During our time of economic challenges, it seems that SBA has chosen the wrong time to tighten up the rules regarding Business Acquisition financing! Effective March 01, 2009, SBA has implemented the following changes regarding the financing of GoodWill related to a business acquisition:
"In no event may the amount of goodwill financed by an SBA guaranteed loan exceed 50% of the loan up to a maximum of $250,000".
This means, that the seller will need to step up to the financing plate and take a subordinate lien position to the bank and SBA on 50% of Goodwill that is part of the sales price of the business.
For loan applications where the request for 7(a) financing of goodwill exceeds the limits identified above, and the seller is not able to finance the GoodWill,SBA will require the lender to complete an extensive host of additional analysis to determine if it is feasible. One requirement (on all business acquisitions), is the business appraisal. This must be ordered by the bank from an independent, approved appraiser. Once value has been determined to be acceptable, the lender MUST submit the loan request to SBA's Standard 7(a) Loan Guaranty Processing Center.
What does this really mean if the seller cannot finance a minimum of 50% of Goodwill?
A much longer process, than what a preferred lender would normally take, based on our expertise and delegated authority from SBA. It means that SBA is taking away our ability to make prudent lending decisions, which is why they (SBA) created the Preferred Lender Program (PLP) in the first place!
This change in "process" will be in place through August 31st, 2009, so SBA can obtain further data regarding goodwill.
Seems to me that SBA has lost IT'S Goodwill, at a time when we need it most.
Saturday, February 28, 2009
Monday, February 23, 2009
Important Scam Alert from SBA
News Release
PRESS OFFICE
Release Date: February 18, 2009
Contact: Mike Stamler (202) 205-6919
Release Number: 09-11
Internet Address: http://www.sba.gov/news
SBA Warns of Fraudulent Attempts to Obtain Bank Account Information from Small Businesses
WASHINGTON – The U.S. Small Business Administration issued a scam alert today to small businesses, warning them not to respond to letters falsely claiming to have been sent by the SBA asking for bank account information in order to qualify them for federal tax rebates.
The fraudulent letters were sent out with what appears to be an SBA letterhead to small businesses across the country, advising recipients that they may be eligible for a tax rebate under the Economic Stimulus Act, and that SBA is assessing their eligibility for such a rebate. The letter asks the small business to provide the name of its bank and account number.
These letters have not been sent by or authorized by the SBA, and all small businesses are strongly advised not to respond to them.
The scheme is similar in many ways to e-mail scams often referred to as “phishing” that seek personal data and financial account information that enables another party to access and individual’s bank accounts or to engage in identity theft.
The SBA is working with the SBA Office of Inspector General to investigate this matter. The Office of Inspector General asks that anyone who receives such a letter report it to the OIG Fraud Line at 1 (800) 767-0385, or e-mail at OIGHotline@sba.gov.
PRESS OFFICE
Release Date: February 18, 2009
Contact: Mike Stamler (202) 205-6919
Release Number: 09-11
Internet Address: http://www.sba.gov/news
SBA Warns of Fraudulent Attempts to Obtain Bank Account Information from Small Businesses
WASHINGTON – The U.S. Small Business Administration issued a scam alert today to small businesses, warning them not to respond to letters falsely claiming to have been sent by the SBA asking for bank account information in order to qualify them for federal tax rebates.
The fraudulent letters were sent out with what appears to be an SBA letterhead to small businesses across the country, advising recipients that they may be eligible for a tax rebate under the Economic Stimulus Act, and that SBA is assessing their eligibility for such a rebate. The letter asks the small business to provide the name of its bank and account number.
These letters have not been sent by or authorized by the SBA, and all small businesses are strongly advised not to respond to them.
The scheme is similar in many ways to e-mail scams often referred to as “phishing” that seek personal data and financial account information that enables another party to access and individual’s bank accounts or to engage in identity theft.
The SBA is working with the SBA Office of Inspector General to investigate this matter. The Office of Inspector General asks that anyone who receives such a letter report it to the OIG Fraud Line at 1 (800) 767-0385, or e-mail at OIGHotline@sba.gov.
Tuesday, February 17, 2009
Updated~ Economic Recovery Act for SBA Loans
Here is the latest on the SBA's portion of the bill. It has NOT been implemented yet, but is anticipated to take a short period for the SBA to issue new policy notices.
*504 loans may have the following changes. Eliminate the 1.5% Certified Development Company (CDC) fee for a 12 month period.
*Eliminate the 0.50% lender fee for a 12 month period.
*Reduce the Debenture fee from approximately 2.15% to 0.67% for a 12 month period.
*Guarantee the first mortgage until the $3 Billion is exhausted.
*Allow some refinancing, with very limited parameters up to 50% of the total project.
*7(a) loans may have the following changes.
*up to 90% guarantee (increased from 75%)
*reduce or eliminate the SBA guarantee fee for a 12 month period.
*improve the secondary market value of the 7(a) loan, which would make it more attractive for lenders to make SBA 7(a) loans.
Until these proposals are implemented by the SBA and notices are sent to lenders, we are still in a "grey" area and must operate under the current policy of SBA.
Next blog will outline the basics of what each applicant should have, in order to increase the likely hood of getting an approval.
*504 loans may have the following changes. Eliminate the 1.5% Certified Development Company (CDC) fee for a 12 month period.
*Eliminate the 0.50% lender fee for a 12 month period.
*Reduce the Debenture fee from approximately 2.15% to 0.67% for a 12 month period.
*Guarantee the first mortgage until the $3 Billion is exhausted.
*Allow some refinancing, with very limited parameters up to 50% of the total project.
*7(a) loans may have the following changes.
*up to 90% guarantee (increased from 75%)
*reduce or eliminate the SBA guarantee fee for a 12 month period.
*improve the secondary market value of the 7(a) loan, which would make it more attractive for lenders to make SBA 7(a) loans.
Until these proposals are implemented by the SBA and notices are sent to lenders, we are still in a "grey" area and must operate under the current policy of SBA.
Next blog will outline the basics of what each applicant should have, in order to increase the likely hood of getting an approval.
Friday, February 13, 2009
Closer to changes with the SBA Loan Program
Well, we are one step closer to seeing positive changes that will impact the small business loan applicant. The House has passed the newest version of the SBA Stimulus Package. The Senate still needs to approve and the President needs to sign.
Although many changes are cited, some of the most significant are the increased guarantee to lenders and the reduction or elimination of loan fees for both the 7(a) and 504 program to the applicant. Another significant change would be the refinance eligibility under the 504 loan program and the secondary market guarantee. Here is where we will most likely see the greatest activity on a go-forward basis.
Stay tuned for the up to date changes, as they occur.
Although many changes are cited, some of the most significant are the increased guarantee to lenders and the reduction or elimination of loan fees for both the 7(a) and 504 program to the applicant. Another significant change would be the refinance eligibility under the 504 loan program and the secondary market guarantee. Here is where we will most likely see the greatest activity on a go-forward basis.
Stay tuned for the up to date changes, as they occur.
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