Important Updates & Upcoming Events in SBA Programs

2. Updates & Upcoming Events • SBA Awards Event – Wednesday, May 15th at the Hilton Garden Inn, Freeport • Lenders Round Table in Windham – Thursday, May 9that noon, Windham Public Library • America East – Wednesday, August 14th – Friday, August 16th, Foxwoods Resort, CT • Notice 5000-19007 – Changes to 7(a) & 504 Loan Program Appraisal Requirements • Appraisal Requirement modified to require an appraisal on all loans greater than $500,000 secured by commercial real property rather than $250,000 • Appraisals must be dated within 12 months of the application for guaranty • Appraisals still required if there is a close relationship between buyer & seller OR if the SBA or Lender feels one is necessary to evaluate creditworthiness • Issuance of SOP 50 10 5 (K) went into effect on April 1, 2019

3. SOP (K) Program Updates • SBAInfo Notice 5000-19004 Issuance of SOP 50 10 5 K • Reflects a total of 91 Clarifications, Additions, Deletions and Updates • Subpart A 14 • Subpart B 40 • Subpart C 35 • Appendices 2

4. SOP 50 10 5 (K) Updates for 7(a) only Subpart B Cooperative financing PAGES 140-141 ADDITION Leasehold improvements loan maturity PAGE 148 REVISION Construction performance bond update PAGES 216-217 EWCP structure, modifications, foreign accounts and borrowing certificates PAGE 196 Equity injection PAGE 185 and page 234 SBA Express, Export Express and 7a small loans REVISION New borrower certification regarding leasing PAGE 237 ADDITION Removed Semi-annual monitoring requirement for Working Capital CAPlinesPAGE 248

5. SOP 50 10 5 (K) Updates for 504 only Subpart A Updated CDC professional services contract requirements PAGE 49-50 REVISED CDCs may not perform independent loan review for other CDCs PAGE 49-50 REVISED Independent loan review every 2 years unless directed by OCRM PAGE 52 REDUCED Retention of 912 clearance documentation for life of loan PAGE 56-57 UPDATE Revision of 1081 submissions PAGE 60-62 REVISED CDC reporting of organization changes and documentation PAGE 58-59 CLAR Updated Designated Attorney status requirements PAGE 74 REVISED Updated Local Area Expansion (LEA) and Multi-state CDC guidance 81-82 UPDATED

6. SOP 50 10 5 (K) Updates for 504 only Subpart C Escrow closing guidance PAGE 267 MOVED Review of historic properties PAGE 308 REVISED Updated Job Opportunity requirements PAGE 309 UPDATED Permissible debt refinance without expansion PAGE 312 UPDATED Loan processing and closing using E-Tran PAGE 340 ADDED Use of Proceeds documentation requirements prior to closing PAGE 366 RESTRICTION 25 year debenture PAGE 341 UPDATED Insurance requirements for Authorization PAGE 341 CLAR Change of ownership approval and documentation PAGE 348 ADDED PCLP authority update and restrictions on approving change of ownership PAGE 348 ADDED No Adverse Change dated within 120 calendar days of closing PAGE 351 CLAR 504 Complete File Review by OGC PAGE 353-354 CLAR Updated Energy Public Policy guidance PAGE 355 UPDATED Incorporated language on revised Form 159 PAGE 362-363 UPDATED

7. SOP 50 10 5 (K) Updates for both 7(a) and 504 Subparts B and C Process for submission of religious eligibility worksheet (SBA Form 1971) PAGE 109 Revised Revised 912 submission process PAGES 110-113 REVISED Revised prurient eligibility determination process PAGE 114 REVISED Ineligibility of leasing to any business engaged in illegal activity PAGE 138 CLAR Updated Environmental Phase II guidance PAGE 207 NEW GUIDANCE 100% of applicant ownership must identified in E-Tran PAGE 221 CLAR 4506-T reconciliation of financial information PAGE 218-219 CLAR

8. Credit Elsewhere ClarificationChapter 2, paragraph II.E.1: • Comment on liquidity of the business & guarantors • Comment on the specific weakness of loan • Lack of collateral • Longer term needed • Credit weakness • Industry the bank wouldn’t normally lend in • Startup or projections based cash flow • Any other reason that the borrower could not otherwise get the loan • Specifically state that without the government guaranty the borrower would not be able to obtain their financing on reasonable terms from non-Federal, non-State, or non-local government sources, including from the Lender

9. Businesses Engaged in Illegal ActivityUpdated to clarify rules around marijuana related businesses • Marijuana-Related Businesses: Because federal law prohibits the distribution and sale of marijuana, financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity. Therefore, businesses that derive revenue from marijuana-related activities or that support the end-use of marijuana may be ineligible for SBA financial assistance. Whether a business is eligible is determined by the nature of the business’s specific operations. The following businesses are ineligible: • “Direct Marijuana Business” -- a business that grows, produces, processes, distributes, or sells marijuana or marijuana products, edibles, or derivatives, regardless of the amount of such activity. This applies to recreational use and medical use even if the business is legal under local or state law where the applicant business is or will be located.

10. Eligible or Not Eligible? • “Indirect Marijuana Business” -- a business that derived any of its gross revenue for the previous year (or, if a start-up, projects to derive any of its gross revenue for the next year) from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to aid in the use, growth, enhancement or other development of marijuana. Examples of Indirect Marijuana Businesses include businesses that provide testing services, or sell or install grow lights, hydroponic or other specialized equipment, to one or more Direct Marijuana Businesses; and businesses that advise or counsel Direct Marijuana Businesses on the specific legal, financial/accounting, policy, regulatory or other issues associated with establishing, promoting, or operating a Direct Marijuana Business. However, for purposes of illustration, SBA does not consider a plumber who fixes a sink for a Direct Marijuana Business or a tech support company that repairs a laptop for such a business to be aiding in the use, growth, enhancement or other development of marijuana. • Indirect Marijuana Businesses also include businesses that sell smoking devices, pipes, bongs, inhalants, or other products if the products are primarily intended or designed for marijuana use or if the business markets the products for such use.

11. HEMP Legal Less than 0.3% THC • Consistent with the Agriculture Improvement Act of 2018 (Public Law No. 115-334), a business that grows, produces, processes, distributes or sells products made from hemp (as defined in section 297A of the Agricultural Marketing Act of 1946) is eligible.

12. SOP 50 10 5 (K) Updates for both 7(a) and 504 Subpart A • System for Award Management (SAM) excluded parties list • Chapter 1, paragraph II.E.1 and Chapter 3, paragraph II.B.2 (pages 13,14 & 52) • Ethics guidance for review of loan financing if government employee of GS 13 or higher involved • Chapter 1, paragraph II.E.3 and Chapter 3, paragraph B.5: (pages 16 & 55) • Loan and Lender Monitoring System update to include new peer group of $350 million or more • Chapter 1, paragraph III.A.3: (page 18)

13. SOP 50 10 5 (K) Updates for both 7(a) and 504 Subparts B and C • Franchise review process for Applicants operating under multiple agreements, management agreements, and the appeal process for decisions not to place a brand on the SBA Franchise Directory. • Chapter 2, paragraph II.D.8: • Clarified guidance related to the credit elsewhere • Chapter 2, paragraph II.E.1: • Incorporated the policy change included in SBA Policy Notice 5000-17057 to increase the threshold for Lender review of liquidity from 10 percent to 20 percent for owners of the equity of the Applicant, and provided additional guidance on addressing credit elsewhere in the Lender’s credit memorandum. • Chapter 2, paragraph II.E.2-3:

14. SOP 50 10 5 (K) Updates for both 7(a) and 504 Subparts B and C • Added guidance that if an Environmental Professional recommends proceeding directly from the Transaction Screen to a Phase II (bypassing the Phase I), and the Lender concurs, the Lender must seek in advance an exception to policy from the SBA Environmental Committee. • Chapter 4, paragraph V.E.4: (page 207 ) • Clarified that the Lender must disclose 100% of the Applicant’s ownership on SBA Form(s) 1919/1244 and 100% of the Applicant’s ownership also must be entered in the E-Tran system in order to submit a loan application. Each owner must be identified in the E-Tran system. • (Chapter 6, paragraph I: page 221) • 4506-T reconciliation of financial information: • 7a Lenders prior to first disbursement* • CDCs prior to submitting closing documents to SBA Counsel • Chapter 5, paragraph IV.D.1 and paragraph IV.D.4: page 218 – 219)

15. SOP 50 10 5 (K) Updates for both 7(a) and 504 Subparts B and C • Clarified that residential facilities that do not provide healthcare and/or medical services are not eligible, and businesses that are licensed as nursing homes or assisted living facilities and provide healthcare and/or medical services are eligible. • Chapter 2, paragraph III.A.3: (page 105 & 288) • Clarified guidance regarding a Borrower leasing space to a third party and added instructions for when the Lender discovers a Borrower is leasing space to a business engaged in any illegal activity. • Chapter 2, paragraph V.F.1: (page 138)

16. SOP 50 10 5 (K) Updates for both 7(a) and 504 Subparts B and C • Agriculture Improvement Act of 2018, revised guidance concerning the eligibility of hemp-related businesses • Chapter 2, paragraph III.A.8: (page 108) • Process for submission of religious eligibility worksheet (SBA Form 1971) • Chapter 2, paragraph III.A.11: (page 109) • Revised 912 submission process • Chapter 2, paragraph III.A.13: (pages 110-113) • Revised prurient eligibility determination process • Chapter 2, paragraph III.A.15: (page 114)

17. SOP 50 10 5 (K) • Emphasized that once a loan is submitted to LGPC, cannot be processed delegated (exception for 7(a) Small Loans that do not meet minimum score). • Clarified non-delegated applications for refinancing debt must include all supporting docs (Note to be refinanced, etc.). • Updated guidance for documenting equity injection • Increase waiting period from 6 to 12 months for change of ownership when: • Using delegated authority, and • When debt not owed to seller

18. SOP 50 10 5 (K) Maturity for leasehold improvements (LHI) may not exceed 10 years plus up to 12 months for construction period Incorporated updated maximum allowable fixed rate Updated SBA Express and Export Express interest rates Revised guidance for checking Dept. of Treasury/OFAC Sanctions lists for Export Express Update fee disclosure requirements from revised SBA Form 159

19. SOP 50 10 5 (K) • Incorporated legislation permitting loans to cooperatives to acquire a controlling interest in the employer small business • Updated guidance for change of ownership involving a new owner for ESOPs and Cooperatives • Revised guidance that delegated lenders must obtain approval from LGPC for any adjustments to ownership of the Borrower to verify: • Borrower complies with loan & guaranty limits to one Borrower & Affiliates • There has been no prior loss caused by any new owners

20. Form 159 Updates • New SBA Form 159 was released August 31, 2018 • Same form used for 7(a) and 504 loan programs • Updated for clarity and ease of use • Multiple services by the same Agent - all services may be listed on a single Form 159 • Effective April 1, 2019, CDCs must submit SBA Forms 159 into E-Tran within 30 days of the initial disbursement on the loan. For those loans that were funded prior to the effective date of this SOP, the CDC may upload Forms 159 to E-Tran or submit with the CDC’s Annual Report. • Chapter 8, paragraph III.B.1 and III.B.6: (page 363)

21. Insurance Requirement • Insurance requirements for the authorization • Any insurance required by State law • Liability insurance; Workers’ compensation (at origination with Servicing follow up if notified of an issue); Malpractice • Other insurance appropriate to the loan • Product liability; Dram shop; Disability; etc. • Chapter 5, paragraph I.D-D.1: (page 341)

22. What is Delegated Loan Authority & How Do We Get It??

23. Delegated Authority • SBA Express • 50% guaranty • Loans up to $350,000 • Lines of Credit (up to 5 years revolving with matching term out period) • Follow bank policies and procedures, use bank docs • Export Express • Lines of Credit or Term loans up to $500,000 including letters of credit to support exporting • Loans are made and serviced by a bank or credit union • Guaranties - 90% for loans up to $350,000 or 75% for loans of $350,000 to $500,000 • Preferred Lenders Program (PLP) • Guaranties of 85% for loans up to $150,000 or 75% for loans between $150,000 and $5 million • PLP Export Working Cap Program (EWCP) • This program offers the opportunity for SBA 7(a) Lenders with experience using the EWCP or who are participants in the Delegated Authority Lender Program of the Export-Import Bank to apply for PLP authority to underwrite EWCP loans. Lenders with PLP-EWCP authority are delegated the same level of authority to process, close, service, and liquidate EWCP loans as is granted to approved 7(a) Lenders with PLP authority.

24. How to get delegated loan authority? • SBA Express & Export Express Delegated Authority • Must have a signed SBA 750/750B agreement • Lender is in good standing with SBA & the lender’s regulators • Must have been involved with SBA lending for at least a year OR have made at least 20 commercial/business loans of $350,000 or less in the past FY • Can request Export Express & SBA Express authority simultaneously • Make your request for either Express program through your District Office • Preferred Lenders Program (PLP) Delegated Authority • Must have disbursed at least 5 SBA loans in the past 24 months • Provide a written request to the District Office • The District Office will work with you to get the correct information to OCRM for review and approval (Outlined on page 24 of SOP 50 10 5 K) • PLP – Export Working Cap Program • Must have been actively using the Export Working Cap Program with SBA or Ex-IM for at least six months • Must have booked at least three EWCP loans in 24 months prior to application • Must have experience in offering trade financing to businesses • Lenders participating in the Delegated Lender Authority Program of Ex-Im Bank are eligible for EWCP PLP Authority

25. Lender Match • LenderMatch isauser-friendly website that connects participatingSBA lenderswithsmall businessborrowers. • LenderMatchcanincreaseyour reachto borrowers outside of your local area. • Lenders can select referral searchcriteria to better target customers who meet their requirements.

26. US Small Business AdministrationMaine District Office • Amy Bassett, District Director 207-622-8382; amy.bassett@sba.gov • Diane Sturgeon, Deputy District Director 207-622-8286; diane.sturgeon@sba.gov • Jim Pineau, Senior Area Manager, Northern Maine 207-945-2021; james.pineau@sba.gov • Brad Currie, Senior Area Manager, Southern Maine 207-780-1013; bradley.currie@sba.gov • Bill Card, Economic Development Specialist 207-622-8555; william.card@sba.gov • Keith Lind, Public Affairs Specialist 207-622-8551; keith.lind@sba.gov