Best Practices: Use of Proceeds Disbursement Considerations
One of the most important conditions in properly closing an SBA loan is making sure that the use of loan proceeds complies with the SBA Loan Authorization. It is the responsibility of the lender to ensure that proceeds are properly disbursed. If the Lender does not properly monitor all loan disbursements, a lender will be ... Read More
Best Practices: Calculating Rent under the EPC/OC Rule
Most lenders know the EPC/OC rules, but calculating the proper rent payment on an EPC/OC lease can be complicated. The SBA does not permit lenders to make SBA loans to passive entities, that is, entities that do not actually use or occupy the assets acquired or improved with loan proceeds. The one exception to this ... Read More
Best Practices: Troubleshooting Adverse Search Results
As we have noted in the past, ordering public records searches for commercial loan transactions is more an art than a science. The objective in performing pre-closing searches on SBA loan transactions, in particular, is to ensure the correct lien priority of any collateral filings for the subject loan, and to confirm there are no ... Read More
Best Practices: Navigating Conflicts Between State Statutes and the SOP
In construction law, retainage is the percentage of the completed work that is deliberately held back until a project is completed (or sometimes substantially completed) and not paid to the contractor or subcontractor until that project is satisfactorily finished. Therefore, retainage provides a property owner – and by extension the owner’s lender – “insurance” for ... Read More
Best Practices: The Burden of Proving Your Guaranty Purchase Case #2
In the American criminal justice system, defendants are afforded a presumption of innocence which is derived from the fifth and fourteenth amendments to the Constitution. This standard, which has been enshrined through countless police procedurals and courtroom dramas, has become, in the minds of many people, the commonplace standard of proof in dealings with the ... Read More
Best Practices: Further Changes to Franchise Review Procedures Under SBA Policy Notice 5000-1941
In a previous Starfield & Smith article posted on December 14, 2016, I discussed SBA’s new franchise guidelines that were implemented with SOP 50 10 5(I) in an effort to streamline the franchise review process for lenders. Since the posting of that article, SBA has issued Policy Notice 5000-1941 (the “Policy Notice”), effective February 14, ... Read More
