Significant SBA 504 Program Changes


Today the SBA published new regulations in the Federal Register that will positively affect the SBA 504 Program. These changes will be effective as of April 21, 2014.

A summary of the changes are as follows:

Elimination of the Personal Resource Test – Section 120.102
“SBA will no longer require that the personal resources of owners be used to reduce the SBA funded portion of the total financing package. Lenders should continue to follow prudent lending practices and require that assets either be injected or pledged as collateral for a particular loan if deemed prudent.”

In the past, depending on the size of the 504 project, if a borrower had significant personal liquid assets over and above the project size – they may have been required to inject a portion into the project. This Personal Resource Test has now been eliminated all together.

The “9-Month Rule” – Section 120.882(a)
SBA will eliminate paragraph (a)(2) of this section which limits Project expenses eligible for 504 Loan Program financing to those incurred within 9 months prior to receipt by SBA of a complete loan application. This change will permit financing of expenses toward a Project regardless of when they were incurred, so long as they are directly attributable to the Project. SBA will continue to determine whether expenses incurred prior to application were in fact incurred for a 504 project.

For more detailed information please contact your local MBFC Business Development Officer by clicking the “Contact Us” tab above.

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