Underwriting continues at SPEDCO during government shutdown

SBA Building

The partial government shutdown became the longest in modern U.S. history on Jan. 13. It has affected community banks across the country in many ways, most notably the review and approval of loans by the Small Business Administration. 

While community banks wait for SBA to reopen, however, they can continue to work with partners like ICBM-endorsed provider SPEDCO. The SBA-certified development company continues to market, underwrite, and prepare 504 loans for loan committee review.

“SPEDCO continues work with community bank to prepare loans and new loan applications for the day that SBA re-opens,” said SPEDCO CEO Jonathan Sage-Martinson. 

SPEDCO also continues to close loans that were approved by the SBA before the shutdown. Changes to loans have been slowed, however, because SBA isn’t approving loan changes at this time. Loan servicing continues as usual.

What is happening at SBA and its partners at the Central Servicing Agent and Fiscal Agent?

Funding: Loans approved and planned for January funding were funded as normal on January 16th.  Limited SBA staff is at work processing loans previously approved and scheduled for February funding as well, as long as there are no changes to the original SBA approval (changes are not being reviewed at this time).

Loan servicing: Loan payments are being collected by the Central Servicing Agent as usual. There are limited SBA employees available for limited servicing actions – those considered essential to protect SBA and lender interests.

Loan applications: The SBA has suspended reviews of new loans for approval. Banks, however, can continue to pursue 504 loans. Within the SBA rules for 504 lending, there is guidance for the option of bridge financing. With the current partial government shutdown, this could be a great option for bankers.

Provided the financing is for a term of three years of less, bridge financing is considered short term debt, the purpose of which is to provide financing until longer term financing can be obtained.  We recommend shorter maturities out of caution but this is the rule.

This means bankers could do a short-term loan to secure the purchase of a piece of real estate, for instance, and still retain the option of utilizing the 504 program later on.

Bridge financing is an acceptable use of funds in a 504 structure and is not considered a refinance, assuming it funded only 504 eligible fixed assets and related eligible fees.

Questions? Contact SPEDCO CEO Jonathan Sage-Martinson at jonathan.sagemartinson@spedco.com or call 651-631-4900.

 

 

 

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February 21, 2019

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