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SBA Loans Aid Business--and the Economy

April 07, 1985

The anti-SBA article by The Times ("SBA: Helping Hand for Small Firms or Welfare for Weak?", March 24) was as misguided as the Reagan Administration's attempt to eliminate the agency. The article concentrated on the problems associated with loans funded directly by the Small Business Administration. Since these loans represent only 5% of the SBA-related commercial loans funded, the emphasis was misguided. The Times should have devoted more attention to the guaranteed-loan program, which accounts for the other 95%.

As an officer of a firm that makes SBA-guaranteed loans in California, I can state that we do not make loans to "bail out" businesses that are in trouble. We lend to creditworthy companies that do not qualify for conventional financing. These borrowers may not qualify because they are looking to start a new business; the history of their business is too short or a non-recurring event (i.e. fire, labor dispute) has distorted their earnings. In addition, many commercial lenders will not consider loans for less than $500,000, whereas SBA-guaranteed lenders fund loans as small as $50,000.

Our borrowers are viable, young companies. As such, our losses during the past five years of economic turbulence have been no worse than the average of all commercial lenders during this period.

The Reagan Administration and The Times did not do their homework concerning the benefits derived under the guaranteed-loan program. Our borrowers create jobs, thereby reducing the expense of unemployment and welfare, while increasing our tax rolls. These companies borrow to increase profitability, which increases taxes paid to both the state and federal government.

I am confident the elimination of the guaranteed-loan program would increase, rather than reduce, the national deficit.


Executive Vice President

Government Funding

Los Angeles

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