September 20, 2017

Best Practices: Basics of SBA Lender Oversight

by Jennifer E. Borra

SBA lenders have a responsibility to ensure that they maintain the integrity of the SBA loan programs throughout their institutions. 13 CFR §120.140(f) prohibits SBA lenders from engaging “in conduct reflecting a lack of business integrity or honesty”; and the SBA monitors the lending practices of its participant lenders to assure compliance.

The SBA’s Office of Credit Risk Management manages not only credit risk, but oversees lender performance in order to assure that program requirements are met. They accomplish this oversight through ongoing reporting requirements, Loan and Lender Monitoring System reviews (L/LMS), reviewing external information sources available for monitoring, and off-site and on-site lender reviews/examinations, which are all described in SBA SOP 50 53(A).

The frequency and scope of SBA’s oversight actions are directly related to potential risk a Participant poses to the SBA loan program and portfolio. If your organization is deemed a higher risk, it will receive increased scrutiny. Failure to correct material deficiencies in your lending program may result in enforcement actions and/or increased supervision that could negatively impact a Lender’s ability to fully participate in SBA’s loan programs.

The temptation to underwrite risky loans or circumvent SBA rules or regulations must be resisted for SBA loan programs to thrive and for small businesses to succeed. If your institution is not monitoring its agents, its employees or otherwise devoting its efforts to establishing internal controls to comply with all SBA program requirements, the federal government may utilize its resources and enforcement authority to investigate and prosecute offending institutions for such transgressions. Accordingly, savvy SBA lenders adopt best practices to minimize portfolio risks by maintaining a culture of program integrity, and continuously training their staff on the latest SBA rules and regulations

For more information regarding SBA lender oversight and program integrity, please contact Jen at 267-470-1206 or via email at