Lots of action at this year’s NAGGL Annual Conference and lots to think about, with changes in SBA lending discussed at every Breakout Session. One of the BIGGEST and the one with a call to action is Proposed Rule RIN: 3245-AG74, Express Loan Programs, Affiliation Standards, published in the Federal Register on September 28, 2018.

 Comment Period Extended. At the Conference, NAGGL and SBA asked lenders to weigh in. We agree. Importantly, the deadline for comments has been extended to December 18, 2018. If you have an opinion, voice it! Here’s a rundown of three Hot Buttons from the Proposed Rule that carry significant impact.


  1. Credit Elsewhere and the use of a Personal Liquid Asset Test for owners of 20% or more of the applicant business. Why is this so important?  Wouldn’t more guidance on this issue be helpful?  YES. ABOLUTELY. But is the proposed guidance the right one? We haven’t had a Personal Resource Test since before 2014. At that time, many of us had strong opinions and were concerned whether the formula used accomplished the intent, which was ensuring that the SBA funds would go to applicants truly needing a government-backed loan. So again, we’re looking at a formula, similar in nature to what we had before. And the questions come back: Is it the right one?  What happens when an entity is an owner of an applicant, not an individual?  If we require individuals to inject “excess” into a project, how does that affect their ability to perform under stress if they encounter it later? Stay tuned!
  1. Allowable Fees to Borrower. SBA is concerned – and rightfully so – that borrowers are being charged multiple fees from multiple providers (Lenders, LSPs, Agents and other Third Parties). Seems reasonable. It’s important to ensure small businesses have access to funds at reasonable costs. What’s your opinion?  Are limitations on what you as a lender can charge curtailing your ability to cover overhead for your SBA Program?Do you rely on referral agents for much of your growth and will that now limit your growth?  Take a look at the Rule – and offer up your opinion.
  2. This already is complex, as currently we must consider family relationships as well as commonly owned firms. Now, the Proposed Rule adds a couple more wrinkles or resurrects a few with some twists: 1) Firms with common investments or firms that are economically dependent through contractual or other relationships may be considered Affiliates and: 2) Situations where current or former principal(s) of one concern organize a new concern in the same industry.

In our current economic environment, where we’re seeing more and more levels of ownership, this analysis is becoming time consuming. Yet we understand that the point is to ensure SBA funds are going to small businesses, not large ones that know how to structure to appear small. Will more regulation lead to clarification, more work, or more confusion?  How far is too far?

These Hot Buttons from the Proposed Rule were discussed at length at NAGGL. At JRB we believe being an active part of the process aids in the solutions. So we encourage you all to reach out and share your comments and concerns!

Send follow-up questions or recommendations for consideration to with ‘Proposed Rule’ in the subject line. Submit comments to SBA by following directions in Federal Register Proposed Rule referencing RIN: 3245-AG74.

Rebecca Mendoza
Senior Associate