lerch early sba seminar november 2011

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

© Lerch, Early & Brewer, Chtd. 2011 www.lerchearly.com

Changes to the 7(a) Program

Changes to the 504 Program

Overview

2


Changes to the 7(a) Program

3


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

4


SBA Express Loans

Capped at $350K

SBA Revised CAPline programAsset Based Lines

Working Capital Lines

Contract Lines

5


CAPline Program

Provides up to $5 million in loan

funds

Use own form and own PLP

lenders

6


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

7


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

8


Debt Refinancing

Cannot refinance debt in

principal’s nameException

Credit Card Debt where expenses on

credit cards are justified as business debt

9


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


Changes in Interest Rates

Pre-Disbursement

Post- Disbursement

11


Extraordinary Servicing Fees

Submit fee request to SBA

SBA may determine if fee is

unreasonable, it must be

refunded to borrower

12


Lender Service Providers

May impactBroker Fees

Referral Fees

Awaiting SBA input

13


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


Other changes

Leased Space

Credit Elsewhere

Life Insurance

Flood Insurance

OREO Transactions

Prior government loss

15


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

16


Changes to the 504 Program

17


Third Party Lender

Lender preference

Additional collateral preference

no longer in existence at time of

liquidation not a problem if

CDC/SBA acquiescence

18


Interest Rate Swaps

SBA Requirements

Minimal guidance from SBA

19


Special Purpose Property

Minor Changes in Policy

20


Eligibility: Non-profits

Non-profits Test: Loan proceeds

used for benefit of non-profit

21


Eligibility: “Small”

TNW Requirement - $15M

Average Net Income

Requirement - $5M

22


Eligibility: Franchises

Agreement executed prior to

submittal

Franchise-findings website

Franchise Registry

Control Issues

“Curves” rule

23


Eligibility: Trusts

Liquid assets held by revocable

trust

Applicant owned by trust

24


Eligibility: Prior Loss

Applicant causing prior loss to

government

25


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

26


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

27


Speakers

28

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

http://www.lerchearly.com/team/alison-w-rind

http://www.lerchearly.com/team/alison-w-rind

http://www.lerchearly.com/team/arnold-d-spevack

http://www.lerchearly.com/team/arnold-d-spevack


For more information

29

Lerch, Early & Brewer, Chtd.

3 Bethesda Metro Center, Suite 460

Bethesda, MD 20814

(301) 986-1300

www.lerchearly.com

Thank you for your participation

lerch early sba seminar november 2011

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