October 2, 2019

By Caity Witucki
Contributing Editor, C-Suite Tips Wednesday

SBA C-Suite Tips Wednesday — Review SAM to Determine if a Borrower is Ineligible for SBA Funding

Participating lenders enter into an agreement with the SBA to make loans to small businesses in accordance with the rules, regulations, policies, and procedures set forth in the SOP. Although the current version of the SOP does not explicitly require lenders to review SAM to determine if a borrower is ineligible for SBA funding, it does state that “individuals and entities suspended, debarred, revoked, or otherwise excluded under SBA or government wide debarment regulations are not permitted to conduct business with the SBA”. Therefore, a prudent lender should take all steps necessary to determine whether potential borrowers are ineligible for SBA funding, including reviewing SAM.

In a recent audit of the SBA’s suspension and debarment process, the Inspector General not only recommended that the SOP be updated to include an express requirement for lending partners to review SAM, but also recommended the recension of SBA’s loan guaranty for a $2.9 million loan and a review of the lender’s eligibility for continued participation in the SBA lending program.

According to the Inspector General’s review of the $2.9 million loan, the borrower falsely certified that it had not been declared ineligible for SBA funding. However, the entity was convicted of a Clean Water Act violation and was listed on the SAM exclusion list. The Inspector General found no reference in the lender’s file to reviewing the entity’s name in SAM prior to the loan’s disbursement. Therefore, resulting in the SBA Inspector General’s recommendation.

In order to maintain your institution’s status as an SBA lender and avoid the denial of an SBA guaranty, you must provide adequate proof that SBA loan applicants have not been suspended, debarred, revoked, or otherwise excluded under SBA regulations. To fulfill this requirement, the Inspector General report recommends that lenders should include a screen printout of their SAM search results and any other evidence to support their thorough review.

SBA OIG Report 19-18