SBA Urged To Establish Better Loan Monitoring Policies
BY Matt Quinn
July 14, 2004 -- The Small Business Administration now has at its disposal a loan monitoring system that can help it oversee a portfolio of $45 billion in loans. Now it needs to lay out exactly how it is going to use it, says Senator Olympia Snowe, chair of the Senate Committee on Small Business and Entrepreneurship.
In 2003, the SBA awarded a contract to Dun & Bradstreet to provide the agency with a loan monitoring service to help it assess and manage risk associated with its borrowers and lenders. The General Accounting Office recently finished a review of the service at Senator Snowe's request.
The GAO in its report stated that the service is on par with those used by private sector lenders, but that the SBA does not have policies in place to use it to fulfill the agency's needs. Snowe is now pushing the SBA to develop those policies.
"It is now essential that the SBA design methods to apply the data this system provides," said Snowe. "I urge the SBA to make these efforts a priority so that we can either avoid losses entirely or minimize the impact of poorly performing loans before they cost the federal government and the taxpayer money."
From 1998 to 2001, the SBA attempted to improve its monitoring by independently developing its own system at a cost of nearly $10 million. In its report, the GAO concluded that this effort failed in part because the agency did not plan properly.
Senator Snowe has been at the forefront of the effort to streamline the SBA. Additionally, she led the charge to restore funding to the agency's most popular loan program, the 7(a) program, when it ran out of money in January.
MATT QUINN contributes to the Wall Street Journal's corporate finance blog. He has also written extensively about banking and corporate finance for publications including Inc., American Banker, and Financial Week. He lives in Brooklyn, New York.