C-Suite Wednesday – Loan Guaranty Processing Center’s Top Reasons for Declines and Screen-Outs

April 13, 2022

Delaney Sexton
Contributing Editor

C-Suite Wednesday – Loan Guaranty Processing Center’s Top Reasons for Declines and Screen-Outs

SBA’s 7(a) Quarterly Connect Call on Tuesday, April 12, provided insight into the Loan Guaranty Processing Center. Current loan approval turn times for smaller loans and community advantage loans are six calendar days, and for other loans, the current turn time is nineteen calendar days. Most loans are assigned to a loan specialist for processing within a day.

On the call, they stated that 90% of loans are approved, and a majority of the 10% of loans that are not approved were declined for similar reasons. A common reason for being declined is refinancing of debt was within six months, on reasonable terms, or the original purpose was ineligible. Other reasons loans are not approved include lack of repayment ability, an ineligible loan structure or business purchase, and credit reasons other than lack of repayment (credit elsewhere, ineligible changes of ownership, etc.).

The biggest factor that affects turn time at the LGPC is the screen-out rate, in which one-third of the loans they receive have had more than one screen-out. 75% of the loan screen-outs can be attributed to four issues. One cause for screen-outs is incomplete financial statements or financial statements with issues. Projection issues are another top reason for screen-outs, and it is often caused by projections that have not been substantiated by comments from the lender. Incomplete lender credit memos, often correlating to financial statement issues and projection issues, lead to screen-outs, and the last most common reason for screen-outs is the 1919 or 1920 being incomplete.

Loan modifications have a turn time of up to five calendar days, but the LGPC typically turns the loan modifications in three to four days. When necessary, loan modifications can be expedited and finished within 24 hours.

Lenders seeking support or who have sent a question to 7aQuestions will have a quick turn time. Although they have a volume of 2,300 questions each month, 90% of questions are answered within 24 hours. Questions should be answered within a maximum of 72 hours. The next 7(a) Quarterly Connect Call will take place on July 12, 2022, and the 504 Quarterly Connect Call is on June 14, 2022.