Article by Roger Schlueter, MBA
The SBA 504 Loan Simultaneous Close is suppose to be the closing of the Bank Portion of the SBA 504 Loan and The Closing of the CDC (SBA) Portion of the SBA 504 Loan at the Same Time thus the Term – Simultaneous Closing. This is very Misleading and in actuality a Blatant Lie and a Misdirection of the Borrower.
The SBA 504 Loan is a Loan where the Bank makes the Interim Loan of 80% to 90% of the loan and the SBA Lends up to 40% of the Loan by Taking out Part of the Banks interim Loan in an amount of 40% of the Interim Loan. This by SBA Rules can only happen after the Bank has lent their portion. The SBA Closing Process takes anywhere from one month to one and a half months to complete. There is NO WAY The BANK CAN DO The BANK and The SBA Portions of the SBA 504 Loan Simultaneously!
What the Bank does is having some or all of the Borrowers CDC/SBA Documents signed when the Bank Closes their Loan. There is No Closing of the SBA Portion of this loan only a Dark-Moral Sense that since the Borrower has signed some of the SBA’s Closing Documents that they have to Close The SBA Portion. This is Not True! The CDC closes the loan with the SBA and would not close if the borrower decided to withdraw.
The Bank also wants the CDC to Execute their Deed of Trust and Get Title Insurance when the bank closes their loan even though the CDC/SBA does not have a loan yet! This is borderline Illegal. Liens on Real Estate are suppose to be for Real Estate loans or Contractors Payment.
The SBA 504 Loan Simultaneous Close is a game of smoke and mirrors designed by the banks to lock in the Borrower and the CDC before the information is arrived at or decided upon. The Borrower and the CDC are signing blank documents or documents that are suppose to document certain events being done or accomplished which are not done or Accomplished at the time of signing. This game benefits the Bank. The Bank will argue that Signing the SBA Closing Documents before some of the information is decided upon befits the borrower because the Bank is Saving the Borrower Time and Money. The Time the Bank is Saving would be approximately 15 minutes at the most to Sign Several Documents (The CDC Usually goes to the Borrower so the Borrower is not having to go anywhere to Sign the SBA Forms.) The Money is that they are saving you money by using one Title Company to Do Title Work but the CDC usually uses the same Title Company as the Bank for the same Savings. It is hard to benefit someone who is signing blank documents. The SBA must be turning their eyes to this form of Blackmail and if the Letter of the SBA Law was Followed this type of Closing would not be Approved By SBA.
Supposedly the CDC and the bank can do a simultaneous close but it involves Escrow Money and a willingness to avoid any Attorney Problems that may occur.
Shame on the Banks for bullying the CDC/SBA and the Borrower, and Shame on the SBA for letting this happen by Turning a Blind Eye to the Event!