13 C.F.R. Subpart D—Lenders
Title 13 - Business Credit and Assistance
SBA may enter into a Loan Guarantee Agreement with a Lender to make deferred participation (guaranteed) loans. Such an agreement does not obligate SBA to participate in any specific proposed loan that a Lender may submit. The existence of a Loan Guarantee Agreement does not limit SBA's rights to deny a specific loan or establish general policies. See also §§120.441(b) and 120.451(d) concerning Supplemental Guarantee Agreements. Participation Criteria A Lender must: (a) Have a continuing ability to evaluate, process, close, disburse, service and liquidate small business loans; (b) Be open to the public for the making of such loans (not be a financing subsidiary, engaged primarily in financing the operations of an affiliate); (c) Have continuing good character and reputation, and otherwise meet and maintain the ethical requirements of §120.140 (d) Be supervised and examined by a State or Federal regulatory authority, satisfactory to SBA; and (e) In order to make Low Documentation loans, be: (1) A bank or thrift institution which has executed an SBA Form 750, Loan Guaranty Agreement, and which has at least 20 qualified loans outstanding as of the call report date closest to the date of its fiscal year end, or (2) An institution other than a bank or thrift institution which has executed an SBA Form 750, Loan Guaranty Agreement, and which has at least 20 qualified loans outstanding as of its latest fiscal year end. For purposes of this paragraph (e), a qualified loan is one which was initially approved in the amount of $100,000 or less and is classified as a commercial, industrial or commercial real estate loan for purposes of call reporting. A lender may request an exception to the requirements of this paragraph (e) from the SBA Associate Administrator for Financial Assistance. [61 FR 3235, Jan. 31, 1996, as amended at 62 FR 302, Jan. 3, 1997] An agreement to participate under the Act may not establish any Preferences in favor of the Lender. Subject to §120.140 Lenders, their Associates or the designees of either may provide services to and contract for goods with a Borrower only after full disbursement of the loan to the small business or to an account not controlled by the Lender, its Associate, or the designee. A Lender, an Associate, or a designee providing such services must do so under a written contract with the small business, based on time and hourly charges, and must maintain time and billing records for examination by SBA. Fees cannot exceed those charged by established professional consultants providing similar services. See also §120.195. A Lender may refer in its advertising to its participation with SBA. The advertising may not: (a) State or imply that the Lender, or any of its Borrowers, has or will receive preferential treatment from SBA; (b) Be false or misleading; or (c) Make use of SBA's seal. Miscellaneous Provisions A Lender must allow SBA's authorized representatives, during normal business hours, access to its files to review, inspect and copy all records and documents relating to SBA guaranteed loans. [61 FR 3235, Jan. 31, 1996. Redesignated at 64 FR 6509, Feb. 10, 1999] SBA may suspend or revoke the eligibility of a Lender to participate in the 7(a) program because of a violation of SBA regulations, a breach of any agreement with SBA, a change of circumstance resulting in the Lender's inability to meet operational requirements, or a failure to engage in prudent lending practices. Proceedings for such purposes will be conducted in accordance with the provisions of part 134 of this chapter. A suspension or revocation will not invalidate a guarantee previously provided by SBA. [61 FR 3235, Jan. 31, 1996. Redesignated at 64 FR 6509, Feb. 10, 1999] Participating Lender Financings Source: Sections 120.420 through 120.428 appear at 64 FR 6507–6509, Feb. 10, 1999, unless otherwise noted.
(a) 7(a) Loans—All references to 7(a) loans under this subpart include loans made under section 7(a) of the Small Business Act (15 U.S.C. 631 et seq.) and loans made under section 502 of the Small Business Investment Act (15 U.S.C. 661 et seq.), both of which may be securitized under this subpart. (b) Bank Regulatory Agencies—The bank regulatory agencies are the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. (c) Benchmark Number—The maximum number of percentage points that a securitizer's Currency Rate can decrease without triggering the PLP suspension provision set forth in §120.425. SBA will publish the Benchmark Number in the (d) Currency Rate—A securitizer's “Currency Rate” is the dollar balance of its 7(a) guaranteed loans that are less than 30 days past due divided by the dollar balance of its portfolio of 7(a) guaranteed loans outstanding, as calculated quarterly by SBA, excluding loans approved in SBA's current fiscal year. (e) Currency Rate Percentage—The relationship between the securitizer's Currency Rate and the SBA 7(a) loan portfolio Currency Rate as calculated by dividing the securitizer's Currency Rate by the SBA 7(a) loan portfolio Currency Rate. (f) Good Standing—A Lender is in “good standing” with SBA if it: (1) Is in compliance with all applicable: (i) Laws and regulations; (ii) Policies; and (iii) Procedures; (2) Is in good financial condition as determined by SBA; (3) Is not under investigation or indictment for, or has not been convicted of, or had a judgment entered against it for a felony or fraud, or charges relating to a breach of trust or violation of a law or regulation protecting the integrity of business transactions or relationships; and (4) Does not have any officer or employee who has been under investigation or indictment for, or has been convicted of, or had a judgment entered against him for a felony or fraud, or charges relating to a breach of trust or violation of a law or regulation protecting the integrity of business transactions or relationships unless, the Securitization Committee has determined that good standing exists despite the existence of such person. (g) Initial Currency Rate—The Initial Currency Rate (ICR) is the securitizer's benchmark Currency Rate. SBA will calculate the securitizer's ICR as of the end of the calendar quarter immediately prior to the first securitization completed after April 12, 1999. This calculation will include all 7(a) loans which are outstanding and were approved in any fiscal year prior to SBA's current fiscal year. Each quarter, SBA will compare each securitizer's Currency Rate to its ICR. (h) Initial Currency Rate Percentage—The Initial Currency Rate Percentage (ICRP) measures the relationship between a securitizer's Initial Currency Rate and the SBA 7(a) loan portfolio Currency Rate at the time of the first securitization after April 12, 1999. The ICRP is calculated by dividing the securitizer's Currency Rate by the SBA 7(a) loan portfolio Currency Rate. SBA will calculate the securitizer's ICRP as of the end of the calendar quarter immediately prior to the first securitization completed after April 12, 1999. (i) Loss Rate—A securitizer's “loss rate,” as calculated by SBA, is the aggregate principal amount of the securitizer's 7(a) loans determined uncollectable by SBA for the most recent 10-year period, excluding SBA's current fiscal year activity, divided by the aggregate original principal amount of 7(a) loans disbursed by the securitizer during that period. (j) Nondepository Institution—A “nondepository institution” is a Small Business Lending Company (“SBLC”) regulated by SBA or a Business and Industrial Development Company (“BIDCO”) or other nondepository institution participating in SBA's 7(a) program. (k) Securitization—A “securitization” is the pooling and sale of the unguaranteed portion of SBA guaranteed loans to a trust, special purpose vehicle, or other mechanism, and the issuance of securities backed by those loans to investors in either a private placement or public offering. All SBA participating Lenders may securitize subject to SBA's approval. All securitizations are subject to this subpart. Until additional regulations are promulgated, SBA will consider securitizations involving multiple Lenders on a case by case basis, using the conditions in §120.425 as a starting point. SBA will consider securitizations by affiliates as single Lender securitizations for purposes of this subpart. A Lender may only securitize 7(a) loans that will be fully disbursed within 90 days of the securitization's closing date. If the amount of a fully disbursed loan increases after a securitization settles, the Lender must retain the increased amount. To securitize, a Lender must: (a) Be in good standing as determined by the Associate Administrator for Financial Assistance (AA/FA); (b) Use a securitization structure which is satisfactory to SBA; (c) Use documents acceptable to SBA, including SBA's model multi-party agreement, as amended from time to time; (d) Obtain SBA's written consent, which it may withhold in its sole discretion, prior to executing a commitment to securitize; and (e) Cause the original notes to be stored at the FTA, as defined in §120.600, and other loan documents to be stored with a party approved by SBA. A securitizer must comply with the following three conditions: (a) Capital Requirement—All securitizers must be considered to be “well capitalized” by their regulator. SBA will consider a depository institution to be in compliance with this section if it meets the definition of “well capitalized” used by its bank regulator. SBA's capital requirement does not change the requirements that banks already meet. For nondepository institutions, SBA, as the regulator, will consider a non-depository institution to be “well capitalized” if it maintains a minimum unencumbered paid in capital and paid in surplus equal to at least 10 percent of its assets, excluding the guaranteed portion of 7(a) loans. The capital charge applies to the remaining balance outstanding on the unguaranteed portion of the securitizer's 7(a) loans in its portfolio and in any securitization pools. Each nondepository institution must submit annual audited financial statements demonstrating that it has met SBA's capital requirement. (b) Subordinated Tranche—A securitizer or its wholly owned subsidiary must retain a tranche of the securities issued in the securitization (subordinated tranche) equal to the greater of two times the securitizer's Loss Rate or 2 percent of the principal balance outstanding at the time of securitization of the unguaranteed portion of the loans in the securitization. This tranche must be subordinate to all other securities issued in the securitization including other subordinated tranches. The securitizer or its wholly owned subsidiary may not sell, pledge, transfer, assign, sell participations in, or otherwise convey the subordinated tranche during the first 6 years after the closing date of the securitization. The securities evidencing the subordinated tranche must bear a legend stating that the securities may not be sold until 6 years after the issue date. SBA's Securitization Committee may modify the formula for determining the tranche size for a securitizer creating a securitization from a pool of loans located in a region affected by a severe economic downturn if the Securitization Committee concludes that enforcing this section might exacerbate the adverse economic conditions in the region. SBA will work with the securitizer to verify the accuracy of the data used to make the Loss Rate calculation. (c) PLP Privilege Suspension. (1) Suspension: If a securitizer's Currency Rate declines, SBA may suspend the securitizer's PLP unilateral loan approval privileges (PLP approval privileges) if the decline from the securitizer's ICR is more than the Benchmark Number as published in the (2) Reinstatement: The suspension will remain in effect until the securitizer meets either the condition in paragraph (c)(1)(i) or (c)(1)(ii) of this section. If the securitizer meets either condition by the end of the 3-month period, notifies SBA with acceptable documentation, and SBA agrees, SBA will reinstate the securitizer. If the securitizer cannot meet either condition, the suspension will remain in effect. The securitizer may then petition the SBA Securitization Committee (Committee) for reinstatement. The Committee will review the reinstatement petition and determine if the securitizer's PLP approval privilege and securitization status should be reinstated. The Committee may consider the economic conditions in the securitizer's market area, the securitizer's efforts to improve its Currency Rate, and the quality of the securitizer's 7(a) loan packages and servicing. The Committee will consider only one petition by a securitizer per quarter. (3) The Benchmark Number. SBA will monitor the Benchmark Number. If economic conditions or policy considerations warrant, SBA may modify the Benchmark Number to protect the safety and soundness of the 7(a) program. (4) Data. SBA will calculate Currency Rate and Currency Rate Percentages quarterly from financial information that securitizers provide. SBA will work with a securitizer to verify the accuracy of the data used to make the Currency Rate calculation. [64 FR 6508, Feb. 10, 1999, as amended at 65 FR 49481, Aug. 14, 2000] If a securitizer transfers the subordinated tranche prior to the termination of the holding period, SBA will suspend immediately the securitizer's ability to make new 7(a) loans. The securitizer will have 30 calendar days to submit an explanation to SBA's Securitization Committee (“Committee”). The Committee will have 30 calendar days to review the explanation and determine whether to lift the suspension. If an explanation is not received within 30 calendar days or the explanation is not satisfactory to the Committee, SBA may transfer the servicing of the applicable securitized loans, including the securitizers' servicing fee on the guaranteed and unguaranteed portions and the premium protection fee on the guaranteed portion, to another SBA participating Lender. If a securitizer does not maintain the level of capital required by this subpart, SBA will not approve a securitization application from that securitizer. The securitizer must continue to service and liquidate loans according to its PLP Supplemental Agreement. Other Conveyances Source: Sections 120.430 through 120.435 appear at 64 FR 6509, 6510, Feb. 10, 1999, unless otherwise noted.
Sections 120.430 through 120.435 cover all other transactions in which a Lender sells, sells a participating interest in, or pledges an SBA guaranteed loan other than for the purpose of securitizing and other than conveyances covered under Subpart F, Secondary Market, of this part. All Lenders may sell, sell participations in, or pledge 7(a) loans in accordance with this subpart. (a) A Lender may sell all of its interest in a 7(a) loan to another Lender operating under a current Loan Guarantee Agreement (SBA Form 750) (“participating Lender”), with SBA's prior written consent, which SBA may withhold in its sole discretion. A Lender may not sell any of its interest in a 7(a) loan to a nonparticipating Lender. The purchasing Lender must take possession of the promissory note and other loan documents, and service the sold 7(a) loan. The purchasing Lender purchases the loan subject to SBA's existing rights including its right to deny liability on its guarantee as provided in §120.524. After purchase, the purchased loan will be subject to the purchasing Lender's Loan Guarantee Agreement. (b) A Lender may sell, or sell a participating interest in, a part of a 7(a) loan to another participating Lender. If the Lender retains ownership of a part of the unguaranteed portion of the loan equal to at least 10 percent of the outstanding principal balance of the loan, the Lender must give SBA prior written notice of the transaction, and the Lender must continue to hold the note and service the loan. If a Lender retains ownership of a part of the unguaranteed portion of the loan equal to less than 10 percent of the outstanding principal balance of the loan, the Lender must obtain SBA's prior written consent to the transaction, which consent SBA may withhold in its sole discretion. The Lender must continue to hold the note and other loan documents, and service the loan unless SBA otherwise agrees in its sole discretion. (c) For purposes of determining the percentage of ownership a Lender has retained, SBA will not consider a Lender to be the owner of the part of a loan in which it has sold a participating interest. SBA requires the following: (a) The Lender must be in good standing as determined by the AA/FA; and (b) In transactions requiring SBA's consent, all documentation must be satisfactory to SBA, including, if SBA determines it to be necessary, a multi-party agreement. (a) Except as set forth in §120.435, SBA must give its prior written consent to all pledges of any portion of a 7(a) loan, which consent SBA may withhold in its sole discretion; (b) The Lender must be in good standing as determined by the AA/FA; (c) All loan documents must be satisfactory to SBA and must include a multi-party agreement among SBA, Lender, the pledgee, FTA and such other parties as SBA determines are necessary; (d) The Lender must use the proceeds of the loan secured by the 7(a) loans only for financing 7(a) loans and for costs and expenses directly connected with the borrowing for which the loans are pledged; (e) The Lender must remain the servicer of the loans and retain possession of all loan documents other than the original promissory notes; (f) The Lender must deposit the original promissory notes at the FTA; and (g) The Lender must retain an economic interest in and the ultimate risk of loss on the unguaranteed portion of the loans. Notwithstanding the provisions of §120.434(d), 7(a) loans may be pledged for the following purposes without notice to or consent by SBA: (a) Treasury tax and loan accounts; (b) The deposit of public funds; (c) Uninvested trust funds; (d) Discount borrowings at a Federal Reserve Bank; or (e) Advances by a Federal Home Loan Bank. Certified Lenders Program (CLP) Under the Certified Lenders Program (CLP), designated Lenders process, close, service, and may liquidate, SBA guaranteed loans. SBA gives priority to applications and servicing actions submitted by Lenders under this program, and will provide expedited loan processing or servicing. All other rules in this part 120 relating to the operations of Lenders apply to CLP Lenders. [61 FR 3235, Jan. 31, 1996; 61 FR 7986, Mar. 1, 1996] (a) An SBA field office may nominate a Lender or a Lender may request a field office to consider it for CLP status. SBA district directors may approve and renew a Lender's CLP status. The district director will consider whether the Lender: (1) Has the ability to process, close, service and liquidate loans; (2) Has a satisfactory performance history with SBA, including the submission of complete and accurate loan guarantee application packages; (3) Has an acceptable SBA purchase rate; and (4) Has shown the ability to work well with the local SBA office. (b) If the district director does not approve a request for CLP status, the Lender may appeal to the AA/FA, whose decision will be final. If SBA grants CLP status, it applies only in the field office that processed the CLP designation. A CLP Lender must execute a Supplemental Guarantee Agreement that will specify a term not to exceed two years. The AA/FA may suspend or revoke CLP status upon written notice providing the reasons at least 10 business days prior to the effective date of the suspension or revocation. Reasons for suspension or revocation may include a loan performance record unacceptable to SBA, failure to make the required number of loans under the expedited procedures, or violations of applicable statutes, regulations or published SBA policies and procedures. A CLP Lender may appeal the suspension or revocation made under this section under procedures found in part 134 of this chapter. The action of the AA/FA remains in effect pending resolution of the appeal. Preferred Lenders Program (PLP) Under the Preferred Lenders Program (PLP), designated Lenders process, close, service, and liquidate SBA guaranteed loans with reduced requirements for documentation to and prior approval by SBA. (a) An SBA field office serving the area in which a Lender's office is located can nominate the Lender, or a Lender can request a field office to consider it for PLP status. The SBA field office will forward its recommendation to an SBA centralized loan processing center which will submit its recommendation and supporting documentation to the AA/FA for final decision. (b) In making its decision, SBA considers whether the Lender: (1) Has the required ability to process, close, service and liquidate loans; (2) Has the ability to develop and analyze complete loan packages; and (3) Has a satisfactory performance history with SBA. (c) If the Lender is approved, the AA/FA will designate the area in which it can make PLP loans. (d) Before it can operate as a PLP Lender, the approved Lender must execute a Supplemental Guarantee Agreement, which will specify a term not to exceed two years. (e) When a PLP's Supplemental Guarantee Agreement expires, SBA may recertify it as a PLP Lender for an additional term not to exceed two years. Prior to recertification, SBA will review a PLP Lender's loans, policies and procedures. The recertification decision of the AA/FA is final. (f) A PLP Lender may request an expansion of the territory in which it can process PLP loans by submitting its request to a loan processing center. The center will obtain the recommendation of each SBA office in the area into which the PLP Lender would like to expand its PLP operations. The center will forward the recommendations to the AA/FA for final decision. If a PLP Lender is not a CLP Lender in a territory into which it seeks to expand its PLP status, it automatically obtains CLP status in that territory when it is granted PLP status for the territory. (a) Subparts A and B of this part govern the making of PLP loans, except for the following: (1) Certain types of businesses, loans, and loan programs are not eligible for PLP, as detailed in published SBA policy and procedures. (2) A Lender may not make a PLP business loan which reduces its existing credit exposure for any Borrower, except in cases where an interim loan(s) has been made for other than real estate construction purposes to the Borrower which was approved by the Lender within 90 days of receipt of the issuance fo a subsequent PLP loan number. (3) SBA will not guarantee more than the specified statutory percentage of any PLP loan. (b) A PLP Lender notifies SBA of its approval of a PLP loan by submitting to SBA's loan processing center appropriate documentation signed by two of the PLP's authorized representatives. SBA will attach the SBA guarantee and notify the PLP Lender of the SBA loan number (if it does not identify a problem with eligibility, and funds are available). (c) The PLP Lender is responsible for all PLP loan decisions regarding eligibility (including size) and creditworthiness. The PLP Lender is also responsible for confirming that all PLP loan closing decisions are correct, and that it has complied with all requirements of law and SBA regulations. The PLP Lender must service and liquidate its SBA guaranteed loan portfolio (including its non-PLP loans) using generally accepted commercial banking standards employed by prudent lenders. The PLP Lender must liquidate any defaulted SBA guaranteed loan in its portfolio unless SBA advises in writing that SBA will liquidate the loan. The PLP Lender must submit a liquidation plan to SBA prior to commencing liquidation action. The PLP Lender may take any necessary servicing action, or liquidation action consistent with a plan, for any SBA guaranteed loan in its portfolio, except it may not: (a) Take any action that confers a Preference on the Lender; and (b) Accept a compromise settlement without prior written SBA consent. [61 FR 3235, Jan. 31, 1996, as amended at 64 FR 6510, Feb. 10, 1999] SBA may review the performance of a PLP Lender. SBA may charge the PLP Lender a fee to cover the costs of this review. The AA/FA may suspend or revoke PLP status upon written notice providing the reasons at least 10 business days prior to the effective date of the suspension or revocation. Reasons for suspension or revocation may include loan performance unacceptable to SBA, failure to make the required number of loans under the expedited procedures, or violations of applicable statutes, regulations or published SBA policies and procedures. A PLP Lender may appeal the suspension or revocation made under this section under procedures found in part 134 of this chapter. The action of the AA/FA remains in effect pending resolution of the appeal. Small Business Lending Companies (SBLC) A Small Business Lending Company (SBLC) is a nondepository lending institution licensed by SBA. SBA supervises, examines, and regulates SBLCs. An SBLC is subject to all applicable SBA regulations, including those governing Lenders. SBA has imposed a moritorium on licensing new SBLC's since January, 1982. (a) An SBLC may only make: (1) Loans under section 7(a) (except section 7(a)(13)) of the Act in participation with SBA; and/or (2) SBA guaranteed loans to micro-Lenders in the SBA Microloan program (see subpart G of this part). Such loans are subject to the same conditions as guaranteed loans made to SBA-designated microlenders by SBA participating Lenders. (b) In addition to complying with §§120.400 through 120.413, an SBLC must meet the following requirements: (1) Business structure. It must be a corporation (profit or non-profit). (2) Written agreement. It must sign a written agreement with SBA. (3) Capital structure. It must have unencumbered paid-in capital and paid-in surplus of at least $1,000,000, or ten percent of the aggregate of its share of all outstanding loans, whichever is more. (4) Capital impairment. It must avoid capital impairment at all times. Impairment exists if the retained earnings deficit of an SBLC exceeds 50 percent of combined paid-in capital and paid-in-surplus, excluding treasury stock. An SBLC must give SBA prompt written notice of any capital impairment within 30 calendar days of the month-end financial report that first reflects the impairment. Until the impairment is cured, an SBLC may not present any loans to SBA for guarantee. (5) Issuance of securities. Without prior written SBA approval, it must not issue any securities (including stock options and debt securities) except stock dividends and common stock issued for cash or direct obligations of, or obligations fully guaranteed as to principal and interest by, the United States. (6) Voluntary capital reduction. Without prior written SBA approval, it must not voluntarily reduce its capital, or purchase and hold more than 2 percent of any class or combination of classes of its stock. (7) Reserves for losses. It must maintain a reserve in the amount of anticipated losses on loans and receivables. (8) Internal control. It must adopt a plan designed to safeguard its funds and other assets, to assure the reliability of its personnel, and to maintain the accuracy of its financial data. (9) Dual control. It must maintain dual control over disbursement of funds and withdrawal of securities. An SBLC may disburse funds only by checks or wire transfers authorized by signatures of two or more officers covered by the SBLC's fidelity bond, except that checks in an amount of $1,000 or less may be signed by one bonded officer. There must be two or more bonded officers, or one bonded officer and a bonded employee to open safe deposit boxes or withdraw securities from safekeeping. The SBLC shall furnish to each depository bank, custodian, or entity providing safe deposit boxes a certified copy of the resolution implementing these control procedures. (10) Fidelity insurance. It must maintain a Brokers Blanket Bond, Standard Form 14, or Finance Companies Blanket Bond, Standard Form 15, or such other form of coverage as SBA may approve, in a minimum amount of $500,000 executed by a surety holding a certificate of authority from the Secretary of the Treasury pursuant to 31 U.S.C. 9304–9308. (11) Common control. It must not control, be controlled by, or be under common control with, another SBLC. Without prior written SBA approval, an Associate of one SBLC shall not be an Associate of another SBLC or of any entity which directly or indirectly controls or is under common control with another SBLC. (12) Management. An SBLC must employ full time professional management. (13) Borrowed funds. Without SBA's prior written approval, it must not be capitalized with borrowed funds. Shareholders owning 10 percent or more of any class of its stock shall not use borrowed funds to purchase the stock unless the net worth of the shareholders is at least twice the amount borrowed or unless the shareholders receive SBA's prior written approval for a lower ratio. Each SBLC must comply with the following requirements concerning records: (a) Maintenance of Records. It must maintain accurate and current financial records, including books of account, minutes of stockholder, directors, and executive committee meetings, and all documents and supporting materials relating to the SBLC's transactions at its principal business office. Securities held by a custodian pursuant to a written agreement shall be exempt from this requirement. (b) Preservation of records. (1) It must preserve in a manner permitting immediate retrieval the following documentation for the financial statements required by §120.472 (and of the accompanying certified public accountant's opinion), for the following specified periods: (i) Preserve permanently: (A) All general and subsidiary ledgers (or other records) reflecting asset, liability, capital stock and surplus, income, and expense accounts; (B) All general and special journals (or other records forming the basis for entries in such ledgers); and (C) The corporate charter, bylaws, application for determination of eligibility to participate with SBA, and all minutes books, capital stock certificates or stubs, stock ledgers, and stock transfer registers; (ii) Preserve for at least 6 years following final disposition of the related loan: (A) All applications for financing; (B) Lending, participation, and escrow agreements; (C) Financing instruments; and (D) All other documents and supporting material relating to such loans, including correspondence. (2) Records and other documents referred to in this section may be preserved electronically if the original is available for retrieval within a reasonable period. An SBLC must submit the following to the AA/FA: (a) An audited financial statement prepared by a certified public accountant within three months after the close of each fiscal year, and interim financial reports when requested by SBA; (b) A report of any legal or administrative proceeding, by or against the SBLC, or against an officer, director, or employee of the SBLC for an alleged breach of official duty, within 10 days after initiating or learning of the proceeding, as well as notification of the terms of any settlement or final judgment (in addition to any reporting under applicable SBA Forms); (c) Copies of any report furnished to its stockholders (including any prospectus, letter, or other publication concerning the financial operations of the SBLC); (d) A summary of any changes in the SBLC's organization or financing, such as: (1) Any change in its name, address or telephone number; (2) Any change in its charter, bylaws, or its officers or directors (to be accompanied by a statement of personal history on an approved SBA form); (3) Any changes in capitalization (including those identified in §120.470); (4) Any changes affecting the eligibility of the SBLC to continue to participate as an SBLC; and (5) Notice of a pledge of stock within 30 calendar days of the transaction if 10 percent or more of the stock is pledged by any person (or group of persons acting in concert) as collateral for indebtedness, and such pledge does not involve a transfer for which prior written approval of SBA is required under §120.473; (e) Such other reports as SBA may require from time to time by written directive. (a) Any change of ownership or control without prior written approval of SBA is prohibited. An SBLC must request approval of any such change from the AA/FA. Pending the approval, the SBLC may not register the proposed new owners on its transfer books nor permit them to participate in any manner in the conduct of the SBLC's affairs. Change of ownership or control includes: (1) Any transfer of 10 percent or more of any class of the SBLC's stock, and any agreement providing for such transfer; (2) Any transfer that could result in the beneficial ownership by any person or group of persons acting in concert of 10 percent or more of any class of its stock, and any agreement providing for such transfer; (3) Any merger, consolidation, or reorganization; or (4) Any other transaction or agreement that transfers control of the SBLC. (b) If transfer of ownership or control is subject to the approval of any State or Federal chartering, licensing, or other regulatory authority, copies of any documents filed with such authority must, at the same time, be transmitted to the AA/FA. An SBLC may not make a loan to a small business that has received financing (or a commitment for financing) from an SBIC that is an Associate of the SBLC. Every SBLC is subject to periodic audits by SBA's Office of Inspector General, Auditing Division, and the cost of such audits will be assessed against the SBLC, except for the first audit. Fees are structured based on the SBLC's assets as of the date of the latest audited financial statement submitted to SBA before the audit. The fee schedule is set forth in SBA's Standard Operating Procedures manual. SBA may revoke or suspend an SBLC for a violation of law, these regulations, or any agreement with SBA. An appeal can be made following the procedures set forth in part 134 of this chapter.
Title 13: Business Credit and Assistance
PART 120—BUSINESS LOANS
Subpart D—Lenders
§ 120.400 Loan Guarantee Agreements.
§ 120.410 Requirements for all participating Lenders.
§ 120.411 Preferences.
§ 120.412 Other services Lenders may provide Borrowers.
§ 120.413 Advertisement of relationship with SBA.
§ 120.414 SBA access to Lender files.
§ 120.415 Suspension or revocation of eligibility to participate.
§ 120.420 Definitions.
§ 120.421 Which Lenders may securitize?
§ 120.422 Are all securitizations subject to this subpart?
§ 120.423 Which 7(a) loans may a Lender securitize?
§ 120.424 What are the basic conditions a Lender must meet to securitize?
§ 120.425 What are the minimum elements that SBA will require before consenting to a securitization?
§ 120.426 What action will SBA take if a securitizer transfers the subordinated tranche prior to the termination of the holding period?
§ 120.427 Will SBA approve a securitization application from a capital impaired Securitizer?
§ 120.428 What happens to a securitizer's other PLP responsibilities if SBA suspends its PLP approval privilege?
§ 120.430 What conveyances are covered by §§120.430 through 120.435?
§ 120.431 Which Lenders may sell, sell participations in, or pledge 7(a) loans?
§ 120.432 Under what circumstances does this subpart permit sales of, or sales of participating interests in, 7(a) loans?
§ 120.433 What are SBA's other requirements for sales and sales of participating interests?
§ 120.434 What are SBA's requirements for loan pledges?
§ 120.435 Which loan pledges do not require notice to or consent by SBA?
§ 120.440 What is the Certified Lenders Program?
§ 120.441 How does a Lender become a CLP Lender?
§ 120.442 Suspension or revocation of CLP status.
§ 120.450 What is the Preferred Lenders Program?
§ 120.451 How does a Lender become a PLP Lender?
§ 120.452 What are the requirements of PLP loan processing?
§ 120.453 What are the requirements of a PLP Lender in servicing and liquidating SBA guaranteed loans?
§ 120.454 PLP performance review.
§ 120.455 Suspension or revocation of PLP status.
§ 120.470 What is an SBLC?
§ 120.471 Records.
§ 120.472 Reports to SBA.
§ 120.473 Change of ownership or control.
§ 120.474 Prohibited financing.
§ 120.475 Audits.
§ 120.476 Suspension or revocation.
