SOP Changes Effective January 1 Bob Coleman, Editor, Coleman Report November 29, 2017
SOP Changes Effective January 1 • Managing SBA Loan Service Providers • New Franchise SBA Eligibility Rules • New Business Acquisition Equity Injection Rules • New Personal Guaranty Rules
Other Stuff You Must Know • December 1, 2017 Liquidation Deadline for loans > 2 Years in Default • The “Credit Elsewhere” Rule • SBA and False Claims • Causes of SBA Loan Guaranty Denials & Repairs • SBA Credit Score and Express Loan Programs • SBA One • PARRiS
POLL QUESTION How Active is your Bank in SBA Lending? • We are a PLP Lender • We are a GP Lender • We are not an SBA Lender
POLL QUESTION I am an SBA Express Loan Lender • True • False • No Clue
POLL QUESTION My bank uses an SBA loan service provider • Yes • No
POLL QUESTION We use an SBA loan servicer provider for (Check all that apply) • Underwriting • Closing • Servicing • Liquidation
POLL QUESTION Premiums for 25-year SBA 7(a) Loans are Currently over 118. • True • False • Don’t Know
SBA SOP 50 10 5(J) The 5010 5 I is still in effect for 7A and 504 loans until December 31, 2017. The SOP 5010 5 J becomes effective January 1, 2018.
Managing Loan Service Providers
Top 10 Things to Know about Lender Service Providers 1. Know your reputation and SBA license are being outsourced 2. If you pay a third party to help underwrite, close, service or liquidate you need a LSP agreement 3. SBA must approve the agreement 4. If the LSP underwrites your loan, you must perform a review 5. You must have an experienced in- house SBA lending professional oversee your LSP’s work 6. Know the Two-Master Rule 7. LSPs may not have access to your PARRiS score 8. Don’t let the LSP handle borrower loan payments 9. Fees must be prudent and consistent with non-SBA similarly sized loans 10. Do not split secondary market premiums with LSPs or BDOs
New Franchise Eligibility Rules
New Franchise Eligibility Rules • If the Applicant’s brand meets the FTC definition of a franchise, it must be on the Directory in order to obtain SBA financing. • Lenders will be able to rely on the Directory and will no longer need to review franchise or other brand documentation for affiliation or eligibility
New Business Acquisition Equity Injection Rules • Business Acquisition Loans resulting in a new owner of the business require a 10% of the total project cost equity injection. • Seller debt cannot be considered part of the equity injection unless it is on full standby for the life of the loan and it cannot exceed 50% of the equity injection.
New Personal Guaranty Rules • 20% Owner or Significant Management Role
December 1, 2017 Liquidation Deadline for 7(a) loans > 2 Years in Default • Wrap Up Report Deadline is December 1, 2017 • Prudent Liquidation is Defined as 24 months • Source: SBA Information Notice 5000-1378, April 1, 2016
The “Credit Elsewhere” Rule • Lender must include the specific reasons why the Applicant does not meet the Lender’s conventional loan policy requirements. • i . The business needs a longer maturity than the Lender’s policy permits (for example, the business needs a loan that is not on a demand basis); • ii. The requested loan exceeds the Lender’s policy limit regarding the amount that it can lend to one customer; • iii. The collateral does not meet the Lender’s policy requirements; • iv. The Lender’s policy normally does not allow loans to new businesses or businesses in the Applicant’s industry; • These other factors must be specifically documented in the loan file
SBA and False Claims • PNC Bank Case Study • Pinnacle Bank (Wyoming) Case Study
Causes of SBA Loan Guaranty Denials & Repairs Loan Underwriting • Discrepancy between Loan Authorization and Credit Memo • Failure to Include Industry Analysis
Causes of SBA Loan Guaranty Denials & Repairs Loan Closing • Stand-Stand by Note not obtained • Lease Term Conditions not met • Assignment of Lease not located • Construction Performance Bond not obtained • Secondary Market Sales before full disbursement • Child Support Verification not obtained • Landlord Waiver not obtained • Inaccurate certificates of insurance
Causes of SBA Loan Guaranty Denials & Repairs Loan Servicing • On Going – Flood and/or Hazard Insurance • Annual Financial Statements Not Obtained and Analyzed • On Going – Property Taxes Policy/Procedures • Site Visit Not Conducted • Liquidation Practices • Recovery Remittance Timely Submission/Wrap Up Report
Causes of SBA Loan Guaranty Denials & Repairs Liquidation • Recovery Remittance • Timely Submission of Wrap Up Report SBA One & PARRiS Score
Thank You! Questions? Bob Coleman Editor Coleman Report bob@colemanreport.com
Recommend
More recommend
