Senate panel chair urges SBA to review USDA-removed lenders over taxpayer risk

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SBA lenders, taxpayer risk review

Highlights

Senate Committee Chair Joni Ernst urged the SBA to investigate lenders removed from USDA's OneRD loan guarantee program for potential risks to taxpayer funds.
Eight of the 10 lenders recently expelled from the USDA's OneRD program still participate in the SBA's 7(a) loan program, raising concerns about cross-program compliance.
Ernst's call for review aligns with recent SBA actions to tighten underwriting standards and oversight to prevent waste, fraud, and abuse in federal loan guarantees.

Congressional push for lender review

As reported by the Senate Committee on Small Business and Entrepreneurship, Chair Joni Ernst is calling on the U.S. Small Business Administration to examine lenders recently removed from the USDA's OneRD loan guarantee program and decide whether further corrective action is needed.

In a letter to SBA Administrator Kelly Loeffler, Ernst points to the failure of Community Bank & Trust, West Georgia, which participated in both USDA and SBA lending programs. She says the bank expanded an SBA- and USDA-guaranteed lending operation through nonbank affiliates and later came under Federal Reserve scrutiny.

Ernst says the SBA should review loans originated by institutions whose approved-lender status was permanently revoked by USDA because of noncompliance findings. She argues that when a lender is removed from one federal guarantee program over serious compliance concerns, the agency should determine whether similar risks are present in another.

Implications for the SBA 7(a) program

Eight of the 10 lenders recently removed from USDA's OneRD program currently participate in the SBA's 7(a) loan program, which supports small businesses through federally guaranteed loans made by private-sector lenders. That overlap raises the prospect that weaknesses identified in one program could affect a major financing channel for small businesses nationwide.

Ernst frames the review as part of a broader effort to curb waste, fraud, and abuse in federal programs while protecting taxpayer funds. Her request also follows recent SBA moves to tighten underwriting standards and strengthen oversight of federally guaranteed lending programs.

Our earlier article on the SBA’s proposed 8(a) Business Development Program reforms explained how the agency plans to require all individually owned applicants to provide verifiable, fact-based evidence of social disadvantage, ending automatic eligibility tied to racial minority status. We also noted that the changes would leave tribal and other entity-owned participants’ rules intact while reflecting a broader SBA push to tighten oversight, reduce fraud and abuse, and align eligibility with objective documentation standards.

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