SLA Credit Memorandum Template & Requirements

SLA Credit Memorandum Template & Requirements

Business Summary / Rational for Approval

Business Type:
Business History:
Management Experience:
Rational for Approval:
Other Comments:

Cash-Flow Analysis

Repayment Ability / Debt Service Coverage:
Income Verification:
Other Comments:

Business Analysis

Business Plan (if necessary):
Overall Financial Condition (if necessary):
Equity Injection (if necessary):
Pro-forma Debt to Worth Comments (if necessary):
Other Comments:

Collateral Analysis

Comments on Required Collateral (if necessary):
Other Comments:

Other Analysis

Comments on Refinance Eligibility, Franchise, etc.:
Other Comments:

The SLA lender’s Credit Memorandum must include the following:

1.  Business Summary /Rational for Approval

a.  A brief description and summary of the business.

b.  A discussion of the length of time in business under current management; and, if applicable, the depth of management experience in this industry or a related industry. Such analysis should include a brief description of the management team of the company, and the rational for approval.

2.  Cash-Flow Analysis

a.  If the lender is credit scoring the loan, the borrower’s score and brief explanation of what it indicates about reasonable reassurance of repayment based upon the lender’s model.

b.  If the loan is not credit scored:

i.  Cash flow and owner/guarantor analysis consistent with the lender’s underwriting process for their similarly-sized non-SBA commercial loans.

ii. A Debt Service Coverage ratio that exceeds 1:1 on a projected or historical basis.

iii.  With the exception of loans under $50,000, an applicant’s global a Debt Service Coverage ratio that exceeds 1:1, on a projected or historical basis. Lender must include their definition/formula for calculating global cash flow.

c.  A statement that business income has been verified via a review of the IRS tax transcript (must be done prior to loan approval).

The SLA lender’s Credit Memorandum might also include the following:

·  Business Analysis:

o  Depending on the lender’s underwriting process, it might also include a description of the business plan and comments on the overall financial condition of the business.

o  If the lender requires an equity injection and, as part of its standard processes for similarly-sized, non-SBA guaranteed commercial loans verifies the equity injection, it must do so for SLA loans.

·  Collateral Analysis: For SLA loans of $25,000 or less, lenders are not required to take collateral. For SLA loans over $25,000 and up to and including $350,000, the lender must follow the collateral policies and procedures that it has established and implemented for its similarly-sized non-SBA guaranteed commercial loans, but at a minimum the lender must obtain a lien on the borrower’s business assets to secure the SBA-guaranteed loan.

·  Other Analysis: Based on the lender’s underwriting process for similarly sized non-SBA commercial loans, it might include a discussion of any seller financing, standby agreements, derogatory credit (especially judgments and bankruptcy, and trade disputes); affiliates and franchise agreements; any additional information the lender considers relevant.

Version 1.0 Rev. 6/15/2012