SBA SOP 50 10 8, A.Ch4.E.6 — Professional Services Contractors
Verbatim text of SBA SOP 50 10 8 section A.Ch4.E.6 (Professional Services Contractors), effective 2025-06-01. 7 provision(s) quoted from the SOP PDF. SBA's own document page serves superseded editions, and the SOP is further amended by policy notices — read this with the notices that touch it.
Verbatim regulatory text
Verbatim provisions from SBA SOP 50 10 8, A.Ch4.E.6 — Professional Services Contractors — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
SOP 50 10 8 A.Ch4.E.6
6. Professional Services Contractors 13 CFR § 120.824 Pre-approval of a professional services contract by the D/FA is required prior to engaging the services of a contractor for any of the following functions: • Managing (a request for a waiver of the requirement that the manager be employed directly by the CDC must be submitted to SBA; • Marketing; • Packaging; • Processing; • Closing; • Servicing; • Liquidating; • Legal services in connection with loan liquidation or litigation; • Independent Loan Reviews to be conducted by another CDC. CDCs may not review each other’s portfolios or exchange any other services, nor may they enter into any other arrangement with each other that could appear to bias the outcome or integrity of the independent loan review; or • Co-employment contracts (e.g., for paying wages and taxes and providing retirement and health benefits to the CDC’s staff under which the CDC and the contractor are deemed to be co-employers of the CDC’s staff). CDCs may contract for the following functions without SBA approval: • Accounting; • Legal services (except in connection with loan liquidation or litigation); • Information technology; and • Independent loan review services performed by a non-CDC. CDCs entering into a contract to provide services to another CDC:
SOP 50 10 8 A.Ch4.E.6.i
i. Must be located in the same SBA Region (except for contracts for liquidation services or independent loan reviews); or ii. If not located in the same SBA Region, must be located in a contiguous State (except for contracts for liquidation services or independent loan reviews); and iii. May provide assistance to only one CDC per State (except for contracts for liquidation services or independent loan reviews);
SOP 50 10 8 A.Ch4.E.6.i.iv
iv. Must not provide assistance to another CDC in its State of Incorporation or any State in which the CDC has multi-state authority (except for contracts for liquidation services or independent loan reviews); v. Must have a separate and independent Board of Directors; vi. If either CDC is for-profit, neither may own stock in the other CDC; vii. CDCs are prohibited from comingling any funds.
SOP 50 10 8 A.Ch4.E.6.i.viii
viii. Notwithstanding the prohibition in 13 CFR § 120.820(d) against a CDC affiliating with another CDC, a CDC may, with SBA’s prior written approval, obtain services through a contract with another CDC even if the arrangement would give rise to an affiliation between the CDCs based on an “identity of interest,” as defined under 13 CFR § 121.103(f). However, affiliation between CDCs based on grounds other than identify of interest, including but not limited to, through ownership or common management under 13 CFR § 121.103(c) and (e), respectively, would continue to be prohibited. Review and Pre-Approval: i. For all contracts that require prior approval (except for contracts involving legal services in connection with loan liquidation or litigation), the 504 Loan Program Division reviews the contracts and provides its recommendation to the D/FA, or designee, who makes the final decision.
SOP 50 10 8 A.Ch4.E.6.i.ii
ii. With respect to contracts for management or independent loan reviews performed by another CDC, the D/FA’s final decision will be made in consultation with the D/OCRM (or designee). iii. The Office of Financial Assistance (OFA) will notify the CDC in writing of the D/FA’s final decision and will provide a copy of the decision to the Lead District Office. iv. For contracts involving legal services in connection with loan liquidation or litigation, the appropriate Commercial Loan Servicing Center will review and approve the contracts. v. If a CDC engages the services of a contractor without obtaining SBA’s approval in accordance with the process described below, the CDC’s non- compliance will be reported to OCRM. In addition to any other appropriate action, any loan application requests sent to the SLPC by an individual employed under the contract may be delayed for processing and approval until such time as the professional services contract is approved by the D/FA. Submission Process:
SOP 50 10 8 A.Ch4.E.6.i
i. At least 60 days prior to the date on which the CDC intends to engage the contractor’s services, the CDC must submit to OFA at [email protected]: a) A request from a responsible CDC management official to review the draft materials; b) An unsigned draft of the contract; and c) A justification from the CDC’s Board of Directors explaining its reasoning for why the Board believes it is in the best interest of the CDC to contract for CDC functions. (13 CFR § 120.824(2)(e)). ii. The request for SBA’s approval of a contract may not be submitted with the CDC’s Annual Report. (The Annual Report must include a list of all CDC contracts by status (e.g., current, not current, expired) with renewal dates and/or expiration dates.) iii. If the D/FA approves the contract, the CDC must submit a copy of the fully executed contract to OFA upon its execution by the parties. iv. If the CDC wishes to renew a professional services contract, the CDC must re- submit the contract at least 60 days prior to the end of the approved contract term (including any approved optional renewal years) for review and pre- approval. The professional services contract: i. Must state the following: a) The CDC’s Board of Directors specifically acknowledges and retains the ultimate responsibility for all loan approvals and loan servicing actions, and that such responsibility must be carried out independently of any control by the contractor, 13 CFR §120.823; b) No contractor or any officer, director, 20 percent or more equity owner, or Key Employee of a contractor may be a voting or non-voting member of the CDC’s Board of Directors; c) All compensation paid to the contractor will be paid by the CDC and the contractor cannot charge the Borrower for the same services; and d) The contractor is prohibited from requiring a 504 Applicant or Borrower to purchase other services from the contractor as a condition of the contractor’s performing CDC staff or management functions; e) Each individual performing services must receive a character determination. f) CDCs are responsible for the actions of their contractors and must ensure that they comply with all applicable laws and regulations governing confidentiality. CDCs should consult with their Counsel to obtain appropriate language to be included in the contracts. ii. Must include the following: a) A description of services that the contractor will perform; b) A description (resume or summary of work history/relevant experience) of each individual providing services under the contract; c) A breakdown of compensation by individual if more than one person is being compensated under the contract; d) The rate of compensation for all parts of the contract except servicing stated at an hourly rate (the servicing portion may be based on a percentage not to exceed the amount authorized by the regulations 13 CFR §120.971(a)(3)); e) The basis for its determination that the fees are customary and reasonable for similar services in the area; f) A statement that additional compensation from CDC fee income such as multipliers or bonuses is not permitted; g) A provision that allows the CDC procuring the services to terminate the contract with written notice (usually a 30 to 60 day notice) without penalty and with or without cause at any time prior to the expiration date of the contract; iii. Must not: a) Include any contractual services provided by the Executive Director of a CDC; b) Evidence any actual or apparent conflict of interest or self-dealing on the part of any of the CDC’s officers, management, and staff, including any members of the Board or any Loan Committee; c) Diminish the responsibility of the Board of Directors for the operations of the CDC;
SOP 50 10 8 A.Ch4.E.6.i.iv
iv. Must be accompanied by a Board of Directors’ Resolution containing the following statements: a) The contract is in compliance with 13 CFR §§ 120.823, 120.824 and 120.825 and SBA Loan Program Requirements; b) Of understanding that the contract is subject to pre-approval by SBA D/FA upon each new contract term; and c) Of understanding that approved contracts are subject to yearly review by SBA.
Operationalizing SBA SOP 50 10 8, A.Ch4.E.6 — Professional Services Contractors
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Source of record: https://claudeforcompliance.com/regs/sba-sop-a-ch4-e-6/
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