SBA Loan Program: Spend Now or Later

According to “ ‘Deficiencies’ Seen in Review of SBA-Guaranteed Loans,” [Feb. 16], the Office of Inspector General in its review of the SBA’s lending program found that in half of the loans examined, lenders did not follow the procedures set down by the SBA.

The IG found that 11% of the loans it examined--estimated to represent more than $400 million--contained errors and omissions, most of which occurred in the up-front credit screening and loan disbursements, where the SBA had little or no oversight over the lenders.

The IG audit amounts to a wake-up call.

The Preferred Lender Program is authorizing SBA-backed loans without prior SBA credit approval. You may save money by having the lenders approve SBA-backed loans, but it will “pale” in comparison to your write-off in default loans.

The losses have been declining in the last few years, but I believe it was due to the strong economy and not because the loans have been justified. I hate to think of the increase in defaults should the economy take a downturn.

Spend the money now and increase the staff so that poor loans will surface and can be eliminated from the SBA’s guaranteed portfolio.

DAN ROSS

Beverly Hills