The DSP agreement is a written contract that governs the relationships of lenders and DSP and is required by the SBA. The SBA has developed a set of guidelines to protect all parties who enter into a contractual PSD agreement, but there is no universal PSD contract. Therefore, each DSP has its own agreement with models, and it is important that you fully understand it before signing. Here are the main points that any DSP agreement must address according to the SBA: Will McClain: Whenever a lender uses a third party to help the SBA credit functions they would normally do alone. For example, processing, closure, secondary market sales, documentation review and/or liquidations. In each of these cases, a lender should insist on accessing the file with the SBA. Once you select a DSP that fits your organization, check and sign your DSP agreement. From there, the agreement is sent to the SBA for final approval. This ensures that all parties – lenders, LSPs and SBA – are in line with the requirements and responsibilities.
Through a DSP agreement, you have defined a system of roles and responsibilities to ensure that your program receives the services needed for growth. The sixth condition is that the DSP agreement be determined or disclosed: (i) that the lender and the DSP cannot share a premium on the secondary market; (ii) that PSDs do not support an unsecured portion of the loan; (iii) DSP`s membership in other financial institutions, lenders, brokers and other joint ventures; (iv) any previous or existing relationship between the DSP and the Lender (or a declaration of the absence of such a relationship); (v) the DSP agreement is subject to all laws, regulations and directives, including the requirements of the SBA loan program; and (vi) that the terms of the DSP agreement control the lenders` loan portfolio in the event of other competing contracts or agreements between LSP and Lender. (SOP 50 10 5 (K), subsection B, section X (D) (6) (a-f)). If you have any further questions about PSDs and PSD agreements, please contact us. We`ll be happy to help and we`re just a phone call away. Here we examine the basics of the lender and DSP relationship as well as some important points that you need to know when concluding the small business administration PSD agreements. The cost of setting up and maintaining an internal SBA team is often prohibitive for small credit institutions. For this reason, LSPs are an effective way to work an experienced SBA team quickly and cheaply for you. Question: What are some important points that lenders should consider when evaluating PSAs? Will McClain: In the eyes of the SBA, the lender is still responsible for the possibility of a remedy or refusal. PSD agreements generally contain a language in which the responsibilities agreed between the lender and its service provider in the event of a loss of monetary policy are indicated. Lenders should always understand these clauses and ensure that they are aware of them.
I appreciated your article, Tim. They took the most important points of why banks and credit unions need competent and experienced SBA professionals. We look forward to your future blogs! Extended repayment terms: Both programs offer loans with longer amortization than most lenders would accept for a similar unsecured loan.