On March 11, 2026, SBA’s Office of the Inspector General (OIG) issued Report 26-07, SBA’s Screening of 7(a) Loan Applications Under its Risk Mitigation Framework Evaluation Report. The report is highly critical of the eligibility screening undertaken by SBA under the requirements set forth in SOP 50 10 7 (effective August 1, 2023 – November 14, 2023) and SOP 50 10 7.1 (effective November 15, 2023 – May 31, 2025). It specifically cites as problematic the eligibility determinations made on all loans approved by SBA and disbursed during the period August 1, 2023, through December 31, 2024.
NAGGL is aware that the issuance of this report is causing lenders to be concerned that SBA may deny liability on loans where the agency failed to identify an issue(s) that should have caused the loan to be found ineligible. It is our understanding that SBA does not intend to pursue that course of action. We believe that, as to the issue of eligibility only, a denial of a guaranty purchase would be pursued only if the lender knowingly submitted an ineligible loan application to SBA.
Background:
Effective August 1, 2023, pursuant to SOP 50 10 7, SBA assumed responsibility for making “the final determination as to the eligibility of the [loan] applicant” for all loans, including loans processed on both a delegated and nondelegated basis. The SOP also authorized lenders processing under delegated authority to “accept as true the information provided by the Applicant”, further stating “if the Applicant eligibility information and certification of same is determined to be invalid at any time over the loan life cycle, for 7(a), SBA will not use this as the basis to deny or repair the guaranty purchase request …” Effective November 15, 2023, with the issuance of SOP 50 10 7.1, SBA amended the eligibility process language to add the following: “However, in all cases, SBA Lenders must not submit an application that the SBA Lender knows is not eligible, regardless of the Applicant’s certification.” The OIG report acknowledges the requirements that were in place through the period of its review. And here we would note that, during the period that these requirements were in place, NAGGL raised serious concerns about the efficacy of the SBA eligibility review process numerous times.
SBA maintained responsibility for conducting loan eligibility determinations until May 31, 2025, when SOP 50 10 8 returned this responsibility to delegated lenders, subject to SBA’s continuing risk mitigation review as part of the E-Tran submission process. NAGGL strongly supported this, and other changes made in version 8 of the SOP that we believe restored greater integrity to the 7(a) program.
Based on its review of a sample of the nearly 10,000 loans originated during the review period that initially had error codes, the OIC concluded that “there [was] limited assurance that borrowers met eligibility requirements for the 73,302 loans, totaling about $32 billion …” made during the period. Therefore, the OIG recommended that SBA flag the entire group of loans so that if guaranty purchases were requested, SBA could “assess whether borrowers met all eligibility requirements and seek remedy for all loans for all loans deemed ineligible”. SBA concurred with this recommendation, stating: “SBA will flag 73,302 loans in the Centralized Loan Chron System (CLSC) for review at the time of guaranty purchase”. But as to the second part of the OIG recommendation – that SBA seek remedy for all loans deemed ineligible – SBA indicated that it would pursue recovery “where appropriate and legally justified”. [Emphasis added.]
To recap, SOPs 50 10 7 and 50 10 7.1 make it clear that SBA was responsible for all eligibility determinations made during the cited period unless the lender knowingly submitted an ineligible loan application to SBA, and the OIG report acknowledges that responsibility. Therefore, the logical conclusion is that, absent a lender’s knowing submission of an ineligible application, a denial of liability could not be “legally justified”.
Please review the OIG report in its entirety for additional information regarding the OIG methodology and findings. NAGGL will be staying in close contact with SBA’s Office of Capital Access (OCA) and with the OIG on this important issue and will share any additional information that we receive. In the meantime, please send your questions or comments to NAGGL via the Technical Q&A hub.
