{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-specific-due-diligence-must-a-lender-perform-to-evaluate-the-borrower-s-proposed-mana","api_url":"https://dealroom.so/api/public/questions/what-specific-due-diligence-must-a-lender-perform-to-evaluate-the-borrower-s-proposed-mana","question":"What specific due diligence must a lender perform to evaluate the borrower's proposed management team's experience for a startup?","topic":"Prudent Lending Standards","audience":"lender","bot_mode":"lender","short_answer":"Lenders must obtain resumes for key management, verify relevant industry experience, assess their roles and responsibilities, and analyze the team's collective ability to execute the business plan effectively.","rule":"For startups, management experience is critical for successful operation and repayment. Prudent lenders go beyond just accepting resumes; they verify experience, assess the management team's collective skills, and ensure they have the operational, financial, and industry-specific expertise necessary to succeed, especially where the borrower has limited direct experience.","example":"A lender evaluates a $750,000 7(a) loan for a new restaurant. The borrower has marketing experience but no restaurant management. The lender requires resumes for the proposed head chef and general manager, verifies their 10+ years of restaurant experience, reviews their roles in the business plan, and documents the collective expertise to run the restaurant.","what_lenders_check":"Lenders must demonstrate that the management team, as a whole, possesses the necessary skills. Overlooking gaps in critical management experience for a startup can be seen as imprudent lending, increasing the risk of default and potential guaranty repair.","required_facts":["Startup business","Key management resumes","Relevant industry experience","Collective team capability"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"What constitutes 'prudent lending standards' regarding a borrower's industry experience for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/what-constitutes-prudent-lending-standards-regarding-a-borrower-s-industry-experience-for-"},{"question":"What specific conditions allow a lender to approve a 7(a) loan for a business relying heavily on government contracts?","url":"https://dealroom.so/for-lenders/questions/what-specific-conditions-allow-a-lender-to-approve-a-7-a-loan-for-a-business-relying-heavi"},{"question":"How does a lender document adherence to prudent lending standards in the underwriting credit memo?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-document-adherence-to-prudent-lending-standards-in-the-underwriting-cred"},{"question":"How does the credit memo for a 7(a) loan demonstrate adherence to prudent lending standards?","url":"https://dealroom.so/for-lenders/questions/how-does-the-credit-memo-for-a-7-a-loan-demonstrate-adherence-to-prudent-lending-standards"},{"question":"How does the SBA assess a lender's adherence to \"prudent lending standards\" during 7(a) loan reviews?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-assess-a-lender-s-adherence-to-prudent-lending-standards-during-7-a-loan-"},{"question":"In what specific areas does the SBA typically scrutinize a lender's \"prudent lending standards\" during an oversight review?","url":"https://dealroom.so/for-lenders/questions/in-what-specific-areas-does-the-sba-typically-scrutinize-a-lender-s-prudent-lending-standa"}],"related_terms":[{"term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"},{"term":"Operational due diligence","url":"https://dealroom.so/glossary/operational-due-diligence"},{"term":"Legal due diligence","url":"https://dealroom.so/glossary/legal-due-diligence"},{"term":"Inadequate due diligence","url":"https://dealroom.so/glossary/inadequate-due-diligence"},{"term":"Heightened due diligence","url":"https://dealroom.so/glossary/heightened-due-diligence"},{"term":"Enhanced Due Diligence","url":"https://dealroom.so/glossary/enhanced-due-diligence"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/what-specific-due-diligence-must-a-lender-perform-to-evaluate-the-borrower-s-proposed-mana","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}