What happens when an SBA guarantee loan goes into default?

When I was a Professional Business Consultant with the Missouri SBDC program, I worked hard with a client to obtain an SBA guaranteed loan that eventually went into default. I was very disappointed, as was the bank President. During our conversation, he explained to me the process of working with the SBA to make good on the guarantee. It was the first time I had a glimpse into that part of the process from the banker's perspective.

To better understand that process, here is a 'flowchart' of the process from Ethan Smith, Partner at Starfield & Smith, P.C. and provided by the Coleman SBA Daily Lender website.

http://www.colemanpublishing.com/public/GuarantyPurchaseProcessFlow.jpg

When I was the Regional Director of the UC Merced CA-SBDC, I arranged for a tour of the Commercial Loan Service Center in Fresno graciously provided by Mr. Joel Stiner the Director of the center. He runs a great operation there and explained the metrics and the incredible volume of loans that goes through there with a dedicated, relatively small number of staff. He also showed me the hugh file area where all of the inevitable paperwork trails each and every loan made. It was a very impressive operation, and Mr. Stiner's cheerful enthusiam for the center and the people that support it was contagious.