Structuring & Eligibility

With decades of industry experience and functional expertise, Waterstone LSP goes beyond the norm to develop new business, and provide SBA lending solutions and processes. Our services are designed specifically to assist community banks and their small business customers. We help community banks compete against the big banks.

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On Tuesday, June 10, 2014, SBA Administrator Maria Contreras-Sweet announced in a speech to the Center for American Progress in Washington D.C. a key policy change for SBA 7(a) loans in the amount of $350,000 or less.

Within the current SOP, small loans are defined as loans $350,000 or less and by using the SBA’s predictive scoring model, can be submitted with abbreviated loan analysis. However, the model still requires lenders to exercise prudent lending practices, including performing a debt coverage ratio analysis in its underwriting. The SOP states:

“The Small Business Applicant’s debt service coverage ratio exceeds 1:1 on a historical or projected cash flow basis”

Beginning July 1, 2014, this requirement may now have changed. Per the Administrator’s announcement on the June 10th, she states:

We’re now so confident of our model’s predictive value on small loans that we’re eliminating cumbersome and impeding analyses of a company’s cash flow, a step that can delay loan decisions. Effective next month, I’m directing that SBA’s total credit scoring model be made available to all our lending partners for loans of $350,000 or less. We’re making these changes knowing it will simplify and streamline the lending process and get more small loans into the hands of entrepreneurs, especially the under served.

This change is still subject to the issuance of a policy notice, but if such occurs, Waterstone will still perform a business debt service coverage analysis as well as a global debt service coverage analysis on all SBA 7(a) loans underwritten. It is our position that while small loans carry a small non-guaranteed risk to the lender, it is still our priority to assist lenders with prudent lending analysis, properly assessing risk for the lender’s formal credit decision.