November 22, 2016
By Bob Coleman
Editor, SBA Hot Topic Tuesday
SBA Hot Topic Tuesday — SBA Announces New PARRiS Factors
The New Quantitative Factors
Forecasted Purchase Rate
The Forecasted purchase rate projects the percent of a 7(a) Lender’s portfolio that will
be purchased over the next 12 months. It is calculated from the dollar-weighted loan-level
predicted purchase rate for each loan.
SBA is replacing the Lender Purchase Rating with the Forecasted Purchase Rate. The Forecasted Purchase Rate can be used to provide further information (e.g., it can be used to project the dollar amount of a Lender’s purchases simply by multiplying the rate by the Lender’s SBA Share Dollars Outstanding).
5 Year Charge Off Rate
The 5 year charge-off rate measures the total dollars charged-off during the past 5 years as a
percentage of the total Gross Dollars Outstanding plus total dollars charged-off during the past 5
SBA is replacing the Recovery rate metric in PARRiS with the more comprehensive
charge-off rate that effectively provides a Lender’s portfolio loss rate. This measure is
distinguished from the 5-year cumulative net yield in that the net yield takes into account the
cash flow associated with loan fees.
The PARRiS methodology also features “flags” that are intended to highlight additional areas
that SBA will be monitoring in identifying risk. These flags remain unchanged and, currently,
the PARRiS flags include:
(1) loan agent rate over last 5 years;
(2) industry concentration rate;
(3) franchise rate;
(4) sold or secondary market sale rate;
(5) acquired loan rate;
(6) loans greater than $2 million approved over the last 12 months;
(7) rapid portfolio growth;
(8) early default.
These flags are subject to change based on risks identified in the portfolio.