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By Molly Klein • November 27, 2017

Rainmaker Roundup-November 2017: How will changes to the SBA's Standard Operating Procedures affect you in 2018?

How will changes to the SBA's Standard Operating Procedures affect your business in 2018?

Below is a transcription of the November 2017 Rainmaker Roundup.  Recorded November 22nd, 2017 by Storm Miller, National Account Manager at Benetrends Financial.

Hello again everyone and thank you for joining me for this month’s edition of the Rainmaker Roundup. My name is Storm Miller and I am the National Account Manager at Benetrends Financial.

As most of you know, typically I use this podcast to highlight a number of interesting businesses Benetrends has helped to fund over the last month. This month I want to build on the foundation we have built the past few months by discussing SBA financing and address some major changes to the standard operating procedures (SOP) of the Small Business Administration that are going to be rolled out in 2018. More importantly, I wanted to shed some light on how these changes will affect your business on a day to day basis.

There is one MAJOR change that has been rolled out by the SBA for 2018 and it involves the need for franchisors to be on what is being called the SBA Directory in order for their franchise candidates to be able to finance their franchise through an SBA loan. The SBA Directory is not to be confused with the Franchise Registry, which is run by FranData. The Directory will be run entirely by the Small Business Administration.
While FranData’s Franchise Registry will still provide lenders with valuable information they might need when reviewing a franchise concept, being listed on the SBA Directory will simply be a pre-requisite for a franchise brand to qualify for SBA financing. I have included a list of all brands listed on the SBA Directory as of 11/20/17 as well as a link to download the most recent copy of the Directory. Keep in mind, this is updated every single day and likely will continue to update as we transition into 2018.

If a brand is not yet on the SBA Directory, it is paramount that they apply to be on the Directory as soon as possible as some of the franchise candidates currently in the pipeline with us may be closing on their loans in early 2018. In order to make it into the SBA Directory, you must do the following:

You will need to email your Franchise Disclosure Document (FDD), Franchise Agreement (FA) and any other documents that you regularly require your franchisees to sign to and request a review for inclusion on the SBA Franchise Directory.

The four attorney team at the SBA will review these documents and reach out to you. They will do one of four things:

  • Approve without addendum
  • Approve with standard addendum
  • Enter conversations with you so that they can then approve with negotiated addendum
  • Disapprove 

The key is to make sure this information is sent to the SBA as soon as possible. Starting January 1, if a franchisor is not on the SBA Directory, their franchisees cannot obtain SBA funding for their project. This is the change that will most directly affect our space.

There are a number of other smaller changes that are being rolled out as well in 2018.

The next largest change that may affect us would be allowing certain visa type holders to be able to apply for SBA financing. The current guidelines state that you have to be green card holder for at least 10 years or US citizen. Many of our franchisor partners work with foreign candidates immigrating to the United States so this change truly opens up a door that has previously been closed as it pertains to financing. The types of visa holders that will be able to apply for SBA financing has not yet been set in stone but we will update you as these decisions are made.

Another small change made to the SOP is if someone had an arrest record, they typically would have to go through a finger-printing process and receive clearance from the SBA to make sure they are eligible. The new SOP will only require that for felony and child abuse crimes only – this may speed up the funding processes for any borrower with a misdemeanor on his/her arrest record.

Also, SBA lines of credit will now be moved from 2-3 years to 10 years. And for business acquisitions that require SBA financing, the SBA will no longer count seller notes towards the cash injection for the project – which could change how effectively businesses exchange hands. Seller notes also now have to be on standby for the length of the loan, normally 10 years.

These were the major changes that we wanted to bring to your attention regarding the SBA SOP for 2018. Thank you again for joining me today and as always, if you have any questions, please do not hesitate to reach out to any of our team members here! This has been Storm Miller, National Account Manager, Benetrends Financial.

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