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02-26-2022, 08:16 PM #1
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The 2 Banks that I rep for - main focus - Can the note holder repay the loan
and if the note goes south, how easily can the property be disposed of. Type of property, location, usages available are all factors.
Generally, participating lenders (Banks) for SBA 7(a) loans follow their normal internal policy for commercial loans when it comes to life insurance.
This is the response from VP of SBA Loans - I've never been directly involved in securing or requesting Life Insurance - that's handled by Underwriting,
so asked a 'what if question"
"If the loan is not “fully secured” by assets such as real estate or equipment, then life insurance is required for the principals of the business which may include sole proprietors, partners or members of LLCs, or those other individuals upon whom the business is dependent. If a principal is deemed uninsurable, then a letter from the insurer may be required.
In general, the procedural rules of the SBA require that any business that is tied to an individual or individuals must purchase life insurance to protect the individual and his/her family as well as the lender. Life insurance policies are often purchased for the full amount of the loan, but the amount of any collateral may be factored into the requirements."
Rules have exceptions - but for the Bank to be able to have the Loan Guaranteed by the SBA - there had to be adequate collateral, income to cover the note.
I would assume that was the case with your client.Dave Lambert, Business Development
dave@fcbankcard.com
Merchant Services Consultant
High Risk Merchant Payment Solutions
SBA 7(a) Loans & Short-Term Funding
T/VM: 727-291-7890
Office: 727-233-1111
Skype: fc-financial
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