September 26, 2018

Best Practices: Getting to Know SBA’s Updated Form 159

by Ethan W. Smith

On September 14, 2018, SBA issued Information Notice 5000-18012 announcing an updated SBA Form 159 “Fee Disclosure and Compensation Agreement”. The majority of the revisions were designed to promote transparency for loan Applicants and to provide greater clarity to Lenders and Agents regarding SBA’s disclosure requirements. Lenders must  begin using the updated Form 159 immediately, and SBA will accept only the updated Form 159 beginning November 1, 2018. For loans currently in process, SBA will allow Lenders to use the old form. A summary of SBA’s requirements under the updated Form 159 are as follows:

  • Form 159 must be completed and submitted to SBA any time a loan Applicant (Borrower) or a Lender pays a fee to an “Agent”. An Agent is defined by SBA as “… an authorized representative, including an attorney, accountant, consultant, packager, lender service provider, or any other person representing an applicant or participant by conducting business with SBA.” 13 CFR 103.1(a).
  • Exceptions to the 159 requirement include closing attorneys, real estate and business appraisers, environmental engineers, lender service providers performing services under an SBA-approved lender service provider agreement, an individual performing services for a CDC under an SBA-approved professional services contract, and real estate agents.
  • Fees that are required to be disclosed include packaging fees (including those charged by the Lender), fees for financial statement preparation for the loan application, and consulting, broker or referral fees.
  • Fees may only be charged for services actually rendered. Fees charged must be supported with a detailed explanation of the work performed, the hourly rate charged and the number of hours spent. This documentation must be obtained regardless of whether the fee is charged on an hourly or percentage basis. Additionally, although the detail is only required to be attached to Form 159 when the total compensation exceeds $2,500, SBA requires that the detail be obtained by the Lender and reserves the right to require it in SBA’s sole discretion.
  • If the Agent is paid a fee by the applicant, Form 159 must be signed by the Agent, the Applicant and the Lender. All fees paid to the Agent may be listed on a single Form 159.
  • If the Agent is paid by the Lender, Form 159 must be signed by the Applicant and the Lender. The Agent is not required to sign Form 159 when the Agent is being paid by the Lender.
  • Lenders must advise Applicants in writing that Applicants are not required to employ an Agent to prepare the SBA loan application.
  • A standard fee cannot be charged to all Applicants.
  • Fees may not be paid by both the Applicant and the Lender to the Agent for the same service.
  • Form 159 requires that all information be completed on the form before the Applicant signs.

These requirements are not new and have been included in the CFR and SOP for some time. The update to Form 159 was designed to ensure that SBA’s requirements are clearly and unambiguously set forth for all parties involved.

For more information about the updated SBA Form 159 and compliance with SBA requirements regarding fees, please contact Ethan at 267.470.1186 or