SBA Lending Matters Newsletter
A Word from Arne

The government has turned the last page of another fiscal year, and once again the Small Business Administration has marked the milestone with a record-breaking number of loans. This accomplishment was aided by many of us involved in the SBA lending industry when the agency’s $18.75 billion funding capacity for 7(a) loans was completely depleted 60 days prior to year-end. Due to conversations with legislators and their quick action, Congress promptly increased the agency’s lending authority to $23.75 billion. The proposed increase was well received by legislators largely because the SBA continues to operate at a zero subsidy level. User assessments (i.e., guaranty fees and ongoing service fees) provide SBA with the means to support its administrative and funding activities as well as potential losses. I firmly believe that the Small Business Administration is an outstanding example of how government can operate effectively while serving its constituents.

Along the subject of prompt action, remember that SBA requires lenders to report payment activity to a reporting agency – and that we have an excellent resource who works with Holtmeyer & Monson clients to simplify their compliance with this requirement.

This is just another way that H&M helps lenders smoothly address all SBA-related matters. If you run into any questions or issues that you’d like us to clarify, please don’t hesitate to reach out. In addition to supplying answers and explanations, we can also serve as your out-of-house SBA loan department as a qualified Lender Service Provider (and a Preferred Service Provider of the Independent Community Bankers of America). We’re happy to fill these needs for your institution.

Featured Article

Banks turn to Online Commercial Lending Center to Meet Customer Needs
by: Kristin Zell, Lending Solutions, ProfitStars

It’s no surprise to banks that today’s technology offers them new avenues to drive loan growth. But how does your bank exploit those opportunities without compromising its credit culture or overwhelming resources? And those are just two of the issues at hand. As we all know, today’s world is full of consumers who expect service to be quicker and easier – even instant – and the same holds true for your business borrowers. We know that business borrowers:

  • Are increasingly turning to technology to find credit – they don’t always have time to come into a branch or sit down with a lender.
  • Want a more efficient experience – they can’t afford a long, drawn-out loan decision.
  • Want their business financing to fit within their lifestyle.
  • Need the whole process to be simple. Period.

Unfortunately, banks are struggling to keep up. In 2014 survey of financial institutions conducted by ProfitStars Commercial Lending Solutions, only 8% said they offer an online loan application for business borrowers. That means a business actively seeking funding on their website doesn’t have the option even to submit a loan request. ProfitStars is working to help change this situation with the Commercial Lending Center.

Commercial Lending Center is a simple and secure way to help businesses in your community get quick, convenient access to loans from your bank. The Internet, smart phones and social media have transformed the way banks and borrowers can interact. Capitalizing on the variety of new channels available to reach borrowers, Commercial Lending Center takes the entire process online. Here’s how it works. A bank-branded online portal puts you in the driver’s seat, allowing businesses to request a loan directly from your bank’s website anytime, anywhere – on any device. And the streamlined workflow process gives you the ability to respond faster to your prospects. Businesses use a simple online application, provided by Commercial Lending Center, to request financing. The application is then routed to the appropriate lender, accelerating the approval process. The business owner receives a response immediately, which effectively takes the deal off the street and places it in your hands.

Offering loans online gives your customers and business prospects the opportunity to get the working capital they need to grow faster and more easily than ever before – and all the credit goes to your bank.

Commercial Lending Center easily covers the top three concerns of your customers:

  • The possibility of rejection – if an inquiry does not fit the bank’s lending criteria, you have the option of referring the prospect to the ProfitStars LendingNetwork and its alternative financing options. Should the prospect receive funding through the LendingNetwork, referral fees will be paid to your bank.
  • Decisioning will take too long – with the rules-based triage engine of the Commercial Lending Center, the business will receive immediate feedback on the status of their application.
  • The bank is unavailable when needs arise – with the Commercial Lending Center’s support, your bank will be available 24/7 to cater to business borrowers. 

Less time. Less paperwork. Quick Response. Why wait? Engage existing and new customers by taking action TODAY. Offer online lending with Commercial Lending Center and give businesses access to a variety of loans to meet their funding needs.

ProfitStars Commercial Lending Solutions will be hosting a webinar about the Commercial Lending Center on Thursday October 29th at 3pm EST. Registration is free.

Or, get a personalized demo for your bank. Contact Kristin Zell at 815-722-3932 or [email protected]

Regulatory Corner

Changes in the Credit Elsewhere Test
Changes in provisions of the Credit Elsewhere Test (CET) became effective 10-01-15 with the enactment of H.R. 2499 (which also increased funding to the SBA). Historically, lenders could satisfy the CET requirements and justify the justify the use of the SBA Full Faith and Credit Guaranty if certain circumstances existed, including: 1) the proposed loan exceeded the lender’s legal lending limit; or 2) the lender’s liquidity depended upon the ability to sell the loan guaranty in the secondary market; among others. The new changes now restrict lenders from using the legal lending limit or the liquidity gained from selling the loan guarantee as the sole justifications for meeting the Credit Elsewhere Test.

Lenders now must justify the issuance of an SBA Guaranty as a service to the borrower, citing circumstances such as: 1) the borrower requires a longer loan maturity than the lender would offer conventionally: 2) there’s a collateral shortfall; or 3) the lender’s policy restricting loans to start-up businesses. Lenders must document their justification(s) in lender credit memos in order to avoid any complications in the event of a Guaranty claim.

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

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SBA Hot Topic
Currently, there is no ongoing SBA service fee on 7(a) loans of $150,000. Effective 10-01-15, the ongoing service fee on 7(a) loans greater than $150,000 was reduced to .473%. Additionally, the SBA enacted a 50% reduction in the guaranty fee for 7(a) loans greater than $150,000 approved under the Veterans Advantage Program. Fee relief confirms the agency’s continuing ability to operate without subsidies.


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