Receiving a repair or a denial on an SBA guaranty purchase request can be daunting to even the most seasoned SBA lender.  Unfortunately, the current economic climate has placed lenders of all types and sizes face-to-face with the SBA's National Guaranty Purchase Center ("NGPC"), and many are weathering this process for the first time.  Thankfully, however, repairs or denials need not wreck havoc on your portfolio; with knowledge and persistence, many of these requests can be turned into full purchases.
 
        Perhaps the biggest mistake that lenders make when faced with a repair or denial is not responding at all.  Often times, a loan specialist at the NGPC will review the initial package and recommend to the lender that they "withdraw" the purchase request.  Many lenders receive these letters and simply "give up," presuming that the guaranty will never be paid.  However, such a suggestion by the loan specialist does not mean that a purchase request will be denied.  In reality, only major deficiencies warrant repairs or denials.  Such letters therefore should be viewed as a opportunity to respond to the SBA's particular areas of concern and a chance to gather additional documentation to support your request.  The NGPC reviews lenders' responses very carefully, and in many instances, requests which were previously recommended for repair or denial are paid. 
 
        The good news is that deficiencies do not necessarily mean that the guaranty should not be paid.  Often times, a deficiency may be entirely unrelated to the reason a loan defaults.  If you find that you are missing a required document, it is best to be forthcoming with the deficiency.  If it appears that a major deficiency is related to the reason for default, admitting the deficiency and suggesting a possible repair may go a long way to securing at least partial payment of the guaranty.  Being forthcoming will not only speed up the review of your request, but will also demonstrate to the SBA that you are acting in good faith.  Hopefully your encounters with the NGPC will be infrequent, at best, and demonstrating your honesty and trustworthiness on each package will help to build critical relationships and inspire confidence in your future submissions. 
 
        Of course, familiarizing yourself with the requirements for closing, servicing, and liquidating loans is the best protection against many common reasons for repair or denial.  Defaults will happen, but with a solid understanding of the SBA's requirements, the guaranty purchase request process will seem much less daunting.  If you have any questions about the SBA program or the guaranty purchase process, please feel free to contact Starfield & Smith, P.C. at 215-542-7070.  Our attorneys have amassed decades of experience with SBA loans and would be happy to work with your institution to overcome recommended repairs or denials.