Financial Condition of SBA's Business Loan Portfolio Is Improving
RCED-92-49: Published: Dec 3, 1991. Publicly Released: Jan 7, 1992.
Pursuant to a congressional request, GAO reviewed the Small Business Administration's (SBA) portfolio of its 7(a) Loan Program, which provides financial assistance to eligible small businesses that cannot borrow at reasonable terms from conventional lenders without government assistance, focusing on: (1) the number and dollar amounts of direct and guaranteed loans in the portfolio; (2) demographic information on loan recipients; (3) the portfolio's performance; and (4) statistics on overall losses to the direct and guaranteed portions of the portfolio, as well as losses incurred by each loan program.
GAO found that: (1) as of September 30, 1991, the 7(a) loan portfolio included almost 90,000 loans valued at over $10.3 billion; (2) although 89 percent of the 90,000 loans were SBA-guaranteed, SBA made the remaining 11 percent of the loans directly; (3) the demographic characteristics of the small business owners represented in the 7(a) portfolio were generally similar to the demographic characteristics of small business owners nationwide; (4) the percentage of the portfolio that was either in default or liquidation has declined during the past 10 years; (5) at the end of fiscal year 1981, 19 percent of the SBA 7(a) portfolio was in default or liquidation; (6) in 1983, the default or liquidation rate peaked at 28 percent, but then declined steadily to 16 percent in 1990; (7) in the past 10 years, 7(a) loan portfolio losses have generally decreased; and (8) although in the early 1980s, direct loan losses and guaranteed loan losses increased to as high as 28 percent and 19 percent, respectively, SBA data indicate that since the mid-1980s, both direct and guaranteed loan losses have remained below 10 percent.