Prudent Lenders’ approach to Government Guaranteed Lending Programs is comprehensive and systematic. A brief outline of services is as follows:
Marketing, Goal Setting & Staff Training
To initiate a successful Government Guaranteed Lending Program, the Lender is encouraged to develop goals, incentives, product-specific collateral materials and a focused marketing plan to increase program awareness and product knowledge for the Lender’s staff and established referral sources. Staff training for lenders, analysts, and operations must follow. Prudent Lenders will provide assistance in the tasks to maximize both loan volume and program profitability for both large and small loans. It is important to facilitate “face-time” with the line lenders with sufficient frequency to form a “top-of-mind” approach towards Government Guaranteed Lending. Prudent Lenders will host lender training, introduce the lender to National Association of Government Guaranteed Lenders “NAGGL,” participate in monthly sales meetings and work with each lender to promote to the borrower the benefits of the SBA loan programs.
Additionally, Prudent Lenders in working with research database firms will provide the Lender with up-to-date marketing information on prospects, borrowers up for loan renewals and current real estate transfers. This information can be invaluable to lenders in identifying new borrower prospects, both conventional and for SBA programs.
Initial Interview with Prospective Borrowers
The Application process begins with identifying a Borrower prospect, obtaining limited financial documentation (11-point checklist), and allowing Prudent Lenders to evaluate and prepare an Initial Project Assessment (“IPA”) for the Lender‘s review. This document focuses on eligibility and underwriting criteria, as well as the feasibility of the Borrower’s request, conventional and/or government-guaranteed. This document is a valuable tool that will be used for loan structure and pricing determination with the Lender and the Borrower. The Lender’s evaluation, input, and approval of the IPA, and subsequently the approval by the Borrower, assure a successful Application prior to processing the application. The Prudent Lenders turnaround time for the Initial Project Assessment is 24 hours.
Once the Initial Project Assessment has been approved by the Lender and the Borrower, a Borrower Engagement Meeting is scheduled with the Lender, the Borrower and a Prudent Lenders representative. At that time the loan amount, structure, pricing and any other considerations are discussed. This is the step where Prudent Lenders will assist the Lender in promoting the benefits of the Government Guaranteed Loan. Here pricing, structure, costs and timelines are discussed and how we manage both Lender and Borrower expectations.
Final Document Checklist Meeting
After engagement, checklists are compiled and sent to the Lender and the Borrower for review and for the Final Document Checklist Meeting. This includes all information for 1.) Underwriting 2.) Agency submission and 3.) Closing. This is a meeting with the Lender, the Borrower and Prudent Lenders via teleconference to compile and review all of the required documents to move the loan through the Prudent Lenders Process. We have found that 90% of the documents are secured at this point in time and an important part of our ability to promote Prudent Lenders’ “Fast Track System.” Additionally, the Borrower has now authorized the Lender and Prudent Lenders to move forward with the appraisal and environmental investigation at this point in time. Timelines are again reinforced at this meeting for all parties to clearly understand and be accountable for to insure a successful closing.
Application Underwriting and Processing
Prudent Lenders’ proven system is designed to provide a thoroughly documented loan application for the Lender, including,
- A Credit Approval Memorandum “CAM” outlines every aspect of the proposed loan, including: applicant information, rates and terms, the purpose of the loan, a history of the business and management summary, an overview of total business funding, a balance sheet and ratio analysis, analysis of repayment ability, principals and guarantors personal financial information, and a summarization of the credit’s strengths and weaknesses. The Credit Approval Memorandum is completed by Prudent Lenders within five business days from receipt of the check listed underwriting documents.
This standardized CAM can eliminate many of the eligibility exceptions during an SBA Risk-Based Review.
The Application process is facilitated by comprehensive documentation checklists and supporting worksheets, so as to assure the accuracy and quality of the information included in the Application. Utilizing the proven Prudent Lenders Processing System, Prudent Lenders is able to assemble a complete Application, with delivery to the Lender within three (3) business days of receiving all the necessary documents. Upon receipt, the Lender needs only to conduct a thorough due diligence review, which must be performed in the Lender’s sole discretion, and render a credit decision. The Lender’s Credit Approval Memorandum Addendum, setting forth the terms and conditions of approval, is then prepared, in support of the Application to the Agency.
Submission to Agency
Upon Lender approval, Prudent Lenders will coordinate Application delivery to the Agency. Once a loan is approved, the Agency will issue an SBA Loan Authorization & Guaranty Agreement, which outlines all conditions between the Agency and the Lender for properly closing and servicing the loan.
Loan Closing Coordination
In anticipation of loan closing, Prudent Lenders will coordinate loan closing for the Borrower and Lender, and facilitate loan closing requirements with closing counsel. The number one area where mistakes occur that result in SBA repairs or denials of the SBA Guaranty is in the documentation requirements within closing process. The Prudent Lenders Process helps to ensure SBA compliance in addressing last minute changes to loan documents, settlement sheets and use of proceeds all of which may change at the closing table. Documentation of use of proceeds, elimination of post closing tasks and proper verification equity injection are all areas where there is risk in maintaining the SBA Guaranty. Subject to SBA regulations, fees for loan documentation may be passed on to the borrower.
Post-Closing Loan Review & Compliance
In anticipation of loan closing, Prudent Lenders will facilitate a post closing Loan and Compliance Review, correlated to the SBA Guaranty documents, for the Lender’s consideration. As part of the Prudent Lenders process, all aspects of loan review and compliance surrounding the SBA government guaranteed loan programs will be performed.
As required by Lender, Prudent Lenders shall provide general training to Lender and Lender’s staff on general SBA lending requirements, compliance issues and trends. Such training will be scheduled as needed between the Prudent Lenders and Lender and may be provided in either a formal or informal format as may be agreed between the parties. Prudent Lenders will offer NAGGL trade organization training locally for the Lender at an additional cost.
Secondary Market Sale (optional)
Should the Lender desire to sell the guaranteed portion into the secondary market, Prudent Lenders will solicit updated secondary market bids for the sale of the guaranteed portion of the loan, and prepare a final Yield Analysis, summarizing Lender’s anticipated earnings. Prior to loan closing, Prudent Lenders will coordinate the secondary market sale documents with the pool assembler and Lender.
After closing, three files will be setup for each SBA loan.
- Credit File: this reflects the Lender’s rationale for making the loan to the borrower based upon the Lenders Credit Policy and the SBA Standard Operating Procedures at the time of approval. This file, once compiled is then scanned, sealed and filed at the Lender and Prudent Lender locations.
- Closing Binder: a closing binder is compiled, scanned, sealed and filed at the Lender, Law firm and at the Prudent Lender locations.
- Servicing File: this is the “working file” the Lender and Prudent Lender will use and will be set up based upon SBA Audit recommendations.
Servicing functions and ticklers will be set up to include follow up for required annual reporting such as tax returns, financial statements and insurance renewals. Other Servicing functions include any “Servicing Action” functions such as collateral substitutions or other borrower generated requests that affect the loan status or the underlying collateral. In accordance with SBA SOP, Lender Matrix Prudent Lenders will provide written notice to Lender in the form of a “Servicing Action Report” for consideration and approval. Upon Lender, Prudent Lenders will execute all requirements.
Prudent Lenders will scan the servicing files and maintain shadow files at the Prudent Lenders offices.
Standard reporting includes the Colson Settlement (SBA Form 1502 & Electronic Media Report) SBA Lender Portal and the Servicing Fee Income Report.
Credit Policies & Procedures
Prudent Lenders shall review Lender’s CAM, Credit Policy, Loan Servicing and Portfolio Monitoring Policy, Disaster Recovery Policy, and where deemed appropriate, propose changes to those manuals and policies for consideration by the appropriate authority of Lender, in order to establish policies and procedures that are compliant with SBA requirements.
Portfolio Review: Prudent Lenders shall review the existing SBA loan portfolio of Lender, if any, provide annual reviews and make recommendations as to action plans to improve overall portfolio and specific loan performance.
Loans shall be reviewed for SBA program compliance based upon SBA regulations applicable at the time of loan application and/or closing. Loan servicing requirements shall be reviewed pertaining to SBA program compliance based upon current regulations.
Intensive servicing requirements shall be reviewed based upon SBA regulations applicable at the time of the intensive servicing action.
Upon borrower default, or if a loan otherwise passes into collection or liquidation, Prudent Lenders at the written request of Lender will take any and all appropriate actions, in compliance with the existing SBA policy and regulations and appropriate Lender policy, to reasonably increase the likelihood of the repayment of the obligation by a borrower (“Intensive Servicing”). Prudent Lenders will be required to report in a mutually agreed upon format all of such actions for the review and approval of Lender. Additionally, Prudent Lenders shall consult with Lender regarding any liquidation actions to ensure that any such actions are SBA compliant, and will assist Lender with any SBA Guaranty purchase issues. At appropriate times, the services of third party specialists, such as legal counsel may be required to fully protect the Lender’s interests in liquidation actions and guaranty purchase situations. The cost of any such third-party services shall be borne exclusively by Lender.