SBA Implements Revised Loan Processing Procedures

Are lenders ready for the revised SOP 50-10?

sbalogoThe relationship between the Small Business Association (SBA) and small business lenders has reached a new chapter. For years, small business lenders have had a difficult time following the procedures in the SBA’s standard operating procedure (SOP 50-10) document, which outlines the association’s programs for lenders who produce loans on its behalf. In March, the SBA published a revised version of the SOP 50-10, with new policy notices, but a comprehensive rewrite of the policies had yet to be done.

Lenders who were concerned about the changes in the document had requested that the effective date be pushed back twice. They originally had 15 days to adjust to the user-friendly SOP 50-10 before it went into effect, but their requests delayed the effective date from May 1 to June 15, and finally to Aug. 1. Eric Zarnikow, the SBA’s associate administrator for capital access, was asked to provide lenders at least 60 days before implementing the new rules in order to “allow sufficient time to identify the program changes, make necessary adjustments, and appropriately train staff members.” The SBA agreed to the delays in order to become “good partners” with its lenders.

“We really had an agenda at the SBA of being easier to work with our lending partners,” Zarnikow says. The SOP document was updated because the previous one was “awkward to deal with.” Zarnikow says that the revised SOP is not a “big policy change document.” To make the document more accessible for lenders, it was published online and streamlined from 1,000 pages to 400 pages. Once the revised SOP 50-10 takes effect, it will be updated every six months.

Marilyn Landis, a former SBA lender and now small business owner, says the revised document isn’t easier to use and says it does, in fact, have any policy changes.
“I think many lenders are saying, ‘We’re all in favor of improving the SOP because it was tough to maneuver,’” she says. “But when they finally published it, lenders really had a chance to look at what some of this meant and said ‘Wait a minute. There’s some major changes in here, and we’ve got some problems with those changes.’”

One noted change requires small business owners to complete more environmental due diligence to their property, while another will no longer allow owners to use home equity toward their businesses. “You see someone who’s worked hard, they’ve built some equity in their home, and they want to tap into that resource because they have an opportunity to grow their business,” Landis says. “[But] they’re not going to be able to.”
For more information about the SOP 50-10 revisions, visit www.sba.gov.

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