Office of Capital Access | Resources

  1. Lien and Collateral Issues that Result in Missed Recoveries (Generally a Repair)

    • Failure to obtain required lien position

    • Failure to properly perfect security interest

    • Failure to fully collateralize loan at origination when additional collateral was available

  2. Unauthorized Use of Proceeds

    • Proceeds disbursed for purpose(s) inconsistent with the loan authorization or subsequent modifications without a business justification. (Could be a Denial if early default and improper use of proceeds caused the failure of the business)

    • Same lender Non-SBA loan paid with PLP loan proceeds (preference)

  3. Liquidation Deficiencies (Generally a Repair unless harm is the full value of the outstanding balance)

    • Failure to conduct Site Visit which resulted in missed recoveries

    • Improper safeguarding or disposition of collateral which resulted in missed recoveries

    • Misapplication of recoveries to lender’s loan when SBA-guaranteed loan has lien priority

  4. Undocumented Servicing Actions (Generally a Repair)

    • Liens not properly renewed during servicing on worthwhile collateral

    • Release or subordination of collateral without documented business justification

    • Allowing hazard insurance to lapse on major collateral and collateral was subsequently destroyed

    • Failure to maintain life insurance on principal and principal subsequently dies

  5. Early Defaults (Denial if determined to be reason for business failure)

    • Missing or unsupported verification of required equity injection (includes verification of source in some cases)

    • Missing or unsupported documentation of verification of borrower financial information with IRS when financial information was relied on in lender’s credit analysis

  6. SBA Loan Eligibility (Denial)

    • Ineligible franchise

    • Ineligible loan purpose

    • Ineligible loan recipient (loan to an associate of lender)