Best Practices: Lender Due Diligence Crucial to Identification of Covid-19-Related Financial Crimes
SBA’s Office of Inspector General (SBA-OIG) advises that financial institutions (FI) continue to serve an important role in uncovering and identifying thousands of fraudulent PPP (Paycheck Protection Program) loans and EIDL (Economic Injury Disaster Loans). FI serve as the “Receiving Depository Financial Institution (RDFI)” for PPP program funds from a third-party FI (the PPP lender), ... Read More
Best Practices: SBA Form 159 Submission Changes
The SBA recently announced changes to the submission procedure for SBA Form 159 Fee Disclosure Form and Compensation Agreement (“Form 159”). Lenders are required to submit Form 159 when a third party agent is paid by the SBA applicant or the SBA Lender in connection with an SBA loan application. There are no substantive changes ... Read More
Best Practices: The Importance of Certificates of Good Standing
Prior to the closing of an SBA loan, it is critical that lenders obtain appropriate documentation that the borrowing entity is in good standing. The best evidence to confirm active status and verify good standing is a Certificate of Good Standing (also sometimes known as Certificate of Existence) obtained through the Office of the Secretary ... Read More
Best Practices: Handling PPP Bankruptcies
As we near the first anniversary of the Paycheck Protection Program (“PPP”), it has become clear that this program was essential in helping millions of small businesses weather the storm of the COVID-19 pandemic. Unfortunately, it has also become clear that, despite the best efforts and intentions of Congress, the SBA, and the lending community, ... Read More
Best Practices: The Importance of “Foreign Qualification”
A startup company may elect to file its preliminary corporate documents, such as the articles of organization (limited liability company) or incorporation (C-corporation), in a state other than the one in which the company intends to conduct actual business operations. However, such companies, including Borrowers applying for SBA loans, must also be authorized to conduct ... Read More
Best Practices: Refinancing Interim Advances under SOP 50 10 6
In the most recent iteration of the SOP, the SBA added a provision prohibiting the use of loan proceeds when refinancing interim advances if those advances were made with the intent of being subsequently refinanced with a 7(a) loan. SOP 50 10 6, A.1.b.iii, page 228. For quite some time, however, the SBA has allowed ... Read More
