TopS&S Horizontal Logo
 
In This Issue:  
Quick Links:  

Spotlight

In the Spotlight!

 

 

Kim Web Photo
Kimberly A. Rayer, Esq.
Kim concentrates her practice in the areas of financial services, commercial contracts, real estate and corporate law.  Kim has extensive experience representing banks, financial institutions, as well as companies in connection with commercial financing transactions, including acquisition financing, asset-based financing, healthcare receivable financing and other secured transactions. She has experience with intercreditor relationships, as well as creditor's rights in bankruptcy.  Kim also advises small businesses on corporate governance and transactional matters.

Kim is admitted to practice before the Supreme Courts of Pennsylvania and New Jersey and the Federal District Court for the Eastern District of Pennsylvania. She is a member of the Philadelphia Bar Association and the National Association of Government Guaranteed Lenders (NAGGL).

Kim is a graduate of Drexel University where she received a Bachelor of Science Degree, cum laude, and the James E. Beasley School of Law, Temple University, where she earned a Juris Doctor degree.

Facebook  

Starfield & Smith

is on FACEBOOK!!

 

Like us on Facebook

 

Become our fan on Facebook to receive updates, articles and news pertaining to SBA and lending related topics. 

 

Facebook  

Link yourself to Starfield & Smith, PC today to get the most recent news and articles:  

 

View my profile on LinkedIn 

 

Facebook  

Starfield & Smith, PC is on Twitter!

 

Follow me on Twitter

 

Follow us for links to our most recent news and articles. 

 

 

Best Practices: Credit Bidding to Protect Your SBA Guaranty 

 

 By: Greg T. Kupniewski, Esq.

 

 

Greg
Greg T. Kupniewski, Esquire

 

Generally, the SBA encourages a Lender to credit bid when its collateral is being sold at auction. The SBA offers some guidance on when to credit bid and how much. The SBA's guidance varies depending largely on the context and the unique economic factors of the auction. 

 

The SBA's guidance, however, is largely open to interpretation. While this provides the Lender with some discretion, the Lender should also be aware that its credit bidding decisions will be reviewed by the SBA at the time of guaranty purchase. Failure to heed the SBA's guidance could result in a substantial repair or denial of the guaranty. The prudent Lender should bid conservatively and remain comfortably within the SBA's guidelines to protect the real prize: the SBA guaranty.

 

The SBA's credit bidding guidance depends largely on the Recoverable Value (RV) of the collateral. The SBA defines RV as the Orderly Liquidation Value (OLV) of the collateral minus the amount of any senior liens minus the cost of any extraordinary recovery cost, such as remediation, minus ten percent of the remaining OLV as an estimate of the cost of regular recovery expenses such as foreclosure sale costs, appraisals, and environmental investigations. In other words, the collateral's RV is the equity available for the Lender.

 

When a senior lender is foreclosing on the SBA Lender's collateral, the SBA encourages the SBA Lender to credit bid when the collateral's equity exceeds ten percent of the OLV. The amount of the Lender's bid should be the lesser of: (i) the SBA loan balance; or (ii) the RV. The Lender may decline to bid on the collateral if the RV is less than either: (i) ten percent of the OLV, or (ii) $5,000.

 

When the Lender conducts a real property foreclosure of its own senior lien, the SBA's guidance is much looser then for credit bidding where the SBA Lender holds a junior lien. When the SBA Lender is in 1st lien position on real estate, the SBA encourages the Lender to make a credit bid after considering the following factors: (i) the RV, (ii) the loan balance, and (iii) the need or ability of the Lender to collect a deficiency judgment. In this type of sale, the SBA offers no bright line guidance for the Lender.

 

Similarly, when the Lender liquidates personal property collateral, the SBA's guidance is somewhat contradictory. The SBA discourages credit bids at UCC auctions because it could chill other potential bidders. Conversely, the SBA encourages the Lender to credit bid when personal property collateral is foreclosed by judicial sale. In a judicial sale, the Lender should credit bid based on the same factors relevant to real property auctions.

 

The biggest potential credit bidding pitfall for the Lender, regardless of the type of sale or type of collateral, is the potential loss of the ability to seek a deficiency judgment. In some jurisdictions, the Lender's ability to collect a deficiency may be cut off if the Lender is the successful bidder at auction. The rules regarding collecting on a deficiency vary from state to state. The Lender should consult counsel before entering a credit bid. If the Lender rashly credit bids and inadvertently cuts off its right to collect the deficiency from a solvent guarantor, the Lender not only loses the direct ability to collect the deficiency, the SBA will likely repair the guaranty for the amount of the deficiency as well.

 

The savvy SBA Lender should keep the big picture in mind when credit bidding because while it may win the battle at auction, it may lose the war at guaranty purchase.

 

For more information regarding credit bidding on SBA loans, contact Greg at [email protected] or
at (215) 542-7070.    

 

 

 

Seminars                Seminars and Events 

  

Ask the Lawyers: Exploring Equity A-Z

 

*** Today *** 

 

Presented By:  NAGGL

Instructor:David W. Starfield

Date:  December 12, 2012

Time: 1:00 pm ET

Location:  Webinar

 

For more information about this event and/or to register, click here.

 

 

Coleman's 4th Annual 2013 Herndon SBA Guaranty Purchase Workshop

 

Presented By:  Coleman Publishing

Instructor:  Ethan W. Smith

Date:  January 10, 2013

Time:  11:00 am ET

Location:  Crowne Plaza Dulles Airport

 

For more information about this event and/or to register, click here.

 

  

Back to Top

 

DYK                      

                         Did You Know...  

 

  Compass 

...that Starfield & Smith, PC provides liquidation services, including representation in foreclosure, bankruptcy, workouts and commercial litigation matters to its lender clients nationwide?

 

For more information about this and other services Starfield & Smith, P.C. provides its clients, please contact Jeffrey S. Feldman at [email protected] or at (215) 542-7070.

 

 Help Starfield & Smith, PC

Give Back to the Community!

  

Manna on Main    

 

Click on the icon above

to make a donation today!

 

Shark
                         


 

ContactInfo 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

 

* * * * *
   
Florida Office
1101  North Lake Destiny Road| Suite 105
Maitland, FL 32751
phone: (407) 667-8811 | fax: (407) 667-0020

* * * * *

 

California Office
2955 Main Street, Second Floor
Irvine, CA 92614
phone: (949) 333-4108| fax: (949) 679-1709

   

 
 Loan Documentation | Closing | SBA Guaranty Purchase
Franchise Consultation | Regulatory Compliance 
Business Consulting | Commercial Litigation
Creditors' Rights 

This email is an advertisement from Starfield & Smith, P.C. and is subject to this disclaimer.
 � 2009-2012 Starfield & Smith, P.C. All Rights Reserved