SBA Loss Report

The Small Business Administration (SBA) Loss Report provides information to management on the Agency’s loss experience for its various loan programs. The Loss Report focuses on the actual losses as a percentage of disbursements made to date on SBA loan programs. The report allows the user, at a glance, to review historical and current year data for each of the Agency’s primary lending programs. The report combines the results of loans made since FY 1992 that are subject to the requirements of Federal Credit Reform accounting (credit reform loans) with the results of loans made prior to FY 1992 (pre-credit reform loans) that are not subject to this accounting requirement.

The concept of charge-off deserves some explanation. The SBA has extensive debt servicing and collection procedures using all reasonable efforts to assure maximum recovery of loans prior to charge-off. These procedures include the use of modern collection methods and the acquisition and sale of collateral through liquidation processes. Only after the Agency has exhausted these collection methods does SBA classify a loan as charged-off. For guaranty loans, the loan must first be purchased from the participating lender before this classification can be made. Also, charge-off does not preclude the Agency from further collection remedies if it is determined that these efforts would result in additional collections to the Agency. It should be noted that charged-off loan amounts are principal only, and do not include accrued interest.

This Loss Report includes additional data on the losses and gains from the sale of collateral (real estate and other property) acquired due to borrower loan defaults. This property is known as “ColPur.” In addition, it includes other “costs of doing business” to service and liquidate defaulted loans that have been added to the loss of principal and interest since 1992 to give a complete picture of the component costs of SBA lending programs. We have not included, however, the losses on the financing of the sale of acquired collateral due to the lack of historical information.

The SBA uses loss data as part of its process to compute the subsidy rate for its loan programs. However, the loss rates developed in this Loss Report are not directly comparable with the SBA’s subsidy rates. This is due to the other factors included in the subsidy rate computation such as loan fees, the present value of cashflows and interest rate considerations. As a result, the loss rates developed in this report are not easily compared to the subsidy rates on SBA’s loan programs.

This report is prepared using the SBA’s official records including general ledger and loan accounting system data.