SBA lending update lerch early 04 05-11

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SBA Lending Update

Alison RindArnie Spevack

Lerch, Early & Brewer

ideas that work www.LerchEarly.com

Balloon payments for owner-occupied businesses

Dealer floor plan programSmall Loan Advantage Program

Expiration requirements deleted

New SBA Loan Programs


Assist owner-occupied businesses with refinancing balloon mortgage payments.

Refinancing Balloon Payments


Property must be 51% owner occupied

Operating company must be 2 years old

Loan must be minimum 2 years old Loan must have been current for previous 12-month period.◦No payment deferred or past due for more than 30 days

◦Transcript required

Eligibility Basic Requirements


No federal debt is eligible for refinance◦No refi of 7a loan, USDA loan, tax-exempt bond-financing, existing 504 loan

All regular 504 economic development goals apply

Eligibility


3rd party lender loan – 1st trust, not less than 50%

SBA 504 Loan – 2nd trust, not more than 40%

Borrower contribution – not less than 10%

Loan Structure


3rd party lender loan and SBA 504 loan combined cannot exceed 90% of FMV of fixed assets securing the loan plus eligible soft costs.

Combined loans may not exceed the outstanding principal balance of debt being refinanced.

Loan Structure: Important


If the amount of the new loan is not sufficient to pay off entire outstanding debt must disclose how balance of debt to be addressed

Loan Structure


1. Forgive deficiency (but possible tax consequences to borrower);

2. Accept payment for all/part of deficiency;

3. Accept a new note for balance which will not be subordinate to the liens of the lender making the 504 companion loan and the 504 loan (but new loan will have to be on standby for 3 years); or

4. The borrower can post additional collateral

Lender of Original Debt May


CashEquity in eligible fixed assets for the refinanced project

Equity in other fixed assets (may include commercial and residential real estate)

Borrower Contribution


85% of loan proceeds must have been used for 504 eligible purposes

100% of loan proceeds must have been used by operating company

Closing costs may be included

Use of Proceeds: Eligible Costs


Initially not allowed as the program is currently being implemented

SBA still seeking comment as to how best to enact cash out provisions of the Jobs Act legislation

Use of Proceeds: Cash Out


Borrower and 3rd party lender must certify as to the eligible use of proceeds

CDC and 3rd party lender must certify that they have no knowledge of borrower default or information concerning the likelihood of a default

Use of Proceeds: Certification Required


Independent current appraisal and environmental required

Must comply with regular SBA requirements

Appraisal and Environmental Requirements


Transcript of entire loan history (not just prior 12 months)

3rd party loan may not be sold on the secondary market as part of guaranteed loans being sold by lender.

Refinancing Same Institution Debt: SBA Requires


504 loan must be closed and funded within 6 months of SBA approval (or authorization will be canceled)

CDC must report any delinquency to SBA after loan approval which occurs prior to funding as an adverse change

Closing Issues


50% Bank

40% SBA

10% Borrower

Bank

SBA

Owner

504 Financing


Revolving lines of credit to acquire titleable inventory for resale

SBA provides 75% guarantyLoans from $500K to $5MMax advance rate 100%Facility can mature between 1 and 5 years

New Dealer Floor Plan Program


May refinance with other lenders or replace existing with participating lender

Secured by first lien on inventory acquired with line

May charge extraordinary servicing fees

Lenders with $1 billion may qualify for delegated authority

Line of Credit


Encourage larger existing SBA lenders to make lower dollar loans, benefiting businesses in underserved markets

Max loan $250K85% guaranty for loans up to $15OK

75% guaranty for >$150KProcessed through E-Tran

Small Loan Advantage Program


No longer has to expire in the next year

Change in Requirement


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.

www.lerchearly.com/team/alison-w-rind 301-657-0750 [email protected]

Speakers

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

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

mailto:[email protected]


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.

www.lerchearly.com/team/arnold-d-spevack 301-657-0749 [email protected]

Speakers

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

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

mailto:[email protected]


Article on Changes: http://www.lerchearly.com/publications/376-sba-announces-programs-targeting-refinancing-balloon-payments-dealer-floor-plans

SBA Press Release Re Temporary Refinancing: http://www.sba.gov/content/sba-opens-temporary-refinancing-program-real-estate-mortgages-maturing-after-december-2012

Changes to 504 CDC Loan Program Re Debt Refinancing: http://www.sba.gov/sites/default/files/bank_5000-1197.pdf

Dealer Floor Plan Pilot Program: http://www.sba.gov/content/dealer-floor-plan-financing-program-0, http://www.sba.gov/sites/default/files/bank_5000-1195.pdf

Small Loan Advantage and Community Advantage: http://www.sba.gov/advantage

Submission of Form 159: http://www.sba.gov/sites/default/files/bank_5000-1200.pdf

3rd Quarter “Peg” Rate: http://www.sba.gov/sites/default/files/5000-1203.pdf

For More Information

http://www.lerchearly.com/publications/376-sba-announces-programs-targeting-refinancing-balloon-payments-dealer-floor-plans

http://www.lerchearly.com/publications/376-sba-announces-programs-targeting-refinancing-balloon-payments-dealer-floor-plans

http://www.sba.gov/content/sba-opens-temporary-refinancing-program-real-estate-mortgages-maturing-after-december-2012

http://www.sba.gov/content/sba-opens-temporary-refinancing-program-real-estate-mortgages-maturing-after-december-2012

http://www.sba.gov/sites/default/files/bank_5000-1197.pdf

http://www.sba.gov/content/dealer-floor-plan-financing-program-0


http://www.sba.gov/advantage


http://www.sba.gov/sites/default/files/5000-1203.pdf


Lerch, Early & Brewer, Chtd.3 Bethesda Metro Center, Suite 460

Bethesda, MD 20814301-986-1300

www.LerchEarly.com

http://www.lerchearly.com/

Date post:	14-Jan-2015
Category:	Economy & Finance
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SBA lending update lerch early 04 05-11

Economy & Finance