7(a) LOAN APPLICATION PROCESS AT THE LGPC

Transcription

1 7(a) LOAN APPLICATION PROCESS AT THE LGPC 7(a) LOAN GUARANTY PROGRAM Flexible financing for your small business customers Igniting the Flames of Success OFO/OCA LENDER RELATIONS SPECIALISTS TRAINING September 6, 2017 Presenters Brendell Givens and Betty Hill 1

2 7A LGPC LOCATIONS 6501 Sylvan Road, Suite 122 Citrus Heights, CA Phone: (877) Black Gold Blvd Hazard, KY Phone: (606) General Questions: Loan Mods (prior to full disbursement): Phone: (877)

3 LGPC MISSION STATEMENT The mission of the Center is to efficiently process 7(a) loan guaranty applications and to provide assistance and oversight, as necessary, to lenders before and after submission. 3

4 LGPC LEADERSHIP TEAM Gregory Prichard Acting Center Director Support Teams Loan Processing Teams Betty Hill Supervisory Loan Specialist Annette May Acting Deputy Center Director Curtis Lee Acting Deputy Center Director/Hazard Theresa Teri Hendrix Supervisor/Loan Modifications Eric Aylor Supervisor Kristi Harris Supervisor/App Intake Brendell Givens Supervisor Kimberly Bury Supervisor William Bill Reed Supervisor 4

5 7(a) LOAN APPLICATION SUBMISSION PROCESS 5

6 WHO MUST USE THE LGPC Non-Delegated Lenders All 7(a) Loans (except SBA Express and Export Express) Delegated Lenders (In the following scenarios) Refinance of Same Institution Debt (SID) or refinancing a 504 Loan Financing of an OREO property A business acquisition when there is more than $500,000 of intangibles and less than a 25% injection A Delegated Lender that is making a personal loan to the borrower for the equity injection in a business acquisition Where there is a potential conflict of interest with the lender An owner of 10%, or more, is an SBA employee, former SBA employee, Member of Score or Congress, or a GS-13 or higher government employee. When there is known environmental contamination or on-going remediation at the property 6

7 SUBMISSION METHODS 1. Create an application 2. Answer required questions 3. Verify data 4. Attach documents 5. Submit SBA One or E-TRAN Origination Status will change from Application in Process to Review Reviewer 1 If the status is anything other than Review Reviewer 1 the file will not transmit to the LGPC. For questions regarding SBA One, contact Colson s SBA One support services at SBA.One@bnymellon.com or , Call Option 5 For questions regarding E-TRAN, contact Ryan Gerald at ryan.gerald@sba.gov or Glenn Hannon at glenn.hannon@sba.gov For general submission questions contact 7aQuestions@sba.gov 7

8 WHAT NEEDS TO BE INCLUDED? For submissions to the Center Small & CA Loans Regular 7(a) Form 1919 (complete Borrower Application) X X Form 1920 (complete Lender Application) X X Lender Credit Memorandum (see detail page) X X Personal Financial Statements for all principals owning 20% or greater 912s (where required) * X X USCIS Verification (where required) * X X X Business Financials (Interim + 3 prior yrs.) including debt schedule Projections with reasonable assumptions for start-ups and change of ownership Affiliate Financials (Interim + 3 prior yrs.) Draft Authorization (CLP Submissions) X X X X * We suggest submitting the following forms to the appropriate Agencies as early in the application process as possible to avoid any unnecessary delays in the application process: IRS Form 4506-T, Form 912 Statement of Personal History, and Form G-845 8

9 WHAT ELSE SHOULD BE INCLUDED? For submissions to the Center Small Loan & CA Loans Regular 7a Copies of all notes to be refinanced X X Transcripts for Same Institution Debt (SID) X X Copy of Business Purchase Agreement X X Seller Financials signed by Seller (Interim + 3 prior yrs.) Lender Certification that Financials are verified against IRS Transcripts * X X X Internal or External Business Valuation per SOP guidelines X X Real Estate Purchase Agreement OREO property only X Real Estate Appraisal (OREO properties only) X X Franchise Documents (see next page for detail) X X * We suggest submitting the following forms to the appropriate Agencies as early in the application process as possible to avoid any unnecessary delays in the application process: IRS Form 4506-T, Form 912 Statement of Personal History, and Form G-845 9

10 REQUIRED FRANCHISE DOCUMENTS Documents required to be submitted to the LGPC: In all cases the lender must submit the Agreement (Franchisor, Fuel Supply, Dealer etc.) along with any related documents the franchisor requires the franchisee to execute with their loan documentation. In addition, the lender must submit either one of the following : The revised SBA Addendum to Franchise Agreement. A complete description of the revisions as well as the revised addendum can be found in SBA Procedural Notice OR A Certification together with the franchisor s SBA negotiated addendum. The negotiated addendum must have a date of 2015 or 2016 which is based on the review of a 2015 or 2016 agreement. Otherwise this option cannot be used and the Lender must obtain the SBA Addendum. The certification can be found in SBA Procedural Notice

11 WHO NEEDS TO COMPLETE THE FORM 1919? For ALL Regular 7(a) Processing including Small & CA Loans For a sole proprietorship, the sole proprietor For a partnership, all general partners, and all limited partners owning 20% or more of the equity of the firm, or any partner that is involved in management of the applicant business For a corporation, all owners of 20% or more of the corporation and each officer and director For limited liability companies (LLCs), all members owning 20% or more of the company and each officer, director, and managing member Any person hired by the business to manage day-to-day operations Make sure that each 1919 is signed and dated. 11

12 WHAT SHOULD BE COVERED IN YOUR CREDIT MEMO? Do the loan terms match the 1920 and your Draft Authorization? Addressed financial analysis including repayment ability from operations? Is the request for SBA funds clearly articulated? Have you addressed Credit Elsewhere? Have you clearly addressed the eligibility of each note to be refinanced? (e.g. unreasonable terms, 10% savings) Have you addressed the specific collateral that will secure the proposed loan? If so, have you done a liquidation value evaluation to determine whether the loan is fully secured? Discussed business and management history? How about the personal history, experience and credit history of the principals? If repayment is based upon projections, have you addressed why they are reasonable? Changes of Ownership why is it good for the business? Experience of new owner, recent business trends, seller financing standby terms? If there is other financing involved, has it been addressed? Injection and need for working capital 12

13 LGPC WORKFLOW The completeness of the submission package will impact the efficiency of the processing timeline. 13

14 PRIMARY SCREEN-OUT REASONS 14

15 THE TOP FIVE CATEGORIES 22% Credit Memo Incomplete 29% Financial Statements/Projections Debt Refinance 6% 7% 1919/1920 Missing/Incompletee Change of Ownership Other 10% 26% The top 5 categories account for 78% of the total Screen Outs Fiscal YTD 15

16 NUMBER ONE Credit Memo Incomplete Collateral Shortfall not addressed Life Insurance not addressed Derogatory credit not addressed including Delinquent Federal Debt Use of Proceeds Unclear Need for Working Capital not addressed Schedule of Collateral Missing or Incomplete Certification that financial information has been verified against IRS Transcripts is missing Shareholder debt not placed on standby or not addressed Draft Authorization conflicts with Credit Memo Notes to be refinanced not clearly identified Justification for refinance not properly addressed (Benefit to the Borrower) Justification for Projections not addressed 16

17 2ND ON THE LIST Financial Statements Missing/Incomplete Affiliate financial statements missing/incomplete Projections missing or assumptions not included Borrower s historical financial statements missing/incomplete Personal Financial Statement Incomplete Debt schedule missing/incomplete or doesn t match balance sheet debt Pro-forma Balance Sheet missing/incomplete Seller financial statements missing/incomplete Make sure that current YTD Business Financials are no older than 180 days from submission to SBA Make sure the Personal Financial Statement is no older than 90 days from submission to SBA 17

18 3RD ON THE LIST Debt Refinance Copy of Notes to be Refinanced Missing Transcripts for Same Institution Debt Refinance Missing Benefit to Business Not Stated Loan to be Refinanced on Reasonable Terms Not Met 10% Improvement to Cash Flow Not Met Same Collateral Position Required When Refinancing Certification that Credit Card was Used for Business Purposes Missing 18

19 4TH ON THE LIST Forms 1919 and 1920 Forms are missing, incomplete or unsigned Co-borrower ownership % is not reflected on form Ownership identified does not total 100% Other SBA loans are not identified on 1920 Use of Proceeds on 1920 is incomplete or doesn t match credit memo Trade Name (dba) left blank when applicable on 1920 Payment Amount and Rate Adjustment Frequency missed on

20 5TH ON THE LIST Change of Ownership Asset Purchase/Stock Purchase Agreement Missing Third party Independent Business Valuation Missing/Unacceptable Lender s Internal Business Valuation Missing/Unacceptable Change of Ownership Appears Ineligible Payment to Associate EPC partner buyout Finance amount not supported by business valuation 20

21 7(a) LOAN MODIFICATION PROCESS 21

22 REQUESTING A LOAN MODIFICATION The lender may request modifications to the terms and conditions of the Authorization at any time after approval. Prior to final disbursement, LGPC modifications should be sent by to 7aloanmod@sba.gov or by fax (202) A 2237 Form is not required. After final disbursement, LGPC modification requests must be sent to the appropriate CLSC Fresno or Little Rock. *(For EWCP loans, submit the request to the appropriate USEAC.) Visit us at: 22

23 PLP LOAN MODIFICATION PROCESS For PLP processing, the lender may modify the authorization under its delegated authority. The file must be documented with a written explanation that includes justification for the change and any supporting documentation. Exceptions: The following actions require SBA approval: Change in the guaranty % - If funds have been disbursed, rate is locked. Reinstatement - SOP (I), Page 135. Transfer of participation the form MUST be signed by both Lenders Preference issues Visit us at: 23

24 LOAN MODIFICATION FORMAT Submit a written request to the LGPC (via ) that includes the name of the lender, name of the lending officer, phone number, fax number, name of the borrower, SBA Loan Number and the following information: How it is now; How it should be; and Why (justification for the change and any supporting documentation must be included to process the request). Please include the address you want the completed request returned to. Visit us at: 24

25 LGPC UNILATERAL ACTIONS No SBA Approval is Required Changes are made in E-Tran by the Lender 1. Lender can cancel the SBA Guaranty in E-Tran. 2. Lender can extend the Maturity Date (prior to the stated maturity expiring). 3. Lender can change the loan from a revolving to a non-revolving loan in E-Tran. 4. Lender can change the Borrower s Name or Address in E-Tran. 5. Lender can process the Assumption of the loan without releasing an Obligor (Adding a Borrower). 6. Lender can ADD a Guarantor (All SOP Requirements apply as in original processing). 7. Lender will Classify the loan in liquidation status. 8. Lender can change the interest rate prior to the first disbursement. 9. Lender can extend the final disbursement date. 48 months is already stated in the Loan Authorization which is the maximum number of months allowed. 10. Lender can change the name and the title of the individual signing the Loan Authorization on behalf of the Lender. 25

26 LGPC UNILATERAL ACTIONS (CONT.) No SBA Approval is Required Changes are made in E-Tran by the Lender 11. Lender can change Furnish year end statement to Lender within days of fiscal year end not to exceed 120 days of the fiscal year end. 12. Performance Bond Waiver No modification required -SOP (I), Page 179 (13 CFR ) SBA has granted a blanket waiver on the requirement of a performance bond when a 3rd party in the business of construction management services controls the disbursement of the loan proceeds. 13. Lender can change the monthly payment amount the Loan Authorization states the Lender should amortize at least annually. 14. Lender can change the adjustment period without a modification. 15. Lender can change from the Date of the Note to the Date of Initial Disbursement without a modification. 16. Lender may establish the payment due date without submitting a modification. 26

27 LENDER RESOURCES 27

28 SBA.GOV 28

29 SBA.GOV FOR LENDERS 29

30 SBA.GOV LGPC 30

31 THANK YOU FOR ATTENDING THIS BREAK OUT SESSION 31