Best Practices: The Importance of Closing Instruction Letters
When Lenders rely on a third party closing agent, such as a title agent or escrow agent, to assist with loan closing and disbursement on behalf of the Lender, it is important for Lenders to provide clear written instructions to the closing agent with respect to the Lender’s funding, title and closing requirements. An instruction ... Read More
Best Practices: Verification of Source of Equity Injection: Practical Tips
Equity injection is a key component of many SBA 7(a) loans and, when it is required, it is imperative that every lender verify the source of injection. Not verifying the source of equity injection will likely cause a full denial of the SBA loan guaranty if the loan suffers an early default. Per the SOP ... Read More
Best Practices: Interest Rate Changes Under “The Deregulatory Rule”
The Final Rule: Regulatory Reform Initiative: Streamlining and Modernizing the 7(a), Microloan, and 504 Loan Program to Reduce Unnecessary Regulatory Burden (87 FR 38900, commonly known as the “Deregulatory Rule”) became effective on August 1, 2022. The purpose of the Deregulatory Rule is twofold: (1) to remove or revise regulations that are obsolete, unnecessary, ineffective, ... Read More
Best Practices: Recommendations for Effectively Working with Outside Counsel for SBA Loan Transactions
Using outside counsel to assist with loan closings may or may not be standard practice for SBA Lenders depending on a variety of factors such as: where a Lender is located in the country, the size of the loan transaction, the anticipated use of loan funds, or if the loan is out of a Lender’s ... Read More
Best Practices: Seller Notes and Standby Agreements
On SBA 7(a) loans, it is common for sellers of small businesses to offer the buyer a promissory note to pay some of the purchase price for the business. Seller financing is favored by buyers and financial institutions. It demonstrates the seller’s confidence that the company will succeed, reduces the risk to the lender by ... Read More
Best Practices: How to Deal with a Subpoena for a Customer’s Bank Records
Banks are repositories for vast amounts of financial information. This information may be useful to parties in lawsuits in which the bank is just an innocent bystander. Banks often receive requests for financial information in matters in which the bank has no direct involvement. However, banks have duties to their customers to maintain the confidentiality ... Read More
