It’s a given. We’re moving in a fast-paced world. Seems like today’s news is old stuff in seconds. We communicate as fast as our thumbs skip around on our phones. In the world of making loans, the pressure is on to make sure potential deals don’t spend much time “on the street.” So we move fast. We underwrite, we approve, we close, we book. And we move on to the next loan. Fast.

Is slower ever better? Pick your mantra from yesteryear: “Haste makes waste,” “A stitch in time saves nine.” “Slow and steady wins the race,” “Measure twice, cut once.” “Don’t close the barn door after the horse is gone.” It’s a little late to correct a problem after the damage is done.

Take your time, slow down, do the job right. Loan closing and loan servicing teams are critical in making sure loans are closed properly, i.e., all documentation was properly prepared and signed, the loan was disbursed according to the approval, all collateral has been perfected, and any pending or trailing items are tracked for completion.

Read at the right pace. Don’t skim through the documents. Read the credit memo and any change memos or addendums. Understand the loan, the borrower, and why the loan was made. Review the documents to be sure all appropriate questions are answered, signed, and dated.

Read the SBA Authorization. The SBA Authorization and the Credit Memorandum must be in sync. Then, there are “State Specific Provisions” and SBA clauses that must be in a Note, Security Agreement, Guaranty, or collateral document such as a mortgage or deed of trust.

Refer to the correct SOP and Procedural Notices. Bob Dylan got it right: “The times they are a-changin’.” And so are SBA’s notices and guidance. Taking a few minutes to review SBA Procedural Notices and appropriate SOPs will help you review accurately. Since the beginning of the Covid 19 Pandemic additional underwriting information is required, so keeping up to date will better equip you as a reviewer.

Follow through on any exceptions. You’re missing the purpose of the review if you don’t resolve exceptions. In this case it’s OK to leave the barn door open awhile. A missing signature, a missing document, or some other oversight that could have been remedied easily is often the most difficult to resolve when the loan is troubled, and the borrower is unwilling to cooperate.  Make it your aim to resolve the exceptions right away.

Taking time to comb through the file soon after the loan has closed and resolving exceptions can help you preserve the SBA guaranty and also identify other areas in the underwriting, packaging, or documenting stage that need shoring up.

Paul Baker
JRB Associate
paul@jrbrunoassoc.com