Audit Standards for SBA 504 Projects has arrived...

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​Are you prepared for to establish Use of Proceeds in your upcoming US Small Business Administration (“SBA”) audit?  Has your Closing Attorney discussed recently released SBA Guidance on Use of Proceeds?  Bolt Law Group works diligently to stay apprised of developments at the SBA and thereafter informs all of its Certified Development Company (“CDC”) clients about such developments.  Below is a quick discussion about the new standards by which your portfolio files will be judged in upcoming SBA 504 Audits.
 
Projects involving Construction, Leasehold Improvements and Installation of Equipment:

1. Signed Contract where total is equal to what is shown on the SBA 504 Loan Authorization (“Authorization”).  A Bid Proposal is no longer acceptable;
2. Evidence that construction was completed (Architect, Appraiser, or by some other means).  Example: If a pool was to be built do we have evidence one is now there?
3. Certificate of Occupancy;
4. Disbursement Schedule showing Payee, Date of Payment, and Amount of Payment, signed by Title, Escrow, or Third Party Lender;
5. Owner/Builders
   1. Documentation to support conclusion that Owner/Builder is experienced in the type of construction or machinery installation;
   2. 2 Bids from independent contractors that prove that the cost of the project is the same or less; and
   3. Owner/Builder cannot earn a profit.

 
Projects involving Installation of Equipment:

1. List of all equipment with serial numbers for all items worth more than $5,000;
2. Disbursement Schedule showing Payee, Date of Payment, and Amount of Payment, signed by Title, Escrow, or Third Party Lender;
3. Where Borrower receives any disbursement further evidence, e.g. Canceled Checks, are required to show what was paid for.

 
This article is meant only to quickly introduce the topic.  There are additional details to be considered for simple Real Estate transactions and where the CDC is the Interim Lender.  In any project success or failure can often hinge on the supporting cast with which you surround yourself.  At Bolt Law Group we pride ourselves on being the most informed and dedicated SBA 504 closing attorneys and would relish the opportunity to introduce ourselves to you.
 
Please reach out to us today, Curtis@boltlawgroup.com or 714-595-1696.
 
We are now proudly serving CDC clients throughout California and Texas.

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