Delegated Authority and General Program (GP) loans both play a vital role in the success of small businesses and the SBA Program on an annual basis. As a Lender Service Provider for more than 75 banks and credit unions nationwide, Windsor works with delegated and non-delegated lenders, both of which utilize the General Program strategically. Since 2010, the team at Windsor Advantage has submitted nearly $1 billion in 7(a) loan applications through the General Program to the SBA Loan Guaranty Processing Center (LGPC) in Citrus Heights, California.
All non-delegated lenders are required to submit loan applications to the LGPC while delegated lenders have the flexibility to choose to approve a loan on their own or send it to the Center. Often times, the LGPC provides delegated lenders (whether new or vastly experienced) with a second set of eyes on items such as bankruptcies, credit issues, grey areas for eligibility, and loans in unfamiliar or uncomfortable industries. LGPC feedback can help refine lenders’ credit practices for 7(a) loans and also train non-delegated lenders who hope to gain delegated authority in the future.
Given our experience, we believe there are 5 things you should know about submitting an SBA loan application through the General Program.
1. SBA Loan Application Turn-Times
After submitting an SBA loan application, the application automatically enters the “queue.” Time of year, employee schedules during the holidays and volume levels are the most common factors which determine how quickly the SBA will review the application. The below chart illustrates LGPC turn-times for loans submitted by Windsor from January 1, 2016 through June 30, 2017. As seen below, turn-times are greatly impacted during the holidays and start to speed up again toward the end of January. Despite these fluctuations, application submission strategy should be driven by the fundamentals of the loan, consistent with bank policies and procedures, and not based on the LGPC timeline.
2. Third-Party Reports
Lenders can run certain third-party reports concurrently with a GP application including appraisals, environmental reports for non-sensitive industries, and title work. This offers lenders the flexibility to maintain similar timelines to lenders using delegated authority. Business valuations, environmental reports for sensitive industries, and Tax Verification must always be completed prior to a GP submission.
3. Number of Review Specialists Involved
- Loans under $350,001 which pass the SBA liquid credit score test (140+) are reviewed by one specialist. The SBA relies upon the lender to do their own analysis of repayment ability. As a result, these loans often obtain authorization quickly after they are picked from the queue.
- Loans over $350,000 are reviewed by at least two specialists, a primary specialist and then subsequently checked by a “lead specialist” prior to authorization, typically adding a few additional days to the approval timeline.
- Loans of $3,000,000 or more will follow the same process as smaller loans; however, a third specialist performs a “Quality Control (QC)” Audit. A lender should anticipate adding at least 1 additional days to the standard $350,000+ timeline.
4. Importance of a Complete Credit Memo
It is important to keep in mind that the Processing Center hasn’t had the opportunity to speak with your borrower to gain an understanding of the business or the loan transaction. The most influential document a reviewer uses to interpret the lender’s analysis and the loan itself is the lender’s credit memo. Providing thorough background to the business, transaction and “credit elsewhere test” is key to a successful submission. Providing these details in a complete, consistent format within your SBA loan application should cut down on clarifying questions and therefore improve your timelines.
5. E-TRAN vs. SBA One
During 2016, SBA One was implemented by the SBA for both delegated and non-delegated lenders. At the 2017 NAGGL Technical Conference in Indianapolis, the SBA made it clear that they are stepping back from the large SBA One push and have made room for other technology companies to submit applications through E-TRAN. Currently, there is no requirement for delegated or non-delegated lenders to submit GP applications through SBA One, and we have no expectation that this will be pushed again in the near term.
Processing loans through the LGPC is much different than utilizing delegated authority. However, following the right process and providing consistent and complete credit memos can result in a similar timeline to a loan closing, while providing lenders strategic flexibility.
About Windsor Advantage, LLC
Windsor provides a comprehensive outsourced SBA and USDA loan department to lenders nationwide. With more than $230 million processed through the General Program in 2016, Windsor is uniquely qualified in supporting lenders to develop and implement a compliant process for submitting GP loans.
Since 2010, Windsor has processed more than $1.5 billion in government guaranteed loans and currently servicing a portfolio in excess of $1.2 billion (as of September 30, 2017) for more than 75 banks across the US. Windsor Advantage is based in Chicago, Illinois, with offices in Indianapolis, Los Angeles and Charleston. For more information visit WindsorAdvantage.com or call (312) 248-850.
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About the Author: Jeff manages Windsor’s overall risk management process, with a focus on documentation and compliance. Prior to joining Windsor, Jeff was an associate at Charles River Associates where he gained extensive experience in business valuation and complex litigation.