Valuation of Loan Servicing
SBA 7(a) Gain on Sale
We are the nation’s second largest provider of Small Business Association 7(a), or SBA 7(a), loan sales accounting calculations. We have a thorough understanding of the required accounting and regulatory reporting for SBA 7(a) loans and offer our clients a cost-effective turnkey solution.
Why Choose Us
We calculate the gain on sale at the loan level and our reports detail each component in the transaction, facilitating our clients’ ongoing accounting. We provide a basis roll-forward file at the loan level that details and summarizes the amount of servicing rights to be amortized and the retained portion discount to be accreted each month.
Our Approach
Proper accounting for the sales of the guaranteed portions of SBA 7(a) loans is relatively complex and requires the seller to:
- Calculate the gain on sale based on relative fair value, including any premium required to be shared with the SBA, and derecognize the sold portion;
- Calculate and recognize the servicing right asset related to the sold portion;
- Record the required discount on the retained portion of the loan;
- Amortize the servicing right asset; and
- Accrete the discount on the retained portion into income.
Our report includes the journal entries to make on day one and the amounts to record monthly going forward.
We also value SBA 7(a) loan servicing portfolios, and this knowledge informs our sales calculations.