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Coleman Report Special Edition — SBA 504 Processing Update

September 16, 2016

By Bob Coleman
Editor, Coleman Report

SBA Sacramento Loan Processing Center

SBA Sacramento Loan Processing Center

Coleman Report Special Edition — SBA 504 Processing Update

The frustration of the industry with the Sacramento Loan Processing Center going off the grid for the past several weeks is also off the grid. The industry is angry. Period.

90% don’t believe everything is working as intended. 92% say it is as bad as last June’s disruption.

SBA has released a letter to the industry regarding the outage, so I’ll lead with that.

September 15, 2016

To Our Valued CDC Partners:

As you know, the Sacramento 504 processing system has experienced downtime in recent weeks and we want you to know what is causing the issues, what SBA is doing to rectify them and what you can expect in the coming weeks.

SBA began migrating from its existing 504 server to a new server this spring. Early on, the existing server experienced problems and attempts to restore it were unsuccessful. It was decided to move faster to complete the migration process, knowing that the trade-off would be possible unforeseen issues. We expect the migration to be complete by October 31, 2016. Most of the identified issues have been resolved, and the e504 process is now functional. There are known technical issues remaining that we are working on, and other issues may still arise. We appreciate your understanding and patience as we complete this process as quickly and efficiently as possible.

Below is a description of the remaining issues:

File Transfers:

  • SLPC still must manually transfer some files from the old server to the new server (approximately 35 files remain). CDCs that have a manually transferred file will receive a new Control Number via email from the Center; estimated completion for this is 9/16.
  • Some files were received without the appropriate CDC ID Number format (approximately 30 files remain). SLPC is working with software vendors to correct existing records and ensure correct formatting going forward. CDCs that have a file in this category will receive an email from the Center with the tracking number to be used going forward; estimated completion for this is 9/16.

Loan Approval Decision Time: SBA is approving overtime for the Center to catch up in processing of 504 applications that have stalled in the past two weeks.

  • Loan decisions are currently taking between 7 and 10 working days; expect a return to normal turnaround times by the end of September. SLPC is currently funding approximately 50 loans per day to catch up, which is 20 higher than average.
  • Environmental reviews are currently taking 13 working days. Expect a return to normal turnaround times within 3 weeks.

Now, for your comments:

The August-September outage was WORSE than the June outage. Only communication from NADCO. Local district offices were not made aware until the problem was fixed (unless they heard it from outside the agency).

Where was the leadership of SBA? Where was the 504 Policy-Program leadership of SBA. Certainly not acting as an advocate or a responsible steward. In the private sector this degree of failure would have consequences.

1. SBA needs to communicate with the industry directly as to the status of the outages 2. there should be an SBA crisis management team with a back-up plan to manually process urgent/at risk projects during outages

The most frustrating part of this is that it continues to be a recurring issue with no end in sight. We have been experiencing these delays for months now and there really has been no improvement. We need assurances from SBA that this is a top issue and is being given the utmost priority.

Received an email 2X stating my 327 action could not be processed due to the loan not being approved; however, the loan was approved and I was told to ignore the email…2X. Seems like system still has some “issues”

This is not only an inconvenience, it is doing damage to the program. Everyday we battle the perception that SBA is “to much of a hassle”. It’s difficult to counter this perception when it has become reality.

SBA needs to be more transparent, and forthcoming with information. SBA also needs to have backup system (for processing an application) in place in case the primary system goes down. Then loan application could still be processed, albeit slower, but there would not be a total system failure.

SBA does not have a great reputation with bankers as it is and this is just reinforcing why they do not want to deal with SBA. Hurting CDC’s when trying to sell the program.

Where is SBA leadership on this matter? A major program has operational failures running to a higher than 30% offline rate, and the only public reaction, after being badgered by the trade association, is a series of terse statements describing failures of function.

Unfortunately, this is just another day at the office when it comes to dealing with the ineptness of SBA.

The system has been up and down. As a former banker, we had procedures for when our system was down. Why doesn’t a government loan program? This has had a very big impact on the ultimate recipient and tax payer. Maybe all of the technology dollars went to SBA One?

I feel the SLPC staff is doing all they can, this is at the high SBA management level. Renaming programs seem to be of more importance then make sure the small business owners are having their loans processed.

Problems worse than last June. SBA needs a plan B to process loans, which they don’t have – there will always be some IT problems over a course of a time period, and they aren’t prepared.

SBA informs that they have approved overtime to catch up

We submitted two applications on 8/25/16. One was approved 9/12/2016 and there has been response yet on the other. One environmental report was submitted 8/19/2016 with the approval received 9/13/2016 (17 business days for a clean report!).

SBA should heed their own advice http://www.agilityrecovery.com/assets/SBA/criticalbusfuncsba.pdf

We still have 504 approvals pending that were submitted over four weeks ago

In addition to new applications, these problems are really impacting our funding submissions.

Electronic issues aside, the underwriting is the biggest problem at the SLPC. Inconsistencies and what appear to be screen out for the sake of moving on to the next transaction and dump it back into the CDC’s lap. Underwriting and turns continue to decline as well as the best interest of the small business. It is like the SLPC would rather not do a loan.

This is ridiculous, a real black eye to the 504 program. The worst part is they have no idea when things will be back to normal. What are we supposed to tell our customers, especially those with time constraints?

We have confirmation receipts but call center says they have no record of these loans in their system.

SBA turn around days are not accurate

We are not getting receipts for items submitted (the last receipts came 2 days after submission of an item – when we should see receipt within 2 hours)

We have sent items prior to the outage with no response. We were told not to ask if they got it, and not to send it again. We have numerous projects that are being impacted. We re-sent our requests anyway and finally received acknowledgement of receipt. Now we are being told 7-10 business days for responses. This is unacceptable. All we can tell our borrower is our government had server issues but cannot tell them with confidence when we will receive our approvals so they can still hopefully close.

Recurring problem – not acceptable. Discredits the SBA and the CDCs

Isn’t this the third time this year? I seem to remember something happening in February. Also, we had an avoid a screen out when one of these “outages” occurred and since SLPC didn’t get the email due to the outage it became a screen out. When I asked why…they didn’t receive it in time. Of course I said it was due to the outage but that didn’t matter.

SBA, especially the 504 loan program, has made SO much progress over the past 15 to 20 years. So it’s just utterly unconscionable that these problems keep occurring. SBA has single-handedly become it’s own worst enemy. The 504 program (and its borrowers and its champions) deserves better. One of the government’s best economic development programs is being screwed up by incompetent bureaucrats. Heads should roll. This wouldn’t fly in the private sector. Things need fixed once and for all!

We had to go back to loan committee to renew our loan approval AND we had to renegotiate with our participating bank to account for the 3 month extension.

I have a hard time believing this would have gone on this long if it were impacting the 7a program

It is extremely difficult to understand how this situation has occurred at least twice within the past 90 days. Once it occurred, it seems that measures could have been taken to prevent it from happening again and alternatives set up to allow for continued processing. Small business borrowers are being affected by this scenario. Faith in the 504 program is being further eroded.

It is ridiculous that these outages continue to occur this frequently. Something needs to be done!!

I have no faith that slpc / sba can manage their IT issues. This would have never happened in private industry, nor would it be tolerated. But we have to as we have no alternative. And this is worse than last June, not just as bad.

The most frustrating part is that I feel like I have to follow up on everything that has been submitted.

Horrible

The reason I say above “we don’t know” is because we submitted packages over three weeks ago and we are just now receiving confirmations that the loan(s) are being worked on. SBA is putting a very positive spin on what I believe to be an incredibly bad situation for 504.

No publicly traded or private business could survive if they did this. Since 5/31, the system has been down on and off for several weeks. What a travesty.

This has been a year of devastating shut downs at SLPC. Combine that with no communication of policy interpretations and credit questions that are unreasonable why use the 504 program.

Really? No redundant systems???

Immediate notice would be helpful so we can manage expectations, notice after it is fixed (typical) results in duplicate submissions and missed deadlines (these are Real Estate deals). Note, the above does not consider the automatic screenouts and delays resulting.

The lack of urgency is a major concern.

7a applications are messed up as well. SBA One is causing havoc.

We have some deals that were lost, others taking nearly three weeks just to get reviewed. This is TERRIBLE for a program that is already hampered by regulations that are unfriendly to small businesses.

Between 5/31/16 & 9/7/16, SBA’s system has been either interrupted or down 33% of the time…that is equal to 1 out of 3 months!

The challenge has been the lack of communication about the outage for several days. We found out last Friday that items sent on Tuesday never made it and now we must resubmit and are told we are back in line. Very frustrating especially here at year end.

I give credit for SBA personnel working to meet approval deadlines. Hard to understand how the system is so unreliable and can not work for a week, that would never happen in private sector. Timing especially bad given that FYE is coming up. I hope this does not happen in the future.

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