SBA Lending Matters Newsletter
A Word from Arne

Spring brings some excitement for us: ICBA Community Banking LIVE Convention and Expo. The 2016 version will be held in New Orleans March 6-10. This is always a great event, filled with interesting opportunities to take the pulse of our industry and learn about new developments. A wide array of very informative topics will be covered in workshops and educational sessions throughout the Convention. In addition, the Expo will feature a variety of industry-related products and services designed to bring real value to community banks. If you’re attending this year, please be sure to visit us at Booth 724. And by all means, plan to attend our Executive Panel workshop on Wednesday at 7:30am. It’s titled “Making SBA Lending Profitable” and three H&M customers will be sharing practical lessons and best practices that you can use to enhance your SBA lending program. We look forward to seeing you in New Orleans!

Protect your guarantees
Loan defaults, liquidations, and guaranty claims are a reality of our business, and processing these transactions can be confusing and frustrating. SBA loan defaults can occur for a variety of reasons, including the loss of a key customer or market, personnel deficiencies, debt overload and poor decision making. The SBA guaranty claim process involves a very specific protocol, and navigating it can be onerous. This reason alone prompts bankers to work with a qualified Lending Services Provider like H&M. Our guaranty claim department is led by Dustin Powell, a recognized expert in this area. If you have SBA loans that require this specialized process, please call him at 800.340.7304 to discuss your specific needs or issues.

Holtmeyer & Monson invites your inquiries and we are happy to answer them. That’s one of our primary responsibilities serving as an out-of-house SBA loan department for community banks. We’ve likely encountered your questions before – and if not, we have relationships with experts at the SBA who can provide the information. Just one more benefit of relying on the Preferred Service Provider of the Independent Community Bankers of America.

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Featured Article

How Specialty Financing Helps Banks Keep Customers and Add Small Business Borrowers
by: Mark Cerminaro, Chief Revenue Officer, RapidAdvance

Small businesses employ half of the private sector workforce in the U.S. and create nearly two of every three new American jobs – and loans from community banks play a vital role in supporting their hard work and success. But what can you do when a business doesn’t qualify for credit under your guidelines? Or when a borrower has working capital needs in excess of what your bank is able to provide? Due to realities like these, community banks’ loan approval rate for small businesses is 49%, according to January 2016 statistics.

A growing trend in small business lending
Faced with such situations, more and more banks are turning to specialty financing solutions from a trusted provider as a way to help their customers today and know they’re in good hands until they can graduate into more traditional lending products. Utah-based AmBank is a prime example. The community bank contacted RapidAdvance when a small business customer experienced a cash flow crunch, but lacked the equity required for a bank loan. AmBank wanted to take care of its customer and preserve the relationship. RapidAdvance helped it do just that.

The customer quickly received $25,000 to cover immediate payroll needs. Some time later, the business received $50,000 to put toward operating capital while an SBA loan was being finalized. Bridging the gap in capital with this type of loan can be critical for a small business needing interim funds during a lengthy bank/SBA approval process, or assistance with issues such as tax liens and other complications.

RapidAdvance also proved to be a win for the bank, as well as the customer. AmBank could refer the company without facing financial, third-party or reputational risk. And, RapidAdvance has a firm policy of never cross-selling products to the bank’s customer.

How the RapidAdvance process works
When a bank identifies a customer who needs working capital or wants to pursue timely growth opportunities, they can either contact their RapidAdvance personal account representative, or simply provide the RapidAdvance contact information to the customer.

The RapidAdvance personal account representative handles everything, working directly with the bank or applicant to complete the transaction. The first priority is to recommend the best solution for the customer, based on their operational model, repayment requirements and other information provided by the applicant. Minimal documentation is required for underwriting, financing can be provided in as little as 24 hours and the account representative is available to answer any questions or provide assistance.

RapidAdvance can provide up to $1,000,000 of flexible funding in the form of small business loans, business cash advances, lines of credit and SBA bridge loans that fit the various operating and repayment needs of companies in many industries including challenging ones such as retail, hospitality, construction and healthcare. Approvals are not contingent upon collateral and the company’s terms and rates are very competitive.

From start to finish the loan process spans only a few days and involves:

  • A simple, secure online application process
  • Underwriting that requires minimal documentation
  • Quick approval not contingent upon collateral
  • Funding in as little as 24 hours

Borrowers report being happy to work with RapidAdvance. Banks appreciate the great service RapidAdvance provides to their customers from day one. And having this added financing option available for them helps banks retain more customers and acquire new ones (instead of losing a valued banking relationship to a competitor down the street).

This is a good time to consider how a specialty financing provider might complement your small business lending offerings. RapidAdvance can help you meet customers’ needs today and keep those relationships close until the businesses are ready to move into your bank’s traditional loan products. To learn more about the RapidAdvance Program for Banks, call 240.514.1967.

RapidAdvance is BBB accredited with an A+ rating, fully compliant with applicable state and federal regulations including FCRA and ECOA, and has provided nearly $1 billion in financing to 38,000+ small and medium businesses.

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Regulatory Corner

The Goodwill Factor
An important use of SBA guaranteed loans is business acquisition financing, which almost always includes an element of goodwill. Intangible assets such as customer lists and non-compete agreements are esteemed by buyers and seller alike, but can be difficult to value and finance. In order to use SBA loan programs to finance the goodwill inherent in most business acquisitions, certain established requirements must be met. Below are highlights of these requirements.

  • If intangible assets exceed $250,000, an independent valuation from a qualified source must be provided to support the purchase price and the financing need. In cases where the intangible assets do not exceed $250,000, Holtmeyer & Monson is qualified to provide business valuations.
  • Equity of 25% must be provided for the Preferred Lenders Program (PLP) or SBA Express loan approvals. This equity may include seller financing placed on full standby (no payments during term of SBA loan) for a minimum of two years.
  • The sale must be identified as either an asset purchase or stock transaction.

Please call your Holtmeyer & Monson representative for additional details on this issue.

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SBA Hot Topic
SBA loans that involve a construction phase are often funded by a bank’s conventional loan product, which is secured after authorization of the SBA loan. Funding the SBA loan will then retire the interim conventional financing. The SBA very specifically requires this interim funding to be used exclusively for hard construction costs (i.e., direct materials and labor). Soft costs (i.e., origination fees and interim interest expense) must be deferred until interim funding is converted to permanent financing.

 

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