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In the
Spotlight!
| Jeffrey S. Feldman, Esq. |
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Jeff is a trial attorney who offers a wealth of knowledge regarding commercial and business litigation, contract disputes, collections matters, equipment financing and leasing. He also reviews and prepares SBA loan guaranty purchase packages and advises SBA lenders on servicing, liquidation and compliance issues.
Jeff's practice concentrates on the litigation, arbitration and trial of commercial disputes in the state and federal courts and appellate courts. Over the course of his 15 years of litigation experience, he has represented organizational and individual clients in lawsuits involving a broad range of substantive areas, including: contract law, the Uniform Commercial Code, the transfer and enforcement of judgments, creditors' rights matters, class actions, partnership law, disputes among members of limited liability companies, injunction proceedings, fiduciary duty claims, commercial disparagement and defamation claims, business torts, civil fraud claims, civil conspiracy and RICO claims, covenants not to compete, abuse of process claims and vicarious liability claims.
To read more about Jeff, click here. |
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Best Practices: SBA Continuing to Streamline Rules for Change of Ownership Transactions
By: David W. Starfield, Esquire
| David W. Starfield, Esquire |
Over the past several versions of SOP 50 10 5, the SBA began requiring lenders and small business applicants to structure changes in ownership transactions in ways that were increasingly circumscribed. One change in interpretation caused many existing EPC/OC change of ownership loans to appear to be ineligible and made new ones difficult to structure. Concerns raised by lenders over this change caused the SBA to modify its position and again make prior practices eligible by allowing an EPC/OC structure to be used in change of ownership transactions. [See Direct Final Rule published April 2, 2012, 77 FR 19531]
As NAGGL reported in its February 17 News Flash, at the start of 2013, certain asset purchase changes of ownership that included intangibles were being rejected as ineligible by the Loan Guaranty Processing Center (LGPC). When the matter was scrutinized by the policymakers in SBA's Office of Capital Access, the Agency reiterated and clarified - for its internal staff as well as for lenders - its long-standing policy permitting changes of ownership through asset purchase transactions.
The last major hurdle created by the SOP 50 10 5 is the restrictive manner in which changes of ownership must be structured. The stock redemption format, although riskiest for borrowers and lenders, is the preference in the current SOP. Making matters worse, as reflected in the 5(C) version of the SOP (effective 10/1/2010), along the way SBA had concluded that because only "business entities" may be borrowers, allowing an individual to be a co-borrower on a change of ownership transaction was ineligible. These rules have caused consternation in the lending community and among small businesses. The unclear and increasingly complex structures necessary to meet eligibility requirements have made it difficult for borrowers to use the 7(a) program to accomplish changes of ownership.
We are pleased to report, however, that at NAGGL's Lender Leadership Summit and in other conversations with NAGGL and lenders, senior officials in the Office of Capital Access advised that the SBA is planning to remove the restriction barring co-borrower structures. This effort supports Administration Executive Order 13563 which provides that our regulatory system "must identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends," and directs agencies "to promote retrospective analysis of rules that may be outmoded, ineffective, insufficient or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned."
Other than allowing co-borrower structures, we believe that there will be little change to existing policy, with retention of the following requirements: (1) that the borrower is an eligible small business; (2) that the borrower will own 100% of the business after transfer; (3) that the sale be for a valid purpose and for the benefit of the business being acquired; (4) that an appropriate evaluation of the business be undertaken; (5) that repayment ability be established in the credit; and (6) that loan proceeds not be used for personal use.
Taken as a whole, the SBA's changes and reinterpretations will allow change of ownership transactions to be structured more in line with customary business practices and in a manner consistent with state and federal law. Lenders should no longer be exposed to lender liability claims and potential denials of the SBA loan guaranty. This will give borrowers greater access to financing and fewer worries about unnecessary tax burdens and unforeseen liabilities. We understand that SBA is working on a notice to make the long-awaited change and we are hopeful that it will be issued soon.
For more information about change of ownership transactions, please contact David at [email protected] or at (215) 542-7070.
Reprinted with permission from the National Association of Government Guaranteed Lenders. This article first appeared in the March 2013 issue of In Focus Online, a publication of the National Association of Government Guaranteed Lenders. This reprint contains minor revisions.
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Seminars and Events |
18th Annual Quality Circle 2013 - Small Business Lending Conference
*** Tomorrow ***
Presented By: W.P.A.S.G.L.
Instructor: Ethan W. Smith
Date: April 10, 11, 12, 2013
Location: Seven Springs Mountain Resort, Champion, Pennsylvania
For more information about this event and/or register, click here.
SBA Lending Update 2013: Trends, Regulations & a Look at SOP 50 10
Instructed By: Kimberly Rayer & Janet M. Dery
Date: April 23, 2013
Time: 3:00 pm ET
Location: Webinar
For more information about this event and/or register, click here.
Closing & Funding the SBA Loan
Presented By: NAGGL
Instructor: Ethan W. Smith
Dates: April 29 - 30, 2013
Time: 8:30 am - 4:30 pm
Location: NAGGL SBA Lending Technical Conference
For more information about this event and/or register, click here.
Advanced SBA Loan Documentation & Closing
Presented By: NAGGL
Instructor: David W. Starfield
Dates: April 29, 2013
Time: 8:30 am - 4:30 pm
Location: NAGGL SBA Lending Technical Conference
For more information about this event and/or register, click here.
Understanding How to Get SBA to Honor Its Guaranty
Presented By: NAGGL
Instructor: David W. Starfield
Dates: April 30, 2013
Time: 8:30 am - 4:30 pm
Location: NAGGL SBA Lending Technical Conference
For more information about this event and/or register, click here.
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Did you know...
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... Starfield & Smith provides liquidation services, including representation in foreclosure, bankruptcy, workouts and commercial litigation matters to its lender clients nationwide?
For more information about this, contact Jeff Feldman at (215) 542-7070 or at [email protected].
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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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Florida Office
1101 North Lake Destiny Road| Suite 105
Maitland, FL 32751
phone: (407) 667-8811 | fax: (407) 667-0020
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California Office
3759 Caldera Place
Carlsbad, CA 92010
phone: (949) 333-4108| fax: (949) 679-1709
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