On September 14, 2018, the Small Business Administration (SBA) announced the update and release of SBA Form 159, “Fee Disclosure and Compensation Agreement.” This updated form is designed to simplify the collection of information by combining the currently utilized SBA Form 159 (7a) and SBA Form 159 (504) into one comprehensive document titled “SBA Form 159.” This revised form will serve both the SBA’s 7(a) and 504 loan programs.
The purpose of this form is to identify Agents and to collect information about Agents, the services they provide, compensation rendered, and who paid the compensation to Agents by or on behalf of a small business Applicant for the purpose of obtaining or expediting an application for a loan guaranteed by the SBA.
According to the SBA, Agents include: loan packagers, referral agents, brokers, accountants, attorneys, and consultants, and any other party that receives compensation from representing an Applicant or lender in connection with an SBA loan.
SBA lenders must begin using the new Form 159 immediately. However, for applications currently in process, SBA lenders may continue to utilize the previously approved forms through October 31, 2018. Beginning on November 1, 2018, the SBA will only accept the revised version of the form.
The changes to the updated form include:
- The term “Lender” has been changed to a more accurate term: “SBA Lender” – which is defined as a 7(a) Lender or Certified Development Company (CDC) and includes SBA Supervised Lenders;
- The new form has added citations to the Standard Operation Procedures (SOP) and Code of Federal Regulations (CFR) in an effort to reduce duplication of information found in Agency regulations and in the SBA SOP 50 10;
- The parties required to complete the form have been more clearly identified in the revised instructions;
- Areas of the form that were frequently misunderstood or misinterpreted have also been addressed in this new form and cover:
- A redesign of the form to group all identifying information and compensation information paid into one central and summarized location in order to promote transparency, ensure the Applicant is fully informed of all fees being charged, and allows the SBA to more easily implement its legislative mandate to monitor fees paid by an Applicant in any financial matter involving the SBA.
- Adds a statement that the Agent may not be compensated by both the Applicant and SBA lender for the same services rendered. Additionally, any Agent employed by an SBA lender must be paid by the SBA lender and such fees cannot be passed on to the Applicant.
- The form also includes a new check box to indicate that required itemization details are attached when a fee exceeds a pre-determined dollar threshold.
- The new form also clarifies the language in the Applicant’s certification – adding the following statement: “Applicant must not sign this form until all required services and fee information is disclosed.”
- A revision to the structure of the SBA Lender’s certification has also been included which clarifies and numbers existing statements.The new form also added statements which include new Statements 4, 5 and 6:
- New Statement 4: If the SBA deems any portion or all of the fees charged in connection with the application for or making of the loan to be unreasonable or prohibited, the SBA lender agrees to refund that amount to the Applicant;
- New Statement 5: The SBA lender has consulted the System for Awards Management’s (SAM) Excluded Parties List System or any successor system to ensure that the Agent is not debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation in a transaction by any Federal department or Agency.
- New Statement 6: Any fee charged is not a standardized amount and all fees charged to the Applicant comply with SBA Loan Program Requirements.
- SBA Form 159 has also revised the structure of the Agent’s certification to number the statements; clarified that the Agent must disclose compensation that has been charged or paid by the Applicant or the lender, not just the Applicant; and added the following new Statement 4:
- New Statement 4: If the SBA deems any portion or all of the fees charged in connection with the application for or making of the loan to be unreasonable or prohibited, the Agent agrees to refund that amount to the Applicant. If the certification is made by a legal entity (e.g., corporation, limited liability company), execution of the certification must be in the legal entity’s name by a duly authorized officer or other entity representative; if by a partnership, execution of the certification must be in the partnership’s name by a general partner.