Wednesday, June 5, 2024

SBA has issued Procedural Notice 5000-857477, Updates to SOP 50 10 7.1 and SOP 50 45 3 Related to the Criminal Justice Final Rule (notice effective May 31, 2024). The notice supplements and formalizes the message transmitted by the deputy, 7(a) eligibility, on May 29, and has the following purposes:

  • To inform all SBA employees, SBA Lenders, SBA Sureties, and SBA Microlenders of the publication, on April 30, 2024, of the “Criminal Justice Reviews for the SBA Business Loan Programs, and Surety Bond Guaranty Program” final rule (89 FR 34094), and,
  • To revise the applicable provisions of relevant SBA Standard Operating Procedures (SOPs). 

As noted in previous NAGGL summaries, the Final Rule, which took effect on May 30, 2024, among other things, amended 13 CFR 120.110(n) to remove the regulatory restrictions that previously made a business with an associate who was on parole or probation ineligible for a 7(a) or 504 loan. Per the revised regulation, a business with an associate “who is currently incarcerated, serving a sentence of imprisonment imposed upon adjudication of guilty, or is under indictment for a felony or any crime involving or relating to financial misconduct or a false statement” remains ineligible.  

According to the notice, SBA Form 1919, SBA 7(a) Borrower Information Form, Question #4 (page 2), will be revised to read as follows: “4. Is the Applicant or any Associate of the Applicant currently incarcerated, serving a sentence of imprisonment imposed upon adjudication of guilty, or is under indictment for a felony or any crime involving or relating to financial misconduct or a false statement? (if “Yes” the Applicant is not eligible for SBA Financial Assistance.)” However, the revised form is not yet available.  So, applicants are required to use the existing 1919 form and if the applicant answers “yes” to current question 4, the lender “must determine whether the Applicant is eligible for a 7(a) loan based on the Criminal Justice Rule’s requirements, and … document the results in the loan file”. 

Please see the notice for additional information, including the eligibility requirements applying to the 504, Microloan and surety bond guaranty programs.