SBA Approval

Once a borrower seeking a Small Business Administration (SBA) loan receives approval from a lender, the transaction must still be forwarded to the SBA for the lender's loan guaranty request to be considered. The status of the particular lender with the SBA determines the method by which the guaranty request is handled. Listed below are the three distinct lender classifications that are utilized by the SBA.

The Preferred Lender Program (PLP) is a special classification in which the SBA delegates the entire guaranty approval process to the lender. Lenders qualify for PLP status by maintaining an exceptional performance record along with strong loan volume and low default rates. These attributes tend to validate that PLP lenders are more experienced and better equipped to manage SBA loans than other participating lenders. In this SBA classification, the lender notifies the Administration of any loan approvals that it grants under the program and submits documentation describing the transaction and verifying compliance with all eligibility requirements. Utilizing the PLP status, the lender is able to reduce the processing time required to obtain SBA approval, often to as little as one day.

In the Certified Lender Program (CLP) classification, the SBA agrees to provide accelerated processing of the member lender's 7(a) loan guaranty requests. Lenders of this designation agree to provide the Administration with more thorough financial analysis of borrowers and to assume additional servicing responsibilities. Lenders qualify for CLP status by having a consistent performance record of good loan volume and low default rates. A CLP lender ensures the borrower of faster loan processing by the SBA as well as the added advantage of dealing with a more experienced SBA lender.

All chartered banks and licensed Small Business Lending Companies (SBLCs) are eligible to participate under the SBA's General Program Lender (GP) classification, which is the designation by which most lenders participate in the 7(a) loan guaranty program. Lenders must implement a standard agreement setting forth their pledge to comply with the program regulations of the SBA. GP lenders submit loan guaranty applications to their SBA district office for evaluation on a 'first-come, first-served' basis. Applications that are not completed according to program requirements are screened out and returned to the lender for any necessary modifications or amendments.

The SBA evaluates each loan based solely on the documentation prepared and submitted by the lender. SBA personnel rarely make visits to the borrowing business and do not interview the borrowers. The participating lender is required to answer any questions that the SBA may have regarding the guaranty application and provide additional information as requested. Except for lenders that have a poor track record with the SBA, the Administration generally assumes that the lender has the capacity to make prudent loan decisions. Notwithstanding, the SBA will review the lender's approval choice for rationality and accuracy.

In summation, SBA approval of a loan guaranty request by a lender is not automatic. However, if the lender is well acquainted and experienced with the SBA program and does not make any substantive errors in qualifying the proposal, the borrower can be reasonably comfortable that the SBA will likely approve the request.





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