With interest rates at their highest level in over twenty years and other factors in the economy impacting small businesses, more borrowers are having a difficult time meeting their debt service payments on SBA loans that they could easily manage just a few years prior. As a result, more lenders may be seeking guaranty purchase from SBA. The Universal Purchase Package (UPP) has replaced the former SBA 10 Tab Package and continues to evolve with new procedural requirements.

The first question is when to submit the UPP.   The SBA loan must be in liquidation status on the lender’s SBA 1502 report. Typically, this occurs after more than 60 calendar days in payment default.  A Lender may request SBA approve submission before the 60-day payment default if a borrower’s actions could potentially harm the lender and/or SBA’s ability to liquidate its collateral.

While SBA strongly encourages the lender to fully liquidate the loan prior to requesting guaranty purchase, this isn’t always possible to do. For example, if a loan was previously sold on the secondary market, the lender must repurchase or request that the SBA repurchase the Loan back from the secondary market once the Loan is in liquidation status.  If SBA repurchases the loan, the lender has 45 days to submit its UPP. If the lender repurchases the loan or never sells the Loan following closing, the Lender may fully liquidate the loan prior to submission of the UPP.  SBA requests that the UPP be submitted to SBA no later than 180 calendar days after the maturity date of the loan, or the date the Lender completes the liquidation of a matured loan.

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! The facts and circumstances will determine what needs to be provided to the SBA in the UPP for its review.  A lender needs to be familiar with the UPP form and what is now required in different guaranteed purchase scenarios.

In the original version of the UPP released in August 2023, if the loan was an early default (occurring within 18 months from the final disbursement of loan proceeds), SBA required lender’s financials and projections, underwriting, and also evidence of equity injection, if it was applicable to the Loan.  The current version of the UPP now requires the Lender to submit this information in all UPP submissions, regardless if it’s an early default or not.  This is just one example of the ever changing documentation required and the reason that Lenders need to keep current with all changes to the document.

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 result in SBA paying the lender its guaranteed portion of the loan in a timely manner.

UPPs for standard 7(a) Loans should be submitted to the National Guaranty Purchase Center (NGPC).  UPP’s for 7(a) Small, SBA Express, Export Express, Community Advantage and Pilot Program Loans should be submitted to the appropriate SBA Loan Center.  Completed UPP submissions are uploaded electronically through the SBA’s “Box.com” link on the UPP Tab cover sheet.  Once the UPP is confirmed received by SBA, the review process may take a few weeks, but may take much longer if SBA determines that not all information was included in the initial UPP submission and must request additional documentation from the lender. To ensure an efficient resolution on an SBA guaranty purchase request, it’s important to be thorough in the preparation and review of the UPP prior to submission to SBA.  Further guidance on the guaranty purchase process can be found in SBA’s SOP 5057 4 and the NGPC website.

If you would like assistance with the preparation of a UPP, or have any questions regarding the guaranty purchase process, please reach out and email me at tdlauro@starfieldsmith.com