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 Attorney Spotlight |
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Ethan W. Smith
Ethan focuses his practice in business law, with an emphasis on commercial lending, government guaranteed lending, mergers and acquisitions, real estate, contracts, commercial and corporate law. He is a closing attorney for various lenders nationwide. Ethan is also a designated closing counsel for several Certified Development Companies that operate in Pennsylvania, New Jersey and Delaware. In addition to representing commercial lenders, Ethan represents and counsels a number of small businesses in a variety of contexts, including mergers and acquisitions, corporate governance, and contract and real estate matters.
As a closing attorney for commercial lenders, Ethan prepares and reviews loan files for conventional, SBA 7(a) and 504, and USDA B&I loans, confers with loan processors and in-house counsel, and drafts, analyzes and negotiates loan documents. He has closed hundreds of government guaranteed commercial loans through the SBA 7(a) and 504 loan programs, through the USDA B&I program, and has closed numerous conventional commercial financing transactions, including asset-based, real estate, and factoring arrangements. Ethan has closed numerous complex commercial transactions, often involving multi-jurisdictional issues and collateral. As a licensed title agent in Pennsylvania and New Jersey, Ethan provides title insurance for commercial projects including purchases, refinancing and ground up construction. Through his underwriters' national networks, Ethan coordinates title insurance, escrow and closing services for his clients nationwide.
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REFINANCING SELLER NOTES
By Annie C. Johnson |
 On October 14, 2009, SBA published its Second Update Highlights to the SOP 50 10(5)(B). One of the technical updates to the previous version of the SOP moved the seller note refinancing requirements from the section pertaining to financing a change of ownership involving intangible assets to the section addressing eligibility requirements for debt refinancing.
Lenders may use SBA loans to refinance seller take-back financing only if:
- The note has been in place for at least 24 months following the change of ownership and
- The note is, and has been, current for the past 24 months.
Additionally, a new business valuation is required if the last valuation was done more than 36 months ago or does not meet SBA requirements for a business valuation. If the business valuation shows that intangible assets exceed $500,000.00, the borrower must provide at least 25% in equity injection to process the loan PLP.
These requirements are in addition to the provisions that govern all refinances:
- The loan must have been eligible for SBA financing at the time it was originally made.
- The new installment amount must be at least 10% less than the current installment amount.
Lenders' credit write ups must also contain written analysis answering the following:
- Why was the seller note originally incurred?
- Has over-obligated or imprudent borrowing necessitated major debt restructuring?
- Is the seller note currently on reasonable terms?
- Will the refinance improve the financial condition of the applicant?
- Is the seller note holder is in a position to sustain a loss?
- Would the lender/SBA sustain part or all of the same loss through refinancing the debt or will additional collateral or modified terms protect the taxpayer's interests?
- What portion of the loan is allocated to the refinance?
- If any credit card debt is also refinanced, the borrower must certify that the debt was incurred exclusively for business purposes.
The updated SOP 50 10(5)(B) showing the tracked changes can be found here. For more information on this and other government guaranteed lending topics, contact the author at ajohnson@starfieldsmith.com or 215.542.7070.
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Did you know... |
...that Starfield and Smith provides loan documentation and closing services for SBA 7(a) loans to its lender clients nationwide? Call 215-542-7070 for more information, or visit our website at www.starfieldsmith.com.
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Seminars and Events |
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Protect Your SBA Loan Guarantee and Avoid Guarantee Purchase Issues
Presented by David W. Starfield
When: December 10, 2009
Where: District Offices, U.S. Small Business Administration
Parkview Towers, 10th Floor
1150 1st Avenue, Suite 1001
King of Prussia, PA 10406
In a joint presentation with the local district office of the U.S. Small Business Administration, David W. Starfield will participate in a Quality Circle program on Guarantee purchase issues.
Topics to be discussed include:
- Preparation and submission of the 10-tab package
- Ways to ensure that the SBA guarantee will be honored
For more information, please email us at info@starfieldsmith.com.
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Starfield & Smith, P.C.
Pennsylvania Office
501 Office Center Drive, Suite 350 | Ft. Washington, PA 19034
phone: (215) 542-7070 | fax: (215) 542-0723
Minnesota Office
1516 West Lake Street, Suite 303 | Minneapolis, MN 55408
Loan Documentation | Closing | SBA Guaranty Repurchase
Regulatory Compliance | Franchise Eligibility
Business Consulting
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