SBA SOP 50 10 8.1, C.Ch2.C.5 — Closing and Post-Closing Activities

5. Closing and Post-Closing Activities a. CDC’s Responsibilities The CDC must:

i. Certify that the Project costs were paid in full and that the Project proceeds were used in accordance with the requirements of the SBA Terms and Conditions, and that each party to the Project contributed the required amount to the costs. To support this certification, the CDC must have evidence of the use of proceeds and the contributions by each party (Third Party Lender, Interim Lender, and Borrower). Sufficient evidence is: a) For the purchase of land and/or building, a signed or certified Settlement Statement, or its equivalent, showing the amounts paid and whether paid by the Borrower or from the Third Party Lender or Interim Lender’s loan proceeds. b) For construction or renovations, i) Copy of construction contract and all change orders; ii) Evidence of each progress payment and final payment of project reflecting cumulative costs and source of payment (Third Party Lender, Interim Lender, or Borrower); iii) If a construction escrow account is used as set forth in this SOP, copies of paid invoices and a copy of the cancelled check made payable to the Borrower and the designated contractor; and iv) Copy of Mechanic’s Lien Releases, if applicable. c) For debt refinancing, a copy of the transcript of account and settlement statement. d) For all other costs, a settlement statement or copies of the paid invoices and cancelled checks or evidence of wire transfers. e) No funds should be paid directly to the Borrower unless the CDC obtains evidence of the Borrower’s payments (cancelled checks and paid invoices). For 504 debt refinance balances, the principal balance of the loan(s) approved for the debt refinance may decrease between the original approved amount and the actual balance due at 504 loan closing and funding because of intervening payments made by the Borrower. SBA requires that the CDC document its file to account for the changes to the principal balance of the refinanced debt that arise after loan approval, and provide this information to District Counsel with the closing package. OCRM will include this as part of a CDCs review. Submissions of 327 loan modification requests to SLPC are not required to reduce the originally approved debt refinance amount (with or without expansion) when: i) Account for the principal reductions from payments made by the borrower on the debt being refinanced during the period between submission and disbursement; ii) The principal amount of these debt payments may be reimbursed to the borrower from the proceeds of SBA-approved interim financing, or from the SBA debenture if no interim financing is used. Submissions of 327 loan modification requests to SLPC are required when the approved project costs are reallocated, unless it is an ALP Express Loan, in which case de minimis reallocations are allowed as stated under Section C, Chapter 2, Paragraph B.3.e.

ii. Notify SBA counsel in writing of planned debenture closings at least 30 days before the SBA District Office deadline for CDCs to submit closing packages. This notification is for SBA counsel’s planning purposes only and the CDC may ultimately submit more, fewer or different closing packages.

iii. Request from the SLPC all necessary modifications to the SBA Terms and Conditions before submitting closing packages as far in advance of submitting the loan closing package as possible. The CDC must obtain SBA approval of all such issues before submitting the closing package to the SBA District Office.

iv. Each CDC must issue a written opinion based upon financial statements current within 120 calendar days from the published Central Servicing Agent (CSA) Cut-Off Date for the applicable Debenture Funding Date that to the best of its knowledge there has been no unremedied substantial adverse change in the Applicant’s (or Operating Company’s) ability to repay the 504 loan since its submission of the loan application to SBA. This CDC opinion must be made within 14 business days prior to its request to SLPC to ship the file, and the CDC opinion must be supported by financial statements that are dated no earlier than 120 calendar days from the published CSA Cut-Off Date for the applicable Debenture Funding Date.

v. For all 504 loans except ALP and PCLP, CDCs must provide its finding to the SLPC along with copies of the financial statements. The SLPC either will notify the CDC of its approval or, if SBA disagrees with the CDC’s determination of no unremedied substantial adverse change, the debenture will not close until SBA has been satisfied that any adverse change has been remedied. ALP and PCLP CDCs must submit the closing package to SBA counsel and retain the finding and copies of the financial statements on which they relied in their files.

vi. If the debenture closing is not consummated in the month following the CDC’s opinion of no unremedied substantial adverse change, the CDC must prepare a new opinion and follow the same process described above if the financial statement supporting the opinion will be more than 120 days old when the CDC requests the file from the SLPC for closing. For example, if a CDC’s opinion of no unremedied substantial adverse change is made and approved in April, the debenture may be funded in May or June if the financial statements supporting the opinion remain no more than 120 days old at the time the request for the file is made. Otherwise, the CDC must submit a new opinion to the SLPC in the same manner noted above.

vii. Request that access to each SBA Terms and Conditions approval and all modifications be granted by the SLPC to the SBA counsel for closing in time to meet the SBA District Office’s deadline for submission of loan closing packages. CDCs must not request access to the SBA Terms and Conditions and modifications unless the debenture is ready for closing and sale during the month following the request. If access has not been granted to SBA counsel by its loan closing package submission deadline, SBA counsel may hold over the package for the next month’s debenture sale.

viii. Electronically submit closing packages by the deadline established by SBA counsel. No late closing packages will be accepted. SBA counsel will hold late packages over for the next month’s debenture sale.

ix. Use only the 504 Debenture Closing Checklist and submit documents in the order appearing on the Checklist. In the column labeled “CDC” on the Checklist, the CDC must check off each document the CDC has included in the closing package or for documents not applicable to a particular transaction, write “NA” in the block. CDC must submit only a copy of each document and must retain the original until SBA counsel completes their review. After the debenture sale, the CDC must retain a copy of the closing package in its files and make it available to SBA upon request.

x. Hold all original loan documents until SBA gives the CDC written notification that SBA has completed its review of the closing package and approved the debenture sale. If SBA counsel determines that the loan is ready for funding, SBA counsel must notify the CDC and CSA that the debenture is ready for sale. If the SBA counsel determines that changes are needed in the closing documents, SBA must notify the CDC of such changes before the cut-off-date by which the CSA must receive documents from the CDC for the debenture sale. After the CDC makes the necessary changes and SBA has approved the changes, SBA must notify the CDC and CSA that the debenture is ready for sale.

xi. Send by overnight mail to the CSA the necessary debenture closing documents for the debenture sale. After SBA sends the CDC notice of which debentures SBA has approved for sale, the CDC must send to the CSA by overnight mail the following debenture closing documents for each debenture to be sold: a) SBA Form 1506, “Servicing Agent Agreement” (original); b) SBA Form 1504, “Development Company 504 Debenture” (original); c) SBA Form 1505, “Note (CDC/504 Loans)” (copy); d) Authorization Agreement for Preauthorized Payment (Debit) and voided check (original); e) IRS Form W-9, “Request for Taxpayer ID Number and Certification” (original); and f) Third-party lender participation fees must be withheld from the CDC Processing Fee. Checks or other paper instruments are not accepted.

xii. Forward the original of all documents listed on SBA Form 2286, “504 Debenture Closing Checklist,” (Checklist) (which serves as the original collateral listing) to the CLSC within 30 days after the debenture sale. a) The CDC must forward the collateral file containing all the original documents listed on the Checklist to the CLSC. The CDC must use the Checklist as the collateral listing. The CDC must maintain the collateral file in a manner acceptable to SBA. b) If the CDC has not yet received all original documents by 30 days after the debenture sale date, the CDC must send the documents it does have and must send additional documents along with a collateral listing upon receipt.

xiii. Ensure that all recorded interim lender documents are canceled of record (officially canceled at the place of recordation, as required by law) within 90 days after funding.

xiv. If a 504 loan is canceled after closing but before funding. Ensure that all recorded documents are canceled of record.