WHEN YOU CLOSE, FUND AND SERVICE YOUR SBA 7a LOANS
There’s a lot of heavy lifting in processing an SBA loan. From initial application to Lender Approval takes time and concentration to analyze the data, then tell the story about the borrower - where they’ve been, where they are, and where they’re going.
And after approval and closing, the fun starts, right? Everyone’s happy. Lenders are ready to invest in the communities they serve. Borrowers are ready to provide products or services to benefit their communities.
All that’s left is – oh, yes, funding the loan!
Consider these five crucial steps:
1. Start with the end in mind.
When I was younger and started a new book, I always read the last chapter first. I wanted to see where the story ended so I could get more out of the journey to get there.
The same holds true for the story of an SBA loan. What if the guarantee purchase must be requested? Will the story end with a smooth guarantee purchase process, or will there be bumps along the way? How will this affect funding?
2. Document, document, document…
Documenting your loan doesn’t end with signed closing documents. Funding your loan is the next chapter in the story. Whether it be invoices, cancelled check copies, wire confirmations, etc., be sure to follow SOP to determine the level of supporting documentation needed for each funding draw.
Since we all know how much SBA loves prudence and checklists – use a funding checklist, Use of Proceeds reconciliation spreadsheet, and dual control of the process!
3. File Organization
In the old days, we used to call this the “stacking order.” Remember the color-divided folders – blue, red, brown, and so on? Each section had its own responsibility. In the Banks I led, the sections told the story from start to finish. And EVERY file was stacked the exact same way.
Whether your files are stored electronically or you have paper files, a systematic file organization system is a must to ensure that when needed, the file reads like a well-written book.
4. Don’t save important documents in an email folder.
Employees come and go. By the time that environmental report, appraisal, bank statement, or funding documentation is needed, chances are that if it wasn’t downloaded to the borrower’s file, it isn’t going to be easy to find. Written procedures for downloading these items will ensure they don’t get trapped in the black hole of email attachments.
5. Post-funding file review.
Whether you handle this internally or outsource it to an experienced SBA Loan Service provider, the post-funding file review is one of the most important steps. While the loan file is still in the “honeymoon stage,” it’s imperative to complete a full file review with the end of the story in mind. If there are any missing documents or gaps in the loan’s story that need to be backfilled, do it now. Your co-workers who handle loan servicing, liquidations, and special assets will thank you.
Here at LRM, we’ve seen it all. And we really don’t like horror stories with skeletons in the closet. We see them, but we don’t like them. And we’re here to help you put effective processes in place so if your loan ends up in liquidation, you can be assured of a smooth, skeleton-free journey down the road of liquidation, guarantee purchase, and SBA Charge-off.
Schedule a Free Consultation Today!