Assistance
Capacity Building
Research and Development
PRIME Grant Program

19. Ladder of Opportunity SBA Program Tiers
3. 7(a) – Bank Serviced
Maximum loan size $5 Million.
Available through participating lenders.
Longer loan maturity terms available
Ten years for working capital, inventory, and equipment
2. Community Advantage – Max Loan Size $250,000
Maximum Loan Size $250,000.
Many Community Advantage Lenders offer Technical Assistance.
1. Microloan Program – Max Loan Size $50,000
- Maximum Loan Size $50,000.
Network of Non-Profit Intermediaries who offer Small Business Technical Assistance and training.
Many Non-Profits specialize in Startups.

20. Community Advantage Program Parameters
$250,000
Maximum loan size
Prime + 6%
Maximum interest rate
5% cash reserve on unguaranteed portion of loan
LLRF requirement
60% of the number of CA loans must be in underserved markets
Markets served
Highly encouraged but not a requirement for the program
Management and technical assistance
Underserved markets include: Low-to-Moderate Income (LMI) Communities, Empowerment Zones and Enterprise Communities, new businesses (in business for no more than two years), businesses where full-time workforce is > 50% low-income and/or resides in LMI census tracts, and businesses eligible for Patriot Express
Reserve requirements reduced: base reserve 5% on unguaranteed portion, additional reserve requirement of 3% of guarantees sold on secondary market

21. Key Community Advantage Program Features
90% guaranty for International Trade loans
85% guaranty for loans of $150,000 or less
75% guaranty for loans greater than $150,000
Percent of Guaranty
Maximum of 10 years for working capital
Maximum of 10 years or useful life for equipment
Maximum of 25 years for real estate
Maturity
0.25% for maturities ≤ 12 months (guaranteed portion)
For maturities > 12 months
2.0% for CA loan ≤ $150,000 (guaranteed portion, lender can retain ¼ fee)
3.0% for CA loan > $150,000 (guaranteed portion, full fee paid to SBA)
0.55% on-going guaranty fee paid by lender
Guaranty Fees

22. Symbiotic Relationship Cont.
WHO ARE APPROVED CA LENDERS?
February 2011 to June 30, 2017
121 Approved CA Lenders
58 SBA Microlenders
49 SBA CDCs
80 Treasury-certified CDFIs
Many CA lenders have more than one designation – for instance 12 lenders are approved as a CDC, CDFI and Microlender
49 CDCs 29
58 Microlenders 5 3 7 12 34 31
80 CDFIs

23. Community Advantage: FY17 to 6/30/17
Top 10 CA Lenders
# Approved
$ Approved
CDC Small Business Finance Corp. 81
$12,581,300
PeopleFund 67
$7,189,000
Main Street Launch 47
$7,280,300
LiftFund, Inc. 32
$4,510,800
Business Development Finance Corporation
$4,093,700
Accion New Mexico
$2,960,000
Empire State Certified Development Corp 29
$4,228,500
Carolina Small Business Development Fund 28
$3,062,000
Growth Capital Corp. 27
$1,698,900
Women's Wisconsin Business Initiative Corporation 25
$3,046,300

24. Questions and Point of Contact
Manny Hidalgo, Director
Phone

25. Office of Surety Guaranties
Jennifer Bledsoe and Tamara Murray
Underwriting Marketing Specialists

26. OSG Contact Info
Jennifer Bledsoe
Tamara Murray

27. Questions