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SBA 504 Q&A: Changes in Ownership After Debenture Loan Funding

May 2019

Q: Can a Small Business Administration (SBA) 504 borrower obtain approval for a change of ownership immediately after debenture loan funding?

A: Frequently after an SBA loan has been fully disbursed, and the debenture has funded, circumstances change and give rise to the need for borrower servicing requests. However, a request for approval of any change of ownership must be reviewed, analyzed and implemented pursuant to both the requirements of the SBA's 504 Loan Servicing and Liquidation SOP 50-55 as well as the recent SBA Procedural Notice 5000-19009, effective April 1, 2019, which states as follows:

SBA Lenders, including those with delegated authority, may not unilaterally approve any adjustment to or change in the ownership of a Borrower, including a change in percentage of ownership, for 12 months after final disbursement on any 7(a) or 504 loan. Effective April 1, 2019, such changes require SBA's prior approval.

SBA is making corresponding changes to the procedure set forth in SOPs 50 55, 504 Loan Servicing and Liquidation, and 50 57 2, 7(a) Loan Servicing and Liquidation.

In order to obtain SBA's prior approval of such changes, SBA Lenders must submit a request to the appropriate Commercial Loan Servicing Center (CLSC), as identified in SOP 50 55, Chapter 2 and SOP 50 57 2, Chapter 2. The request must include the reason for the change(s), the details of the requested action, along with the recommendation of the SBA Lender. The appropriate CLSC will make its determination after:

1. Verification that the proposed changes to the ownership of the Borrower comply with limitations on the aggregate amount of SBA portions of all loans to a Borrower, including affiliates; and
2. Verification that there has been no prior loss to the Government caused by the new owner(s) or any business owned, operated or controlled by the new owner(s).

In addition to the new requirements as outlined above, all other requirements for servicing requests remain in place for SBA consideration of approval.

While it is the policy of Florida First Capital to petition for approval on behalf of the borrower at submission of all servicing actions, it is important to note final approval authority rests solely with the SBA.

If you have a question you'd like our SBA 504 loan experts to answer, email us at info@ffcfc.com or call 850.681.3601 or toll-free at 800.504.LOAN.