With expansion of disaster loan programs, businesses hurt by extreme weather conditions have started to receive funds in form of disaster loan support. But at the same time it is found that the agency is not collecting back its dues for the millions of dollars that it makes to disaster torn organizations. So, it is double benefit for businesses that are ravaged by natural storms.
Small Business Administration did an audit in which it found that taxpayers owed $171 million because of the disaster loans made to small businesses. Temporary help goes out to businesses in the form of low-interest loans. But if the paid sum of money is not repaid or re-collected by SBA then it is a big loss for the agency.
Disaster loans are guaranteed by SBA agency to areas that are declared affected by natural calamities. So, businesses finding loans in these areas must agree to pay back the amount in due course of time. But the blunder that the agency has done is it did not adhere to its collection rules and thus millions of dollars are left in limbo.
The inspection team of SBA came up with its report just before the agency proposed to expand its disaster loan program to companies and nonprofits operating in 1,430 counties of US spread across 32 states. But, SBA insists that its rules do not make it mandatory for the agency to report about delinquent borrowers to Treasury. In case someone fails then the borrower can work it out with the agency to either liquidate their property or pay wages in return. It is only in worst cases when nothing is paid back, then SBA gives Treasury the authority to do the collection.
This article was submitted by Raj Tulshan, Director of Business Development of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to info@biz2credit.com