If you’re administering Small Business Administration (SBA) 7(a) loans, you know all too well the strain it can place on your internal lending department. Tasked with meeting SBA loan program requirements, regulatory compliance, underwriting, servicing and selling the SBA loans, lenders often find themselves seeking outside assistance from a lender service provider (LSP). Serving as a strategic partner used by lenders, LSPs offer streamlined efficiencies, increased loan volume, dedicated SBA support, entrusted expertise, improved regulatory compliance and reduced burden on internal resources. 

With the requirement set by the SBA to exercise due diligence and prudent oversight of agents, such as LSPs, lenders must take the time to find the best fit provider. Doeren Mayhew’s SBA pros offer five helpful best practices when exploring a partnership with an LSP. 

1. Take the Time to Review LSP Agreements

Before signing off on an LSP agreement, lenders should review the written contract in-depth. While the SBA has developed a set of guidelines for LSP agreements, there is no universal templated contract.

2. Set Realistic Expectations

While selecting an LSP, it’s important to note that the lender must still be able to demonstrate, per the SBA, that they, not the LSP, have the day-to-day responsibility for evaluating, processing, closing, disbursing, servicing, liquidating and litigating their SBA portfolio. Be sure to discuss with the LSP all functions to be performed as an agent for the lender.

3. Product and Service Offerings

Gain a clear understanding of the LSP’s product and service offerings to borrowers relative to SBA loan program requirements.

4. Internal or Third-Party Reviews

Take the time to assess any available LSP internal or third-party reviews, such as IT audits, the results of independent SBA loan reviews, etc.

5. Recent or Ongoing Litigation

Inquire about any ongoing litigation involving the LSP. Note, there cannot be any litigation on the LSP’s behalf for loan collections. Additionally, ensure they are in good standing with the SBA and determine if there have been any previous corrective actions.

Support You Can Count On

Trying to find the right LSP partner can be a hard path to navigate. It’s important to take the time to gain a clear and accurate picture of what they provide and if they will keep you compliant with SBA requirements. Already have an LSP? Rely on Doeren Mayhew’s SBA loan compliance advisory pros to conduct an LSP oversight review to ensure SBA compliance and avoid any potential issues in your lender/LSP partnership.