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Small Business Administration: Additional Measures Needed to Assess 7(a) Loan Program's Performance

GAO-07-769 Published: Jul 13, 2007. Publicly Released: Aug 13, 2007.
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Highlights

The Small Business Administration's (SBA) 7(a) program, initially established in 1953, provides loan guarantees to small businesses that cannot obtain credit in the conventional lending market. In fiscal year 2006, the program assisted more than 80,000 businesses with loan guarantees of nearly $14 billion. This report examines (1) the program's purpose, based on its legislative history, and performance measures; (2) evidence of constraints, if any, affecting small businesses' access to credit; (3) the types of small businesses served by 7(a) and conventional loans; and (4) differences in SBA's estimates and reestimates of the program's credit subsidy costs. GAO analyzed agency documents, studies on the small business lending market, and data on the characteristics of small business borrowers and loans.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Small Business Administration To better ensure that the 7(a) program is meeting its mission responsibility of helping small firms succeed through guaranteed loans, the SBA Administrator should complete and expand SBA's current work on evaluating the program's performance measures. As part of this effort, at a minimum SBA should further utilize the loan performance information it already collects, including but not limited to defaults, prepayments, and number of loans in good standing, to better report how small businesses fare after they participate in the 7(a) program.
Closed – Not Implemented
Although the Small Business Administration agreed with the recommendation and started discussions with a contractor to address it in 2007, the agency had not implemented the recommendation as of August 2011. Agency officials said that the need for expedited implementation of new programs and incentives mandated by the Recovery Act and Jobs Act had required the full use of existing loan program resources. They said that the agency expected to allocate resources to renewing its effort to identify and evaluate performance measures for the 7(a) program that will not be prohibitively costly to the agency or create undue reporting burdens on its lending partners.

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Topics

Cost analysisCreditGovernment guaranteed loansLending institutionsLoan interest ratesMinority businessesPerformance measuresProgram evaluationSmall businessSmall business assistanceSmall business loansSubsidiesProgram goals or objectives