Summary: Under its Preferred Lenders Program, the Small Business Administration (SBA) gives its best private lenders the authority to approve and service SBA-guaranteed loans. The goal is to improve service to small businesses without increasing SBA's involvement. Early indicators show that the program has had favorable results in terms of the number of preferred loans made, the efficiency with which these loans are processed, and the rate at which these loans fail. GAO notes, however, that most preferred loans have not reached the stage at which most loans typically fail, and the Office of Inspector General has found that some preferred lenders are not complying with SBA rules and regulations. Because SBA has not identified all loans with temporary lender identification numbers and its loan accounting system database cannot automatically link temporary and permanent identification numbers, SBA cannot quickly compile data on the amount of lending by and loan failures for individual lenders. SBA officials said that while they can obtain accurate failure rates by manually compiling each preferred and certified lender's guaranteed loan portfolio, they cannot do so for regular loans because of the high volume of regular loans. With the increasing volume of preferred loans, manual compilation will become a major chore.
