by Karen McHugh
As we prepare for another year, it is a good time to think about how we can make our procedures and practices not only more efficient but in line with SBA expectations. Even good SBA loan departments can improve, so making a list of “best practices” may be helpful.
We’ve come up with a few for consideration:
• Develop a SBA Loan Policy
• Develop “ground level” SBA Procedures
• Provide ongoing Training
• Conduct annual Internal Loan Reviews
• Utilize the Loan Authorization as Lead Checklist
• Monitor Ongoing Creditworthiness
Develop a SBA Loan Policy
Some items to consider when developing a SBA loan policy are:
• What SBA loan programs do you utilize and why?
• What makes a SBA guaranty necessary?
• Identify acceptable loan terms, rates and pricing
• Define your geographic footprint
• Provide loan/value liquidation rates to address SBA’s fully secured rule
• Provide high level guidance on SBA regulations, including:
o Credit underwriting
o Closing documentation
o Workouts and liquidation
Develop Ground Level Procedures
Not only is a high level SBA loan policy necessary to define philosophy and general guidelines, it is also important to provide more detailed procedures to those responsible for fulfilling the mission of providing quality SBA loans. A procedures document should include:
• Definition of roles and responsibilities
• Create job aides and resources
• Provide “desk top” procedures (or the fine detail of who does what, when)
SBA requires the lender to understand, implement and stay updated on loan program requirements. How will your lending institution insure your lending team is best equipped to feel confident in their role of delivering the SBA loan product? You will want to develop “training procedures” to address this need:
• Who will provide the training?
• How often will it happen?
• How will it be offered (on-site, remote, online?)
Internal Loan Review
SBA requires the lender to have a procedure of self-monitoring and to identify an approach to address this requirement. You should have a written plan of:
• Who will conduct the loan review? (Internal auditors? Third party auditors?)
• How will they do it?
• How often will they do it?
• How will the information be utilized?
Utilize the Loan Authorization as the lead checklist for every phase of SBA lending including:
• Post closing
Lastly, make sure to monitor ongoing creditworthiness. It is not just about documenting efforts to collect financial statements. SBA wants to see a concerted effort by the lender to understand their borrowers and the financial trends associated with them. If the borrower is less than forthcoming on providing regular, updated financial information, then the lender will want to become more creative. Implement site visits, request copies of sales tax records, and obtain updated credit reports.
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 www.sbacomplete.com or call us at 800-801-2378.