Small Business

This report provides information on loans made to small businesses under section 7(a) of the Small Business Act. This program, run by the Small Business Administration, was created to provide financial help to eligible small businesses that cannot borrow at reasonable terms from conventional lenders without government assistance. GAO discusses (1) the number and dollar amounts of direct and guaranteed loans in the portfolio by loan program, as well as demographic information on loan recipients, including their race, gender, and geographic location; (2) the performance of the portfolio as shown by the amount of outstanding principal that is current, in default, or in liquidation; and (3) 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.