Pursuant to SOP 50 10 7 (click here) effective on August 1, 2023, the U.S. Small Business Administration (“SBA”) implemented a new system to determine 7(a) and 504 loan eligibility and avoid potential risk of fraud through the use of “Compliance Check Codes”. This system is activated based on criteria entered within E-Tran loan origination and alerts lenders with Compliance Check Codes that will be issued at time of submission. This new system supports lenders with timely assurance that the businesses applying for loans at their financial institutions are eligible for an SBA loan.
Should SBA detect any compliance issues, the system will produce a Compliance Check Code that lenders will either be able to clear on their own after pre-check, or by working in partnership with SBA by providing additional documentation. If a code is not issued, the loan continues through normal processing.
Lenders have two options on how to use the fraud and eligibility Compliance Check Code system:
- Pre-check: Lenders may request a pre-check ahead of formal submissions by submitting data on the primary business and the associated principals and clicking the button labeled “Pre-check Compliance” in E-Tran Origination. Lenders should only use this feature for potential SBA loans.
- Submission check: All loans will be checked upon formal E-Tran submission. This check is the formal determination, as conditions may have changed since pre-check was conducted.
Lenders may monitor the status of Compliance Check Codes by logging into E-Tran, navigating to the Origination section and selecting the link for Application Info for Compliance Codes identified. If a file is showing a status of “withdrawn”, the lender can select the details hyperlink within the Compliance Check Code to understand the reason for the withdrawn status. Prior to requesting clearance of Compliance Check Codes, the lender should carefully review the application data within E-Tran and confirm accuracy of entered fields (i.e. typos in any of the Tax ID’s, the Borrower Name, or any Principal/Guarantor). SBA is unable to clear alerts for applications with inaccurate data. Upon review of the application, if errors are identified, the lender should resubmit a new application with corrected data. If data was entered correctly, lenders may request clearance of Compliance Check Codes by following the specific set of instructions with supporting documentation as outlined in the reference chart on the SBA website, click here. After documents have been uploaded, the lender should send an email to the appropriate processing center to request clearance with the subject line “Compliance Code Resolution – Application XXX(enter application number)”:
- For 7(a) Loans: 7aComplianceCheck@SBA.gov
- For 504 Loans: 504Questions@SBA.gov
In cases when the Compliance Check Code cannot be cleared, the applicant is ineligible for an SBA loan.
If you have any questions about the SBA Compliance Check Codes, or any other SBA lending matters, please contact us at SBAQuestions@JellumLaw.com.