Consolidated Results of the OIG High Risk 7(a) Loan Review Program

This report presents the consolidated results of our ongoing High Risk 7(a) Loan Review Program from February 2019 through August 2019.

The Office of Inspector General’s review of eight early-defaulted loans in fiscal year (FY) 2019 identified material lender origination and closing deficiencies that justified denial of the guaranty for five loans in the amount of approximately $8.7 million. We issued three advisory memorandums regarding these five loans to the Small Business Administration (SBA) for appropriate corrective action. The issues we found in our FY 2019 reviews were similar to those identified in previous evaluations, such as business valuations, affiliates, equity injection, and repayment ability.

SBA agreed with our findings and recommendations on the five loans and agreed to contact the lenders to obtain additional information to bring the loans into compliance. If that’s not possible, SBA plans to seek recovery from the lenders.