lerch early sba seminar november 2011
DESCRIPTION
New revisions to Small Business Administration SOP 50 10 5(D) regarding participation in SBA lending programs, including: Sale of Businesses (asset sale vs. stock redemption), Maximum Allowable Fixed Interest Rates, CAPLine Overhaul, Franchise Reviews.TRANSCRIPT
What Lenders Need to
Know About the New
SBA SOP 50 10 5(D)
November 16, 2011
Alison W. Rind
Arnold D. Spevack
Lerch, Early & Brewer, Chtd.
www.lerchearly.com
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Changes to the 7(a) Program
Changes to the 504 Program
Overview
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Changes to the 7(a) Program
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Maximum Loan Amounts and
Net Worth
7(a) loan max=$5 million
Tangible net worth of applicants
≤$15 million
Average net income after taxes
≤$5 million for 2 full years
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SBA Express Loans
Capped at $350K
SBA Revised CAPline programAsset Based Lines
Working Capital Lines
Contract Lines
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CAPline Program
Provides up to $5 million in loan
funds
Use own form and own PLP
lenders
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EPC/OC Structure
May not use for business
acquisitionsAvailable for real estate purchase
Working Capital
Purchase of fixed Assets
May need to structure as 2 separate loan
transactions
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Change of Ownership
Asset Purchase
Stock SaleCannot purchase 100% of stock
May buy out shareholders through stock
redemption
May include a 100% stock redemption
whereby new principal contributes to
redemption price – Apply CLP
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Debt Refinancing
Cannot refinance debt in
principal’s nameException
Credit Card Debt where expenses on
credit cards are justified as business debt
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Packaging Fees
Lenders may only charge fees for
time spent on assisting the borrower
on completing the borrower’s portion
of the SBA application
Lenders may not charge a standard
flat fee to all borrowers
Lenders must document the services
provided to borrowers.10
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Changes in Interest Rates
Pre-Disbursement
Post- Disbursement
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Extraordinary Servicing Fees
Submit fee request to SBA
SBA may determine if fee is
unreasonable, it must be
refunded to borrower
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Lender Service Providers
May impactBroker Fees
Referral Fees
Awaiting SBA input
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Franchises
Obtaining a certificate of no
change from franchisor is no
longer required
Instead, lender mustReview Franchise Registry and confirm
that franchise agreement provided
matches registry
Print out certificate of no change from
registry14
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Other changes
Leased Space
Credit Elsewhere
Life Insurance
Flood Insurance
OREO Transactions
Prior government loss
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Other Changes
Lender Preference – Piggy Back
SBA Loans Approved on Non-
Delegated Basis
PLP Requests – E-tran only
New Authorization- 9/15/11To be further revised for 50 10 5 (D)
changes
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Changes to the 504 Program
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Third Party Lender
Lender preference
Additional collateral preference
no longer in existence at time of
liquidation not a problem if
CDC/SBA acquiescence
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Interest Rate Swaps
SBA Requirements
Minimal guidance from SBA
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Special Purpose Property
Minor Changes in Policy
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Eligibility: Non-profits
Non-profits Test: Loan proceeds
used for benefit of non-profit
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Eligibility: “Small”
TNW Requirement - $15M
Average Net Income
Requirement - $5M
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Eligibility: Franchises
Agreement executed prior to
submittal
Franchise-findings website
Franchise Registry
Control Issues
“Curves” rule
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Eligibility: Trusts
Liquid assets held by revocable
trust
Applicant owned by trust
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Eligibility: Prior Loss
Applicant causing prior loss to
government
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504 Debt Refinancing
“Substantially all” of proceeds test
Also may now include eligible
business expenses
1st Trust Loan to be based upon
50% of total eligible costs – 504
Loan to be at 40% of total eligible
costs
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Liquidation/Servicing
The SBA has advised that the
issuance of the SOP 50 51(4) –
the combined 7(a) servicing and
liquidation SOP is expected to be
released around December 21,
2011
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Speakers
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Alison Rind's practice is focused on representing commercial
lenders in loan transactions and other commercial matters. These
include participants in SBA and other government-guaranteed
lending programs. Her experience crosses a broad spectrum of
lending areas. In addition to government programs, she handles
real estate and asset-secured loans, construction loans,
foreclosures and loan workout arrangements. Her clients include
large national and regional financial institutions as well as smaller
community banks in the Washington, D.C., metropolitan area.
Arnie Spevack represents individuals, businesses, lenders and
borrowers in financings, closings, negotiations and in the courts.
Arnie's experience includes all aspects of commercial lending, as
well as providing assistance in the acquisition, development,
operation and management of office, retail and residential
projects. An experienced creditor's rights attorney, Arnie assists
both borrowers and lenders in workout negotiations and helps
them refinance existing real estate mortgages and business
loans.
(301) 657-0750
awrind@
lerchearly.com
(301) 657-0749
adspevack@
lerchearly.com
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For more information
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Lerch, Early & Brewer, Chtd.
3 Bethesda Metro Center, Suite 460
Bethesda, MD 20814
(301) 986-1300
www.lerchearly.com
Thank you for your participation