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
Best Practices: Change of Ownership via Stock Purchase – A Primer
Changes of ownership financed with SBA guaranteed loans are often structured as stock purchase transactions. Beyond the rigorous requirements imposed by the SBA, the transfer of fractional ownership interests from one individual or entity to another must adhere to strict, corporate formalities required by law. While these can vary significantly from jurisdiction to jurisdiction, some ... Read More
Best Practices: Prudent Liquidation Deadline is Quickly Approaching
When SBA issued Standard Operating Procedure 50 57 (2), which became effective on December 1, 2015, the Agency included a new guideline designed to encourage 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 ... Read More
Best Practices: Liquor Licenses as Collateral
There are a number of occasions where a SBA lender may wish to lien a liquor license as part of its collateral. Not only may a liquor license be a valuable asset of the borrower, but also SBA SOP 50 10(5)(I) p. 156 requires Lenders to take a first security interest on all assets financed ... Read More
Best Practices: Evaluating the Eligibility of Religious Small Business Applicants
While the vast majority of small businesses are eligible for loans through the U.S. Small Business Administration (“SBA”) 7a guaranteed loan program, a business may be ineligible because its activities or purpose is illegal, unconstitutional, or violates public policy. Under the SBA’s regulations and Standard Operating Procedures (“SOP”), a lender must determine if the business ... Read More
Best Practices: Documenting Equity Injection to Protect Your Guaranty
When a lender requires an equity injection under the terms of the SBA loan the lender is extending, it is imperative that the lender ensures that it is properly documenting the equity injection in accordance with SBA loan program requirements. In the event of an early default loan (one that defaults within the first 18 ... Read More