SOP Changes Effective January 1 Bob Coleman, Editor, Coleman Report - - PowerPoint PPT Presentation

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SOP Changes Effective January 1 Bob Coleman, Editor, Coleman Report - - PowerPoint PPT Presentation

Sep 04, 2023 185 likes •446 views

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

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SOP Changes Effective January 1

Bob Coleman, Editor, Coleman Report November 29, 2017

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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
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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
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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
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POLL QUESTION

I am an SBA Express Loan Lender

  • True
  • False
  • No Clue
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POLL QUESTION

My bank uses an SBA loan service provider

  • Yes
  • No
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POLL QUESTION

We use an SBA loan servicer provider for (Check all that apply)

  • Underwriting
  • Closing
  • Servicing
  • Liquidation
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POLL QUESTION

Premiums for 25-year SBA 7(a) Loans are Currently over 118.

  • True
  • False
  • Don’t Know
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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.

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Managing Loan Service Providers

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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
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New Franchise Eligibility Rules

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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

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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.

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New Personal Guaranty Rules

  • 20% Owner or Significant Management Role
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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
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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
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SBA and False Claims

  • PNC Bank Case Study
  • Pinnacle Bank (Wyoming) Case Study
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Causes of SBA Loan Guaranty Denials & Repairs

Loan Underwriting

  • Discrepancy between Loan Authorization and Credit Memo
  • Failure to Include Industry Analysis
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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
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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
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Causes of SBA Loan Guaranty Denials & Repairs

Liquidation

  • Recovery Remittance
  • Timely Submission of Wrap Up Report

SBA One & PARRiS Score

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Thank You! Questions?

Bob Coleman Editor Coleman Report bob@colemanreport.com