SBA Form 1086 Secondary Participation Guaranty Agreement

OMB NO.: 3245-0185
EXPIRATION DATE: 02-28-20XX
SBA LOAN NUMBER

SECONDARY PARTICIPATION GUARANTY AGREEMENT
IMPORTANT INFORMATION
THIS FORM IS TO BE USED FOR THE INITIAL TRANSFER ONLY. ALL SUBSEQUENT
TRANSFERS MUST USE THE DETACHED ASSIGNMENT SBA FORM 1088.
INFORMATION COLLECTED BY THIS FORM IS USED TO RECORD THE SALE OF THE
GUARANTEED PORTION OF AN SBA LOAN. THE INFORMATION IS REQUIRED TO
COMPLY WITH PROGRAM REQUIREMENTS AND PROGRAM PARTICIPATION. THE
LENDER AND REGISTERED HOLDER COMPLETE THE FORM AND SUBMIT IT TO THE
OFFICES OF THE FISCAL TRANSFER AGENT (FTA).
A.
LENDER CERTIFICATIONS. The LENDER CERTIFIES, by signing this document
among other things that: (See Paragraphs 3, 10 and 20 of the Terms and Conditions herein)
(1) Lender, to the best of its knowledge, has underwritten, closed and serviced the
loan in a prudent manner and in accordance with all SBA Loan Program Requirements
as that term is defined in 13 C.F.R. §120.10,
(2) Lender, including its officers, directors and employees, has no knowledge of a default
by Borrower and has no knowledge or information that would indicate the likelihood
of a default,
(3) The Lender will not share any premium received from this sale with a Service
Provider, packager, or other loan referral source,
(4) The loan is not a revolving loan or line of credit facility,
(5) Lender has paid the SBA guaranty fee,
(6) The loan is fully disbursed, and
(7) Lender acknowledges that it has no authority to unilaterally repurchase the
Guaranteed Interest from Registered Holder without the written consent of the SBA.
Lender further acknowledges that the loan cannot be placed on non-accrual status
until the guaranteed interest has been repurchased by Lender or SBA
B.
BORROWER PAYMENTS.
Lender shall send to the Fiscal and Transfer Agent
("FTA") the FTA share of all Borrower payments received after settlement of the loan sale.
LENDER WILL NOT SEND ANY PAYMENTS DIRECTLY TO THE REGISTERED
HOLDER OR TO THE BROKER/DEALER. Lender will retain a copy of this Form. Lender
will not receive a return copy of this Form after settlement. The Wire transfer receipt from the
settlement through FTA will be the Lender’s notification that the sale is complete.
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C.
LENDER PAYMENT AND LATE PAYMENT PENALTY. Lender’s Guaranty Loan
Status and Lender Remittance Form (SBA Form 1502) shall be due at FTA on the third calendar
day of every month, or the next business day if the third is not a business day. On any payment
not received in the offices of FTA by 5 PM Eastern Time on the second business day after the
due date, FTA will, on behalf of SBA, levy a late payment penalty of five percent (5%) of the
amount remitted late, or $100, whichever is greater (subject to a maximum penalty of $5,000 per
month per reporting unit). This late payment penalty will be paid through FTA along with
the late payment penalty identified in Paragraph 6(c). (See Paragraph 6 of the Terms and
Conditions).
D.
PAYMENT MODIFICATIONS. Lender may approve one deferral of payment for up
to three consecutive monthly payments without obtaining prior permission from Registered
Holder. Lender shall immediately notify FTA and SBA of any deferral. Any other payment
modification must receive prior approval by Registered Holder.
Requests for payment
modification must be forwarded to FTA which will forward the proposed modification to
Registered Holder or provide the name of such Registered Holder to Lender for direct
negotiations at Registered Holder's discretion. (See Paragraph 2 of the Terms and Conditions).
E.
BORROWER PREPAYMENTS. For loans approved by or on behalf of SBA after
February 14, 1985, Lender must give ten (10) business days advance written notice to FTA to
allow time for FTA to request that Registered Holder return the Certificate. On the date of
prepayment, Lender will wire funds to FTA consisting of principal and accrued interest through
the date immediately preceding the date funds are wired, plus any penalty or other fees due to
FTA. (See Paragraph 15 of the Terms and Conditions).
F.
LENDER REPURCHASES. Unless all conditions in Paragraph 20 are met, Lender
may repurchase a loan only on a willing buyer-willing seller basis, subject to SBA approval.
Lender liquidity or a desire to add loans to a portfolio are not acceptable reasons to pay off a loan
at par. (See Paragraphs 3 and 20 of the Terms and Conditions).
G.
PROGRAM FEES. There is an ongoing fee collected from all payments received from
the Lender, which is transmitted to SBA to defray program expenses, and subject to change from
time to time. In addition, FTA will withhold from the settlement transaction an amount equal to
50% of the portion of the sale price that exceeds 110 percent of the outstanding principal
amount of the guaranteed portion of the loan. This amount is also sent to SBA to defray
program expenses and will not be refunded under any circumstances. (See Section I of the Terms
and Conditions).

TERMS AND CONDITIONS
The U.S. Small Business Administration, an Agency of the United States Government ("SBA")
and the Lender named below ("Lender") entered into a guaranty agreement on SBA Form 750
("750 Agreement") applicable to a loan ("Loan") made by Lender in participation with SBA to
the Borrower ("Borrower") named below evidenced by Borrower’s Note and any modifications
thereto ("Note") a copy of which is attached hereto and incorporated herein by reference. Lender
is the beneficiary under the 750 Agreement of SBA’s guaranty of the specified percentage of the
outstanding balance of the Loan ("Guaranteed Interest.")
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Section I: Borrower Information and Lender Certifications
Borrower

Lender
Address

Address
Zip

Zip
Lender Telephone

Lender Contact
Lender Email

LENDER CERTIFIES THE FOLLOWING AS OF THE DATE OF LENDER'S SIGNATURE:

Date of 750 Agreement

Percent of SBA Guaranty

Date of Note

Original Face Amount $

SBA Loan Authorization Date

(Date of SBA Form 529B)

Outstanding Principal Amount of Loan $
Outstanding Principal Amount of Guaranteed Interest $
(This is the "Par Value")
THE SBA GUARANTY FEE WAS PAID ON
[Date]
Date of First Disbursement of Loan
[Date]
Date of Final Disbursement of Loan
[Date]
Guaranteed portion has a [

] fixed rate or [

If variable: Base Rate:
Unguaranteed portion has a [

Prime
] fixed rate or [

If variable: Base Rate:

Prime

] variable rate (check one).
LIBOR

SBA Peg Rate

] variable rate (check one).
LIBOR

SBA Peg Rate

Interest is paid to, but not including
Interest is calculated on [ ] 30/360 or [

.
[Date]
] Actual Days/365 (check one).

(OTHER METHODS ARE PROHIBITED)

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SBA shall retain a program fee equal to
(to be completed by the Lender) of one percent
per year of the guaranteed principal amount outstanding. Such fee shall be collected by the FTA
from all payments received from Lender. FTA shall transmit such fees to SBA on a regular
basis, no less frequently than monthly.
There shall be a minimum lender servicing fee required by SBA. This fee shall be published
from time to time in the Federal Register. The minimum servicing fee as of the date of
publication of this Form is 0.4% per annum for all loans. There shall also be a minimum
premium protection fee for any Guaranteed Interest sold at a price greater than Par Value. This
fee shall be published from time to time in the Federal Register. The minimum premium
protection fee for those Loans sold on the secondary market at a premium as of the date of
publication of this Form is 0.6% per annum. For any Guaranteed Interest sold at a price greater
than Par Value, the total minimum lender fees, as of the date of publication of this Form, are
1.0% per annum.
Except for the period between final disbursement and the first interest adjustment date, Lender’s
total fees must remain constant for the life of the loan. Lender’s total fees, as computed on the
unpaid principal amount of the Guaranteed Interest, shall be entered next to the phrase "Lender’s
Permanent Fee" below. If this Agreement relates to a variable rate loan, the total fee may be
adjusted for the period from final disbursement to the first adjustment date to conform the rate to
market rates. If such an adjustment is used, enter the initial fee next to the phrase "Lender’s
Initial Fee" below.
Lender’s Permanent Fee
Lender’s Initial Fee
• Optional - Variable Rate Loans Only - If initial fee is different than permanent fee.
• Lender's Initial Fee must conform to the minimum fee requirements described above.
Price paid for the Guaranteed Interest. (Net of accrued interest. Otherwise include ALL money
and other items of value exchanged.)
Price paid by Purchaser: $

% of Par

SBA shall retain a program user fee equal to 50% of the portion of the sale price, which is in
excess of 110 percent of the outstanding principal amount of the guaranteed portion of the
loan. Such fee shall be collected by the FTA and shall be remitted by FTA to SBA on a regular
basis, no less frequently than monthly, pursuant to FTA’s contract with SBA. SBA will not
refund such program user fee under any circumstances.
CASH FLOW YIELD based upon Constant Prepayment Rate. (Enter both mortgage and bond
equivalent yield.) For a variable rate loan, the yield should be based upon the current net rate
and should be entered as a spread from the Base Rate. EXAMPLE: Base Rate + 1% based
upon 5% Base Rate and current net Rate of 6%.

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Constant Annual Prepayment Rate assumption
Certificate Interest Rate:
Certificate Cap

% per annum
% (Borrower’s Note rate less applicable fees)

%

Certificate Floor

% (if applicable)

Mortgage Yield:
(Fixed Rate Loan)
(Variable Rate Loan) Base Rate:
(+/-)
Bond Equivalent Yield:
(Fixed Rate Loan)
(Variable Rate Loan) Base Rate:
(+/-)

%
Prime
% based on

%
Prime
% based on

LIBOR
SBA Peg Rate
% Base

LIBOR
SBA Peg Rate
% Base

Lender hereby assigns the Guaranteed Interest to Purchaser/Registered Holder as follows:
Name
Address
Zip code
Contact Person

Telephone

Email Address: _________________________________________________________________
_____________________________________________________________
Under the penalties of perjury, Purchaser/Registered Holder certifies that its Taxpayer
Identification Number is
, is not
subject to backup withholding pursuant to an Internal Revenue Service Notice, and is a U.S.
citizen or other U.S. person, as defined in Internal Revenue Service Form W-9. Failure to
provide a Taxpayer Identification Number will subject interest earned to backup withholding.
Registered Holder requests SBA to issue through FTA a Guaranteed Interest Certificate
("Certificate") evidencing ownership of the Guaranteed Interest in the name of Registered Holder
(such person or entity, or any subsequent transferee, during its respective period of ownership of
the Certificate to be called "Registered Holder"). SBA, Lender and Registered Holder (for itself
and for any subsequent Registered Holder) agree to the appointment by SBA of FTA to serve as
the agent to transfer Certificates and to receive loan repayments, and to transmit such payments
to the Registered Holder.

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A written notification to or demand upon SBA pursuant to this Agreement shall be made through
FTA to:
SBA Servicing Office
City

State

SBA Servicing Office Code (Please see Attachment 2 at the end of this document)

Section II: Lender, Registered Holder and FTA Rights and Responsibilities.
1.
Lender’s Sale of Guaranteed Interest. Lender has sold the Guaranteed Interest and
acknowledges that it has received value for that Guaranteed Interest. Lender has given notice
and acknowledgment of the transfer of the Guaranteed Interest by completing the following
legend on the Note:
The guaranteed portion of this Note has been transferred to a Registered Holder for value.
Dated
(Lender)
Lender has delivered or hereby delivers to FTA a photocopy of the Note and any modifications
thereto with the legend; such photocopy shall be incorporated into this Agreement. This legend
shall serve as notification for any future transfer of the Guaranteed Interest. The date of the
legend shall be on or before the date of settlement for the sale of the Guaranteed Interest.
The photocopy of the note and any modifications thereto must have a legend stating that the
photocopy is a true and certified copy of the original.
2.
Loan Servicing.
Lender shall remain obligated under the terms and conditions of
the 750 Agreement, and shall continue to service the Loan in the manner set forth in the 750
Agreement and SBA Loan Program Requirements. Modifications to the 750 Agreement or the
Note that do not affect the repayment terms of the Note may be effected by Lender or SBA
without the consent of Registered Holder (for itself and any subsequent Registered Holder).
Lender, at the request of Borrower, may grant one deferment of Borrower’s scheduled payments
for a continuous period not to exceed three (3) months of past or future installments. Lender
shall immediately notify FTA and the SBA Servicing Office in writing of any deferment. The
notification will include (i) the SBA Loan Number, (ii) the Borrower’s name, (iii) the terms of
such deferment, (iv) the date Borrower is to resume payment and (v) reconfirmation of the basis
of interest calculation (e.g. 30/360 or Actual Days/365). Interest is not waived, only deferred.
Subsequent to the deferment period, payments received from Borrower will first be applied to
accrued interest until such time as interest is paid to a current status, then to principal and

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interest. Registered Holder may not demand repurchase of the Guaranteed Interest during the
deferment period, or before Borrower’s failure to pay the first scheduled installment following
the deferment period. Lender shall not authorize any additional deferment, or any extension of
Loan maturity without the prior written consent of the Registered Holder.
No change in terms and conditions of repayment of the Note other than the deferment authorized
in this Paragraph shall be made by Lender or SBA without the prior written consent of
Registered Holder. A request for such payment modification must be forwarded by Lender to
FTA. FTA will forward the proposed modification to Registered Holder. The Registered Holder
must respond to the request within ten (10) business days of the date of the request from FTA.
Lack of response will be construed by Lender and FTA as non-consent, and appropriate action
under Paragraphs 10, 11 or 20 of this Agreement will be taken. FTA, at the discretion of
Registered Holder, may provide the name of Registered Holder to Lender for direct negotiation
of the modification.
3.
Representations and Acknowledgments of Lender.
Lender hereby certifies that
the Loan has been made and fully disbursed to Borrower, and that the full amount of the
required guaranty fee has been paid to SBA. The outstanding principal amount of the Guaranteed
Interest and date to which interest is paid as certified by Lender is accepted by SBA, and has been
warranted by SBA to the Registered Holder as of the SBA Warranty Date. The Warranty Date is
the date this Agreement is settled by Lender and Registered Holder through FTA. Lender shall
be liable to SBA for any damage to SBA resulting from any error in (i) the certified principal
amount, (ii) percentage of Guaranteed Interest, and/or (iii) date to which interest is paid. Lender
also represents that as of the Warranty Date, which is the date of settlement of this transaction as
determined by the SBA and FTA, neither Lender nor any of its directors, officers, employees, or
agents has or should have through the exercise of reasonable diligence, any actual or constructive
knowledge of any default by Borrower on the Note, or has any information indicating the
likelihood of a default by Borrower or the likelihood of prepayment of the Loan by Borrower by
refinancing or otherwise.
If Lender has repurchased the Guaranteed Interest pursuant to Paragraph 10 or 20, and if the
Borrower subsequently makes installment payments on the Note in full for a period of twelve
(12) consecutive months, Lender may resell the Guaranteed Interest it had repurchased in the
SBA secondary market.
Lender hereby acknowledges that it has no authority pursuant to this Agreement to unilaterally
repurchase the Guaranteed Interest from Registered Holder without the written consent of SBA.
Lender further acknowledges that the Loan will not be placed on non-accrual status until the
Guaranteed Interest has been repurchased by Lender or SBA.
Lender also acknowledges that SBA reserves the right to recover any outstanding Lender
obligations to SBA by setting off any and all funds due to Lender related to Secondary Market
transactions or from SBA including but not limited to SBA guaranty payments and applying such
funds to Lender’s outstanding obligations to SBA.
4.
Obligations and Representations of Registered Holder. SBA shall purchase the
Guaranteed Interest from Registered Holder pursuant to the terms of this Agreement regardless
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of whether SBA has any knowledge of possible negligence, fraud or misrepresentation by Lender
or Borrower, provided neither Registered Holder nor any person or entity having the beneficial
interest in the Guaranteed Interest participated in, or at the time it purchased the Guaranteed
Interest had knowledge of, such negligence, fraud or misrepresentation.
Subject to the provisions of 18 U.S.C. §1001 (relating among other things to false claims)
Registered Holder, and any person or entity having the beneficial interest therein, hereby
warrants that it was not the Borrower, Lender or an "Associate" of Lender, or anyone standing in
the same relationship to Borrower ("Associate" is defined in 13 C.F.R. §120). Registered
Holder warrants that it had neither participated in nor been aware of any negligence, fraud or
misrepresentation by Lender or Borrower with respect to the Note or related Loan
documentation. Neither execution of this Agreement by SBA, nor purchase by SBA from
Registered Holder, shall constitute any waiver by SBA of any right of recovery against Lender,
Registered Holder, or any other person or entity.
Registered Holder (for itself and each subsequent Registered Holder) hereby acknowledges that
the Loan may be terminated on a date other than its maturity date. At that time, the Certificate
will be called for redemption, at par, and the Registered Holder must submit an affidavit attesting
to the provisions of this Paragraph. The Certificate will cease to accrue interest as of the date of
such termination, regardless of whether the Certificate is surrendered and the affidavit is
received.
5.
Issuance of Guaranteed Interest Certificates.
SBA, Lender, and Registered Holder
(for itself and each subsequent Registered Holder) agree that ownership of the Guaranteed
Interest shall be evidenced by a Certificate to be issued by SBA. SBA shall issue such
Certificate by designating and authorizing such issuance by FTA, or through its own facilities.
FTA shall be the custodian of the executed original of this Agreement. The Agreement shall be
delivered to FTA immediately after execution by Lender and Registered Holder. Each
Registered Holder shall receive the Certificate described herein. Registered Holder may obtain
from FTA a copy of the executed Agreement pertaining to the Guaranteed Interest represented
by the Certificate.
Upon execution of this Agreement and delivery to FTA, FTA shall issue to Registered Holder (or
to Registered Holder’s assignee if FTA is provided written information on a timely basis) the
Certificate evidencing the ownership of the Guaranteed Interest in the Loan. If Registered
Holder is not the person or entity having the beneficial interest in the Certificate, Registered
Holder hereby represents that it has obtained authorization from such holder of beneficial interest
appointing Registered Holder as agent for such person or entity with respect to all transactions
arising out of the respective obligations under this Agreement.
The Certificate shall identify the Guaranteed Interest and shall state, among other things: (i)
Name of Registered Holder, (ii) the Principal Amount of Guaranteed Interest as of the Warranty
Date, (iii) the Certificate Interest Rate, and (iv) the Borrower’s Payment Date.

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Transfer of the Guaranteed Interest by Registered Holder may be effected by the transferee: (i)
obtaining from the transferor the executed Detached Assignment and Disclosure Form (SBA
Form 1088), (ii) presenting the Certificate and executed Detached Assignment and Disclosure
Form to FTA for registration of transfer and issuance of a new Certificate, (iii) paying to FTA a
Certificate issuance fee set from time to time by SBA, and (iv) presenting to FTA the exact
spelling of the name in which the new Certificate is to be issued, complete address and taxpayer
identification number of the new Registered Holder, name, email address and telephone number
of the person handling the transfer, and complete instructions for delivery of the new Certificate.
6.

Obligations of Lender.
a. FTA must receive from Lender by the third calendar day of every month or the next
business day thereafter if the third calendar day of the month is not a business day ("FTA
Due Date"), the FTA’s share of all sums Lender received from Borrower as regularly
scheduled payments during the preceding month. By the same date, Lender shall
provide the following information on the Guaranty Loan Status and Lender Remittance
Form (SBA Form 1502) with respect to each Loan, which Lender has sold to a
Registered Holder and which, is registered with the FTA. Lender acknowledges that
"each Loan" means all Loans registered with the FTA regardless of which version of
SBA Form 1086 was executed at the time of sale or transfer.
SEE PAYMENT
CALCULATION EXAMPLE ATTACHED TO THIS AGREEMENT.
1) SBA GP Number: the SBA Loan Number
2) Next Installment Due Date: the date the Borrower is scheduled to make its next
payment.
3) Interest Rate: the rate of interest (or rates if the interest rate on a variable rate
loan changed during the payment period) used to calculate the interest payment
due the FTA (i.e. the Borrower’s note rate less the Lender’s servicing fee
percentage).
4) Guaranteed Portion Interest: the guaranteed portion of the Borrower’s interest
payment received less the Lender’s servicing fee.
5) Guaranteed Portion Principal: the guaranteed portion of the Borrower’s principal
payment received.
6) Total to FTA: the sum of the guaranteed portion interest plus guaranteed portion
principal for the particular Loan.
7) Interest Period From and To: the time period covered by the interest rate and
guaranteed portion interest in Items 3 and 4.
8) Number of Days: the number of days covered by the reported interest payment and
period, determined in accordance with the calendar basis used to compute interest.

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9) Calendar Basis: the interest computation calendar method stated at the time of the
original Loan sale into the secondary market or as approved by the Registered
Holder through a servicing action submitted by the Lender to the FTA. Acceptable
computation methods for secondary market loans are 30/360 and Actual days/365.
10) Guaranteed Portion Closing Balance: the guaranteed portion of the balance
remaining after applying the Borrower’s most recent principal payment.
11) Remittance Penalty: late payment penalty pursuant to Paragraph 6 of this
Agreement or SBA’s Subsidy Recoupment Fee.
12) Grand Total: sum of the totals for Items 6 and 11. Equals the amount of the wire
remitted to the FTA.
b. With the exception of prepayments pursuant to Paragraph 15 of this Agreement,
payments received other than as regularly scheduled in the previous month must be
remitted by Lender to FTA within two (2) business days of receipt of collected funds.
Such remittance shall include the information described in Items 1 to 12 above.
c.

As stated in subparagraph (a) of this Paragraph, Lender remittance of the SBA Form
1502 and the funds collected are due to FTA by the FTA Due Date. POSTMARKS ARE
NOT CONSIDERED AS PROOF OF RECEIPT. THE REQUIREMENT IS RECEIPT
BY FTA.
If Lender remittance, including complete payment information as
specified in subparagraph (a) of this Paragraph is not received in the office of the FTA by
5 PM Eastern Time on the second business day after the FTA Due Date, Lender shall pay:
(i)

(ii)
(iii)

a late payment penalty to SBA (collected by FTA), equal to the interest on the
unremitted amount at the rate provided in the Note, less the rate of Lender’s
servicing fee;
a late payment penalty to SBA (collected by FTA), calculated at a rate of twelve
percent (12%) per annum, on the unremitted amount; and
a late payment penalty to SBA (collected by FTA), which is the greater of $100 or
five percent (5%) of the unremitted amount.

There is no limit on the penalty calculated in (i) and (ii) above. Th e r e is a $5,000
per month per reporting unit limit for the penalty identified in (iii) above. SEE
EXAMPLE OF LATE PAYMENT PENALTY CALCULATION ATTACHED TO THIS
AGREEMENT.
If these penalty fees are not included in the remittance, FTA, on behalf of SBA, shall levy
such late payment penalties on Lender. Failure by Lender to pay such penalty and
collection fees within ten (10) business days of receipt of a bill for such fees may
constitute a significant violation of the Rules and Regulations of the Secondary Market
and a violation of SBA Loan Program Requirements. FTA and SBA reserve the right to
withhold these penalty fees from settlement of any future Guaranteed Interest sale, or any
payment made by SBA or FTA to Lender.
FTA will forward the fees due SBA on a regular basis, no less frequently than monthly,
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pursuant to FTA’s contract with SBA.
d. Lender agrees to work with SBA and FTA, at no charge, to reconcile immediately any
Loan in which the interest paid-to-date on the Lender’s books differs from the records of
the FTA by three (3) days or more and/or has a principal discrepancy greater than $10.00.
Lender agrees to provide a transcript of account of the Guaranteed Portion of the
Borrower’s payments made to the Lender within ten (10) business days of receipt of
a request from SBA or FTA. Failure of Lender to provide a transcript upon request
may cause the Lender to be fined $100 by SBA.
e. Lender’s total fees as computed on the unpaid principal amount of the Guaranteed Interest
for the period of actual services performed by Lender shall remain as specified in Section
I above for the life of the Loan. These Lender fees are not transferable except to an entity
to which servicing of the loan is assigned under the provisions of the Form 750
Agreement, SBA Rules and Regulations and SBA Standard Operating Procedures.
f. Lender agrees to deposit the pro rata share of Borrower’s payment due to the FTA in
a demand deposit account held by the Lender and titled as follows: “[insert legal name of
Lender], fbo Colson Services Corp., as FTA, in trust for the individual security
beneficiaries.” The demand deposit account shall not refer to any party other than the
Lender, FTA, and the individual security beneficiaries (as applicable).
g. For defaulted Loans in which the SBA has purchased the Guaranteed Interest and the
Registered Holder has been paid in full, the Lender is responsible for all accrued interest
in excess of 120 days from the interest paid to date used to compute the purchase amount.
7.

Obligations of FTA.
a. FTA shall have the obligation to remit to Registered Holder payments received pursuant
to Paragraph 6 of this Agreement (less applicable fees and penalties, if any), as follows:
(i)

Investor payment date will be the fifteenth of the month or t he next business
day if the fifteenth of the month is not a business day. Any payment received by
the FTA up to the second business day prior to the investor payment date will be
sent to the Investor on the investor payment date.

(ii)

Any payment received by FTA on or after the second business day prior to the
Investor payment date of the month following Borrower’s scheduled payment will
be remitted to Registered Holder within two (2) business days of receipt of
immediately available funds by FTA. Any late payment penalty received by FTA
pursuant to Paragraphs 6(c)(i) and 6(c)(ii) of this Agreement allocated to the
period after the fifteenth day, or the next business day if the fifteenth is not a
business day, of such following month shall be remitted to the Registered Holder.

(iii)

Other amounts received from Lender by FTA will be held and applied as required
by this Agreement.

(iv)

FTA may offset from payments due to Registered Holder for any guaranteed
interests with beneficial ownership any prior overpayments made to Registered
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Holder. FTA will provide Registered Holder FTA’s transcript of account of the
guaranteed interest in offset of any remittances pursuant to Paragraph 7(c) of this
Agreement.
b. Prepayments pursuant to Paragraph 15 of this Agreement or full redemption payments
received by FTA from Lender or SBA shall be remitted by FTA to Registered Holder by
wire transfer within two (2) business days of receipt of immediately available funds by
the FTA.
Payment on full redemption of the Certificate will be made only after
presentation of the Certificate to FTA by Registered Holder. FTA shall retain a final
transfer fee upon redemption.
c. Each remittance by FTA to Registered Holder shall be accompanied by a statement of (i)
the amount allocable to interest, (ii) the amount allocable to principal, and (iii) the
remaining principal balance as of the date on which such allocations were calculated.
d. If FTA fails to make timely remittance to Registered Holder in accordance with this
Paragraph 7, FTA shall pay to Registered Holder, (i) interest on the unremitted amount at
the rate provided in the Note less applicable fees, and (ii) a late payment penalty
calculated at a rate of 12% per annum on the amount of such payment. In addition, FTA
shall pay a fee of $100 per loan to SBA. The fee paid to SBA shall be limited to not
more than $50,000 per month.
e. FTA agrees to identify to Lender each month any Loan in which the paid-to-date on its
books differs by three (3) days or more from the paid-to-date on the books of Lender
and/or has a principal balance discrepancy greater than $10.00, provided the information
required by Paragraph 6(a) has been submitted to FTA by Lender. Such identified
differences will be reconciled on a timely basis.
f. FTA agrees to issue Certificates within two (2) business days of settlement or receipt of the
SBA Form 1088.
g. FTA agrees to acknowledge any request from Registered Holder for late payment claims
within ten (10) business days of receipt.
h. FTA agrees to forward to Registered Holder, within one (1) business days of receipt, any
servicing request requiring concurrence of Registered Holder. FTA agrees to forward
Registered Holder’s response to Lender within one (1) business days of receipt. If FTA
does not receive a response from Registered Holder within ten (10) calendar days from
the date of the request, Registered Holder will be deemed to have submitted a response of
non-consent. FTA is directed to take appropriate action pursuant to Paragraphs 10, 11
or 20 of this Agreement.
i. Where the Guaranteed Interest is a part of a Pool pursuant to 13 C.F.R. Part 120 Subpart
F of SBA Rules and Regulations (as amended), the FTA, as manager of the Pool, will,
on behalf of the Registered Holder of Pool Certificates, agree to servicing actions by
Lender that have been approved by SBA that will not affect the rights of the Registered
Holder.
SBA Form 1086 (02/17) Previous editions are obsolete.

12

j. FTA agrees to pay accrued interest for any Loan, which FTA fails to include in the late
payment report described in Paragraph 10(a). FTA shall be responsible for interest
beginning 90 days after the interest paid to date of the Loan and continuing until 30 days
after the SBA Servicing Office receives notification of the arrearage.
k. The FTA shall process loan information received from Lenders via SBA Form 1502
reporting and submit the data electronically to SBA on a daily basis. FTA can receive
SBA Form 1502 statements from Lenders via various delivery methods, including but not
limited to: e-mail, FTA’s website or sFTP (Secured File Transfer Protocol). Upon
receipt of the loan information, FTA shall validate the data, and accept those
elements that match the data file provided by SBA. FTA will provide an electronic
update back to SBA each business day. The FTA shall be responsible for contacting
Lenders to correct loan data submitted for the prior reporting period, and to reconcile
missing or incorrect loan information.
Lender shall respond to FTA request for
information within five (5) business days of receipt of such request. Lender’s response to
FTA request for loan information shall be substantive enough so FTA can reconcile loans.
Reconciliation will be performed on a daily basis during the course of the month
following the last reporting period. The FTA shall collect and track the known loan data
errors that were corrected during the m onth following a reporting period. FTA shall
verify SBA Form 1502 data reported by Lenders against edit criteria provided by SBA.
FTA shall report information to SBA on loan accounts that remain uncorrected.
Uncorrected loan account information shall include GP number, name of Lender and
description of loan error. From time to time, FTA shall provide additional reports
derived from the SBA Form 1502 reporting process described above, as prescribed by
SBA.
8.
Transferability of Guaranteed Interest. Each Registered Holder maintains under this
Agreement the right to a s s i gn t h e G u a r a n t e e d Interest. Each Registered Holder of the
Guaranteed Interest shall be deemed to have represented that to the best of its knowledge, it has,
and so long as it is a Registered Holder will have no interest in the Borrower, the Note or the
collateral hypothecated to the Loan, other than the Guaranteed Interest held under this
Agreement. Each Registered Holder represents that it will not service or attempt to service the
Loan, or secure or attempt to secure additional collateral from Borrower.
Without the consent of SBA, Lender or FTA, Registered Holder may transfer the ownership of
the Guaranteed Interest and all of its rights and obligations under this Agreement to a subsequent
assignee via the SBA Form 1088 (other than the Borrower, Lender, or an "Associate" of the
Lender as defined in 13 C.F.R. §120, or anyone standing in the same relationship to the
Borrower). SBA, however, will only be obligated to purchase the Guaranteed Interest under
Section II in the event of such assignment to the extent that such assignee has complied with all
of the Registered Holder’s obligations under this Agreement. The effective date of any transfer
of the Guaranteed Interest shall be the date on which such transfer is registered on the books of
FTA. Any payment or action by FTA or SBA to the transferor Registered Holder prior to the
effective date of the transfer of the Guaranteed Interest shall be final and fully effective. Neither
SBA nor FTA shall have any further obligation to the transferee Registered Holder with
respect to such payment or action, and any adjustment between the transferor and
transferee resulting from such payment or action by SBA or FTA shall be the responsibility
and obligation solely of the transferor and transferee.
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13

FTA will make payments on the payment date to the person or entity that on the books of FTA is
the Registered Holder as of the close of business on the Record Date. The Record Date is the
last business day of the prior month. Any other adjustment between transferee and transferor is
their responsibility and obligation. At any given time, there shall only be one Registered Holder
entitled to the benefits of ownership of the Guaranteed Interest. Upon transfer of the Guaranteed
Interest, the transferor shall cease to have any right in the Guaranteed Interest or any obligation
or commitment under this Agreement.
FTA shall serve as the central registry of Certificate ownership.
9.
Certificates Lost, Destroyed, Stolen. Mutilated or Defaced.
Procedures for claim
resulting from loss, theft, destruction, mutilation or defacement of a Certificate are found in
Secondary Market Regulations (13 C.F.R. Part 120 Subpart F). Upon written request, FTA will
provide such procedures to any claimant.
10.

Repurchase of Guaranteed Interest by Lender.
a. FTA will provide to each SBA Servicing Office on or before the last business day of the
month a list of Loans which are in arrears based on criteria supplied to FTA by SBA.
Within five (5) business days of the receipt of the list, the SBA Servicing Office will
contact Lender to determine the status of the Loan. A Loan requires action where (i)
Lender’s records indicate the interest paid-to-date is more than sixty (60) days in arrears
or (ii) default by Borrower in payment of any installment of principal and interest has
continued uncured for more than sixty (60) days. SBA will, in consultation with the
Lender, decide on an appropriate remedial action under Paragraph 2 of this Agreement,
or determine whether Lender will be offered the option to purchase the guaranteed
portion. This Lender purchase option expires if the interest paid-to-date as reported by the
FTA exceeds 120 days, at which point SBA will immediately notify the FTA of its
intention to purchase the guaranty from the secondary market. Unless SBA identifies the
loan having been in deferment status previously, the Lender will be responsible for all
accrued interest owed beyond 120 days. SBA also reserves the right to offset guaranty
proceeds paid against any excess interest amount due.
SBA will notify the FTA in writing of the action to be taken within five (5) business days
of the decision.
Where the decision is for Lender to purchase the Guaranteed Interest, FTA, at its option,
may request a transcript of account of the guaranteed portion of the Loan from Lender.
Lender agrees to provide the transcript of account within five (5) business days of
receipt of the request from FTA. Lender’s failure to comply with the request for
transcript may result in a $100 penalty payable to SBA.
FTA and Lender will attempt to reconcile the transcript of account of the guaranteed
portion of the Loan within ten (10) business days of the receipt of the transcript by FTA.
If Lender and FTA cannot agree on the balance and interest paid-to-date, FTA will
immediately send the Lender's and FTA's transcript to the SBA Servicing Office for

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14

reconciliation. The reconciliation by the SBA Servicing Office will be final. SBA will
notify Lender and FTA of the reconciliation immediately.
Within ten (10) business days of the reconciliation of the account of a Loan that the
Lender is to repurchase, the Lender will transmit and FTA will receive ten (10) business
days advance written notice of the date of purchase. Within two (2) business days of
receipt of such notification, FTA will notify Registered Holder of the repurchase date and
request Registered Holder to forward the Certificate to FTA.
On the date of purchase, Lender, without further notification from FTA, will forward by
wire transfer a payment to FTA that includes the outstanding principal balance of the
Guaranteed Interest plus, interest through the date immediately preceding the date of the
wire transfer. The wire must be accompanied by SBA Form 1502 for the prepayment
funds. An officer of the Lender must also provide a certification that the Borrower has
defaulted on a payment due under the Note for sixty (60) days of more and repurchase is
being made pursuant to Paragraph 10 of this Agreement.
b. Upon receipt of the purchase amount from Lender (or from SBA pursuant to Paragraph
11 of this Agreement), FTA shall remit to Registered Holder within two (2) business days
the outstanding principal balance of the Guaranteed Interest plus interest through the date
immediately preceding the date of Lender purchase. FTA may deduct from such amount
a final transfer charge for the final transfer and redemption of the Certificate. The
amount of such final transfer charge will not exceed the normal transfer charge for
Certificates.
c. Upon repurchase of the Guaranteed Interest by Lender, the rights and obligations of
Lender, FTA and SBA shall be governed by the 750 Agreement and any continuing
provisions of this Agreement. SBA may request both Lender’s and FTA’s transcripts for
reconciliation. SBA’s reconciliation will be final.
11.

Purchase by SBA.
a. Written notices will be given to Lender and FTA when SBA is to purchase the
Guaranteed Interest. Within five (5) business days of such notice, Lender will provide a
transcript of account of the guaranteed portion of the Loan and final statement of account
of the Guaranteed Interest to FTA. Failure by Lender or FTA to provide the transcript
may result in a $100 penalty payable to SBA by the party failing to comply. FTA will
reconcile the transcripts and the reconciliation will be final.
Within five (5) business days of final reconciliation of the account, SBA will provide ten
(10) business days advance written notice to FTA of the date of purchase. FTA, within
two (2) business days of the receipt of the written notice, will notify Registered Holder of
the repurchase date and request Registered Holder to forward the Certificate to FTA.
On the purchase date, SBA will arrange to have funds wired to FTA. Upon receipt of the
purchase amount from SBA, FTA shall remit to Registered Holder, within two (2)
business days, the outstanding principal plus accrued interest through the date

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15

immediately preceding the date of SBA purchase.
b. SBA’s payment of accrued interest to the payment date on a fixed interest rate Note shall
be at the Note rate less the Lender’s servicing fee. On Notes with a variable interest rate,
SBA’s payment of accrued interest shall be at that rate in effect on the date of the earliest
uncured Borrower default, if the Loan is in default, or at the rate in effect at the time of
purchase, less the Lender’s fees if the Loan is not in default.
c. If Lender fails to furnish a current transcript of account of the guaranteed portion of the
Loan and the statements as required by this Paragraph and Paragraph 13(a)(i) within five (5)
business days after SBA’s request therefor, then SBA may rely on the certified statement of
account with supporting documentation, from FTA. If any such information shall be
inaccurate, whether inadvertently or otherwise, an appropriate adjustment in settlement will
be made as expeditiously as possible.
d. SBA shall not be liable for any amount attributable to any late payment charges pursuant
to Paragraph 6 of this Agreement that may be due FTA or Registered Holder.
e. Upon written demand by SBA, Lender shall immediately repay to SBA the amount by
which the amount paid by SBA exceeds the amount of SBA’s obligation to Lender under
the 750 Agreement and SBA Loan Program Requirements, and the amount paid by SBA
for any payments by Borrower which were not remitted by Lender to FTA, including
accrued interest thereon, plus accrued interest at the Note interest rate computed on the
unpaid balance of the Guaranteed Interest from the date of purchase by SBA to date of
repayment by Lender.
f. Upon purchase of the Guaranteed Interest by SBA pursuant to this Paragraph, the rights
and obligations of Lender and SBA shall be governed by the 750 Agreement and SBA
Loan Program Requirements and any continuing provisions of this Agreement. SBA
shall be deemed a transferee of the Guaranteed Interest and the final Registered Holder
thereof with all the rights and privileges of such Registered Holder under this Agreement.
12.

Default by Lender.
a. Pursuant to Paragraph 10(a) of this Agreement, FTA notifies the SBA Servicing Offices
of Loans which are in arrears. SBA contacts the Lender to determine status of the Loans.
b. When SBA determines that the Lender has failed for any reason to remit to FTA the
payments required pursuant to Paragraph 6 of this Agreement, SBA may purchase the
Guaranteed Interest under the provisions of Paragraph 11 of this Agreement, provided
however, under no circumstances shall SBA be liable for any amount attributable to any
late payment charge.
c. If SBA purchases the Guaranteed Interest from Registered Holder because of default by
Lender, and if Borrower has not been in uncured default on any payment due under the
Note for more than sixty (60) calendar days, SBA shall have the option:

SBA Form 1086 (02/17) Previous editions are obsolete.

16

(i)

(ii)

to require Lender to purchase the Guaranteed Interest from SBA for an amount
equal to the amount paid by SBA to Registered Holder plus accrued interest
(at the interest rate provided in the Note) from the date of the SBA purchase to
the date of the Lender’s repurchase, plus a penalty equal to twenty percent
(20%) of the amount paid by SBA; or
to require Lender to pay SBA a penalty equal to twenty percent (20%) of the
amount paid by SBA to Registered Holder.

d. If on the date SBA purchases the Guaranteed Interest from Registered Holder pursuant to
this Paragraph, and Borrower shall be in uncured default for more than sixty (60)
calendar days, then the provisions of Paragraphs 11(e) and 11(f) of this Agreement will
become applicable in lieu of subparagraph (c) of this Paragraph.
e. If Lender fails to furnish a current transcript of account of the guaranteed portion of the
Loan and the statements as required by Paragraph 13(a)(i) within five (5) business days
after SBA’s request therefor, then SBA may rely on the certified statement of account
with supporting documentation from FTA. If any such information shall be inaccurate,
whether inadvertently or otherwise, an appropriate adjustment in settlement will be made
as expeditiously as possible.
13.

Other Obligations of the Lender.
a. Lender hereby consents to the purchase of the Guaranteed Interest by SBA in accordance
with Paragraphs 11 and 12 of this Agreement. Lender shall, within five (5) business days
of a request therefor, and without charge, furnish to SBA and FTA (i) a transcript of
account of the guaranteed portion of the Loan, (ii) a current certified statement of the
unpaid principal and interest then owed by Borrower on the Note, and (iii) a statement
covering any payments by Borrower not remitted by Lender to FTA.
b. Upon request by FTA at any time, Lender shall issue at no charge a certified statement of
the outstanding principal amount of the Guaranteed Interest and the effective interest rate
on the Note as of the date of such certified statement.
c. Lender agrees that failure to provide the information requested pursuant to Paragraphs
10, 11, 12 and 13 of this Agreement may result in a $100 penalty payable to SBA.
d. Lender agrees that purchase of the Guaranteed Interest pursuant to Paragraphs 11 or 12 of
this Agreement does not release or otherwise modify any of Lender's obligations to SBA
arising from the Loan, the 750 Agreement or SBA Loan Program Requirements, and that
such purchase by SBA does not waive any of SBA’s rights against Lender.
e. Lender agrees that SBA, as final owner of the Guaranteed Interest under this Agreement,
in addition to all rights under the 750 Agreement and the SBA Loan Program
Requirements, shall also have the right to offset against Lender all rights inuring to SBA
under this Agreement against SBA’s obligation to Lender under the 750 Agreement and
the SBA Loan Program Requirements.
f. Lender agrees to assign, transfer and deliver the Note and related loan documents to SBA

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17

upon written demand from SBA after purchase of the Guaranteed Interest pursuant to this
Agreement.
14.

Default by Fiscal and Transfer Agent.
a. If FTA receives any payment from Lender or SBA and fails to remit to Registered Holder
pursuant to Paragraph 7 of this Agreement, Registered Holder shall have the right to
make written demand on FTA for any payment not remitted by FTA.
b. If FTA fails to remit any such payment within five (5) business days of such demand,
Registered Holder shall have the right to make written demand on the SBA Servicing
Office identified in this Agreement.
c. Upon receipt of written demand from Registered Holder, SBA will verify non-payment
by FTA. If non-payment by FTA is verified, SBA, within thirty (30) days of verification
of non-payment by FTA, will (i) make payment directly to Registered Holder of the
amount of the unremitted payment plus interest at the Certificate rate to date of
payment by SBA, or (ii) purchase the Guaranteed Interest pursuant to Paragraph 11 of this
Agreement.
d. FTA shall repay SBA within five (5) business days after receipt of written demand from
SBA an amount equal to the unremitted amount plus interest computed at the interest rate
on the Certificate on the unpaid balance of the Guaranteed Interest from the date of the
failure of FTA to remit to the Registered Holder to the date of FTA’s repayment to SBA.
Such payment will not affect FTA’s liability for a late payment charge under Paragraph 7
of this Agreement.

15.

Prepayment or Refinancing by Borrower.
a. A Borrower may prepay a Loan guaranteed by SBA at any time. A prepayment subject
strictly to this Paragraph is any payment, which is greater than twenty percent
(20%) of the principal amount outstanding at the time of prepayment.
b. Lender shall transmit written notice to FTA of Borrower’s intent to make a partial or total
prepayment of principal. Such prepayment can be by refinancing or otherwise. The
prepayment date is the date prior to maturity that Lender has established with the FTA,
and on which immediately available funds shall be delivered to FTA. The written notice
shall be received by the FTA at least ten (10) business days prior to prepayment date, and
it shall be Lender’s responsibility to verify receipt of such notice by FTA. Lender’s
notice to FTA shall include:
(i)

The SBA Loan number and Borrower name

(ii)

The prepayment date

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18

(iii)

The principal amount of the guaranteed portion of the Loan being prepaid

(iv)

The accrued interest on the guaranteed portion of the Loan due the FTA as of
prepayment date (interest shall accrue through and including the calendar day
immediately preceding the prepayment date)

c. On the prepayment date, Lender will wire the amount due to FTA without notification
from FTA. The wire must be accompanied by SBA Form 1502 for the prepayment funds.
An officer of the Lender must also provide the following certifications:
(i)
The prepayment is in accordance with the terms of this Agreement, the Note and
applicable law.
(ii) The prepayment funds are either Borrower’s own funds or funds borrowed by
Borrower from this or another lending institution (whether or not guaranteed by
SBA) pursuant to a separate transaction.
The certifications are intended to guard against Lender’s unilateral repurchase of the
Guaranteed Interest from the Registered Holder without prior written consent of SBA.
Lender’s failure to provide such timely certification may result in a $100 penalty payable
to SBA.
If funds are not received by FTA on the prepayment date, Lender shall have thirty (30)
calendar days from the date originally identified as the prepayment date to forward the
prepayment funds. The funds will accrue interest through the day immediately prior to
the date payment is received by FTA. If funds are not received within this thirty (30)
day period, a new written notice is required in accordance with subparagraph (b) of this
Paragraph.
d. FTA shall, upon receipt of notice pursuant to subparagraph (b) of this Paragraph, advise
the Lender in writing of any discrepancy between the prepayment information supplied
by the Lender and the FTA’s current records. Lender agrees to work with FTA to resolve
errors or miscalculations that were made by the Lender or FTA during the course of the
Loan and which are discovered subsequent to the prepayment.
e. FTA will remit the prepayment amount to Registered Holder in accordance with
Paragraph 7 of this Agreement.
16.
Option to Purchase by SBA.
SBA shall at any time have the option to purchase
from the Registered Holder the outstanding balance of the Guaranteed Interest at the Note rate
less the Lender’s servicing fee. Failure of the Registered Holder to submit the Certificate to FTA
for redemption on the date of prepayment specified by SBA or FTA will not entitle the
Registered Holder to accrued interest beyond such date.
17.
Separate or Side Agreements.
Separate or side agreements (i) between Lender and
Registered Holder, (ii) between a Registered Holder and a subsequent transferee of the
Guaranteed Interest, (iii) between FTA and Lender, or (iv) between FTA and any Registered
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19

Holder shall not in any way obligate SBA to make any payment except as provided in this
Agreement, nor shall it modify the nature or extent of SBA’s rights or obligations under the terms
of this Agreement, the 750 Agreement or the SBA Loan Program Requirements. Any such side
agreement, which has the effect of distorting the information supplied to SBA, is prohibited.
18.
Indemnity and Force Majeure.
Each party to this Agreement (including FTA) for
itself and its successors and assigns, agrees to indemnify and hold harmless any other party
(including FTA) from and against any costs, liabilities, and related expenses arising from the
performance of its duties or otherwise arising under this Agreement; provided that no
indemnification shall be provided under this Agreement for action or failure to act which
constitutes negligence, breach of authority, or bad faith.
If any party hereto (including FTA) is in doubt as to the applicability of this Agreement to a
communication it has received, it may refer the matter to SBA for an opinion as to whether it
may take, suffer or omit any action pursuant to such communications.
Under no circumstances shall any party hereto (including FTA) be held liable to any person or
entity for special or consequential damages or for attorneys’ fees or expenses in connection with
its performance under this Agreement.
If any party hereto (including FTA) shall be delayed in its performance hereunder or prevented
entirely or in part from completing such performance due to causes or events beyond its control,
such delay or non-performance shall be excused and the reasonable time for performance in
connection with this Agreement shall be extended to include the period of such delay or
non-performance. Causes or events include but are not limited to: (i) act of God; (ii) postal
malfunction; (iii) interruption of power or other utility, transportation, or communication service;
(iv) act of civil or military authority; (v) sabotage or act of terrorism; (vi) national emergency;
(vii) war; (viii) explosion, flood, accident, earthquake or other catastrophe; (ix) fire; (x) strike or
other labor problem; (xi) legal action; (xii) present or future law, government order, rule or
regulation; or (xiii) shortage of suitable parts, materials, labor or transportation. In disputes
between FTA and Lender, or between FTA and Registered Holder, SBA reserves the right to
require FTA to take appropriate action as SBA determines, and if legal action is required, SBA
will pay reasonable attorney’s fees incurred by FTA in taking such action.
19.
Fees and Penalties. Lender and Registered Holder shall be responsible for payment of
fees and penalties required of them by this Agreement which are in effect on the Settlement
Date, and as published from time to time in the Federal Register. If any fees or penalties
required in this Agreement, (including but not limited to those described in Paragraphs 5, 6, 10,
11, 12, 13 and 15), are not remitted on a timely basis by Lender, FTA and SBA reserve the right
to withhold such fees and penalties from the settlement of any future Guaranteed Interest sale or
payment on any defaulted loan in the Lender’s portfolio.
20.
Emergency Repurchase Authority by Lender.
In certain critical situations in which
the Borrower’s ability to remain in business is directly dependent on a change in the provisions
relating to the installment payments by Borrower, SBA may permit Lender to repurchase the
Guaranteed Interest from Registered Holder. Such permission, to be effective, must be in

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20

writing. Lender must submit to the SBA Servicing Office a written request, which includes
the following:
(i)

Current financial statements of the Borrower,

(ii)

A written decline from Registered Holder to a specific request for a change in the
terms and conditions of the payment, or a written statement from FTA that no
response was received from Registered Holder or the Guaranteed Interest is part of a
Pool,

(iii)

A statement that the proposed change in the terms and conditions of the Loan is
solely for the benefit of Borrower, and

(iv)

A certification by Lender that it will make the requested change in the terms and
conditions if repurchase is approved by SBA.

The SBA Servicing Office must review the financial statements of Borrower and any other
appropriate information and conclude that (i) a situation exists that Borrower’s business will
likely fail if the change is not approved, and (ii) that it is probable that the business will survive
and resume payment if the change is approved. If all conditions are met, the SBA Servicing
Office may approve the purchase of the Guaranteed Interest by Lender.
If Lender purchases the Guaranteed Interest pursuant to this Paragraph 20, Lender must also
follow the provisions of Paragraph 10 and provide FTA with ten (10) business days advance
written notice of the date of purchase. Lender must also provide FTA with the written approval
from the SBA Servicing Office to repurchase the Guaranteed Interest in lieu of the prepayment
certification required by Paragraph 15.
Guaranteed Interests purchased pursuant to this Paragraph may not be resold unless the Borrower
has made all payments as scheduled in the Note for a period of twelve (12) months.
21.
Inconsistent Provisions and Caption Headings. Any inconsistency between this
Agreement and the 750 Agreement shall be resolved in favor of this Agreement. Any
inconsistency between this Agreement and Title 13, Code of Federal Regulations, shall be
resolved in favor of Title 13. The provisions of the Secondary Market Regulations (13 C.F.R.
Part 120 Subpart F) in effect on the Settlement Date, and as may be amended from time to time in
the Federal Register, apply to this Agreement. The caption headings for the various
Paragraphs herein are for case of reference only and are not to be deemed part of these Terms and
Conditions.

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21

Certification
By signing below, I hereby certify that I have authority to execute this agreement for the party on
whose behalf I am signing, and that all representations made by such party are true and correct to
the best of my knowledge. I further acknowledge that false statements made to the U.S. Small
Business Administration can result in criminal prosecution under 18 U.S.C. 1001, 15 U.S.C. 645
and other provisions and imposition of civil money penalties under 31 U.S.C. 3729.
In consideration of the mutual promises herein contained, the parties agree to all the provisions
of this Agreement.
IN WITNESS WHEREOF,
this
day of

the parties
20

have executed

this multi-page Agreement

U.S. SMALL BUSINESS ADMINISTRATION
(Registered Holder)
By:

By:

Administrator,

Title:

_U.S. Small Business Administration

Date:

(Lender)

Examined and Accepted by
Fiscal and Transfer Agent

By:

By:

Title:

COLSON SERVICES CORP.
2 Hanson Place, 7th Floor
Brooklyn, NY 11217

Date:

NOTICE: THE GUARANTEE OF SBA RELATES TO THE UNPAID PRINCIPAL
BALANCE OF THE GUARANTEED INTEREST AND THE INTEREST DUE THEREON.
ANY PREMIUM PAID BY THE REGISTERED HOLDER FOR THE GUARANTEED
INTEREST IS NOT COVERED BY SBA'S GUARANTEE AND IS SUBJECT TO LOSS IN
THE EVENT OF PREPAYMENT OR DEFAULT.
This form is required to obtain a benefit.
PLEASE NOTE: The estimated burden for completing this form is 1 hour per response. You are not required to respond to any
collection of information unless it displays a currently valid OMB approval number. Comments on the burden should be sent to
U.S. Small Business Administration, Chief, AIB, 409 3rd St., S.W., Washington D.C. 20416 and Desk Officer for the Small
Business Administration, Office of Management and Budget, New Executive Office Building, Room 10202, Washington, D.C.
20503. OMB Approval (3245-0185). PLEASE DO NOT SEND FORMS TO OMB.

SBA Form 1086 (02/17) Previous editions are obsolete.

22

ATTACHMENT 1a -- SBA FORM 1086
SAMPLE CALCULATION
LENDER'S AND INVESTOR'S SHARE OF A BORROWER'S PAYMENT
Total Borrower Payment Received By Lender

$

3,450.05

Total Interest Payment Calculation
Borrower's Balance

$288,857.10

Multiplied by
Borrower's Interest Rate
Multiplied by
Number of Paid Interest Days
Divided by
Interest Calendar Basis
Total Interest Payment

8.750%
31
365
$

2,146.64

Investor's Share Interest Payment
Borrower's Balance
Multiplied by
Percentage of Loan Sold to Investor
Multiplied by
Interest Rate Sold
Multiplied by
Number of Paid Interest Days*
Divided by
Interest Calendar Basis*

$288,857.10
75.000%
7.750%
31
365

Investor's Share of Interest Payment to be Remitted to FTA

$1,425.98

Lender's Share of Interest Payment
Borrower's Balance
Multiplied by
Percentage of Loan Retained by Lender
Multiplied by
Borrower's Interest Rate
Multiplied by
Number of Paid Interest Days
Divided by
Interest Calendar Basis

$288,857.10

Lender's Share of Interest Payment to be Retained by Lender

$

536.66

$

2,146.64

25.000%
8.750%
31
365

Lender's Servicing Fee
Total Interest
Minus
Investor's Interest
Minus
Lender's Interest

$

1,425.98

$

536.66

Lender's Servicing Fee to be Retained by Lender

$

184.00

*NOTE: Figures shown are for illustrative purposes only. This example utilizes an actual number of days in each month with a
365 days per year basis. This same procedure may also be utilized for a constant 30 days in each month with a 360 days per year
basis.

SBA Form 1086 (02/17) Previous editions are obsolete.

23

ATTACHMENT 1b -- SBA FORM 1086
SAMPLE CALCULATION
LENDER'S AND INVESTOR’S SHARE OF A BORROWER'S PAYMENT
Total Borrower Payment Received By Lender

$3,450.05

Total Principal Payment
Borrower's Total Payment
Minus
Total Interest

$3,450.05

Total Principal Payment

$1,303.41

$2,146.64

Investor's Share of Principal Payment
Total Principal Payment
Multiplied by
Percentage of Loan Sold to Investor

$1,303.41

Investor's Share of Principal Payment to be Remitted to FTA

$ 977.56

75.000%

Lender's Share of Principal Payment
Total Principal Payment
Minus
Investor's Principal Payment

$1,303.41
$ 977.56

Lender's Share of Principal Payment to be Retained by Lender

$

325.85

Total to be Remitted to the FTA
Investor's Share of Interest Payment
Plus
Investor's Share of Principal Payment

$1,425.98
$ 977.56

Total to be Remitted to FTA

$2,403.54

Total to be Retained by the Lender
Lender's Share of Interest Payment
Plus
Lender's Share of Principal Payment
Plus
Lender's Servicing Fee

$ 536.66

$ 184.00

Total to be Retained by Lender

$1,046.51

$ 325.85

Payment Distribution Proof
Borrower's Total Payment
Minus
Total to be Remitted to the FTA
Minus
Total to be Retained by Lender

$2,403.54

Payment Distribution Proof

$

SBA Form 1086 (02/17) Previous editions are obsolete.

$3,450.05

$1,046.51
0.00

24

ATTACHMENT 2 – SBA FORM 1086
SBA SERVICING OFFICE CODES

Office Code

Name

City, State

0350

SBA National Guaranty Purchase

Herndon,

0626

Commercial Loan Servicing

Little Rock,

0992

Commercial Loan Servicing

Fresno, CA

SBA Form 1086 (02/17) Previous editions are obsolete.

25

ATTACHMENT 3a -- SBA FORM 1086
EXAMPLE OF A PENALTY CALCULATION
FOR LATE LENDER REMITTANCE OF A BORROWER PAYMENT
(See Paragraph 6 (c))

Example 1
Assume:
1.

2.
3.

that a $1,000 payment received by Lender as a regularly scheduled Borrower payment is
received by the FTA on the tenth of the month (a business day) following receipt by
Lender:
that the interest rate on the note less the Lender's servicing fee is 7.75%:
that interest is calculated on a 30/360 day basis

(a)

The late penalty is the greater of $100 or 5% of the payment amount.
subject to a $5,000 maximum on the Lender's total monthly remittance.
$1,000 x 5% = $50. The penalty is $100.

(b)

A penalty equal to the interest on the unremitted amount at the rate
provided in the Note (less the rate of the Lender's servicing fee).
Unremitted amount
Multiplied by Note Rate minus
Lender's servicing fee
Multiplied by number of late days
Divided by interest calendar basis

(c)

$100.00

$1,000.00
7.75%
5
360
$1.08

A late penalty charge calculated at a rate
of 12% per annum on the unremitted amount.
Unremitted amount
Multiplied by 12%
Multiplied by number of late days
Divided by interest calendar basis

TOTAL PENALTY

SBA Form 1086 (02/17) Previous editions are obsolete.

$1,000
12.0%
5
360
$1.67
$102.75

26

ATTACHMENT 3b -- SBA FORM 1086
EXAMPLE OF A PENALTY CALCULATION
FOR LATE LENDER REMITTANCE OF A BORROWER PAYMENT
(See Paragraph 6 (c))

Example 2
Assume:
1.

2.
3.

that a $5,145.96 payment received by lender as a regularly scheduled Borrower payment
is received by the FTA on the fifteenth of the month (a business day) following receipt by
the Lender;
that the interest rate on the note less the Lender's servicing fee is 7.75%;
that interest is calculated on an actual/365 day basis
(a)

The late penalty is the greater of $100 or 5% of
the payment amount, subject to a $5,000 maximum
on the Lender's total monthly remittance. $5,145.96
x 5% = $257.30. The penalty is $257.30.

(b)

A penalty equal to the interest on the unremitted amount
at the rate provided in the Note (less the rate of the Lender's
servicing fee).
Unremitted amount
Multiplied by the Note rate minus
Lender's servicing fee
Multiplied by number of late days
Divided by interest calendar basis

(c)

$257.30

$5,145.96
7.75%
10
365
$10.93

A late penalty charge calculated at a rate of 12% per
annum on the unremitted amount.
Unremitted amount
Multiplied by 12%
Multiplied by number of late days
Divided by interest calendar basis

TOTAL PENALTY

SBA Form 1086 (02/17) Previous editions are obsolete.

$5,145.96
12.0%
10
365
$16.92
$285.15

27