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RCED-93-112R 1 (1993-03-08)

handle is hein.gao/gaobackhd0001 and id is 1 raw text is: GAO United States General Accounting Office Washington, D.C. 20548 Resources, Community, and Economic Development Division B-252064 March 8,1993 148901 The Honorable Ron Wyden Chairman, Subcommittee on Regulation, Business Opportunities, and Energy Committee on Small Business House of Representatives Dear Mr. Chairman: The Small Business Administration's (SBA) New England Lending and Recovery Project (Project) is a pilot program to provide financial assistance to small businesses in the New England area which have loans with banks that have failed. The Project is an outgrowth of SBA's efforts to determine how its general business loan program--the 7(a) loan program--could be used to help small businesses affected by the record number of bank failures. Initiated by SBA in New Hampshire in December 1991, the Project uses SBA's 7(a) loan program to provide federal loan guarantees' to lenders who are willing to refinance small business loans acquired by the Federal Deposit Insurance Corporation (FDIC) when it W took over the failed banks. Because the FDIC is not in the business of making new-loans or refinancing existing loans, SBA initiated the Project because it was concerned that (1) many of the FDIC-held small business loans were creditworthy and (2) FDIC's efforts to liquidate such loans by demanding Q 0total payment from the small businesses could force many 4) firms out of business. In SBA's view, finding new lenders to refinance these loans with federal guarantees would help to keep the small businesses in operation and provide them 1SBA provides financing to small businesses primarily by 0 .guaranteeing to pay part of the loss on a loan made to a PC S small business by a bank or other financial institution. The 7(a) loan program, authorized by section 7(a) of the Small Business Act, is SBA's largest financial assistance program and can provide a guarantee of up to 90 percent of the loan amount. GAOIRCED-93-112R, SBA's Refinancing of Loans in New England 556601

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