The SOP: Your Rule Book for SBA Lending

Every lender who utilizes U.S. Small Business Administration (SBA) loan programs to extend credit is likely familiar with the SBA’s standard operation procedure (SOP).  In this article we answer what is the SOP and why all lenders must follow it.

What is the SOP?

The SOP is the SBA’s rule book.  It outlines critical requirements that lenders must follow to both obtain and maintain their SBA guarantees. The SOP not only details complex regulations but is the all-around “how-to” manual for navigating SBA loan programs.

All lenders (yes, all lenders) who offer SBA loans play by a standardized set of rules found in the SOP.  Beyond defining loan eligibility, the SOP includes parameters for loan terms, rates and so on. Shared regulations even the playing field for new and existing SBA lenders. Furthermore, as lenders extend credit to their borrowers, it’s paramount the SBA provides the code by which credit may be extended.

Why is following the SOP essential?

Lenders use the credit enhancement provided by an SBA guarantee to extend loans to finance clients who may not be eligible otherwise.  The most common reason a lender requests an SBA guarantee is because a loan borrower lacks adequate collateral.  Unfortunately, good loans go bad.  When that happens, it literally pays to follow the SOP because it ensures your guarantee will not be jeopardized.

SOP insights (procedurally speaking)

Memorizing the SOP is not an overly realistic use of your time.  (But if you happen to have it memorized, let us know if you’re interested in joining our team).  The SOP is more than 400 pages and is updated periodically. Loans are always governed by the version of the SOP that was in effect when the loan was originally approved.  Like any legal code or canon, it’s a lot to know and a lot to stay up on.  On account of the magnitude of information contained in each version of the SOP, lenders may, from time to time, interpret portions of it differently.  Also, the SBA may release additional updates, amendments or clarifications.  These policy and information updates are used to dispel ambiguities and to enforce streamlined program adherence among its users.

Tip:  One need not read the entire SOP to find an answer to a question.  The SOP includes a Table of Contents (totaling five pages alone).  If you’re in search of information contained in the SOP, use the key stroke “Ctrl + F” to activate the find feature.  Test this by searching the word “prudent” (it appears 41 times in the current version of the SOP).

How partnering with a prudent LSP ensures adherence to the SOP

It has been said: She with the gold, makes the rules.  The same is true of the SBA. They have the gold (and the loan guarantees) and their rules are written in the SOP.

With Prudent Lender’s partnership, you can spend more time making more gold for your clients and minimize the resources you spend learning intricate SBA rules—or risk getting it wrong! We’re here to do the heavy-lifting.  Among Prudent Lender’s full suite of offerings is expert assistance of SBA-guarantee products. We enable your institution to stay compliant, so your word is as good as gold and your SBA-guarantees are there when you need them.

Not a partner yet? Get in touch today to learn how Prudent Lenders will expertly obtain and maintain your SBA guarantees according to standard operating procedures…and best practices.