For the Good of Illinois

OpenTheBooks Snapshot Oversight Report – Truth In Lending, The U.S. Small Business Administration’s $24.2 Billion Bad Loan Portfolio

September 7, 2016 10:35 AM
OpenTheBooks Snapshot Oversight Report
TRUTH IN LENDING:

The Small Business Administration's $24.2 Billion Bad Loan Portfolio

 
Playing the 'Big Six Wheel' in Las Vegas has better odds than large tranches of the Small Business Administration's loan portfolio ever paying off. 
 
2016-09-07_16-33-15
OPENTHEBOOKS SNAPSHOT OVERSIGHT REPORT - TRUTH IN LENDING: 
THE SBA's $24.2 BILLION BAD LOAN PORTFOLIO
 
The motto of the Small Business Administration (SBA) is as all-American as apple pie: "The SBA helps Americans start, build and grow businesses." In January of 2012, President Barack Obama elevated the Administrator of the Small Business Administration to a cabinet level position. But proponents of the SBA will be hard pressed to defend some very poor decisions: 160,000 lending transactions defaulted since 2000 with charge-offs on $18 billion in failed lending. In some years, thirty-percent of all SBA lending was charged-off against SBA reserves (taxpayers).

The SBA administration has a goal of ‘zero-subsidy’ – a new ‘self-funded’ lending operation. But, in the latest figures available from the Congressional Research Services, the SBA took nearly $1 Billion in Congressional appropriation.
 
 forbes_logo
PICKING THE LOSERS OVER THE WINNERS 
AT THE U.S. SMALL BUSINESS ADMINISTRATION
Forbes | September 7, 2016
 
It's like apple pie and baseball. The U.S. Small Business Administration finances the American Dream... or does it?

Here's a sample of our findings:
  • In some years, such as 2007, one of every three SBA loans was "charged-off" against taxpayers. 
  • The $24.2 billion bad loan portfolio at the SBA (2000-2015) is larger than the annual budgets of 26 states.
  • 1.4 million workers were dislocated when they lost their jobs after an SBA backed company went belly-up.
SBA_InfoGraphic_image
 
Click here to see an interactive map of the $24.2 billion in failed SBA loans since 2000. Who did the SBA fund in your ZIP code that "charged-off" their loan?  
 
 

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Richard Rosenthal
New York, NY
7/27/2017 11:53 AM
 

  Two sides to the coin. I agree that the SBA underwriting standards are much more lenient than free market lending. That results in higher rate of default. However, SBA lending stimulates and facilitates small business owners with a plan. This creates employment (notwithstanding jobs lost when businesses fail), and supports commercial real estate values and local economic activity (all good!) 51% owner-occupancy requirements prevent investor abuse. While the article seems to decry the use of SBA funds by wealthy business owners, SBA loans always require a Personal Guaranty --- so wealthy business owners help the risk pool.