We’re into the 4th Quarter so about now you’re conducting annual budget discussions and strategic planning for the next fiscal year. At the same time, you should be scheduling internal loan reviews in preparation for yearend reporting because it’s critical for your leadership to know the quality of your loan portfolio.
Why are loan reviews important? We hear that question time and again. In working with clients across the country, we often see loan reviews getting stuck in lenders’ “Pending” files as other priorities pile on top. Yet loan reviews are critical. Here’s why:
With OIG’s increased monitoring of SBA’s repurchases of guarantees, the last thing you want is to have examiners come in and find a concern that should have been addressed during your annual loan review. That’s why it’s important to proactively address any issues SBA identifies as the top reasons for repair/denial of the guaranty and any concerns identified in OIG’s report findings.
We know there’s a lot involved. Loan reviews are a big job: All SBA loans and commercial term loans secured by real estate require an annual review to make sure all necessary information is obtained and reviewed to provide timely identification of problem assets and to establish adequate Allowance for Loan and Lease Losses. Required information includes updated financials, personal and business tax returns, rents rolls, collateral evaluations, insurance and site visits.
Dig into that ‘Pending’ file. Reap the benefits. An annual review of your portfolio will give you added peace of mind. Among other benefits, you’ll be better able to:
- maintain handle on your policies procedures to ensure they comply with the latest SBA requirements;
- identify weaknesses in your processes and procedures that may require additional training;
- gain time to correct deficiencies instead of finding out at repurchase that you have deficiencies that can lead to repair or denial of the guarantee.
It’s possible that your assigned loan reviewers are busy handling other priorities including new loan proposals. As always, our JRB Team is here to perform your loan reviews. We’ll conduct a thorough loan portfolio review, check your tickler reports to ensure accuracy, and in some cases perform site visits.
So don’t let those loans pile up until they spill over!