Top Reasons for Repair & Denial
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Lien and Collateral Issues that Result in Missed Recoveries (Generally a Repair)
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Failure to obtain required lien position
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Failure to properly perfect security interest
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Failure to fully collateralize loan at origination when additional collateral was available
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Unauthorized Use of Proceeds
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Proceeds disbursed for purpose(s) inconsistent with the loan authorization or subsequent modifications without a business justification. (Could be a Denial if early default and improper use of proceeds caused the failure of the business)
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Same lender Non-SBA loan paid with PLP loan proceeds (preference)
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Liquidation Deficiencies (Generally a Repair unless harm is the full value of the outstanding balance)
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Failure to conduct Site Visit which resulted in missed recoveries
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Improper safeguarding or disposition of collateral which resulted in missed recoveries
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Misapplication of recoveries to lender’s loan when SBA-guaranteed loan has lien priority
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Undocumented Servicing Actions (Generally a Repair)
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Liens not properly renewed during servicing on worthwhile collateral
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Release or subordination of collateral without documented business justification
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Allowing hazard insurance to lapse on major collateral and collateral was subsequently destroyed
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Failure to maintain life insurance on principal and principal subsequently dies
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Early Defaults (Denial if determined to be reason for business failure)
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Missing or unsupported verification of required equity injection (includes verification of source in some cases)
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Missing or unsupported documentation of verification of borrower financial information with IRS when financial information was relied on in lender’s credit analysis
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SBA Loan Eligibility (Denial)
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Ineligible franchise
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Ineligible loan purpose
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Ineligible loan recipient (loan to an associate of lender)
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