At Starfield & Smith, we see one theme every year: lenders who take SBA compliance seriously keep their 7(a) guaranties intact. Those who don’t often find themselves on SBA’s naughty list, facing repairs and denials that could have been avoided with a little more discipline and documentation.  While the holiday season may be festive, the rules are not. The 7(a) program rewards lenders who follow SBA loan program requirements, document their decisions, and treat compliance as a core risk-management function—not a year-end clean-up exercise.

The “Nice” List: Actions That Protect the Guaranty

These are the habits we consistently see in SBA lenders whose files withstand guaranty purchase scrutiny:

• Clear, supportable credit decisions that tie back to SOP compliance and prudent lending standards.
• Early and thorough eligibility analysis, including size standards, affiliation, franchise issues, and eligible uses of proceeds.
• Meticulous documentation – if the file can’t show it happened, SBA will assume that it didn’t.
• Substantial adherence to the SOP 50 10 requirements, internal approval requirements, conditions precedent, collateral requirements, and post-closing obligations.
• Timely lien perfection and insurance compliance, without significant gaps or exceptions.
• Consistent servicing and liquidation practices under SOP 50 57, including timely site visits, prudent and cost-effective loss-mitigation actions, and justification for deviations.
• Prompt escalation of compliance red flags, supported by contemporaneous notes and legal input where appropriate.

Lenders who maintain these practices rarely receive unpleasant surprises from SBA. They stay squarely on the “nice” list, where guaranties are honored and files speak for themselves.

The “Naughty” List: Errors That Invite Coal in the Form of Repairs or Denials

SBA’s “coal” often arrives because of preventable missteps such as:

• Defective collateral perfection such as intervening liens, late UCC filings, name mismatches, or missing real-estate recordings.
• Unverified or poorly documented equity injection, especially where funds are not seasoned or traceable.
• Missing eligibility items, including EPC/OC leases, or compliant purchase agreements.
• Inadequate cash-flow analysis, missing global debt service analysis, or missing tax transcripts.
• Non-compliant servicing actions, including unjustified collateral releases or subordinations.
• Untimely site visits or thin liquidation files that fail to show the lender acted diligently and in a cost-effective manner.
• Inadequately documented files that make it impossible to reconstruct the lender’s decisions or compliance steps.

These deficiencies can easily result in repairs or complete guaranty denials. SBA is not shy about enforcing its rules, and the cost of landing on this list can be significant.

A Seasonal Reminder: Protect the Gift You’ve Earned

For lenders, the guaranty is the most valuable part of the 7(a) program. Preserving it requires systems, training, and a culture of compliance and documentation that withstands scrutiny. The lenders who prioritize compliance from origination through liquidation rarely find themselves fighting over guaranty enforcement later.

This holiday season, resist the temptation to fast-track files or leave loose ends for “future you.” The best way to avoid a lump of coal from SBA is simple: keep your processes tight, document everything, and never presume that something “minor” won’t matter.  A clean, compliant file is the gift that keeps your guaranty intact long after the decorations come down.

For more information on preserving your SBA guaranty, contact Ethan at 267-470-1186 or esmith@starfieldsmith.com.