SBA Lender Risk Assessment

January 24, 2013

by Karen McHugh
SBA Complete, Inc.

Now is a good time of the year to get your processes in order. One way to accomplish that worthy goal is to consider what SBA may be looking at when they analyze risk associated with your SBA loan portfolio. The risk –based review by SBA assesses the lender’s SBA lending operations (both off site and possibly on site). The primary focus by SBA will be:

Portfolio Performance
SBA Management and Operations
Credit Administration Practices
Compliance with SBA Loan Program Requirements

Portfolio Performance
SBA is watching each lender’s performance, regardless of portfolio size. This information is published via the Lender Portal quarterly. However, there are many elements of the assessment based on a review of portfolio size, composition, performance and credit quality. SBA’s approach will take into consideration industry/geographic concentrations; a comparison to peer groups; analysis of performance trends; and, whether or not SBA loan program requirements are met. Basically, the overriding question is, “does the lender have the continuing ability to make and manage its SBA portfolio?”

SBA Management and Operations
SBA will review the lender’s policy and procedures pertaining to SBA lending at some point in time (typically in conjunction with an on-site loan review). Do you have a SBA Loan Policy? Maybe these should be the questions you should address in your policy and procedures:
Who are the staff personnel responsible for the SBA loan portfolio?
Are they adequately trained?
Are internal controls adequate?
Do you have a systematic internal review process?
Does the lender have the ability to plan strategically and operationally?
How easy is it to respond to changing circumstances?
Does the lender comply with SBA loan program requirements?

Credit Administration Practices
SBA assesses lending operation policies for origination, servicing and liquidation practices. Is the lender PRUDENT in their decision-making (and documentation of such), which will reflect the adequacy of their procedures governing SBA lending activities.

SBA may consider:
Lending practices, reports and activities are reasonable and consistent
Lender’s underwriting and regular services activities may be evaluated
Loan servicing and monitoring practices (including collection, loan review and risk rating systems) will be assessed

Compliance with SBA Loan Program Requirements
SBA determines compliance with SBA specific requirements in eligibility decision-ing and proper reporting activities. SBA’s review takes into consideration whether there has been:
Accurate and timely reporting (1502 reports monthly)
Accurate and timely payment of guaranty fees and prepayment fees
Accurate and timely payments or recoveries due to SBA
Also, SBA will look for proper documentation of program eligibility when proper explanation is required, such as:
Refinancing calculations (for 10% improvement to payment rule)
Credit elsewhere factors listed (reasons for necessity of SBA guaranty)
Size standard analysis (when affiliates are involved, for example)

We want to be your “go to” team for whatever needs you may have in the SBA lending world. To learn more about the all-inclusive SBA lending services of SBA Complete, go to or call us at 800-801-2378.