Best Practices: Documenting 401(k) Funds Used as Equity Injection
When a Borrower wishes to use funds from a 401(k) plan (the “Plan”) as equity injection on SBA loans, lenders must make sure they are properly documenting the injection and that the loan structure remains compliant with SBA rules and regulations. See SOP 50 10 5(I), pages 157 and 158. SBA requires that all individuals ... Read More
Best Practices: Credit Elsewhere Requirements
The SBA’s credit elsewhere test underpins the 7(a) loan program. Accordingly, failure to comply with the SBA’s credit elsewhere requirements may subject a lender to a denial of the SBA guaranty as well as a possible enforcement action by the Office of Credit Risk Management. To comply with the SBA’s credit elsewhere requirements, which appear ... Read More
Best Practices: To Use or Not to Use- That is the Ten Million Dollar Question
It turns out that your English teacher may have been right, after all: a misplaced comma can be a big deal. A Maine dairy company was reminded of the importance of grammar in a recent court decision, that could cost the dairy company an estimated $10 million. In 2014, three truck drivers sued Oakhurst Dairy ... Read More
Best Practices: Documenting Small Construction Projects Under $350,000
SBA guaranteed loan proceeds may be used to construct or renovate buildings. The SBA provides specific requirements for SBA guaranteed loans where the construction component of the loan is more than $350,000. For small construction projects where the construction component of the loan is less than $350,000, the SBA has more relaxed requirements. However, even ... Read More
Best Practices: Franchise Agreements and Consistencies with the SOPs
Lenders extending financing to franchisees – either to re-finance existing debt or open new facilities – have historically been concerned with determining whether affiliation exists between the franchisor and franchisee. The Small Business Administration (“SBA”) streamlined this determination in Standard Operating Procedure 50 10 5(I) (“SOP”) by requiring lenders to obtain the SBA Addendum to ... Read More
Best Practices: All Available Collateral
Everything AND the kitchen sink? This question faces all SBA lenders who are attempting to comply with SBA’s policy concerning available collateral. Under SOP 50 10 5(I), Chapter 4, Paragraph II.A. SBA acknowledges that “one of the primary reasons lenders use the SBA program is for those Small Business Applicants that demonstrate repayment ability but ... Read More