{meta_title}

SBA 504 Q&A: Annual Loan Servicing Requirements

May 2017

Q: Once a Small Business Administration (SBA) 504 loan has funded and goes into repayment, will the borrower and operating company ever be required to provide the Certified Development Company (CDC, i.e., Florida First Capital) with more information?

A: Yes, at or prior to the 504 loan closing, the CDC must require the borrower and operating company to certify that they will:

1. Keep proper books of account in a manner satisfactory to the CDC;

2. Furnish year-end statements to CDC within 120 days of fiscal year end;

3. Furnish additional financial statements or reports whenever the CDC requests them;

4. Allow the CDC or SBA, at borrower or operating company's expense, to:

a) Inspect and audit books, records and papers relating to the borrower's and operating company's financial or business condition; and

b) Inspect and appraise any of the borrower's and operating company's assets; and

c) Allow all government authorities to furnish reports of examinations, or any records pertaining to the borrower and operating company, upon request by the CDC or SBA.

This is outlined in both the SBA Authorization for Debenture Guarantee as well as the SBA Form 2289 Borrower and Operating Company Agreement.

In addition to these requirements, all necessary insurance coverage must be maintained as stated in the loan authorization for the life of the loan and evidence of any cancellations and renewals provided to the CDC on an annual basis. If the CDC cannot verify that property taxes have been paid it will request proof of payment for those as well.

All of this this information is necessary to allow the CDC to fully service the loan as required by the SBA and most if not all of the documentation requested is typically also required by the first mortgage lender and can be easily reproduced.

The CDC's goal is to keep a fair balance between minimizing the workload for its borrowers as much as it can while still meeting the mandates of the SBA.

If you have a question you'd like our SBA 504 loan experts to answer, email us atinfo@ffcfc.comor call850.681.3601 or toll-free at 888.320.5504.