U.S. Small Business Administration Quarterly Update - October 24, 2023
The U.S. Small Business Administration Office of Capital Access presents its 7(a) Connect Quarterly Update for October 24, 2023. Highlights include hot topics, updates on SOP 50.10, and upcoming training sessions and program updates for small business lenders and SBA staff. Stay informed on important changes affecting small business financing.
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U.S. Small Business Administration Office of Capital Access 7(a) Connect Quarterly Update October 24, 2023
Agenda Opening remarks from Katie Frost, Acting Associate Administrator, Office of Capital Access (OCA) Hot Topics Dianna Seaborn, Director, Office of Financial Assistance (OFA) Ginger Allen, Chief, 7(a) Loan Policy Division, OFA SBA s Risk Mitigation Framework OPSM & OFPO Introduction to SOP 50 10 7.1 - 7(a) Loan Origination Policy Team 3
SBA Office of Capital Access Acting Associate Administrator Katie Frost 4
Office of Financial Assistance Dianna Seaborn Director
Hot Topics Update to SOP 50 10 SOP 50 10 7.1 provides clarifications based on feedback from the lending community Effective date is November 15, 2023 Download SOP 50 10 7.1 here Information Notice will be published OFA will update SOP 50 10 trainingon SBA s Training on Demand page Existing 50 10 7 training will be removed New updated training will be published with downloadable slide decks Updated Form 1919 is at OMB for final approval targeted publication date is mid-December 7
Hot Topics #2 FY 2024 7(a) Fees: Information Notice 5000-848801 for 7(a) Fees Effective October 1, 2023 for Fiscal Year 2024 Training and deck available on SBA s Training on Demand page Sunset of the Community Advantage Pilot Program has been extended to October 31st, 2023 FRN 2023-22185 Community Advantage Pilot Program published October 5th Information Notice 5000-850230 Sunset of the Community Advantage Program published October 11th Please join the 504 Loan Policy Team for a training on 504 Loan Program Updates on Thurs. Oct. 26th at 2:00 Eastern - Login link 8
Save the Date Upcoming Updates 7(a) Connect Quarterly Update 3:00 p.m. Eastern Quarterly call for 7(a) Lenders and SBA staff Login links: Jan. 9, 2024; April 9, 2024; July 9, 2024; Oct. 8, 2024 504 Connect Quarterly Update 3:00 p.m. Eastern Quarterly call for CDCs, Third Party Lenders and SBA staff Login link: Dec. 12, 2023 504 Loan Program Updates Thurs. Oct. 26, 2023 at 2:00 Eastern 9
Subscribe/Unsubscribe to SBA OFA Policy News Subscribe to OFA 7(a) Policy Newsletter Subscribe to OFA 7(a) Community Advantage Policy NewsletterUnsubscribe from OFA 7(a) Community Advantage Policy Newsletter Subscribe to OFA 504 Policy NewsletterUnsubscribe from OFA 504 Policy Newsletter Unsubscribe from OFA 7(a) Policy Newsletter If you are already subscribed, you do NOT need to re-subscribe! If the above hyperlinks don t open a new email, you may complete the process manually by either scanning a Quick Response (QR) code or: 1. Send an email to OFANotifications@sba.gov 2. Use one of the below subject lines exactly as it appears below: REQUEST TO SUBSCRIBE: OFA 7(a) Policy REQUEST TO SUBSCRIBE: OFA 504 Policy REQUEST TO SUBSCRIBE: OFA 7(a) Community Advantage Policy REQUEST TO UNSUBSCRIBE: OFA 7(a) Policy REQUEST TO UNSUBSCRIBE: OFA 504 Policy REQUEST TO UNSUBSCRIBE: OFA 7(a) Community Advantage Policy The email will be read by computer software the email subject line must use the specific text above, and should not include any additional language, either in the subject line or body of the email 10
SBA OFA Quick Response (QR) Codes for Subscriber Lists To sign up for SBA OFA s subscriber lists using a QR code: Scan the QR code with your cell phone camera Select the popup link or email address Your phone will auto-populate an email Click send (no text needed in body of email) 11
Subscribe to SBA OFA News 7(a) Policy 12
Subscribe to SBA OFA News 504 Policy 13
Training On Demand SBA s Training On Demand webpage is now organized by topic for ease of use. Scan the code below to learn more about SBA policy! 14
Training on Demand How to Download a Videos Slide Deck 1. 2. Navigate to the Training on demand webpage HERE Select a video from the list as pictured below 15
Click on Show more in the Video Description Box 3. When your video selection loads, scroll down or click on Show more in the video description box Click on the link to download the slide deck 4. 16
SBA box.com 5. View the deck or download it from the box.com platform 17
7(a) Connect Call E-TRAN Updates October 2023
ETRAN Implementation of SOP Updates
ETRAN Updates Effective as of August 1, 2023 7a Terms and Conditions Generate T&C from within ETRAN 504 Job Creation & Retention Requirements Effective Date of May 12, 2023 STAR Compliance Codes Process flow impacts API and 3rd Party vendor updates 504 Terms and Conditions Generate T&C from ETRAN Hazard Insurance Requirement SBSS Score Increased threshold to $500k Removed validation for Hazard Insurance for loans $500k and below Franchise Franchise questions are now optional Franchise validations removed Affiliation Rule Updates to ETRAN Affiliation table Credit Elsewhere Added options to align with SOP PIMS and CA SBLC Enhanced PIMS table for tracking of CA SBLC 20
NEW: Validation Error 4363 Introduced August 1, 2023 to flag individuals/entities with potential compliance issues on existing SBA loans This error checks for hold codes on other SBA loans such as PPP and Covid EIDL This validation must be resolved to proceed with the application Check for this Error: Validate your loan within ETRAN before you submit your application to SBA for Approval/Funding Log into CAFS Select ETRAN Origination Search for your App Number Click on the blue button labeled Validate 22
NEW: Validation Error 4363 Processing Tips When 7a Lenders and CDCs are requesting a resolution please use the following format in the email subject line: New Email Inbox: 4363resolution@sba.gov SubjectLine: Error 4363 Application XXX (enter your app number) Body of Email: If known, please include the loan number and the Loan Program (COVID EIDL, PPP, etc.) for the existing SBA loan that you believe may be causing the validation error. If loan number for the existing loan is unknown, please provide the last 4 digits of the Tax Id that is causing the error. Important Notes: SBA is generally prohibited from sharing details about compliance issues on existing SBA loans directly with SBA Lenders due to privacy concerns and legal obligations. To address these concerns and to enable SBA to provide additional details about most compliance issues and steps to resolve them, SBA Lenders should submit a Borrower s Consent to Verify Information and 3rdParty Authorization (SBA Form 2518), signed by the borrower, with the request for resolution. Even with a signed Borrower Authorization, there will be instances where SBA is unable to share details about the compliance issue on the existing loan. Reviewing compliance issues on existing loans can be a time-consuming process that may involve SBA obtaining additional documentation from the borrower. Compliance issues cannot always be resolved by paying off the loan. In many cases, the compliance issue will not be able to be resolved. 23
Validation Error 2087 This is not a new Validation Error This error checks for prior defaulted SBA loans The defaulted loan must be cured by the borrower before the application can proceed Lenders and CDCs can contact the appropriate processing center for details on which loans are defaulted: 7(a) Loans: 7aquestions@sba.gov 504 Loans: 504questions@sba.gov 25
Validation Error 2087 Processing Tips Validate your loan within ETRAN before you submit your application to SBA for Approval/Funding Log into CAFS Select ETRAN Origination Search for your App Number Click on the blue button labeled Validate When 7a Lenders and CDCs are requesting info on defaulted loan, please use the following format in the email subject line: Subject Line: Error 2087 Application XXX (enter your app number) Important Note: Even after a Borrower has cured the defaulted loan, it can take several weeks before the appropriate information is reflected in the system to clear the error. 26
Compliance PreCheck Highlights Go-live date of August 18, 2023 Applicable for any 7a and 504 loan Lenders should only use this feature for potential SBA loans Smaller data-set sent for Compliance PreCheck Similar in concept to SBSS pre-scoring lenders perform for potential SBA loan Business and Principals Purpose is to alert lenders of Compliance Check codes that will be issued at time of submission There is no clearing of codes at pre-check Informational only 28
Compliance PreCheck Highlights. How to use: Log into CAFS Select ETRAN Origination Search for your App Number Click on the blue button labeled PreCheck Compliance Reminder: There is NO CLEARING OF CODES at Pre Check 29
High-Level Compliance Pre Check Process Lender Clicks Pre Check Compliance (Optional) Loan File In Compliance Review Status Loan File Application In Process Status 4pm EST: Compliance Check 9am EST: Code Issued? No Yes Loan File Application In Process (Failed Pre Check) Status Lender formally submits loan when ready Legend Reminders Lender System Pre Check codes cannot be cleared, as they are informational only; Lender must copy/create a new application to formally submit loan. Loan will undergo a second compliance review upon formal submission. 30
New Fraud Risk Framework STAR and Do Not Pay Implementation
Compliance Reviews SBA is changing their business model for all 7a and 504 loan guaranty products as part of the new SOP release: Treasury Do Not Pay (DNP) SBA History of Compliance Lexis Nexis evaluation of Business and Principals Business Credit Score This business process is like PPP round 3. 32
High-Level Compliance Code Process Loan File In Compliance Review Status 4pm EST: Compliance Check Loan continues through normal processing Lender Submits Data Code Issued? No Yes Lenders work with Applicants and Centers to clear codes (e.g., collecting documentation) Loan File Withdrawn (Failed Compliance) Status 9am EST the following day: Lender/Vendor can check status Legend Lender System 33
Steps to Review Compliance Check Codes Checking for Codes within ETRAN If your file is showing a a status of Withdrawn the following are steps to view compliance code checks that were issued 1) Log into ETRAN > Origination and pull up your Application 2) Click on the menu labeled Application Info on the left-hand side 3) Scroll to the bottom of the page to view Compliance Codes BEFORE you proceed any further Carefully review the application data in ETRAN If there are typos in any of the Tax ID s, the Borrower Name or any Principal/Guarantor, resubmit a new application with corrected data (copy the app within ETRAN) SBA cannot clear alerts for applications with inaccurate data If the data was input accurately, Lenders and CDCs can request for SBA to clear the compliance code. 4) Click on the hyperlinked Details within the Star Comments column to view additional details 34
Requesting Clearance of Compliance Code(s) from SBA If the data was input accurately, Lenders and CDC s can request clearing of Compliance Codes from SBA. Each code has a different set of instructions and/or documents 1)Upload supporting documentation via the Documents blue bubble and select Compliance Support Documents. 2)AFTER documents have been uploaded, send an email to appropriate processing center to request clearance: 7(a) Loans: 7aComplianceCheck@sba.gov 504 Loans: 504questions@sba.gov Subject line: Compliance Code Resolution Application XXX (enter app number) 35
Common Compliance Check Codes and Docs to Resolve. 819 818 817 39
7(a) Terms & Conditions Implemented in ETRAN Origination 7a Terms and Conditions is available within ETRAN Data Entry Guide found in 2 areas within CAFS: CAFS Landing Page ETRAN > Origination > FAQ Refer to Data Entry Guide for questions 41
7(a) Terms & Conditions Implemented in ETRAN Origination, 42
Reminders & Tips The document button and generation are only available for Lenders from within ETRAN Origination for loans with the following statuses: Application In Process (IP) Awaiting Documents (AD) Funded (FD) A loan with a status of In Review Reviewer 1 (R1) cannot be edited, nor can a T&C be generated. Post-Approval Changes / Loan Modifications: Any changes made to ETRAN Servicing will not be reflected in the T&C. Changes or corrections needed post-approval will follow the normal loan modification process. 43
Cheat Sheets Contact Email Summary Origination Loan Statuses Summary
Email Contact Summary Compliance Code & Validation Errors 45
Origination Loan Statuses Summary Loan Status Status Definition / Tips In Compliance Review Loan is currently in compliance review Status applies to both Pre Check and regular compliance reviews No edits are permitted to Loan while in this status Application In Process Loan has not been formally submitted Loan is in process and has not been submitted for compliance review; OR Loan passed a Pre Check compliance review with no codes present. Application In Process (Failed Pre Check Compliance) Loan has not been formally submitted Pre Check compliance review was conducted with codes present. Codes cannot be cleared; Lender must copy/create a new application to formally submit loan Withdrawn (Lender) Loan was withdrawn by Lender Withdrawn (Failed Compliance) Loan was formally submitted and compliance review was conducted with codes present Codes must be cleared to move to next status Awaiting Documents Applies only to Non-Delegated Loan passed compliance review with no codes present; OR Codes were present, but have been cleared by Center Documents must be uploaded to formally submit In Review Reviewer 1 Applies only to Non-Delegated Loan was formally submitted Loan under review by associated processing center Funded Loan has been approved 46
SOP 50 10 7.1 Lender and Development Company Loan Programs 7(a) and 504 Loan Origination Policy Effective Nov. 15, 2023 48
Section A. Core Requirements for all 7(a) and 504 Loans Significant Updates 49
Chapter 1: Primary Applicant Eligibility Requirements Certified by Applicant and Validated by SBA s Risk Mitigation Framework SBA will make the final determination as to the eligibility of the Applicant for all eligibility requirements stated in Section A, Chapter 1, using SBA s Risk Mitigation Framework Applicant is an operating business located in the United States, is organized for profit, is small in accordance with SBA s size standards, and is not one of the types of ineligible businesses listed at 13 CFR 120.110 Lenders may conduct a pre-check in E-Tran before submitting a loan application to determine whether SBA s Risk Mitigation Framework will flag any eligibility issues for the Applicant Lenders must not submit an application that they know is not eligible, regardless of the Applicant s certification 50
