A new study claims that many of the loans given out by the Small Business Administration in the last few years have gone to luxury industries and subsidiaries of large corporations, instead of typical main street businesses.
According to a report released on Monday by Open the Books, a group that catalogs government spending, SBA awarded 34,677 loans valued at $1 million or more between 2007 and 2013, worth a little more than $67 billion together. (RELATED: Loans for Risky Small Businesses Reduces Growth)
About 20 percent of that total (just over $13.5 billion) went to companies that are not normally thought of as "small businesses," including country clubs, Rolex and Lamborghini dealers, Napa Valley wineries, and even affiliates of Fortune 100 companies.
Adam Andrzejewski, the report’s author and founder of Open the Books, notes that the SBA’s motto is, "The SBA helps Americans start, build, and grow businesses," but says supporters of the agency "will be hard pressed to justify many of the examples cited in our report." (RELATED: ‘Pawn Stars’ Host: Government, Obamacare Hurting Small Business [VIDEO])
For instance, SBA loaned $760 million to retailers of luxury goods, including $21 million to exclusive Rolex jewelers, $37 million to other high-end jewelers, $3.5 million to Lamborghini dealers, and $91 million to beauty spas. Another $393 million went to restaurants, some of which are "millionaire fast food franchisees."
In addition, more than $4 billion in loans "flowed to business serving the Wealthy Lifestyle," such as high-end vacation destinations and "luxury pet resorts." Notably, some of the top recipients of SBA loans for the vacation/recreation industry were also among America’s wealthiest communities, including Beverly Hills, Napa, and Park City, Utah.
Perhaps the most startling finding, though, is that from 2006 to 2012, more than $250 million in SBA loans "went to ten Fortune 100 companies and their affiliates"—Chevron/Texaco, Ford, General Motors, Exxon, Marathon, Sears, State Farm, Allstate, SuperValu, and American Express. (RELATED: Ex-Im Plays ‘Fast and Loose’ with Small Business Claims)
The single biggest recipient was Chevron/Texaco, which received $109.5 million to expand its network of retail dealers. "How is it," Andrzejewski asks, "that the affiliated business financially qualifies for Chevron licensing, but is so under-capitalized that it still qualifies for government loans?"
"Contractors to Wal-Mart, the world’s largest retailer, received $12.76 million" worth of SBA loans, as well. Although the contractors are technically independent of Wal-Mart, Andrzejewski points out that "Wal-Mart is the net beneficiary of lower contractor costs because of the taxpayer subsidized guarantees."