Due to the restrictions placed on businesses during the COVID-19 pandemic, many lenders across the United States slowed, or temporarily halted, the origination of new U.S. Small Business Administration (“SBA”) 7(a) loans. As lenders begin ramping up 7(a) loan production, lenders are reminded of the importance of properly documenting their files.

SBA performs 7(a) risk-based reviews using composite risk methodology and a scoring guide, “PARRiS.” The components of a PARRiS review include: Portfolio Performance; Asset Management; Regulatory Compliance; Risk Management; and Special Items. During a PARRiS review, SBA’s representatives have access to the lender’s files to review and inspect all records and documents related to SBA-guaranteed loans.

As part of a PARRiS review, SBA representatives examine SBA-required forms, such as the Fee Disclosure and Compensation Agreement (SBA Form 159), Settlement Sheet (SBA Form 1050), and Borrower Information Form (SBA Form 1919). On many of the SBA-required forms, such as those above-mentioned, there is only one signature line for a borrower to sign. When a borrower’s governance documents require multiple signatures, or when a loan is made to co-borrowers, a common practice of lenders has been to attachthe signatures as an addendum/exhibit to the form, without obtaining a signature on the actual SBA-required form. However, recently, lenders have been scrutinized for such practice during PARRiS reviews. While the SBA has not issued formal guidance, the Office of Credit Risk Management (“OCRM”) has advised lenders to obtain at least one borrower signature on the SBA-required form, and to attach the remaining required signature(s) for the borrower, or co-borrower, as an attached addendum. Lenders are encouraged to follow the informal guidance of OCRM, which may help lenders avoid citations in upcoming PARRiS reviews.