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In the Spotlight
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Victor is the Managing Partner of Starfield & Smith's Florida office where he concentrates his practice in the areas of financial, commercial, transactional and property law, with emphasis on the representation of financial institutions involved with SBA lending programs. Victor represents numerous national, regional and local banks, credit unions and development companies. He has closed thousands of commercial transactions from complex real estate and business acquisitions to simple business startups. He is a Designated Closing Counsel for several Certified Development Companies that operate in the State of Florida. He draws on his extensive experience to provide outstanding service and legal representation to his lender clients. Victor has been recognized for possessing the highest levels of professional skills and ethics with an "AV Preeminent Rating" from Martindale Hubbell.
ADMISSIONS:
To read more about Victor, click here. |
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FEATURED ARTICLE
Best Practices: Proving Eligibility for Debt Refinance Transactions
By: Ethan W. Smith, Esquire
When SBA lenders use loan proceeds to refinance existing debt, there are a number of additional requirements that must be met for the loan to be eligible. Perhaps the most basic of these requirements is the requirement that the original use of proceeds for the debt being refinanced must have been eligible at the time the debt was originally incurred. SOP 50 10 5 (G), Subpart B, Chapter 2, Paragraph IV. E. 1. (p.109) states: "SBA guaranteed loan proceeds may not be used to refinance debt originally used to finance a loan purpose that would have been ineligible for SBA financing at the time it was originally made." While this requirement seems to be rather straightforward, in practice it can pose some challenges for the unwary SBA lender.
PLP lenders, operating under their delegated authority, bear the burden of proving that their loans are eligible and are underwritten and closed in accordance with all SBA Loan Program Requirements. So, how does a PLP lender prove that the original use of proceeds for the debt being refinanced was eligible? In many cases, obtaining documents from the borrower such as settlement statements and copies of loan and other transaction documents (such as a purchase and sale contract, invoices, receipts, etc.) is the most straightforward approach to proving the eligibility of the refinanced loan. If the debt was incurred less than seven years ago, then the borrower should have these documents and be able to produce them to satisfy the SBA's eligibility requirements.
But what happens if the original debt is an older debt, a debt that has been refinanced multiple times, or the borrower just can't provide the necessary documentation for the lender's eligibility determination? A lender in this position has a few options: 1) if the debt being refinanced, a copy of the deed and the title work should provide information regarding the debt being refinanced in the chain of title; 2) have the borrower check with the title company or attorney that handled the transaction to see if documents can be obtained from these sources; 3) UCC indexes often permit both active and lapsed financing statements to be searched which can provide evidence of prior debts and the collateral taken; 4) credit reports can provide evidence regarding current and closed debts; 5) an affidavit from the borrower; and 6) if sufficient documentation cannot be obtained, submitting the loan GP/CLP for SBA approval.
Each of these options may provide information from which the lender can reconstruct the purpose of the loan with s sufficient amount of detail to satisfy the SBA eligibility requirements. However, getting to this conclusion may take some detective work on the part of the lender. Read the documents and review their terms. Can you glean any information from them? Who are the parties to the loan and who are the debtors? When were the debts incurred? Does the timing match the borrowers representations regarding the debt? These are just a few questions that can help solve the eligibility puzzle.
By using the tools and information at their disposal, SBA lenders can often obtain information sufficient to prove the eligibility of their debt refinance loans and avoid repairs or denials of the SBA loan guaranty. For more information on debt refinance eligibility,
please contact Ethan at 267-470-1186 or at [email protected]
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EVENTS & SEMINARS
SBA Lending Technical Conference
** NEXT WEEK **
Advanced SBA Documentation and Closing
Date:
May 4 - 5, 2015
Location: San Antonio, Texas
For more information about this event and/or to register, click here.
Avoiding Lender Liability
Presented By: SBA
Date: May 26, 2015 @ 10:00am EST
Location: Webinar
For more information about this event and/or to register, click here.
Exploring the SOP
Presented By: SBA
Date: May 19, 2015 @ 10:00am EST
Location: Webinar
For more information about this event and/or to register, click here.
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Brad L. Durham / President / Independent Bank of Texas
I have to tell you that we continue to become bigger fans of the firm every time we use you. While Texas and Pennsylvania are pretty far apart geographically, we now have only one firm when it comes to liquidations and/or collections on our SBA loans, and you guys are definitely the firm!
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