SBA Loans to Luxury Businesses Creating Negative Sentiment around the Program

by / Friday, 05 December 2014 / Published in Small Business Loans

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Revelations as to who is getting funded by the SBA are raising critical voices around the organization’s activities. 

What do luxury car dealerships, exclusive resorts, and boutique cosmetic surgery clinics all have in common? According to an article contributed to Forbes by Adam Andrzejewski, they are all among businesses aimed at serving the needs of the very wealthy that are recipients of subsidized SBA loans, supported by taxpayer money. The SBA does not directly provide business loans, rather it guarantees the loans against tax payer money, with the intent of providing subsidized rates for small businesses that need capital to grow, but are wary of taking a loan from a private bank carrying a rate that they can’t afford, or simply can’t get approved for a typical loan without a government guarantee provided by the SBA. However, in the cases that are pointed out in the Forbes article, luxury businesses that could most likely get a loan from a wide number of private financial institutions are being provided with artificially subsidized loans backed by tax payer money, keeping their rates low as they apply for financing often exceeding $1 million in government backed capital.

Questions are being raised surrounding the effectiveness of SBA methodology. 

For small business owners struggling to obtain capital at all, let alone from traditional banking networks that have been reticent to underwrite all but the largest loans for the most highly qualified businesses, the revelation that money they are paying in taxes is helping fund established luxury businesses is making many question the real purpose of the SBA, which claims to be a good faith branch of the government aimed at helping independent businesses succeed. With public hue and cry over the process of obtaining SBA disaster loans being another point where the SBA has been brought to the attention of the media of late, the ostensible mission of the SBA compared to its actual dealings seems to deserve more critical scrutiny that may have previously been afforded to it by the public, in particular other business owners who are not receiving their backed loans.

Photo Credit to Lawrence Yeh on Flickr

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