December 15, 2017                                                          TIMELY. RELEVANT. NEWSWORTHY. 


Note: IVES and IRS transcript delays

The IRS has been updating their the transcript request process. IRS has also strengthened their access for the IVES system and users of this system. Existing users of IVES will need to update their account by providing more information (mobile phone number and tax information) in order for IRS to authenticate identities.  For new users, additional steps will be required including providing emails, mobile phone number, tax information and personal financial account information. This new IRS requirement is intended better protect the personal information of all taxpayers. More information on the recent changes >

NAGGL Video Update with Tony Wilkinson >

Borrowing Capacity: Availability of SBA guaranty dollars when applicant has or needs both 504 and 7(a) loans 

CORRECTION:  Thanks to a few eagle-eyed NAGGL members, an error was spotted in the "sequencing" example provided by SBA in the News Flash published on December 6.  See bullet #2 in the "Scenario", red font for the correction. We are republishing the entire Q&A.

Q: We have a question regarding an applicant's SBA loan/guaranty dollar availability; it seems that  each person we speak to has a different response. A borrower of ours owns a number of franchised gyms. The borrower currently has two 504 “green loans” with debentures totaling $1.8 million. The borrower also has an SBA 7(a) loan with a balance of $600,000.

How much 7(a) availability does the applicant have left? We’ve been told that the SBA 504 green loans do not apply against the 7(a) cap of $3.75 million outstanding guaranty dollars -- is that accurate? Furthermore, does the debenture debt get deducted from the 7(a) maximum outstanding guaranty dollars of $3.75 million, or from the $5 million maximum 7(a) loan? Help!

A: Per the Small Business Act which governs the 7(a) program, the maximum amount of a single loan to an applicant is $5,000,000 and the maximum SBA guaranty amount, including the guaranteed portion of all 7(a) loans that are outstanding together with the outstanding balances of all 504 debentures, may not exceed $3.75 million.

The Small Business Investment Act which governs the 504 program provides different requirements for 504 financing and allows an individual loan to be made in an amount up to $5.5 million, but only for projects involving energy public policy or manufacturing.

These different standards make the issue of the borrowing capacity available to a small business that either has an existing SBA loan(s) outstanding, or that is seeking both 7(a) and 504 financing at the same time, one that is always very confusing. So, in order to give you the best possible advice, we reached out to the 7(a) and 504 policy experts at SBA headquarters. The very detailed information below comes from two experts at SBA headquarters.

In your situation where the borrower is seeking additional financing under the 7(a) program, you would need to calculate the total dollar amount of all SBA guaranties currently outstanding. The formula to use is:

$3.75 million [maximum 7(a) guaranty limit] minus any outstanding 7(a) + 504 [including energy public policy and manufacturing]   

 So, assuming that the outstanding balance on the existing 7(a) loan is $600,000 and that the SBA guaranteed share of that amount is $450,000 (75% guaranty), and that the current outstanding balances of the 504 debentures total $1.8 million, the math would be:  

Total guaranty amount allowed to a borrower + affiliates



Minus any outstanding guaranteed ($600,000 x .75)

- 450,000


Minus balance outstanding on all 504 debentures



Total guaranty availability under 7(a) loan program =



Therefore, based on the information in the lender's question and assuming the balances and 7(a) guaranty figures are correct, the borrower could be eligible for a new $2,000,000 7(a) loan with a 75% guaranty ($2,000,000 X 75% guaranty = $1.5 million).    

** SBA note: “The lender states there are two outstanding SBA 504 “green loans”, which we assume are 504 loans meeting the Energy Public Policy requirements. While Energy Public Policy loans have an increased debenture limit of $5,500,000, the current SOP 50 10 5 (I) provides, “There can be more than one Project (for small manufacturers and eligible energy projects) for the same applicant or for its affiliates provided that SBA determines that each Project meets prudent lending standards.The $5,500,000 per Project is not reduced by other prior SBA loan amounts outstanding because the $5,500,000 is a limit per Project not a limit for each small business concern.” This language means if the borrower has a 7(a) loan for the maximum $5,000,000 amount and maximum $3,750,000 guaranteed portion, they may still obtain a $5,500,000 504 debenture, if they meet the requirements of the small manufacturer or energy public policy goals; however, such a provision does not work in the reverse – that is, if the borrower already has a $5,500,000 energy public policy 504 debenture, they no longer have availability to borrow under the 7(a) loan program as they have exceeded the 7(a) guaranteed loan limit of $3,750,000. The borrower, however, is permitted to obtain other 504 loans IF they meet the small manufacturer or energy public policy goal provisions. Be aware that SOP 50 10 5 (J) will limit the total debenture amount under the Energy Public Policy goals to a total maximum outstanding debenture/guaranty amount of $16,500,000.”
As to the more general issue of how the 7(a)/504 maximums are calculated when the loans are being requested at the same time, the SBA experts also said:  

Generally, the sequence of 504 and 7(a) is important, although it was not critical in the question provided by the lender.

So, let’s look at another example where the sequencing of 7(a) 504 loans would be critical:

SCENARIO:  Small business wants to apply for a $5.5 million in a 504 energy public policy/or manufacturing loan for their land and building for Location 1. They also want to apply for SBA financing for Location 2 and plan to use 504 with no policy initiatives for $4 million in land and building and $1 million for 7(a) for working capital.

What needs to be considered to maximize the SBA authority for both projects?

SBA understands the complexity of this topic, but it believes that it is helpful for lenders and CDCs to provide the formula, the sequencing explanation and some pretty straight forward deal structure examples and caveats to convey these concepts.

Attention SBLCs & NRFLs
Federal Register 60-day notice and request for comments - due January 16, 2018
"Small Business Lending Companies (SBLCs) and Non-federally regulated lenders (NFRLs). ... As sole regulator of these institutions, SBA requires them to submit audited financial statements annually as well as interim, quarterly financial statements and other reports to facilitate the Agency’s oversight of these lenders." Comment on whether this information is necessary for agency to properly perform its function, burden estimates are accurate, and more. See the FR Notice for details >

Urgent Need for new success stories

We need borrower success stories! 

We regularly share details of a 7(a) borrower's success with The Hill. Our treasure chest of stories needs to be replenished. PLEASE Send them our way >

Just a few simple facts are all we need to get started: Business name, location of business, type of business, jobs created or supported, when the 7(a) loan was made, amount of the loan (include total financing), use of proceeds & congressional district (if known).



Version 13 of Servicing & Liquidation Actions Matrix remains current
Reminder:  Version 13 of the Matrix should be used

Prudent Liquidation Deadline was December 1, 2017
NAGGL has reminded lenders many times about the 2-year Prudent Liquidation requirement (most recently in the September 8 News Flash, which includes a long article Correcting Misperceptions About SBA's Prudent Liquidation Requirements).  Don't delay -- resolve your loans or request an extension to avoid enforcement action. (See p. 143 of SOP 50 57 2 for possible consequences of failure to comply with the prudent liquidation deadline, including having to "purchase the loan back from SBA".) 

Template: Request extension of 2-year Prudent Liquidation deadline >

Link to the NEW SBA Franchise Directory >

SOP 50 10 5(J) published with effective date of January 1, 2018

SBA Information Notice 5000-17008

Notice 5000-17009
Annual Franchisor Certification SBA Form 2464

SBA Form 1919 >
SBA Form 1920 >
SBA Form 1971 >
SBA Form 2237 >
SBA Form 2449 >

PDF of FY 2018 fees chart >

SBA announces new Express Bridge Loan Pilot Program to provide assistance in declared disaster areas


FIRST MEETING! We had our first face-to-face Individual Member meeting during the Annual Conference in Colorado Springs, and although it was early in the morning, 30 intrepid IMs enjoyed a short presentation by CEO Tony Wilkinson and VP Kristen Granchelli on FY 2017 gross lending results and the characteristics of the 7(a) portfolio FY 2012-FY 2017, followed by a primer that helped Individual Members to better understand the critically important role of the NAGGL PAC. Finally, we enjoyed a special speaker, Skiffington Holderness, Chief of Staff for the chairman of the Senate Committee on Small Business and Entrepreneurship. 

New membership add-on available - Individual Membership
Interested in better understanding the ins & outs of government relations as it relates to the 7(a) program? Want to know how to best communicate with your congressional representatives and the agency while getting involved with NAGGL leadership and learning about our PAC? Add an Individual Membership to your existing NAGGL membership! Voluntary enrollment is open to ANY interested existing NAGGL Member

 FAQ >

What are the additional benefits of an individual membership?

More, including application >

Register >


January 11 – WEBExpress: Evolution of an SBA Loan Default
February 22-23 – SBA Lender Leadership Summit (Austin, TX) [Registration is Open -- A FEW spots remain for lending members only!]
March 12-15 – Classroom Training Courses (Long Beach, CA)
April 30-May 3 – Classroom Training Courses & Technical Conference (Chicago, IL)

National Association of Government Guaranteed Lenders, Inc.
215 East 9th Avenue | Stillwater, OK 74074 | 405.377.4022 | |

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