SBA Hot Topic Tuesday — Inspector General Calls for More Oversight of Nonbank Lenders, LSPs and Agents
January 20, 2026
by Bob Coleman
Founder & Publisher
SBA Hot Topic Tuesday — Inspector General Calls for More Oversight of Nonbank Lenders, LSPs and Agents
Sheldon Shoemaker
One of the challenges facing SBA is its oversight of lenders the Inspector General says for 2026.
This is what the OIG concludes:
It is vital that the agency continues to:
- Enhance oversight of program lenders;
- Enhance oversight of third-party service providers, including loan agents on whom lenders place significant reliance; and
- Address emerging issues in a timely manner to reduce risk.
SBA’s Office of Credit Risk Management manages program credit risk on financial assistance portfolios of guaranteed loans that totaled approximately $163 billion as of June 2025. The office monitors lender performance and enforces lending program requirements.
In 2023 and 2024, SBA made significant policy changes to its flagship 7(a) loan program to help expand access to capital for disadvantaged entrepreneurs. The agency lowered underwriting standards and granted mission-driven financial institutions access to the 7(a) loan program as Community Advantage Small Business Lending Companies. In 2025, SBA reversed many of these changes.
The agency has recently issued a moratorium on program expansion and will require existing lenders to meet prudent financial stability standards as a condition of continued participation. SBA’s challenge is to serve entrepreneurs while also mitigating increased risk to its 7(a) loan program.
Many non-bank lenders are not regulated by other federal entities, which means they are primarily regulated and examined by SBA. The agency considers these lenders to be higher risk than those subject to federal regulation and therefore requires greater oversight by SBA’s Office of Credit Risk Management.
The Office of Inspector General (OIG) has conducted prior audit work related to third-party service providers in the 7(a) loan program. In FY 2025, OIG assessed the risk associated with non-bank lenders in the Paycheck Protection Program (PPP), including financial technology companies and service providers.
OIG identified opportunities for SBA to enhance its oversight of non-bank lenders to promote program integrity and reduce financial loss. Specifically:
- Non-bank PPP lenders originated $14.2 billion in suspected fraudulent loans at a rate more than five times higher than traditional bank lenders.
- Of the $14.2 billion in suspected fraudulent non-bank PPP loans, over $6.1 billion, or nearly 43 percent, were made by lenders categorized as fintechs and other state-regulated finance companies.
- Loans involving service providers had a suspected fraud rate more than three times higher than loans made without a service provider.
In addition, OIG has investigative cases that reflect some of the effects non-bank lenders have had on the PPP.
SBA has taken steps to mitigate these challenges and has significantly improved its tracking and monitoring of third-party providers in traditional loan programs. OIG will continue to monitor compliance with SBA policies and procedures, as well as corrective actions taken to address noncompliance.