|
SBA issues clarification regarding "salon suite" business models
On 10/10/2014, SBA issued Notice 5000-1322, Clarification of the Ineligibility of Certain Passive Business Models, intended to make clearer 7(a) eligibility issues related to "certain personal services businesses" such as "barber shops, hair salons, nail salons, and similar types of businesses". In conversations with SBA program officials, the agency has made clear that the notice is intended only to clarify existing program requirements related to the eligibility of these businesses, not to change those requirements.
Based on language in the notice, as well as a conversation with SBA, it appears that when determining whether a business in this industry is active or passive, one key test will be whether the business is perceived by the public to be a single business operated by the business owner, as contrasted with the perception that it is an operation made up of multiple individual businesses. The notice doesn't go as far as specifying the individual elements of the business operation that will need to be present in order to support the public perception that the business is a single business. But clearly the burden will be on the lender to provide sufficient information to support that conclusion.
Finally, there are two important caveats regarding the notice. First, the guidance applies only to personal services businesses as described in the notice, not to businesses operating in other industries such as storage facilities, parking garages, etc. Also, the guidance applies whether the personal services business is operating under a franchise agreement or as stand-alone operation. When the applicant is operating under a franchise agreement, lenders should check the Franchise Registry to determine whether the specific franchise agreement under which the business is operating has been found acceptable by SBA. Per SOP 50 10 5(G), page 77, "A finding that [a franchise] agreement is acceptable . . . means that the agreement does not impose unacceptable control provisions on the Small Business Applicant which would result in affiliation. The fact that the agreement is acceptable does not mean that the Small Business Applicant is eligible; therefore, [the] lender must consider all other size, eligibility and underwriting requirements specific to a respective loan applicant/application in accordance with [the] SOP."
...............................................................................................................
SOP 50 10 5(G) released, along with Information Notice 5000-1321
SBA published a revision of its SOP 50 10 5(G) that will be effective for applications received on or after October 1, 2014. Information Notice 5000-1321 summarizes the changes for both the 7(a) and 504 programs. This version incorporates the regulatory changes that were effective on April 24, 2014 for the 7(a) program --that is, the elimination of the personal resources test.
There are several other 7(a) language updates included in the 5(G) and listed in the Notice --
however, from an admittedly cursory review comparing the list of 'additional changes' on page 2 of the Notice to the tracked changes version of 5(G), it appears that a couple changes are not marked via highlighting or margin comments. NAGGL created a special version of the Notice and the 5(G) in which we highlighted in blue any additional changes listed in the Notice that may have been accidentally overlooked.
Highlighted changes version of SOP 50 10 5(G) >
Notice 5000-1321 >
Notice with NAGGL comments >
SOP 50 10 5(G) with NAGGL highlight/watermark > Email us
............................................................................................................................ FY 2015 -- Renewal & Expansion of Veterans Advantage Fee Relief
5000-1319 >
Although there are no changes to borrower qualifications under Veterans Advantage, there will be an expansion of the upfront guarantee fee waivers for FY 2015 (10.1.2014-9.30.2015) for qualified veteran-owned businesses only (See Notice, page 1 for a list of qualifications, as well as the Notice attachment which describes documentation requirements for proving veteran status.) It is important to note that this is an expansion of fee relief -- not a "program".
Upfront Guarantee Fees for Veterans Advantage
| SBA Express loans | $150,001 - $350,000 | No fee | | Non-SBA Express 7(a) loans | $150,001 - $5 million | Reduced 50%* |
*The 50% reduction of the upfront fees means that: |
Maturity
|
Loan Amount
| Percentage of Guaranteed Portion | |
> 12 months
|
$150,001 - $700,000
| 1.5%
|
|
$700,001 - $5 million | 1.75% up to $1 million
PLUS 1.875% over
$1 million |
12 months or less
| |
.125% |
Reminder - No reduction in lenders' ongoing servicing fee (annual fee) for loans over $150,000 and 90-day rule remains in effect. (See Notice 5000-1318)
Members -- How do YOU intend to let your internal lending teams know about the expanded fee waivers of Veterans Advantage and its goal to provide veteran-owned small businesses increased access to long-term capital? Will you help drive your institution to success in supporting veterans as this member is doing by making sure her entire team knows about the special SBA initiative?
|
