Coleman C-Suite Small Business Lending Report — Three Triggers for an SBA Inspector General Loan Review

‘We believe that preventing improper payments in the 7(a) guaranty purchase review process continues to be a challenge for the Agency,’ writes SBA’s Inspector General in a just released report. The OIG concludes $1.8 million in SBA guarantees previously paid to lenders on three loans now be denied and refunded to the federal government.

‘Improper payment in the guaranty purchase process arise when an SBA purchase reviewer fails to identify material lender deficiencies in the handling of an SBA guaranteed loan.”

The takeaway for the C-Suite is ‘improper payments’ is code that SBA is not denying enough loan guarantees. SBA has notified the lenders to either fix file deficiencies, or send the money back to the agency.

And aggressive the OIG will be. In the report, the three guaranty denials came from a pool of seven loans.

Oh, and don’t be complacent if a file has been closed for a number of years. $900,000 is being sought from a lender that received a check over three years ago — in November 2011.

The loans have three common factors. Loans are greater than $500,000, all are 90% guaranty ARRA loans and all suffered an early default within 18 months

I’ll discuss the specifics of the three loans in future reports:

  • Ridgestone Bank — $900,175 — received guaranty payment in November 2011.
  • USC Credit Union — $471,905 — received payment in March 2014.
  • Monterey County Bank — $413,704 — received payment in January 2014.

In the meantime, if you want a sneak peek of the report go here

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