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OIG Reports

Management Advisory Report 5-27: PLP Processing Restrictions for Paying off Existing SBA Debt in a Change of Ownership Transaction

Date Issued: 
Wednesday, September 28, 2005
Report Number: 
5-27

On September 28, 2005, the OIG issued Management Advisory Report 5-27, PLP Processing Restrictions for Paying off Existing SBA Debt in a Change of Ownership Transaction.  During a review of certain loans originated by a lender, the OIG identified an issue related to compliance with the Agency’s processing restrictions.  Specifically, the OIG reviewed selected paid-in-full (PIF) loans to determine whether they were processed in accordance with SBA policies regarding Preferred Lender Program (PLP) processing restrictions for paying off existing SBA debt in a change-of ownership transaction.

The OIG found that the lender did not comply with the Agency’s PLP processing restrictions for paying off existing SBA debt in seven separate change-of-ownership transactions.  Two transactions involved guaranty purchases for two defaulted loans totaling almost $1.5 million.  The lender has repaid the guaranty purchase amount on one of the loans.  The OIG recommended that the SBA recover the guaranty purchase amount paid of $737,190 for the second defaulted loan, and flag five loans.  If a loan defaults, the guaranty purchase decision should take into consideration that it was ineligible because the lender was prohibited from using its PLP authority to pay off the existing SBA loan.