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The U.S. Small Business Administration (“SBA”) requires that lenders disburse SBA loan proceeds in a prudent manner and in accordance with the Loan Authorization to avoid a potential denial of liability under the SBA guaranty. The SBA Form 1050, Settlement Statement is used to collect information regarding the disbursement of the SBA loan proceeds. When used, the SBA Form 1050 must be signed by the borrower and lender sufficient to determine:

The recipient of each disbursement;
The date and amount of each disbursement; and
The purpose of each disbursement.

To ensure compliance with SBA SOP 50 10 6 requirements, lenders are encouraged to consider the following practices:

When is SBA Form 1050 required?

• SBA Form 1050 must be used for the initial disbursement for all SBA Standard 7(a) Loans (over $350,000)
  • Lenders must document all subsequent disbursements, but may use their own form, or may use SBA Form 1050
  • For SBA Express, Export Express, and 7(a) Small Loans (up to, and including, $350,000), SBA Form 1050 is not required, but may be used
• In addition to SBA Form 1050, lenders must also obtain and retain documentation acceptable to verify disbursement in accordance with the SBA Authorization, such as:
  • Joint payee checks;
  • Copies of receipts, invoices or other supporting documentation marked paid by the seller or vendor; or
  • Evidence of an electronic funds transfer to a vendor along with a copy of the invoice.

How is SBA Form 1050 signed when there are multiple co-borrowers?

• When there are co-borrowers, at least one co-borrower must sign the face of the SBA Form 1050
  • Additional co-borrower signatures may be attached as an addendum to SBA Form 1050

What dates should be used on SBA Form 1050?

• Borrowers must sign SBA Form 1050 as of the date that the initial disbursement(s) are disbursed to the recipient(s).
  • For example:
    • If the lender disburses directly to the recipient(s), the SBA Form 1050 would be dated as of the date that the lender disburses the initial disbursement(s)
    • If the lender disburses to a disbursing party (an escrow agent, title company, etc.), SBA Form 1050 should be dated as of the date that the disbursing party disburses the initial disbursement to the recipient(s) (which may not necessarily occur on the same date that the lender disburses to the disbursing agent).

If your lending institution has questions regarding SBA Form 1050, or any other SBA lending matters, please contact Your SBA Legal Department® at SBAQuestions@JellumLaw.com.