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 Spotlight

IN THE SPOTLIGHT

  

Victor A. Diaz
Victor A. Diaz, Esq.

Victor is the Managing Partner of Starfield & Smith's Florida office where he concentrates his practice in the areas of financial, commercial, transactional and property law, with emphasis on the representation of financial institutions involved with SBA lending programs. Victor represents numerous national, regional and local banks, credit unions and development companies. He has closed thousands of commercial transactions from complex real estate and business acquisitions to simple business startups. He is a Designated Closing Counsel for several Certified Development Companies that operate in the State of Florida. He draws on his extensive experience to provide outstanding service and legal representation to his lender clients. Victor has been recognized for possessing the highest levels of professional skills and ethics with an "AV Preeminent Rating" from Martindale Hubbell.

 

In addition to his work as part of the Starfield & Smith team, Victor's interests include economic development, job creation, entrepreneurship and philanthropy.   

  

ADMISSIONS:

  

  • Florida

 

To read more about Victor, click here

  




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FeatureArticle 
FEATURED ARTICLE 

Recently Announced Changes in the Credit Standards for 7(a) Small Loans  

 

By: Kimberly A. Rayer, Esquire  

  

Kimberly A. Rayer
Kimberly A. Rayer, Esquire

On June 12, 2014, SBA issued SBA Information Notice 5000-1314 regarding an update to the 7(a) Loan Program Credit Standards ("Policy Notice").   The Policy Notice, which takes effect on July 1, 2014, specifically amends the credit standards for 7(a) Small Loans (except for SBA Express and Export Express loans) by replacing Subpart B, Chapter 4, Paragraph I.A. through Subparagraph I.A.1 of SOP 50 10 5(F) (the "7(a) Small Loans Credit Amendment").

  

7(a) SBA Small Loans are defined by the SBA as any loan in amount of $350,000 or less.  The changes to the SOP by the 7(a) Small Loans Credit Amendment are intended to streamline the underwriting process for 7(a) Small Loans by placing more emphasis on the SBA credit score in determining creditworthiness of a Small Business Applicant, and removing some of the time consuming credit analysis previously required for 7(a) Small Loans and which are still required for SBA loans over $350,000.

 

The SBA credit score model was previously referred to as the Small Loan Advantage ("SLA") credit score and was used as part of the SLA program "prescreening" process.   The SBA credit score is a combination of consumer credit bureau data, business bureau data, borrower financials, and application data.   It is determined by submitting certain information on the Small Business Applicant through Etran.  If the Small Business Applicant's credit score meets the minimum score set by the SBA (currently 140), then the Lender will no longer be required to complete certain credit underwriting analysis.  Specifically, under the 7(a) Small Loans Credit Amendment, an acceptable Credit Score satisfies the requirements for analysis of the following:

  

  1. The credit history of the applicant (and the Operating Company if applicable), its Associates, and guarantors, including historical performance as well as the potential for long term success (character and reputation will be determined through the appropriate questions on SBA Form 1919 and, if required, SBA Form 912);
  2. The strength of the business;
  3. Past earnings, projected cash flow, and future prospects; and
  4. The applicant's ability to repay the loan with earnings from the business.

  

See 7(a) Small Business Loans Credit Amendment, Subpart B, Chapter 4, Paragraph I. A.1.b). Credit Analysis (first paragraph)  

 

However, even with an approved SBA Credit Score, a Lender should still analyze the Small Business Applicant's ability to repay the loan.  The guidance provided in the 7(a) Small Loans Credit Amendment states that a credit memorandum should still:  (a) describe the business and a brief history of the business, (b) provide a summary of the management team and their experience, (b) provide an owner/guarantor analysis, including personal financial statements (consistent with Lender's non SBA commercial loan standards), (c) confirm collection of business tax returns and verification and reconciliation of the Small Business Applicant's financial data against IRS tax transcripts,  (d) determine equity and proforma debt to worth are acceptable (based on Lender's non-SBA commercial loan standards), (e) provide a list of collateral and its values and (f) describe the effect of affiliates, if any, on repayment ability of the Small Business Applicant of the 7(a) Small Loan.

  

See 7(a) Small Business Loans Credit Amendment, Subpart B, Chapter 4, Paragraph I. A.1.b). Credit Analysis (second paragraph)

 

The final few provisions of the 7(a) Small Business Loans Credit Amendment provides conforming revisions to certain sections of the SOP 5010(5)(F) regarding the requirement to address the verification of IRS tax Transcripts in the Lender's credit memorandum for a 7(a) Small Business Loan.  The applicable language generally reads as follows:

  

"For loans up to and including $350,000, the lender is required to confirm in its credit memo collection of business tax returns, and verification and reconciliation of the applicant's financial data against income tax data (received in response to IRS Form 4506-T, Request for Transcript of Tax Return) prior to submitting the application to SBA. If the business has been operating for less than 3 years, lender must obtain the information for all years in operation."

  

See 7(a) Small Business Loans Credit Amendment, Replace Subpart B, Chapter 5, Paragraph III.D. 1. a), Chapter 6, Paragraph I.A.2.t) and Chapter 7, Paragraph IV.F.3.a)
For any questions on the 7(a) Small Loans Credit Amendment, please contact Kim at 267-470-1208 or at [email protected].

   

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EVENTS & SEMINARS Events

 

Presented By:  CTAGGL
Date:  August 18 - 20, 2014
Location:  Westin Riverwalk, San Antonio, Texas

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

Presented By:  FLAGGL
Date:  September 17 - 19, 2014
Location:  Rosen Shingle Creek Resort, Orlando, FL
 
For more information about this event and/or to register, click here.

NAGGL 2014 Annual Conference

Presented By:  NAGGL
Date:  October 28 - 30, 2014

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


Sylvie S. Boesser / Managing Director - SBA / Talmer Bank & Trust

 

I have had the pleasure of working with Ethan Smith and David Starfield for over 10 years starting with the attendance of many of their excellent training classes. Most recently, their staff's experience in dealing with SBA's purchase process not only helped our bank save a large guaranty purchase request, but also helped to resolve various FDIC loss share issues we faced. Their training and on-going assistance throughout the years has allowed me to enrich my SBA lending skills. These skills allow me to both maintain the integrity of our SBA lending program and service our small business marketplace.  

 

                                          
OUR PRACTICE AREAS

 

SBA Compliance Audits  |  SBA Guaranty Purchase Reviews & Recovery

SBA Franchise Reviews |  SBA Lender Training

Regulatory Compliance & Lender Oversight |  Loan Documentation & Closing

Commercial Litigation |  SBA Portfolio Management

SBA & Conventional Creditors' Rights 

 

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