Competitive and Special Competitive Opportunity Gap Analysis of the 7(a) and 504 Programs

COMPETITIVE AND SPECIAL COMPETITIVE OPPORTUNITY GAP ANALYSIS OF THE 7(A) AND 504 PROGRAMS Final Report January 2008 Prepared for: U.S. Small Business Administration Prepared by: The Urban Institute 2100 M Street, NW ● Washington, DC 20037 Competitive and Special Competitive Opportunity Gap Analysis of the 7(a) and 504 Programs Final Report January 2008 Prepared By: Kenneth Temkin Brett Theodos with Kerstin Gentsch The Urban Institute Metropolitan Housing and Communities Policy Center 2100 M Street, NW Washington, DC 20037 Submitted To: U.S. Small Business Administration 409 Third Street, SW Washington, DC 20416 Contract No. GS23F8198H UI No. 07112-020-01 The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and governance problems facing the nation. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Gap Analysis of the 7(a) and 504 Programs 1 CONTENTS INTRODUCTION .......................................................................................................................... 2 KEY FINDINGS ............................................................................................................................ 2 PROGRAM BACKGROUND ........................................................................................................ 3 METHODOLOGY ......................................................................................................................... 5 Data Sources ....................................................................................................................5 Comparative Analysis ....................................................................................................... 6 Market Penetration Analysis ............................................................................................. 7 FINDINGS ..................................................................................................................................... 8 Comparative Analysis ....................................................................................................... 8 Market Penetration Analysis ........................................................................................... 16 CONCLUSION ............................................................................................................................ 21 REFERENCES ........................................................................................................................... 22 Gap Analysis of the 7(a) and 504 Programs 2 FIGURES AND TABLES Table 1: Overview of SBA 7(a) and 504 Programs ....................................................................... 5 Table 2: Comparison by Industry of Firms that Received 7(a) and 504 SBA Loans to Conventional Small Business Loans Made between 2001 and 2004 .................................. 10 Table 3: Comparison by Census Division of Firms that Received 7(a) and 504 SBA Loans and Conventional Small Business Loans Made between 2001 and 2004 ........................... 10 Table 4: Comparison of Characteristics of Firms that Received 7(a) and 504 SBA Loans and Conventional Small Business Loans Made between 2001 and 2004 .................................. 13 Table 5: Comparison of Mean Loan Amounts, by Borrower Characteristic, for 7(a) and 504 Loans to Conventional Small Business Loans: 2001–2004................................................. 14 Table 6: Comparison of Characteristics of Firms that Received 7(a) and 504 SBA Loans to Firms that Received Conventional Small Business Loans Made between 2001 and 2004.............................................................................................................................. 15 Table 7: Comparison of Loan Characteristics for Firms that Received a 7(a) or 504 SBA Loans to Conventional Small Business Loans Made between 2001 and 2004 ................... 15 Table 8: Comparison of Firms that Received a 7(a) or 504 SBA Loan to all Firms that Received a Small Business Loan and Firms that Faced a Capital Opportunity Gap between 2001 and 2004 ...................................................................................................... 17 Table 9: Ratio of Number of Firms, by Industry that Received a 7(a) or 504 SBA Loan to Firms that Faced a Capital Opportunity Gap between 2001 and 2004................................ 18 Table 10: Ratio of Number of Firms, by Census Division that Received either a 7(a) or 504 SBA Loan to Firms that Faced a Capital Opportunity Gap between 2001 and 2004 .......... 19 Table 11: Ratio of Number of Firms, by Rural/Urban that Received either a 7(a) or 504 SBA Loan to Firms that Faced a Capital Opportunity Gap between 2001 and 2004................... 20 Table 12: Ratio of Number of Firms, by Borrower Type that Received a 7(a) or 50