One of the key tools in an SBA Application is the lender’s credit memo. I outlined last month the important topics that should be in your Credit Memo. This month I would like to point out the importance your credit memo as the starting point for creating an SBA Application package. Each document prepared from here on out should match the terms and conditions of your credit memo. The Use of Proceeds applied for should match that of your credit memo, your borrower, guarantors, rate, maturity, covenants, collateral, etc. should all match that of your credit memo. If at any time throughout this process anything changes, you should start with a material change or file comment to amend your credit memo. The changes should be documented and include an explanation or justification for the change and the affect the change has on the overall credit.
Once you have your bank approved credit memo, you can begin to prepare an application package for SBA. If you’re a Preferred Lender (PLP), this package remains in your file and never goes to SBA. If your not a PLP Lender, you’ll keep the original application package in your file and submit an electronic copy to SBA for loan approval. Some lenders have the expertise in house to compile these applications, if not, I encourage you to engage the assistance of a packager to help ensure your application is well received by SBA and approved in a timely manner.
Some of the SBA forms needed in the application include:
· Form 4—Business Application
· Form 4-I—Lender’s Application for Guaranty Request
· Form 912—Statement of Personal History
· Form 1624—Debarrment
· Form 1846—Lobbying
· Form 4506-T —IRS Request for Transcript.
· SBA Eligibility Checklist
In addition, you’ll need 3 years of historical information on both the business and each guarantor.
If the loan request was approved based on projections, they must include 2 years and the first 12-months must be broke down month by month.
If the loan request is for the purchase of a business or change in ownership structure, a Business Valuation is required.
A Real Estate Appraisal is not required as part of the applications, however will be required prior to closing and must meet the value outlined in the SBA Authorization.
This is not an all inclusive list, but rather gives you a basic understanding of items that may be required in a standard application. Each application brings about its own set of challenges and requirements. If you are unsure what structure is eligible under SBA or what items may be required based on a specific situation, please give us a call.
