IFS Articles and Industry Resources

SBA Notice 5000-830948

The interest rate on Section 7(a) Direct Business Loans is 3.13 percent (3.13%) for the fiscal quarter beginning April 1, 2022. The optional peg rate for fluctuating interest rates on guaranty loans is 2.00 percent (2.00%) for the April – June quarter of FY 2022. Pursuant to 13 CFR 120.921(b), the maximum legal interest rate for any third party lender’s commercial loan which funds any portion of the cost of a 504 project (see 13 CFR 120.801) shall be 6% over the New York Prime rate or, if that exceeds the maximum interest rate permitted by the constitution or laws of a given State, the maximum interest rate will be the rate permitted by the constitution or laws of the given State.

SBA Procedural Notice 5000-829416 Revisions to SOP 50 10 6 Financial Information Verification Procedures to Allow for the Use of IRS Forms 4506-C or 8821 for 7(a) and 504 Loans

Transcript/Verification of Financial Information process Lenders and Certified Development Companies (CDCs) (collectively, “SBA Lenders”) use to verify small business borrower financial information (“financial information verification”). Effective with the date of this Notice, SBA Lenders may use either IRS Form 4506-C, IVES Request for Transcript of Tax Return, or IRS Form 8821, Tax Information Authorization, for purposes of financial information verification.

Procedural Notice 5000-829036

The purpose of this Notice is to revise the guidance provided in SBA Procedural Notice 5000- 823852, “Guidance on the Implementation of the Section 1112 Debt Relief Program for the 7(a) and 504 Programs, Including the Availability of Funds for Section 1112 Payments and the Return of Payments Made for Ineligible Loans; and on Loan Increases Requested on or after October 1, 2021”, effective December 6, 2021, with respect to requests for 7(a) loan increases that were approved on or before December 27, 2020.

Avoid Being Caught Off Guard by SBA Policies

SBA application processing and underwriting requires great attention to detail and planning to successfully navigate the SBA’s application and approval process. After submitting an application to the Loan Guaranty Processing Centers (LGPC), even the most diligent SBA professionals can be caught off guard by a “screen out” or “denial” of the loan application. In most cases, these issues raised by the SBA can be addressed satisfactorily and promptly; however, in some cases the “screen out” or “denial” is a result of new directives from the SBA’s Washington, DC headquarters or the LGPC Center Director. Sometimes these policy positions are never formally published in the SOP or can be new directives that have not yet been published. We have assembled a list of some new or unwritten policy mandates that have impacted loan applications we’ve processed: Pending Divorce: The SBA generally will not approve a loan application when it is known one of the Principals is undergoing a pending divorce. It is treated similarly to any other pending litigation against the company or its Principals. Approval is consequently withheld until a final divorce decree and settlement agreement is established. However, the SBA does grant approval under some rare circumstances where there are compelling mitigating factors (i.e. a detailed prenuptial agreement). If you become aware of a pending divorce while an application is in progress, first try to determine if factors are present that mitigate the risk and present them to the SBA. If there are no factors present that would mitigate the risk, be prepared to discuss with the Applicant the likelihood of potential significant delay until the divorce is settled. Refinancing SBA 7(a) Debt: The SBA has and does allow existing SBA guaranteed debt to be refinanced by a new SBA 7(a) loan. However, after issuance of SOP 50 10 [...]

SBA Policy Changes on the Horizon

On September 28, 2018, the SBA published a proposed rule which will amend various regulations governing its business loan programs. The public commentary period was originally scheduled to expire November 28, 2018. On November 16, 2018 the SBA extended the public commentary period through December 18, 2018. A copy of the easy to read version of the proposed rule can be found at https://federalregister.gov/d/2018-20869. Key changes incorporated within the proposed rule are summarized as follows: SBA Express & Export Express Programs: Loan Processing, Underwriting, Closing, Servicing, Liquidation & Litigation Requirements – The SBA proposes adding regulations that set forth the requirements for loan processing, underwriting, closing, servicing, liquidation, and litigation. Currently, the regulations are peppered throughout the Standard Operating Procedures and there is considerable ambiguity regarding minimum program requirements. The proposed rule will incorporate additional clarity relative to minimum requirements specific to Express loans. Loan Sales – The proposed regulation provides that Lenders may sell the guaranteed portion of Express & Export Express term loans in the secondary market, but may not sell revolving lines of credit. Credit Elsewhere & Personal Resources of Small Business Applicant Owners: Effective April 21, 2014, the SBA removed the “Personal Resource Test” from the regulations. The regulation required owners of the Applicant to inject personal liquid assets into the business to reduce SBA-guaranteed funds otherwise needed. The SBA eliminated the requirement because it was found some borrowers whose principals had significant resources may have been unable to obtain long-term fixed asset financing from private sources at reasonable rates. The SBA is now concerned that borrowers with substantial amounts of personal assets are receiving government backed loans. The SBA proposes re-instating a “Personal Resource Test” which includes: Analyzing the resources of individuals and entities that own 20% or more of the Applicant. Requiring an injection [...]

Innovative Financing Solutions Wins Philadelphia Top 100 Award!

Innovative Financing Solutions (IFS) has been recognized as a Philadelphia 100 Fastest-Growing Private Company – ranking 29th on this prestigious list. The Philadelphia 100 Award is one of the most sought after awards in the Philadelphia region. IFS’ President, Michael D. Ryan accepted the award at gala event held at The Crystal Tea Room in the Wannamaker Building, in Philadelphia. Started in 1988 by The Entrepreneurs' Forum of Greater Philadelphia and the Wharton SBDC, the Philadelphia 100 Fastest-Growing Private Company award is a merit-based program that has recognized some of the region's finest companies in their earliest days including: Mothers' Work, Fiberlink, Urban Outfitters, Forman Mills, Kremer Laser Eye Center, Primavera Systems, and a host of other privately held companies. To qualify for this prestigious award, applicants must be headquartered in one of the following Pennsylvania counties: Philadelphia, Delaware, Chester, Montgomery, and Bucks. Applicants may also be headquartered in one the following New Jersey counties: Burlington, Camden, Gloucester, and Mercer. Michael D. Ryan, President and CEO of Innovative Financing Solutions said, “We are honored to receive the Philly 100 Award as the 29th fastest growing company in the greater Philadelphia region. None of this would be possible without the hard work and dedication of the IFS team who I am so very fortunate to work with every day!” In 2018, the Entrepreneurs’ Forum of Greater Philadelphia partnered with Philadelphia Media Network, publisher of The Philadelphia Inquirer, Daily News and Philly.com to spotlight the winners in a special editorial section of each newspaper. “It is exciting to be a part of a team that has a true passion for helping community banks and small businesses grow and prosper. I look forward to many more years of growth, not only with IFS, but with the community banks and small businesses which we [...]

The New SBA Form 159: Simplified and Consolidated for Efficiency

On September 14, 2018, the Small Business Administration (SBA) announced the update and release of SBA Form 159, “Fee Disclosure and Compensation Agreement.” This updated form is designed to simplify the collection of information by combining the currently utilized SBA Form 159 (7a) and SBA Form 159 (504) into one comprehensive document titled “SBA Form 159.” This revised form will serve both the SBA’s 7(a) and 504 loan programs. The purpose of this form is to identify Agents and to collect information about Agents, the services they provide, compensation rendered, and who paid the compensation to Agents by or on behalf of a small business Applicant for the purpose of obtaining or expediting an application for a loan guaranteed by the SBA. According to the SBA, Agents include: loan packagers, referral agents, brokers, accountants, attorneys, and consultants, and any other party that receives compensation from representing an Applicant or lender in connection with an SBA loan. SBA lenders must begin using the new Form 159 immediately. However, for applications currently in process, SBA lenders may continue to utilize the previously approved forms through October 31, 2018. Beginning on November 1, 2018, the SBA will only accept the revised version of the form. The changes to the updated form include: The term “Lender” has been changed to a more accurate term: “SBA Lender” – which is defined as a 7(a) Lender or Certified Development Company (CDC) and includes SBA Supervised Lenders; The new form has added citations to the Standard Operation Procedures (SOP) and Code of Federal Regulations (CFR) in an effort to reduce duplication of information found in Agency regulations and in the SBA SOP 50 10; The parties required to complete the form have been more clearly identified in the revised instructions; Areas of the form that were frequently [...]

Success Story: How SBA Financing Solved a Seemingly Unsolvable Problem

Over the years, Innovative Financing Solutions (IFS) has helped many small businesses obtain access to capital that would often have been unavailable to them under conventional lending guidelines. These businesses have gone on to create jobs, stimulate the economy and provide valuable products and services locally, regionally, nationally and even internationally. An example of how one of IFS’ small business clients took full advantage of its growth potential was the result of using a series of SBA 7(a) term loans and a conventional line of credit provided by an IFS partner lender. Several years ago, we were approached by a business owner in the medical equipment industry serving the home care market. The business was growing rapidly due to a recent exit by a large competitor, but the company had insufficient capital available to continue growing on its current trajectory. Much of the company’s problem was due to an overly burdensome debt position – comprised of short-term, high interest debt. In addition, the company’s primary source of revenue came from insurance billings, which have an average cash conversion cycle of 90-120 days. As a result, the little working capital that was available was quickly used to support current debt service. The company was treading water and unable to hire necessary employees, purchase additional equipment/inventory, and procure other necessary resources to support growth. We quickly determined an SBA 7(a) term loan was the right fit. The first round of financing provided a complete debt restructure which decreased annual debt service by 62% per year. In addition, the company was provided permanent working capital and new equipment/inventory financing to implement planned expansion efforts over the next 12 months. Within one year of this debt restructure, the company increased its employee headcount from 28 employees to 48, relocated its headquarters, added an additional [...]

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