SBA Procedural Notice 5000-876777

(b) The debt service coverage ratio must be calculated using one of the following: Last year-end financial statement (tax return, internal statement, or accountant-prepared), which must be dated and received within 120 days of year end. Last year-end statement plus interim financial statement. Lenders will calculate the debt service coverage ratio using the last year- end statement while also confirming that there has not been a decline in the financial condition of the Applicant during the interim period. Interim financial statements must be dated within 120 days of submission to SBA. 12-month projections, including supporting assumptions. When using projections, the Applicant must demonstrate a debt service coverage equal to or greater than 1.10:1 within one year of loan funding. This method must be employed on all complete change of ownership transactions. ii) Lenders must obtain and analyze the two most recent months of commercial bank activity or statements on the primary operating account and include them within their credit file. The commercial bank activity is to be used by the Lenders to confirm the commercial debts and obligations in the debt service coverage calculation.

(a) If the Lender is underwriting an Applicant that is not currently in operation and has no commercial debts or obligations, they are not required to obtain two months of commercial bank activity or statements on the primary operating account.

(b) If the Lender is underwriting a complete change of ownership transaction and there are no other debts or obligations beyond the 7(a) loan, they are not required to obtain two months of commercial bank activity or statements on the primary operating account. iii) If the Lender has calculated an acceptable debt service coverage ratio and PAGE 3 of 5 EXPIRES: 3/1/27 SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete Must be accompanied by SBA Form 58 Federal Recycling Program Printed on Recycled Paper reviewed two months of commercial bank activity to confirm the commercial debts and obligations, the requirement to determine the Repayment Ability is satisfied. iv) If the Applicant does not meet or exceed the required debt service coverage ratio, the loan must be processed following the procedures for either Standard 7(a) or SBA Express Loans. c) Insurance – Lender must address whether life insurance or other insurance (i.e., insurance other than hazard insurance) will be required. For insurance other than hazard insurance, Lender may follow the same written policies and procedures it uses for its similarly-sized, non-SBA guaranteed commercial loans. Hazard insurance is required in accordance with Section A, Ch. 5, Para. C.1. d) Lender must address other specifics relating to the loan as applicable, including: i) A description of any proposed collateral and estimated value; ii) For loans greater than $50,000, when 50 percent or more of the loan proceeds will be used for working capital, Lender must explain in its credit memorandum why this level of working capital is necessary and appropriate for the subject business; iii) The terms of any seller financing and standby agreements; iv) Discussion of any liens, judgments, or pending litigation, including divorce proceedings; v) If the application involves a franchise (as defined by FTC), the Lender must review any credit information provided, such as the number of failed franchisees and cash flow projections provided by the franchisor. Lender must review any management agreement (unless the management agreement is part of the franchise disclosure documents for a brand listed on the Franchise Directory) to determine if it results in an ineligible passive company; vi) Any debt refinancing, including justification and original purpose (copies of all notes to be refinanced must be submitted with any loan submitted to the LGPC). vii) The effect any affiliates may have on the ultimate repayment ability of the Applicant. SBA SOP 50 10 8, Appendix 2, Acronyms, page 400, reference to “SBSS Small Business Scoring ServiceSM Score” is deleted from the list of acronyms in the SOP. PAGE 4 of 5 EXPIRES: 3/1/27 SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete Must be accompanied by SBA Form 58 Federal Recycling Program Printed on Recycled Paper Loan applications approved in E-Tran prior to 11:59 PM Eastern on February 28, 2026, may continue to use the SBSS score. All 7(a) Small loans approved on or after March 1, 2026, must comply with the 7(a) Small Loan underwriting requirements stated above. Questions Lenders can submit questions on the sunset of the SBSS Score to 7aQuestions@sba.gov. Thomas Kimsey Associate Administrator Office of Capital Access PAGE 5 of 5 EXPIRES: 3/1/27 SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete Must be accompanied by SBA Form 58 Federal Recycling Program Printed on Recycled Paper