I got a question the other day that took me back to the days of sock hops, 45 rpm records, malt shops and Sha-Nah-Nah. Not that I remember them, of course!
Put a Nickel in the Juke Box. Here’s the Question.
Richard, our CDC needs advice. This thing about not needing a Form 912 Statement of Personal History is messing up our loan process. No other document asks borrowers for their birthday, so pulling credit is hard. What’s more, the only document telling us if a borrower was ever convicted of a felony is the 1244, which isn’t signed until we’re ready to submit to SBA. How can we make this efficient?”
What’s New Since Eisenhower?
About now, bunches of readers could be asking, “What? What?? A 912 is required for every loan?” Some readers might be the ones who collect personal and business tax returns for each of the last three years. Some might even require a Form 652 with every application. For these folks, I’m offering a new course: What’s new in the 504 Program since Eisenhower?
Fast Forward …
About Form 912. Most loan applications don’t require a 912. And you don’t need it at all unless your borrower’s principal has been arrested for a criminal offense in the past six months or was ever convicted or pled guilty to a criminal offense. Check it out. It’s right there in Section XIX of Form 1244. Yes, I know: The 1244 is the last thing the borrower signs before you submit the loan to SBA. But Section XIX just happens to copy to a one-page Word document. You can give it to the borrower to initial and sign when the application process starts. After all, you probably want to know if your applicant has a criminal history early enough to go through the finger printing process. And while you’re at it, why not ask for their birthday?
Taxes. The Only Thing Certain … Only the most recent personal income tax return is required. Just one year. Most of the time there is no need to see personal tax returns for prior years, unless the business is reporting Schedule C income. Once upon a time SBA required the last three years of federal tax returns for 504 loans. That’s only true if you’re qualifying the business under 7(a) size standards. But if the business qualifies under 504 size standards, SBA doesn’t require three years. Your underwriter may want three years. I require them on conventional loans because I look for patterns. But for 504 loans only the last filed personal return, i.e., one year, is required.
And the 652? Park That DeLorean. The last CDC loan officer to ask a borrower for a Form 652 was Fred Flintstone! If you’re really looking for it, Form 652 is now part of the 1244. Lots of changes since Eisenhower! Lucky for us, we don’t need to keep track of everything. The checklist on Form 1244 is a free tool you can use to review what’s needed and what’s not. Sha Boom!
Senior Associate, CDC/504 Programs