Are you ready for the shift?
With the new guidance on PPP Forgiveness, Servicing, and Guaranty purchase, it feels like we’ve turned the corner heading back to regular 7a lending.
A deep sigh of relief is heard across the country!
However, industry experts are predicting that with the sunsetting of the PPP and other stimulus programs, we’ll start seeing some businesses struggle or fail. Their problems were pre-COVID, and the last 18 months just masked the issue.
Those Borrowers are going to be looking to Lenders for new financing or refinancing. Add on some healthy rate/term competition from Lenders, and it will be easy to make mistakes.
Now is a good time to review the Debt Refinance eligibility requirements for 7a lending with your team. That way, you’ll be confident they know the do's and dont's, so your loans will be eligible and the guaranty will be intact.
The most important to consider is the transfer of risk of loss.
Is the loan being refinanced current?
If the loan is a line of credit, has it matured? Is there an extension?
If current or matured, have the payments been made because of deferments offered by the Lender or because of stimulus money?
Is the debt refinanced the same Lender debt? (If so, this is processed under non-delegated authority.)
Do you have file copies of all documentation to support eligibility? (You’ll need this before closing and funding.)
Then review your team’s servicing skills for distressed loans. Things to focus on:
Have you collected and analyzed current financials and tax returns for servicing requests?
Did you collect a COVID-19 questionnaire? Have you addressed its impact in your analysis?
Do local, state, and federal guidelines allow you to perform site visits? They should be completed with servicing requests, or within 15 days of adverse event notification and 60 days of payment default.
Have you obtained proper approval for deferrals if they’re not within your delegated authority?
Have you prepared Liquidation and Litigation plans and obtained proper approval from SBA when required?
PPP stressed lending departments. The industry overall could use a little rest and relaxation, but alas, the job is not done and we have little time left to catch our breath and prepare for the craziness that comes with recovery.