December 19, 2018

Government Shutdown Looming: Happy Holidays!

The last Continuing Resolution was passed through Friday December 21stbecause of the death of George H.W. Bush.  It appears we may see a stop in all SBA lending next Friday.  President Trump has alluded that he would not support another Continuing Resolution without “border security” being included in the budget extension.  Lenders get your end of the year SBA tasks completed in the next few days or risk ruining some small businesses hopes for 2018.

The proposed SBA regulations now being considered such as increasing SBA Express Programs, Credit Elsewhere, Personal Resources Test and Borrower Fees will be discussed and decided upon in 2019, and the National Association of Government Guaranteed Lenders (“NAGGL”) is clearly on top of these issues for our industry.  There are no surprises in the proposed regulations but there is some wavering support on the Hill. 

A few comments on the proposed regs:

SBA Express should be increased to $500,000 as these loans truly support the SBA’s mission and focus on providing better access to capital for small businesses.  The program has been around for a while and if we can expand this program to stimulate smaller loans, it makes sense.

Credit Elsewhere is the hot button for 2019 as many feel with $30 billion in SBA lending, some of these loans are being made to take advantage of the secondary market premiums and to borrowers that more than likely can get conventional financing.  Lenders should clearly document why their borrowers cannot get financing elsewhere and make sure your reasoning can pass the “smell test.”

Another change is to bring back the personal resource test that was eliminated during recessionary times to stimulate lending but now with record levels of SBA lending Congress wants a change.  Hopefully this does not pass as presented and they will listen to NAGGL’s recommendations.

Borrower fees are becoming a hot topic as referral agents, packagers, loan brokers and just about anyone involved in SBA lending has or is charging the borrower a fee to help get their loans across the finish line.  The SBA has been monitoring this through the submission of the Form 159 and now has proposed some limits to borrower fees for packaging and referrals. They have (for the moment), taken the focus off of fees charged the lenders and the new regs are centered around limiting borrower fees and requiring more documentation. This is long overdue but should be clarified. The days of everyone in the process charging the borrower and the lender are soon to be much more scrutinized and hopefully the bad apples will be eliminated over time. The days of agents charging the both the borrower and the lender may soon be over as well but that is still not completely clear.  My suggestion would be if it appears to be improper by anyone, it is, and make sure you are working for one master in SBA lending.  My suggestion is to pick the borrower, pick the lender but don’t pick both!

Next year 2019 hopefully will be a good year for this industry, stay tuned!  Happy Holidays all.

-J.M. Chuck Evans

SBA District Office Training Webinars

December 20: USDA Business Programs Overview
10:00 am EST ~ Hosted by Philadelphia District Office
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December 18: Getting Equity Injection Right
10:00 am EST ~ Hosted by Arkansas District Office
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December 19: ETran
1:00 pm EST ~ Hosted by Orange County/Inland Empire District Office
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January 15: Intro to SBA Lending Part 1
11:00 am EST ~ Hosted by West Virginia District Office
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January 16: 1502 Reporting by Colson Services
2:00 pm EST ~ Hosted by Fresno District Office
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January 22: Intro to SBA Lending Part 2
11:00 am EST ~ Hosted by West Virginia District Office
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January 29: Intro to SBA Lending Part 3
11:00 am EST ~ Hosted by West Virginia District Office
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