SBA Hot Topic Tuesday: OIG Says SBA Cannot Explain Improper 7(a) Guaranty Payments to Lenders 

October 20, 2026

Bob Coleman
Founder & Publisher

SBA Hot Topic Tuesday: OIG Says SBA Cannot Explain Improper 7(a) Guaranty Payments to Lenders 

More Than $5 Billion in Defaulted SBA Guaranteed Loans Purchased in FY 2025

SBA has been unable to accurately identify the root causes of improper 7(a) loan guaranty purchases, leaving its corrective action plans ineffective, according to a new report from the SBA Office of Inspector General.

SBA purchased more than $5 billion in defaulted guaranteed loans during FY 2025, exceeding the resources available to fund those claim payments.

The report does not establish that SBA improperly paid the $5 billion in guaranty purchases, nor does it disclose the dollar amount of improper 7(a) guaranty payments.

The findings appear in the OIG’s October 16 report, Top Management and Performance Challenges Facing the Small Business Administration in Fiscal Year 2027.

What SBA Lenders Need to Know About Guaranty Purchases

Pages 7 and 8 of the report identify significant problems with SBA’s financial controls and improper payments.

OIG reports that SBA failed to conduct required improper payment risk assessments in 2025, potentially leaving programs exposed to payment problems unknown to agency management.

The Inspector General also found that SBA could not accurately identify the root causes of improper payments or implement effective corrective action plans in three programs:

• SBA 7(a) loan guaranty purchases.
• SBA disaster assistance loans.
• PPP loan guaranty purchases.

An improper 7(a) guaranty purchase can occur when SBA pays a guaranty that should have been denied or repaired. For example, SBA may honor a guaranty despite an eligibility violation that warrants denial or pay the full guaranty when a lender’s servicing deficiency warrants a repair. Incorrect payment calculations and insufficient supporting documentation can also result in improper payments.

OIG says SBA has not accurately determined why improper guaranty purchase payments occur, leaving the agency unable to implement effective corrective actions.

The report does not identify specific deficiencies in lender underwriting, closing, servicing or guaranty purchase documentation that caused these improper payments.

SBA Management Challenges

Overall, the Inspector General identified four key management challenges.

• Information Technology Systems — Cybersecurity weaknesses, incomplete system inventories and declining performance in three security domains.
• Combating Fraud and Program Oversight — More than $200 billion in potentially fraudulent pandemic loans, weaknesses in disaster loan collections and higher default rates among Small Business Lending Companies.
• Financial Reporting and Improper Payments — Inaccurate improper payment reporting, ineffective corrective actions and six consecutive years of financial statement audit disclaimers.
• Workforce Development — Leadership succession, disaster workforce staffing and agency-wide artificial intelligence skills.

The OIG report establishes no new guaranty purchase requirements for SBA lenders and identifies no new grounds for repair or denial.