October 30, 2018

SBA Hot Topic Tuesday — Offer your Feedback on SBA’s Proposed Rule Changes

By Bob Coleman
Editor, SBA Hot Topic Tuesday

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The key topics for SBA lenders include reinstatement of the personal resource test, limiting lender and agents fees, and changes to affiliation rules.

Poll results will be published next week and posted on SBA’s website as industry comments.

I have attempted to simplify the proposed rule for this poll.

To understand all of the finer points read the proposed rule

Credit Elsewhere and the Personal Resource Test
When an owner of 20 percent or more has liquid assets that exceed stated thresholds, SBA is proposing to require an injection of cash from any such owner to reduce the SBA loan amount.
(The resources of an owner who is an individual include the resources of the owner’s spouse and minor children.)

$350,000 or less — Applicant must inject liquid assets 1 ¾ times above the loan amount, or $200,000.
$350,001 to $1 million — Applicant must inject liquid assets 1 ½ times above the loan amount, or $1 million.
Over $1 million — Applicant must inject liquid assets 1 times above the loan amount, or $2.5 million.

Lender Packaging Fees
Regardless of what the fee is called (e.g., a packaging fee, application fee, etc.), the Lender would be permitted to collect a fee from the applicant that is no more than $2,500 for a loan up to and including $350,000 and no more than $5,000 for a loan over $350,000.

Loan Agent Fees
SBA proposes to limit loan agent packaging and referral fees paid by the applicant.
Less than $350,000 — 2.5% of the loan amount of $7,000, whichever is greater.
$350,001 to $1 million — 2% of the loan amount or $15,000 which is greater.
Over $1 million — 1.5% of the loan amount or $30,000, whichever is greater.

The Two-Master Rule
SBA proposes to eliminate the limited exception to the ‘‘two master prohibition’’ and prevent an Agent, including an LSP, from providing services to both the Applicant and the SBA Lender and being compensated by both parties in connection with the same loan application.

Poultry Lending
SBA proposes to take away a PLP lender’s right to approve agreements between a poultry farmer and a large poultry producer (integrator) in determining if an affiliation relationship exists.
“ . . .the determination of whether the farmer is an independent small business but, due to the complexity of the typical integrator agreement, SBA Lenders may be uncertain as to the correct outcome of the affiliation analysis for such a business relationship. SBA is considering reviewing these agreements and making the affiliation determination itself so that SBA Lenders will not be reluctant to make loans to small poultry farmers operating under such agreements.”

Affiliation Rule
The proposed rule includes changes to SBAExpress, Export Express, loans to qualified employee trusts, microloan intermediaries, and the definition of affiliation.
Do you wish to comment on these or any other change?