Patriot Express: SBA Should Measure The System and Enhance Eligibility Controls

Patriot Express: SBA Should Measure The System and Enhance Eligibility Controls

Just Just Exactly What GAO Found

Patriot Express loans respected at about $703 million have actually defaulted at an increased price than loans beneath the Small Business Administration’s (SBA) other associated loan guarantee programs, and losings for Patriot Express have actually surpassed its earnings. Except for loans authorized in 2007, Patriot Express loans have actually defaulted at a greater price than loans made under SBA’s primary 7(a) program or loans made under SBA’s structured loan guarantee system (SBA Express). The Patriot Express system’s general standard price ended up being considerably greater for smaller loans, specifically for loans below $25,000 (20 %). Furthermore, one loan provider accounted for a lot more than 64 per cent of those smaller loans and skilled higher standard prices compared to the staying loan providers. From 2007 through 2012, losses within the Patriot Express program surpassed income by $31.1 million ( perhaps perhaps maybe not accounting for future charge profits or funds recovered from loans in standard)

Chosen borrowers and lenders, in addition to veteran solution companies GAO came across with, reported different advantages and challenges towards the Patriot Express system, but SBA has yet to gauge the end result with this pilot system on qualified users of the community that is military. Borrowers and loan providers stated that some great things about this system had been them to take advantage of the streamlined application process that it helped veterans expand their businesses and allowed. Some challenges they identified had been awareness that is low of system and which loan providers took part in this system. This season, SBA stretched the Patriot Express pilot through 2013 to permit time for you assess the aftereffect of this system. Up to now, SBA has not yet examined the scheduled system or founded an idea of just just exactly what it promises to do to assess it. SBA officials told us which they concentrated their resources on evaluating 7(a) loans because there are lots of a lot more of them and, consequently, they pose a higher danger to SBA than Patriot Express loans. As well as Patriot Express, SBA has formerly initiated other pilot programs it hasn’t examined. GAO has discovered that system assessment provides a company the chance to refine system design, assess if system operations have actually led to the specified advantages, and, for pilots, see whether to help make the programs permanent. Without performing evaluations of pilot programs, SBA does not have the info needed seriously to assess their performance and their impacts on eligible participants and decide whether to expand these programs, including Patriot Express.

SBA’s interior controls over loan providers might not offer reasonable assurance that Patriot Express loans are only built to qualified people in the army community and therefore only these users take advantage of loan profits. SBA depends on loan providers to confirm and report debtor eligibility in the period of loan approval. Certainly one of SBA’s controls over loan providers’ conformity with eligibility demands is made from sampling loan files during exams regarding the 7(a program that is) but few Patriot Express loans are evaluated. Patriot Express is supposed to help just qualified people of the community that is military SBA officials told us they anticipate borrowers to keep eligibility following the loan is disbursed. But SBA have not developed procedures for loan providers to supply assurance that is reasonable borrowers keep this eligibility. Federal interior control criteria and GAO’s fraud-prevention framework suggest that ongoing monitoring is a vital element of a very good interior control system. Without improved internal settings, particularly with regards to track of borrowers, SBA does not have assurance that Patriot Express loans are serving just borrowers that are eligible.

Why GAO Did This Research

In June 2007, SBA established the Patriot Express Pilot Loan Program within its 7(a) loan guarantee system to offer small enterprises owned and operated by veterans along with other qualified users of the army community access to money. Through Patriot Express, SBA guarantees individual small company loans that loan providers originate. GAO ended up being expected to judge this system. This report examines (1) trends when you look at the amount and gratification of Patriot Express and associated SBA loan programs; (2) the end result associated with the system on qualified people in the community that is military and (3) SBA interior settings to ensure just eligible borrowers participate. GAO analyzed information on performance and expenses of Patriot Express along with other similar SBA loan programs from 2007 through 2012; interviewed chosen borrowers, loan providers, and veteran solution companies; and evaluated SBA interior control assistance with debtor eligibility.