With a new SOP around the corner, we’ve heard rumblings about changes to the SBA forms we all use. We’ve also learned that OCRM is performing targeted reviews of Form 159 with some lenders. In that light, we’re sharing our thoughts and findings about SBA forms. It may seem elementary to talk about forms. Yet there’s nothing elementary about these forms − not when they pertain to SBA eligibility and are key in repurchase demands for the guaranty.

The message: Stay informed! Here’s what’s going on:

  • The IRS will be doing away with Form 4506-T, replacing it with Form 4506-C. Watch for SBA notifications to see if there will be a grace period to continue using Form 4506-T.
  • Form 1919 has replaced the need for the Forms 1846 and 1624 for some time. Yet we still see lenders using the old forms. We recommend discontinued use ASAP. This will further streamline your programs and reduce paperwork.
  • Form 1920 is the Lender Application Form that’s reviewed by SBA for all GP loans. However, we’re finding many PLP lenders not completing it correctly or omitting information. Some common errors:
  • Section I: Size Analysis. The second half of this section is often missed. SBA looks to the lender to confirm if several statements are True. We often find these unanswered.
  • Section O: Change of Ownership. Most business purchases are done through brokers and yet this section is often left blank. Important: You are required to disclose a broker on Form 1920 and also on Form 159.
  • Section R: Franchise. Lenders will often skip this section if the applicant isn’t a Franchise. But at minimum, you must answer the first question regarding whether the applicant operates under a Franchise/License/Jobber/Membership or similar agreement.
  • Final Page: PLP lenders are required to provide two signatures on the final page.
  • Form 159 has come into focus by OCRM partly because it’s a newer version, but also because it’s often incomplete. Key critical: Proper disclosure of third party/vendor fees and an attached itemization when fees exceed $2,500. If the lender is the agent, we recommend that someone in your SBA department, the packager for instance, signs the agent’s certification as the employee who performed the work. Then an SBA department manager/officer should sign the SBA Lender’s Certification after verifying the information as complete and correct.

And importantly, there are numerous touch points in your process where your information needs to flow and remain consistent: Credit Memo structure should mirror your Form 1920; Form 1920 should mirror your SBAOne/ETran entry; your Authorization should mirror what was entered into SBA/One ETran. If it doesn’t, a memo to file explaining the change. with the appropriate level of approval, should be prepared and maintained in the file.

Forms: They may feel like simple things, but there’s nothing simple about their importance.

Rebecca Mendoza
Senior Associate