Standby Creditor Agreement

Form SBA 155, the watch agreement or the confirmation agreement is a form used to formalize the subordination of the custody lender`s pledge rights to the small business administration lender`s (SBA) guarantees. In addition, SBA 155 finds that, without the agreement of the SBA lender, the on-call creditor will not take any action against the borrower or the guarantee of the debt on standby. In certain circumstances, an SBA lender may be required to obtain a standby loan agreement for the conclusion of its SBA loan. As a general rule, the watch agreements provide for the postponement of payments on sellers` debts or debts against the borrower`s investor (s) to achieve one of the two objectives: (1) for credit reasons such as the postponement of the debt payment, in order to improve cash flow for technical insurance purposes; or (2) qualify debt as an equity contribution. Notwithstanding the reason for the standby agreement, the SBA has certain requirements for these agreements that lenders should meet when liquidating and closing their SBA-guaranteed loans. “… The lender can use the SBA 155 form or a standby contract form. A copy of the note must be attached to the standby agreement… The custodial creditor must subordinate all the security rights to the security that provide credit to the lender`s rights to the guarantees and not take action against the borrower or the security that secures the debt on standby without the lender`s consent” (added mention). Second, whatever the reason for the standby agreement, the reference should contain a language that reflects the “watch” provisions or, at the very least, indicate that the reference is subject to the provisions of the standby agreement. By adding this language to the “watch” note, any future third-party buyer or beneficiary of the watch ticket will be informed of the monitoring rules, which will allow the lender to enforce these provisions in the future to these third parties.

First, revision C of the SOP requires that a copy of the standby note be attached to the standby agreement. Where the standby debt is a shareholder debt or other debt due to the investor, there is often no indication of the debts that exist only in the applicant`s annual accounts. In this case, the borrower must write a note and provide a copy to the lender. Third, while the SBA requires the custodial creditor to subordinate its pawn rights to the lender`s pledge, Form SBA 155 does not contain a language of subordination. It is therefore up to the lender to sign, in addition to Form 155, a separate subordination agreement or to use its own form, which contains the necessary language of subordination. Lenders should ensure that these forms, when using their own forms, meet all the requirements of the monitoring agreement in the credit authorization. The SBA preparation contract form is used as part of the debt supporting documents as well as a debt security. Instead of the recommended SBA 155 form, you can also use a lender`s personal watch contract form. The SBA 155 is marketed without procedural guidelines. The SBA loan application instructions are listed below: David is the co-founder and managing director of Starfield-Smith, P.C., a law firm specializing in SBA commercial credit and government-guaranteed commercial loans, SBA regulatory issues and general business advice. David has been actively involved in SBA loans and has been assisting lenders in documenting, closing, servinting and winding SBA loans for more than 20 years.

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