Patriot Express: SBA Should Evaluate the System and Enhance Eligibility Controls

Patriot Express: SBA Should Evaluate the System and Enhance Eligibility Controls

Just Exactly What GAO Found

Patriot Express loans respected at about $703 million have actually defaulted at a greater 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 an increased rate 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 default price had been dramatically greater for smaller loans, specifically for loans below $25,000 (20 %). Also, one loan provider accounted for a lot more than 64 per cent of the smaller loans and skilled higher standard prices compared to the lenders that are remaining. From 2007 through 2012, losings when you look at the Patriot Express system surpassed earnings by $31.1 million ( perhaps perhaps not accounting for future cost profits or funds recovered from loans in default).

Chosen borrowers and loan providers, in addition to veteran solution companies GAO came across with, reported various advantages and challenges to your Patriot Express system, but SBA has yet to gauge the end result with this pilot system on eligible people in the community that is military. Borrowers and loan providers stated that some great things about this program were so it helped veterans expand their companies and permitted them to use the streamlined application procedure. Some challenges they identified had been low understanding of the system and which lenders took part in this program. This year, SBA stretched the Patriot Express pilot through 2013 to permit time for you to assess the effectation of this system. Up to now, SBA has not yet assessed the scheduled system or founded an idea of just just exactly what it promises to do in order to assess it. SBA officials told us them and, therefore, they pose a greater risk to SBA than Patriot Express loans that they focused their resources on evaluating 7(a) loans because there are many more of. As well as Patriot Express, SBA has formerly initiated other pilot programs so it have not examined. GAO has unearthed that a scheduled system assessment offers a company the chance to refine system design, assess if system operations have led to the required advantages, and, for pilots, see whether to really make the programs permanent. Without performing evaluations of pilot programs, SBA does not have the info had a need to assess their performance and their impacts on eligible participants and determine whether or not to extend these programs, including Patriot Express.

SBA’s interior settings over loan providers might not offer assurance that is reasonable Patriot Express loans are just designed to qualified people in the armed forces community and that only these people reap the benefits of loan profits. SBA hinges on lenders to validate and report debtor eligibility in the time of loan approval. One of SBA’s settings over loan providers’ compliance with eligibility demands is made from sampling loan files during exams associated with the 7(a) program, but few Patriot Express loans are evaluated. Patriot Express is supposed to aid just qualified people in the armed forces community and SBA officials told us which they anticipate borrowers to keep up eligibility following the loan is disbursed. But SBA have not developed procedures for loan providers to present reasonable assurance that borrowers keep this eligibility. Federal interior control criteria and GAO’s fraud-prevention framework suggest that ongoing monitoring is definitely an essential element of a powerful interior control system. Without improved interior settings, especially with regards to track of borrowers, SBA does not have assurance that Patriot Express loans are serving just qualified borrowers.

Why GAO Did This Research

In June 2007, SBA established the Patriot Express Pilot Loan Program within its 7(a) loan guarantee system to present small enterprises owned and operated by veterans along with other eligible people in the armed forces community access to money. Through Patriot Express, SBA guarantees individual small company loans that loan providers originate. GAO had been expected to guage this program. This report examines (1) styles into the amount and gratification of Patriot Express and associated SBA loan programs; (2) the consequence regarding the system on qualified people of the community that is military and (3) SBA internal controls to make sure that just eligible borrowers participate. GAO analyzed information on performance and costs of Patriot Express as well as other comparable SBA loan programs from 2007 through 2012; interviewed chosen borrowers, loan providers, and service that is veteran; and evaluated SBA interior control help with borrower eligibility.