The SBA's Justification IOU

9 Pages Posted: 6 Apr 2007

See all articles by Veronique de Rugy

Veronique de Rugy

George Mason University - Mercatus Center


Supporters of the Small Business Administration's loan program argue that it is necessary because traditional sources of credit do not provide loans for the purposes, in the amounts, and with the terms required by small business borrowers. However, a large economic literature dismisses this argument and demonstrates no failure of the private sector to allocate loans efficiently. Absent such a clearly identified problem, the SBA's activities are simply a wasteful, politically motivated subsidy to this sector.

Keywords: The SBA's Justification IOU, Small Business Administration, loan programs, credit, SBA loan, credit scoring, disadvantaged groups, SBA borrowers, government aid

JEL Classification: E49, E51, E52, E59, E62, G28, H81

Suggested Citation

de Rugy, Veronique, The SBA's Justification IOU. Regulation, Vol. 30, No. 1, pp. 26-34, Spring 2007, Available at SSRN:

Veronique De Rugy (Contact Author)

George Mason University - Mercatus Center ( email )

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