The rapidly evolving environment precipitated by the coronavirus will have a wide reaching adverse economic impact on many American small businesses, as more and more business are forced to close to comply with government declarations. Unfortunately, many are likely to suffer an adverse economic impact from the current crisis, and if the business was already in trouble, may default on their loans. On March 10, 2020, SBA published Information Notice 5000-20005 which discusses recent revisions to the Guaranty Purchase Tabs enacted to make processing of guaranty purchase submissions quicker, with fewer requests for additional documentation. Lenders must use the revised Guaranty Purchase Tabs beginning with all packages submitted on April 1, 2020, but can begin to use them sooner.
Some of the key revisions are as follows:
- All submissions must be sent electronically to the Guaranty Purchase Center by using the Send This File link on the first page of the Tabs.
- The Lender’s credit memo for all loans to the Borrower is now required to be submitted with all guaranty purchase submissions, not just early default loan submissions, and must be included with Tab 2. Lenders should make sure the credit memo includes its Credit Elsewhere/Personal Resources Test analysis (as applicable). If such analysis is not contained in the credit memo, the separate analysis must also be submitted with Tab 2.
- Lender’s CAIVRS search results and a favorable determination letter for a IRS Rollover as Business Starts Ups (if applicable) must be submitted with Tab 3.
- Environmental Questionnaire and Phase I/II (full report, not summary), must now be submitted with Tab 3, instead of Tab 10.
- Business Appraisal/Valuation (when applicable) must be submitted with Tab 4.
- Tab 7 was revised to change the events of default that would constitute an Early Default to exactly match the way such events are listed in SOP 50 57 2 (Standard Operating Procedures for 7(a) Loan Servicing and Liquidation).
- If lender is ready to charge off the loan, the executed Assignment Form must now be included with Tab 9, instead of Tab 4.
Lenders can obtain the updated Guaranty Purchase Tabs at https://www.sba.gov/document/sba-form–regular-7a-guaranty-purchase-package-tabs. It is highly recommended that even if lenders are not using the new Guaranty Purchase Tabs for its submissions prior to April 1st, that lenders submit the additional documents now required under the updated Guaranty Purchase Tabs to avoid the Guaranty Purchase Center coming back to request them from the lender. Remember, as stated on the bottom of the 1st page of the current and revised Guaranty Purchase Tabs, the “SBA has the right to request additional documentation other than the items listed on this Index, and the Lender must comply with SBA’s request.”
While preparing the updated Guaranty Purchase Tabs submission, lenders need to remember to contact the appropriate Servicing Center to request the loan be placed in liquidation status.
Other items to keep in mind while preparing the Guaranty Purchase Tab submission:
- The credit memo that is attached to the standard Demand Letter should thoroughly describe what happened to cause the loan to default and why the Lender could not have anticipated it.
- If there are disparities between the credit memo and the SBA Authorization, such disparities should be addressed, either by including the modification(s) to the credit memo made by Lender from the time of initial application through the closing of the loan or other documentation to explain how the loan requirements changed to those in the SBA Authorization during such time period.
- Lender needs to make sure it includes all documentation demonstrating the use of equity injection and the source of such injection.
- If a deferment is granted to a Borrower, remember to include a copy of the executed Deferment Agreement with Tab 4.
For more information regarding SBA Guaranty Purchases or if you need assistance with your Guaranty Purchase submission, contact the attorneys at Starfield & Smith, PC at 215-542-7070.
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