Complimentary Coleman Report Live!  

Featuring Bob Coleman & Jon Winick 1:50 - 2:00 PM E.T. Log on 10 minutes early before every Coleman webinar for a briefing on issues vital to the small business lending industry with your hosts: Bob Coleman, Editor of the Coleman Report & Jon Winick, President, Clark Street Capital

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ARE YOU READY FOR YOUR SBA REVIEW?    

Coleman Webinar October 29, 2013 

How to Ask Questions 

• Use Go‐to‐Meeting's chat function, you can choose to ask question in writing or verbally. If comfortable, give us your first name, name of bank, and city. 

• Send an email to bob@colemanreport.com 

Certificates of Participation • All Coleman Webinar attendees will receive a certificate of 

participation. This documents your continuing education history for your regulators. Also, this documents the answer for SBA’s Review question of continuing staff education. 

• We will automatically forward a certificate of participation for those who are registered to attend the webinar via GoToWebinar. 

• If you have purchased the unlimited site license and would like certificates for all who attend simply forward their names and email addresses to jeanne@colemanreport.com. She will email the certificates to all attendees. 

Panelist Tom Wallace is the President of IDS Corporation, since 2002, a Florida CDC, which contractually co‐ordinates, with locally licensed CDCs, 504 services in a dozen states.  Mr. Wallace previously ran the largest Lender Service Provider for 7(a) in the Southeastern US.  He has over twenty years of experience, both 7(a) &504.  • Twelve years on NAGGL’s Board of Directors. • NAGGL Instructor for ten years; 7(a) Portfolio Servicing/Liquidation & 504 Lending. Former 

member of the Board of Directors of RMA Chapters in Orlando & Tampa, FL.  • Published in RMA Journal  (Eight articles) and The Banking Law Journal (One article). • 2000 SBA Financial Services Award‐Florida.  2004 NADCO McDowell Memorial Award. • Crummer Graduate School of Business at Rollins College, MBA (Concentration: Finance; 

Myers Award, Patterson‐MacGregor Scholarship, Sherman Fellowship) • Peking University, Beijing, People’s Republic of China (Advanced studies‐Chinese History, 

Foreign Student Scholarship) • State University of New York, BA. (Majors: Chinese Studies & Political Science; Magna Cum 

Laude, Regents Scholar.)   • Member of the Board of Directors of IDS Corporation. • Trustee of the Religious Society of Friends, Fort Myers Monthly Meeting.   

Review Formats 

• Select Analytic Review or Onsite • Difference is more that Remote • Statistical Drivers: Start with Lender Portal • LRR, LRR vs. Components • vs. Peer, vs. Portfolio • Benchmarks are still forming! 

Onsite: Specific & Process 

• Areas of Compliance • Eligibility • Credit Standards & Underwriting • Collateral, Appraisals & Disbursements • Servicing & Liquidation 

Eligibility 

• Size determination correct • Franchise passes muster • No prior loss to Federal Government • SID PLP vs. non‐PLP 

Credit Standards & Underwriting 

• Acquired company tax returns • Repayment (Cash Flow) in line with industry, check the projections! 

• Business credit reports • Equity Injection & Leverage  

Collateral, Appraisals & Environmental 

• Business valuation is throughly reviewed • Disparity between any valuation/appraisal is addressed 

• All environmental professional or SBA raised concerns were addressed 

Authorization, Closing & Disbursement • Authorization matches credit memo/approvals (PLP); chain of 327 otherwise; & matches closing documents? 

• Insurance coverage in place, as approved? • Standby documentation • IRS verifications • No material adverse change documentation before funding 

Servicing & Liquidation 

• Annual reviews, and beyond? • Insurance & collateral verification • Document deferments • Over‐document liquidation 

Office of Credit Risk Management 

• PARRiS • Portfolio Performance • Asset Management • Regulatory Compliance • Risk Management • Special • Preferred, Acceptable, Less than Acceptable 

Critical Triggers 

• Early defaults, high delinquencies, high purchase rates, high losses 

• Concentrations: Industry (NAISC) or Franchise • Other: •     1502 Reporting •      Remittances due SBA (172s or...) •      Results from last RBR 

Office of the Inspector General 

• Who watches the watchers? • Semi‐annual Report to Congress, Individual • Spring 2013 Congressional • Improper Payment Rate‐‐‐smoke • Loan Agents‐‐‐MD/VA; $100MM LOSS‐‐‐fire •      Business acquisitions & refinance projects 

OIG, continued... 

• July 2013 "SBA's Portfolio Risk Management Program Can Be Strengthened" (#13‐17) 

• Three specific franchises: Planet Beach, Petland, Coldstone Creamery 

• Five Retail Industries (Unnamed, but...)   

Questions?  Bob Coleman Editor Coleman Report  (818) 974 8934 (direct) (626) 824‐9431 (Joe Coleman, alternate contact) (818) 790‐4591, extension 3 (Jeanne Carelli, alternate contact)   

Thomas Wallace President IDS Corporation 8280 College Parkway, Ste. 204 Fort Myers, FL 33919 Phone: 239.652.5588 extension 1308 Fax: 239.652.9988 www.idscorp.org      

7(a) File Checklist (Version 02.01.12) Page 1 of 5

7(a) Risk- Based Lender Review File Checklist

Lender FIRS _____________________

Loan Name

SBA Loan #

Approved Amount $ Current Balance $

SBA Authorization Date Final Funding Date

Guaranty Fee Due Date Guaranty Paid Date

Delivery Method Amt of Other SBA Loans $

Reviewer Name

Review Date

Status

Current Past Due Delinquent (+60 days) Active Purchase Liquidation

Check any of the following that apply to this loan

EPC/OC Franchise Change of Ownership Existing Business

Start-up Early Default Sold in the Secondary Market

Use of Proceeds ($ Amount)

__________ Machinery/Equipment __________ Fixtures __________ Leaseholds __________ Purchase R/E __________ Construct R/E __________ Business Acquisition __________ Working Capital __________ Debt Refinance __________ Other

Key Metrics

__________ Debt/Net Worth __________ Current Ratio __________ Equity Injection % __________ Debt Service Coverage

ELIGIBILITY

Reference: 13 CFR §120.101, 102, 110, 111, 130, 140, & SOP 50 10 5 (C) Subpart B Chapter 2 & www.frandata.com.

Questions Req Yes No NA Explain

1 1. Business is a for-profit domestic operation. 2 X 3 4 5 6

2. Size determinations were correct and analyzed according to SBA policy.

X

3. Written evidence that credit is not available elsewhere without guarantee provided by SBA.

X

4. Franchise is on FranData; lender obtained Certificate of Change/No Change or otherwise eligible per SBA requirements.

5. SBA Form 912 “Statement of Personal History” obtained for all owners, loan guarantors, and key management (if applicable); if any question answered in the affirmative proper SBA clearance was obtained.

X

6. No prior loss to the Government from prior federal assistance. X

7. Owner(s) and guarantor(s) are eligible citizens or have eligible non-citizen status.

X

8. All EPC/OC conditions have been met.

9. Loan proceeds were used for eligible business purposes and in accordance with Loan Authorization.

10. Loan meets loan program–specific eligibility requirements/restrictions for delivery method under which the loan was approved.

11. All change of ownership eligibility requirements were met.

12. All debt refinancing conditions have been met.

7(a) File Checklist (Version 02.01.12) Page 2 of 5

13. Loan proceeds used for same institution debt (SID) refinance meets PLP refinancing requirements.

14. All occupancy percentage and use of proceed requirements are met.

15. Business meets all other eligibility requirements.

16. No actual or apparent conflicts between borrower and/or lender, or lender preferences were detected.

Additional Comments:

CREDIT STANDARDS AND UNDERWRITING

Reference: SOP 50 10 5 (C) Subpart B Chapter 4

Questions Req Yes No NA Explain

17. Personal resources test was performed and documented for each business owner with 20% or more interest in the business.

18. Credit analysis was performed and included repayment ability based on historical income statements and/or tax returns for an existing business or business acquisition.

19. Repayment is justified based on projections with reasonableness of assumptions and compared to industry standards.

20. A ratio analysis of the financial statements including comments on any trends and a comparison with industry averages was performed.

21. Business credit reports were obtained and reviewed.

22. Owners’ & managers’ relevant experience in business, credit histories & explanation of adverse info on credit histories.

23. Borrower equity injection appropriate for project and verified prior to disbursement with supporting documentation.

24. Capitalization has been adequately analyzed for business solvency.

Required Narrative Describing Credit Underwriting:

COLLATERAL, APPRAISALS AND ENVIRONMENTAL POLICIES

Reference: 13 CFR §120.160 & SOP 50 10 5 (C) Subpart B Chapter 2 & Chapter 4

Questions Req Yes No NA Explain

25. Business valuation was obtained for business acquisition in accordance with SBA loan program requirements (if applicable).

26. All available collateral was pledged and lender performed an analysis of of collateral adequacy, including liquidation values.

27. Appraisals were obtained and comply with SBA loan program requirements.

28. Environmental Questionnaire obtained before pledging and/or acquiring title to commercial real estate.

29. Phase I and/or Phase II Environmental Report was conducted in accordance with SBA loan program requirements and no further remediation required.

7(a) File Checklist (Version 02.01.12) Page 3 of 5

Additional Comments:

LOAN AUTHORIZATION, CLOSING AND DISBURSEMENT

Reference: 13 CFR §120.150, 160, 191, 220, 410 & SOP 50 10 5 (C) Subpart B Chapter 4, Chapter 5, & Chapter 7

Questions Req Yes No NA Explain

30. Loan Authorization prepared in accordance with credit memo. X

31. Hazard Insurance Policies obtained for all assets pledged as collateral, if not required it must be documented.

32. Standard Flood Insurance Policy or documentation showing property is not located in a special flood hazard area.

33. Life Insurance determination was conducted and documented in accordance with SBA loan program requirements.

34. Collateral assignment of life insurance obtained (if applicable).

35. Other insurance policy requirements (workers’ comp, malpractice, etc.).

36. Reconciled IRS tax transcripts for past 3 years (if not a start-up) to verify historic financial information upon which credit decision was made (including affiliates as applicable).

37. Standby Agreement required for equity injection is properly executed and copy of promissory note is in the file (if applicable).

38. Standby Agreement(s) obtained and properly executed for other standby debt identified in Loan Authorization (if applicable).

39. All required personal and corporate guarantees (SBA Form 148/148L) were obtained.

40. Lender obtained proper lien position as required by Loan Authorization.

41. Lender has copies of certificate of ownership and/or titles on any non-real estate collateral (vehicles, boats, motor homes, etc.).

42. All required SBA Forms 159 (Fee Disclosure Form and Compensation Agreement) to identify all agent/broker relationships were obtained.

43. Guarantee fee paid as required in the authorization and within the required timeframe.

44. Evidence that the loan proceeds were used for purposes defined in the loan authorization.

45. All required collateral lien positions have been adequately perfected.

46. Loan risk rating reflects the risks posed by the borrower’s expected performance at the time of closing.

Additional Comments:

SERVICING AND LIQUIDATION

Reference: 13 CFR §120.150, 220, 410, 536 & SOP 50 50 4 Chapter 4, SOP 50 51 3 Chapter 8, Chapter 10

Questions Req Yes No NA Explain

7(a) File Checklist (Version 02.01.12) Page 4 of 5

47. Lender obtained annual financial statements and analyzed in accordance with loan authorization.

48. Lender’s monitoring of continued creditworthiness is considered sufficient.

49. Evidence that the loan has been risk rated at least annually in accordance with Lender’s risk rating policies.

50. Evidence that Lender monitors required insurance coverage at least annually.

51. Evidence that Lender has kept all lien positions current.

52. Evidence that Lender performed a site visit or engaged in other intensive servicing activities when loan became 60 days past due or otherwise indicated reasons for elevated concern.

53. Lender had prior written SBA approval for servicing and/or liquidation actions as described in the SOP.

54. Initial deferment occurred within 18 months from initial disbursement.

55. Lender has provided written notice to SBA upon classification of the loan “in liquidation”.

56. Lender had a written liquidation plan.

57. Evidence that, upon placing the loan in liquidation, lender performed timely site visits and took reasonable steps to secure the collateral.

58. Current appraisals were used by the Lender to evaluate liquidation collateral.

59. In a liquidation case where property title was taken, an environmental review was done prior to the acquisition of title.

60. Lender has forwarded all recoveries to SBA within 15 days of receipt.

61. The Wrap-Up Report has been completed and submitted to SBA in accordance with SBA loan program requirements.

Additional Comments:

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 (RECOVERY ACT)

Reference: 74 FR 27196 of June 8, 2009, 74 FR 27243 of June 9, 2009, Policy Notice 5000-1097, Policy Notice 5000-1103, Policy Notice 5000-1105, Policy Notice 5000-1107.

Questions Req Yes No NA Explain

RA1. All guaranty fee collection, payment and/or reimbursements are in accordance with Recovery Act requirements.

RA 2. Loan funded with Recovery Act funds for a project with restricted uses.

RA3. Recovery Act proceeds used for working capital.

RA4. If Recovery Act proceeds are used for working capital, Lender obtained certification executed by borrower and/or OC certifying the use of working capital funds.

RA5. If an America’s Recovery Capital (ARC) loan, all requirements of the ARC loan program procedure guide were followed.

RA6. If an ARC loan,1502 reporting is in accordance with SBA loan program requirements.

Additional Comments:

ADDITIONAL REFERENCE

SOP EFFECTIVE DATES

ORIGINATION

7(a) File Checklist (Version 02.01.12) Page 5 of 5

50-10 (4) 12-01-00 50-10 (5) 08/01/08 50-10 5A 03/01/09 50-10 5B 10/01/09 50-10 5C 10/01/10 50-10 5D 10/01/11

LIQUIDATION 50-51 2 12/01/97

50-51 2B 04/20/05 50-51 2C 09/06/05 50-51-3 11/15/10