This form is an assumption agreement for a Small Business Administration (SBA) loan. Party assuming the loan agrees to continue payments thereon. SBA agrees to the assumption of the loan and release of original debtor. Adapt to fit your circumstances.
Assumption Agreement of SBA Loan
Category:
State:
Multi-State
Control #:
US-00193
Format:
Word;
Rich Text
Instant download
Description
Definition and meaning
An Assumption Agreement of SBA Loan is a legal document that allows one party, known as the Assumptor, to assume responsibility for the repayment of a loan originally taken by another party, known as the Borrower, from the Small Business Administration (SBA). This agreement is used primarily in situations where a property or business secured by the SBA loan is being transferred, and the new owner wishes to take over the loan obligations. By signing the document, the Assumptor agrees to adhere to all terms and conditions outlined in the original loan agreement, including any amendments.
How to complete a form
Completing the Assumption Agreement of SBA Loan requires careful attention to detail. Follow these steps:
- Gather necessary information: Collect details about the Borrower, Assumptor, and the original loan, including the principal amount and any associated documents.
- Fill in the form: Clearly provide the names of the Borrower and Assumptor, the date, and the specific loan amount. Ensure all corresponding sections detailing rights, obligations, and terms are covered.
- Review: Double-check all the information for accuracy. It's crucial that names, dates, and figures are correctly entered to avoid future issues.
- Sign and notarize: Both the Borrower and Assumptor must sign the document in the presence of a notary public to ensure its legality.
Who should use this form
This form is ideal for individuals or entities that are considering taking over an SBA-backed loan from the original Borrower. Typically, this occurs during property transfers such as sales or business acquisitions. Both property buyers and existing Borrowers can benefit from using this form to formalize the transfer of loan obligations and ensure that all parties are aware of their responsibilities.
Key components of the form
The Assumption Agreement of SBA Loan includes several essential components:
- Parties involved: Clearly states the Borrower and Assumptor, along with their roles and responsibilities.
- Loan details: Specifies the original loan amount, terms, and any necessary identifiers for tracking the agreement.
- Consent of SBA: A section where SBA grants approval for the Assumptor to assume the loan, which is critical for the validity of the transfer.
- Notary acknowledgment: Required for authenticity, ensuring that all signatures are verified by a licensed notary public.
Common mistakes to avoid when using this form
While completing the Assumption Agreement of SBA Loan, be aware of these common pitfalls:
- Inaccurate information: Ensure all names, dates, and amounts are correct.
- Missing signatures: Both parties must sign the document, and it should be notarized.
- Neglecting SBA consent: Avoid submitting the agreement without obtaining the necessary consent from the SBA.
- Failing to keep copies: Always retain a copy of the signed agreement for your records.
What documents you may need alongside this one
When preparing the Assumption Agreement of SBA Loan, consider having the following documents on hand:
- Original loan agreement: This provides context and details about the original loan terms.
- Deed of Trust: A copy of the security document related to the loan, which secures the lender's interest in the property.
- Identification: Valid IDs from both the Borrower and Assumptor to verify their identities during notarization.
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FAQ
Are SBA 504 loans assumable? Yes, as long as the SBA/SPEDCO have an opportunity to review both corporate and personal financial information on the proposed borrower(s) in advance of the sale. One note of caution: the release of the original borrower's personal guaranty is NOT automatic with a loan assumption.
An assumable mortgage allows a buyer to take over the seller's mortgage. Once the assumption is complete, you take over the payments on a monthly basis, and the person you assume the loan from is released from further liability. If you assume someone's mortgage, you're agreeing to take on their debt.
The SBA isn't willing to negotiate for the sake of negotiating. An OIC will only be considered if you can demonstrate your ability to repay the debt over a reasonable period.
SBA 504 loans can only be assumed once, and the new loan must include a due on sale or death clause to prohibit any future assumptions. All parties involved must sign a written agreement that specifies the terms of the assumption.
EIDL termsLoan collateral can include tangible and intangible property like inventory and equipment. Borrowers can't sell, lease, license or transfer collateral without prior approval from the SBA.
Fortunately for borrowers, SBA loans, including the SBA 7(a) loan, are fully assumable with SBA approval.In particular, the SBA will look to ensure that the new borrower is eligible under SBA guidelines, and has enough financial strength and business experience to make a potential loan default unlikely.
The streamlined SBA loan forgiveness application is available to business owners who borrowed $50,000 or less in PPP funds. The streamlined process is not available for business owners who, together with their affiliates, received $2 million or more under the program.
Guarantee Portion - Under the 7(a) guaranteed loan program SBA typically guarantees from 50% to 85% of an eligible bank loan up to a maximum guaranty amount of $3,750,000.
In order to qualify for an SBA disaster loan, the Small Business Administration will perform a routine credit check to ensure you qualify against the SBA's credit score requirements.According to Fundera, SBA loan minimum credit requirements fall around 620-640.