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In the Spotlight!
| Janet M. Dery, Esq. |
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Janet is a Partner in the firm whose areas of practice concentrate in SBA lending, and include banking, real estate, contracts, commercial and corporate law. She has a strong background in contract and corporate law which she regularly applies to her commercial lending practice.
Janet acts as a closing attorney for many commercial lenders located throughout the United States. As a closing attorney, Janet reviews SBA guaranteed and conventional loan files, confers with loan processors and in-house counsel, drafts, analyzes and negotiates loan documents, and advises on due diligence documentation.
In her corporate law practice, Janet advises on corporate governance and assists clients in all aspects of corporate transactional law, including the formation/incorporation of businesses and drafting, reviewing and negotiating various documents for business entities, which documents include interest-holder agreements, resolutions, corporate minutes, purchase agreements, and leases.
Admissions: * Pennsylvania * New Jersey
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Best Practices: Servicing and Monitoring Working Capital CAPlines
By: Kimberly Rayer, Esq.
| Kimberly Rayer, Esquire |
The SBA's working capital CAPline program continues to gain in popularity among SBA lenders since changes to the program were implemented last year. The CAPline program gives lenders the option to provide either borrowing base or general, secured lines of credit to its small business customers, while maintaining the benefit of the SBA guaranty.
As with any SBA Loan program, the SBA guaranty must be carefully guarded by the lender at all stages of the loan - underwriting, closing, servicing and liquidation. An important factor for any SBA lender considering the working capital CAPline program is whether its institution has the infrastructure and staff to property service CAPline loans.
For lenders not currently offering conventional asset based lending products to their customers, lenders should assess their available manpower, set-up training, and implement policies and procedures for monitoring and servicing CAPlines, prior to closing CAPline loans. Being prepared to closely monitor the CAPlines will ensure that the collateral is still in place if needed, and hopefully, so will the SBA guaranty. For example, asset based lenders often use financial covenants as a leading indicator on how their Borrower is performing. A CAPline lender may choose to require balance sheet ratios, such as Current Ratio or Debt to Tangible Net Worth Ratio tested quarterly or annually. However, the lender must have systems, processes and procedures in place to make sure that borrower's financial statements are collected and financial covenants are tested in a consistent and timely manner.
For Borrowing Base CAPlines, borrowing base reports with supporting documentation, such as AR aging and inventory reports must be received and reviewed by lender on a monthly basis to ensure that the advances on the CAPline are supported by the Eligible AR and inventory. For CAPlines over $1,000,000, a lender or its agent must also conduct an annual field examination which includes a physical verification of the assets that compose the borrowing base, including samplings of accounts receivables and inventory. At a minimum, an examination must be conducted prior to the initial disbursement and annually thereafter.
For non-borrowing base CAPlines, lenders must conduct a credit review (including cash flow analysis), a collateral analysis to ensure the 1:1 collateral ratio is maintained, an owner/guarantor credit review, and a site visit, all on an annual basis. If the CAPline is undercollateralized, then additional collateral must be obtained, or the lender must consider lowering the CAPline.
Proceeds from cash sales and receivable collections must be used to pay down the CAPline. If a lender has the borrower's deposit accounts, the lender is not required to utilize lockboxes or controlled accounts, but must monitor payments received to make sure they are properly applied to the Borrowing Base CAPlines. If the lender does not have the borrower's deposit accounts, then the lender must enter into a deposit account control agreement and/or a lock box with the Borrower and the depository institution.
While Working Capital CAPlines require a great deal of servicing and monitoring, the good news is that CAPline lenders can change an extraordinary servicing fee in connection with these loans. Typically the fee for extraordinary servicing of any 7(a) loan cannot exceed 2% of the loan amount. However, on working capital CAPlines, with prior written approval by the SBA, a lender may charge more than 2%, so long as it is reasonable and prudent based on the effort required and not higher than fees charged on the lender's non-SBA guaranteed loans. For more information about the SBA Working Capital CAPLine program, please contact Kim Rayer at [email protected] or 215-542-7070.
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Seminars and Events |
FLAGGL Small Business Lending Conference
"Navigating the New SOP Changes and Key Technical Issues."
Presented By: FLAGGL
Instructor: David W. Starfield
Dates: September 12-14, 2012
Location: Rosen Shingle Creek, 9939 Universal Boulevard, Orlando, FL 32819
For more information about this event and/or to register, click here.
WPASGL Fall Training & Golf Outing
Presented By: W.P.A.S.G.L.
Instructor: Ethan W. Smith
Date: Friday, October 5, 2012
Location: Pittsburg National Golf Club, 287 Monier Road, Gibsonia, PA 15044
For more information about this event and/or to register, click here.
NAGGL Rocks! Annual Conference
Presented By: NAGGL
Dates: October 23 - 25, 2012
Location: Red Rock Resort, 11011 West Charleston Boulevard Las Vegas, Nevada 89135
For more information about this event and/or to register, click here.
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Starfield & Smith, P.C.
Pennsylvania Offices:
1300 Virginia Drive | Suite 325
Ft. Washington, PA 19034
phone: (215) 542-7070 | fax: (215) 542-0723
2000 Market Street | Suite 500
Philadelphia, PA 19103
phone: (215) 542-7070 | fax: (215) 542-0723
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Maitland, FL 32751
phone: (407) 667-8811 | fax: (407) 667-0020
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phone: (949) 333-4108| fax: (949) 679-1709
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