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The SBA-backed lending is an industry with nearly 5,000 lenders and Certified Development Companies (CDCs). About 650 lenders are in its Preferred Lender Program (PLP). As such, the SBA takes its lender oversight responsibility and duties very seriously, which allow lenders to improve loan portfolio performance while continuing to serve the small business community.

The challenge the SBA faces when deciding what corrective measures to take against under-performing lenders is to balance implementation of
appropriate safeguards to protect taxpayers without imposing excessive
regulations that will not unnecessarily impede the flow of capital to
underserved small businesses through the program.

The SBA has taken several steps to improve its lender oversight program and to assist its lenders and the nation’s small businesses. New reforms include:

• Implementing a comprehensive off-site monitoring program featuring
sophisticated risk rating measurements developed by a nationally-recognized
provider of commercial credit scoring solutions;
• Instituting a risk-based on-site review/examination program that includes
qualitative analysis of a lender’s credit administration, SBA operations
management, and loan portfolio performance data;
• Drafting proposed lender oversight and enforcement regulations; and
• Developing a coordinated and more independent supervision and enforcement
process.

The SBA is also cooperating with its lending partners to ensure they have appropriate policies and procedures to identify and prevent fraudulent activity.  It is also working to identify irregularities in lenders’ portfolios and to bring
them to the attention of SBA’s Office of Inspector General (OIG and the Justice Department’s experts in fraud to investigate and prosecute fraud-related activities. HBM

For more information on the SBA, visit www.sba.gov.