Several hundred thousand dollars in loans have gone uncollected by the small-business lending arm of the Boston Redevelopment Authority (BRA), with more than half of its loans seriously delinquent, according to an internal audit obtained by The Boston Globe through a public records request.

The audit of taxpayer-funded nonprofit, the Boston Local Development Corp., comes after a larger audit of the BRA that found the authority did not collect millions of dollars in fees and lease payments from developers.

Boston Local Development has written off nearly $700,000 in bad loans since 2011. In one example, checks collected from a borrower and totaling $235,000 were not cashed for six months, according to the audit, which covered the fiscal year that ended June 2013. The delinquent loans averaged more than $100,000 each.

The audit also found that 51% of the total amount borrowed has been delinquent for 90 days or longer, a rate roughly more then 50 times greater than that of banks, which average less than 1% on similar loans, according to the Federal Deposit Insurance Corp.

Boston Local Development was founded in 1979 to promote economic development by providing business loans, usually between $25,000 and $150,000. It has approved $14 million in loans since 1996 to 139 businesses and created 2,800 jobs, an average of 165 new jobs a year. The program currently has approximately $2 million available to lend through grants from local and federal agencies.

The loan program is a revolving fund, thus as money is paid back it is re-loaned to others. If it’s not paid back, then there’s less to lend unless the fund is replenished by taxpayers or other sources.

William Nickerson, chief financial manager at Boston Local Development, defended the agency’s collection policy. He said the agency exists to create jobs by helping businesses succeed, so he is willing to give more time to companies that have a chance at success. He noted that the recession hampered borrowers’ ability to repay and explains the high delinquency rate.

Nickerson said he has restructured or plans to restructure eight loans totaling nearly $1 million to get borrowers paying on time. He cited the example of HDM Systems Corp., a battery technology firm that received a $250,000 loan in 2008 at 5% interest. When the loan was due, Nickerson gave HDM an opportunity to secure new contracts. The company recently paid $10,000, in addition to more than $49,000 in principal and interest it already paid. It has agreed to make interest payments over the next year, according to a BRA spokeswoman.

Once the new contracts start generating revenue, the authority will review HDM’s finances with the goal of moving the company to principal and interest payments, officials said.

The administration of Boston Mayor Martin J. Walsh, meanwhile, is reviewing putting more money into Boston Local Development to expand the lending program. The plan is to reduce delinquencies by pairing small-business owners with services provided by the Department of Neighborhood Development, where entrepreneurs can get help building businesses.

Boston Local Development's highest profile case of loan delinquency involved the minority-owned Bay State Banner newspaper. In August 2009, Thomas M. Menino, the mayor at the time, urged the agency to approve loans to help the Banner avoid closing. The Banner did not repay the loans when they came due in November 2011 and a monthly interest-payment plan was established in January 2012. Another year, with just one payment made, passed before the Banner was declared in default. The Banner has made all interest payments since Feb. 1, according to the BRA.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.