Small Business 7(a) Lending Oversight Reform Act of 2018

Small Business 7(a) Lending Oversight Reform Act of 2018

(Sec. 3) This bill amends the Small Business Act to provide statutory authority for the Small Business Administration (SBA) Office of Credit Risk Management (OCRM) and the SBA Lender Oversight Committee.

The bill modifies the OCRM's supervisory duties and the committee's review of OCRM formal enforcement action recommendations. The bill requires OCRM to supervise:

• lenders making loans under the SBA's guaranteed loan program, commonly known as 7(a) lenders;
• lending partners or SBA intermediary participants in a lending program of the SBA's Office of Capital Access;
• small business lending companies; and
• nonfederally regulated lenders.

The OCRM may assess a monetary penalty against lenders that violate requirements.

(Sec. 4) Under current law, a borrower is ineligible for an SBA guaranteed loan if the applicant may obtain credit elsewhere. The term "credit elsewhere" is redefined to include the availability of credit on reasonable terms and conditions to the loan applicant from nongovernment sources, considering factors associated with conventional lending practices, including:

• the business industry in which the applicant operates;
• whether the applicant is an enterprise that has been in operation for two years or less;
• the adequacy of the collateral available to secure the requested loan;
• the loan term necessary to reasonably assure the ability of the loan applicant to repay the debt from the business's actual or projected cash flow; and
• any other factors relating to the particular credit application, as documented in detail by the lender, that cannot be overcome except through obtaining a federal loan guarantee under prudent lending standards.

Such term is inapplicable to certain SBA guaranteed loans to repair, rehabilitate, or replace property damaged or destroyed by or resulting from natural or other disasters.

(Sec. 5) The SBA may, with congressional approval, increase the cap for general business loans if the cap will be reached within that fiscal year. An increase may only be implemented once each fiscal year.

(Sec. 6) SBA waivers of regulations or requirements in the Standard Operating Procedures Manual or Policy Notice related to an Office of Capital Access's program or function must be in writing and maintained in an index.

(Sec 7) The bill repeals a requirement for the SBA to report certain information to the President and Congress, including the number and amount of loan defaults.