Lenders have certain responsibilities when it comes to preparing, approving, closing, and servicing SBA guaranteed loans. For example, lenders must submit proper application forms, documentation, and analysis to the LGPC and/or PLP Center. The loan must be closed in accordance with the SBA loan authorization and the SOP 50 10 5. The loan file must also be maintained, serviced, and liquidated according to the SOP 50 57.
It is important to note that lenders must monitor financial conditions of each borrower after the SBA loan is closed and until the loan is paid in full. Just a few of the tasks lenders can do to encourage a smooth transaction includes the following:
- Require and review periodic submissions of the borrower’s financial statements
- Maintain contact with the borrower via phone and site visits
- Conduct ongoing reviews of credit reports, credit scores, and tax returns
Additionally, lenders are required to report borrowers of SBA loans to commercial credit reporting agencies. As a reference, the Guide to the Federal Credit Bureau Program (GFCBP) lists the designated credit reporting agencies for commercial accounts. Note— the GFCBP requires reporting on a quarterly basis.
Just as there are certain tasks lenders should complete, there are other actions a lender must not take. For example, a lender may not take action that establishes “preference” in favor of the lender. Examples include:
- Taking any side collateral or guaranty that would secure its own interest in a loan
- Obtaining a separate guaranty on the unguaranteed portion of the loan
- Requiring a borrower to purchase a certificate of deposit
- Maintaining compensating balances not under the control of the borrower
- Taking a side note which would have the effect of ensuring a limited risk on the lender’s share
- Having an SBA loan in a “piggyback” structure
banc-serv does assist our lending Partners in making, closing and administering their SBA loan transactions; however, it is important to keep in mind that the lender is ultimately responsible for the quality and integrity of their SBA loan portfolio.
The most recent Monthly banc-serv Buzz session involved “SBA Franchise Lending”. In that discussion, banc-serv presented the new franchise review procedures that were made effective on January 1 2017. The new rules will streamline the following procedures:
- The SBA will require an SBA Addendum to Franchise Agreements (executed by franchisor and franchisee)
- The SBA will no longer review franchise (or license) agreements to determine affiliation between the franchisor and franchisee
- The Franchise Registry will no longer be maintained or utilized
- The SBA will identify the specific franchise of the applicant in E-tran/SBA One
We greatly appreciate active communication with our partners and we would love for you to join us for future events. The next scheduled session is for February 15 2017.
Saying no to one of your borrowers is never fun. Unfortunately, it still happens. Sometimes lenders have to say no to their prospective borrowers not because they can’t or don’t want to make an SBA loan, but because a lender’s credit policy criteria doesn’t match up with the transaction or project at hand. Each lending institution develops their own “credit box” according to the risk, the industry, and the project they are most comfortable in assisting. Saying no can be difficult as you are there to fill their lending needs.
However, there is an alternative to saying no. Our new partnership with Newtek Business Services has provided banc-serv an opportunity to take our services to the next level. With the development of the banc-serv and Newtek Referral program, Lenders are presented with another lending source for business borrowers they are unable to accommodate.
It is important to note that Newtek is not a competitor to any of banc-serv’s Partners. In fact, they are a valuable asset to your lending institution—allowing lenders an opportunity to serve their borrowers, grow their community, and earn a referral fee in the process.
The process is easy with the online referral system called Newtracker. This online tool allows lenders the ability to submit, receive, and track every referral. Simply log in, submit a referral and Newtek will do the rest. Track the progress of each loan with online and real time updates. Contact Kerri Agee at firstname.lastname@example.org to learn more.
- Nancy has a strong financial and lending background through her experience with First Commercial Bank (AL). She graduated from the University of Florida with a BS/BA in Finance.
- Lala has been a credit analyst or financial professional for over give years with institutions First Colorado National Bank, CMB Worldwide and The Prudential Insurance Company. She graduated from Kelley School of Business with a Bachelor of Science, Finance degree in 2013.
- Sarah has been an SBA loan underwriter for over seven years with institutions Alterra Bank and Stearns Bank. She has overseen a credit department, developed credit policies and procedures, and served as a credit analyst. While in college she worked as a bank teller and attained an internship as an underwriter, catapulting her into a full-time banking career.
- Drew has been a commercial lender for 17 years, working for institutions such as JP Morgan Chase, BMO Harris Bank, and PNC Bank. He has held positions such as credit analyst, relationship manager, senior underwriter, senior portfolio manager, senior credit officer and senior workout consultant. He is currently working on his MSA in Accounting through IU Kelly School of Business.
The banc-serv Team