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  **TO:**        ALL                                      **CONTROL NO.:** 5000-1049
                 EMPLOYEES                                                 

  **SUBJECT**:               504 Loan Disbursement        **EFFECTIVE:**   2/6/2008
                             Reporting                                     
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The purpose of this Notice is to institute procedures to ensure the
timely cancellation of undisbursed 504 loans.

**[Background:]{.underline}**

Federal law requires that on September 30^th^ of the 5^th^ fiscal year
after the period of availability before an obligation of a fixed
appropriation account ends, the account shall be closed and any
remaining balance (whether obligated or unobligated) in the account
shall be cancelled and thereafter shall not be available for an
obligation or expenditure or for any purpose. \[31 U.S.C.§1552(a)\] For
the 504 Program, a CDC must disburse the loan in accordance with Section
B.1.e of the Loan Authorization, which states: "Disbursement: CDC must
issue a Debenture and the Debenture Proceeds must be disbursed no later
than 12 months from the approval date of this Authorization, unless CDC
or SBA extends the time in writing." Assuming a CDC is within the
initial 12 month disbursement period, or has been approved for an
extension of the disbursement period, the CDC is permitted to disburse
the loan during the approved period. However, no extension period can
exceed five years under the above-referenced Federal Account Closure
Law. In order to provide for an orderly disbursement procedure within
the period of availability of the funding, SBA is issuing this
Procedural Notice.

**[Specific Modifications for 504 Loans Approaching the 4-year
Anniversary:]{.underline}**

Under applicable appropriations law, the approval period for a 504 loan
cannot extend beyond the end of the fifth fiscal year following the
fiscal year in which the funds were approved for disbursement (the
appropriations law disbursement deadline). To help ensure that all 504
borrowers receive funds within the applicable appropriation law window,
and pursuant to a properly extended Loan Authorization, a CDC must
contact the Sacramento Loan Processing Center and request, in writing,
an extension of disbursement period up to, but not beyond, 48 months
from the date that SBA approved the loan.

**[Notification to CDCs:]{.underline}**

Undisbursed dollars are automatically cancelled in accordance with the
"schedule" established by this Notice **(**Attachment 1), and the Denver
Finance Center (DFC) will automatically generate the messages
(Attachment 2). DFC will make a reasonable effort to mail the initial
message to the CDC approximately 2 months prior to taking action on
remaining undisbursed funds.

The message will inform the CDC of the undisbursed dollar amount and
will provide a date on which the dollars are automatically cancelled.
After the 2‑month message has expired, DFC will make a reasonable effort
to mail a second message on the day the automatic cancellation is
processed. (Attachment 2 provides the exact messages).

**[Field Office Responsibilities:]{.underline}**

On a monthly basis, the field offices may want to review the Desktop
Application called the "Cancellation of Undisbursed Balance" and contact
the CDC to determine if any undisbursed balances are subject to
automatic cancellation in order to prevent cancellations of loans that
remain active. When DFC mails the CDC a message, the loan information
will update in the Desktop Application detailing the action taken based
on the message generated. The loan number, CDC's name, projected
cancellation, and actual cancellation date will display. The Desktop
Application will update daily. Access to the system is through a new
menu screen titled "Gty Loan Portal," where the existing
"Gty Termination-Unpaid Fee" application is also located.

DLCS and PMQD26 automatically post each message and action. Any SBA
staff that contacts a CDC must report the outcome of that conversation
in the DLCS. The report should include name and title of the CDC
official and a summary of the CDC's statement regarding the disbursement
schedule.

CDCs with questions should contact Hien Nguyen at the SBA Sacramento
Loan Processing Center at [(916) 930‑2463]{.underline}. SBA field staff
with questions regarding the use of this systems and the Desktop
Application should contact Michael Avant at (202) 205-6372. SBA
supervisors with questions regarding policy issues should contact A. B.
McConnell, Jr., Chief 504 Program Branch, at (202) 205-7238.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Grady B. Hedgespeth Jennifer E. Main

Director/Office of Financial Assistance Chief Financial Officer

and AA/Office of

Performance Management

**ATTACHMENT 1**

**CDC Notification Message Schedule**

**Based on Loan Approval Date**

46-Month Message -- will be mailed providing initial notification that
outstanding undisbursed dollars will be automatically cancelled.

48-Month Message -- will be mailed to report the automatic cancellation
of all outstanding undisbursed dollars.

**ATTACHMENT 2**

**46 month Message -- First Business Day:**

CDC Name & Loan #:

Business Name:

SBA approved a 504 loan for the amount of \$\_\_\_\_\_ on
[(date)]{.underline} . As of the date of this message, the loan remains
undisbursed.

You are reminded that the lender must prudently disburse all loan
proceeds within 12 months from the date of approval not to exceed 48
months with an approved extension.

Questions may be addressed to Hien Nguyen at the SBA Sacramento Loan
Processing Center at [(916) 930‑2463]{.underline}.

**48 month Message -- Last Business Day:**

CDC Name & Loan #:

Business Name:

The 504 loan for the amount of \$\_\_\_\_\_\_\_\_\_\_ was cancelled on
[(date)]{.underline}. This action was taken as a result of our previous
notification that required the 504 loan to be disbursed as of this date.

Questions may be addressed to Hien Nguyen at the SBA Sacramento Loan
Processing Center at [(916) 930‑2463]{.underline}.