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Spotlight

IN THE SPOTLIGHT

  

Kimberly A. Rayer
Kimberly A. Rayer, Esq.

 

Kim concentrates her practice in the areas of commercial lending, commercial contracts and corporate law. She represents financial institutions nationwide, including national banks, community banks, credit unions and non-bank lenders, in extending commercial credit facilities to small and mid size businesses. Kim has extensive experience in the areas of government guaranteed financing, as well as business and real estate acquisition financing, lines of credit, healthcare financing and other secured and non-secured credit transactions. Kim advises lenders on eligibility, documenting and closing loans under the SBA 7(a) and 504 loan programs. As a closing attorney, she prepares commitment letters, reviews credit approval and loan files, drafts, and negotiates loan documents and coordinates closing and funding of transactions. She also assists lenders with loan modifications and loan work outs. With her experience with Article 9 of the Uniform Commercial Code and the U.S. Bankruptcy Code, Kim assists her clients in lien priority issues, intercreditor agreements, as well as creditor's rights in bankruptcy. Kim is a presenter on SBA loan documenting and closing for a number of continuing education companies, as well as presents custom training programs for clients. Kim also counsels small businesses on corporate governance and transactional matters. She has guided companies through ESOP stock transactions, shareholder divorce, loan workout and business acquisitions, as well as advising clients on day to day corporate and contract matters, such as confidentiality and joint venture agreements.

  

To read more about Kim, click here

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FEATURED ARTICLE FeatureArticle

 

Best Practices: Timing to Perfect a Purchase Money Security Interest

 

By: Kristen G. Dickey, Esquire  


 

Kristen G. Dickey
Kristen G. Dickey, Esquire
The U.S. Small Business Administration ("SBA") Loan Authorization requires lenders to obtain a "purchase money security interest" ("PMSI") in personal property (including machinery, equipment, or inventory) when the personal property is acquired by a borrower using SBA loan proceeds. A PMSI is a powerful tool, because it will provide the lender, as the secured party, a super priority over a conflicting security interest in the same collateral, but the PMSI must be "perfected" by following the filing requirements of the Uniform Commercial Code ("UCC").

 

The UCC defines a PMSI as a security interest that is: (i) taken or retained by the seller of the collateral to secure all or part of its price; OR (ii) taken by a person who, by making advances or incurring an obligation, gives value to enable the debtor to acquire rights in or the use of collateral if such value is in fact so used.  UCC � 9-107 This means that a lender is eligible to acquire a PMSI when it provides a loan that enables a borrower to acquire goods and the funds are specifically used for that purpose (documentation required).

 

A lender must take special care to perfect the PMSI so that it is ensured a super priority over conflicting security interests in the same collateral.   The UCC states that a perfected PMSI in goods (other than inventory or livestock) has priority over a conflicting security interest in the same goods (and, many times, identifiable proceeds) if the PMSI is perfected: (i) when the debtor receives possession of the collateral; OR (ii) within 20 days thereafter.   Lenders must exercise caution, because a borrower could receive possession of a piece of machinery or equipment before the loan has closed and before the sale (using loan proceeds) is complete. The clock will run and the lender may lose its priority if the PMSI is not perfected within the 20 day timeframe.

 

With respect to inventory or livestock, a perfected PMSI has priority if: (i) the PMSI is perfected when the debtor receives possession of the inventory; (ii) the purchase-money secured party sends an authenticated notification to the holder of the conflicting security interest; (iii) the holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; AND (iv) the notification states that the person sending the notification has or expects to acquire a PMSI in inventory of the debtor and describes the inventory.   UCC � 9-324

 

For lenders that participate in the SBA loan program, SOP 50 10(5)(E) includes an added regulatory requirement that lenders confirm their correct lien position on the borrower's assets as contemplated in the SBA Loan Authorization.   A lender's failure to adhere to the time limits and notice requirements required by the UCC for filing financing statements to perfect a PMSI or to resolve issues identified in UCC searches (such as a conflicting security interest) may create lien priority issues that can jeopardize lender's SBA loan guaranty. The following articles include best practices to troubleshoot UCC search issues and pre-file UCC filing statements.

 

By pre-filing UCC financing statements, ordering UCC searches early in the loan process, and strictly following the UCC time limits and notice requirements, lenders will avoid the most common mistakes associated with obtaining the properly perfected lien position and protect their SBA loan guarantees.

 

For more information on PMSI security interests contact Kristen at [email protected] or at (407) 667-8811.

 

Please also see Kimberly Rayer's February 2012 Article titled "Best Practices: Perfecting Against an Individual Debtor under the 2010 Amendments to UCC Article 9," which identifies amendments to UCC Article 9 that will take effect on July 1, 2013. 

    

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EVENTS & SEMINARS Events

 

Protecting the SBA Guarantee Start to Finish
 
Presented By:  Katie O'Brien & Ethan W. Smith
Date:  Wednesday, August 28, 2013
Time:  2:00 pm EST
Location:  Webinar
 
For more information about this event and/or to register, click here.
 
 
Date:  September 11, 2013 through September 13, 2013
Location:  Rosen Shingle Creek, Orlando, FL
 
For more information about this event and/or to register, click here.
 
 
Date:  November 5, 2013 through November 7, 2013
Location:  JW Marriott Desert Springs, Palm Desert, CA
 
For more information about this event and/or to register, click here.  
  
 
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Testimonials

WHAT OUR CLIENTS SAY... 


 

Michael A. Schwartz / President / DelVal Business Finance Corp
 

As President of DelVal Business Finance Corp, a leading SBA 504 lender in Pennsylvania for nearly twenty years, I have utilized several law firms to close our SBA 504 loans.

 

Without a hesitation, Starfield & Smith have been the best we've worked with. They understand that in the 504 industry "time is money" better than anyone else, and their ability to pull in extra resources when needed has made getting the 504 loan closed a priority for them.

 

From the attorney's to the support staff, everyone is "user friendly" and the professional staff know the SBA 504 rules & regulations as well as I do (well almost).

Simply put, I highly recommend Starfield & Smith for anything that involves SBA financing. They are the best!


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