Best Practices: Revised SBA Form 1919 Analysis: Part 1 – Who is Required to Sign?

Pursuant to SBA Information Notice 5000-17007, effective October 12, 2017, SBA has issued a revised Form 1919.

One of the most notable changes is that Form 1919 is now split into two sections, each of which is completed and executed by different parties. The first section contains the Applicant business information, while the second section contains information about the principals of the business. Previously, the form stated that it was to be completed by an individual. The list of required individuals was included on the form. The actual certification would be signed by the individual in his/her individual capacity, although several of the questions in the form explicitly related back to the business. The new Form 1919 requires that Section I be completed and executed by an authorized representative of the applicant business. With the new form, this individual is making the representation on behalf of the applicant business and executing as an authorized representative. Section II of the revised Form 1919 is completed and executed by the listed individuals that SBA now designates as “Principals”. This list is the same as the list contained on the prior version of the form with the following changes:

1. With respect to partnerships, previously, all general partners, and all limited partners owning 20% or more of the equity of the firm” were required to complete the form. The new version adds “or any partner that is involved in management of the applicant business.”
2. The older version of the form required “any other person who is guaranteeing the loan, if required by SBA.” This reference has been removed from the new version.

These changes reflect a shift in focus to the management of the business. With resect to partnerships, the SBA is clarifying that, to the extent a minority limited partner has management control/responsibilities, lenders are expected obtain and review a Form 1919 from such an individual. At the same time, to the extent that there are limited guarantors that are not involved in the management of the business (e.g. a spouse that is guaranteeing solely for the purposes of pledging real estate), such individuals may not be required to provide a Form 1919. It is worth noting that, with respect to limited liability companies, the Form 1919 requires “all members owning 20% or more of the company, each officer, director and managing member” to complete Section II. While rare, it is possible for a limited liability company to have a manager that is not a member. While the operating agreement may not designate titles for “officers and directors,” it would be prudent for lenders to require a Form 1919 from such an individual, since the manager would exercise a certain level of control over the business, even if it is not a member.

Lenders must ensure that all required Form 1919s are obtained in order to perform a thorough eligibility analysis. For more information regarding the revised Form 1919, contact Jessica at (267) 470-1188 or at jconn@starfieldsmith.com.