Lenders Quality Circle – 2014Presented by
Western Pennsylvania Association of SBA Guarantied Lenders - WPASGL
Primer on SBA Lending
Presenters:Michele Steinbugl-Conklin, Mark Protch and Steve Drozda
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Lenders Quality Circle - 2014
Event Highlights
Exhibitors and service providers
Networking
What classes are planned? Why should you attend?
Thursday
Friday
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What we will be talking about…
Why SBA?
Okay, I want to play: What are the rules? What’s an SOP?
What about the loan programs?
What kind of lenders are there?
Eligible Borrowers & Eligible Use of Proceeds
How are loans submitted/approved? Talk about SBA’s processing centers.
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Why Use SBA’s Programs?
SBA’s guaranty helps you lend to businesses that “don’t quite” meet your institution’s minimum credit standards:
Start-ups
A change in ownership with lots of intangibles
Lack of collateral
Reduction of bank’s loan/portfolio risk.
There’s a strong secondary market for the guaranteed portion of an SBA loan.
Sale proceeds allow for relending of guaranteed interests.
Premium income is recognized immediately upon settlement.
Terms of sale include servicing income from investor to lender.
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Title 13 Code of Federal Regulations (CFR) Part 120 – Business Loans
Standard Operating Procedures:
SOP 50 10 5 (f) (effective 1/2014) - Lender Development Company Loan ProgramsThe 7(a) Loan Program is authorized by section 7(a) of the Small Business Act and is governed by the regulations outlined in Part 120 of Title 13 of the Code of Federal Regulations (CFR).This multi-purpose business loan program is administered as a deferred participation program where SBA guarantees a portion of the loan made by a Lender. The Lender initiates the loan to a small business and, if the SBA agrees to guaranty the loan, the Lender funds and services the loan. In the event of default, the lender conducts the work-out or the liquidation efforts and the Lender and SBA share in the loss, if any, in accordance with the percentage guaranteed by the SBA.
SOP 50 57 (effective 2/2013) - 7(a) LOAN SERVICING and LIQUIDATION Sets out the standard operating policies and procedures of the Small Business Administration (“SBA”) for the administration of 7(a) Loans that are in "regular servicing” and "liquidation" status.
SOP 50 51 3 (effective 11/2010) - Loan LiquidationThe purpose is to provide SBA personnel, Lenders and CDCs with standard operating policies and procedures for handling 504 Loans that are in default.
SOP 50 50 4 (effective 1/2008) - Loan ServicingThe purpose is to provide SBA personnel, Lenders and CDCs with standard operating policies and procedures for servicing 504 Loans.
What is an SOP? CFR & Standard Operating Procedures
Basic Eligibility
13 CFR ss 120.100
1)Be an operating business (except for loans to Eligible Passive Companies);
2)Be organized for profit;
3)Be located in the United States
4)Be small under the size standards of this chapter ( including affiliates)
5)Be able to demonstrate a need for the desired credit.
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SBA’s 7(a) Loan Eligibility
Ineligible Businesses
13 CFR ss. 120.110 (b) & (c) thru (s)
•Non-profit businesses (for profit subsidiaries are eligible.)
•Financial businesses engaged in lending
•Passive businesses owned by developers and landlords
•Apartment buildings, strip malls, etc.
•Life Insurance companies
•Pyramid or Multi-level Sales Distribution Plans; Like Mary Kay, Tupperware, Avon
YES, MINI-WAREHOUSES ARE ELIGIBLE
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SBA’s 7(a) Loan Eligibility
A Few Eligibility Issues
Eligible and Ineligible Use of Proceeds (13 CFR SS. 120.120)
1. Most loans can be used for permanent working capital, equipment, facilities, land & buildings and debt refinancing.
2. Revolving lines of credit can only be guaranteed under the SBAExpress program.
3. Refinancing – there are specific conditions for refinancing (see SOP 50 10 5 (f) subpart B, Chapter 2, Para. IV.E.)
4. Payments to an associate of the applicant, except for compensation for services actually rendered at a fair and reasonable rate, are not permitted.
5. Loan proceeds cannot be used to pay delinquent taxes.
SBA’s Lending Programs
7(a) Loan Programs (See Chart) Most popular program, with 45 lenders providing 404 loans for $112 Million in FY13.
$5.0 Million Maximum with a 75% Guaranty
SBAExpress Up to $350,000 with 50% Guaranty: 66% of the loans made in FY13.
SBA Veterans Advantage – Guaranty Fee on loans up to $350,000 waived for vets.
SPECIAL DEAL!!
Guaranty fees waived for all loans $150,000 and less!!
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SBA 504 Loan Program
Provided through certified development companies (CDCs) which are licensed by SBA.
Lender loan (50% of project) enjoys first position on project collateral, CDC loan (40% of project) in second position, borrower injects 10% of project costs.
CDCs deal with SBA, and once project is complete, SBA sells debenture to “take out” a portion of the lead lender debt.
Debentures have 10 or 20 year maturities, at fixed rate that is determined when the debentures are sold.
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Submission of Application for Guaranty
Standard 7(a) Guaranty
Loans up to and including $350,000 (SLA)
Loans over $350,000 to $5,000,000
Certified Lender Program
Loans up to and including $350,000 (SLA)
Loans over $350,000 to $5,000,000
Preferred Lender Program (delegated)
Loans up to and including $350,000 (SLA)
Loans over $350,000 to $5,000,000
SBA Express (delegated)
Export Express (delegated)
Community Advantage
Loans up to and including $250,000
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Submission of Application for Guaranty
Program forms can be found at www.sba.gov/for-lenders.
Centralized 7(a) Loan Submission Instructions and a checklist can be found at the Standard 7(a) Loan Guaranty Processing Center website along with other forms, telephone numbers and fax numbers: http://www.sba.gov/category/lender-navigation/find-center/standard-7a-loan-guaranty-processing-center-lgpc-ca
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eMail Boxes De-mystified
[email protected] This email box is the central intake for all inquiries from lenders and borrowers for 7a questions that cannot be answered at the local level by district office LRSs.
[email protected] the central intake point for 912 inquiries for loans that will be submitted to the LGPC.
[email protected] email box is for trailing documents for loan applications. It has a 10MB limit.
[email protected] to be used for the submission of Lender Service Provider Agreements.
[email protected] for questions pertaining to the CA loan initiative.
[email protected] for Loan Modifications (refer to Servicing & Liquidation Actions 7(a) Lender Matrix).
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Citrus Heights – Standard 7(a) Loan Guaranty Processing Center [email protected]
Sacramento – Sacramento Loan Processing Center(EWCP, IT, PLP, SBA Express, Veterans Advantage, SBA Export Express, PCLP Loan Support)
Little Rock – Commercial Loan Servicing [email protected]
Herndon – National Guaranty Purchase [email protected]
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Local Contacts Mark Protch, Lender Relations Specialist
Phone 412-395-6560 Extension 111
Steve Drozda, Lender Relations Specialist Phone 412-395-6560 Extension 114
Michele Steinbugl-Conklin, V. P. of Business Lending Phone 814-865-6439
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