SBA Hot Topic Tuesday — Takeaways from Today’s SBA 7(a) Lender Call

April 10, 2018

By Bob Coleman
Editor, SBA Hot Topic Tuesday

SBA Hot Topic Tuesday — Takeaways from Today’s SBA 7(a) Lender Call

View the SBA 7(a) Connect Call April 2018 Presentation

Every quarter SBA hosts a quarterly call for the lending community Here are the takeaways from today’s SBA’s 7(a) Connect Call held at 3 p.m. Eastern

Bill Manger, Associate Administrator’s five points:

SBA has a new Logo! Decals will be available for your “store front” during Small Business Week.
SBA announces a goal to increase lending in HUBZones and Rural Areas by 5% in loan numbers over the next two years
Encourage lenders to sign up on lender match.
In June, SBA will be training lender relations specialists on ETrain and SBA One to support the lender community
SBA 7(a) and 504 Charge-off rate are at historic lows For FY 2017

Charge-0ff Rates
7(a) 0.80%
504 0.41%

Purchase rates
7(a) 0 .79%
504 regular loans 0 .67%

Other Call Takeaways

Credit Elsewhere Clarification — Lenders must include the reason/need for desired credit in credit memo.
SBA has increased the minimum percentage ownership at which owners are subject to personal liquidity consideration from 10% to 20%. As a reminder, the liquidity of the owner includes the liquid assets of the owner’s spouse and any minor children. Spouses must sign the SBA Form 413 or Banks Personal Financial Statement (PFS) even if they are a non-owner of the business. Signing of the PFS does not obligate spouse for any responsibility of the loan.

Minimum Equity Requirements — For a change of ownership transaction between existing owners (“partner buyout”) on 7(a) loans:
the remaining owner(s) must certify that he/she has been actively participating in the business operation and held the same ownership interest in the business for at least the past 24 months ; and
the business balance sheets for the most recent completed fiscal year and current quarter must reflect a debt-to-worth ratio of no greater than 9:1 prior to the change in ownership.
In the event the Lender is unable to document that both (1) and (2) above are satisfied, the remaining owner(s) must contribute cash in the amount of at least 10% of the purchase price of the business, as reflected in the purchase and sale agreement.

25 Year Debenture – Overview
Launch date – April 2, 2018; Federal Register Notice and Information Notice will announce program change officially and provide start date.
SBA Information Notice 5000-17058 was released on April 5, 2018.
25 year debenture will provide small business borrowers with more choice in financing their long term capital projects.
25 year debenture will provide longer repayment term and lower borrower’s monthly loan payments.
20 year 504 loan cannot be converted to 25 year 504 loan after loan approval.
Program forms and the Wizard and SBA systems have been updated.

No Regulatory Change on Third Party Loan Term
A Third Party Loan (TPL) must have at least 7 years when the 504 loan is for a term of 10 years and 10 years when the 504 loan is for 20 years.” SBA will use the 10 year minimum maturity for a TPL to a 504 loan with a stated 25 year maturity.

View the SBA 7(a) Connect Call April 2018 Presentation