Sba's Sop 5057 Definitions

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Borrower

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The Person or Persons who executed the Note evidencing the SBA loan.

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Close Relative

Back 2

A spouse, parent, child or sibling, or the spouse of a parent, child or sibling.

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Computer Tracking System

Back 3

The electronic method used by SBA or a Lender to create and maintain a chronological record of the significant activities on an SBA loan such as Loan Actions and the substance of telephone calls, meetings or letters regarding the loan.

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Credit Bid

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An offer to purchase at a foreclosure sale submitted by a creditor who, instead of paying cash, will "credit" the bid amount against the debt owed to the creditor.

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Default Charges

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Includes all monetary amounts payable as the result of a default on a senior secured creditor's loan such as prepayment penalties, late fees and interest paid at an escalated rate.

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Denial of Liability

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A determination made by SBA that it is not obligated to purchase the guaranteed portion of the 7(a) Loan. A Denial of Liability may be for the full amount of the guaranteed portion of the loan or any part thereof.

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Early Default

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Any of the following events of default that occurred either within 18 months of the initial disbursement of the loan or within 18 months of the final disbursement of the loan if the final disbursement occurred more than six months after the initial disbursement, unless the Borrower cured the default and made the scheduled loan payments for 12 consecutive months following the 18 month period:
a. Failure to make a scheduled loan payment;
b. Funding a scheduled loan payment from the sale of collateral rather than from business operations;
c. Deferment of more than three consecutive scheduled full payments; or
d. Any other event of default that required the loan to be classified in liquidation status, e.g., bankruptcy

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Financial Hardhship

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An inability to pay for basic living expenses, i.e., the costs that must be paid to obtain the following categories of goods and services necessary for the survival of an Obligor, their spouse and dependents as defined by the most current version of the Collection Financial Standards published by the IRS: (1) food and clothing; (2) out-of-pocket health care expenses; (3) housing and utilities; and (4) transportation.

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FTA

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The entity that acts as SBA's fiscal and transfer agent.

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Good Faith

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Whether capitalized or not, means the absence of any intention to seek an unfair advantage or to defraud another party; i.e., an honest and sincere intention to fulfill one's obligations in the conduct or transaction concerned.

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Guaranty

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SBA form 148 (Unconditional Guarantee), SBA form 148L (Unconditional Limited Guarantee) or a substantially similar document exectued by a Guarantor that contains an unconditional promise to pay the debt owed on a Note if the Borrower fails to pay it.

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Including

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Whether capitalized or not, means "including but not limited to," i.e., the list is not exhaustive.

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Key Employee

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Any Person hired by a business to manage its day-to-day operations, including, for example, the hiring and firing of employees, and the expenditure of money.

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Lender or 7(a) Lender

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An institution that has executed a Participation Agreement (SBA form 750) with SBA under the 7(a) Guaranteed Loan Program.

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Liquidation Plan

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A Lender's written plan outlining the actions that it intends to take to maximize reccovery on a specific SBA loan, which includes the information outlined in the template accessible from www.sba.gov/for-lenders.

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Liquidation Value

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The likely price the collateral will sell for if sold quickly and with limited exposure to potential buyers. An Appraisal is necessary to determine the Liquidation Value for real or personal property collateral unless it consists of:
a. Cash or Cash Equivalent; or
b. Moter Vehicles and Stock
(reference the 5057 page 13 for additional detail about how to determine value for a. and b.)

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Litigation Plan

Back 17

A Lender's written plan outlining the court proceedings it intends to initiate or otherwise participate in order to maximize recovery on a specific SBA loan, which includes the information outlined in the template accessible from www.sba.gov/for-lenders as well as any other information or documentation required by Chapter 21, such as the qualifications of the attorney the Lender intends to hire, a copy of the engagement letter, and the justification for, and estimate of, any expense listed in Chapter 21, Paragraph F that is presumed to be unnecessary , unreasonable and non-customary such as the use of multiple law firms, travel or the appointment of a receiver to perform routine liquidation duties.

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Loan Action

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An activity or decision regarding a specific SBA loan including a decision to engage or not to engage in a particular activity, such as a decision not to enter a Protective Bid at a senior lienholder's foreclosure sale.(formerly known as an SBA Form 327 Action)

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Loan Action Record

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The paper or electronic document used to memorialize the decision and justification for a specific Loan Action. It may consist of a memo, email, letter, SBA form 327 or other document provided. It must contain at a minimum:
1. the Borrower's name and the SBA loan number;
2. the Lender's name and contact information;
3. a reasonable description of the Loan Action;
4. the justification for the Loan Action including an analysis of any Supporting Documentation;
5. and a citation to the applicable SOP provision that provides authority for the proposed Loan action

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Loan Authorization

Back 20

SBA's written agreement, including subsequent modifications therto, which sets out the terms and conditions under which SBA will guarantee a loan.

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Loan File

Back 21

Whether capitalized or not, means the electronic or paper folder dedicated exclusively to storing a hard copy or an electronic copy of all of the Loan Documents pertaining to a specific SBA loan.

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Loan Program Requirements

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The requirements pertaining to SBA's 7(a) Loan Program, as revised from time to time, imposed by statutes, regulations, use of the word "must" in SOPs, contracts, Loan Authorizations, and SBA Notices and program guides.

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Material Loss

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With regard to personal property collateral - a single loss or the aggregate amount of multiple losses totaling $5,000 or more; and

With regard to real property collateral - a loss in the amount of $10,000 or more.

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Must

Back 24

Whether capitalized or not, means the action is mandatory.

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Non-recoverable Expense

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A cost that is not SBA-approved and cannot be recouped by being added to the principal balance of the Note, because, for example, the cost was not:
a) related to collection of amounts due under the Note, enforcement of the terms of the Loan Documents, or the preservation or disposal of the collateral;
b) necessary, reasonable or customary; or
c) incurred in accordance with prudent lending practices or SBA Loan Program Requirements

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Non-routine Litigation

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Includes the following:
a) All litigation where factual or legal issues are in dispute and require resolution through adjudication;
b) Any litigation where legal fees are estimated to exceed $10,000 in the aggregate
c) Any litigation involving a loan where a Lender has an actual or potential conflict of interest with SBA; or
f) Any litigation involving a 7(a) Loan where the Lender has made a separate loan to the same Borrower which is not an SBA loan.

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Obligor

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Includes every Person with direct liability for repaying an SBA loan such as the Borrower and any assumptor, and every Person with contingent liability such as a Guarantor.

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Office of Financial Program Operations (OFPO)

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The SBA office in charge of administering SBA's loan program operations and managing SBA's loan portfolio.

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Person

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Any individual, corporation, partnership, limited liability company, association, unit of government, or other legal entity, however organized.

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Pilot Loan Program

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Includes any program designated by SBA as a pilot loan program at the time that the loan is approved by SBA and as of 11/1/2012, includes the following programs: Patriot Express, Community Advantage and Dealer Floor Plan (CRF is currently set up to particiate in the Patriot Express pilot, but not the others)

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Preference

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An arrangement not pre-approved by SBA that gives a 7(a) Lender a preferred position compared to SBA relating to the making, servicing, or liquidation of an SBA loan. (For example, a Lender would receive a Preference if it released the collateral for an SBA loan in order to use it as security for a non-SBA loan to the same Borrower.)

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Protective Bid

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An offer made by a secured creditor to pay a designated price for property at a foreclosure sale to "protect" the secured creditor's interest in the property that might otherwise be eliminitated by the foreclorsure sale.

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Purchase

Back 33

Whether capitalized or not, when used in conjunction with SBA's 7(a) loan guaranty ("guaranty purchase") refers to SBA's purchase of the guaranteed portion of a 7(a) loan.

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Purchase Package

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The packet of documentation prepared and submitted by a 7(a) Lender to support its request to have SBA honor its guaranty by purchasing the guaranteed portion of a loan.

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Real Estate Owned/REO

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Real property collateral acquired by a Lender or SBA (formerly referred to by SBA as "COLPUR").

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Recoverable Expense

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A SBA approved, necessary, reasonable and customary cost incurred to collect amounts due under the Note, to enforce the terms of the Loan Documetns, or to preserve or dispose of collateral, which according to the terms of the Note, can be recouped by adding it to the principal balance of the loan.

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Recoverable Value

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The net dollar amount that a prudent lender could reasonably expect to recover by liquidating a particular piece of collateral. Determined by deducting the following amounts from the Liquidation Value of the collateral:
a) the balance owed on senior liens (less amts waived or subordinated by a Loan Document);
b) Recoverable Expenses associated with any necessary lien foreclosure action; and
c) if the collateral is likely to be acquired by SBA or the Lender at the foreclosure sale, the expenses associated with the care, preservation and resale of the acquired collateral.

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Repair

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An agreement between SBA and a 7(a) Lender as to a specific dollar amount that will be deducted from the amount SBA pays on te Lender's SBA loan guaranty in order to fully compensate SBA for an actual or anticipated loss on the loan caused by the Lender's actions or omissions. A Repair does not reduce the percent of the loan guaranteed by SBA or SBA's pro-rata share of expenses or recoveries.

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Routine Litigation

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Uncontested litigation, such as non-adversarial matters in bankruptcy and undisputed foreclosure actions, the estimated legal fees for which will not exceed $10,000 in the aggregate.

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Seasoned Loan

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The borrower did not, within the first 18 months after the initial disbursement or 18 months after the final dispursement if it occured more than six months after the initial dispursement:
a. Fail to make a scheduled loan payment;
b. Fund a scheduled loan payment from the sale of collateral;
c. Have more than three consecutive scheduled full payments deferred; or
d. Experience an event of default that required the loan to be classified in liquidation

A borrower can attain seasoned loan status after a default if it is cured and for 12 consecutive months following the 18 month post dispursement period.

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Servicing Request

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A Loan Action requested by a Borrower regardless of whether it is simple (address change) or complex (assumption).

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Should

Back 42

Whether capitalized or not, means that the action is recommended but not required.

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Site Visit Report

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The paper or electronic record documenting the Lender's findings and conclusions after visiting the Borrower's business premises. Post-default Site-Visit reports should contain specific information - Reference the chapter on Site Visits and the definition on page 18 of the 50 57 for additional detail.

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Supporting Document or "Supporting Documentation"

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The original or a complete and accurate executed copy (must contain all of the required signatures and include all addendums thereto) of any document relied upon to reach a decision regarding a Loan Action.

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Treasury

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U.S. Department of the Treasury Bureau of Financial Management Service

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Wrap-Up Report

Back 46

The documentation, whether or note it is entitled "Wrap-up Report", that a Lender must provide to the SBA Loan Center after completing the liquidation of an SBA loan, which includes the information outlined in the template accessible from www.sba.gov/for-lenders.

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Agency

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U.S. Small Business Administration

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Agent

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An authorized representative, including an attorney, accountant, consultant, packager, lender service provider, or any other Person representing a loan applicant or a Lender by conducting business wtih the SBA.

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Appraisal

Back 49

An expert's written opinion as to the value of specific property prepared specifically for the Lender and SBA's use with regard to a particular SBA loan.

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Qualified Appraiser

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May be an appraiser, broker, auctioneer, retail inventory specialist or other expert, provided that the Person meets these minimum qualifications:
1) Has the specific education, training an experience required to develop a professional opinion as to the value of the specific type of property in question
2) Meets all applicable government licensing, certification and bonding requirements;
3) Has no real, apparent or potential conflic of interest with SBA, Lender or Obligors; and has no financial interest in the property (however, when it is commercially reasonable, the Person who appraised the collateral may also sell it as long as the sale is widely advertised and otherwise consistent with applicable law).

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Appriasal Standards for Real Property

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A real property Appraisal should
a) Comply with the appraisal requirements that applied to the original collateral when in support of a a substitution of collateral Loan Action
b) Comply with the Uniform Standards of Professional Appraisal Practice whenever required by prudent lending practices
c) may consist of a BPO prepared in substantial compliance with the Broker Price Opinion Board Standards when neither purdent lending practices nor SBA Loan Program Requirements require an appraisal in compliance iwth the Uniform Standards of Professional Appraisal Practice.
d) The appraisal report format must comply with the SBA requirements specified on pages 10-11 of the SOP 5057

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Appraisal Standards for Personal Property

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A personal property Appraisal should
a) Comply with the appraisal requirements that applied to the original collateral when in support of a a substitution of collateral Loan Action
b) Comply with the Uniform Standards of Professional Appraisal Practice whenever required by prudent lending practices
c) may consist of an auctioneer or other expert's opinion as to value if neither prudent lending practices nor SBA Loan Program Requirements require an appraisal in compliance with the Uniform Standards of Professional Appraisal Practice
d) The appraisal report format must comply with the SBA requirements specified on pages 10-11 of the SOP 5057

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Associate of the Borrower

Back 53

An officer, director, Key Employee of the Borrower, or a Person who has an ownership interest of 20% or more in the Borrower's business; any entity in which one or more of the foregoing Persons has an ownership interst of 20% or more in the entity's business; or any Person in control of, or controlled by, the Borrower except a Small Business Investment Company licensed by SBA

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Associate of the Lender

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An officer, director, Key Employee of a Lender or other senior lender, or owner of 20% or more of the value of the Lender's stock or debt instruments; an Agent involved in teh loan process; or any entity in whichg one or more of the foregoing Persons, or a Close Relative of any such Person, has an ownership interest of 20% or more.