SBA’s Guaranty Purchases for Paycheck Protection Program Loans

The Office of Inspector General (OIG) is issuing this Inspection report to assess the Small Business Administration’s (SBA) guaranty purchase process for Paycheck Protection Program (PPP) loans. The Coronavirus Aid, Relief, and Economic Security (CARES) Act established the PPP to provide guaranteed SBA loans for eligible businesses, individuals, and nonprofits adversely impacted by the Coronavirus Disease 2019 pandemic. We assessed whether SBA reported and referred charged-off PPP loans to commercial credit reporting agencies and the U.S. Department of Treasury in accordance with applicable regulations, policies, and procedures; and effectively oversaw lender communication, servicing, and debt collection activities to ensure lenders met their responsibilities.

SBA can forgive PPP loans if borrowers use loan proceeds as required. If the loan is not forgiven and the loan payment becomes more than 60 days past due, the lender should request a guaranty purchase, which is SBA’s purchase of the guaranteed portion of the loan. SBA simultaneously purchases and charges off delinquent loans when the borrower is 60 days or more past due on a loan payment, permanently closed, bankrupt or deceased. Charge-off status means SBA removes the outstanding balance of the loan from its accounting records.

SBA did not always report and refer charged-off PPP loans to commercial credit reporting agencies and Treasury, as required. Specifically, SBA did not report 14,739 loans totaling $945.3 million to commercial credit reporting agencies and did not refer 7,550 loans totaling $2.2 billion to Treasury. Further, SBA did not effectively oversee lender communication, servicing, and debt collection activities to ensure lenders met their required responsibilities.

We made seven recommendations to improve SBA’s reporting and referring of charged-off PPP loans to commercial credit reporting agencies and Treasury; and to ensure lenders comply with SBA’s requirements for their communication, servicing, and debt collection activities.