Vermont Watchdog: SBA loans support luxurious lifestyles, burden taxpayers Money50

March 16, 2015 04:40 AM



]By Bruce Parker | Vermont Watchdog

The Small Business Administration is the federal agency that helps "little guy" businesses get loans they couldn’t get through traditional lenders. Or so the story goes.

According to a 2014 federal oversight report from public research group American Transparency, taxpayer-backed SBA loans are popular with businesses serving "wealthy lifestyles."

The report, which analyzed SBA loans between 2007 and 2013, found that billions of dollars flowed to businesses that, in many cases, could obtain standard loans with standard interest rates. SBA loans offer advantageous low rates.

During that period, the SBA issued $67.23 billion in loans and guarantees to 34,677 entities.

Many of the loans, which ranged from $1 million to $5 million, went to luxury goods retailers, exclusive clubs, Fortune 100 companies, plastic surgery clinics and even private equity firms.

Found among the list of borrowers were Rolex and Lamborghini dealers, Napa Valley wineries, Sears and State Farm affiliates, Jackson Hole and Lake Tahoe resorts, and Levine Leichtman Capital Partners in Beverly Hills — not your typical mom-and-pop shops.

Not all big-dollar SBA loans went to serve the lifestyles of the rich and famous, and the ones that did weren’t necessarily unethical or illegal. The SBA’s definition of a "small business concern" is broad enough to allow for such apparent abuses of the SBA mission.

However, as taxpayers become aware of such lending in their states, they may wonder why they are on the hook for all these loans, should they go into default.

American Transparency’s government spending website,, allows anyone to see who’s getting SBA loans.

In Vermont, the list of million-dollar SBA loan recipients reveals a broad mix of businesses and industries.

Vermont SBA Loans 4 - Small Business Administration

The borrowers’ business missions range from charitable to exclusive.

Quechee Lakes Landowners Association operates The Quechee Club, a membership club that bills itself as "Vermont’s premier four-season destination." Queechee’s attractions include Lakeland and Highland championship golf courses, the Queechee ski area, polo fields and upscale dining.

CRL Solar, the developer of large, utility-scale solar farms in Barton and White River Junction, is owned by Essex Capital Partners, a Boxford, Massachusetts-based renewable energy developer. The firm’s subsidiary, Barton Solar, has produced one of the largest commercial solar installations in Vermont.

Essex Mansfield, the state’s top-dollar borrower, provides assisted living and memory care for seniors at Mansfield Place in Essex.

Vermont Creamery is an international-award-winning cheesemaker.

While these companies may technically fall within the SBA’s definition of a small business, they challenge the notion that the SBA exists to provide financial aid to entrepreneurs who can’t obtain traditional bank loans.

Adam Andrzejewski, the author of American Transparency’s oversight report, told Vermont Watchdog such lending practices should alert Congress to convene hearings about the SBA loan program.

"The mission of the SBA isn’t to provide taxpayer-subsidized banking to wealthy, large or established companies. It’s supposed to lend to mom-and-pop businesses on Main Street," Andrzejewski said.

"The millions of dollars lent to already-established businesses just amounts to a slush fund for the wealthy lifestyle."

Andrzejewski said the main problem with SBA loans is taxpayers are left picking up the tab whenever borrowers default.

According to loan data from the SBA, the agency has "charged off" over $27 billion in loans and guarantees since 2005. About $11 billion of that amount was charged off since 2010.

Moreover, because the SBA’s Fiscal Year 2014 loan portfolio stands at about $114 billion in outstanding loans, taxpayers could be opening their wallets to cover such defaults indefinitely.

As the national debt continues to spiral out of control, taxpayers fed up with government waste may call for an end to the SBA lending program.

Andrzejewski said the SBA’s failure to follow its own mission demands it.

"The purpose of the SBA isn’t to become a slush fund loan pool for established companies, private country clubs, the Fortune 100, or successful companies serving the wealthy lifestyle. Extreme lending of taxpayer dollars calls into question the entire small business lending program," he said.

Original Article, click here


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