Sba sop 51 00 On-Site Lender Reviews/Examinations Office of Lender Oversight
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- 2. Notice of Implementation
- 3. Authority
- 4. Applicability
Chapter 1Introduction1. Purpose of this Standard Operating ProcedureLending functions related to loans made under SBA loan programs (SBA loans) are performed by financial institutions (lenders) and Certified Development Companies (CDCs) authorized to make SBA loans (collectively “SBA Lenders”). The majority of loans guaranteed annually by SBA are made by SBA Lenders under delegated authority. In delegated loan programs, an SBA Lender is authorized to make credit determinations without prior review by SBA. All such determinations must comply with SBA requirements and are subject to subsequent review by SBA. While delegating lending functions to SBA Lenders allows small businesses faster, more efficient access to capital, SBA must have adequate controls to ensure that SBA Lenders are prudently originating and managing their SBA loan portfolios and complying with all SBA requirements. The Office of Lender Oversight (OLO) was established to provide this control. OLO reviews, monitors and evaluates SBA’s Lenders, and implements Corrective Actions, as necessary. Under certain 7(a) loan programs - the Preferred Lending Program (PLP), SBAExpress Program and CommunityExpress Program - SBA delegates to the lender the authority to make loan approval decisions, including credit determinations, without prior review by SBA. The regular 7(a) loan program is SBA’s non-delegated 7(a) loan program. Under regular 7(a), SBA makes the loan approval decision, including the credit determination. SBA Lenders making loans under any of the 7(a) programs must assert that they would not make the loan without an SBA guaranty. Most 7(a) SBA Lenders are depository institutions with a Federal Financial Institution Regulator. While these lenders are overseen and examined for safety and soundness by their respective Federal Financial Institution Regulator, SBA conducts risk-based and compliance reviews of their SBA lending operations. In addition to the depository institutions, SBA authorizes other types of lenders to make SBA-guaranteed loans. These lenders include Small Business Lending Companies (SBLCs) and Non-Federally Regulated Lenders (NFRLs). SBLCs consist of a small number of 7(a) Lenders. SBLCs are generally not subject to oversight and examination by a Federal Financial Institution Regulator. SBLCs are non-depository lenders who enter into agreements with the SBA to provide 7(a) and micro-loans to qualified small businesses. By statute, SBA is the primary Federal regulator for SBLCs and conducts safety and soundness examinations of SBLCs. NFRLs are state licensed non-depository financial service companies authorized as 7(a) Lenders. SBA has statutory authority to oversee NFRLs. SBA may perform safety and soundness examinations on NFRLs. SBLCs and NFRL are referred to collectively as SBA Supervised Lenders. The 504 loan program is delivered through Certified Development Companies (CDC) that SBA has authorized to participate in the program. CDCs are generally (but not exclusively) non-profit organizations and may or may not engage in additional economic development activities. CDCs are also not depository institutions, and therefore are not subject to periodic examinations by a Federal or state regulatory authority. CDCs can participate in a number of lender programs with SBA. Under the Accredited Lender Program (ALP), CDCs have been delegated additional authority to evaluate loan applications in return for expedited SBA processing. Under the Premier Certified Lender Program (PCLP), CDCs have delegated authority to make credit determinations. In all other 504 loans, SBA is responsible for making credit determinations. As part of the PCLP authority, a PCLP CDC is required to maintain a loan loss reserve account for those loans approved under its PCLP authority. All CDCs are subject to risk-based and compliance reviews of their SBA lending operations. This Standard Operating Procedure (SOP) contains on-site review procedures for all types of SBA Lenders participating in SBA’s 7(a) and 504 loan programs. It defines the on-site risk-based review conducted of 7(a) Lenders and CDCs, depending upon their level of lending activity. It also defines the more comprehensive safety and soundness examination conducted of those 7(a) Lenders that are SBA Supervised Lenders, which is also dependent upon the level of lender activity as well as other regulatory control. 2. Notice of ImplementationThis SOP establishes procedures for on-site risk-based lender reviews and safety and soundness examinations. It contains separate guidance and procedures for 7(a) Lenders and CDCs. This SOP replaces the Loan Policy and Program Oversight Guide for Lender Reviews, SOP 50 50 4B, Appendix 30; oversight of PLP lenders found in SOP 50 10 (4)(E), Subpart D, Chapter 3, paragraphs 10 and 11, and oversight of CDCs found in SOP 50 10 (4), Subpart H, Chapter 24, paragraph 2. 3. AuthorityThe following statutory and regulatory citations provide authority for SBA’s on-site review and examination activities: 15 USC § 650; 15 USC § 634 note, citing, Public Law 104-208, Division D, Title I, §103(h); 15 USC § 634(b)(14); 15 USC § 634(b)(7); 15 USC § 636(a)(31); 15 USC § 687(f); 15 USC § 696(3)(A); 15 USC § 697(a)(2); 15 USC § 697e(c)(8); 15 USC § 634(b)(6); 13 CFR § 120.470; 13 CFR § 120.454; 13 CFR § 120.410; 13 CFR § 120.414; 13 CFR § 120.451; 13 CFR § 120.472; 13 CFR § 120.853; 13 CFR § 120.845; and 13 CFR § 120.841. 4. ApplicabilityOn-site reviews are generally conducted on: (1) all 7(a) Lenders with outstanding balances on the SBA-guaranteed portions of its loan portfolio amounting to $10 million or more and (2) all CDCs with outstanding balances on its SBA-guaranteed debentures totaling $30 million or more. Though less frequent, SBA may conduct on-site reviews of any SBA Lenders, as it considers necessary. SBA’s calculation of the outstanding balances of 7(a) Lender loan portfolios and CDC debenture portfolios will be based on a 12 to 24 month cycle, determined depending upon the risk characteristics of the lender. SBLCs and selected NFRLs receive more extensive on-site examinations on a 12 to 24 months cycle, also determined based upon the risk characteristics of the lender. On-site reviews and examinations are supplemented by regular off-site reviews and monitoring. 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