Best Practices: Requirements for the Universal Purchase Package

On August 1, 2023, the SBA unveiled its new streamlined Guaranty Purchase package.  The new Universal Purchase Package (UPP) now takes the place of the former SBA 10 Tab Package. There are now 8 Tabs, instead of the previous “10 Tabs” that Lenders were required to submit.

While the guaranty purchase package has changed, a lot of the same information that is required to be submitted remains the same.  But, before the Lender submits the new UPP, they must make sure that some requirements have been met.   The first requirement is that the Borrower must be in default on a payment due for more than 60 calendar days, or if not, they must obtain written approval from the SBA in writing before submission.  An example of a reason that the Lender may request, and the SBA would possibly approve submission before the 60-day payment default would be if the Borrower is taking actions that could potentially be harming the Lender’s and SBA’s ability to liquidate its collateral at a later date.  The second requirement for submitting a purchase request is that the Lender must transfer the Loan to liquidation status.  While the SBA strongly encourages the Lender to fully liquidate the Loan prior to requesting a purchase, this isn’t always possible to do.

Other factors also determine when the UPP must be submitted as well.  For example, if a Loan was previously sold on the secondary market, the Lender must request that the SBA purchase it back before it can submit the UPP.  Once the SBA repurchases the Loan, it provides notice to the Lender that it has 45 days to submit its UPP.

Now, we have determined when a Lender can or must submit its UPP to the SBA, but we have not yet discussed what substance needs to be included in the UPP.  Well, the short answer is- it depends! While that answer is very lawyerly and isn’t overly helpful, each loan is unique and every circumstance is different.  The facts and circumstances will determine what needs to be provided to the SBA for its review.  For example, if the Loan is an early default, SBA will focus more energy on reviewing the Lender’s financials and projections, underwriting, and also equity injection if it’s applicable to the Loan.  A Lender needs to be familiar with the UPP form and what is now required in a guaranteed purchase scenario.

One constant requirement in all UPP submissions, is that Lender must produce a loan summary for the SBA that provides a detailed summary of the nature of the business, cause of the default, reason for the business’s failing, loan servicing history, liquidation efforts by the Lender, and also actions taken in pursuit of the Borrower and any Guarantors.  This provides the Lender an opportunity to tell its side of the story and give any details to the SBA that helps them better understand the file, and hopefully more efficiently pay the Lender its guaranteed portion of the Loan.

Once complete, all UPP submissions are uploaded electronically through the SBA’s “Send This File” link on the UPP Tab cover sheet.  One of the best qualities of the SBA loan program is that the SBA will guarantee a portion of the Loan should it go into default.  Lenders need to be well versed on the UPP submission to ensure they give themselves the best chance of the SBA honoring its Guaranty, or else they could miss out on money the Lender was depending upon.

If you have any questions, please reach out and email me at tdlauro@starfieldsmith.com.