- Key insight: The spotlight on lenders' credit quality may signal a broader concern about the health of government-guaranteed loan portfolios.
- What's at Stake: Sen. Joni Ernst's letter suggests that the Small Business Administration could begin sanctioning lenders, similar to recent actions by the U.S. Department of Agriculture.
- Expert quote: "SBA must determine whether taxpayers were exposed to unnecessary risk and ensure bad actors are not exploiting federally guaranteed loan programs." -- Sen. Joni Ernst, R-Iowa
The chair of the U.S. Senate committee that oversees the Small Business Administration is urging the agency to examine the performance of 10 lenders the Department of Agriculture
In a letter Thursday, Iowa Republican Sen. Joni Ernst, who chairs the Small Business and Entrepreneurship Committee, called on SBA Administrator Kelly Loeffler to "urgently review" loans originated by the institutions whose approved-lender status was permanently revoked by the USDA last month.
Ernst asked Loeffler to "consider similar corrective action to prevent irresponsible lenders from taking advantage of SBA's 7(a) loan program."
Both the SBA's 7(a) program and the USDA's OneRD program guarantee loans made by private-sector lenders to businesses. The 7(a) program is considerably larger, however. The SBA reported $123.4 billion in active regular 7(a) loans as of Sept. 30, 2025. Meanwhile, OneRD's total portfolio recently topped $12 billion.
Eight of the 10 lenders that USDA expelled are active 7(a) participants, Ernst wrote.
Many people in the government-guaranteed lending sector were stunned when the USDA announced the lender revocations on May 12.
The USDA's action and now Ernst's letter signal "a broader shift toward accountability, portfolio quality across all government-backed lending," said Dave Bohrman, co-founder and vice president of marketing at Tax Guard, a servicer of both SBA and USDA loans.
"There's been signals in this direction for a while now," Bohrman told American Banker. He pointed to controversy over fraudulent Paycheck Protection Program loans and Loeffler's
During Loeffler's tenure as administrator, the SBA has raised fees and tightened 7(a) lending rules after experiencing a spike in defaults and delinquencies.
A USDA spokesperson said the 10 revocations were "an unprecedented action" taken after the department identified "significant findings of noncompliance with the regulatory requirements of the OneRD program."
In her letter, Ernst singled out one lender, Community Bank & Trust – West Georgia, which
A longtime USDA lender, Community Bank and Trust had moved to
"When a small community bank becomes a top SBA lender one year and fails the next, something went seriously wrong," Ernst told American Banker in an emailed statement. "SBA must determine whether taxpayers were exposed to unnecessary risk and ensure bad actors are not exploiting federally guaranteed loan programs."
Several lenders on the USDA revocation list question their inclusion and are indicating that they will appeal the agency's decision.
A spokesman for the $9.9 billion-asset Byline Bancorp in Chicago said the company was "proud of the positive impact we've made in partnership with the USDA in rural communities for nearly two decades." The Byline spokesman added that the bank's involvement in the OneRD program had been "limited during the past several years."
"We take our responsibilities within all government-guaranteed lending programs seriously and maintain strong internal controls and compliance practices," the Byline spokesperson told American Banker in an email. "In response to the recent USDA press release, we are actively engaging with agency leadership."
BOM Bank President and CEO Ken Hale, who represents the fifth generation of his family to run the $1.5 billion-asset, Natchitoches, Louisiana-based institution, said it had an unblemished 18-year record of USDA lending up until February, when it learned the USDA was reviewing its portfolio.
"We had never, in all those years, received a single derogatory comment from USDA," Hale told American Banker. "They never asked to review our loans, never gave us pushback on servicing. I mean, nothing for all these years."
Hale added that he and his USDA lending team — all former Department of Agriculture officials — felt they were lending effectively under the program and that problem loans and defaults were relatively few.
That viewpoint was seemingly supported by a series of awards the bank received from the USDA as Louisiana's rural lender of the year.
Moreover, the data cited in the February 2026 USDA email notifying BOM Bank that it was under review revealed the bank's annualized loss rate over its 18-year involvement in USDA lending to be 0.25%, Hale said.
The revocation left him stunned. "I was the most shocked I've been in my entire life," Hale said.
BOM has hired an attorney and appealed USDA's action. Hale said he's hopeful the effort will succeed. It may be some time before the hard feelings subside, though.
"This has really bothered me on a personal and professional level," Hale said.
