To the Editor:
Your article on SBA lending ["
You did quote Superior Financial CEO Tim Jochner as an example of lender dissatisfaction with SBA. Mr. Jochner is hardly the typical SBA lender and his complaints should not be portrayed as representative. Just last week, SBA senior staff met with Mr. Jochner to express concerns over the company's activities in Community Express, its misrepresentation of facts, and its public release of confidential SBA portfolio information. He has pushed aggressively for months for SBA to expand the Community Express pilot program beyond its current statutory cap.
The agency has refused to ask Congress for this change due to concerns about predatory and exploitative lending in the program, its unusually high default rate (more than double the SBA average), and the concentrated usage — more than 80% of its volume — among just two lenders, one of which is Superior Financial. SBA has referred these concerns to its office of inspector general and has requested an audit of the program.
SBA recently restructured Community Express and will assess its expansion once we see these changes working and review any findings of the Office of Inspector General.
Considering SBA lending more broadly, in every year from 2002 to 2007 the agency set loan volume records. Even with the current credit crunch, 2008 was SBA's fifth-largest year ever for number of loans and the fourth-largest for dollar volume, dwarfing the previous administration's best year by 30% in number of loans and 42% in dollars. That's a neglected program?
Under the current administration, SBA has centralized its loan process from 68 sites to six, necessary to standardize procedures, upgrade technology and cut turnaround times. Since 2006, 7(a) loan processing times have fallen by more than 50%. In 2007, SBA took 279 days on average to pay lenders their guaranties; today it's less than 25 days for correct loan packages.
The current administration also eliminated the loan program's $120 million annual subsidy and funded the program through user fees that are similar to fees charged in the program going back 20 years. This approach freed the program from volume limitations that caused program shutdowns in 2002 and 2004. Today, lenders don't worry about the program shutting down late in the year.
Other recent steps SBA has taken to improve lending processes and products:
- Simplified the program rule book down from over 1,000 pages to 400 pages and made it searchable online.
- Created the Small and Rural Lender Advantage program, a streamlined loan product aimed at helping community and rural lenders.
- Upgraded the E-Tran system to allow lending partners to service loans electronically.
- Met with over 200 lenders around the country as part of a concerted outreach program.
Moved rapidly last month to change regulations to help address credit market challenges, introducing Libor base rates and Weighted Average Coupon pools, major helps to SBA lenders hit by the credit crunch.These changes are having an effect. Over the last year SBA has seen a net increase in active lenders, specifically community banks.
In recent years SBA loan volume has increased substantially, systems have been modernized and streamlined, and lenders in the program have increased. Unfortunately, your negative analysis did not include these significant facts and did not present a balanced report.Eric R. Zarnikow
Associate administrator
Office of Capital Access
Small Business Administration
