October 13, 2017

Fraud Friday — Uh Oh, FBI Raids Banc-serv Campus, Locks Doors

By Bob Coleman
Editor, Fraud Friday

The nation’s largest SBA loan service provider Indiana’s office were raided and its doors were padlocked by the FBI.

Banc-serv claims over 400 SBA 7(a) lenders in 45 states as clients.

Writes the Indianapolis Star about yesterday’s events:

Several agents wearing blue gloves and FBI jackets were visible through large windows on two floors as they searched files and took photographs inside several different rooms in the banc-serv location at 777 E. Main St.

Chris Bavender, spokeswoman for the FBI’s Indianapolis office, said agents are conducting “investigative activity in the area.”

The front doors to the building were locked Thursday. The parking lot was half full of cars, but empty of people except for media and curious bystanders. It’s unclear how many employees were in the building.

Other than the FBI, that’s about all anyone knows right now.

Request for a comment email yesterday afternoon by the Coleman Report to banc-serv CEO Kerri Agee and Barry Sloane, President, Chairman and CEO of Newtek, the parent of banc-serv, have yet to be answered.

View local TV coverage of the raid here.

FBI investigates at Westfield lender banc-serv

Editor Note: The image inserted at the top of this report is on banc-serv’s website and has not been altered.
http://info.banc-serv.com/blog/2014/04/banc-serv-hits-trade-show-circuit-western-pennsylvania-association-sba-guaranteed-lenders/

This rewrite of SBA’s Standard Operating Procedure includes changes to SBA’s 7(a) and 504 lending programs effective January 1.

Coleman webinar instructor and former SBA Deputy Director of the Little Rock Commercial Loan Center, Lance Sexton will walk you through all the changes in a professional, concise presentation.

Importantly, Lance will teach the webinar, putting all changes into their proper context and importance.

Don’t Jeopardize your SBA 7(a) guaranty by not following the new rules!

Give your staff the tools to become experts in the new SBA SOP 5010 (J)

MANAGEMENT ISSUES, COMPLIANCE & LENDER RESPONSIBILITY

• Updated guidance on Agents, including Lender Service Providers
• Added the process for obtaining SBA’s prior written consent on portfolio transfers and loan participations
• Added the process for obtaining SBA’s prior written consent to secured credit and SBA securitization transactions, including a description of the basic conditions that a Lender must meet in order to securitize and minimum elements that SBA requires for securitizations
• CAIVRS Disclosure to Applicants

ELIGIBILITY

• New procedures for determining franchise eligibility
• New guidance regarding affiliation control based on management agreements
• New procedures for businesses with a religious affiliation
• Revised procedures for businesses with an associate with poor character/912 issues
• New rules for consumer and marketing cooperatives
• Revised rules for businesses providing prurient sexual material
• New guidance for non-US citizens
• Finance change of ownership with EPCs

UNDERWRITING

• Added minimum equity requirements for certain 7(a) loans — Start-Up businesses and Changes of ownership
• Removed the requirement for 25% equity injection when intangibles exceed $500,000 in change of ownership loans.
• Provided direction that SBA and/or the Lender, for loans processed using delegated authority, may require a personal guaranty, regardless of ownership interest, if any, when deemed necessary for credit or other reasons
• Clarified that Lenders must consider seller debt as debt in all applications
• Increased the percentage of loan proceeds that may be used to purchase land from 20 percent to 33 percent for the Builder’s CAPLine.
• Clarified the eligible uses of loan proceeds for farm enterprises.
• Expanded EWCP credit underwriting standards
• Updated EWCP collateral requirements
• Revised policies regarding debt refinancing for SBA Express, Export Express, and EWCP Lenders.
• Clarified the Loan Program Requirements for change of ownership loans involving Employee Stock Ownership Plans or equivalent trusts.
• Updated eligible uses of proceeds for Export Express.
• Clarified guidance regarding maximum guaranty amounts for combination of 7(a) and 504 loans.
• Revised the requirements for SBA Express Revolving loans to include a term-out period.
• Clarified EWCP maturities for Single Transaction-Specific loans.
• Clarified that the Note terms for variable interest rate loans must include the first adjustment date by either stating a specific date, or using the final disbursement date to determine the timing.
• Clarified the guidance regarding allowable fees for packaging and other services.
• Updated the guidance concerning disclosure of fees and Lender expenses, including SBA Form 159
• Updated environmental policy guidance to reflect current federal requirements and added guidance related to the release of rights to indemnification from SBA/Lender
• Changed standard for business financial statements to be dated within 120 days of submission to SBA

COLLATERAL

• Guidance when collateral is listed in the National Register of Historic Places

CLOSING

• Revised the guidance on how and when the guaranty fee must be paid for loans with short term maturities and the circumstances under which a refund will be provided to the Lender.
• Consolidated and simplified the guidance on the fees a Lender may charge an Applicant to conform to regulatory changes made in the Final Rule
• Added guidance on the process for selling loans in the Secondary Market

SERVICING

• Expanded the list of actions that do not require prior approval by SBA. Lender may use E-Tran Servicing to notify SBA of those actions
• Added guidance that Lenders are required to report information to the appropriate credit reporting agencies whenever they extend credit through an SBA loan
• Added guidance that SBA and the PLP-EWCP lender may determine certain requirements for foreign accounts receivable, including advance rates and/or use of control accounts for asset based EWCP loans

October 13, 2017

By Bob Coleman
Editor, Fraud Friday

Fraud Friday Part II — Newtek Stock Down 10%, Says FBI Executed Search Warrant on Banc-serv

Newtek, said today its subsidiary, banc-serv, was served with a search warrant by the FBI in Westfield, Indiana.

“Newtek closed on its $5.4 million investment in banc-serv in June 2016. Newtek is monitoring the situation and is cooperating fully with the authorities. Banc-serv will be open for business today.”

Newtek’s stock is getting hammered, down over 10% at 11:30 am Eastern.

Read our earlier reporting here

October 13, 2017

By Bob Coleman
Editor, Coleman Report

Breaking News — SBA Releases Updated SBA 1919, 1920, Other Forms

Effective 10/12/17.

The forms and the SBA notice are attached.

SBA One users can continue to use the forms generated thru SBA One (Old version) until SBA One is updated .

The updated new SBA 7(a) forms:

• 1919 — Borrower Information Form
• 1920 — Lender’s Application for Loan Guaranty

Updated for SBA 7(a) and 504:

• 1971 — Religious Eligibility Worksheet

Community Advantage Forms

• 2449 — Community Advantage Addendum for SBA form 1919

Also Form 2237

Changes to SBA Form 1919 include:

1. A separate Instruction and Definition cover page
2. The division of the form into Section 1 to be completed by the Applicant or co-Applicant
3. Section 2 to be completed by Associates and principals of the Applicant
4. General updates to align the form with current SOP 50 10 requirements.

Changes to SBA Form 1920 include:

1. Modified the general format to be visually practical and provide clarity;
2. A new Sources and Uses table with details on total project costs;
3. Grouped together questions associated with the same SBA Loan Program Requirement;
4. Added alternate contact information, pricing (split pricing and rate changes)
5. Requirements for 7(a) Small Loan processing
6. Confirmation the SBA Lender received and reconciled applicable tax return transcripts
7. Removed questions relating to business valuations and construction that were not pertinent to determining eligibility.

Read the SBA Notice here!

October 13, 2017

By Bob Coleman
Editor, Coleman Report

More SBA Breaking News — SBA Issues New SOP 50 10 5(J), Franchise Rules

Here are the just released policy notices

SBA Notice 5000-17009 – Revisions to Franchise Review Process for 7(a) and 504 Loans
http://colemanreport.com/wp-content/uploads/2017/10/5000-17009.pdf

SBA Notice 5000-17008 — Issuance of SOP 5010 5 (J)
http://colemanreport.com/wp-content/uploads/2017/10/5000-17008.pdf

We’ll forward the link to the new SOP when it is published on SBA’s website.

Analysis and more to come later. . . .

October 16, 2017

Main Street Monday — SBA Issues New SBA SOP 5010 J

By Bob Coleman
Editor, Main Street Monday

Access the link for the new SOP 5010 (J) effective January 1, 2018

Be sure to register for Coleman’s webinar to learn about all the new changes in proper context and importance.

MANAGEMENT ISSUES, COMPLIANCE & LENDER RESPONSIBILITY
Updated guidance on Agents, including Lender Service Providers
Added the process for obtaining SBA’s prior written consent on portfolio transfers and loan participations
Added the process for obtaining SBA’s prior written consent to secured credit and SBA securitization transactions, including a description of the basic conditions that a Lender must meet in order to securitize and minimum elements that SBA requires for securitizations
CAIVRS Disclosure to Applicants

ELIGIBILITY
New procedures for determining franchise eligibility
New guidance regarding affiliation control based on management agreements
New procedures for businesses with a religious affiliation
Revised procedures for businesses with an associate with poor character/912 issues
New rules for consumer and marketing cooperatives
Revised rules for businesses providing prurient sexual material
New guidance for non-US citizens
Finance change of ownership with EPCs

UNDERWRITING
Added minimum equity requirements for certain 7(a) loans — Start-Up businesses and Changes of ownership
Removed the requirement for 25% equity injection when intangibles exceed $500,000 in change of ownership loans.
Provided direction that SBA and/or the Lender, for loans processed using delegated authority, may require a personal guaranty, regardless of ownership interest, if any, when deemed necessary for credit or other reasons
Clarified that Lenders must consider seller debt as debt in all applications
Increased the percentage of loan proceeds that may be used to purchase land from 20 percent to 33 percent for the Builder’s CAPLine.
Clarified the eligible uses of loan proceeds for farm enterprises.
Expanded EWCP credit underwriting standards
Updated EWCP collateral requirements
Revised policies regarding debt refinancing for SBA Express, Export Express, and EWCP Lenders.
Clarified the Loan Program Requirements for change of ownership loans involving Employee Stock Ownership Plans or equivalent trusts.
Updated eligible uses of proceeds for Export Express.
Clarified guidance regarding maximum guaranty amounts for combination of 7(a) and 504 loans.
Revised the requirements for SBA Express Revolving loans to include a term-out period.
Clarified EWCP maturities for Single Transaction-Specific loans.
Clarified that the Note terms for variable interest rate loans must include the first adjustment date by either stating a specific date, or using the final disbursement date to determine the timing.
Clarified the guidance regarding allowable fees for packaging and other services.
Updated the guidance concerning disclosure of fees and Lender expenses, including SBA Form 159
Updated environmental policy guidance to reflect current federal requirements and added guidance related to the release of rights to indemnification from SBA/Lender
Changed standard for business financial statements to be dated within 120 days of submission to SBA

COLLATERAL
Guidance when collateral is listed in the National Register of Historic Places

CLOSING
Revised the guidance on how and when the guaranty fee must be paid for loans with short term maturities and the circumstances under which a refund will be provided to the Lender.
Consolidated and simplified the guidance on the fees a Lender may charge an Applicant to conform to regulatory changes made in the Final Rule
Added guidance on the process for selling loans in the Secondary Market

SERVICING
Expanded the list of actions that do not require prior approval by SBA. Lender may use E-Tran Servicing to notify SBA of those actions
Added guidance that Lenders are required to report information to the appropriate credit reporting agencies whenever they extend credit through an SBA loan
Added guidance that SBA and the PLP-EWCP lender may determine certain requirements for foreign accounts receivable, including advance rates and/or use of control accounts for asset based EWCP loans

Updated October 16, 2017

By Bob Coleman
Editor, Coleman Report

banc-serv PARTNERS LLC Announces the Retention of Brent Ciurlino, Former Director of the SBA Office of Credit Risk Management
October 16, 2017

Fraud Friday Part II — Newtek Stock Down 10%, Says FBI Executed Search Warrant on Banc-serv
October 13, 2017

Fraud Friday — Uh Oh, FBI Raids Banc-serv Campus, Locks Doors
October 13, 2017

October 17, 2017

By Bob Coleman
Editor, SBA Hot Topic Tuesday

SBA Hot Topic Tuesday — Coleman SBA 7(a) Lenders of the Year

Coleman SBA 7(a) Lenders of the Year

About the 2017 Coleman small business lending professional awards

The Coleman Report is awarding 2017 small business lending professional awards in six categories.

• Main Street Lenders of the Year
• SBA 7(a) Lenders of the Year
• SBA 504 Lenders of the Year
• Rural Small Business Lenders of the Year
• Mission-Based Small Business Lenders of the Year
• Emerging Leader Small Business Lenders of the Year (Under 40)

Winners are chosen from community nominations.

Winners will be honored at an event, date and location to be announced shortly.

Award winners are only eligible for one award per year.

We will be announcing the final category winner tomorrow:
Coleman 2017 Rural Small Business Lenders of the Year — Wed, October 18

Congratulations to this year’s Coleman SBA 7(a) Lenders of the Year!

Stephenie Frazier Whitfield, Senior Vice President, SBA Market Manager, Bank of America Merrill Lynch, Georgia

WHAT I DO: I lead a team of SBA BDO’s throughout the South who help business owners improve cash flow and increase profitability by providing long term financing with low down payments.

WHY IT MATTERS: As a business owner your focus is on increasing your customer base and your bottom line profitability. We provide the capital to grow your business.

HOW I DO IT: I’m here to help you grow your business by improving cash flow with loan terms up to 25 years. You can even finance closing costs and put as little as 10% down.

WHAT OTHERS SAY: “I can’t thank you enough for how important a role you have played in my success. You have been with me since the beginning, and I hope our working relationship continues for life. You have truly been a blessing, a voice of reason, and a great financial confidant.” – Kamran Kurani, Owner of Legacy Pizza, LLC (5 franchised Pizza Hut locations)

“I have had the pleasure of partnering with Stephenie for several years and have truly come to appreciate the depth of her knowledge of SBA loans.” – Jan Norton, President, Prospect Solutions, LLC

WHO I AM: For the past 20 years, my #1 goal has been to help small business owners thrive through flexible financing options. I have always had a passion for small business. From my first chocolate chip cookie company in elementary school to my school memorabilia business in college and my own business consulting firm after law school, I have enjoyed the thrill ride of entrepreneurship.

Rajiv Bhavsar, Senior Vice President, Wallis State Bank, Texas

With over 20 years of experience in banking and business development, his desire and vision to consistently help small businesses in any shape or form makes him ideally suited for the banking profession.

Mr. Bhavsar has helped create countless jobs across various industries in Houston, TX. Due to Raj’s perseverance in small business lending, Wallis Sate Bank has been the leading SBA lender in the Houston district for the past two years. His loan volume for the past 5 years has averaged around $200 million. Of this, $162 million has consisted of small business lending.

Aside from his contributions to the Small Business community, Mr. Bhavsar sacrifices personal time and is actively involved in many organizations in the Houston area, such as the Indo American Chamber of Commerce, India Culture Center, and International Hindi Association, SCORE, SBDC, and HCC- Business Plan Competition.

Raj demonstrates leadership outside of his regular business duties by being actively involved in many organizations in the Houston area. Raj uses his position at the Indo American Chamber of Commerce (Director since 2014; active member since 1999), IBN Sina Foundation (Advisor to the Board since 2012), and Indian Culture Center (President in 2012 and 2016, active member since 2003) to arrange small business seminars. Raj frequently sets up booths with SCORE and attends many seminars held by them to encourage and guide them on how to obtain financing for their new or prospective business. Furthermore, Raj has volunteered numerous times to be a speaker at many small business seminars when held at Houston Community College. He helps set up, take part in a Q & A, and most importantly helps the attendees understand the different type of financing that is offered by most banks to help with their small business needs. Raj uses his active roles in a plethora of platforms and organizations to be an advocate for small business financing.

He is also highly involved in nurturing the youth of the community to become leaders of tomorrow. Mr. Bhavsar still finds the time to actively fundraise for underprivileged youth in India by providing them with school supplies and clothes, enabling them to obtain an education that previously was not available to them. As great of a business professional Mr. Bhavsar is, everyone that knows him will tell you, he is even a greater person. — Asif Dakri, Vice Chairman and CEO, Wallis State Bank

Michele Light, Senior Vice President & Market Leader, Centric Bank, Pennsylvania

“Michele Light, Senior Vice President and Market Leader in our Philadelphia office, is leading our SBA initiative with tremendous results. Our SBA loans contributed 62% of gross fee income in 2016,” says Patti Husic, President & CEO of Centric Bank. “Michele is the answer to the biggest challenge for small business owners and female business owners—access to capital.”

Under Michele Light’s team leadership, she was responsible for the following 2017 SBA 7(a) lending numbers exceeding expectations and meeting strategic lending goals ahead of target:

• Centric Bank booked 52 SBA loans in the first six months of 2017 through June 30, totaling $23.4 million.
• The Philadelphia office, led by Michele Light, booked 29 of the 52 SBA loans, for a total of $17.6 million.
• Since 2015, Michele and her team have originated $85 million in loans with SBA guarantees.
• Total loans increased by $95.8 million from the second quarter 2016, an increase of 26%.
• As of July 27, 2017, Centric Bank is the #2 SBA 7(a) Lender in Pennsylvania in dollar volume.
• Ranked as the #1 non-preferred SBA 7(a) Lender in Pennsylvania.
• Ranked #6 in total number of SBA loans in the Eastern District of Pennsylvania, representing 40 out of 67 counties in the Commonwealth, or more than two-thirds of Pennsylvania’s business landscape.

Ranked as a Top 100 SBA 7(a) Lender in the United States.

Leigha McLendon, Vice President & the Director of Government Guaranteed Lending, BankPlus, Mississippi

Through Leigha’s leadership and expertise in guaranteed lending, BankPlus has been enabled to expand its role as a community bank and partner with more small business than ever before.
Since her employment began in February of 2012, BankPlus has approved and funded over $50 million in government guaranteed loans for small businesses throughout Mississippi. These investments have transformed the lives of our customers and have made tremendous financial impacts in the communities these businesses serve. Leigha is highly committed to her job, our shareholders, and our customers. She conducts business with the highest of standards. I believe her success is reflective of her character and commitment to excellence. — Kenny Wilson, Senior Vice President & Commercial Team Leader, BankPlus

Brad Lebsack, SBA Senior Relationship Manager, Pinnacle Bank, California

Has extensive knowledge, production level and years serving the SBA borrowers and community! He builds and runs successful SBA Departments since the early 2000’s. Pinnacle Bank is currently rated number four for the state of California with only two people. His loans are of supreme quality for under served hospitality and assisted living business communities. — Rebecca Wang, Vice President Pinnacle Bank

October 18, 2017

By Bob Coleman
Editor, C-Suite Wednesday

C-Suite Wednesday — Coleman Rural Small Business Lenders of the Year

October 19, 2017

By Bob Coleman
Editor, Coleman Movers and Shakers

Coleman Movers & Shakers — Banc-Serv Retains Brent Ciurlino, Appoints Karen McHugh EVP

Brent Ciurlino’s consulting group has been retained to review the operations of banc-serv.

Brent was formerly the Director, Office of Credit Risk Management / Asst. Associate Administrator for SBA from January 2012 through September 2015.

In addition, the Board of Managers announced Karen McHugh was elevated to the position of Executive Vice President of Operations. Karen brings over 30 years of SBA and banking industry experience to her new position, as well as a wealth of knowledge and a proven track record of success in specialized areas including SBA loan audits, policy and procedure, credit underwriting, and eligibility.

Previously, Karen served as the EVP/Chief Operating Officer of NAGGL for over 10 years.

Says banc-serv, “Customers are invited to meet with the banc-serv team at the banc-serv booth at the upcoming NAGGL Annual Conference, October 30 – November 1, in Colorado Springs.”

Harvest Names Vanna Truong and Todd Overly as SVPs of Business Development

Vanna Truong, Senior Vice President of Harvest, has over twelve years of lending experience to small business owners. Vanna has consistently been a top sales producer throughout her career in SBA and banking, which included positions as Senior Business Development Officer at Wells Fargo and Plaza Bank.

Prior to sales Vanna worked as a Senior Underwriter in the SBA Department at Wells Fargo and has been formally trained through the College of Commercial Credit (WFB).

A graduate of the Walter A. Haas School of Business at UC Berkeley, Vanna calls San Jose, California and the Bay Area her home.

Traveling, trying new foods, and training CrossFit, she is also an avid sports fan and has been a 49er Faithful and Golden State Warrior fan even before the emergence of the Warriors’ “Super-team status.” When she’s not busy working on commercial real estate deals you can find her in the gym working and training for CrossFit or at a Niner’s or Warrior’s game.

Todd Overley is a small business lending expert with twenty years of experience in every aspect of SBA lending.

Earning elite, top rankings numerous times while mastering various roles such as credit and business development throughout his career with finance companies, such as CIT, Todd most recently was Chief Operating Officer of SBA Loans Today. During his career he has reviewed or signed on over $1 billion of loans.

Todd enjoys making dreams come true for small business owners as they grow their business. Throughout his illustrious journey, he has always maintained his passion for the SBA program in particular and what it offers for millions of businesses around the country.

Brent Ciurlino’s consulting group has been retained to review the operations of banc-serv.

Brent was formerly the Director, Office of Credit Risk Management / Asst. Associate Administrator for SBA from January 2012 through September 2015.

In addition, the Board of Managers announced Karen McHugh was elevated to the position of Executive Vice President of Operations. Karen brings over 30 years of SBA and banking industry experience to her new position, as well as a wealth of knowledge and a proven track record of success in specialized areas including SBA loan audits, policy and procedure, credit underwriting, and eligibility.

Previously, Karen served as the EVP/Chief Operating Officer of NAGGL for over 10 years.

“Says banc-serv, “Customers are invited to meet with the banc-serv team at the banc-serv booth at the upcoming NAGGL Annual Conference, October 30 – November 1, in Colorado Springs.

Upcoming SBA Lending Professional Industry Events

NAGGL Annual Conference, October 30 – November 1, Colorado Springs

FLAGGL, November 13-15, Orlando

Restaurant Finance & Development Conference, November 15-17, Las Vegas

10th Annual 2017 SBA Secondary Market Summit, December 4-5, Washington D.C.

Coleman’s 2017 SBA Lending Awards, December 5, Washington D.C.

The SBIC Summit: Increased Profit, Improved Regulatory Compliance, December 6, 2017 Washington, DC

USDA Rural Development Lenders Meeting, December 7, 2017 Washington, DC

Southeastern Small Business Lenders Conference, March 7-9, Asheville

Mid-America Lender’s Conference, April 15-17, Fort Worth

America West, June 20-22, Costa Mesa

October 20, 2017

By Bob Coleman
Editor, Fraud Friday

Fraud Friday — Oregon Community Bank CEO, CFO Fraud Trial Begins

A retired Oregon community banker reported borrower and employee irregularities to the Feds in 2011.

Don Heine filed a Suspicious Activity Report with the Financial Crimes Enforcement Network and called the FBI to report his concern that possible criminal activity had occurred.

He thought he was a witness. Turns out the FBI made him a target. Don and his CFO, Sally Yates, were indicted in 2015 on 27 counts of bank fraud.

The trial is expected to last four to six weeks.

From the June 29, 2015 Coleman Report:

The indictment alleges the two conspired to bring $1.3 million delinquent loans current, thus hiding a number of bad loans from the Board of Directors and the regulators.

Several of the charges are from the sale of two bank OREO properties.

In 2010 a bank customer purchased two properties from the bank for $812,500. The bank provided 100% financing.

In 2011, the FDIC questioned the validity of the accounting of the transaction as the purchased did not meet the minimum equity requirements needed to remove the properties from the OREO account. CFO Yates said the borrower would make a down payment for the two loans.

The indictment alleges Yates sent a letter the bank’s CPA firm confirming receipt of the down payment.

“When, in truth and fact, no payments had been received.”

The bank eventually obtained the down payment from — yep, another side loan to the borrower. Money was transferred from the borrower’s account for a $37,500 down payment, a transfer the borrower now says he never knew about.

Two months ago, Dan Heine penned an op ed piece in response to reporting by the Oregonian.

“As was reported to the bank’s shareholders in the summer of 2012, the bank posted an operating loss stemming from internal irregularities that I discovered after the termination and departure of certain employees. I immediately notified our Board of Directors and called federal and state banking agencies and the FBI, which eventually lead to indictments for alleged criminal activities of a former employee before and after his employment with the bank. Thereafter, the bank’s board and management cooperated fully with an extensive two-year investigation.

The notion that I was personally involved in a scheme or scandal to conceal problem loans and delinquencies from the bank’s examiners is preposterous.”

October 23, 2017

By Bob Coleman
Editor, Fraud Friday

Main Street Monday — Main Street Paying its Obligations Better than Ever

“Conditions are in place for small businesses to drive GDP growth resulting from exceptional financial health,” states William Phelan, president of PayNet, Inc.

Small Business Delinquencies

The PayNet Small Business Default Index (SBDFI) at 1.84% is 35% below pre-crisis readings, and has been receding in recent months. Much of the improvement in recent months has come from two formerly high-risk sectors experiencing improvements in default rates. Mining default rates have declined close to 1%-point over the last year, and Transportation default rates have been declining at a 0.6% annualized rate over the last three months.

The Thomson Reuters/PayNet Small Business Delinquency Index (SBDI) 31-90 days past due decreased to 1.33% in August 2017 from 1.35% in July 2017. Compared to one year ago, delinquency increased by 1 bp.

Transportation showed a 10 bp decrease in delinquency. Increases in delinquency are shown in both Agriculture (2 bps) and Construction (1 bp).

Small Business Lending

The August 2017 Thomson Reuters/PayNet Small Business Lending Index (SBLI) increased 8% to 134.2 in August 2017 from 123.8 in July 2017. Compared to August 2016, the SBLI increased 1%.

Top growth sectors driving investment expansion by small businesses are found in the
Construction (+5.6%) and Accommodation & Food Services (+5.9%) businesses which together represent over 13% of the small business economy. Arts, Entertainment & Recreation (+10.0%) remains the top growing sector among small businesses. In a big turnaround, Mining (+3.2%) and Wholesale Trade (+3.0%) are now both positive for the first time in the last several years.

After many months of double-digit contractions, growth in the Healthcare sector has stabilized dramatically, and has been slightly positive in recent months with a 0.2% increase.

October 24, 2017

By Bob Coleman
Editor, SBA Hot Topic Tuesday

SBA Hot Topic Tuesday — Fountainhead Brings AI to SBA Lending

We have postulated for many years how technology would improve our decision-making in business and that artificial intelligence would play a role. Many of us, however, didn’t try to equate this to commercial real estate and SBA loans.

Until now.

For Chris Hurn and his team at Fountainhead Commercial Capital, artificial intelligence turned out to be the key to moving commercial real estate approvals onto a new technological plane.

Fountainhead’s proprietary system, known as Pronto, cuts by several days the company’s loan approval time. The Pronto system runs through a highly secure interface on the Fountainhead website. Borrowers or their representatives fill out key information fields and then drag-and-drop financial documents into the secure file system.

Fountainhead’s software then reads documents such as tax returns, financial statements and business debt schedules among other documents. Within a few minutes, the Pronto system reviews the files, applies the real estate transaction data to its underwriting guidelines for qualifying deals and then produces a detailed loan approval letter – auto-populating relevant numeric and alphanumeric data.

Fountainhead’s team of underwriters and credit analysts then perform a thorough yet quick review of the information before formally issuing the approval letter to the borrower – all within two hours.

“Today’s entrepreneur demands quick decisions,” says Chris. “We streamlined an historically time-consuming and arduous process so that business owners can now get fast decisions and get back to running their companies.”

According to Hurn, the most time-consuming part of the process is in the hands of borrowers who need to produce the appropriate financial documentation. Beta testers have found the system easy to use, and most completed the application process in less than 15 minutes.

“Business owners who have ready access to the financial information required for an SBA 504 or our conventional loans can literally look at a property or building in the morning and have an approval by early afternoon. It brings an immediate competitive advantage for business owners and commercial brokers. Reliable, accurate and valuable information is quickly delivered to borrowers, providing relief from loan approval anxiety.

“The new reality is that once time-consuming tasks can be completed quickly and efficiently using our evolving technology. The day will come when SBA loans will be approved and funded in matter of days,” says Chris.

Borrowers and their representatives can access Pronto at: www.Fountainhead504.com/Apply-Today.

October 25, 2017

By Bob Coleman
Editor, Coleman Report

C-Suite Wednesday — SBA 7(a) 25-Year Secondary Market Quotes up to 117.75

Source: Government Loan Solutions

Announcing the 10th Annual 2017 SBA Secondary Market Summit
Join this high-level gathering of public and private stakeholders to review strategies for capitalizing on emerging opportunities and avoiding new threats and pitfalls.

October 26, 2017

By Bob Coleman
Editor, Coleman Movers and Shakers

Coleman Movers & Shakers — Vinny Muratore Named President of Stone Bank’s SBA Division

Vinny Muratore Named President of Stone Bank’s SBA Division

Marnie Oldner, Stone Bank CEO said “Our SBA division, headed by this professional who is so respected in the government-guaranteed loan industry, will allow our bank to continue its profitability and growth plans by originating millions of dollars of loans in Arkansas and around the country while building a community bank presence in Mountain View, White Hall, Little Rock, and Harrison.”

Vinny has over 40 years of commercial and SBA financing experience, having served as Senior VP of Newtek Business Services, Regional Marketing Director and Vice President for the Treasure Coast, South Florida and Tampa/St. Petersburg regions for Florida First Capital. He was also Regional Director for Zions Bank for the State of Florida and Mid-Atlantic Regions. Vinny was a Founding Director of Flagler Bank, a former Director of Gulf Coast Business Finance, and a former VP of SBA Lending at Comerica Bank. He currently serves on NAGGL as a member of the Secondary Loan Committee. Also serves as the Region IV Liaison Committee for NADCO.

Muratore also serves as Director of the Florida Association of Government Guaranteed Lenders and Board member of the Florida Association of Mortgage Professionals.

Seacoast Commerce Bank Names Joseph Cowles SVP for Oregon Market

“Joseph is an outstanding addition to our SBA Team and will enhance our presence and success in the state of Oregon. He has advocated for small businesses in the past and will continue to be very successful in working with small business owners who want to buy, construct, or refinance their own facility,” says David H. Bartram, Senior Executive Vice President, Chief Operating Officer, and SBA Division Manager.

Joseph has over nine years of proven success in working with small businesses as a SBA Business Development Officer. Cowles past experience includes being in a similar position with US Bank and prior with Evergreen Business Capital. Previously, he spent ten years in corporate sales with American Express and Coca-Cola Company.

Laura Petty Joins First Bank as BDO in North Carolina

“We’ve made it a point to only hire the best, and Laura represents exactly the type of expertise we look for at First Bank. We know you not only have to understand the intricacies of SBA lending, but you need to understand how tough it is for small business owners to manage everything the need to manage financially,” says Stephanie Dunn, National Sales Manager of First Bank.

“I’ve spent many years in the SBA industry and being a part of one of the most experienced teams in the country is an honor. I love helping business owners achieve their dreams and we’re doing just that at First Bank,” says Laura.

Laura has over 12 years of sales and marketing experience in banking and lending.

Ed Schultz Joins U.S. Bank’s Wisconsin SBA Team

“We are fortunate to have someone of Edward’s extensive and diverse background in the Wisconsin market,” says Robert Einstein, vice president and Midwest regional manager for U.S. Bank’s SBA Division. “Edward brings to U.S. Bank a strong presence, having worked in the Wisconsin market for many years. We are very excited to have him join the SBA team.”

Ed has more than 26 years of combined experience in finance and business development, and holds a bachelor’s degree in Business Administration in Finance from University of Hawaii.

Schultz has been actively involved in the community, having previously served as the WB&T Chilton Advisory Board President as well as on various boards in Appleton for the United Way, Rotary and Chamber of Commerce Business Development Committee.

Upcoming SBA Lending Professional Industry Events

NAGGL Annual Conference, October 30 – November 1, Colorado Springs

FLAGGL, November 13-15, Orlando

Restaurant Finance & Development Conference, November 15-17, Las Vegas

10th Annual 2017 SBA Secondary Market Summit, December 4-5, Washington D.C.

Coleman’s 2017 SBA Lending Awards, December 5, Washington D.C.

The SBIC Summit: Increased Profit, Improved Regulatory Compliance, December 6, 2017 Washington, DC

USDA Rural Development Lenders Meeting, December 7, 2017 Washington, DC

Southeastern Small Business Lenders Conference, March 7-9, Asheville

Mid-America Lender’s Conference, April 15-17, Fort Worth

America West, June 20-22, Costa Mesa

October 27, 2017

Fraud Friday — SIGTARP Ensnares Borrower of a Failed Community Bank

By Bob Coleman
Editor, Fraud Friday

Barge on the Ohio River at Wheeling West Virginia

Thomas Comer of Mississippi owned a small business that shipped gravel on the Mississippi and Ohio Rivers.

His business failed during the Great Recession. Unfortunately his loans to purchase the barges were from a failed Alabama community bank — a bank that took TARP funds from the U.S. Treasury.

Enter SIGTARP.

Says the Inspector General, “Today’s plea is an important step in the fight against fraud that hurt a TARP bank and cost taxpayers. One week after taxpayers funded Bank of Vernon with $6 million in a TARP program to foster small business lending, the bank loaned money to Thomas Comer to buy river barges. Months later, Comer sold the barges that served as collateral for the loans, and defrauded the bank, keeping the money for himself rather than repaying the loans. Fraud against a TARP bank is fraud against taxpayers, as seen here when the bank could not repay TARP in full and Treasury took a loss of nearly half a million dollars.”

U.S Attorney Jay E. Town adds, “Those who greedily seek a self-indulgent advantage during times of calamity, especially in times of financial crisis or natural disaster, will be vigorously prosecuted by the United States.

The FBI concurs, “Mr. Comer ultimately stole from tax-paying citizens in order to line his own pockets. The FBI and our partners will continue to pursue and bring to justice those who perpetrate this type of fraud.”

From the SIGTARP press release:

Comer had an established banking relationship with the Bank of Vernon in Lamar County and in March 2009 obtained a $295,922 business loan to buy nine barges, according to the plea agreement. The loan documentation designated the barges as security for the loan.

Several months later, Comer obtained a second loan, in the form of a $136,278 line of credit, saying the barges “had been arrested” and he needed money to recover them, according to the plea agreement. In early 2010, Comer sold six of the nine barges for $239,000 but used that money to prop up his struggling businesses rather than to repay his bank loans. Comer also did not inform the Bank of Vernon that he had sold the barges. Between July 27, 2010, and June 25, 2013, on 11 loan renewals and extensions of his two loans, Comer misrepresented his security for the loans, listing the nine barges as collateral, according to his plea agreement.

Yesterday, Thomas, 58, pled guilty to one count of bank fraud. He faces the obligatory ten years in jail.

The SBA loan broker is a key player in matching Main Street borrowers with SBA 7(a) and 504 lenders.

However, SBA is fraught with numerous complexities and traps that can trip up even the most experienced loan broker.

But, SBA loan brokers can now access the same professional training SBA lenders utilize — to monetize your referrals and solve your client’s capital needs.

We’ll start at the beginning. You will learn all about SBA eligibility and underwriting requirements that will allow you refer a loan that can get funded while adhering to all SBA ethical requirements.

Importantly, this training incorporates the new changes to SBA SOP 5010 (J) effective January 1, 2018.

This professionally produced high quality online video instruction will offer superior training for novices and seasoned SBA loan brokers alike.

Bob Coleman
Editor
Coleman Report
Bob is the Publisher of the Coleman Report, a trade newsletter and website for small business bankers. He is the nationally recognized expert on small business lending.
He is a regular contributor for Fox Business News and is sourced frequently by all major financial media news outlets including the Wall Street Journal and Bloomberg.
He is a prolific keynote speaker and training instructor at events in the US and EU.
Bob has a B.A. in Medieval History from the University of California Santa Barbara and a M.B.A. in Real Estate Finance from the University of Southern California

Participants receive weekly notifications of the uploaded Video Modules, Quizzes and reading materials.
Each segment averages ten minutes. Each session ends with a short quiz.
The segments consists of a number of teaching tools. Lectures will be augmented with case studies.
Total instruction over the eight weeks will be about 30 hours.
There will be assigned reading materials drawn from the SOPs, SBA Inspector General audits and the weekly Coleman Report trade newsletter.
The course load averages three to four hours a week.
Don’t worry if you miss a week due to vacation or real life issues. All video segments will be archived for you to review at your own pace at a later date.
At the end of the course you may choose to take a final comprehensive exam.
Once you pass the exam, you receive the professional designation of “Coleman Certified SBA Loan Broker”
In addition, participants will have access to bonus “live” online office hours each week, so you can ask any questions about the SBA 7(a) process.
Here’s what your team will learn during this ten-week (about 30-hours) online video program

Course Syllabus
November 28 — Introduction
December 5 — Week 1 — Overview of SBA

Ethics 101
SBA 7(a) Loan Program
SBA 504 Loan Program
Credit Reasonably Available Elsewhere Rule
Prudent Lender Standard

December 12 — Week 2 — SBA and the Loan Broker

The Two Master Rule
Allowable Fees you can Charge
SBA Form 159
Borrower Documentation Collection
SBA Form 1919

December 19 — Week 3 — SBA Borrower Required Documents

Documents you need to Collect
Tips to Streamline the Paperwork Requirements
Stuff Lender’s want you to do
Preparing Projections
Equity Injection Documentation
The Lender Referral Memo

(One Week off for Winter Break)

January 2 — Week 4 — What the Broker Needs to Know about the Financial Statements
The Income Statement
The Balance Sheet
Pro Forma Balance Sheet
Cash Flow Analysis
Projections

January 9 — Week 5 — SBA’s Definition of Affiliates and Global Cash Flow

SBA’s Definition of Affiliation
Franchise Eligibility
Calculating Global Cash Flow
Historical Cash Flow Analysis
Working Capital Adequacy
Sources of Affiliates Impact on Cash Flow

January 16 — Week 6 — How SBA Calculates Collateral Values

Collateral Calculation for Real Estate
Collateral Calculation for FFE
When SBA Requires the Personal Residence
SBA’s Life Insurance Requirements

January 17 — Week 7 — Special SBA Forms and Rules

SBA Form 1920
SBA Form 1912
Business Acquisition Loans
Refinancing Debt
Construction Issues

January 24 — Week 8 — Special SBA Requirements you Need to Know

Appraisals
Environmental Reports
Business Valuations
Insurance
Non-Citizen Provisions
Final Ethics Review

 “Thank you, Mr. Bob Coleman! I really enjoyed taking your course. The skills I learned and the informative lectures were absolutely amazing.”

Ruben Cardona
Loan Officer
First National Bank of Bastrop County

“Coleman’s SBA 7(a) Loan Underwriter course was a great investment! Bob’s thorough presentation of SBA’s requirements for underwriting and processing 7(a) loan applications, together with the real life case studies, increased my confidence that I can do SBA 7(a) lending right! It was a very beneficial ten weeks!”

Gary Throckmorton
Sr. Executive Vice President
Community Ventures, Lexington, KY

“I really enjoyed the training and learned a lot about the SBA program and underwriting. This was very helpful”

Laura Proulx
Vice President, Credit Manager
The Provident Bank, Amesbury, MA

What platform does the Coleman online course use?
We use Litmos as the platform. You will access the course from the Litmos website without downloading anything to your computer.

How many weeks does the course run?
Eight weeks — technically nine weeks, but we are dark for Christmas.

How much time will I need to devote to the course?
Three to four hours per segment.

How do the segments work?
Each week is divided into segments averaging ten minutes each.

Do I have to finish each segment every week?
No, you may complete the course at your own pace.

Are there reading assignments?
There will be assigned reading materials drawn from the SOPs, SBA Inspector General audits, and the Coleman Report newsletter.

Tell me about quizzes.
At the end of each segment there will be a short multiple-choice quiz to test your mastery of the segment. Segments may be viewed as many times as you wish.

What are Office Hours coaching sessions?
Each Thursday at 1:00pm ET you will have the opportunity to log in and discuss the week’s topic. If you miss a session, office hours will be recorded and archived for your future use.

How do I become a certified Coleman SBA Loan Broker?
At the end of the course, you may choose to take a final exam. Those who score 90% or higher will receive a certification plaque. The exam is open material and may be taken as many times as you wish.

How much does the course cost?
The fee is $995.

How long is the certification valid?
Certification is valid for 12 months.

How do I renew for 2019?
We’re working on that. But, if you have successfully completed your online training you may renew for 2019 with either a three hour webinar or onsite training in conjunction with NACLB. A very reasonable fee will be assessed.

Last month’s FBI raid on the nation’s largest SBA loan service provider has rocked the industry. Coincidentally, on the same day SBA released SOP 5010 (J) that codified a slew of new rules about hiring LSPs effective at the beginning of the year.

The FBI raid reinforces with an exclamation point that SBA expects Lenders to exercise “due diligence” and “prudent oversight” of their third party vendors.

This webinar will define these terms with best practice recommendations you need to implement to manage your third-party vendor relationships to be compliant with SBA’s new SOP.

Extra care will be also be given of how to structure your contract with your LSP that meets SBA’s new guidelines.

This webinar takeaway is a checklist for you to use to create your LSP agreement.

Importantly you will also be given specific guidance of what to include in your SBA loan policy addendum in relation to LSPs.

(As an added bonus you will be provided with a template for you to write your own SBA loan policy.)

For an additional nominal fee you can include all important members of your team to ensure everyone knows SBA’s new SOP’s requirements for managing LSP relationships.

• What is an LSP and what is an agent.
• What LSPs can and can’t do for you.
• Writing the contract
• Writing your specific SBA loan policy
• Federal Financial Institution Regulator policies regarding third party vendors
• Lender’ duty to evaluate, process, close, service, liquidate and litigate small business loans
• Meeting the standarding of “exercising day-to-day responsibility for evaluating, processing, closing, disbursing, servicing, liquidating and litigating its SBA portfolio.
• How to obtain SBA approval for LSP and lender agreements.
• Follow the Money — Rules LSPs must follow when holding your borrower payments.
• Allowable fees that can be charged to you by the LSP.
• How to pay your LSP for services rendered.
• Disclosures required by LSP to you per SBA.
• Power of Attorney and the LSP
• Ethics 101

October 31, 2017

SBA Hot Topic Tuesday — Quick Takeaways from SBA’s Sr. Management 7(a) Quarterly Call

By Bob Coleman
Editor, SBA Hot Topic Tuesday

Quarterly, SBA’s senior management team hosts a call for 7(a) lenders. Here are some quick takeaways from last week’s call you and your team should know:
Download the PowerPoint

• Poultry Loan proceeds cannot be used to purchase excess land. If the operation only requires 10 acres, you cannot purchase 160 acres.
• A franchise eligibility list is posted on SBA’s website. If a franchise is not on the list you must assume it is not eligible for SBA financing. Guidance is given on getting a new franchisor placed on the list.
• If a small business’ revenues comprise more than 5% from “sexual purient” matieral, it is ineigible.
• Zero down financing for startups has been eliminated. A minimum 10% equity injection is required.
• Lenders must notify borrowers of a CAIVRS disclosure. (Note: If SBA does not release suggested language, I’ll draft something for you to use before the end of the year.)
• New 1919/1920 forms can be used now, but are mandatory until January 1.
• Personal guaranties may be required for less than 20% owners if they are significant in running the company.
• There are new IRS 4506 forms 
• Due to the number of changes in the SOP 5010 (J), a track change SOP was not released.
• SBA Express lines of credit now include a term-out period.
• SBA has announced a SBA 504 “listening session” on Tuesday, 11/7 @ 2 pm Eastern
• SBA has announced a SBA 7(a) listening session” on Tuesday, 11/7 @ 11 am Eastern

Finally, there are numerous changes in managing your loan service provider. Be sure to register for our webinar:

November 1, 2017

By Bob Coleman
Editor, C-Suite Wednesday

C-Suite Wednesday — SBA Wants Your Feedback

Says SBA, “In an effort to assess and enhance our relationships with our key stakeholders, the SBA is holding a series of public meetings in the fall. These public meetings will take place in the form of online listening sessions so that geographic boundaries are not a barrier to participation.

“We share the same goal in serving America’s entrepreneurs. It is our hope that this discussion will help us better understand how we complement each other’s services, how we can better distinguish ourselves in the mind of the entrepreneur, as well an opportunity to uncover any gaps in service provisions.”

SBA 7(a) Session –November 7 @ 11 am Eastern.

The listening sessions will focus on gathering your individual experience and perceptions of the SBA. Because we expect many SBA 7A lenders to join the call, we ask that you register at the following link by Friday, November 3rd:
https://www.surveymonkey.com/r/VZVVLST

The conference begins at 11:00 AM Eastern Time on November 07, 2017; you may join 10 minutes prior.
Step 1: http://ems7.intellor.com/login/714523

Step 2: Instructions for connecting to conference audio will then be presented on your computer

SBA 504 Session — November 7 @ 2 pm Eastern

Register at the following link by Friday, November 3rd:
https://www.surveymonkey.com/r/VZ3F8MG

The conference begins at 2:00 PM Eastern Time on November 07, 2017; you may join 10 minutes prior.
Step 1: http://ems7.intellor.com/login/714524

Step 2: Instructions for connecting to conference audio will then be presented on your computer