The SBA has played an important role in the national response to the pandemic. The agency – along with the rest of the country – is adjusting to a new reality where COVID-19 is expected to have a significant financial impact on many businesses now and well into the future. In response, the SBA has updated its underwriting guidelines to reflect new COVID-19 criteria.
SBA Standard Operating Procedures (SOPs) already require that lenders analyze each 7(a) loan application in a commercially reasonable manner, consistent with prudent lending standards. The SOPs also provide that cash flow is primary source of loan repayment, and not collateral.
“Prudent underwriting” during the COVID-19 emergency means that 7(a) loans should be analyzed with consideration for COVID-19’s impact on a business’s current and future operations, cash flow and repayment ability.
Here is a summary of the 10 new COVID-19 considerations outlined for SBA 7(a) loans. Please refer to the SBA procedural notice for full guidance. (LendXP clients can always contact our SBA lending team with questions.)
SBA 7(a) loans have been a trusted and highly valuable source of small business financing since the 1950s. The program continues to evolve, and the updated COVID-19 underwriting criteria are the latest change to help lenders meet the needs of this current period in time. 7(a) loans are perhaps more valuable in 2020 than any time in recent history, and continued adaptations of the program will ensure it remains relevant far into the future.
Contact the LendXP SBA lending team when you need an expert resource for financing your small business customers. Learn more about our proven, efficient processes for lenders.