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| | Kimberly A. Rayer, Esquire |
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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.
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: The "Art" of Ordering Public Records Searches
By: Ethan W. Smith, Esquire
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| | Ethan W. Smith, Esquire |
SBA Lenders often wonder about what public records searches they must order as part of their due diligence when processing an SBA loan. Unfortunately, the SBA does not specify any requirements for performing searches, instead specifying the requirements for collateral and underwriting and leaving it up to lenders to engage in "prudent lending" to fulfill the SBA's requirements. While this lack of express requirements may seem challenging to lenders, the reality is that every loan is different, and a static set of search requirements will not provide the degree of flexibility that lenders will need to adequately protect the interests of both the lender and the SBA. Invariably, such an approach will likely be either over-inclusive, thereby wasting borrower's money on unnecessary searches, or under-inclusive, thereby exposing the lender and the SBA to unnecessary risk.
When approaching the question of what searches should be ordered, lenders should keep in mind that there are essentially two rationales for ordering searches of the public records as part of a lender's due diligence: 1) confirming lien position; and 2) credit.
With respect to lien position, the analysis is relatively straightforward - searches should be ordered that will confirm that the lender has obtained the requisite lien position on the collateral set forth in Section H. of the Loan Authorization. Accordingly, searches should be ordered on all parties, and in all locations, to confirm that the lender's lien will only be subject to those liens permitted in the Authorization. What this means for lenders, is that if they are required to take a first lien on Business Personal Property ("BPP") that will be perfected by the filing of a UCC-1 Financing Statement, the lender must order searches to confirm that its UCC will not be subject to any other liens. You will need to run a UCC search (ideally, after you have pre-filed your UCC against the borrower) against the borrower and, in a change of ownership, against the seller and any other party pledging BPP collateral. Lenders will also need to run tax-lien and judgment searches against these same parties to ensure that no tax or judgment liens have been levied against the BPP collateral. For real property collateral, a title insurance commitment or title search must be performed in the county where the real property is located to ensure the lender's lien will have the requisite priority. Lenders would do well to keep in mind that a title search will include tax-liens and judgments against the owner of the real property so as to avoid ordering duplicative searches.
With respect to credit considerations, the analysis is less straightforward. What searches do you need to run when your lien position is not at issue? What are the credit issues that a prudent lender should be concerned with? Across the spectrum of risk, lenders vary from one extreme of merely relying on a credit report to address any issues that may affect the lender's credit decision, to the other extreme of ordering a full set of searches, including pending litigation and other non-lien related searches, on each and every party to the loan. Lenders must balance the cost of such searches with the potential harm of relying on a credit report which may or may not be entirely accurate. On the one hand, lenders do not want to put borrowers to unnecessary expense. Nor do they want to create any "false-positive" issues. On the other hand, lenders might want to know about a pending litigation or discharged bankruptcy against the borrower or its principals since it may say something significant about the parties' ability to repay the loan in the future. Ultimately, whatever policy the lender decides to employ, it should be at least as stringent as its policy for non-guaranteed loans. By becoming proficient at the "Art" of ordering searches, lenders can minimize expenses while providing maximum protection to themselves and the SBA guaranty.
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SEMINARS & EVENTS
Avoiding Lender Liability Presented By: SBA West Virginia District Office Instructor: Ethan W. Smith Date: May 17, 2016 at 11:00am EST Location: Webinar
For more information about this event, and/or to register, click here.
Closing & Funding the SBA Loan Presented By: NAGGL & Georgia Lenders Quality Circle Instructor: David W. Starfield Date: May 17, 2016 & May 18, 2016 Location: Georgia State University, Atlanta, Georgia
For more information about this event and/or to register, click here.
WPASGL 2016 Quality Circle Presented By: Western Pennsylvania Association for SBA Guaranteed Lending (WPASGL) Instructor: Kimberly A. Rayer Date: May 22, 2016 through May 23, 2016 Location: Nemacolin Woodlands
For more information about this event, and/or to register, click here. | |
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WHAT OUR CLIENTS SAY...
Donald Tyson / Senior Vice President / The Bancorp Bank
When The Bancorp Bank made the strategic decision in 2009 to become a national SBA lender, our first call was to Ethan Smith at Starfield & Smith. I had worked with Ethan in deals where he represented the SBA lender and was impressed by the firm's capacity to handle a particularly complicated management buy-out with multiple layers of financing provided by multiple firms. This deal involved a credit line, an SBA term loan, a mezzanine loan, and private equity from multiple investors, not to mention an obstinate seller. The legal side of the deal could not have gone more smoothly. Bancorp's SBA team has been very successful and we have relied on the guidance of Starfield & Smith every step of the way. They work to earn our trust every day and we could not be more pleased with our relationship with them. They have a well earned national reputation for expertise in SBA lending that is unmatched.
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