SBA SOP 50 10 8, B.Ch4.A.4 — Credit Standards for Export Express
Verbatim text of SBA SOP 50 10 8 section B.Ch4.A.4 (Credit Standards for Export Express), effective 2025-06-01. 8 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 SBA's own document page serves superseded editions, and the SOP is further amended by policy notices — read this with the notices that touch it.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, B.Ch4.A.4 — Credit Standards for Export Express — 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 B.Ch4.A.4
4. Credit Standards for Export Express The policies that make up SBA’s credit standards begin with the requirements outlined in 13 CFR §§ 120.101 and 120.150. This section provides procedural guidance as to what the Lender should or must consider when analyzing any request for financial assistance that will be guaranteed by SBA. A Lender must analyze each application in a commercially reasonable manner, consistent with prudent lending standards. The cash flow of the Applicant is the primary source of repayment, not any expected recovery from the liquidation of collateral. Thus, if the Lender’s financial analysis demonstrates that the Applicant lacks reasonable assurance of repayment in a timely manner from the cash flow of the business, the loan request must be declined, regardless of the collateral available or outside sources of repayment. To the maximum extent practicable, Export Express Lenders may use their own forms, internal credit memoranda, notes, collateral documents, and servicing and liquidation documentation. In using their documents and procedures, Lenders must follow their established and proven internal procedures used for their similarly-sized non-SBA guaranteed commercial loans.
SOP 50 10 8 B.Ch4.A.4.a
a. Processing Method Once submitted to SBA for non-delegated processing, an application withdrawn by a Lender, screened-out, or declined by SBA may not be approved by any Lender under its Export Express authority. E-Tran will not permit the submission of such an application under any Lender’s Export Express authority for a period of 12 months from the date of the withdrawal, screen-out, or decline of the application. Export Express loans are only processed via an Export Express Lender’s delegated authority. When a Lender submits an SBA 7(a) loan guaranty request under the Lender’s Export Express authority, the Agency does not review the Lender’s analysis of the credit or structure of the loan or line of credit prior to issuing a loan number. The Lender must analyze credit worthiness in accordance with SBA Loan Program Requirements and properly document its file. The Export Express Lender’s analysis is subject to SBA’s review and determination of adequacy, when the Lender requests SBA to purchase its guaranty or when SBA is conducting lender oversight activities.
SOP 50 10 8 B.Ch4.A.4.b
b. Underwriting i. SBA has authorized Export Express Lenders to make the credit decision without prior SBA review. Lenders must not make an Export Express loan that would be available on reasonable commercial terms from either the Lender itself or another source without an SBA guaranty. ii. The credit analysis must demonstrate there is a reasonable assurance of repayment. iii. The credit analysis must include the factors demonstrating the Applicant does not have credit available elsewhere on reasonable commercial terms from non-Federal, non-State, non-local government sources, in accordance with Section A, Ch. 1, Para. H, Credit not available elsewhere; iv. The Lender must use appropriate, prudent, and generally accepted industry credit analysis processes and procedures (which may include credit scoring) and these procedures must be consistent with those used for the Lender’s similarly-sized non-SBA guaranteed commercial loans. v. In addition to using the Lender’s appropriate, prudent and generally accepted industry credit analysis and procedures, Export Express Lenders may use a business credit scoring model (such a model cannot rely solely on consumer credit scores) to assess character, reputation, and credit history of the applicant and/or repayment ability if they do so for their similarly-sized, non- SBA guaranteed commercial loans. a) The business credit scoring model may only be used in addition to the Lender’s appropriate, prudent, and generally accepted industry credit analysis and procedures. b) If used, the business credit scoring results must be documented in each loan file and available for SBA review. c) Lenders must validate (and document) with appropriate and accepted statistical methodologies that their business credit scoring model is predictive of loan performance and they must provide that documentation to SBA upon request. d) Although SBLCs do not make non-SBA guaranteed loans, SBA has determined they may use credit scoring. SBLCs are required to provide credit scoring model validation to SBA on an annual basis. vi. The credit decision on Export Express loans, including how much to factor in a past bankruptcy or whether to require an equity injection, is left to the business judgment of the Lender. Also, if the Lender requires an equity injection and, as part of its standard processes for similarly-sized, non-SBA guaranteed loans verifies the equity injection, it must do so for Export Express loans. While the credit decision is left to the business judgment of the Lender, early loan defaults will be reviewed by SBA pursuant to SOP 50 57. If the application involves a franchise (as defined by FTC), the Lender must review any credit information provided, such as the number of failed franchisees and cash flow projections provided by the franchisor). Lender must review any management agreement (unless the management agreement is part of the franchise disclosure documents for a brand listed on the Franchise Directory) to determine if it results in an ineligible passive company. c. Collateral See Section A, Ch. 5, Para. A. for guaranty requirements.
SOP 50 10 8 B.Ch4.A.4.i
i. With respect to collateral, Lenders must use commercially reasonable and prudent practices to identify collateral, which conforms to procedures at least as thorough as those used for their similarly-sized non-SBA guaranteed commercial loans. Decisions regarding what collateral must be taken to secure a loan are based on the circumstances of the individual loan, including size, and must meet the minimum requirements set forth in this section. a) For loans of $50,000 or less, Lenders are not required to take collateral. b) For loans over $50,000, the Lender must follow the written collateral policies and procedures that it has established and implemented for its similarly-sized, non-SBA guaranteed commercial loans, except for Export Express lines of credit over $50,000 used to support the issuance of a standby letter of credit. The line of credit must have collateral (cash, cash equivalent or project) that will provide coverage for at least 25% of the issued standby letter of credit amount. ii. Adequacy of Collateral: a) A Lender may not take any action in connection with an SBA- guaranteed loan that establishes a preference in favor of the Lender (13 CFR § 120.411). The Lender must not have a 7(a) loan in a “piggyback” structure.
SOP 50 10 8 B.Ch4.A.4.i.i
i) Piggyback financing occurs when one or more lenders provide more than one loan to a single Borrower at or about the same time, financing the same or similar purpose, and where the SBA-guaranteed loan is secured with a junior lien position or no lien position on the collateral securing the non-guaranteed loan(s). SBA considers “at or about the same time” to mean loans approved within 90 days of each other. ii) SBA does not consider a scenario where both the SBA-guaranteed loan and the non-SBA guaranteed loan are for working capital and the non-SBA guaranteed loan is secured only by working/trading assets to be a piggyback structure. iii) SBA does not consider a shared lien position with the lender (pari passu) to be a piggyback structure when the maturity of the non-SBA guaranteed loan is not shorter than the maturity of the SBA-guaranteed loan. iv) Environmental Indemnification provisions that run with the land are not eligible and need to be removed or waived as to the Federal Government. b) A loan request is not to be declined solely on the basis of inadequate collateral. In fact, one of the primary reasons Lenders use the SBA- guaranteed program is for those Applicants that demonstrate repayment ability but lack adequate collateral to repay the loan in full in the event of default. However, SBA does not permit its guaranty to be a substitute for available collateral.
SOP 50 10 8 B.Ch4.A.4.d
d. Real Estate Appraisal and Business Valuation Requirements The regulation governing real estate appraisals is set forth at 13 CFR § 120.160(b). i. Commercial Real Estate: a) For all loans secured by commercial real property: i) If the loan finances a transaction involving parties with a close relationship (for example, transactions between existing owners or family members), or if the Lender otherwise concludes that an appraisal is necessary to appropriately evaluate creditworthiness, the Lender must obtain an appraisal. ii) Appraisals must be in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP). Additionally, SBA requires that completed appraisals be dated within 12 months of the application for guaranty. iii) If an appraisal is not required under the preceding Paragraph, all Lenders must obtain an appropriate evaluation of the commercial real estate securing the loan that is consistent with safe and sound banking practices. Evaluations are not required to be performed in accordance with USPAP or by State licensed or certified appraisers but should be consistent with the Interagency Guidance Appraisal and Evaluation Guidelines and the Interagency Advisory on the Use of Evaluations in Real Estate-Related Financial Transactions, issued by the Federal Banking Regulators. b) The appraiser must be:
SOP 50 10 8 B.Ch4.A.4.d.i
i) Independent and have no appearance of a conflict of interest (such as a direct or indirect financial or other interest in the property or transaction, independent of the loan production function, and not involved in the approval of the transaction); and ii) Either State-licensed or State-certified, with the following exception: when the commercial property’s estimated value is over $1,000,000, the appraiser must be State-certified. c) In order for the appraiser to identify the scope of work appropriately, the appraisal must identify the Lender as the client and/or an intended user of the appraisal, as those terms are defined in USPAP, except that federally-regulated Lenders may follow their primary regulator’s FIRREA requirements to the extent they permit otherwise. The Lender may not use an appraisal prepared for the seller or the Applicant. The cost may be passed on to the Applicant. d) The appraisal must be an “Appraisal Report” prepared in compliance with USPAP. e) If the loan will be used to finance new construction or the substantial renovation of an existing building, the appraisal must estimate what the market value will be at completion of construction. (“Substantial” means rehabilitation expenses of more than one-third of the purchase price or fair market value at the time of the application.) After construction is completed, Lender must obtain a statement from the appraiser, general contractor, project architect, or construction management firm that the building was built with only minor deviations (if any) from the plans and specifications upon which the original estimate of value was based. If the Lender cannot obtain such a statement, then the Lender may not close the loan without SBA’s prior written permission. f) If the SBA-guaranteed loan was used to cover the construction period, the Lender must notify the appropriate SBA CLSC of any deviation(s) and work with the SBA CLSC to determine an appropriate course of action, including the securing of additional collateral. The Lender’s notification to SBA must provide a sufficient understanding of the reasons for the differences in values between the estimated and actual values as well as a recommendation as to a remedy to offset the difference in values such as additional equity or additional collateral. If additional collateral is being required, the Lender must identify both the fair market and liquidation values of the additional collateral. If the Lender is unable to obtain a statement that the building was built with only minor deviations (if any) from the plans and specifications upon which the original estimate of value was based, but is able to obtain a new appraisal demonstrating that the market value meets or exceeds the original estimate of value, then no additional action on the part of the Lender is necessary. g) If the loan will be used to acquire an existing building that does not require construction, the appraiser should estimate market value on an as-is basis. If the appraiser estimates the value other than on an as-is basis, the narrative must include an explanation of why the as-is basis was not used. h) When valuing the collateral, the Lender must not include the contributory value of any rental income or the value of any intangible assets contained in the appraisal. i) An appraisal may be obtained as part of the loan application to assist with the underwriting or as part of the loan closing. In no case may the Lender rely on an appraisal that was prepared more than 12 months prior to the date of the application. j) If the Lender is going to require the appraisal at closing, the loan application must include an estimate of the value of the real estate and the estimate must be identified in the Lender’s credit memorandum with the requirement for an appraisal that supports the estimated value at time of closing. k) If at time of closing the appraised value:
SOP 50 10 8 B.Ch4.A.4.d.i
i) Is 90% or more of the estimated value, the Lender may close the loan but must include a written explanation as to why the appraisal is less than the estimated value in the loan file. ii) Is less than 90% of the estimated value, Export Express Lenders are permitted to close the loan, but the Lender must include a written justification as part of its file that may be reviewed by SBA at time of guaranty purchase or when conducting lender oversight activities. The justification must include a thorough analysis by the Lender of the reasons for the appraisal being low and an explanation as to what steps the Lender took to offset the risk to SBA from the low appraisal such as additional equity or additional collateral. ii. Non-commercial real estate or real estate securing a personal guaranty: SBA has no specific appraisal requirements for non-commercial real estate (such as a residence) or real estate (commercial or non-commercial) taken as collateral to secure a personal guaranty. iii. Other Fixed Assets: If the valuation of fixed assets is greater than their Net Book Value, an independent appraisal by a qualified individual must be obtained by the Lender to support the higher valuation. The appraiser must be independent of the loan production function, not involved in the approval of the transaction, and must not have the appearance of a conflict of interest. A valuation of the fixed assets provided as part of a business valuation will not meet these requirements, except as part of a going concern appraisal. iv. Business Valuation Requirements – Change of Ownership: a) Determining the value of a business (not including real estate which is separately valued through a real estate appraisal) is the key component to the analysis of any loan application for a change of ownership. An accurate business valuation is required because the change in ownership will result in new debt unrelated to business operations and potentially the creation of intangible assets. A business valuation assists the buyer in making a determination that the seller’s asking price is supported by an independent Qualified Source (See definition in Appendix 3). b) In order for the individual performing the business valuation to identify the scope of work appropriately, the business valuation must be requested by and prepared for the Lender. The scope of work should identify whether the transaction is an asset purchase or stock purchase and be specific enough for the individual performing the business valuation to know what is included in the sale (including any assumed debt). The business valuation must include the individual’s conclusion of value, the qualifications of the individual performing the business valuation and their signature certifying to the information contained in the business valuation. The Lender may not use a business valuation prepared for the Applicant or the seller. The cost of the business valuation may be passed on to the Applicant. i) Non-Special Purpose Properties: (a) If the amount being financed (including any 7(a), 504, seller, or other financing) minus the appraised value of real estate and/or equipment being financed is $250,000 or less, the Lender may perform its own valuation of the business being sold, unless the Lender’s internal policies and procedures require an independent business valuation from a Qualified Source. (b) If the amount being financed (including any 7(a), 504, seller, or other financing) minus the appraised value of real estate and/or equipment is greater than $250,000 or if there is a close relationship between the buyer and seller (for example, transactions between existing owners or family members), the Lender must obtain an independent business valuation from a Qualified Source. ii) Special Purpose Properties: A “Special Purpose Property” is a limited- market property with a unique physical design, special construction materials, or a layout that restricts its utility to the specific use for which it was built. (a) If the amount being financed (including any 7(a), 504, seller, or other financing) minus the appraised value of real estate and/or equipment being financed is $250,000 or less, the Lender may perform its own valuation of the business being sold, unless the Lender’s internal policies and procedures require an independent business valuation from a Qualified Source. (b) If the amount being financed (including any 7(a), 504, seller, or other financing) minus the appraised value of real estate and/or equipment being financed is over $250,000 or if there is a close relationship between the buyer and seller (for example, transactions between existing owners or family members) and the business operates from a Special Purpose Property, the Lender must obtain an independent business valuation performed by a Certified General Real Property Appraiser. The appraiser must be independent of the loan production function, not involved in the approval of the transaction, and must not have the appearance of a conflict of interest. (c) The business valuation must allocate separate values to the individual components of the transaction including land, building, equipment, and intangible assets. (d) The Certified General Real Property Appraiser must have completed no less than four going concern appraisals of equivalent special use property as the property being appraised, within the last 36 months, as identified in the qualifications portion of the Appraisal Report. (e) Each business valuation assignment under this section must be undertaken with a specific instruction for the Certified General Real Property Appraiser to conduct the appraisal in compliance with current USPAP guidelines. iii) The business valuation may be obtained and reviewed after the issuance of an SBA Loan Number and prior to closing. If the Lender requests the business valuation after issuance of an SBA Loan Number, the credit memorandum must include an estimate of the value of the business. The credit memorandum must be updated after receipt of the business valuation to include a comparison of the loan amount and the business valuation. iv) Any amount(s) of the loan proceeds that will be used to facilitate a change of ownership may not exceed the business valuation. v) Lender Verification of Business valuation Financial Data: Lender must obtain a copy of the financial information relied upon by the individual who performed the business valuation and verify that information against the seller’s IRS transcripts to ensure the accuracy of the information.
Operationalizing SBA SOP 50 10 8, B.Ch4.A.4 — Credit Standards for Export Express
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