Generally, the SBA encourages a lender to credit bid when its collateral is being sold at auction. While the SBA offers some guidance on when to bid and how much, the guidance is open to interpretation.
Lenders should be aware that their credit bidding decisions will be reviewed by the SBA at the time of the guaranty purchase, and failure to heed the SBA guidance could result in a substantial repair or denial of the guaranty. The prudent lender should bid conservatively and remain comfortably within the SBA’s guidelines to protect the real prize: the SBA guaranty.
How good are at interpreting SBA guidance during a collateral auction? Do you know the SBA’s variance depending on context and economic factors of the auction? This article from Starfield & Smith’s Greg T. Kupniewski will help you brush up on some of the basics and assure the safety of your guaranty.