CDC Best Practices Guidance - Findings of No Unremedied Substantial Adverse Change

In connection with the closing of a 504 loan, 13 CFR § 120.892(c) and SOP 50 10 require a CDC to issue an opinion that to the best of its knowledge there has been no unremedied substantial adverse change in the Borrower's (or Operating Company's) ability to repay the 504 loan since the submission of the loan application to SBA (“CDC Finding”). CDCs that do not have ALP or PCLP status must submit the CDC Finding to SBA’s Sacramento Loan Processing Center (“SLPC”) and obtain the SLPC’s approval of the CDC Finding before debenture closing. ALP and PCLP CDCs are not required to obtain SLPC approval of the CDC Finding, but those CDCs must retain the CDC Finding in their files. SBA may review a CDC Finding by a CDC with ALP or PCLP status in connection with a SMART review or the CDC’s ALP or PCLP renewal application.



Additionally, all CDCs (including those with ALP and PCLP status) are required to submit SBA Form 2101 (CDC Certification) with each 504 debenture closing package. Among other things, Form 2101 at paragraph 7.a. requires a CDC to certify, to the best of its knowledge after diligent inquiry, that since the date of the Borrower’s application to the CDC for the 504 loan, there has been no unremedied substantial adverse change in the financial condition of the Borrower or Operating Company. SBA Form 2101 provides that the CDC warrants and represents that all information provided to SBA, including all information regarding the Borrower’s and Operating Company’s financial condition is accurate to the best of the CDC’s knowledge and that the CDC has not withheld any material information from SBA. SBA Form 2101 also provides for certain criminal and civil penalties for the submission of false information or the withholding of material information from SBA.