SBA Highlights. Michelle Torres DFW District Office 4300 Amon Carter Blvd Ste 114 Fort Worth, TX February 15, 2018

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1 SBA Highlights Michelle Torres DFW District Office 4300 Amon Carter Blvd Ste 114 Fort Worth, TX February 15, 2018

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3 TIPS & REMINDERS New SBA Form 1919 and SBA Form 1920 Veteran Fee Waivers: SBA Express= fee is 0 Standard 7a loan over $125K-$350K= 50% reduction in Guaranty fee No fee reduction on loans > $350K Collateral Requirements for 7(a) Small Loans (Over $25,000 - $350,000) Pg. 186 SBA s minimum collateral requirements are: i. Lender must take a first lien on assets financed with loan proceeds; ii. Lender must take a lien on all of the Applicant s fixed assets, including real estate, up to the point that the loan is fully secured. Lender is not required to take a lien against Applicant s real estate when the equity is less than 25% of the fair market value. The Lender may limit the lien taken against real estate to the amount necessary to ensure the loan is fully secured; PLP CLOSING REQUIREMENTS: The Lender must provide a copy of the Authorization to SBA electronically through E-Tran and retain all other documents in the Lender s loan file.

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7 SBA GOALS # of loans in rural and HUB Zones # of smaller loans (<$350K and <$150K) # of lenders to participate in making SBA loans # of Export loans (90% Gty!) # of loans to minority, women, and Veteran owned businesses

8 Save The Date!! April 15-17, 2018: MALC- Omni Fort Worth Go to SBA DFW District Office Michelle Torres, Lender Relations Specialist And now let s sort through the many changes as they apply to your loan process today Thank You!!

9 SBA SOP (J) Critical Changes Presented by: Gary Griffin Chief Executive Officer Capital Growth Solutions, LLC

10 Pertinent References/Docs Join NTAGGL!!!! SBA Notice Control #: (10/2017) SBA Notice Control #: (10/2017) SBA Notice Control #: (12/2017) Just print the current version on the SBA Website and read it!

11 Hot Buttons for Regular Lenders SBA is making the PLP designation almost essential to effectively process credit in a timely manner. More apparent every SOP. 3 week minimum turnaround right now. Stamp Actions MINIMUM of 2 weeks (and there are ALWAYS stamp actions) Working Capital is a killer! In the initial memo go into DETAIL; no matter how little the request (in loan in excess of $350K). Do NOT expect SBA to AUTOMATICALLY allow the reallocation of excess proceeds to WC. Credit elsewhere, RMA and chicken farms!

12 Must do s (in my opinion) Dedicated SBA person to follow and interpret the SOP (BOTH SOP s) Join NAGGL and PARTICIPATE in training. Consider SBA guidelines the MINIMUM you must do to protect the guaranty. Site visits and pictures!!! External review?

13 Document!!! Lots of changes, but as always, your best defense (if PLP), and best opportunity to avoid screen-outs (regular processing), is to provide all required documentation. For PLP, it is maintaining docs in file, and for regular if is providing all supporting docs the FIRST time!

14 Regular PRIOR to submitting the loan, MUST inform Borrower/Principals in writing that they MAY be referred to CAIVRS in the event of default/loss to the government which could impact them negatively upon applying for any future government assisted financial aide. PRIOR to submission, MUST inform Borrower that they do NOT have to employ Lender/Agent of Lender to assist in the preparation of SBA documentation (packaging fee).

15 PLP 1) CAIVRS 2) Fee disclosure 3) Docs required to be kept in file 1) Pgs too long to go over here. I would put together a checklist for each PLP loan application addressing ALL items in BOLD and have that as a cover sheet in each application. 4) RMA

16 LSP s A Lender must have a continuing ability to evaluate, process, close, service, liquidate and litigate small business loans (13 CFR ). A Lender may contract with a third party (Lender Service Provider (LSP)) to assist the Lender with one or more of these functions. However, the Lender itself, not the LSP, must be able to demonstrate that it exercises day-to-day responsibility for evaluating, processing, closing, disbursing, servicing, liquidating and litigating its SBA portfolio. SBA determines whether or not an Agent is an LSP on a loan-by-loan basis. If an Agent meets the definition of an LSP, a formal agreement between the Agent and Lender is required and must be reviewed by SBA. (See Paragraph X.D. for further guidance on LSP agreements.)

17 Franchise SIMPLE: MUST be on the franchise directory Guidance as to where to send them is in the SOP. Jury still out on how long the process takes! I believe it is the attorneys at the Franchisor which delay the process; not SBA. Assume everyone is a franchise unless not even closely related! Multiple Agreements All must be eligible.

18 Drum Roll Please!

19 Minimum Equity 10% of TOTAL project costs (this INCLUDES purchase price if BizAc, closing costs, guaranty fee, working capital, all PP&E) Start-up or BizAc. Owner carryback; FULL standby. 50% rule/interpretation of minimum equity. Partner buy-out.

20 Credit Elsewhere New and Improved! (just kidding; this is nuts!) Not your Father s SBA anymore Identify non-government sources Personal Resources (drill down to 10%) About the only thing I am sure of is call features and balloons as part of policy/market.

21 Other ideas ALWAYS have multiple reasons: 1) Balloon and call features. 2) Collateral. 3) DSC (term) necessary to meet cash flow coverage (Lender Policy). 4) Start-ups and projection deals (Lender Policy). 5) LAST is loan size and loan limit to a particular customer (and NEVER alone).

22 Collateral Adequacy of collateral has really ALWAYS been there. PLEASE use the new discount factors in SBA s recommendations to determine fully collateralized. NOTE: New personal residence rule over short-term assets. Texas is lucky (for lots of reasons!) Let s discuss Liquid collateral.

23 Management Agreements Basic common sense Who signs the checks and makes the day-to-day decisions BEWARE affiliation. If management agreement gives too much authority to operator, may bring in affiliation and size standard issues.

24 912 s You, the LENDER, are expected to clear 912 issues if they are: 1) minor in nature (misdemeanor) 2) and distant in past. 3) Felonies still must be submitted. 2 issues: 1) MUST still document the same way as before (Addendum B, court records, letter from principal and letter from Lender) 2) Citrus Heights seems to not have gotten the memo.

25 Chicken Farms (Ag based loans supposedly) Rumors???? Reality is SBA has taken a dislike to feed lot projects and growers. 1) Environmental studies as to waste dispersal 2) Excess land 3) Term 20/15 period!

26 Other Express LOC Maturity: 5/5 rule (loan MUST amortize half way through maturity cycle). Occupancy: Applicant gets benefit of common area. 504 Green capped at $16.5M. If you don t like something go to SOP50-10modernization@sba.gov Subject line 7(a) SOP (J) 7(a) comments.

27 Thank You!!! Capital Growth Solutions, LLC Gary Griffin, CEO Chuck Evans, President (W) (C)