Sec. 203. Lending criteria
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Section 7(a)(1) of the Small Business Act ( 15 U.S.C. 636(a)(1) ) is amended by adding at the end the following: With respect to a loan guaranteed under this subsection— the applicant (including an operating company) shall be creditworthy; the loan must be so sound as to reasonably assure repayment; and subject to the approval of the Administrator, the Director of the Office of Credit Risk Management may require additional criteria. With respect to a loan guaranteed under this section that is not less than $350,000, the Administration and lenders shall, as applicable, consider the following:
Credit history of the applicant (and the operating company, if applicable), and the associates and guarantors of the applicant. Experience and depth of management. Strength of the business. Past earnings, projected cash flow, and future prospects. Ability to repay the loan with earnings from the business of the applicant. Sufficient invested equity to operate on a sound financial basis. Potential for long-term success. Nature and value of collateral (although inadequate collateral may not be the sole reason for denial of a loan application).
The effect any affiliate of the applicant may have on the ultimate repayment ability of the applicant. With respect to a loan guaranteed under this section that is less than $350,000— lenders shall use appropriate and generally acceptable commercial credit analysis processes and procedures consistent with those used for similarly-sized commercial loans that are not guaranteed by the Administration; the Administration and lenders may use a business credit scoring model; and the Administration and lenders shall, as applicable, consider— the credit score or credit history of the applicant (and the operating company, if applicable), and the associates and guarantors of the applicant; the earnings or cash flow of the applicant; any equity or collateral of the applicant; and the effect any affiliates of the applicant may have on the ultimate repayment ability of the applicant. .
Section 502 of the Small Business Investment Act of 1958 ( 15 U.S.C. 696 ) is amended by adding at the end the following: With respect to a loan made under this section— the applicant (including an operating company) shall be creditworthy; and the loan must be so sound as to reasonably assure repayment. With respect to a loan made under this section— lenders and certified development companies shall use appropriate and generally acceptable commercial credit analysis processes and procedures consistent with those used for similarly-sized commercial loans that are not guaranteed by the Administration; the Administration, lenders, and certified development companies may use a business credit scoring model; and the Administration, lenders, and certified development companies shall, as applicable, consider— the credit score or credit history of the applicant (and the operating company, if applicable), and the associates and guarantors of the applicant; the earnings or cash flow of the applicant; and any equity or collateral of the applicant. .
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