SBA Disputes New York Times' Claims on Bank Participation
WASHINGTON -- With claims of a distortion of the facts, the Small Business Administration has once again criticized The New York Times for a recent article discussing the agency's operation.
The main thrust of the May 31 article, with the headline "Small Business Not as Usual," is that post-2004 loan fee increases and poor service due to budget and staffing cuts have caused borrowers to drop out of SBA's loan programs.
"This premise is flat-out wrong," the SBA said in a statement. "Due to the hard work of SBA district offices and Capital Access personnel, SBA loans have set new records in the last two years, both in number of loans made and total dollars lent. If The Times gave this fact proper weight it would have run a positive story under the headline, 'Despite Fee Increases, Staff and Budget Cuts, SBA Loans Set New Records.'"
The SBA said there are three main reasons for the smaller number of banks participating in SBA loan programs, "none of them related to fees." First, mergers have reduced the number of banks nationwide to half the number 30 years ago, according to the agency. Second, SBA made a "scoring" change after 2001. It used to count a bank operating in multiple states as a separate bank in each state. Now it is just one bank, nationwide. Third, due to its high default rate and fraud risk, SBA scrapped the "Low Doc" loan program, which was
widely used among small community banks.
According to The Times, "reduced staffing levels at the agency have had a profound effect on small business...the biggest area where staff cutbacks are hurting small business is in helping to gain access to $400 billion in federal contracting."
The SBA responded with, "The Times goes to great lengths to suggest that staff cuts are a recent phenomenon introduced by the current administration. In five separate paragraphs The Times refers to staff cuts since 2001. Nowhere does the article mention that SBA staffing has been trending down for the last 25 years. In fact, staff reductions during President George W. Bush's administration have been almost identical to those under President Bill Clinton."
SBA Administrator Steven Preston sat down with the publication for a June 7 article that addressed Congressional efforts to overhaul the agency and other matters. When asked about the Senate and House's proposals for reforming certain programs, Preston said the agency is not a fan on certain plans.
"I am not in favor of subsidizing our loan programs. I think we should be focusing on expanding those programs by making them more effective in reaching small business," Preston told the publication. "But frankly, for the amount of fees that they pay, I don't think that that's an inhibitor to our getting capital in their hands."
When asked about staffing levels, Preston said the agency is beginning to "hire a number of critical positions," especially in the guaranteed-lending operations, much of which is in the processing center, "where we need some people."
Preston also disputed previous claims that the SBA only helps about 1% of all small businesses. "Well, you know, our resource partner network touched 1.5 million people last year. So that's 1.5 million out of 25, so that's more than 1%--that's 6%. We made 100,000 small-business loans."