Tip of the Week Securing the SBA Loan With the release of the new SOP 5010 (version 5), SBA has clarified the "fully secured" rule even more and placed more detail in how personal guaranties are to be obtained. Also, there have been significant changes to what is required when ordering the real estate appraisal and business valuation in a business acquisition. With that said, have you updated your policies and procedures accordingly? Have you deciphered between what is required between standard 7(a) loans, SBAExpress loans and 504 loans? Have the changes been communicated to the sales team? Do your credit underwriters understand the impact the changes may have on their analysis? Have the closing/documentation team made the appropriate changes to closing checklists and procedures? An area of the SOP 50 10 where considerable attention should be paid is in pages 174 - 182, where collateral requirements are addressed. Remember, a loan is considered fully secured if SBA has a security interest in assets with a combined liquidation value that equals or exceeds the loan amount. Liquidation value is determined on a case-by -case basis by the lender depending on experiences in their market and economy. However, liquidation value determined by the lender must be fully justified in each transaction. In version 5 of the SOP 5010, SBA now requires that when calculating the value of business assets, the lender is to exclude operating and trade assets even if taken as collateral. The perfect place to define the lender's approach to determining liquidation values at time of origination is in their written SBA policy. The changes made in the new SOP version became effective August 1, so all loans being approved going forward are impacted. Dust off your policy and procedures to see how they may be "tweaked" to remain in compliance. If you don't have written SBA policy and/or procedures, now may be the time to think about creating these documents (the timing is perfect), so you are prepared for your next SBA on-site review. Even if you don't expect a visit from SBA in the near future, written guidelines are the best "coaching" tool you can have for your SBA lending personnel to assure consistency from loan to loan. Please join Karen McHugh on August 21 when she teaches a NAGGL WebExpress course on how collateral requirements have been impacted by the new SOP. To register for this event, visit www.naggl.org for more information. Take the right approach! Karen McHugh and Brian Burke
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