We are grateful to Brian Rogers, Blue Maven Law LLC, for presenting “Legal Topics for Business Owners” at our February 8, 2022, membership meeting.
Brian has graciously shared the slides from his presentation.
Updated SBA Form 159 and Instructions Regarding Submission Issued Nov 12
Monday, November 15, 2021
by John Vitale, MBA Commercial Relationship Manager Midland States Bank
SBA Procedural Notice 5000-821479, Issuance of Updated SBA Form 159 and Revised Procedures in SOP 50 10 6 for Submission of the Form (effective November 12, 2021), announces issuance of the revised SBA Form 159, Fee Disclosure and Compensation Agreement, and details the changes to the form. It also revises the procedures governing submission of the completed form to SBA by lenders. [SOP 50 10 6, Part 2, Section A, Chapter 5, Paragraph D.8.e. (p. 191) – for 7(a) Lenders – and Paragraph E.7.c.iv. (p. 201) for CDCs.] Lenders must begin using the new form immediately for new loan applications, but may continue to approve the previously approved version for applications already in process.
Per the notice, the substantive revisions to the 159 form include:
- Clarification that a separate Form 159 must be completed for each application when an Agent provides services to an Applicant in connection with multiple applications, and explanation of the new procedure for submitting completed forms and supporting documentation;
- Revisions to guidance regarding the itemization of services provided and the requirements for supporting documentation;
- Deletion of references to FTA/Colson Service mailbox since that email account is no longer active; and,
- New requirement that the lender use its 6-7 digit Location ID instead of its FIRS number to identify itself.
Effective immediately, the lender must submit all required executed SBA Forms 159, together with any required supporting documentation electronically to SBA’s Capital Access Financial System (CAFS) at https://caweb.sba.gov. After initial disbursement of the loan, the required form(s) and documentation must be uploaded into E-Tran Servicing in conjunction with the Lender’s monthly SBA Form 1502 report with submission required within two 1502 reporting cycles. There is no change to the requirement that 7(a) Lenders retain original signature versions of all 159 forms and all supporting documentation in their files for compliance review purposes. [Similar procedural changes are provided for forms and supporting documentation required in connection with 504 loans.] Please see the revised Form 159 and notice for full details.
Read MorePPP and Changes of Ownership Update 10/2/2020
by John Vitale, MBA
Commercial Relationship Manager
Midland States Bank
The SBA has extended its notice on required procedures when it comes to changes of ownership and outstanding PPP loans.
In essence, if someone plans to sell their business and has an outstanding PPP loan that hasn’t been forgiven, that loan does not transfer to the new owner. In most cases, funds covering the PPP loan will have to be set aside from the sale proceeds in an escrow account until forgiven.
If you are considering using an SBA loan to fund a business purchase, be sure to check out SBA’s updated notice:
SBA Procedural Notice: Paycheck Protection Program Loans and Changes of Ownership
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The Importance of Owner Flexibility
You shouldn’t expect to sell your company overnight. For every company that sells quickly, there are a hundred that take many months or even years to sell. Having the correct mindset and understanding of what you must do ahead of time to prepare for the sale of your company will help you avoid a range of headaches and dramatically increase your overall chances of success.
First, and arguably most importantly, you must have the right frame of mind. Flexibility is a key attribute for any business owner looking to sell his or her business. There are many variables involved in selling a business, and that means much can go wrong. An inflexible owner can even irritate prospective buyers and inadvertently sabotage what could have otherwise been a workable deal.
Be Flexible on Price
A key part of being flexible is to be ready and willing to accept a lower price. There are many reasons why business owners may fail to achieve the price they want for their business. These factors range from lack of management depth and lack of geographical distribution to an overreliance on a handful of customers or key clients. Of course, one way to address this problem is to work with a business broker or M&A advisor in advance, so that such price issues are minimized or eliminated altogether.
Be Prepared to Compromise
In the process of selling your business, you may want to achieve confidentiality and sell your business quickly and for the price you want. However, the fact is that most sellers find that it is possible to have confidentiality, speed, and the price you want, but not all three. Ultimately, you’ll have to pick two of the three variables that are most important to you.
Be Patient
A third way in which business owner flexibility can boost the chances of success is to embrace the virtue of patience. By accepting the fact that businesses can “sit on the shelf” for a considerable period of time, you are shifting your expectations. This realization can help reduce your stress level. The fact is that stressed out owners are far more likely to make mistakes.
Sometimes Losing is Really Winning
A fourth way in which business owners should be flexible is realizing that you and your lawyer will not win every single fight. There will be many points of contention, and a smart dealmaker realizes that it is often better to have a good deal than a perfect deal. You may have to make sacrifices in order to sell your company. Simply stated, you shouldn’t expect the other side to lose every point.
At the end of the day, a savvy business owner is one that never loses sight of the final goal. Your goal is to sell your business. Seeing the situation from the buyer’s perspective will help you make better decisions on how you present your business and interact with prospective buyers. Maintaining a flexible attitude with prospective buyers helps to position you as a reasonable person who wants to make a deal. Goodwill can go a long way when obstacles do arise.
Copyright: Business Brokerage Press, Inc.
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The Main Street Lending Program
There is no doubt that the COVID-19 situation seems to change with each and every day. The disruption and chaos that the pandemic has injected into both daily life and business is obvious. Just as it is often difficult to keep track of the ebbs and flows of the pandemic, the same can be stated for keeping up to speed on the government’s response and what options exist to assist companies of all sizes.
In this article, we’ll turn our attention to an overlooked area of the government’s pandemic response and how businesses can use a whole new lending platform to navigate the choppy waters.
As the pandemic continues, you will want to be aware of the main street lending program, which is a whole new lending platform. It was designed for businesses that were financially sound prior to the pandemic. Authorized under the CARE Act, the main street lending program is quite attractive for an array of reasons. Let’s take a closer look at what makes this program almost too good to be true.
This lender delivered program is a commercial loan. Unlike the PPP, there is no forgivable component. However, the main street lending program does have one remarkable feature that will certainly grab the attention of all kinds of businesses. It can be used to refinance existing debt at a rate of around 3%. With that stated, it is also important to note that businesses cannot refinance existing debt with the current lender. Instead, a new lender must be found. Generally, loans are a minimum of a quarter million dollars and have a five-year term. In another piece of good news, there is a two-year payment deferment period.
The main street lending program can be used in a variety of ways. In short, the program is not simply for refinancing existing debt. Additionally, there is no penalty for prepayment. The way the program works is that lenders make the loans and then sell 95% of the loan value to the Fed. This of course means that the lender is only required to retain 5% of the loan on their balance sheet. The end result is that lenders can dramatically expand the amount of loans they can make.
Whether it is the PPP or a program like the main street lending program, there are solid options available to help you. Businesses looking to restructure debt or put an infusion of cash to good use may find that the main street lending program offers a very flexible loan with great interest rates.
Copyright: Business Brokerage Press, Inc.
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