SBA Lending Matters Newsletter
A Word from Arne

We’re now halfway through 2015, and all of us at Holtmeyer & Monson hope that everyone is enjoying a great year. This point in the calendar is always a good time to update our readers on some critical things happening at the US Small Business Administration. Following are a couple of the most common questions and/or issues we’re currently hearing and encountering as we work with H&M clients:

  • PARRiS Analytical Reviews: The SBA’s Office of Credit Risk Management typically conducts remote analytical reviews using the risk measurement methodology and ‘scoring guide’ known as PARRiS (Portfolio performance, Asset management, Regulatory compliance, Risk management and Special items). Per this protocol, a well-defined set of metrics is applied to the lender's SBA loan portfolio to highlight areas of concern, as well as to identify those that may require additional oversight. When the SBA selects a bank for a review, it will send a large, detailed report with areas/issues that banks must respond to. We know first-hand that it can be overwhelming for bankers who are unsure about how to efficiently facilitate a response (and not waste their time). If your institution receives a notification that it will be subject to a PARRiS review, please contact us immediately. Having assisted several clients with the process, we’ll be happy to share our input. We gladly remove the unknowns and lead institutions through the process of responding effectively – all at no additional charge to our customers.
  • Business Credit Reports: Previously, we noted that the SBA requires lenders to report payment activity to a credit reporting agency – a requirement that has been in place for decades. This is an area that has historically been largely overlooked by lenders. Actually, it is critically important and lately it appears to be on the SBA’s radar. If a lender fails to comply with this requirement and cannot demonstrate a credit report history for the loan, ultimately the SBA loan guarantee could be jeopardized. To help our clients meet this requirement, we’ve partnered with an excellent source that works directly with H&M clients, free of charge, to ensure that payment activity is properly reported. Contact us for more information and please be reminded that this matter requires your prompt attention.

If you have an SBA-related question or issue, please call upon us here at Holtmeyer & Monson. As a qualified Lender Service Provider, we serve as an out-of-house SBA loan department for banks all across the country. In fact, we’ve been named a Preferred Service Provider by the Independent Community Bankers of America. We would be happy to answer any questions, and fill any SBA-related needs for your institution.

Featured Article

SBA loan program's cap likely will be increased to avoid lending shutdown
by: Kent Hoover, Washington Business Journal
Read the Article

Our comments: The SBA flagship 7a program is enjoying an unprecedented year, with gross loan approvals through 06-27 reaching a record high at nearly $16 billion. As this article indicates, the current FY budget includes $18.75 billion to fund 7a loans. With program usage very strong, that cap could be met in August, well before the new fiscal year begins October 1. Congress is taking steps to raise the current FY authorization to $20.5 billion. It is clear that our legislators appreciate the value SBA provides to our economy. Just last week I joined a call in which participants confirmed that Congress is indeed committed to increasing the cap. Read this article for more specifics.


Regulatory Corner

New, Unpublished Requirement – Franchise Affiliates
If your bank is involved in franchise financing, please take note.  Recently, we came across a confusing regulatory change (which seems very onerous) involving franchise certifications for affiliates. Our client’s borrower is financing a Denny’s franchise. The borrower’s principal also has minority ownership in other franchises. We are being told that the borrower’s SBA application must include franchise certifications and/or franchise agreements for all of the principal’s other franchise units. The SBA must ensure these documents are intact – a cash flow financial analysis is no longer enough. Be aware of this requirement. We’re working directly with the SBA to clarify this issue.

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SBA Hot Topic
Frequently, modifications are required for an SBA 7a Authorization after issuance, but before loan closing. In most cases, such modifications are not anticipated, and we regularly handle them for our clients on an “expedited” basis to accommodate a loan closing. SBA has notified us that an “expedited request” will now require a MINIMUM of 24 hours to process, and that no additional expedited requests will be honored for the same loan closing.

 

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