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IN THE SPOTLIGHT
 | | Kimberly A. Rayer, Esq. |
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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 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.
ADMISSIONS:
- Pennsylvania
- New Jersey
- Federal District Court for the Eastern District of Pennsylvania
To read more about Kim, click here.
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| FEATURED ARTICLE
Best Practices: A Lender's Burden of Proof: The Materiality Standard
By: Katie O'Brien, Esquire
 | | Katie O'Brien, Esquire |
When submitting 10 tab purchase packages (the "10 tab") to the National Guaranty Purchase Center ("NGPC"), it is helpful for SBA lenders to know what the NGPC is focusing on in its review and what standard of review it is applying to deficiencies in the file. Generally speaking, NGPC focuses on "material" deficiencies in its review. Although this term is not defined in the SOPs, the NGPC typically looks at whether the deficiency caused a significant loss or harm to the SBA or resulted in the failure of the borrower's business.
The most clear example to illustrate this concept is hazard insurance. If a borrower or lender failed to maintain hazard insurance on real property or personal property collateral, but the collateral was not destroyed, the deficiency is not considered material - "no harm, no foul." But if the collateral was subsequently destroyed, the deficiency would be deemed a material deficiency (as it caused a loss to the SBA), and NGPC would most likely recommend a repair to the lender's SBA guaranty.
Other examples of material deficiencies include:
- Failure to properly perfect a collateral assignment of life insurance on the principal of the business and the principal subsequently dies
- Failure to properly perfect a security interest in collateral
- Failure to obtain the required lien position on collateral
- Failure to perform a timely site visit after a loan has defaulted and the collateral goes missing
- Failure to verify a borrower's or seller's financial information and tax returns
- Failure to verify equity injection and/or use of proceeds
Examples of deficiencies that would most likely be considered non-material include:
- Failure to properly perfect a collateral assignment of life insurance on the principal of the business, but the principal is still living
- Failure to properly perfect a security interest in collateral, but the collateral has little to no value
- Failure to perform a timely site visit after a loan has defaulted but there is no loss of collateral
If a lender knows that its file contains deficiencies, but thinks that the deficiencies are not material, it should make sure to explain to NGPC why the deficiencies are not material. The burden of proof is on the lender to prove that the deficiency did not cause the loss or the failure of the business. The NGPC is not going to assume non-materiality or make the argument for the lender.
It is important to understand that this materiality standard does not apply to eligibility issues, which are always material. The SBA and NGPC interpret eligibility strictly. Even minor deviations from eligibility, that a lender might not consider to have contributed to the loss or failure of the business, will render a loan ineligible and result in a full denial of the lender's SBA guaranty. For this reason, it is crucial for lenders to make the correct eligibility determination at origination when analyzing eligibility concerns such as size standards and affiliation issues, whether a business is organized for profit or whether the applicant's business is otherwise eligible for SBA financing.
For questions regarding 10 tab submissions or the materiality standard, contact Katie at 267-470-1207 or at kobrien@starfieldsmith.com.
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EVENTS & SEMINARS
SBA Loan Processing SOP & Policy Changes
How to Protect your SBA Guaranty
Avoiding Lender Liability
Date: March 12 - 14, 2014
For more information about this event and/or to register, click here.
Date: March 17 & 18, 2014
Location: Newport Beach, CA
For more information about this event and/or to register, click here.
Date: March 19 & 20, 2014
Location: Newport Beach, CA
For more information about this event and/or to register, click here.
Date: May 6 - 8, 2014
For more information about this event and/or to register, click here. |
Diane Gallion / Sr. Vice President / The Bancorp Bank
Starfield and Smith has been the exclusive law firm of the Bancorp Bank's commercial division, providing all of our closing needs for both SBA and conventional loans. The team at the Bancorp has collectively worked with Starfield and Smith for more than 10 years . Throughout this working relationship, we have always found them to be on the leading edge of process and industry knowledge. We consider them to be a valued member of our team, and we plan to continue our successful partnership as we continue to grow.
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