13 CFR 120.-150 Regulation

§ 120.150

13 CFR Ch. I (1–1–13 Edition)

and exhibit good character. Ethical indiscretion of an Associate of a Participant or a member of a CDC will be attributed to the Participant. A Participant must promptly notify SBA if it
obtains information concerning the unethical behavior of an Associate. The
following are examples of such unethical behavior. A Participant may not:
(a) Self-deal;
(b) Have a real or apparent conflict of
interest with a small business with
which it is dealing (including any of its
Associates or an Associate’s Close Relatives) or SBA;
(c) Own an equity interest in a business that has received or is applying to
receive SBA financing (during the term
of the loan or within 6 months prior to
the loan application);
(d) Be incarcerated, on parole, or on
probation;
(e) Knowingly misrepresent or make
a false statement to SBA;
(f) Engage in conduct reflecting a
lack of business integrity or honesty;
(g) Be a convicted felon, or have an
adverse final civil judgment (in a case
involving fraud, breach of trust, or
other conduct) that would cause the
public to question the Participant’s
business integrity, taking into consideration such factors as the magnitude,
repetition, harm caused, and remoteness in time of the activity or activities in question;
(h) Accept funding from any source
that restricts, prioritizes, or conditions
the types of small businesses that the
Participant may assist under an SBA
program or that imposes any conditions or requirements upon recipients
of SBA assistance inconsistent with
SBA’s loan programs or regulations;
(i) Fail to disclose to SBA all relationships between the small business
and its Associates (including Close Relatives of Associates), the Participant,
and/or the lenders financing the
Project of which it is aware or should
be aware;
(j) Fail to disclose to SBA whether
the loan will:
(1) Reduce the exposure of a Participant or an Associate of a Participant
in a position to sustain a loss;
(2) Directly or indirectly finance the
purchase of real estate, personal property or services (including insurance)

from the Participant or an Associate of
the Participant;
(3) Repay or refinance a debt due a
Participant or an Associate of a Participant; or
(4) Require the small business, or an
Associate (including Close Relatives of
Associates), to invest in the Participant (except for institutions which require an investment from all members
as a condition of membership, such as
a Production Credit Association);
(k) Issue a real estate forward commitment to a builder or developer; or
(l) Engage in any activity which
taints its objective judgment in evaluating the loan.
[61 FR 3235, Jan. 31, 1996, as amended at 68
FR 57980, Oct. 7, 2003]

CREDIT CRITERIA FOR SBA LOANS
§ 120.150 What are SBA’s lending criteria?
The applicant (including an Operating Company) must be creditworthy.
Loans must be so sound as to reasonably assure repayment. SBA will consider:
(a) Character, reputation, and credit
history of the applicant (and the Operating Company, if applicable), its Associates, and guarantors;
(b) Experience and depth of management;
(c) Strength of the business;
(d) Past earnings, projected cash
flow, and future prospects;
(e) Ability to repay the loan with
earnings from the business;
(f) Sufficient invested equity to operate on a sound financial basis;
(g) Potential for long-term success;
(h) Nature and value of collateral (although inadequate collateral will not
be the sole reason for denial of a loan
request); and
(i) The effect any affiliates (as defined in part 121 of this chapter) may
have on the ultimate repayment ability of the applicant.
§ 120.151 What is the statutory limit
for total loans to a Borrower?
The aggregate amount of the SBA
portions of all loans to a single Borrower, including the Borrower’s affiliates as defined in § 121.103 of this chapter, must not exceed a guaranty

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