SBA sop 50 10 5(e) 2012 06-12
-
Upload
lerchearly -
Category
Economy & Finance
-
view
1.464 -
download
2
description
Transcript of SBA sop 50 10 5(e) 2012 06-12
The New SBA SOP 50 10 5(E)Key Updates for Lenders
June 12, 2012
Alison W. RindArnold D. Spevack
Lerch, Early & Brewer, Chtd.
www.lerchearly.com
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Overview
Dates & Documentation
Small Loan Advantage
Franchise Issues Cooperatives EPC Loans Debt Refinancing CAPLines Change of
Ownership Involving Stock
Interest Rate Policy on Variable Loans
Guaranty Fee Payment
Packaging & Other Fees
Post-Approval Modifications
504s Export Lending
Programs2
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Dates & Documentation
3
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Revision E Effective Date
Applies to all applications received by the SBA on or after June 1, 2012.
4
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Related SBA Notices
5000-1239: key revisions E of SOP 50 10(5)
5000-1240: changes to Small Loan Advantage
5000-1241: revisions to Export Lending programs
5
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
SOP Online
To download a copy of the SOP, go to http://www.sba.gov/lender-documentation-tool?type=sops&order=field_sopno_value
Two versions Document with “tracked changes” shows what was updated in this recent revision
Document without tracked changes6
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
RevisionsCredit Score Pre-ScreeningAfter Credit ScreenCredit AnalysisEquity Requirements
Small Loan Advantage
7
Collateral PolicyLife Insurance & Environmental PoliciesClosing & Disbursement
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Small Loan Advantage
New version of prior adopted program
Pages 10 82-83 182-184 197 225-227
8
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Revisions to SLA
9
All SBA
Lenders
Maximum loan size increased
Old: $250K
New: $350K
Revolving Lines of Credit
Credit scoring by SBA prior to loan approval
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Change in Forms
10
Old Forms• S/RLA Forms (SBA Forms
2301 Parts A, B and C) • PLP Eligibility Checklist
(SBA Form 7)
New Forms• Forms used in the SBA
Express and Pilot Loan Programs (SBA Forms 1919 and 1920 Parts B and C)
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
SLA Revisions (con’t)
11
Your Form
SBA SLA Closing and
DisbursementProcedures and Documentation
SBA SLA Closing and
DisbursementProcedures and Documentation
SBA SLA Closing and
DisbursementProcedures and Documentation
SBA SLA Closing and
DisbursementProcedures and Documentation
SBA SLA Closing and
DisbursementProcedures and Documentation
Similarly Sized Non-SBA Closing
and Disbursement
Procedures and Documentation
=
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Credit Score Pre-Screening
12
Consumer Credit Bureau Data
Business Bureau Data
Borrower Financials
Application Data
Current Minimum
Score:140
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Credit Score Pre-Screening (con’t)
13
E-Tran
Submit
under SLA
Submit standard 7(a) loan app
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
If Credit Score is Not Acceptable
Lender may submit standard 7(a) loan app through LGPC or, if lender is SBA Express lender, an SBA Express application via E-Tran for a 50% guaranty
14
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
After Credit Screen – Non PLP
E-TranAdditional docs electronically to the Standard 7(a) Loan Guaranty Processing Center (LGPC) (Form 1919 plus any other forms
required based on a “yes” response to the 1919 (i.e., 912), Form 1920SX Parts B and C and lender’s credit memorandum)
15
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
PLP Lenders Submitting SLA Loans
E-Tran SBA will not conduct eligibility review prior to issuing loan number
Must retain loan file documentation - SBA will review
16
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
PLP Lenders Submitting SLA Loans (con’t)
Eligibility requirements for SLA same as Standard 7(a)
Apps that cannot be processed under lender’s PLP authority (e.g., include refinancing same institution debt) may be submitted using non-delegated procedures
17
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Retain Copies of Documentation
Lender must retain copies of documentation in its loan file for all SLA loans whether submitted under delegated or non-delegated authority
18
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Credit Analysis
SLA lenders must perform a thorough and complete credit analysis of applicant in order to ensure that loan is of such sound value as to reasonably assure repayment and this credit analysis must be documented in the loan file.
19
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
SLA Lender’s Credit Memo Must Include
20
SBA SLA Combination of Factors
for Underwriting & Credit Decisions
=
SBA SLA Combination of Factors
for Underwriting & Credit Decisions
SBA SLA Combination of Factors
for Underwriting & Credit Decisions
SBA SLA Combination of Factors
for Underwriting & Credit Decisions
SBA SLA Combination of Factors
for Underwriting & Credit Decisions
Similarly Sized Non-
SBACombination of Factors
for Underwriting & Credit Decisions
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Cash Flow Analysis
AdequacyDuration Dependability of cash flow/projected cash flow analysis
Owner/Guarantor analysis
21
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Credit Scoring Criteria
22
Your CreditScoring Criteria =
SBA SLA
Business
Credit Scorin
g Model
Similarly Sized Non-SBA
Business
Credit Scoring Model
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Lender’s Credit Decisions
Length of time/depth of management experience
Key account characteristicsVerify accuracy against tax data
Demonstrate ability to repay Debt service coverage >1:1 Cash flow coverage ratio >1:123
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Equity Requirements
24
SBA SLA Combination of Factors
for Underwriting & Credit Decisions
=
SBA SLA Combination of Factors
for Underwriting & Credit Decisions
SBA SLA Equity & Pro-Forma
Debt to WorthEquity
Injection Required?
SBA SLA Combination of Factors
for Underwriting & Credit Decisions
SBA SLA Combination of Factors
for Underwriting & Credit Decisions
Similarly Sized Non-
SBAEquity & Pro-Forma
Debt to WorthEquity
Injection Required?
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Collateral Policy
Not required to take collateral
Same policies & procedures as non-SBA
Must obtain lien on business assets
<$25K $25K-$350K
25
$250K+ collateralized by commercial real estate must comply with appraisal requirements
Lenders must use commercially reasonable and prudent practices
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Life Insurance & Environmental Policy
For all SLA loans, lender will follow the environmental policies of SOP 50 10 5(E), Subpart B, Chapter 4, Paragraph III26
=SBA SLA Life
Insurance Internal Policy
Similarly Sized Non-SBA Life
Insurance Internal Policy
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Closing & Disbursement
Same as similarly-sized non-SBA procedures and documentation
Must obtain collateral and meet conditions before disbursement
Option to use own note and guaranty forms27
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Lender Must Ensure That Note
Is legally enforceable and assignable
Has a stated maturityIs not payable on demandIncludes specific language
28
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
InformationEligibility
Franchise Issues
29
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Franchise Information
No changes to Franchise Registry process
When NOT on the Franchise Registry, must check the Franchise Findings List
Now lenders may (not must) go to the Franchise Findings List when franchise IS on registry
30
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Franchise Eligiblity
Prohibits franchise agreement provision that requires sale of real property
Now allows agreement to require lease of real property on reasonable terms
31
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Cooperatives
32
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Cooperatives - Eligibility
Adds guidanceClarifies agricultural coop can be considered producer coop
Clarifies worker coop is eligible if meets all other SBA eligibility requirements
33
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
EPC Loans
34
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
EPC Loans
Common practice of loan proceeds to be used for multiple purposes
OC as co-borrower
35
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Debt Refinancing
36
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Debt Refinancing
Now allows refinancing of debt in personal name of owner used for business purposes
No change in how to document credit card debt in personal name
37
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
CAPLines
38
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Debt Refinancing Under CAPLines
Only short-term revolving debt can be refinanced with working capital CAPLine
Refinancing of same-institution, SBA-guaranteed short-term revolving debt
Disbursement on Contract CAPLines39
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Change of Ownership Transactions Involving Stock Purchases
40
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Change of Ownership Transactions Involving Stock Purchases
Business required to be borrower
Cannot be made to an individual
If buyer is business entity and is aquiring/merging with selling business, buyer may use SBA-guaranteed loan41
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Clarification of Interest Rate Policy
42
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Clarification of Interest Rate Policy
Previous SOP allowed lender to delay but spread remained the same
Language inconsistent, so deleted
Now lender may change spread over base rate provided lender complies with SOP requirements
43
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Payment of Guaranty Fee
44
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Payment of Guaranty Fee
Submit electronicallyIncreases in loansExtensions of maturity
45
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Fees for Packaging & Other Services
46
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Fees for Packaging & Other Services
Lenders or 3rd parties permitted to charge a fee based on % of loan
Restrictions on fees
47
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Fees
May not exceed 3% on loans ≤$50K
May not exceed 2% on first $1 million and an additional ¼% over $1 million (max fee of $30K)
Must be reasonable, customary and consistent
Must not be standard48
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Fees (con’t)
Paid by lender to lender service provider may not be passed on
Direct costs of in-house counsel may be charged to borrower under certain circumstances
49
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Post-Approval Loan Modifications
50
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
SOP Revisions Re Loans Not Closed/Fully Disbursed
Requests for post-approval loan modifications or notifications of unilateral actions submitted to LGPC
After loan is closed and fully disbursed, submitted to CLSC
If change is made using E-Tran Servicing, no further notification needed
51
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Eligible 504 Project Costs
52
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Eligible 504 Project Costs
Previously permitted purchase costs of land without building to be included in project costs
Now includes land with building that will be razed
Cost of destruction part of preparing land for new construction
53
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
504 Appraisal Requirements
54
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
504 Appraisal Requirements
Previously required appraisal to identify CDC and SBA as client/intended user
Removes requirement that CDC is identified
SBA still must be named
55
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Export Lending ProgramsSBA Request for SOP [email protected] of SOP 50 53(A)Issuance of SOP 50 51 (4)
Additional Items
56
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Speakers
57
Alison Rind is an attorney at Lerch, Early & Brewer in Bethesda, MD who represents commercial lenders in loan transactions and other commercial matters. These include participants in SBA and other government-guaranteed lending programs. Her experience crosses a broad spectrum of lending areas. In addition to government programs, she handles real estate and asset-secured loans, construction loans, foreclosures and loan workout arrangements. Her clients include large national and regional financial institutions as well as smaller community banks in the Washington, D.C., metropolitan area.
(301) [email protected]
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Speakers
58
Arnie Spevack is an attorney at Lerch, Early & Brewer in Bethesda, MD who represents individuals, businesses, lenders and borrowers in financings, closings, negotiations and in the courts. Arnie's experience includes all aspects of commercial lending, as well as providing assistance in the acquisition, development, operation and management of office, retail and residential projects. An experienced creditor's rights attorney, Arnie assists both borrowers and lenders in workout negotiations and helps them refinance existing real estate mortgages and business loans.
((301) [email protected]
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
Speakers
59
Nicole Soraruf is an attorney at Lerch, Early & Brewer in Bethesda, MD who helps national, regional and local banks, credit unions and SBA lenders close loans, and works with real estate buyers, sellers, landlord and tenants in contract and lease negotiations.
(301) [email protected]
© Lerch, Early & Brewer, Chtd. 2012 www.lerchearly.com
For more information
60
Lerch, Early & Brewer, Chtd.3 Bethesda Metro Center, Suite 460
Bethesda, MD 20814(301) 986-1300
www.lerchearly.com
Thank you for your participation
This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before
acting on any information contained herein.