Best Practices: Things to Consider in the New Year

As we begin the new year, here are some items of interest that lenders should keep an eye out for in 2019:

First, it is important to make sure that you are using the most recent versions of SBA’s forms and incorporating required language into your loan documents. The SBA released a new SBA 7(a) Loan Authorization boilerplate in August 2018 that requires changes to certain loan documents (i.e. Note, Borrower and Operating Company Certification, etc.). The 504 Loan Program also had multiple forms change over the past year to allow for the new 25 year debenture. Hopefully, by now lenders have updated their documents accordingly, but checking to make sure all required revisions have been made will insure the lender’s compliance with SBA program requirements in 2019.

Second, keep an eye out for any changes to SBA regulations, SBA has proposed rules that include incorporating specific requirements applicable to the SBA Express and Export Express Loan programs, requiring certain owners of small business applicant to inject excess liquid assets into the business to reduce the amount of SBA-guaranteed funds that otherwise would be needed, revising the allowable fees for the 7(a) Loan Program to limit the fees payable by the small business applicant and to clarify what SBA considers reasonable with respect to such fees, and modifying affiliation provisions to include additional circumstances when a small business applicant will be deemed affiliated with another entity for determining size of applicant, among other things. The Comment period closed on December 18, 2018, and it is possibly that the final rule may differ from the proposed rule based on the feedback SBA received.

Additionally, lenders should remember that beginning January 1, 2019, pursuant to the Small Business 7(a) Lending Oversight Reform Act of 2018, OCRM is required to provide a written report to a lender within 60 days of completing its review. If OCRM is unable to meet the report deadline, it must provide written notification to the Lender and indicate the reason for the delay. If lenders have not received the report and/or written notification about the reason for the delay, it should reach out to OCRM to inquire as to the delay.

Finally, lenders should keep an eye out for new regulations relating to the Small Business 7(a) Lending Oversight Reform Act of 2018. SBA has until June 29, 2019 to draft and implement new regulations regarding to OCRM enforcement actions and lender’s rights in relation thereto.

For more information regarding SBA developments in 2019, contact Janet Dery at 267.470.1189 or   jdery@starfieldsmith.com