THE 10 TAB FILE: THE STORY OF A LOAN

Chris M. Evans, Esq.

It is an unpleasant reality that not every 7(a) SBA guaranteed loan can result in a happy ending, especially in the current economic climate. When a borrower defaults on an SBA loan, lenders may request that the SBA honor its guaranty. In order to proceed, 7(a) lender must submit a "10 Tab" Guaranty Purchase Request to the National Guaranty Purchase Center in Herndon, Virginia. This process can result in a denial or repair of the SBA guaranty if there are material deficiencies in the file; in other cases, the SBA may request additional documentation, which can drag out the guaranty purchase process. In order to make the purchase request process easier for the lender and for the SBA, it is very important that lenders understand exactly what the 10 Tab process entails.

A 10 Tab submission is a request for money from the SBA. Accordingly, when a lender delivers a 10 Tab file, it should be as close as possible to what the SBA expects. In order for the SBA to honor its guaranty, the lender must demonstrate to the SBA that the lender complied with the terms and conditions of the loan authorization (the "Authorization"), the SBA's Standard Operating Procedures (the "SOPs"), and sound lending practices. The 10 Tab file provides the SBA with the story of the life of the loan, from its origination to its liquidation. Ideally that story should demonstrate to the SBA, in the clearest and most complete way possible, that the lender has met the terms and conditions of the Authorization and the SOPs. Therefore, the 10 Tab file should illustrate to a reviewer that the lender has given the SBA no reason to deny a guaranty purchase request and that the lender should be paid the full amount of the guaranteed portion of the loan. Being honest, diligent, and forthright with the SBA is very important in any lender's dealings with the SBA. This is especially true in documenting all aspects of liquidation and submitting 10 Tab files in the exact manner required by the SBA.

No loan file is perfect, especially when the borrower has defaulted, and lenders frequently fail to comply perfectly with the terms of the Authorization and of the SOPs. However, not all deficiencies in a file are material deficiencies that should result in a repair or denial of the guaranty. Identifying, disclosing, and discussing technical deficiencies in the 10 Tab submission serves two goals. First, the lender shows the SBA that the lender is being forthright and transparent. This establishes the lender's credibility. Second, the lender makes the SBA's job of review easier by identifying where the file has weaknesses, and explaining why those weaknesses should not be considered material deficiencies. It always helps a lender to make the SBA's job easier.

The following is a list of points that lenders may want to consider when submitting a 10 tab file to the SBA:

Make sure that all 10 Tab files tell the whole story of the life of the loan - from origination to liquidation - and that all 10 Tab files are complete before they are submitted.
Be honest, diligent, and forthright in all dealings with the Purchase Center and with the SBA.
Thoughtfully organize each 10 Tab file according to the sequence outlined by the SBA guidelines, using bright colored paper or dividers to separate tabs. Ensure that there are no unnecessary or misplaced documents and clearly label each document. SBA's guidelines may be found here.
Make sure to identify, disclose, and discuss all deficiencies. When a deficiency is technical, at the front of the tab in question, explain in a separate typed paragraph why the deficiency did not contribute to the business failure (which must be explained in detail in Tab 10).
Care for and preserve the collateral. Take all steps to protect the lender's interests and the interests of the SBA in the collateral and make every effort to liquidate all collateral when appropriate, including site visits, appraisals, and reconciliation of lists of collateral; document these efforts and include detailed reports in the 10 Tab files.
At every stage of the loan, document each action and every decision.

By submitting 10 tab files which tell the entire story of the loan, lenders will increase the likelihood that SBA will honor the guaranty. For more information on the 10 tab submission process, contact Chris Evans at:

cevans@starfieldsmith.com or
215-542-7070

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