SBA Issues New Standard Operating Procedures (SOPs)

For the first time since December of 1997, SBA has rewritten its SOP, the manual by which SBA loans are approved, closed and funded. The new SOPs will be effective June 15, 2008. Many of our banking partners have seen the new SOPs and expressed concerns over some of the policy changes made by SBA, including new appraisal and environmental policies. During a recent marathon discussion with SBA at our trade association’s Annual Meeting, SBA agreed to a number of changes, and we anticipate a revision to the SOP prior to its implementation. No significant changes will be made to the new policies and procedures for gas station properties, and based on the documentation that will be required, we do not believe that gas station properties are viable SBA financing candidates.

Additionally, we want to provide our bankers with advance notice of a new appraisal requirement. SBA must be included as a party to the appraisal at the time the engagement letter is sent to the appraiser. Reliance letters will not be acceptable (according to SBA, the Appraisal Institute has informed them that a reliance letter does not provide the same protections as being named in the initial process).

SBA was still reviewing changes to environmental considerations, but it appears that we will need to get a records review and risk assessment to accompany environmental questionnaires, and SBA will require reliance in the form of a signed letter from all environmental consultants when a TSA, Phase I or other professional environmental study is performed.

When the revised SOP is made available and we are better able to assess its impact, we will provide training for our bankers – stay tuned!