What is an SBA Preferred Lender?
Short answer
A Preferred Lender has SBA delegated authority to process, close, service and liquidate 7(a) loans with reduced documentation and reduced prior approval. It makes the eligibility and credit decisions itself. Source: 13 CFR 120.450 and 120.452.
A Preferred Lender is a 7(a) lender with delegated authority under SBA's Preferred Lenders Program, or Preferred Lender Program (PLP). Under 13 CFR 120.450, these lenders process, close, service and liquidate SBA guaranteed loans with reduced documentation to SBA and reduced prior approval.
What the lender decides
The lender is responsible for all PLP loan decisions on eligibility, including size, and on creditworthiness. It must also confirm that closing decisions are correct (13 CFR 120.452(c)).
What SBA still does
The lender notifies SBA of its approval. SBA attaches the guarantee and issues a loan number, if it finds no eligibility problem and funds are available (13 CFR 120.452(b)). SBA does not review the credit analysis first. It can test that analysis when the lender requests guaranty purchase or during oversight (SOP 50 10 8.1, Sec. B, Ch. 1, Para. C.1.b, p. 118).
How a lender earns the status
SBA weighs the lender's ability to process and service loans, its performance and its compliance (13 CFR 120.440(a)). The agreement runs no more than two years. A lender with under 3 years of SBA lending experience gets 1 year or less (13 CFR 120.440(c)).
Limits that still apply
- A PLP loan may not reduce the lender's existing credit exposure, apart from a narrow interim loan exception (13 CFR 120.452(a)(2)).
- Some businesses, loans and programs are not eligible for PLP (13 CFR 120.452(a)(1)).
- A lender's advertising may not state or imply preferential treatment from SBA (13 CFR 120.413).
Apart from those points, the same regulations govern PLP loans as other 7(a) loans (13 CFR 120.452(a)).
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