Watchdog Group Blasts SBA Lending

AS the economy slowly cranks itself out of recession, the very small businesses and entrepreneurs who provide the greatest potential for expansion and job growth are the same ones least able to secure taxpayer-supported loans.

This is the finding of a new study of the US Small Business Administration's lending practices by the California Reinvestment Committee, a group of nonprofit organizations and public agencies. Not unlike earlier studies of mortgage lending, where minorities and low-income communities were found to be consistently redlined, small-business loans also discriminate against Latino and African-American applicants, the study says. Only one-thirteenth of all loans were made to these two groups, far below their representation in the community.

Calling the SBA's guaranteed lending ``the most important public credit resource,'' the study points out that although SBA lending in California increased by more than one-half between 1980 and 1992, loans directed at businesses in low-income areas shrunk four-fifths, from $91 million to $16.7 million, over the same period. And the smallest loans - under $50,000 - were the hardest to secure. The study recommends:

* That the SBA simplify the process for financial institutions to make loans under $50,000.

* That the SBA target minority-owned businesses and low-income communities for increased lending.

* That the SBA make sure that participating lenders abide by the Community Reinvestment Act, a law that ensures that banks lend to all parts of the community.