There’s joy in your loan department. Your loan is fully underwritten (maybe with JRB assistance), submitted to SBA or delegated authority and authorized. Your BDO and Loan Officer pat each other on the back, put a hash mark under “DONE,” and tell the loan closer that you’ve got another loan to close.

Is “DONE” Really DONE? Now the Odyssey of loan closing begins. Unlike Homer’s poem, it won’t take 10 years to fund the loan. Yet between Authorization and the day it funds, the loan will undergo many updates, including changes to borrower(s), guarantor(s), collateral, use of proceeds, and repayment terms to name just a few.

Along the way, your loan file should be full of stamped 327s or other documentation showing SBA or delegated approval of each change. An amended Authorization isn’t the same as an approved 327. For every amendment to an Authorization change, you should also have an amendment to your Credit Memo.

Document. Document. Document. Where have you heard that? From us at JRB many times over the years. Yet, some lenders, presumably in the interest of time, wait until the loan is ready to fund and then prepare one all-encompassing catch-all conforming amendment. As long as they’re confident there’s an excellent system in place to track each change, these lenders consider that acceptable. Me? Not a chance.

No matter how good my system is I would spend many an hour wide awake in bed worrying that I might have overlooked one of the Periods in “L.L.C.” or committed some other atrocity that would doom my loan to a full denial of the SBA guaranty. Therefore I am a believer in contemporaneously preparing a change memo or amendment to the credit approval as changes occur during the closing process and obtaining the required credit approval signatures.

But then, what to do about those pesky items ordinarily collected during the closing process but which for one reason or another, for this particular loan, are collected post-closing? It is incumbent upon lenders to include a memo to the file to show what items will be coming after the loan closes, This requires lenders to ensure that there’s a good post-closing review in place so that any post-closing diligence items don’t fall through the cracks,

JRB recommends … Lenders should have a post-closing agreement as one of the loan documents included at closing. It lists the various items the lender expects the borrower to provide within a specific time frame. We also recommend that a post-closing review of the loan documents be scheduled for a reasonable time after closing (45-90 days) to ensure a complete closing package. Now, you’re done.

Richard Jeffrey
Senior Associate