WASHINGTON — The Government Accountability Office has just released a report that takes a hard look at the Small Business Administration's 7(a) loan program's performance measures, any constraints and what types of small businesses are being approved for the loans.
GAO found a higher percentage of 7(a) loans went to minority-owned and start-up businesses compared with conventional loans from 2001 to 2004. Twenty-eight percent of 7(a) loans compared with an estimated 9% of conventional loans were approved for minority-owned small businesses. Twenty-five percent with to start-ups while the overall lending market served almost exclusively established firms at 95%, according to the report.
The agency's 7(a) loans tended to be larger, were more likely to have variable rates, longer maturities and higher interest rates than conventional loans to small businesses, the GAO found.
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The GAO has recommended that SBA expand its current work on evaluating the program's performance measures including defaults, prepayment rates, and the number of loans in good standing, to better report how small businesses fare after they participate in the 7(a) program.
More than 350 credit unions participate in the SBA's 7(a) loan program.
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