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Starfield & Smith, Welcomes
Sarah K. Minteer
to the firm!
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Sarah is an associate in the firm's Fort Washington office. She concentrates her practice on commercial financing, real estate and corporate law with a focus on commercial lending and government guaranteed lending. In that capacity, Sarah 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. She assists commercial lenders with due diligence, loan documentation, closing issues and with the drafting of corporate and finance documents related to conventional loans and government guaranteed loans through the SBA 7(a) loan program. As a closing attorney for commercial lenders, Sarah prepares and reviews loan files for SBA 7(a) and conventional commercial loans, confers with loan processors and in-house counsel, and drafts, analyzes and negotiates loan documents. She also assists lenders with loan modifications and loan work outs.
ADMISSIONS:
To read more about Sarah, click here.
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FEATURED ARTICLE
Best Practices: Working Out with the SBA
By: Greg T. Kupniewski, Esquire
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| | Greg T. Kupniewski, Esquire |
Whenever a client asks a lawyer a question, the answer almost always starts with "it depends." Lenders frequently ask us whether SBA approval is required for a proposed workout. The short answer is: it depends on the terms of the workout. If any term of the workout would require SBA approval under the Lender's Matrix, then SBA approval is required of the workout. If each term of the workout is within the Lender's delegated authority under the Matrix, then SBA approval is not required to proceed with the workout.
For example, if the proposed workout involves the release of a guarantor, the SBA needs to approve it. Conversely, if the workout involves the release or substitution of collateral, SBA approval of the workout is not necessary. This is because the release of a guarantor requires SBA approval under the Lender's Matrix, but a release of collateral does not.
Typically, workouts grant multiple concessions to the borrower. If any one of those concessions requires SBA approval, such as the compromise of the principal balance, the entire workout requires SBA approval.
The Matrix, however, does not hold all the answers for a lender that is contemplating a workout. For starters, workouts only arise once a loan is in liquidation. That means the lender must place the loan in liquidation status with the SBA. A lender can place a loan in liquidation status once defaults occur that are sufficient to permit the lender to accelerate the note. Once the loan is in liquidation status, the loan must be repurchased from the secondary market. The secondary market repurchase streamlines the workout process because it eliminates the need for the lender to seek investor approval for any potential workout plan.
Once these prerequisites are met, the lender can proceed with the workout process itself. The SBA has certain requirements regarding both the due diligence that is necessary for, and the terms of the workout agreement. It is imperative that the lender collect all of the required due diligence and document the workout agreement properly. If prior SBA approval is not required for the workout, the first time the SBA will review the workout file is at during the guaranty purchase process. If there is any material flaw in the due diligence or other documentation, the lender could face a repair or even a denial of the SBA guaranty.
The SBA requires lenders to obtain the past two years of tax returns for all the individuals and business entities involved. The lender also needs to obtain the most recent year-end financial statements for the borrower and a copy of the current financial statement signed under penalty of perjury.
The SBA also requires that workouts be evidenced by a written agreement. There is no specific form for a workout agreement, but the agreement must contain certain terms, such as new consideration from the borrower, a confirmation of the events of default, a confirmation of the collateral and other specific terms.
If done properly, a workout can be a win-win for the borrower and the lender. But the lender must pay attention to the detail because, if the lender doesn't meet all of the SBA's requirements, it could wind up effectively trading its SBA guaranty for a failed workout.
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EVENTS & SEMINARS
10 Pitfalls in Determining 7a Eligibility ** NEXT WEEK ** Presented By: SBA West Virginia District Office Date & Time: March 10, 2015 @ 10:00am EST Location: Webinar Instructor: Ethan W. Smith For more information about this event and/or to register, click here.
** NEXT WEEK **
Date: March 11 - 13, 2015
Location: Seven Springs Mountain Resort, Champion, PA
For more information about this event and/or to register, click here.
Date: March 23-26, 2015 Location: Long Beach, CA
For more information about this event and/or to register, click here.
SBA Lending Technical Conference
Presented By: NAGGL Date: May 5 - 7 , 2015 Location: San Antonio, Texas
For more information about this event and/or to register, click here.
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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.
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