SBA Releases and Information
The following notices are in PDF format. You
must have Adobe Reader to open.
July 24, 2009
SBA Notice: Servicing and Liquidation Authority of
7(a) Lenders
July 14, 2009
On April 12, 2007, SBA published regulations on liquidation and debt
collection activities that amended 13 CFR Part 120 governing
business loans. The new regulations became effective on May 14,
2007. Section 120.536 standardized across the various 7(a) loan
programs the servicing and liquidation actions that require prior
SBA approval, and reminded lenders to maintain in their loan files
supporting documentation for actions taken in connection with a loan
not requiring prior SBA approval. This documentation is essential
for SBA's review of the lender's handling of a loan if it is
submitted for guaranty purchase and for SBA's determination as to
whether the lender's actions were prudent, commercially reasonable
(consistent with generally accepted commercial lending practices)
and in accordance with loan program requirements.
Th e purpose of this notice is to remind all SBA 7(a) lenders that
they are given the same authority previously held by PLP lenders to
service and liquidate their loan portfolios. Therefore, lenders may
use their unilateral authority in order to expeditiously address the
needs of small business concerns in these difficult economic times.
This unilateral authority includes, among other things, deferments
and loan restructuring where needed to keep a small business open
and operational.
SBA's regulations at 13 CFR § 120.535 set forth the following
general standards for loan servicing, liquidation and debt
collection litigation actions:
(a) Service using prudent lending standards. Lenders … must service
7(a) … loans in their portfolio no less diligently than their
non-SBA portfolio, and in a commercially reasonable manner,
consistent with prudent lending standards, and in accordance with
Loan Program Requirements. Those Lenders … that do not maintain a
non-SBA loan portfolio must adhere to the same prudent lending
standards for loan servicing followed by commercial lenders on loans
without a government guarantee.
With the exception of the actions specifically identified in 13 CFR
§ 120.536, SBA has now delegated to all 7(a) lenders identical
unilateral servicing authority as indicated above. SBA's Commercial
Loan Servicing Centers (CLSCs) in Fresno and Little Rock and the
Herndon National Guaranty Purchase Center (NGPC) are unable to
approve actions within a lender's unilateral servicing
authority20because of the high volume of such actions.
As a helpful guide for lenders to determine which actions they may
take unilaterally, SBA has developed a matrix for both servicing and
liquidation actions that replaces previous matrices that addressed
servicing and liquidation actions separately. The new combined
matrix is available on SBA's websites for the Fresno, Little Rock
and Herndon centers accessible through
www.sba.gov/banking.
As indicated above, for all loan servicing actions lenders must
continue to document the justifications for their decisions and
retain these and supporting documents in their loan files for future
SBA review if the loan is submitted for guaranty purchase, as well
as for lender oversight purposes. A lender's actions will be
evaluated in the purchase process to determine whether they
constituted a reasonable business decision made in connection with
good faith efforts to keep a borrower's business open.
It is important that lenders notify SBA with respect to the
unilateral actions identified in the combined matrix that are
identified as requiring SBA notification. Such notice is necessary
to update SBA's loan database and to maintain accurate records for
loans that will be sold in the secondary market.
SBA encourages all lenders to become familiar with and use E-tran,
which permits lenders to make many changes to their SBA loan record
using a direct connection via the internet. SBA is offering special
training and assistance in relation to servicing, the use of E-tran,as
well as the servicing and liquidation matrix. This training is being
offered through local SBA district offices in cooperation with SBA's
loan servicing centers. Lenders are encouraged to contact brand
managers or other officials at their local SBA district office for
more information regarding training
For questions, please contact the Little Rock CLSC Director, Nique
Carrington (501-324-5871, Ext. 281), the Fresno CLSC Director, Joel
Stiner (559-487-5136, Ext. 215), the Herndon NGPC Director, Vanessa
Piccioni (703-487-9293), or Walter Intlekofer at SBA Headquarters
(202-205-7543)
504 ARRA Re-financingo: SBA Notice
and Talking Points
Karen Mills, SBA Administrator held a press conference today to announce
the implementation of the new ARRA refinance regulations for the SBA 504
loan guarantee program. Eric Zarnikow, Associate Administrator of
the Office and Capital Access and Chris Crawford, NADCO President
participated in a press conference. Attached are the SBA press
release and the key program talking points from today’s press
conference.
The press conference provided SBA and NADCO the opportunity to convey
the benefits of these new refinancing provisions for small businesses
that are expanding their stores, facilities or fixed assets. The
ARRA, also known as the stimulus bill, provides refinancing provisions
will open up credit and potentially free up working capital for small
businesses by improving cash flow.
These provisions will also provide flexibility for banks and other small
business lenders that may have existing mortgage loans to qualifying
borrowers that are maturing in the next several years, and want to
reduce their credit risk by utilizing the benefits of the SBA loan
guarantees to reduce their loan-to-value ratios. This program also
enables these banks to maintain their relationships with their business
borrowers, while reducing their cost of reserves.
By making additional credit available to borrowers, this refinancing
program will also provide more opportunities for them to purchase new
real estate assets at more favorable prices in many markets. Not only
can these firms expand their plants; these transactions will help local
economies by reducing the inventory of commercial properties or bank
real-estate-owned. In turn, this can stabilize local commercial real
estate prices and restore these properties to expand local tax bases.
Participants were also interested to learn that 504 debentures were now
TALF eligible collateral for investors. Mills noted that over $80
million in 504 20-year debentures had been used to secure new loans by
investors in the past two months under TALF guidelines issues by the New
York Federal Reserve Bank.
In addition to the 504 refinancing regulations issued today by SBA under
provisions of the ARRA, Crawford noted that NADCO and SBA are now
reviewing proposed Congressional legislation that might temporarily
extend the benefits of mortgage debt refinancing to certain qualifying
small businesses that simply need to refinance their mortgages that are
coming due soon. He stated that 504 cannot stray from its Congressional
mandate of job creation through expanding small businesses. However, in
today’s recession 504 can also be used to retain jobs in small
businesses by temporarily enabling them to roll over mortgages that
contain short term “balloon” payments. This could enable businesses to
work with their primary bank lenders to secure improved terms and
stabilize their businesses, thus avoiding potential future defaults and
additional bank losses.
Mills and Crawford encouraged small businesses to contact the local SBA
offices, or go to SBA.GOV for
information on the 504 program, or to talk to their local bank lenders
about refinancing opportunities through 504. Additionally, potential
expanding small businesses can contact Certified Development Companies
in their community to learn more about applying for financing. These can
be located by going to NADCO’s web site at
NADCO.ORG.
June 4, 2009
SBA Will Offer Floor Plan Financing to
Auto, RV, Other Dealerships Beginning July 1
KOKOMO, IND. – The U.S. Small Business Administration will
offer government guaranteed loans to finance inventory for eligible
auto, recreational vehicle, boat and other dealerships under a new pilot
program announced today by SBA Administrator Karen Mills.
Floor Plan Financing New Release
Dealer Floor Plan Financing F.A.Q.
New Alternative Size Standards Notice
SBA has temporarily eliminated the upfront guaranty fee on 7a loans and the third party lender fee and CDC processing fee on 504 loans. For those loans that have been approved since February 17, 2009, the fee will be refunded. The 25 basis point guaranty fee for 7a loans with a term of 12 months or less is still in effect. All 7a loans up to a dollar value of $1,666,666 are eligible to receive a 90% SBA guaranty. Since the amount of guaranty is still capped at $1,500,000, all loans above $1,666,666 will have a declining percentage of guaranty in order to maintain the maximum guaranty of $1,500,000.
SBA Policy Notice on Implementation of Section 501 of the Recovery Act - Fee Elimination Provisions