Certified lenders are banking institutions that qualify for inclusion in a streamlined lending program maintained by the Small Business Administration. Certified lenders are also institutions that have been heavily involved in regular SBA loan-guaranty processing and have met other criteria stipulated by the SBA. When a lender is approved as a SBA certified lender, its applications are given priority by the Small Business Administration. The lender receives a partial delegation of authority and is given a three-day turnaround by the SBA on the loan applications (they also have the option of using regular SBA loan processing). In the late 1990s, certified lenders accounted for nearly a third of all SBA business loan guarantees.
Lending institutions can become a part of the SBA's Certified Lender Program (CLP) in one of two ways: 1) It may make a request to an SBA field office for consideration for the program, or 2) An SBA field office may nominate the lender without prompting from the institution. SBA district directors approve and renew a lender's status as part of the CLP. Primary considerations in determining whether the lender will qualify include:
● Whether the applicant has the ability to process, close, service, and liquidate loans.
● Whether the applicant has a good performance history with the SBA (i.e., has it submitted complete and accurate loan guarantee application packages in the past?).
● Whether the applicant has an acceptable SBA purchase rate.
● Whether the applicant seems able to work amicably with the local SBA office.
If a lending institution makes an application for inclusion in the CLP, only to be turned down, it may make an appeal to the AA/FA, whose decision is final.
According to the Small Business Administration, the AA/FA may suspend or revoke CLP status upon written notice providing the reasons at least 10 business days prior to the effective date of the suspension or revocation. Lending institutions may lose their status for a variety of reasons, including poor loan performance record; failure to make the required number of loans; violations of applicable statutes, regulations, or published SBA policies.
Similar to certified lenders are preferred lenders. Banks that qualify as preferred lenders are among the best SBA lenders and enjoy full delegation of lending authority in exchange for a lower rate of guaranty. In other words, they do not have to run an SBA loan past the SBA before approving it. This lending authority has to be renewed every two years, and the lender's portfolio is examined by the SBA on an annual basis. Preferred lenders are also required to employ two SBA-trained loan officers. Preferred loans accounts for about ten percent of all SBA loans.
Buchanan, Doug. "SBA Fretting Over Adequacy of Credit to Small Companies." Business First-Columbus. September 17,1999.
Heath, Gibson. Doing Business with Banks: A Common Sense Guide for Small Business Borrowers. DBA/USA Press, 1991.
Jayaratne, Jith, and John Wolken. "How Important are Small Banks to Small Business Lending?" Journal of Banking and Finance. February 1999.