Best Practices: Meeting SBA’s Prudent Liquidation Deadline
SBA Standard Operating Procedure 50 57 (2) requires SBA lenders to complete liquidation of their 7(a) loans in a “prompt, cost effective and commercially reasonable manner.” This concept, defined by the SBA as “Prudent Liquidation,” is intended to incentivize lenders to timely wrap up their SBA loans and help the agency further reduce the number ... Read More
Best Practices: Financial Reporting
SBA lenders often include financial reporting provisions in their loan documentation, but may not realize the significance of this type of monitoring and the potential impact it can have on the ability of the lender to collect on the guaranty. Pursuant to the Authorization Boilerplate, borrowers are required to “furnish year-end statements to Lender within ... Read More
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
