Recent U.S. Department of Justice enforcement and qui tam suits demonstrate that Small Business Administration lenders face increasing risk of liability under the False Claims Act. This article provides an overview of SBA programs, describes traps for potential liability, and highlights steps that SBA lenders can take to reduce FCA exposure.

Small Business Administration Loans -

The SBA does not directly lend money, but instead relies on third parties to provide loans that the agency guarantees. The SBA has a large loan portfolio, totaling over $118 billion in fiscal year 2015. General small business loans (Section 7(a) loans) make up the largest portion of the portfolio, with $23.6 billion gross loans approved last fiscal year. Real estate and equipment loans (CDC/504 loans) make up another $4.3 billion of annual gross loans approved. The SBA also offers microloans and disaster loans, and helps small businesses get access to government contracting opportunities through programs such as HUBZone, which provides assistance to qualified small businesses located in historically underutilized business zones.

Originally published in Law360 on August 13, 2016.