A common issue that we find when conducting U.S. Small Business Administration (“SBA”) loan reviews is the proper completion and execution of SBA Form 1919 (Click here to download a copy of SBA Form 1919), specifically when the Applicant Business has “layered ownership”.
When an Applicant Business is owned in whole, or in part, by an Entity Owner(s), a Form 1919, Section III “Entity Owner Information”, must be completed, and executed, by any Entity Owners. Each required Section III must list all proprietors, partners, officers, directors, members, Trustees, and holders of outstanding stock in the Entity Owner. Additionally, 100% of the ownership in the Entity Owner must be disclosed.
It is also important to note that, if an Applicant Business is owned by an Entity Owner (in whole or in part), any individual owner of the Entity Owner who is also an officer or director of the Applicant Business must complete, and execute, a Form 1919, Section II.
Individual owners of the Entity Owner(s) are deemed to have “indirect” ownership of the Applicant Business. Additionally, the individual owners of the Entity Owner(s) may also hold direct, individual ownership in the Applicant Business, in which case the individual owners must also complete, and execute, a Form 1919, Section II, as an Individual Owner.
Layered ownership of an Applicant Business often results in complex structures which complicate the determination of the required Form 1919 sections that must be completed and executed to ensure compliance with SOP 50 10 6.