According to the U.S. Small Business Administration (“SBA”) Standard Operating Procedure 50 10 6, Standard Operating Procedure 50 57 2, and in accordance with the Debt Collection Improvement Act of 1996, lenders are required to report to the appropriate credit reporting agencies whenever they extend credit via an SBA loan. This practice provides other creditors notice of debts owed by the small business and the borrower’s total existing debt. Since regulating authorities do not require banks to report non-SBA commercial credit to credit reporting agencies, many financial institutions need to implement a process for reporting to credit reporting agencies as they build and improve their SBA lending departments. While omitting the credit reporting practice from SBA lending operations likely does not place the loan at risk for SBA to honor its guaranty, it places the financial institution at risk for a “finding” on an SBA loan audit.

Who does the lender include in the report?
Lenders are required to report borrowers of SBA-guaranteed loans to the commercial credit reporting agencies. Reporting of guarantors is not required.

Where does the lender submit a report?
Lenders are required to submit the report to at least one commercial credit bureau reporting agency. Appendix 3 of the Guide to the Federal Credit Bureau Program (“GFCBP”) lists the designated credit reporting agencies for commercial accounts.

When does a lender provide information to the commercial credit agencies?
Lenders are required to report commercial account information to the appropriate credit reporting agencies whenever they extend credit via an SBA guaranteed loan. Lenders should continue to report information concerning the extension of credit, including servicing, liquidation, and charge-off activities throughout the life cycle of the loan. The GFCBP requires reporting on a quarterly basis, but states “more frequent updates may be provided as necessary to maintain the integrity and accuracy of the information being reported.”

What information is a lender required to supply to the credit bureau?
Lenders are required to provide information necessary to establish the identity of the borrower which includes:

  • Name, address, and taxpayer identification number
  • The amount, status, and history of the debt
  • The agency or program under which the debt arose

Each credit reporting agency will have their own data element requirements on credit bureau reporting, in addition to or in place of the above items. Lenders should contact the individual credit reporting agency for the applicable requirements.

Charged off loan should be reported to the appropriate credit bureaus, and if there has been a substantial change in the condition or amount of the delinquent debt after it has been reported, the new information should be promptly reported to each credit bureau and database where the original disclosure was made. Lender’s requirements to report to the appropriate credit bureaus until the final Wrap-Up Report is submitted to SBA.