SBA Quarterly Lender Newsletter FY14 Q1

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SBA Colorado District Office

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SBA Veterans Advantage

As of January 1, 2014 through September 30, 2014, SBA's Veterans Advantage program will facilitate lending to veteran-owned small businesses to start and grow their businesses. Listed below you will find important information regarding this program.

Guaranty Fee Reduction

Currently, SBA Express loans of $150,001 to $350,000 have an up-front guaranty fee of 3%. To continue supporting America’s veterans, the SBA Veterans Advantage reduces the up-front guaranty fee from 3% to 0% for SBA Express loans over $150,000 approved to small businesses owned by qualified veterans. This will encourage greater participation in SBA lending programs with a direct benefit to veteran-owned small businesses. (All 7(a) loans of $150,000 or less have an up-front guaranty fee of 0%, as announced in SBA Information Notice #5000-1288.) Note that there is no reduction in the Lender’s annual service fee for loans over $150,000.

SBA Veterans Advantage Qualifications

In order to qualify for this, businesses must be 51% or more owned and controlled by an individual or individuals in one or more of the following groups:

• Veterans (other than dishonorably discharged);

• Service-Disabled Veterans;

• Active Duty Military service member participating in the military’s Transition Assistance Program (TAP);

• Reservists and National Guard Members; or

• Current spouse of any Veteran, Active Duty service member, or any Reservist or National Guard member; or widowed spouse of a service member who died while in service or of a service-connected disability.

Lenders must document in their loan file a borrower’s eligibility using the documentation identified in the attachment to this Notice and must present copies of that documentation with any request to SBA to purchase.

 SBA currently assists veterans through its 68 local SBA district offices, 15 Veterans Business Outreach Centers nationwide, its partnership with approximately 1,000 Small Business Development Centers and approximately 12,000 SCORE Counselors. Questions concerning this Notice should be directed to the lender relations specialist in the local SBA field office. The local SBA field office may be found at www.sba.gov/localresources.

SBA Veterans Advantage Documentation Requirements:

1) Veteran: Copy of Form DD 214, which is provided for other than dishonorably discharged veterans.

2) Service-Disabled Veteran: Copy of Form DD 214 or documentation from the DVA that the veteran has been determined as having a service-connected disability.

3) Transitioning Active Duty Military Member: DD Form 2, "U.S. Armed Forces Identification Card (Active)," or DD Form 2, "Armed Forces of the United States Geneva Conventions Identification Card (Active)" and, DD Form 2648 (Active Duty Military member) or DD Form 2648-1 (Reserve Component member ).

4) Reservists and National Guard: DD Form 2, Armed Forces of the United States Identification Card (Reserve).

5) Current Spouse of Veteran: The veteran’s Form DD 214 and evidence of status as a current spouse.

6) Current Spouse of Transitioning Active Duty Military Member or Current Reservist/National Guard Member: DD Form 1173, Department of Defense Guard Reserve Family Member Identification Card and evidence of status as the current spouse.

7) Widow of Active Duty Service Member who died in service or Widowed Spouse of Veteran who died of a service connected disability: Documentation from DOD or from DVA clearly showing this to be the case.

Alternatives:

In the event that the veteran’s DD 214 is unavailable, a “Certification of Military Service” (NA Form 13038) is an acceptable equivalent.

For any category listed above that requires a photocopy of a military ID, as an alternative to photocopying the military ID, the service member may provide a “statement of service” signed by, or by the direction of, the adjutant, personnel office, or commander of the unit or higher headquarters they are attached to. There is no one unique form used by the military for a statement of service. While statements of service are typically on military letterhead, some may be computer-generated. The statement of service must clearly show:

1. The Servicemember’s full name;

2. The Servicemember’s Social Security Number (SSN) or the last 4 digits of SSN;

3. The entry date on active duty or the entry date of applicant’s Reserve/Guard duty, as applicable (depending on whether the applicant is on active duty or is a current member of the Reserves or National Guard);

4. The duration of lost time, if any (for active duty); and

5. The name of the command providing the information.

Note for Current Reserve/Guard Members: The statement must clearly indicate that the applicant is an “active” reservist and not just in a control group (inactive status)

Guaranty Fee Reduction

Currently, SBA Express loans of $150,001 to $350,000 have an up-front guaranty fee of 3%. To continue supporting America’s veterans, the SBA Veterans Advantage reduces the up-front guaranty fee from 3% to 0% for SBA Express loans over $150,000 approved to small businesses owned by qualified veterans. This will encourage greater participation in SBA lending programs with a direct benefit to veteran-owned small businesses. (All 7(a) loans of $150,000 or less have an up-front guaranty fee of 0%, as announced in SBA Information Notice #5000-1288.) Note that there is no reduction in the Lender’s annual service fee for loans over $150,000.

SBA Veterans Advantage Qualifications

In order to qualify for this, businesses must be 51% or more owned and controlled by an individual or individuals in one or more of the following groups:

• Veterans (other than dishonorably discharged);

• Service-Disabled Veterans;

• Active Duty Military service member participating in the military’s Transition Assistance Program (TAP);

• Reservists and National Guard Members; or

• Current spouse of any Veteran, Active Duty service member, or any Reservist or National Guard member; or widowed spouse of a service member who died while in service or of a service-connected disability.

Lenders must document in their loan file a borrower’s eligibility using the documentation identified in the attachment to this Notice and must present copies of that documentation with any request to SBA to purchase.

 SBA currently assists veterans through its 68 local SBA district offices, 15 Veterans Business Outreach Centers nationwide, its partnership with approximately 1,000 Small Business Development Centers and approximately 12,000 SCORE Counselors. Questions concerning this Notice should be directed to the lender relations specialist in the local SBA field office. The local SBA field office may be found at www.sba.gov/localresources.

SBA Veterans Advantage Documentation Requirements:

1) Veteran: Copy of Form DD 214, which is provided for other than dishonorably discharged veterans.

2) Service-Disabled Veteran: Copy of Form DD 214 or documentation from the DVA that the veteran has been determined as having a service-connected disability.

3) Transitioning Active Duty Military Member: DD Form 2, "U.S. Armed Forces Identification Card (Active)," or DD Form 2, "Armed Forces of the United States Geneva Conventions Identification Card (Active)" and, DD Form 2648 (Active Duty Military member) or DD Form 2648-1 (Reserve Component member ).

4) Reservists and National Guard: DD Form 2, Armed Forces of the United States Identification Card (Reserve).

5) Current Spouse of Veteran: The veteran’s Form DD 214 and evidence of status as a current spouse.

6) Current Spouse of Transitioning Active Duty Military Member or Current Reservist/National Guard Member: DD Form 1173, Department of Defense Guard Reserve Family Member Identification Card and evidence of status as the current spouse.

7) Widow of Active Duty Service Member who died in service or Widowed Spouse of Veteran who died of a service connected disability: Documentation from DOD or from DVA clearly showing this to be the case.

Alternatives:

In the event that the veteran’s DD 214 is unavailable, a “Certification of Military Service” (NA Form 13038) is an acceptable equivalent.

For any category listed above that requires a photocopy of a military ID, as an alternative to photocopying the military ID, the service member may provide a “statement of service” signed by, or by the direction of, the adjutant, personnel office, or commander of the unit or higher headquarters they are attached to. There is no one unique form used by the military for a statement of service. While statements of service are typically on military letterhead, some may be computer-generated. The statement of service must clearly show:

1. The Servicemember’s full name;

2. The Servicemember’s Social Security Number (SSN) or the last 4 digits of SSN;

3. The entry date on active duty or the entry date of applicant’s Reserve/Guard duty, as applicable (depending on whether the applicant is on active duty or is a current member of the Reserves or National Guard);

4. The duration of lost time, if any (for active duty); and

5. The name of the command providing the information.

Note for Current Reserve/Guard Members: The statement must clearly indicate that the applicant is an “active” reservist and not just in a control group (inactive status)

OTHER NEWS FOR LENDERS

FY2014 Changes to Fee Structure

Each year SBA reviews certain fees payable to SBA by 7(a) participating lenders (“Lenders”), Certified Development Companies (“CDCs”), and borrowers to determine if any of those fees need to be adjusted to cover estimated subsidy costs of the 7(a) and 504 loan programs. The purpose of this Notice is to announce a reduction in the FY2014 yearly fee (also known as the “on-going guaranty fee” or the “annual service fee”) for all 7(a) loans and a reduction in the upfront guaranty fee for all 7(a) loans in the amount of $150,000 or less. Additionally, this Notice announces that there are no changes to fees for 504 loans approved during FY2014.

For 7(a) loans greater than $150,000 approved in FY2014:

1. The yearly fee will be 0.52 percent (52 basis points) of the guaranteed portion of the outstanding balance of the loan. Lenders will need to manually adjust this fee in the current Authorization Wizard.

2. The upfront guaranty fee will continue to depend on the loan amount and the maturity of the loan.

a. For loans with a maturity that exceeds 12 months, the applicable guaranty fees remain:

• For loans of $150,001 to $700,000: 3% of the guaranteed portion

• For loans of $700,001 to $5,000,000: 3.5% of the guaranteed portion up to $1,000,000 PLUS 3.75% of the guaranteed portion over $1,000,000

b. For loans with a maturity of 12 months or less that are over $150,000, the guaranty fee remains 0.25% of the guaranteed portion.

3. For guidance on when these fees are due, see SOP 50 10 5(E), Subpart B, Chapter 3, Paragraph V and VI.

For 7(a) loans in the amount of $150,000 or less approved in FY2014:

  1. Both the yearly fee and the upfront guaranty fee will be zero! As the fees charged to the lenders will be zero, lenders may not charge a guaranty fee to the borrower in connection with these loans. Lenders will need to manually adjust these fees in the current Authorization Wizard.
  2. If two or more SBA-guaranteed loans are approved within 90 days of each other, the guaranty fee is determined based on the aggregate amount of the loans. Thus, if the total amount of multiple loans approved within 90 days is greater than $150,000, the normal fees will apply.

NOTE: Lenders are not permitted to split loans for the purpose of avoiding fees.

For questions regarding these topics, please call the specific SBA servicing center involved, or call one of our Lender Relations Specialists at (303) 844-2607.