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Upgrade Loan w/o Analyzing Updated Financials?

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Question: 
If a U.S. Small Business Administration loan is paying as agreed for over 6 months and their credit has improved could you upgrade a loan without obtaining then analyzing updated financials? SBA loans do not have a mechanism in place as conventional lending to be able to require the customer to provide annual financial information to banks.
Answer: 

This is not the definitive answer, but I would say more information is needed. Why was the loan classified, and have the conditions that caused that been mitigated? If not, the loan is not ready to be upgraded. Say some unencumbered assets were sold to make payments, but cash flow is what is preventing timely payments otherwise. And with the sale of some assets cash flow is actually expected to worsen as manufacturing will now decline. In this hypothetical the problem isn't resolved, but could be worsened.

First published on 07/22/2018

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