The SBA's Regular 7(a) Guaranty Purchase Package Tabs (commonly known as the "10 Tab") identify the documentation that the SBA requires for its review and determination that it will honor its guaranty of a loan. By the time a lender is preparing its 10 Tab, however, it may find that it has taken an action - or failed to take an action - that could jeopardize all or a portion of its guaranty. There are some simple actions that can be taken, or should not be taken, to increase the likelihood that the guaranty will be honored without repair.

Don't do that:  Liquidate collateral without properly inventorying and appraising.

Do this instead:  Obtain a listing of all remaining business personal property collateral. Reconcile the list against the list of equipment and fixtures obtained at closing (the SBA 7(a) Loan Authorization Boilerplate requires the lender to obtain such a list at loan origination, with description and serial numbers for items valued at $5000 or more).  Obtain a valuation of the business personal property; this value is needed to support the value obtained from liquidation or the decision to abandon the collateral, in accordance with the provisions of SOP 50 57.  The equipment list, reconciliation and appraisal are required by Tabs 8 and 9 of the Guaranty Purchase Package.

Don't do that: Conduct lengthy work-out or modification discussions with the borrower without performing a site visit.

Do this instead:  As the lender works with the borrower to try to keep a loan in (or return a loan to) performing status, the lender should be mindful that a payment default occurs on the date when the next payment is due and is not made, and should also consider whether a non-payment default has occurred.  SOP 50 57 requires the lender to perform a site visit within 60 days of an uncured payment default, within 15 days of an adverse event that caused the loan to be classified in liquidation status, or sooner, in either case, if the collateral could be removed, lost or dissipated.  Failure to perform a timely site visit, even if the failure occurred because the lender was working with the borrower, shifts to the lender the burden of proving to the SBA that its failure to perform the site visit on a timely basis did not contribute to any loss. If collateral is unavailable for liquidation and the lender cannot provide evidence of a timely site visit, a repair to the guaranty is likely.  Therefore, a lender can best protect itself by performing a site visit while it continues to work with the borrower.

Don't do that:  Ignore requirements of the 10 Tab because items are missing from the loan file.

Do this instead:  Address deficiencies or other issues in the guaranty purchase package. The SBA wants lenders to explain missing documentation; if a 10 Tab requirement is unmet, the lender should explain why - or, better still, find a way to meet the requirement. For example, if an appraisal from origination is missing, a forensic appraisal might be obtained; if a timely site visit was not performed, consider whether a personal property appraisal obtained within the required timeframe might serve as a site visit.  It is also important to resist the temptation to overinclude. The Guaranty Purchase Package Tabs set out the SBA's requirements for the guaranty purchase request; this is the information that the SBA must see.  While certain events and decisions may require explanation, providing the SBA with additional documentation from the loan file may create issues by providing the SBA with additional opportunity to second guess the lender's decisions and actions with respect to issues that the SBA would not otherwise consider.  Addressing only the SBA's guaranty purchase requirements eliminates review of issues outside of those requirements.