Best Practices: The “Art” of Ordering Public Records Searches
SBA Lenders often wonder about what public records searches they must order as part of their due diligence when processing an SBA loan. Unfortunately, the SBA does not specify any requirements for performing searches, instead specifying the requirements for collateral and underwriting and leaving it up to lenders to engage in “prudent lending” to fulfill ... Read More
Best Practices: Executed Purchase-Sale Agreements
Financing change of ownership transactions can present several unique challenges for lenders that are not part of loans for refinances or startups. From determining what searches are required to ensure the proper lien position, to dealing with the challenges posed by parties to the transaction whose timelines and expectations rarely align with those of the ... Read More
Best Practices: Collateral Securing Guaranties
Under Subpart B, Chapter 4, Section II of SOP 50 10 5(H), a lender must use commercially reasonable and prudent practices and procedures to identify property which may be collateral for its 7(a) loan, which practices and procedures are at least as thorough as those used by the lender for similarly-sized non-SBA guaranteed commercial loans ... Read More
Best Practices: Leasing Part of a Building Acquired with SBA Loan Proceeds
The SBA imposes occupancy requirements when loan proceeds include the purchase of an existing building or for new construction. These requirements are designed to ensure that the borrowing entity’s business is successful and that the loan proceeds benefit the borrower, rather than a third party. Accordingly, lenders must perform an analysis of the percentage of ... Read More
Best Practices: When Between a Rock and a Hard Place, Facts Matter!
Most SBA lenders are aware of the rule that they cannot request that the SBA purchase a loan guaranty until the loan has become at least 60 days past due. 13 CFR §120.520. However, a difficult question can arise for lenders when a borrower has defaulted under the note, but continues to stay current on ... Read More
Best Practices: Documenting Disbursements: Construction Loans
Documenting disbursements can be a monumental task for SBA lenders on construction loans. SBA cites failure to use loan proceeds as required by the SBA loan authorization as one of the most common lender deficiencies noted in PLP audits and guaranty purchase reviews. Construction loans present a multitude of pre-closing and post-closing challenges for lenders ... Read More
