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  • Writer's pictureLori N. McCausland



Want to make sure your SBA guarantee remains intact?

Document the required loan equity injection according to SBA’s requirements – or you risk repair and even denial of the SBA guarantee!

That’s not what anyone wants. So here are five essentials to keep you safe.

1. Bank statements. The SBA requires borrowers to provide bank statements from the account the funds will come from for the two months immediately preceding the injection of funds. Even if you collected earlier statements, you’ll need current statements to show that the funds were still available when the injection was completed.

2. Gift Letter. If the injected funds are a gift, the borrower must provide a Gift Letter, plus two months of the giver’s bank statements immediately preceding the gift to source injection. You’ll also need a copy of the borrower’s statement to verify the gifted funds were deposited in the borrower’s bank account.

3. Wire confirmation or cancelled check. A copy of the cancelled check or a wire confirmation and a copy of the source-of-funds bank statement showing the funds were withdrawn verifies that the funds were in fact injected. And you’ll also need a copy of the borrower’s statement to verify funds were deposited.

4. Certified closing statement. If the funds were deposited to an escrow account, the certified closing statement is needed to verify that the funds were received. You’ll also need to watch for funds back to the borrower at closing. If funds were returned to the borrower, the amount will need to be deducted from the total amount injected.

5. Adherence to the Authorization. The lender must verify that the injected funds were used for the purpose stated in the Loan Authorization. If the funds were to purchase a business, then funds may not be used for any other purpose, such as paying the guarantee fee or closing costs.

The Lender should verify and document equity injection before the SBA loan closes. And this documentation should be clearly marked and kept in the borrower’s loan file. (You knew that, right?)

At LRM Lender Consultants, we’ve seen the unfortunate results when source and evidence of injection are not provided to SBA when guarantee purchase is requested by the Lender. To keep your guarantee intact, be sure to develop standard procedures, provide periodic training, and keep open lines of communication in your SBA departments.

LRM provides training, consultative services, and more to SBA 7a Lenders Nationwide. Request a free consultation today - especially if you have any concerns or questions about your SBA Loan Equity Injection procedures!


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