SBA Inspector General Tuesday – SBA Loan Audit Deficiency Edition

June 17, 2014

By Bob Coleman
Editor, Coleman Report

sbaoiglogo2Issued under the ominous title, “Significant Opportunities Exist to Improve the Management of the 7(a) Loan Guaranty Approval Process,” SBA’s Inspector General continues to beat the drum of SBA and lender incompetence, and even lender malfeasance.

A June 6th, 47 page performance audit has many takeaways for lenders and the industry.

I will cover them in the coming month. Today, I will list the top-ten deficiencies listed by the OIG

Deficiencies are in two categories – Eligibility and Repayment Ability


1) Debt refinance documentation errors
2) Transfer of risk to SBA when refinancing debt
3) Lender failed to disclose a material fact
4) Failure to obtain the 912 form on a key employee
5) Failure to obtain a business valuation

Repayment Ability

1) Loans approved with inadequate debt service coverage
2) Loans approved with historical and interim operating losses
3) Failure to underwrite and support cash flow projections
4) Loans approved with negative global cash flow
5) Unreliable borrower financial statements

Read the report here