Small Business Administration (SBA) Loan Programs
The Small Business Administration (SBA) was created in 1953 as an independent agency of the US government to protect the interests of small businesses, preserve competitive enterprise, and strengthen the economy. The SBA helps small business owners remain the engine of the United States by offering higher LTVs and lower DSCRs than most conventional loan products. These programs are operated through private-sector lenders that provide loans which are, in turn, guaranteed by the SBA; the Agency has no funds for direct lending or grants. Although these programs are available for any individual, it gives special advantages to women and those belonging to minority groups. These products are available nationwide.
SBA Loan Features
Term Length and Amortization: SBA term length and amortization depends on the product as well as the underwriting guidelines of the conventional partner. Terms and amortizations can go up to 25 years in some circumstances.
Recourse: SBA Loans are always recourse, which means that a personal guaranty for the repayment of the loan is required. Full recourse loans make the sponsors guarantying the loan responsible for any and all shortfalls between the loan balance and sales price in the event of default and foreclosure as well as any applicable legal and ancillary fees.
Prepayment Penalty: Prepayment structures can vary greatly, depending on the how the conventional partner structures the loan and what SBA program is guarantying the loan.
Lending Areas: SBA loans are nationwide.
Loan Servicing: SBA Loans are typically serviced by the Certified Development Company (CDC) packaging the loan. The Master Servicer is responsible for day-to-day loan servicing practices including collecting loan payments, managing escrow accounts, analyzing financial statements inspecting collateral and reviewing borrower consent requests. All non-performing mortgages are usually sent to the special servicer. The special servicer is responsible for preforming customary work-out related duties including extending maturity dates, restructuring loans, appointing receivers, foreclosing the lender’s interest in a secured property, managing the foreclosed real estate and selling the real estate. Under some situations, master services subcontract some of their responsibilities to a primary or sub servicer in order to uphold the servicing standard when they need additional assistance.