What is delegated versus non-delegated SBA loan processing?
Short answer
On a delegated loan, the lender decides eligibility and credit, and SBA issues a loan number without reviewing the credit first. On a non-delegated loan, SBA reviews the application and makes the final decision. Source: SOP 50 10 8.1, Sec. B, Ch. 1, Para. C.1.
The difference is who makes the final decision. SOP 50 10 8.1, Sec. B, Ch. 1, Para. C.1 (p. 118) describes both paths for a Standard 7(a) loan.
Non-delegated
The lender submits the application and supporting documents to SBA. SBA makes the final determination on eligibility and creditworthiness. That includes the use of proceeds, the adequacy of collateralProperty a lender can take and sell if a loan is not repaid. , the loan structure and any equity contribution. SBA then approves or declines the loan in its system (Appendix 20, Para. A).
Delegated
The lender uses authority SBA has given it, such as the Preferred Lenders Program (PLP). SBA does not review the lender's credit or structure analysis before issuing a loan number. The lender enters the required information in the SBA Loan System and keeps the documents in its file (Appendix 20, Para. A).
That review can still come later. SBA can test the lender's analysis when the lender asks SBA to purchase its guaranty, or during oversight (Para. C.1.b).
Which path applies
- Standard 7(a) and 7(a) Small loans can go either way (Sec. B, Ch. 1 and Ch. 2, Para. C.1).
- SBA Express loans run only through the lender's delegated authority (Sec. B, Ch. 2, Para. C.1.b).
- A lender can use delegated processing only if SBA has granted that authority (13 CFR 120.440).
504 loans
A 504 loan has its own processing methods. All 504 loans are processed at SBA's Sacramento center (Sec. C, Ch. 1, Para. F.1, p. 257).
Ask your lender which route it plans to use, because that affects what SBA sees before closing.
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