**Patriot Express Pilot Loan Initiative**

**PROCEDURAL GUIDE**

June 29, 2007

TABLE OF CONTENTS

1\. WHAT IS Patriot Express*?* 3

a\. Initiative
Defined.................................................................................3

2\. ADDITIONAL SBA Monitoring for Loans Above
\$350,000..................................4

3\. HOW DOES A LENDER BECOME A Patriot Express LENDER? 4

a\. Existing SBA Lenders 4

b\. Lenders Not Currently Participating in SBA's Loan Programs 5

4\. HOW WILL SBA RENEW THE LENDER'S Patriot Express STATUS? 6

5\. WHAT ARE THE REQUIREMENTS OF Patriot Express LOAN PROCESSING? 8

a\. What Individuals Would be Eligible for Patriot
Express?\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....8

b\. What Types of Programs, Businesses and Loans Are Not Eligible for
Patriot Express? 9

\(1\) Types of Loans and Loan Programs Not Eligible for Patriot Express
9

\(2\) Types of Businesses Not Eligible for Patriot
Express.................................10

\(3\) Additional Patriot Express
Restrictions.................................................10

> c\. Are Revolving Lines of Credit Loans Eligible for Patriot Express?
> 14

d\. What are the Terms and Conditions of Patriot Express Loans? 16

> \(1\) Maximum Loan Amount and SBA Guaranty 16
>
> \(2\) Multiple Patriot Express Loans 16
>
> \(3\) Patriot Express Maximum Maturities and Demand Notes 17
>
> \(4\) Interest Rates 18
>
> \(5\) Refinancing Under Patriot Express 18

\(6\) Use of Proceeds for Business Purposes 19

> \(7\) Collateral 19
>
> \(8\) Fees 20
>
> \(9\) Access to Patriot Express Funds 21
>
> \(10\) Secondary Market Sales 21
>
> \(11\) Loan Increases 21
>
> e\. What is the Lender's Responsibility for Reviewing Eligibility? 21

(1) Eligibility Authorized
    Lenders...........................................................22

(2) Lenders Without Eligibility
    Authority................................................\...24

> f\. What Credit Analysis Must the Lender Do? 24

6\. WHAT IS THE Patriot Express APPLICATION PROCEDURE? 25

a\. What Forms are Required? 25

b.  How Does the Patriot Express Lender Request an SBA Loan Number? 27

c.  What Does the Sacramento Loan Processing Center Review? 27

d.  How Does the SLPC Notify the Lender of the Loan Number? 28

e.  How Does a Lender Without Eligibility Authority Request
    Reconsideration of a Denial? 28

7\. WHAT MUST A LENDER DO FOR CLOSING, SERVICING, AND LIQUIDATION OF
Patriot Express LOANS? 28

a\. Who Drafts and Signs the SBA Authorization? 29

b.  What Are the Closing Requirements? 29

c.  What Are the Servicing and Liquidation Requirements? 32

> \(1\) When is SBA Consent for an Action Required? 32
>
> \(2\) When Must Lender Notify SBA of Action Taken?.............. 33

\(3\) Must Patriot Express Lenders Liquidate all Patriot Express
Loans...............\...34

> \(4\) How Does the Lender Document
> Liquidation?\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...35
>
> \(5\) How Does the Lender Apply Proceeds of Collateral? 35
>
> \(6\) May the Lender Take Back a Note Receivable? 35

8\. HOW DOES SBA PURCHASE ITS GUARANTY? 36

a\. When Will SBA Purchase Its Guaranty on an Patriot Express Loan? 36

> b\. What Procedures and Documents Does SBA Require to Purchase? 36
>
> c.  When is SBA Released from Liability on its
> Guaranty?\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....37

9\. HOW DOES SBA ASSESS THE Patriot Express LENDER\'S PERFORMANCE? 37

10\. WHAT IS THE PROCEDURE FOR SUSPENSION OR REVOCATION OF ELIGIBILITY
TO PARTICIPATE IN Patriot Express? 38

APPENDICES I & II-- PATRIOT EXPRESS SUPPLEMENTAL LOAN GUARANTY
AGREEMENTS..........................................................................................\....
39

1\. WHAT IS Patriot Express?

> [a. Initiative Defined]{.underline}
>
> To support the entrepreneur segment of the Nation's military community
> (including spouses) during what is expected to be an extended war on
> terror, SBA has developed and implemented a comprehensive new strategy
> designed to more effectively integrate and promote SBA's financing,
> procurement, and entrepreneurial development programs to the military
> community. The cornerstone of this strategy is the new 7(a) Patriot
> Express Pilot Loan Initiative, which was established on May 14, 2007,
> and will continue as a pilot initiative until December, 31, 2010, at
> which point the Agency will evaluate the initiative and make a
> determination whether to adopt or terminate it. The key features of
> Patriot Express are as follows:

-   Borrower eligibility (which lenders must document) will be limited
    to businesses that meet SBA's standard eligibility requirements and
    that are 51 percent or more owned by an individual or individuals in
    one or more of the following groups:

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-   Veterans (other than dishonorably discharged).

-   Service-Disabled Veterans.

-   Active Duty Military service member participating in the military's
    Transition Assistance Program (TAP), which is applicable to
    potential retirees within 24 months of separation and to discharging
    Active Duty members within 12 months of discharge.

-   Reservists and National Guard members.

-   Current spouse of above, widowed spouse of a service member who died
    while in service, or widowed spouse of a veteran who died of a
    service-connected disability.

-   Streamlined documentation and processing features similar to
    SBAExpress

-   SBA's 75-85 percent guaranty will apply, which contrasts with the 50
    percent guaranty available under SBAExpress. Loans of \$150,000 or
    less may receive a maximum guaranty of 85 percent and loans for more
    than \$150,000 may receive a maximum guaranty of 75 percent.

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-   Maximum loan size of \$500,000.

-   Lenders must use their existing, prudent collateral practices for
    Patriot Express loans of \$350,000 or less, but must take available
    collateral for loans greater than \$350,000.

-   Patriot Express maximum interest rates will be the same as those
    allowed under the regular 7(a) program, which contrasts with the
    higher interest rate allowed under the SBAExpress program.

-   Loans will be centrally processed in SBA's Sacramento Loan
    Processing Center (SLPC), with a strong emphasis on SBA's Internet
    based eTran loan processing.

2\. ADDITIONAL MONITORING AND CONTROL FOR LOANS ABOVE \$350,000

> While Patriot Express is similar to SBAExpress, under Patriot Express
> SBA provides its 75/85 percent guaranty and a loan maximum of
> \$500,000. As a result, Patriot Express may entail increased risk to
> the Agency. As a result, while SBA is implementing Patriot Express as
> a pilot initiative and will monitor its performance very closely, the
> Agency is also adding the following additional management controls:

-   SBA will limit the number of loans approved above \$350,000 under
    Patriot Express to a maximum of 2,000 loans for the life of the
    pilot initiative unless explicit authorization to exceed that 2,000
    maximum is granted by the Administrator (following an analysis by
    the Office of Capital Access (CA) of the performance of those loans)
    pursuant to a policy decision reviewed by the required clearing
    offices and forwarded to the Office of the Administrator.

-   SBA will regularly monitor the performance of all Patriot Express
    loans (including loans above \$350,000) using both predictive and
    other performance indicators**.** Following the earlier of the
    approval of a substantial number of Patriot Express loans above
    \$350,000 (but no more than 2,000 of such approvals) or within two
    years of the first Patriot Express loan approval, CA will conduct an
    analysis of the performance of Patriot Express loans above
    \$350,000, which will be shared with the Office of Inspector General
    (OIG).

-   SBA will discontinue accepting requests for approval of Patriot
    Express loans above \$350,000, irrespective of the number approved,
    if purchases of those loans exceed seven percent.

-   SBA will require Patriot Express lenders to have satisfactory SBA
    performance, as determined by SBA in its sole discretion, including
    an Acceptable Risk Rating (Risk Rating of 1-3). Other factors that
    SBA anticipates considering may include on-site review/examination
    assessments, historical performance measures (such as default rate,
    purchase rate and loss rate), loan volume to the extent that it
    impacts performance measures, and other performance related
    measurements and information.

3\. HOW DOES A LENDER BECOME A PATRIOT EXPRESS LENDER?

# a. Existing SBA Lenders

> Lenders that currently participate in the SBAExpress and PLP programs
> are eligible to make Patriot Express loans. Lenders that do not
> currently participate in the SBAExpress or PLP programs may request
> Patriot Express/SBAExpress authority, but they must (through their
> recent history of processing of standard 7(a) loans) demonstrate that
> they:

(1) Can effectively process, close, service, and liquidate SBA loans and
    have a history of acceptable currency, default rates, and loss
    rates;

(2) Are in compliance with applicable SBA Loan Program Requirements (as
    defined in 13 CFR 120.10);

(3) Have been reviewed by and received a satisfactory review/examination
    from the Office of Credit Risk management (OCRM) and have no major
    objections from the D/OCRM;

(4) Have generally been current in filing SBA required 1502 reports and
    in remitting required guaranty and servicing fees;

(5) Have at least an 85 percent currency rate on their SBA 7(a) loan
    portfolio for the last 3 complete fiscal years plus the elapsed
    portion of the current fiscal year (lenders achieving at least an 85
    percent currency rate may be approved for up to a 1 year term, while
    lenders achieving a 90 percent currency rate may be approved for up
    to a 2 year term.) (For SBA lenders with less than 3 years of SBA
    lending experience/data, the Agency may consider performance over
    the period of time the lender has been an SBA lender, but will limit
    the lender's initial term of participation to 1 years or less);

(6) For lenders regulated by one of the federal/state oversight
    authorities, be in good standing with their primary regulator and
    has had no recent enforcement actions or agreements that are
    unacceptable to SBA;

(7) Are not subject to any SBA enforcement actions;

(8) Has received no major substantive objections from its Lead SBA
    Office. (The Lead SBA Office is that SBA district office where the
    headquarters of the lender is located.)

> While currency and loss rates in SBA loans are critical considerations
> in the lender approval process, the Agency recognizes that mergers and
> acquisitions, changes in SBA's management information systems, and
> other factors may result in anomalous performance figures. As a
> result, lenders that identify significant differences between the
> performance numbers developed by the lender and those developed by SBA
> (not related to lack of accurate 1502 reporting) may follow-up with
> the SLPC to address anomalies.
>
> An SBA lender (or field office) may send a request to participate in
> writing to the Director, Sacramento Loan Processing Center, 501 I
> Street, Suite 12-100, Sacramento, CA 95814-2322 or fax a request to
> (916) 930-2406 with an information copy to its Lead SBA Office. When a
> lender (or field office) requests or extends SBAExpress and/or PLP
> status, it also may request Patriot Express status. When a holding
> company with a PLP subsidiary requests an extension of PLP status to a
> non-PLP subsidiary, it may also request Patriot Express status for the
> non-PLP subsidiary. The nomination or request must include
> documentation that the lender has met the SBAExpress/Patriot Express
> participation requirements. Appendices I and II include the Patriot
> Express Supplemental Loan Guaranty Agreement(s) to be signed by
> participating lenders, which incorporates key requirements of the
> initiative as well as the requirements and procedures set forth in
> this Procedural Guide.

# b. Lenders Not Currently Participating in SBA's Loan Programs

> Lenders not currently participating with the SBA must meet the
> Agency's lender requirements as set forth in SOP 50-10 and must become
> an approved SBAExpress or PLP lender before participating in Patriot
> Express*.* (An application for PLP/SBAExpress/Patriot Express
> authority may be made simultaneously with the application for SBA
> lender authority.) As noted in 3(a) above, a lender may send a request
> to participate to, Director, Sacramento Loan Processing Center.
>
> Non-SBA lenders applying for Patriot Express authority must:

(1) Be in good standing with their primary federal/state regulator and
    have no recent enforcement actions or agreements that are
    unacceptable to SBA;

(2) Show at least 20 commercial or business loans for \$350,000 or less
    at their most recent fiscal year end;

(3) Have a history of acceptable currency, default rates, and loss rates
    on loan loans of \$350,000 or less;

(4) Ensure their primary SBA loan personnel have received appropriate
    training on SBA's policies and procedures (such training could
    include SBA District Office training and/or trade association
    training that adequately addresses SBA's regulations and Standard
    Operating Procedures, including SBA's loan processing, servicing,
    and liquidation requirements);

(5) For lenders regulated by one of the federal/state oversight
    authorities, be in good standing with their primary regulator and
    have had no recent enforcement actions or agreements that are
    unacceptable to SBA; and

(6) Have no major substantive objections from the D/OCRM.

> Lenders not currently participating in SBA's loan programs that are
> approved for Patriot Express will be limited to an initial Patriot
> Express term of one year, after which SBA will review their
> performance. Also, due to the potential broad reach of their marketing
> and promotional practices, many of the prospective new SBA lenders
> could generate significant volumes of SBA loans. As a result, SBA may
> limit new SBA lenders to a yearly maximum of \$25 million of Patriot
> Express and/or other Express lending authority in their initial years
> of participation. This will allow SBA to analyze the underlying
> quality of the lenders' Patriot Express portfolios and the
> implications for the Agency's lending authority. During this initial
> period, OCRM will review the lenders' operations and assess their
> performance. The Office of Financial Assistance (OFA) may thereafter
> authorize higher volumes as appropriate based on the results of the
> lender review, performance data, available SBA 7(a) authority, and
> other factors.

4\. HOW WILL SBA RENEW THE LENDER'S Patriot Express STATUS?

> The SLPC will automatically start the renewal process a few months
> prior to the expiration of a lender's Patriot Express/SBAExpress/PLP
> status. The SLPC will contact the lender and ask it to certify as to
> whether it currently is, or in the past two years has been, subject to
> an enforcement action by or any formal or informal agreements with its
> state or federal regulators. The SLPC will also contact the lender's
> Lead SBA Office and the SBA's Servicing and Purchase Centers for
> information on the lender's proficiency; its currency, loss, etc.
> rates; its adherence to SBA policies and procedures; and other
> information. The SLPC gathers the information relevant to a lender's
> renewal, analyzes it, and sends it with a recommendation to
> Headquarters, which reviews the renewal, makes a final decision, and
> forwards that decision to the SLPC.
>
> Lenders that have participated in Patriot Express for 2 years or more
> may be renewed in the initiative for a term up to 2 years, but SBA may
> renew for less than 2 years if lender or program circumstances
> warrant. Lenders participating in Patriot Express for less than 2
> years may be renewed in Patriot Express for an additional year and may
> be renewed for up to 2 years thereafter.
>
> In renewing a lender and determining its renewal term for Patriot
> Express, SBA will consider whether the lender:
>
> \(1\) Can effectively process, close, service, and liquidate SBA loans
> and has a history of acceptable currency, default rates, and loss
> rates;
>
> \(2\) Is in compliance with applicable SBA Loan Program Requirements
> (as defined in 13 CFR 120.10);
>
> \(3\) Has been reviewed by and received a satisfactory review from
> OCRM and have no major objections from the D/OCRM;
>
> \(4\) Has generally been current in filing SBA required 1502 reports
> and in remitting required guaranty and servicing fees;
>
> \(5\) Has a satisfactory performance history with SBA, including
> acceptable currency, default, and loss rates, including at least an 85
> percent currency rate on their SBA 7(a) portfolio for the last 3
> complete fiscal years plus the elapsed portion of the current fiscal
> year (lenders achieving at least an 85 percent currency rate may be
> renewed for up to a 1 year term, while lenders achieving a 90 percent
> currency rate may be approved for up to a 2 year term.)
>
> \(6\) For lenders regulated by one of the federal/state oversight
> authorities, is in good standing with their primary regulator and has
> had no recent enforcement actions or agreements that are unacceptable
> to SBA (Lender must submit statement of status of any
> regulatory/enforcement actions within past three years.);

(7) Is not subject to any SBA enforcement actions; and

(8) Has received substantive objections from its Lead SBA Office.

> The SLPC notifies the lender of the SBA's decision and, if the renewal
> is approved, the SLPC sends the lender a new Patriot Express
> Supplemental Guaranty Agreement to sign. The lender must sign and
> return the agreement to the SLPC before the lender's Patriot Express
> renewal is effective. (Agreements must be signed and returned to the
> SLPC within 60 days of receipt or a new application to the initiative
> will be required.) If the renewal is not approved, the lender will be
> notified as to the reason(s), and it may not make Patriot Express
> loans after its Patriot Express status ends.
>
> If the lender wants to re-apply for Patriot Express/SBAExpress status
> after its renewal request is declined, it must wait at least one year
> from the decline decision before reapplying for Patriot Express
> status. If the only cause for non-renewal was failure to meet the
> currency rate requirement, the lender may re-apply to the SLPC for
> Patriot Express/SBAExpress status as soon as its currency rate
> satisfies the SBA requirement, even if this is less than 1 year.

5\. WHAT ARE THE REQUIREMENTS OF Patriot Express LOAN PROCESSING?

> SBA's basic business loan eligibility, policy, and procedures apply to
> Patriot Express loans and the Patriot Express lender must apply all
> SBA business loan requirements, including those in the Small Business
> Act, 13 CFR Parts 120 and 121, and SBA Standard Operating Procedures
> (SOPs 50 10, 50 50, and 50 51), unless specifically identified as
> inapplicable by this Guide.
>
> [a. What Types of Individuals are Eligible for Patriot
> Express?]{.underline}
>
> As noted in Section I above, Patriot Express is targeted to the
> military community, so borrower eligibility is limited to certain
> members of the military community, and lenders must document that
> eligibility in their loan file and provide copies of that
> documentation with any request to SBA to purchase.
>
> \(1\) Eligibility for Patriot Express will be limited to businesses
> that meet SBA's standard eligibility requirements and that are 51
> percent or more owned by an individual or individuals in one or more
> of the following groups:

-   Veterans (other than dishonorably discharged).

-   Service-Disabled Veterans.

-   Active Duty Military service member participating in the military's
    Transition Assistance Program (TAP), which is applicable to
    potential retirees within 24 months of separation and to discharging
    Active Duty members within 12 months of discharge.

-   Reservists and National Guard members

-   Current spouse of above, widowed spouse of an active duty member who
    died while in service, or widowed spouse of a veteran who died of a
    service-connected disability.

> Eligibility for Reservists and National Guard members is limited to
> current members of the Reserve or Guard (and their current spouses).
> Former Reservists and National Guard members (and their spouses) are
> not eligible, unless they qualify from active duty as Veterans.
>
> \(2\) Lenders must document in their loan file a borrower's
> eligibility for Patriot Express using the following DOD/DVA
> documentation, including the 51 percent ownership by the above, and
> must present copies of that documentation with any request to SBA to
> purchase.

-   **Veteran:** Certified copy of a DD Form 214, which is provided
    for other than dishonorably discharged veterans.

-   **Service-Disabled Veteran:** Certified copy of the DD 214 or
    documentation from the DVA that the veteran has been determined
    as having a service-connected disability.

-   **Service Member:** DOD photo card (Geneva Convention Identification
    Card) and Form DD 2648 (active duty service member) or Form 2648-1
    (reserve component member).

-   **Transitioning Active Duty Military Member:** DD Form 2, \"U.S.
    Armed Forces Identification Card (Active),\" or DD Form 2, \"Armed
    Forces of the United States Geneva Conventions Identification
    Card (Active)\" and,  DD Form 2648 (Active Duty Military member)
    or DD Form 2648-1 (Reserve Component member ).

-   **Reservists and National Guard:** DD Form 2, Armed Forces of the
    United States Identification Card (Reserve).

-   **Current Spouse of Veteran:** The veteran's Form DD 214 and
    evidence of status as a current spouse.

-   **Current Spouse of Transitioning Active Duty Military Member or
    Current Reservist/National Guard Member:** DD Form 1173, Department
    of Defense Guard Reserve Family Member Identification Card and
    evidence of status as the current spouse.

-   **Widow of Active Duty Service Member who died in service or Widowed
    Spouse of Veteran who died of a service connected disability:**
    Documentation from DOD or from DVA clearly showing this to be the
    case.

> Patriot Express is a streamlined loan initiative, so complex loans or
> unusual situations/issues are generally not eligible and should
> be processed through standard 7(a) loan processing. 

b\. [What Types of Programs, Businesses and Loans are Not Eligible for
Patriot Express]{.underline}?

> \(1\) Types of Loans and Loan Programs Not Eligible for Patriot
> Express
>
> Lenders may use Patriot Express only for 7(a) loans and not for the
> microloan program, the development company program (504) or any other
> SBA pilot program loans, unless specifically allowed by that pilot. In
> addition the following loans or loan programs are not allowed under
> Patriot Express:
>
> \(A\) Energy Conservation
>
> \(B\) International Trade
>
> \(C\) Qualified Employee Trusts (ESOP)
>
> \(D\) Pollution Control Program
>
> \(E\) Defense Loan and Technical Assistance (DELTA)
>
> \(F\) CapLines Program (including Builders Loan Program)
>
> \(G\) Community Investment Adjustment Program (CAIP)
>
> \(H\) Disabled Assistance Loan Program (DAL)
>
> \(2\) [Types of Businesses Not Eligible for Patriot
> Express]{.underline}
>
> Patriot Express loans cannot be made to:
>
> \(A\) Businesses engaged in teaching, instructing, counseling or
> indoctrinating religion or religious beliefs, whether in a religious
> or secular setting. (Businesses engaged in moderate such activity
> could be eligible for standard 7(a) loan processing, but additional
> analysis would be required, which would preclude Patriot Express*'s*
> expedited procedures.)

g.  \(B\) A business deriving directly or indirectly more than de
    minimis gross revenue through the sale of products or services, or
    the presentation of any depiction or displays, of a prurient sexual
    nature or that presents any live performances of a prurient nature.

> Patriot Express loans also must meet regular SBA eligibility
> requirements as to type of business, which are stated in 13 CFR Part
> 120 and SOP 50-10, and which currently include such restrictions as
> non-profit businesses, businesses engaged in lending, passive holders
> of real estate/personal property, life insurance companies, pyramid
> businesses, businesses engaged in gambling, illegal businesses,
> businesses that restrict patronage, government-owned entities,
> cooperatives, businesses engaged in loan packaging, businesses engaged
> in political or lobbying activities, and speculative businesses.
>
> \(3\) [Additional Patriot Express Restrictions]{.underline}
>
> [(A) Existing SBA loan.]{.underline} Any existing SBA loan for the
> applicant business must be current for the lender to make a Patriot
> Express loan.
>
> \(B\) [Piggy-back loan.]{.underline} A loan is not eligible for
> Patriot Express (or a 7(a) loan) if the lender has or contemplates a
> piggy-back loan with the borrower. A piggy-back is a loan made by the
> lender at or about the same time for the same or similar purpose as
> the Patriot Express loan, with a lien position senior to the Patriot
> Express loan.
>
> \(C\) [No more than 90% financing.]{.underline} A Patriot Express loan
> may not be used to finance more than 90 percent of the actual cost of
> any real estate being acquired or of the financing needs for a new
> business. This restriction does not apply to non-real estate financing
> for an existing business (e.g. working capital or equipment).
>
> \(D\) [SBA Form 1919.]{.underline} Generally, loans under Patriot
> Express may be made only if questions 1, 2, and 3 on SBA Form 1919 are
> all answered "No." However, if one or more such questions is answered
> "Yes," the lender may elect to process, submit, and disburse the loan
> under Patriot Express, when the subject's affirmative activity meets
> the following situations (as further defined in SOP 50-10):

-   A Single Minor Offense within the last 10 years; or

-   Several Minor Offenses Remote in Time (occurred more than 10 years
    ago); or

-   A Prior Offense that was cleared by the D/FA or designee on a
    previous application where no other offenses have occurred since the
    previous application was cleared by the D/FA or designee.

> However, in using this authority, Patriot Express lenders must secure
> and submit a completed SBA Form 912 to SBA using the following steps:

-   Applicant must complete and sign the Form 912, Statement of Personal
    History. [Be particularly sure the applicant fully and properly
    completes the following items]{.underline}:

-   [Block 2]{.underline}: [Ensure correct date of birth is noted,
    particularly the correct year;]{.underline}

-   [Block 3: Social Security number must be included;]{.underline}

-   [Block 7: Applicant must be very specific about each charge, the
    date, and the city and state where charged;]{.underline}

-   [Block 8: Applicant must be very specific on the disposition of each
    charge. For example, if probation was the disposition, specify for
    which charge(s) and for how long;]{.underline}

-   [Signature Block: Must be signed and dated with the date falling
    within 90 days of the submission to SBA;]{.underline}

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-   Lender must insert the SBA [Servicing]{.underline} Office that will
    service the loan after it is processed by the SLPC;

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-   Include the address, telephone number, and contact person for the
    lender in block 9;

-   Lender must check, sign, and date the "Fingerprints Waived" box in
    block 10 and the "Clear For Processing" box in block 11 of the 912;

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-   Lender must submit **two copies** of the 912 with affirmative
    answers to the Office of Inspector General, Office of Security
    Operations (OIG/OSO), Small Business Administration, 409 3^rd^
    Street, SW, Suite 5600, Washington, DC 20416; and

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-   Lender must retain the original Form 912 in the loan file.

> For all Form 912s submitted, SBA's OIG/OSO will request a "Name Check"
> (a/k/a background check) from the Federal Bureau of Investigation
> (FBI). [However, OIG/OSO cannot process incomplete Form 912s, so
> lenders need to be especially diligent in ensuring that the applicant
> properly completes this form]{.underline}. OIG/OSO will return
> improperly completed Form 912s to the Office of Operations in OFA,
> which will follow up with the lender to obtain a corrected Form 912.
>
> If the information from the FBI name check is consistent with the
> information provided in the SBA Form 912, OIG/OSO will notify the
> appropriate SBA Servicing Office. The SBA Servicing Office will
> document its file and will notify the lender that the applicant is
> eligible on a character basis for an SBA loan. The lender must
> document its loan file with SBA's notification that the applicant is
> eligible.
>
> If the information from the FBI name check contradicts the information
> provided in the SBA Form 912, OIG/OSO will notify the Office of
> Operations in OFA. The D/FA or designee will evaluate the discrepancy
> and determine if the discrepancy warrants a denial of the loan on a
> character basis. If the loan warrants a denial, the D/FA or designee
> will notify the SBA Servicing Office. The Servicing Office will notify
> the lender that the applicant is not eligible on a character basis and
> SBA cannot guarantee the loan. If the loan has been disbursed, the
> Agency will cancel its guaranty.

If the Patriot Express lender does not exercise its authority to clear
an affirmative Form 912, it may submit a standard 7(a) loan application
to the Loan Guaranty Processing Center to be processed under standard
7(a) loan procedures.

> If the applicant is an alien as indicated on the SBA Form 912, the
> lender must verify with INS the alien's status and document in its
> loan file that status. (Only Legal Permanent Residents are eligible
> for SBA financing.)
>
> \(E\) [Previous submission.]{.underline} A loan is generally not
> eligible for Patriot Express if the Patriot Express lender is aware
> that the application was previously submitted to SBA under any SBA
> program, including SBAExpress, CommunityExpress, Patriot Express, PLP,
> CLP or regular 7(a), except that the Director, Sacramento Loan
> Processing Center, may waive this prohibition if the application was
> preliminary or incomplete when previously submitted or it has changed
> materially since the previous submission. 
>
> \(F\) [Ethical requirements.]{.underline} A loan is not eligible for
> Patriot Express if there is any question of possible violation of any
> of SBA's ethical requirements, as described in 13 CFR Part 120.140 and
> SOP 50-10**.**
>
> \(G\) [Contaminated collateral.]{.underline} A loan is not eligible
> for Patriot Express if it will have primary collateral that will not
> meet SBA's environmental requirements (as described in SOP 50-10) or
> that will require use of a non-standard indemnification agreement, as
> also described in SOP 50-10.
>
> \(H\) [Previous loss to government.]{.underline} A Patriot Express
> loan is not to be made to:
>
> \(i\) A business that previously defaulted on a Federal loan or
> Federally assisted financing that resulted in the Federal government
> or any of its departments or agencies sustaining a loss; or
>
> \(ii\) A business owned or controlled by a principal or any Associates
> (see SOP 50-10) which previously owned or operated a business which
> defaulted on a Federal loan (or guaranteed a loan which was defaulted)
> and caused the Federal Government or any of its agencies or
> departments to sustain a loss in any of its programs. This includes
> any compromise agreement with any such agency/department.
>
> This restriction applies whether or not SBA was involved in the
> previous loss**.**
>
> Also, a loan is not eligible if a principal (as defined in SOP 50-10)
> of the applicant was the recipient of a student loan that is in
> delinquent status.
>
> [(I) Conflict of interest.]{.underline}  A loan is not eligible for
> Patriot Express if there are any real or apparent conflicts of
> interest involved. This includes the transfer of ownership where there
> is a close relationship between the buyer and seller, such as with
> family members.  (SOP 50-10 further defines possible conflicts of
> interest and transfer of ownership issues.) Such applications may,
> however, be processed through standard 7(a) processing procedures. 
>
> \(J\) [Letter of credit.]{.underline} A loan is not eligible for
> Patriot Express if it guarantees or funds a letter of credit.
>
> \(K\) [Floor plan.]{.underline} Floor plan financing is not allowed
> under Patriot Express.
>
> \(L\) [Bankruptcy.]{.underline} A loan is not ineligible for Patriot
> Express just because the borrower has been or is subject to a
> bankruptcy. That is a matter to be considered in the lender's credit
> decision.
>
> \(M\) [Reduced Lender Exposure.]{.underline} The lender may not make a
> Patriot Express loan which reduces its existing credit exposure for
> any borrower, except in cases where an interim loan(s) has been made
> for other than real estate construction purposes to the borrower which
> was approved by the lender within 90 days of receipt of the issuance
> of a subsequent SBA loan number.
>
> Some loans that are not eligible for Patriot Express may be eligible
> under other SBA loan programs, including PLP, regular 7(a) or the
> Military Reserve Economic Injury Disaster Loan (MREIDL).
>
> c\. [Are Revolving Lines of Credit Loans Eligible for Patriot
> Express?]{.underline}
>
> Revolving line of credit loans, including those accessed by credit
> cards, are extremely important to small businesses, particularly new
> and expanding small businesses. The lending community and the SBA are
> therefore continuing to develop and offer new and enhanced loan
> products which better address the demand for revolving line of credit
> loans.
>
> Patriot Express revolving line of credit loans may be offered up to a
> maximum term of seven years, and maturity extensions may be included
> at the outset of the loan provided the combined term does not exceed 7
> years. In addition, a Patriot Express revolver may consist of
> revolving and maturity extensions of any length, as long as the
> combined term does not exceed 7 years. Also, lenders may include
> clean-up provisions (*i.e*. 30 days of zero balance) in Patriot
> Express revolvers.
>
> In offering revolving lines of credit loans and their enhancements,
> the SBA must ensure that borrowers, particularly those accessing SBA
> guaranteed loans through credit cards, understand that these funds
> must only be used for business related purposes. As discussed under
> Section 5(d)(6) below, lenders must apply verification procedures at
> least as thorough as those used for their non-SBA guaranteed
> commercial loans. At a minimum, lenders must thoroughly communicate to
> borrowers that all SBA loan proceeds must be used only for
> business-related purposes and also secure a certification from the
> borrower (now included on SBA Form 1919) that all loan proceeds will
> be so used.

EXAMPLES:

> A Patriot Express lender may approve a loan with a 1 year revolver and
> a 1 year maturity extension.

A Patriot Express lender may approve a loan with a 2 year revolver and a
4 year maturity extension.

> A Patriot Express lender may approve a loan with a 5 year revolver and
> a 2 year maturity extension.
>
> A Patriot Express lender may [not]{.underline} approve a loan with a 7
> year revolver and a 1 year maturity extension.

[Revolving Loan Term Renewals/Extensions:]{.underline}

> A Patriot Express revolving loan with a term of less than 7 years may
> be repeatedly renewed, but only up to a maximum of 7 years from the
> original date of the note. (In repeatedly renewing revolving loans,
> SBA expects lenders to advance a reasonable exit strategy for the
> small business.) The renewal is done by providing notice to the SBA
> servicing office. (No new loan number will be generated.) However, if
> the initial loan was to mature or be paid-in-full in 12 months or less
> with a .25 percent guaranty fee due, and the loan is renewed or
> extended past 12 months, the lender must pay to SBA's Denver Finance
> Center (P.O. Box 748, Denver, Colorado 80259) the remainder of the SBA
> guaranty fee that would have been due if the loan had originally been
> for a term of more than 12 months.
>
> EXAMPLE: A lender makes an \$80,000 revolving loan which is to mature
> or be paid-in-full in 12 months and the lender pays an SBA guaranty
> fee of 0.25 percent. After 12 months, the lender either renews the
> loan of extends its maturity for another 12 months. At that time the
> lender must pay SBA an additional guaranty fee of 1.50 percent (2
> percent minus 0.25 percent originally paid and the .25 that the lender
> is eligible to retain for loans under \$150,000).
>
> SBA does not consider a revolving loan with an annual renewable
> feature as a loan of less than 12 months for SBA guaranty fee
> calculation purposes. The guaranty fee for these loans is the same as
> for any other loan with a maturity exceeding 12 months, unless a
> workout is required (see below).
>
> [Revolving Loan Workouts:]{.underline}
>
> Patriot Express revolving loans may be extended past the initial 7
> years only as a result of a workout situation. For purposes of this
> guide, a workout is an action taken in response to an adverse
> condition of a borrower, with that action intended to keep the
> borrower's debt current and/or preclude default or liquidation. The
> maximum term for any workout is the minimum period that would normally
> be required to pay back the loan from the cash flow of the business.
> SBA generally views that as a maximum of 3 years. However, under
> extraordinary circumstances on behalf of the borrower, the workout
> period may be modestly extended beyond 3 years, but the reasoning must
> be clearly documented in the loan file. Loans with initial terms of 12
> months or less that are extended beyond 12 months as part of a workout
> arrangement do not require an additional guaranty fee above the
> original .25 percent. (See 5(c)(8) below for discussion of fees).
>
> Loans with initial terms of 12 months or less that are extended beyond
> 12 months as part of a workout arrangement do not require an
> additional guaranty fee above the original .25 percent. Maturity
> extensions (termouts) are not considered workouts. For example, for a
> line of credit, if disbursements will continue after the 12 month
> term, the line is considered to have been renewed and the full
> guaranty fee is due. If, however, there will be no additional
> disbursements until the financial statements are received and a
> decision is made by the lender on how to proceed, then the loan is
> considered to have been extended pursuant to a workout and no
> additional guaranty fee will be due. However, if the lender alters its
> collection policy during the decision making process (e.g. it was
> collecting both principal and interest during the first 12 months and
> then just starts keeping interest and allows the borrower to keep
> principal because there are no further disbursements), the full
> guaranty fee is due.
>
> d\. [What are the Terms and Conditions of Patriot Express
> Loans?]{.underline}
>
> \(1\) [Maximum Loan Amount and SBA Guaranty Percentage]{.underline}
>
> The total amount of any Patriot Express loan may not exceed \$500,000.
> (SBAExpress may not exceed \$350,000.) The SBA guaranty on a Patriot
> Express loan may not exceed 85 percent for loans of \$150,000 or less
> or 75 percent for loans greater than \$150,000.
>
> If there is an outstanding balance of an existing SBAExpress or
> CommunityExpress loan or loans, a lender may approve a Patriot Express
> loan to a borrower and its affiliates so long as the aggregate
> outstanding balance does not exceed \$500,000. The aggregate balance
> of the SBA guaranteed portions of Patriot Express and all other
> outstanding SBA loans to a borrower and its affiliates may not exceed
> \$1.5 million.
>
> EXAMPLE 1: A borrower has an SBAExpress loan of \$100,000, and a
> Patriot Express loan of \$100,000. The borrower may obtain another
> Patriot Express loan for \$300,000.
>
> EXAMPLE 2: A borrower has a 7(a) loan with a balance of \$1,800,000
> and a 75 percent SBA guaranty (for an SBA portion of \$1,350,000). The
> borrower may obtain a Patriot Express loan for \$200,000 (for an SBA
> portion of \$150,000).
>
> \(2\) [Multiple Patriot Express Loans]{.underline}
>
> A lender must not approve more than one Patriot Express or SBAExpress
> loan to the same borrower for the same project, unless there is a
> legitimate need to do so, such as would be the case for loans for
> different purposes and/or different terms (working capital versus
> equipment purchase). A loan for a project must not be split into
> multiple smaller loans, in order to avoid SBA fees or requirements.
>
> EXAMPLE 1: A borrower needs \$75,000 for working capital. A lender
> proposes to make three Patriot Express loans of \$25,000 each, so that
> none of the loans require collateral. (See Paragraph 7 below regarding
> collateral requirements.) The loans are not eligible for Patriot
> Express, because the reason for splitting the loans is to avoid an SBA
> requirement.
>
> EXAMPLE 2: A borrower needs \$250,000 to start a business\--\$200,000
> to purchase equipment and a \$50,000 line of credit. The lender
> applies for two separate Patriot Express loans, because the maturity
> and repayment terms will be different for the equipment purchase and
> the line of credit. The loans are eligible for Patriot Express*.*
>
> \(3\) [Patriot Express Maximum Maturities and Demand
> Notes]{.underline}
>
> Patriot Express loans must have a stated maturity and maturities are
> the same as for any other 7(a) loan as set forth in SOP 50-10, except
> that revolving Patriot Express loans are limited to a maximum maturity
> of seven years.
>
> Demand notes and "demand" payment schedules are allowed under Patriot
> Express, under the following conditions:

-   Payment on demand must be for substantive cause, be in writing, and
    be provided to the borrower at loan closing;

-   The terms must be consistent with those for the lender's other
    non-SBA guaranteed commercial loans; and

-   There must be a maturity date established. For example, a line of
    credit loan could state that it is payable upon demand under certain
    conditions, but in no case later than a certain date. SBA loans must
    have a stated maturity date, because the SBA guaranty cannot be
    perpetually outstanding and it must be ascertainable from the note
    that the maturity date does not exceed SBA maximum requirements.

> Patriot Express revolving loans may be established as renewable each
> year, provided they do not exceed the maximum seven year term.
>
> The term of a Patriot Express loan may not exceed the period of the
> SBA guaranty commitment
>
> \(4\) [Interest Rates]{.underline}
>
> For Patriot Express loans (unlike SBAExpress loans), the standard 7(a)
> interest rate restrictions apply: a lender may charge up to 2.25
> percent over the Prime rate for maturities under seven years and 2.75
> percent over Prime for maturities of seven years or longer. The rates
> can be two percent higher for loans of \$25,000 or less and one
> percent higher for loans between \$25,000 and \$50,000.
>
> A lender may charge default interest if it does so for its non-SBA
> guaranteed commercial loans, as long as the interest rate does not
> exceed the amounts stated in this paragraph. (Default interest is a
> change (increase) in interest rate charged the borrower as a result of
> a failure to meet certain conditions clearly specified in the loan
> agreement, typically timely payments.)
>
> For variable rate loans, a Patriot Express lender is not required to
> use the base rate identified in the Federal Register. It may use the
> same base rate of interest it uses on its non-SBA guaranteed
> commercial loans as well as its established change intervals
> (including intervals more frequently than monthly), payment accruals,
> etc. However, the interest rate throughout the term of the loan may
> not exceed the maximum allowable Patriot Express interest rate and the
> loan may be sold on the secondary market only if the base rate is the
> prime rate as published each business day in a national financial
> newspaper or is SBA's Optional Peg Rate.
>
> The amount of interest SBA will pay to a lender following default of a
> Patriot Express loan is capped at the maximum interest rates for the
> standard 7(a) loan program.

### (5) Refinancing under Patriot Express

> Under Patriot Express a lender is prohibited from refinancing (which
> may include an increase) an existing non-SBA guaranteed loan or
> borrower debt unless: (a) The existing loan no longer meets the needs
> of the applicant (for example if the current loan is a term loan and a
> revolver is needed); (b) The new loan meets the SBA's 20 percent
> increase in cash flow requirement, as applicable (see SOP 50 10(4));
> (c) If existing debt between the applicant and the requesting lender,
> it has been current (no payment beyond 29 days past due) for at least
> the last 36 months; and (d) the new loan does not reduce the lender's
> existing credit exposure to the borrower. These conditions must be
> documented in the loan file.
>
> An example regarding reduction of lender's existing credit exposure is
> as follows:
>
> Borrower has an existing line of credit for \$100,000. Lender
> refinances and increases the loan with a Patriot Express loan of
> \$450,000 with a 75 percent guaranty. This is allowable because the
> lender's exposure becomes \$112,500.
>
> Lenders must avoid any circumstances that could create a possible
> conflict of interest.
>
> Also, as discussed further below, in refinancing debt, particularly
> credit card debt, lenders must take reasonable steps to ensure
> applicants are aware and certify that refinancing comprises only
> business related debt. (SBA Form 1919, Borrower's Information Form,
> includes such a certification).
>
> Existing SBA guaranteed loans must not be refinanced under Patriot
> Express. The only exception is if the transaction is the purchase of
> an existing business that has an existing SBA loan that is not with
> the requesting Patriot Express lender.
>
> [(6) Use of Proceeds for Business Purposes]{.underline}
>
> Due to the special nature of Patriot Express*,* particularly the level
> of authority and autonomy delegated to lenders under this initiative,
> SBA is particularly concerned that Patriot Express loan proceeds be
> used exclusively for business-related purposes. SBA therefore expects
> lenders to use reasonable methods to ensure that loan proceeds are
> used for business-related expenses, which means conformance with
> verification procedures at least as thorough as those used for their
> non-SBA guaranteed commercial loans. At a minimum, lenders must
> thoroughly communicate to borrowers that all SBA loan proceeds must be
> used only for business-related purposes, must clearly set forth that
> requirement on the loan authorization, and must secure a certification
> from the borrower that all loan proceeds will be so used. SBA Form
> 1919, which must be signed by the borrower(s) before
> closing/disbursement, includes such a certification.
>
> \(7\) [Collateral]{.underline}
>
> Under Patriot Express, lenders are not required to take collateral for
> loans of \$25,000 or less. For Patriot Express loans greater than
> \$25,000 but less than \$350,000, the lender must follow the
> collateral policies and procedures that it has established and
> implemented for its non-SBA guaranteed commercial loans. (Lenders must
> substantiate their existing, applicable collateral policies in their
> loan file and will be required to certify their conformance with those
> policies for any purchase request.) However, SBA expects the lenders'
> collateral policies will be commercially reasonable and prudent
> practices for lenders generally. For all loans above \$350,000,
> lenders must take all available collateral. Lenders may not use
> Patriot Express to substitute for situations/loans where the lender's
> standard policy for non-SBA guaranteed commercial loans would be to
> take collateral. With respect to collateral taken, Patriot Express
> lenders must use commercially reasonable and prudent practices to
> identify collateral items, which would include conformance with
> procedures at least as thorough as those used for their non-SBA
> guaranteed commercial loans.
>
> \(8\) [Fees]{.underline}
>
> The SBA guaranty and servicing fees are the same for Patriot Express
> as for regular 7(a) loans. If the loan maturity is greater than 12
> months, the full guaranty fee is due to SBA within 90 days of approval
>
> The lender may charge the same other fees for Patriot Express loans as
> it charges for its non-SBA guaranteed commercial loans. This could
> include reasonable transaction fees such as cash advance fees, late
> fees, returned check charges, currency conversion fees, over limit
> fees (assuming borrower did not exceed SBA's approved loan amount),
> and organizational change fees, but referral fees are not allowed. It
> also could include fees for unusual servicing situations, such as for
> lines of credit. However, SBA reserves the right to disallow fees that
> are not customary and/or which do not bear a relationship to the
> service provided. Also, if the loan is purchased by SBA, the Agency
> will not purchase any portion of the loan balance that consists of
> these other fees charged to the borrower.
>
> A packaging fee is allowable for a Patriot Express loan, even if such
> a fee is not charged on the lender's non-SBA products, provided the
> fee is reasonable and is charged as a sum certain, not as a percentage
> of the loan amount.
>
> Lenders cannot charge prepayment fees on SBA loans. However, SBA does
> have requirements, including fees, that impact certain borrowers who
> prepay their loans. For a loan sold on the secondary market, a
> borrower may prepay 20 percent or less of the unpaid principal balance
> at any time without notice. If the borrower prepays more than 20
> percent, the borrower
>
> must:

-   Give the lender written notice;

-   Pay all accrued interest; and

-   If the prepayment is received less than 21 days from the date the
    lender receives the notice, pay an amount equal to 21 days' interest
    from the date the lender receives the notice, less any interest
    accrued during the 21 days and paid as stated above.

> Additionally, if a prepayment exceeds 25 percent of the outstanding
> balance of the loan, a prepayment charge must be paid by the borrower
> to SBA ("subsidy recoupment fee") for any loan that:

-   has a maturity of 15 years or more where the borrower is prepaying
    voluntarily; and,

-   the prepayment is made within the first 3 years after the date of
    the first disbursement of the loan proceeds.

> For a full discussion of the subsidy recoupment fee, please see 13 CFR
> §120.223.
>
> \(9\) [Access to Patriot Express Funds]{.underline}
>
> Patriot Express loan funds may be accessed through a variety of
> methods consistent with the way the lender normally conducts business
> for its non-SBA guaranteed commercial loans. Access through a credit
> card, including for revolving lines of credit, is acceptable under
> Patriot Express. However, SBA will have the right to deny a repurchase
> request of a Patriot Express loan guaranty for the misuse of credit
> cards involving fraud or misrepresentation or if the debtor exceeds
> his/her credit card limit for purchases on credit. In providing access
> through credit cards, lenders must ensure that these loans are
> documented by legally enforceable and assignable promissory notes
> and/or other equivalent debt instruments.
>
> \(10\) [Secondary Market Sales]{.underline}
>
> Patriot Express loans generally may be sold on the secondary market.
> For variable rate loans, the base rate must be the low prime rate as
> published each business day in a national financial newspaper or SBA's
> Optional Peg Rate. A revolving line of credit loan cannot be sold on
> the secondary market, unless it has been termed out.
>
> \(11\) [Loan Increases]{.underline}
>
> Patriot Express loans may be increased based on the needs of the small
> business and its credit situation, but the increase must not make the
> loan exceed the Patriot Express limit of \$500,000. While the amount
> of the increase is left to the discretion of the lender, it is
> expected that increases above 33 percent of the original loan amount
> will include an analysis of appropriate credit and risk factors
> consistent with the procedures the lender uses for its non-SBA
> guaranteed commercial loans. While the lender makes the credit
> decision regarding the merits of the increase, it must be processed
> through the SBA Processing or Servicing Center to which the loan is
> assigned, to check for availability of SBA funds.
>
> e\. [What is the Lender\'s Responsibility for Reviewing an Applicant's
> Eligibility for a Patriot Express Loan?]{.underline}
>
> Patriot Express is a streamlined initiative, so complex or ambiguous
> eligibility issues should generally be processed using standard 7(a)
> procedures rather than through Patriot Express. Also, Patriot Express
> transfers additional authority and responsibility to its participants,
> so Patriot Express lenders are expected to assume greater
> responsibility for screening applicants and loans for SBA eligibility.
> Patriot Express lenders are thus expected to be fully familiar with
> SBA's eligibility requirements as set forth in the Agency's statutes,
> regulations, SOPs, and Patriot Express Procedural Guide and to
> generally screen all Patriot Express applicants and loans to ensure
> they meet those requirements.
>
> In screening Patriot Express loans for SBA eligibility, lenders may in
> many instances rely on certifications provided by the applicant,
> several of which are included in the Patriot Express application
> documents. For example, character and other eligibility factors are
> included on the SBA Form 1919. In the case of size, the lender may
> rely on information provided by the applicant at the date of
> application, unless the lender has credible evidence to the contrary.
>
> However, other eligibility issues will require closer lender
> attention. If, for example, a franchise is involved, the Patriot
> Express lender must review the current list of SBA acceptable
> franchise agreements to ensure the agreement continues to meet SBA's
> requirement that the franchisee's opportunity for profit and risk of
> loss commensurate with ownership is acceptable. If the franchisor's
> agreement does not appear on the registry, or it appears and the
> lender has not been provided a certificate of no change in the
> agreement since the version on the registry was approved, the lender
> must review the agreement to ensure it meets SBA's requirements as set
> forth in SOP 50-10. (Note that the franchise registry addresses only
> the franchise agreement.) In any event, lenders must maintain
> appropriate loan file documentation supporting their eligibility
> screening.
>
> While the SBA expects all Patriot Express lenders to carefully screen
> their applications for SBA eligibility, the Agency may authorize
> qualified lenders to analyze and fully determine an applicant's
> eligibility for a Patriot Express loan without prior review and
> approval by the Agency. Participants in Patriot Express will thus
> include lenders that have authority to make SBA eligibility
> determinations ("Eligibility Authorized Lenders") and lenders that
> have not been so authorized.

(1) [Eligibility Authorized Lenders]{.underline}

> To be authorized to make eligibility determinations, lenders must
> have: (1) Processed at least 25 SBA loans in SBA's most recent fiscal
> year; (2) Received a positive recommendation for eligibility authority
> from their Lead SBA Office; (3) Been reviewed by OCRM and have
> received an acceptable rating from the D/OCRM in its most recent
> review; (4) Have received no major substantive objection from the
> D/OCRM; and (5) No outstanding substantive SBA enforcement actions.
>
> Lenders with eligibility authority must use that authority to process
> all their Patriot Express loans. While these lenders are expected to
> be proficient in and make Patriot Express eligibility determinations
> themselves, if they have questions on a particular Patriot Express
> loan, they may consult with SBA regarding that loan's eligibility.
> However, as noted above, complex eligibility issues generally should
> not be processed through Patriot Express. The consultation request may
> be e-mailed to the SLPC at [Patriot
> Express_Eligibility_Questions@sba.gov](mailto:Patriot Express_Eligibility_Questions@sba.gov).
>
> Eligibility Authorized Lenders will be required to certify in their
> request for an SBA loan number that the applicant and the loan meet
> the Agency's eligibility requirements. In making that certification,
> the lender will acknowledge complete liability for the loan if it
> later comes to the attention of SBA or the lender that the applicant
> or loan was ineligible.
>
> Eligibility Authorized Lenders have the option to use or not use SBA's
> eligibility checklist, which would be maintained in the lender's loan
> file but not sent to SBA. However, the lender must maintain
> appropriate loan file documentation supporting its eligibility
> determination. It must also ensure all required forms/information are
> obtained, are complete, and are properly executed.
>
> A lender wishing to apply for eligibility authorization may send a
> request in writing to the Director, Sacramento Loan Processing Center
> with an information copy to its Lead SBA Office. The SLPC will contact
> the lender's Lead SBA Office and SBA's Loan Servicing and Purchase
> Centers for information on the lender's proficiency in making
> eligibility determinations. The SLPC gathers the information relevant
> to a lender's renewal, analyzes it, and sends it with a recommendation
> to OFA. OFA solicits input and comments from the D/OCRM. The entire
> package is forwarded to the D/FA. The D/FA or designee reviews the
> application, makes a final decision, and forwards that decision to the
> SLPC, which notifies the lender.
>
> The lender's initial authorization to make eligibility determinations
> will extend until its next Patriot Express renewal date and will
> coincide with that date thereafter.
>
> Eligibility authorization will generally be conferred for the term of
> participation in Patriot Express, although the D/FA or designee may
> confer that authority for a shorter period if circumstances regarding
> the lender's performance or its eligibility determinations warrant.
>
> Renewal of eligibility authority will be based on the lender's: (1)
> Proficiency in making SBA eligibility determinations; (2) Receiving a
> positive recommendation for eligibility authority from their Lead SBA
> Office; (3) Having been reviewed by D/OCRM and receiving an acceptable
> rating from the D/OCRM in its most recent review; (4) Having received
> no major substantive objection from the D/OCRM; and (5) Having no
> outstanding substantive SBA enforcement actions.
>
> The SLPC will automatically start the renewal process a few months
> prior to the expiration of a lender's eligibility authority. The SLPC
> gathers the information relevant to a lender's renewal, analyzes it,
> and sends it with a recommendation to OFA. OFA solicits input and
> comments from the D/OCRM. The entire package is forwarded to the D/FA.
> The D/FA or designee reviews the renewal, makes a final decision, and
> forwards that decision to the SLPC.

(2) [Lenders Without Eligibility Authority]{.underline}

> Lenders without eligibility authority must nevertheless carefully
> review and screen Patriot Express applicants and loans to ensure they
> meet SBA's eligibility requirements before transmitting the
> application materials to the SLPC. These materials will include the
> SBA request for a loan number, the eligibility checklist, and the
> supplemental information sheet.
>
> Non-delegated lenders must ensure all required forms/information are
> obtained, are complete, and are properly executed. Appropriate loan
> file documentation must be maintained, including adequate information
> to support the eligibility of the applicant and the loan.
>
> f\. [What Credit Analysis Must the Lender Do?]{.underline}
>
> The Patriot Express credit analysis and credit decision processes are
> delegated to the lender. The lender is required to use appropriate,
> prudent, and generally accepted industry credit analysis processes and
> procedures (which may include credit scoring), and these procedures
> must generally be consistent with those used for its similarly sized
> non-SBA guaranteed commercial loans. Lenders that do not use credit
> scoring for their similarly sized non-SBA guaranteed commercial loans
> may not use credit scoring for Patriot Express. Lenders must validate
> (and document) with appropriate and accepted statistical methodologies
> that their credit analysis procedures are predictive of loan
> performance, and they must provide that documentation to SBA upon
> request. In addition, the credit scoring results must be documented in
> each loan file and available for SBA review.
>
> Lenders must not make a Patriot Express loan which would be
> inconsistent with SBA's "credit not available elsewhere" standard,
> i.e. lenders must not make an SBA guaranteed loan that would be
> available on reasonable terms from either the lender itself or another
> source without an SBA guaranty. In addition, there must be reasonable
> assurance of repayment.
>
> The credit decision, 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 non-SBA
> guaranteed loans verifies the equity injection, it must do so for
> Patriot Express loans. (Lenders must adhere to the requirement that
> owners of 20 percent or more must inject equity into the business
> above certain thresholds.) While the credit decision is left to the
> business judgment of the lender, early loan defaults will be reviewed
> by SBA pursuant to SOP 50-51.

6\. WHAT IS THE Patriot Express APPLICATION PROCEDURE?

> a\. [What Forms are Required?]{.underline}
>
> Patriot Express loan application packages must include the forms and
> information the lender requires to make an informed eligibility and
> credit decision. The lender\'s application must be certified by the
> applicant as true and complete.
>
> Except as set forth in paragraphs 1, 2, and 3 below, the only
> documentation required by SBA from the applicant under Patriot Express
> is the SBA Form 1919, "SBAExpress, CommunityExpress, and Patriot
> Express Borrower Information Form," which must be signed and dated by
> the applicant. The Form 1919 has been modified and consolidated to
> generally include the certifications and requirements previously set
> forth in SBA Forms 159, 601, 912, 1261, and 1624.
>
> Lenders should note that SBA is evaluating various options for
> processing loans and transmitting financial information electronically
> to the Agency. As part of that process, the Agency may in the future
> require participating lenders to provide SBA with additional
> information to what is currently required under the Patriot Express
> Initiative, including FICO scores. For loans submitted under E-Tran,
> additional information, including credit information, will be required
> for all owners of 20 percent or more of the SBC.

(1) [Form 159:]{.underline} If no packager has been used by the
    applicant to complete the Patriot Express loan application, the
    applicant will so indicate on the Form 1919, and no Form 159 is
    required. If a packager has been used or the lender has charged a
    fee associated with the application, the Form 159 must be fully
    completed and kept in the loan file, and the lender does not send it
    to SBA.

(2) [Form 601:]{.underline} If no construction above \$10,000 is
    involved, the applicant will so indicate on the Form 1919, and no
    Form 601 is required. If construction above \$10,000 is involved,
    the applicant and the contractor must complete the Form 601. The
    lender must keep the signed Form 601 in its loan file, and the
    lender does not send it to SBA.

(3) [Form 912:]{.underline} If question 1, 2, or 3 of Form 1919 is
    answered negatively, no Form 912 is required. If question 1, 2, or 3
    is answered affirmatively, the lender may process the loan, but it
    must have the applicant complete Form 912 and follow the steps as
    outlined in section 4(a)(3)(D) above.

(4) [Form 1624:]{.underline} If the applicant has never been debarred,
    suspended, or otherwise excluded, the applicant must so indicate on
    Form 1919, but no Form 1624 is required. If the applicant answers
    affirmatively, the loan cannot be processed through Patriot Express.

> For a Patriot Express loan, an SBA Form 1919 must be signed by each of
> the following:
>
> \(a\) for a sole proprietorship, the sole proprietor;
>
> \(b\) for a partnership, all general partners and all limited partners
> owning 20 percent or more of the equity of the firm;
>
> \(c\) for a corporation, each officer, director, and 20% or more
> owner;
>
> \(d\) any other person, including a hired manager, who has authority
> to speak

for and commit the borrower in the management of the business; and

> \(e\) any person guaranteeing the loan, if that guaranty normally
> would have

been required by SBA, as set forth in SOP 50-10.

> Although lenders are expected to obtain sufficient borrower
> eligibility information, the SBA does not require the Patriot Express
> lender to secure the signed SBA Form 1919 and/or other required
> documents before requesting a loan number from the SLPC. However, the
> lender must continue to ensure that required SBA documents are
> properly executed by all required parties at some point prior to
> closing or disbursing the loan. Lenders also need to keep a copy of
> these signed documents in the loan file.
>
> This procedure will allow lenders, for example, to complete an initial
> screening of prospective applicants by mailing (or e-mailing) a
> promotional piece that includes a preliminary application that
> requests some basic customer interest and SBA eligibility information.
> This information could then be enhanced telephonically, by mail, or
> electronically (e-mail) before submitting final documents to the SLPC.
> (However, lenders will want to ensure that during their initial
> screening process the applicant certifies that he/she meets some of
> SBA's most basic eligibility requirements, particularly those
> regarding size, character, and citizenship status.) Then, at some
> point just prior to (or coincident with) the loan closing, the lender
> must ensure that the loan applicant(s) properly completes, signs, and
> dates all required SBA documents.
>
> The Patriot Express lender is responsible for ensuring all required
> forms/information are obtained, are complete, and are properly
> executed, including electronically based forms/information that are
> the anticipated basis of the Agency's developing electronic lending
> process. In addition, after the loan is closed, the lender must
> continue to apprise SBA of certain critical performance data as well
> as changes in certain basic borrower information, such as trade name,
> address, etc.

b\. [How Does the Patriot Express Lender Request an SBA Loan
Number?]{.underline}

> Lenders without eligibility authority send to the SLPC the "SBA Form
> 1920SX, Express Guaranty Request, Parts A, B, and C." Eligibility
> Authorized Lenders send to the SLPC "SBA Form 1920SX, Express Guaranty
> Request, Part A and SBA Form 2238, Express Guaranty Request
> (Eligibility Authorized)."
>
> The lender may send the request for loan number by mail, facsimile
> transmission or electronic transmission, with the specific option
> worked out with the SLPC. As SBA technology and resources permit, SBA
> may require all Patriot Express loan number requests be transmitted to
> the Agency electronically.
>
> For loans with a maturity of twelve months or less, the lender must,
> within 10 days of when the loan number is assigned, send the guaranty
> fee to the Denver Finance Center, P.O. Box 748, Denver, Colorado
> 80259. The lender must do this before it signs the SBA Authorization
> for SBA. If Denver does not get the check within 10 business days
> after issuing the loan number, SBA will cancel the guaranty.
>
> c\. [What Does the SLPC Review?]{.underline}
>
> The SLPC reviews the request for loan number to check that the lender
> provided the required information and to see if there are any
> eligibility issues (or for Eligibility Authorized Lenders, to see if
> the lender certified that the loan and the applicant are eligible).
> This is a quick review of documentation. However, if the SBA later
> learns that the applicant or the loan is ineligible, SBA has the
> authority to deny liability on its guaranty.
>
> Note: Congress determines SBA\'s budget on an annual basis. SBA does
> not have authority to guarantee loans if it has run out of budgetary
> authority. While we delegate loan approval authority to the Patriot
> Express lender, the loan does not have an SBA guaranty until the SLPC
> issues a loan number. The SLPC cannot issue a loan number if funds are
> not available.

d\. [How Does the SLPC Notify the Lender of the Loan
Number?]{.underline}

> If a loan appears eligible and funds are available, the SLPC will to
> the best of its ability give the lender a loan number by fax or by
> electronic transmission within one day after the request for loan
> number is received. If the SLPC identifies an eligibility problem, the
> SLPC reviewer will advise the lender of the problem. If the lender
> wants, the SLPC will deny the loan within the one-day turnaround
> period and explain the eligibility problem in writing to the lender.
> Or if the lender prefers, the SLPC will keep the application until the
> problem is researched and resolved. However, as noted above, complex
> eligibility issues should generally be handled through standard 7(a)
> loan processes.
>
> e\. [How Does a Lender Without Eligibility Authority Request
> Reconsideration of a Denial?]{.underline}
>
> If the SLPC finds a proposed loan ineligible for a lender without
> eligibility authority and the lender disagrees, the lender may request
> a reconsideration, which must be in writing. An oral discussion can
> occur as to the facts, but any discussion must be followed up in
> writing/electronically and must contain the information needed to make
> an eligibility decision. The lender must send the reconsideration
> request to the SLPC within 30 days after receiving the SLPC\'s initial
> decision of ineligibility. The SLPC will notify the lender of the
> reconsideration decision.
>
> If the reconsideration is denied, the lender must submit a written or
> electronic request for further reconsideration. The request for
> further reconsideration must be sent to the SLPC within 30 days after
> the last eligibility decision. It must specifically request a
> reconsideration at the next higher level and state the reasons as to
> why SBA should reverse the eligibility decision. The SLPC will send
> the request to the D/FA or designee for review and a final eligibility
> decision. The SLPC will inform the lender of the final decision.
>
> Loans ineligible for Patriot Express may, under some circumstances, be
> eligible for submission under some other SBA loan program \[such as
> PLP, CLP or regular 7(a)\]. If the SLPC denies a Patriot Express loan
> number and the lender resubmits the loan to SBA under another loan
> program, the lender must notify the office to which it submits the
> loan that the loan was denied a Patriot Express number. The lender
> must provide that office with a copy of the SLPC \'s denial letter.

7\. WHAT MUST A LENDER DO FOR CLOSING, SERVICING AND LIQUIDATION OF
Patriot Express LOANS?

> The Patriot Express lender must close, service, and liquidate its
> Patriot Express loans using those practices and procedures that the
> lender uses for its non-SBA guaranteed commercial loans, but under all
> circumstances, the procedures and practices used for Patriot Express
> loans must be commercially reasonable, consistent with prudent lending
> standards, and in accordance with SBA Loan Program Requirements,
> as further defined in 13 CFR 120.10. SBA regulations at 13 CFR 120.524
> provide that the Agency will be released from liability on a guaranty
> on various grounds, including a lender's failure to close, service or
> liquidate a loan in a prudent manner or to comply with applicable SBA
> Loan Program Requirements (as defined in 13 CFR 120.10).

a\. [Who Drafts and Signs the SBA Authorization?]{.underline}

> The lender completes the SBAExpress/Patriot Express Authorization (SBA
> Form 2236) without SBA review and signs it on behalf of SBA. (The
> latest version of the Patriot Express Authorization may be accessed
> from SBA's banking page at
> []{.mark}<http://www.sba.gov/banking/>enhance.html#Patriot Express.)
> SBA does not require that this form be provided to the borrower.

b\. [What are the Closing Requirements?]{.underline}

> A Patriot Express lender must use the same closing and disbursement
> procedures and documentation for its Patriot Express loans as it uses
> for its non-SBA guaranteed commercial loans. However, there must be a
> promissory note that is legally enforceable and assignable, in the
> event that it would ever have to be assigned to SBA. While demand
> notes and "demand" payment schedules are allowable if they are used by
> the lender for non-SBA guaranteed commercial loans (see Section
> 5(d)(3) above), the note must still have a stated maturity date.
>
> The lender must obtain all required collateral and must meet all other
> required conditions before loan disbursement, including obtaining
> valid and enforceable security interests in any loan collateral. These
> conditions include requirements identified in the loan write-up, such
> as standby agreements, appraisals, business licenses, and cash/equity
> injections.
>
> The lender must do the following before disbursing a Patriot Express
> loan:
>
> \(1\) As set forth in SOP 50-10(4)(E), Federal business tax
> transcripts must be used to verify business financial information used
> in determining the creditworthiness of an SBA loan, and this policy is
> applicable to Patriot Express loans. However, if business financial
> information is not used to determine creditworthiness, such as may be
> the case with credit scoring, tax transcripts are not required.
>
> The IRS generally responds to SBA related tax requests within 10
> business days, so Patriot Express lenders should forward transcript
> requests to the IRS as soon as possible. However, for SBA's expedited
> loan processes, including Patriot Express, lenders are authorized to
> close and disburse a loan immediately if disbursement is requested by
> the borrower, but the lender must follow-up, secure, and verify the
> business financial data with IRS tax data and must document the loan
> file accordingly.
>
> If the lender encounters problems with acquiring the transcript or the
> IRS advises that it has no record on the applicant, the lender must
> report it to the cognizant SBA processing or servicing office, and the
> Director of that office will advise accordingly.
>
> If a material discrepancy appears or the IRS advises that it has no
> record on the applicant, the lender must report it immediately to the
> appropriate SBA office (either the assigned SBA processing or
> servicing office, depending on what stage of loan processing) and
> document the loan file of the action taken. The SBA will investigate
> the issue and may direct the lender to secure additional information,
> proceed with loan processing, rescind approval of the loan (if no
> disbursement has occurred), suspend further disbursement, call the
> loan, or initiate recovery of any disbursed amounts. In addition, the
> SBA office will determine if a referral of the matter to OIG is
> warranted and will make that referral.

\(2\) Get satisfactory evidence that there has been no unremedied
adverse change (as set forth in SOP 50-10) since the date of the
application, or since any of the preceding disbursements, in the
financial or any other condition of the borrower that would warrant
withholding or not making any disbursement. For revolving line of credit
disbursements, lenders should essentially follow the same practices as
they do for their non-SBA guaranteed commercial revolving lines of
credit loans.

> \(3\) Get required hazard insurance on all assets taken as collateral,
> unless the lender does not require hazard insurance on its non-SBA
> guaranteed commercial loans for similar collateral. If the lender does
> not require hazard insurance (for example, if it would impose an undue
> burden on a borrower given the small size of a loan), the lender must
> document the reason in its loan file. If collateral is not taken,
> hazard insurance is not required.
>
> \(4\) Make the required flood hazard determination and require flood
> insurance (when collateral is taken) pursuant to the flood insurance
> requirements in SOP 50-10. (Generally, those requirements state that
> flood insurance is required on real estate collateral in a flood zone,
> but it is within the lender's discretion to determine whether flood
> insurance is necessary on personal contents and fixtures when the
> building is not taken as collateral.) If collateral is not taken, a
> flood hazard determination is not required and flood insurance is not
> required.
>
> \(5\) In the construction of a new building or an addition to a
> building, get the borrower\'s agreement that the construction will
> conform with the \"National Earthquake Hazards Reduction Program
> Recommended Provisions for the Development of Seismic Regulations for
> New Buildings.\" Compliance with these requirements must be evidenced
> by a certificate issued by a licensed building architect, construction
> engineer or similar professional, or a letter from a state or local
> government agency stating that the issuance of an occupancy permit is
> required and is subject to conformance with building codes and that
> the local building codes include the Seismic standards.
>
> The following codes have been identified as being substantially
> equivalent to the National Earthquake Hazards Reduction Program
> Recommended Provisions: 1991 Uniform Building Code of the
> International Congress of Building Officials (ICBO); 1992 Supplement
> to the Building Officials and Code Administrators (BOCA) National
> Building Code; 1992 Amendments to the Southern Building Code Congress
> (SBCC) Standard Building Code.
>
> \(6\) Get borrower\'s agreement that it will, to the extent feasible,
> purchase only American‑made equipment and products with the proceeds
> of the Patriot Express loan. This certification is included on the SBA
> Form 1919.
>
> \(7\) For any loan involving construction of more than \$10,000, as
> indicated on SBA Form 1919, require borrower and contractor to execute
> SBA Form 601, Applicant\'s Agreement of Compliance. The lender must
> keep this form in the loan file and provide to as SBA as requested.
>
> \(8\) The Small Business Act requires that all borrowers supply
> information about payments to loan packagers, accountants, appraisers,
> lawyers, or any other individual or entity (including lenders) that
> assisted the borrower in getting the loan. If the applicant responds
> negatively to this question on the Form 1919, Form 159 is not
> required. Otherwise, it must be completed, and the lender must keep
> the signed Form 159 in its loan file.
>
> \(9\) Get certification from any 50 percent or more owner of applicant
> business on SBA Form 1919 that he or she is not more than 60 days
> delinquent on any obligation to pay child support arising under:
>
> A\) an administrative order;
>
> B\) a court order;
>
> C\) a repayment agreement between the holder and a custodial parent;
> or
>
> D\) a repayment agreement between the holder and a state agency
> providing child support enforcement services.
>
> \(10\) Require appropriate environmental reviews and compliance. A
> Patriot Express lender must follow the environmental requirements of
> SOP 50-10 and is delegated the authority to make prudent decisions
> regarding environmental risk that are stated there as reserved for the
> processing SBA office. A Patriot Express lender may not request a
> Patriot Express loan number for a loan that will have primary
> collateral that will not meet SBA's environmental requirements or that
> will require use of a non-standard indemnification agreement.
>
> \(11\) If real estate is involved appraisals are required for all
> Patriot Express [loans]{.underline} that exceed \$250,000.
>
> SBA Form 1050, Settlement Sheet, is not required to document
> disbursements. The lender must send only a copy of the executed
> Authorization to the SBA office servicing the loan. The lender should
> not send any other closing documentation to SBA after closing a
> Patriot Express loan unless it makes a request for purchase of the
> guaranty.

[]{.mark}

c\. [What Are the Servicing and Liquidation Requirements]{.underline}?

> Routine Patriot Express loan servicing and liquidation issues are
> currently being handled centrally by either SBA's Commercial Loan
> Servicing Center in Little Rock at 2120 Riverfront Drive, Little Rock,
> AR 72202 (501-324-5871; lrsc.servicing@sba.gov) or in Fresno at 2719
> North Air Fresno Drive, Fresno, CA 93727-1547 (209-487-5650;
> fsc.servicing@sba.gov).
>
> The Patriot Express lender must service and liquidate its Patriot
> Express loans using those practices and procedures that the lender
> uses for its non-SBA guaranteed commercial loans but, under all
> circumstances, such practices and procedures must be commercially
> reasonable, consistent with prudent lending standards, and in
> accordance with SBA Loan Program Requirements (as defined in 13 CFR
> 120.10).
>
> Lenders must use the 1502 reporting format to timely and accurately
> report the status and outstanding balance of all of their SBA loans,
> including Patriot Express loans, to Colson Services Corporation by the
> third day of each month, or the next business day after the third if
> the third of the month is not a business day.
>
> All Patriot Express lenders must remain current in filing the required
> monthly reports in the form required by SBA and in remitting required
> SBA servicing fees.
>
> \(1\) [When is SBA Consent for a Servicing/Liquidation Action
> Required?]{.underline}
>
> While the Patriot Express lender may take any necessary servicing or
> liquidation action for any Patriot Express loan in its portfolio, the
> lender must get the [prior written]{.underline} consent of SBA before
> taking any of the following actions. It must also document the action
> and SBA's consent in its loan file. The lender must secure SBA consent
> to:

(A) Increase the principal amount of the loan above that authorized by
    SBA at loan origination;

> \(B\) Confer a preference on the lender or engage in an activity that
> creates a conflict of interest;
>
> \(C\) Compromise the principal balance of a loan or compromise/release
> any obligor/guarantor for less than the full principal amount due;
>
> \(D\) Take title to any property in the name of SBA;
>
> \(E\) Take title to environmentally contaminated property, or take
> over operation and control of a business that handles hazardous
> substances or hazardous wastes;
>
> \(F\) Transfer, sell or pledge more than 90% of a loan;
>
> \(G\) Take any action for which prior written consent is required by
> an SBA Loan Program Requirement.
>
> \(2\) [When Must Lender Notify SBA of Action Taken?]{.underline}
>
> The lender must document its loan file and notify the SBA Servicing
> Center electronically or in writing as soon as possible, but no longer
> than 10 days after, any of the following actions. (Lenders may use SBA
> Form 2237, PLP/SBA Express/LowDoc Servicing Checklist, to notify the
> Center.) The lender must notify SBA of any of the following actions
> and provide relevant information when it:
>
> \(A\) Decreases the principal amount of the loan;
>
> \(B\) Cancels the loan;
>
> (C) Becomes aware of a change in the trade name of the business or, if
> it has no trade name, a change in the name of the business entity;
>
> \(D\) Becomes aware of a change to the borrower\'s address;
>
> \(E\) Changes the interest rate on a fixed rate loan or the interest
> rate spread on a variable rate loan;
>
> \(F\) Changes a loan\'s maturity;
>
> \(G\) Approves an assumption of a loan; or
>
> \(H\) Classifies the loan into \"liquidation status.\"

[(3)]{.underline} [Must Patriot Express Lenders Liquidate all Patriot
Express Loans?]{.underline}

> Patriot Express lenders must complete the liquidation of all Patriot
> Express loans with an estimated remaining collateral value in excess
> of \$1,000. Lenders must conduct timely site visits; *i.e*., within 15
> calendar days of the occurrence of an event that would cause a loan to
> be placed in liquidation, or sooner if there is collateral of
> significant value (more than \$5,000) that could be removed or
> depleted. If the lender waives the site visit, the lender must
> document the reason in the wrap-up report. No specific justification
> is necessary where there is a minimal loan balance (less than
> \$25,000) or collateral with a value of less than \$5,000.
>
> For loans with an estimated remaining collateral value of \$1,000 or
> less, the lender may request that SBA use the U.S. Department of the
> Treasury in order to complete liquidation. If the lender requests SBA
> to use Treasury to complete liquidation, SBA will review the request
> using normal review criteria and determine if referral to Treasury for
> liquidation is appropriate. Bankruptcy, foreclosure, litigation,
> cross-collateralization with another SBA guaranteed loan, possible
> grounds for an SBA purchase adjustment ("repair") or denial of
> liability, or other factors could preclude SBA's transfer to Treasury.
> In requesting that SBA use Treasury to liquidate, the lender must
> identify all guarantors obligated on the debt that have not been
> discharged in bankruptcy or compromised so SBA can include their names
> in the Treasury offset system. Any recoveries obtained by Treasury
> will be remitted to SBA, and the lender and SBA will share in the
> proceeds reduced by Treasury's costs of collection.
>
> In carrying out their liquidation responsibilities, lenders should
> recognize that, as part of its lender monitoring and review
> responsibilities, the Agency will explicitly evaluate the timeliness
> and reasonableness of Patriot Express lenders' liquidation activities.
> SBA will conduct complete purchase reviews on all loans as provided
> under SOPs 50-50 and 50-51.
>
> \(4\) [How Does the Lender Document Liquidation?]{.underline}
>
> The lender does not have to provide a liquidation plan to SBA,
> although the lender is encouraged to prepare one as an aid to orderly
> recovery. However, as set forth in section 8(b) below, it must
> document all significant actions taken during the liquidation of a
> loan. SBA will review liquidation actions as part of its review of a
> lender\'s processing, making, closing, servicing, and liquidation of
> loans under the Patriot Express Initiative. Please note that the
> lender will need to submit a litigation plan for any non-routine
> litigation (where factual or legal issues are in dispute and require
> resolution through adjudication or where legal fees are estimated to
> exceed \$10,000).
>
> In pursuing liquidation after SBA\'s purchase, Patriot Express lenders
> must provide SBA with a liquidation status report every 180 days until
> all recovery is completed or the lender recommends that the loan
> balance be charged off. Within 60 days of completion of recovery
> actions, the lender must provide the Agency with a liquidation wrap-up
> report summarizing all recovery activity, valuation and disposition of
> collateral, collections, and expenses. The lender must forward to SBA
> its proportionate share of any recovery proceeds not already remitted
> to the Agency.
>
> \(5\) [How Does the Lender Apply Proceeds from Disposition of
> Collateral?]{.underline}
>
> The lender must apply the proceeds from the sale of collateral in the
> following order:
>
> \(A\) liquidation expenses associated with the disposition of
> collateral
>
> \(B\) the 120 days of interest permitted on the balance as of the
> earliest uncured default
>
> \(C\) principal balance of the loan.
>
> \(6\) [May the Lender Take Back a Note Receivable?]{.underline}
>
> A lender may take back a Note Receivable on the sale of collateral on
> any reasonable terms negotiated between the lender and the buyer.
> However, the Note Receivable must be legally enforceable and
> assignable and must be properly signed by the borrower/guarantor
> acknowledging the debt. The principal balance of the loan must be
> reduced by the amount of the Note Receivable, which will
> [not]{.underline} have an SBA guaranty.

8\. HOW DOES SBA PURCHASE ITS GUARANTY?

> a\. [When Will SBA Purchase its Guaranty on a Patriot Express
> Loan?]{.underline}
>
> Normally, SBA purchases its guaranteed interest [after]{.underline}
> the lender has fully liquidated all collateral and the lender has
> pursued all avenues of collection. However, SBA will immediately
> process the purchase of any Patriot Express loan where:
>
> \(1\) the borrower has filed bankruptcy; or
>
> \(2\) the loan involves judicial foreclosure, litigation, or other
> liquidation circumstances likely to extend the liquidation process for
> real estate collateral more than 90 days past the earliest date that
> the lender could request purchase (generally, the earliest date a
> lender could request SBA to purchase is when there has been an uncured
> default exceeding 60 days).
>
> In either of the above situations the lender is still required to
> complete all recovery actions on the loan, and the lender must
> document the liquidation of all business assets in its wrap-up report
> for the loan.
>
> b.  [What Procedures and Documentation Does SBA Require to Complete
> the Purchase?]{.underline}

 

> SBA reviews all loan documentation that is relevant to the purchase
> being processed prior to payment of its guaranteed portion using
> standard guaranty purchase review procedures. For Patriot Express,
> that documentation will include appropriate substantiation of the
> borrower's eligibility for Patriot Express, as described in Section 5
> a. and b. above.
>
> (See Express Purchase Checklist at
> [[http://www.sba.gov/aboutsba/sbaprograms/elending/clc/ep/index.html]{.underline}](http://www.sba.gov/aboutsba/sbaprograms/elending/clc/ep/index.html).)
> When liquidation has been completed, for SBA to process the guaranty
> purchase, the lender must submit to SBA a liquidation wrap-up report
> with all the information required by SBA Loan Program Requirements
> (defined in 13 CFR 120.10) along with copies of required loan
> documentation to the appropriate SBA Commercial Loan Servicing Center
> in Little Rock or Fresno.  When the principal loan balance at the time
> of the purchase request does not exceed \$25,000, the servicing center
> will accept the wrap-up report and, in lieu of documentation to
> evidence that liquidation of collateral has been completed, the
> lender's certification that "liquidation of collateral is complete."
>
>  
>
> The maximum SBA will pay the lender at purchase is the guaranteed
> percentage of the loan balance at the time of default plus up to 120
> days interest at the rate in effect on the date of the earliest
> uncured default (if liquidation proceeds collected by the lender were
> insufficient for the lender to recover a full 120 days of interest) . 
> The lender must absorb any expenses that exceed this amount.
>
>  
>
> SBA will not purchase any portion of the loan balance that consists of
> lender fees (such as late fees) or other amounts charged to the
> borrower (other than reasonable and necessary lender disbursements
> incurred in recovery actions).  If lender fees or other amounts
> charged to the borrower by the lender are not paid by the borrower
> prior to the purchase request, the lender must deduct these amounts,
> and any interest charged on such amounts, from the balance shown on
> the transcript of account submitted to SBA.  Reasonable and necessary
> disbursements incurred in lender recovery actions may be added to the
> transcript if the lender has not been reimbursed for these
> disbursements by the borrower or through collection actions.
>
> ** **
>
> c.  [When is SBA Released from Liability on its Guaranty?]{.underline}
>
>  
>
> SBA regulations at 13 CFR 120.524 set forth the circumstances under
> which SBA is released from liability on a loan guaranty (in whole or
> in part, within SBA's exclusive discretion).  If the lender's loan
> documentation or other information indicates that one or more of the
> events described in the regulations occurred, SBA may undertake such
> investigation as it deems necessary to determine whether to honor or
> deny the guaranty and may withhold a decision on whether to honor the
> guaranty until completion of such investigation.  For Patriot Express
> loans accessed through a credit card, SBA has the right to deny a
> purchase request for misuse of credit cards involving fraud or
> misrepresentation or if the debtor exceeds his/her credit card limit
> for purchases on credit.

9\. HOW DOES SBA ASSESS THE Patriot Express LENDER\'S PERFORMANCE?

> SBA will assess a Patriot Express lender's performance through lender
> reviews/examinations, the lender's SBA Risk Rating, guaranty purchase
> reviews, analysis of lender performance data including currency rate,
> loss rate, etc., and other management oversight and control
> activities. These activities are designed to evaluate how well the
> lender has:
>
> \(a\) Complied with SBA Loan Program Requirements (as defined in 13
> CFR 120.10), including those relating to Patriot Express;
>
> \(b\) Duplicated, for Patriot Express loans, those established
> practices, procedures, and analyses that it uses for other non-SBA
> guaranteed commercial loans;
>
> \(c\) Processed, made, closed, serviced, and liquidated SBA loans;

(d) Maintained satisfactory SBA performance, as determined by SBA in its
    sole discretion;

> \(e\) Complied in filing SBA required performance data (currently
> provided via the SBA's 1502 reporting system) and remitted required
> guaranty and servicing fees;

(f) Remained in good standing with its primary regulator, with no
    enforcement actions or agreements in place that are unacceptable to
    SBA;

(g) Received a satisfactory performance assessment, as determined by SBA
    in its sole discretion, as a result of its most recent review by
    OCRM; and

(h) Responded to previous findings and recommendations as a result of
    OCRM administered lender reviews/examinations.

10\. WHAT IS THE PROCEDURE FOR SUSPENSION OR REVOCATION OF ELIGIBILITY
TO PARTICIPATE IN THE Patriot Express Initiative?

 

> (a)  The D/FA may suspend or revoke a participant lender's eligibility
> to participate in the Patriot Express Initiative.  Reasons for
> suspension or revocation include those factors/requirements set forth
> in Section 4 above.

 

> (b)  SBA will commence suspension or revocation proceedings by written
> notice to a participant lender, with a copy to OCRM.  Such notice will
> set forth the reasons for the proposed Agency action, and advise that
> the proposed suspension or revocation will automatically become final
> 15 business days after the date of the notice unless the participant
> lender submits to SBA, prior to the expiration of that time period,
> written opposition to the proposed Agency action.  Such written
> opposition may include argument, as well as documentary evidence,
> deemed relevant by the participant lender.  Written opposition by a
> participant lender must be delivered or mailed to: Director,
> Sacramento Loan Processing Center.

 

> (c)  If the participant lender timely submits written opposition to
> the suspension or revocation proposed by SBA, the D/FA or designee
> will review that submission, together with relevant Agency records,
> prior to the issuance of a final Agency decision regarding suspension
> or revocation.  Following such review, the Agency's final decision as
> to the suspension or revocation of the participant lender's
> eligibility to participate in Patriot Express will be issued by the
> D/FA.  The Agency will issue a final Agency decision, insofar as
> practicable, within 15 business days following the Agency's receipt of
> the participant lender's written opposition.

 

> (d)  A written notice of proposed suspension will constitute an
> initial Agency decision, and the suspension will be effective as of
> the date of issuance of the notice.  The suspension will automatically
> become final 15 business days following the date of the notice if the
> participant lender does not submit written opposition during those 15
> business days. If the participant lender does timely submit written
> opposition, the suspension will either be vacated or made final
> following the Agency's review of such written opposition and relevant
> Agency records.

Appendix I

U.S. Small Business Administration

[Supplemental Loan Guaranty Agreement]{.underline}

[Patriot Express]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_("Lender")
and the U.S. Small Business Administration ("SBA") enter into this
Supplemental Loan Guaranty Agreement ("Agreement") this
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_, 20\_\_ to establish the terms and conditions
for Lender's participation in the Patriot Express Pilot Loan Initiative
("Patriot Express Pilot Loan Initiative").

WHEREAS, SBA has authorized Lender to participate in the 7(a) Program, a
Federal program in which SBA guarantees certain loansn made by lenders
under section 7(a) of the Small Business Act, and the SBAExpress
Program, and has or has not authorized Lender to participate in the
Preferred Lenders Program, which are subprograms of the 7(a) Program;
and

WHEREAS, SBA, in exchange for Lender's agreement to comply with the
terms and conditions in this Agreement, desires to authorize Lender's
participation in the Patriot Express Pilot Loan Initiative, in which
lenders may utilize streamlined documentation and expedited loan
procedures to make loans to certain members of the Nation's military
community ("Patriot Express Loans").

WHEREAS, Lender desires to participate in the Patriot Express Pilot Loan
Initiative in compliance with the terms and conditions set forth herein.

For valuable consideration, the parties to this Agreement agree as
follows:

1\. [Agreement is Supplemental]{.underline}

This Agreement supplements the Loan Guaranty Agreement, SBA Form 750,
between Lender and SBA. All of the provisions of SBA Form 750, and the
provisions of the Small Business Act, 15 U.S.C. 631, [et
seq.]{.underline}, SBA Regulations, SBA Standard Operating Procedures,
SBA official Notices, and the Patriot Express Pilot Loan Initiative
Procedural Guide, all of which may be amended periodically (collectively
"Participating Lender Rules"), and all of which are incorporated by
reference into this Agreement, remain in effect, except as expressly
modified by this Agreement.

2\. [Lender Agreements]{.underline}

Lender agrees that it will not make any Patriot Express Loan unless the
loan meets the conditions for the Patriot Express Pilot Loan Initiative
set forth in the Federal Register notice at 72 FR 34502, June 22, 2007
and in the Patriot Express Pilot Loan Initiative Procedural Guide.
Currently, these conditions include the following:

> a\. Loans under the Patriot Express Pilot Loan Initiative will be
> limited to businesses that are 51 percent or more owned by one or more
> persons in the following groups:

-   Veterans (other than dishonorably discharged).

-   Service-Disabled Veterans.

-   Active-duty military personnel eligible for the military's
    Transition Assistance Program (TAP), which is applicable to
    potential retirees within 24 months of discharge.

-   Reservists and National Guard members.

-   Current spouse of above and the widowed spouse of a service member
    or veteran who died during service or of a service-connected
    disability.

> b\. Lender will make no Patriot Express Loan over \$500,000.
>
> c\. Although it is generally expected that lender will take collateral
> on all loans where this is consistent with the lender's own policies
> and prudent lending standards, lender must take all available
> collateral for loans greater than \$350,000.
>
> d\. A lender may charge up to 2.25 percent over the Prime rate for
> maturities under seven years and 2.75 percent over Prime for
> maturities of seven years or longer. The rates can be two percent
> higher for loans of \$25,000 or less and one percent higher for loans
> between \$25,000 and \$50,000.
>
> e\. Lenders will document each borrower's eligibility using approved
> Department of Defense or Veterans Administration documentation and
> that documentation must be furnished to SBA with any request for
> purchase of the guaranty.

3\. [Lender's Patriot Express Authority]{.underline}

Lender may issue an SBA guaranty for any loan approved under Patriot
Express procedures ("a Patriot Express Loan") without prior SBA credit
approval by executing a Patriot Express Authorization, provided:

a\. The loan complies with the Participating Lender Rules;

b\. SBA reviews the loan for eligibility and assigns it an SBA loan
number; and

> c\. By executing the Patriot Express Authorization, Lender agrees to
> comply with all

provisions contained therein.

4\. [Review of Lender]{.underline}

Lender agrees to pay to SBA fees to cover costs of examinations and
reviews and, if assessed by SBA, other lender oversight activities.

5\. [Changes in Lender Structure or Operations]{.underline}

Lender must notify SBA in writing if its structure or operations change
significantly during the term of this Agreement.

6\. [Suspension or Revocation]{.underline}

SBA may suspend or revoke Lender's eligibility to participate in the
Patriot Express Pilot Loan Initiative by 15-day written notice to
Lender, setting forth the reasons, which may include failure to comply
with or unsatisfactory performance of any of the requirements in the
Participating Lender Rules. As of the date of the notice of proposed
suspension or revocation, Lender will no longer be permitted to make any
loans under the Patriot Express Pilot Loan Initiative. Lender may file a
written objection to the suspension or revocation within the 15-day
period as provided in the Patriot Express Pilot Loan Initiative
Procedural Guide, but the suspension or revocation will become final if
Lender does not timely object or if SBA, upon review of the objection,
decides to make the suspension or revocation final and notifies Lender
of this decision. Suspension or revocation will not affect the rights,
duties and obligations of Lender or SBA with respect to Patriot Express
Loans that were authorized and disbursed prior to the date of SBA's
initial notice.

7\. [Other Remedies]{.underline}

SBA may also protect its rights under this Agreement by denial of
guaranty, other administrative actions, judicial remedies, and any other
action authorized by law.

8\. [Term of Agreement]{.underline}

This Agreement will end \_\_\_\_\_\_\_ years from the date of execution.

9\. [Notices]{.underline}

The parties must transmit any notice under this Agreement in writing by
personal delivery or certified mail, postage prepaid, return receipt
requested to:

SMALL BUSINESS ADMINISTRATION LENDER

Sacramento Loan Processing Center
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

501 I Street, Suite 12-100
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Sacramento, CA 95814-2322
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Attn: Richard Taylor, Center Director
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

or to any other person or address that either party designates by
written notice to the other. Notice will be effective on receipt or
three days after mailing, whichever is first.

10\. [Interpretation of Agreement]{.underline}

a\. This Agreement and the Form 750 are the entire agreement between the
parties.

b\. This Agreement supersedes all oral agreements and understandings
regarding the subject matter in this Agreement.

c\. All provisions in this Agreement are severable.

d\. If any provision of this Agreement is found invalid or
unenforceable, the other provisions will not be affected.

e\. Lender or SBA may choose not to insist on strict compliance with a
provision of this Agreement. This will not mean that Lender or SBA
waives the provision.

f\. Lender and SBA must agree in writing to any change in the Agreement.

g\. Federal law will govern this Agreement.

h\. Initially capitalized terms used but not defined in this agreement
will have the meanings given them in the Patriot Express Pilot Loan
Initiative Procedural Guide.

11\. [Successors and assigns.]{.underline}

This Agreement does not apply to successors and assigns of Lender.

**IN WITNESS WHEREOF,** the parties execute this Agreement as of the
above date.

U.S. SMALL BUSINESS ADMINISTRATION (Name of Lender)

Director for LENDER

Financial Assistance: Grady Hedgespeth

By: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
By:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Richard Taylor (Authorized Signature)

Sacramento Loan Processing Center Director

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

(Name Printed)

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

(Title)

Appendix II

U.S. Small Business Administration

[Supplemental Loan Guaranty Agreement]{.underline}

[Patriot Express (Eligibility Authorized)]{.underline}

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_("Lender")
and the U.S. Small Business Administration ("SBA") enter into this
Supplemental Loan Guaranty Agreement ("Agreement") this
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_, 20\_\_ to establish the terms and conditions
for Lender's participation in the Patriot Express Pilot Loan Initiative
("Patriot Express Pilot Loan Initiative").

WHEREAS, SBA has authorized Lender to participate in the 7(a) Program, a
Federal program in which SBA guarantees certain loans made by lenders
under section 7(a) of the Small Business Act, and the SBAExpress
Program, and has or has not authorized Lender to participate in the
Preferred Lenders Program, which are subprograms of the 7(a) Program;
and

WHEREAS, SBA, in exchange for Lender's agreement to comply with the
terms and conditions in this Agreement, desires to authorize Lender's
participation in the Patriot Express Pilot Loan Initiative, in which
lenders may utilize streamlined documentation and expedited loan
procedures to make loans to certain members of the Nation's military
community ("Patriot Express Loans");

WHEREAS, Lender desires to participate in the Patriot Express Pilot Loan
Initiative in compliance with the terms and conditions set forth herein.

For valuable consideration, the parties to this Agreement agree as
follows:

1\. [Agreement is Supplemental]{.underline}

This Agreement supplements the Loan Guaranty Agreement, SBA Form 750,
between Lender and SBA. All of the provisions of SBA Form 750, and the
provisions of the Small Business Act, 15 U.S.C. 631, [et
seq.]{.underline}, SBA Regulations, SBA Standard Operating Procedures,
SBA official Notices, and the Patriot Express Pilot Loan Initiative
Procedural Guide, all of which may be amended periodically (collectively
"Participating Lender Rules"), and all of which are incorporated by
reference into this Agreement, remain in effect, except as expressly
modified by this Agreement.

2\. Lender Agreements

Lender agrees that it will not make any Patriot Express Loan unless the
loan meets the conditions for the Patriot Express Pilot Loan Initiative
set forth in the Federal Register notice at 72 FR 34502, June 22, 2007
and in the Patriot Express Pilot Loan Initiative Procedural Guide.
Currently, these conditions include the following:

> a\. Loans under the Patriot Express Pilot Loan Initiative will be
> limited to businesses that are 51 percent or more owned by one or more
> persons in the following groups:

-   Veterans (other than dishonorably discharged).

-   Service-Disabled Veterans.

-   Active-duty military personnel eligible for the military's
    Transition Assistance Program (TAP), which is applicable to
    potential retirees within 24 months of discharge.

-   Reservists and National Guard members.

-   Current spouse of above and the widowed spouse of a service member
    or veteran who died during service or of a service-connected
    disability.

> b\. Lender will make no Patriot Express Loan over \$500,000.
>
> c\. Although it is generally expected that lender will take collateral
> on all loans where this is consistent with the lender's own policies
> and prudent lending standards, lender must take all available
> collateral for loans greater than \$350,000.
>
> d\. A lender may charge up to 2.25 percent over the Prime rate for
> maturities under seven years and 2.75 percent over Prime for
> maturities of seven years or longer. The rates can be two percent
> higher for loans of \$25,000 or less and one percent higher for loans
> between \$25,000 and \$50,000.
>
> e\. Lenders will document each borrower's eligibility using approved
> Department of Defense or Veterans Administration documentation and
> that documentation must be furnished to SBA with any request for
> purchase of the guaranty.

3\. [Lender's Patriot Express Authority]{.underline}

Lender may issue an SBA guaranty for any loan approved under Patriot
Express procedures ("a Patriot Express Loan") without prior SBA credit
or eligibility approval by executing a Patriot Express Authorization,
provided:

a.  The loan complies with the Participating Lender Rules;

b.  Lender certifies in its request for an SBA loan number that the
    applicant and the loan meet SBA's eligibility requirements and
    Lender acknowledges complete liability for the loan if it later
    comes to the attention of SBA or Lender that the applicant or loan
    was ineligible;

c.  SBA assigns the loan an SBA loan number; and

> d\. By executing the Patriot Express Authorization, Lender agrees to
> comply with all

provisions contained therein.

4\. [Review of Lender]{.underline}

Lender agrees to pay to SBA fees to cover costs of examinations and
reviews and, if assessed by SBA, other lender oversight activities.

5\. [Changes in Lender Structure or Operations]{.underline}

Lender must notify SBA in writing if its structure or operations change
significantly during the term of this Agreement.

6\. [Suspension or Revocation]{.underline}

SBA may suspend or revoke Lender's eligibility to participate in the
Patriot Express Pilot Loan Initiative by 15-day written notice to
Lender, setting forth the reasons, which may include failure to comply
with or unsatisfactory performance of any of the requirements in the
Participating Lender Rules. As of the date of the notice of proposed
suspension or revocation, Lender will no longer be permitted to make any
loans under the Patriot Express Pilot Loan Initiative. Lender may file a
written objection to the suspension or revocation within the 15-day
period as provided in the Patriot Express Pilot Loan Initiative
Procedural Guide, but the suspension or revocation will become final if
Lender does not timely object or if SBA, upon review of the objection,
decides to make the suspension or revocation final and notifies Lender
of this decision. Suspension or revocation will not affect the rights,
duties and obligations of Lender or SBA with respect to Patriot Express
Loans that were authorized and disbursed prior to the date of SBA's
initial notice.

7\. [Other Remedies]{.underline}

SBA may also protect its rights under this Agreement by denial of
guaranty, other administrative actions, judicial remedies, and any other
action authorized by law.

8\. [Term of Agreement]{.underline}

This Agreement will end \_\_\_\_\_\_\_ years from the date of execution.

9\. [Notices]{.underline}

The parties must transmit any notice under this Agreement in writing by
personal delivery or certified mail, postage prepaid, return receipt
requested to:

SMALL BUSINESS ADMINISTRATION LENDER

Sacramento Loan Processing Center
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

501 I Street, Suite 12-100
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Sacramento, CA 95814-2322
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Attn: Richard Taylor, Center Director
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

or to any other person or address that either party designates by
written notice to the other. Notice will be effective on receipt or
three days after mailing, whichever is first.

10\. [Interpretation of Agreement]{.underline}

a\. This Agreement and the Form 750 are the entire agreement between the
parties.

b\. This Agreement supersedes all earlier oral agreements and
understandings regarding the subject matter in this Agreement.

c\. All provisions in this Agreement are severable.

d\. If any provision of this Agreement is found invalid or
unenforceable, the other provisions will not be affected.

e\. Lender or SBA may choose not to insist on strict compliance with a
provision of this Agreement. This will not mean that Lender or SBA
waives the provision.

f\. Lender and SBA must agree in writing to any change in the Agreement.

g\. Federal law will govern this Agreement.

h\. Initially capitalized terms used but not defined in this agreement
will have the meanings given them in the Patriot Express Pilot Loan
Initiative Procedural Guide.

11\. [Successors and assigns.]{.underline}

This Agreement does not apply to successors and assigns of Lender.

**IN WITNESS WHEREOF,** the parties execute this Agreement as of the
above date.

U.S. SMALL BUSINESS ADMINISTRATION (Name of Lender)

Director for LENDER

Financial Assistance: Grady Hedgespeth

By: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
By:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Richard Taylor (Authorized Signature)

Sacramento Loan Processing Center Director

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

(Name Printed)

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

(Title)