SBA Provides SFNet with Guidance to Increase the Likelihood of a Quick and Successful EIDL Subordination Request

Earlier this month, SFNet informed readers that, based on continued member feedback expressing concerns regarding the subordination process of the SBA’s COVID EIDL program, SFNet submitted a letter to the SBA. This letter led to a productive discussion with the SBA, who provided insights to increase the likelihood of a quick and successful subordination request.

SFNet was advised that the usual process begins when a completed application is received by SBA intake staff and then assigned to a loan officer for review. The loan officer then has a maximum of seven business days to review the request and respond to the lender/borrower. If the application is complete and the request can be approved under servicing guidelines, it is submitted for approval to a supervisory loan officer and SBA’s legal department for preparation of the subordination agreement. The loan officer will then provide the executed agreement to the borrower/lender.

If a lender has not gotten a response from SBA staff within 7 business days of submission indicating the request has been submitted for approval or additional information is needed to process the request, SFNet members should  contact Michele Ocejo (mocejo@sfnet.com) who will provide direct contact information for the head of SBA servicing for the EIDL COVID program, who has committed to making himself accessible to our members.

The SBA bulleted out a few scenarios that may result in delays in processing of requests. In addition to the below, it is important that borrowers disclose the current status of their SBA loan.  Loans with pending increase requests will still be housed in the SBA Dallas/Ft. Worth origination office rather than one of the two servicing centers. Potential cause for delays in requests are as follows:

• Discrepancy in ownership of the business in SBA loan application and servicing request (business was sold or post funding ownership change without SBA’s consent)
• Application is not returned to proper intake e-mail address
• Lack of complete Application and supporting documents
• Loan is on agency hold due to post funding review of file

In addition, an SFNet member sent us the below list of items that should be sent along with the subordination request:

• Client Subordination Request Letter
• Draft Loan and Security Agreement
• Filed UCC-1
• Client SBA Loan Documents
• Specific Office Application form
• Borrower’s Authorization form per Application link
• Certificate of Insurance
• UCC Search showing SBA lien

SFNet is continuing to pursue an amendment to the 30-day notification-in-event-of-default provision. If you have any questions, please contact Michele Ocejo, mocejo@sfnet.com.