If there is one constant in the world of SBA lending, it is change. SBA rules and regulations are constantly transforming with new interpretations of existing rules and updated regulations being issued with increasing frequency. With the start of the new year, and renewed optimism of SBA lending participants, bolstered in part by the increased program authorization levels provided by Congress late last year, lenders should review and examine their current policies and procedures to start the new year with best practices in place.
In the past year alone, participants in the government guaranteed lending program adapted to changes to loan servicing, credit underwriting, and closing and funding with the issuance of the new SOP 50105(H) and SOP 50 57 2. Notable changes include the use of E-Tran to notify SBA of unilateral servicing actions, updates to the debt refinancing requirements, revisions to the credit elsewhere test, and the permanent reinstatement of the 504 debt refinancing program.
Future changes that SBA indicated are underway include significant revision to franchise eligibility requirements, along with ongoing guidance and clarification of change of ownership transactions.
Some steps lenders can take now to position themselves for a productive 2016 include: (i) evaluating their credit underwriting tools to ensure they include all of SBA’s current eligibility and credit requirements, (ii) reviewing their commitment letter and credit memorandum forms to be sure all terms are updated, (iii) setting clear responsibilities amongst each of their credit, sales, and closing teams to ensure seamless information flow and due diligence gathering, and (iv) reaching out to outside closing counsel or lender service providers to confirm roles and responsibilities.
By proactively evaluating current systems and practices and identifying areas for improvement, lenders can implement changes in processes and procedures that will not only increase potential productivity in the new year, but simultaneously ensure compliance with the latest SBA rules and requirements, thereby protecting the SBA guaranty.
For more information about SBA loan closing policies and procedures, please contact Jen at 267-470-1206 or at firstname.lastname@example.org.