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115483 1 (1981-06-09)

handle is hein.gao/gaobacxtw0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 COMMUNFTY AND ECONOMIC DEVELOPMENT DIVISION June 9, 1981 Mr. Edwin T. Holloway Acting Associate Administrator for Financial Assistance 115483 Small Business Administration Dear Mr. Holloway: As you are aware, the President in his revised fiscal year 1982 budget request has proposed to eliminate the Displaced Business Loan Program. Given this proposed action, tcgether with competing demands for our staff resources, we are termin- ating our review of this program. However, we want to bring to your attention certain problems that we noted regarding the loan servicing function. The Small Business Administration (SBA) is authorized by section 7(b)(3) of the Small Business Act, as amended, to make loans to small businesses suffering substantial economic in- jury caused by construction projects supported in whole or in part by Federal, State, or local government entities having eminent domain authority. Displaced business loans (DBLs) are made to assist businesses to continue in operation at existing locations or to re-establish the business elsewhere. In performing this review, we identified several problems pertaining to loan servicing associated with 31 loans adminis- tered by SBA district offices located in Boston, Massachusetts; Atlanta, Georgia; and Chicago, Illinois. These 31 loans all had a history of delinquency and were selected because we as- sumed that problem loans would receive the most intensive ser- vicing. We recognize that we reviewed servicing for a rather limited number of loans. However, we believe that the extent of servicing deficiencies for these sample loans may indicate that problems we have identified in previous reports 1/ still exist. These servicing inadequacies include: (1) nonreceipt of borrowers' financial statements, (2) infrequent field visits, 1/The Small Business Administration Needs To Improve Its 7(a) Loan Program (GGD-76-24; Feb. 23, 1976). Most Borrowers Of Economic Opportunity Loans Have Not Succeeded In Business (CED-81-3; Dec. 8, 1980).

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