DATE: Wednesday, June 11, 1997              TAG: 9706110001

SECTION: LOCAL                   PAGE: B10  EDITION: FINAL 

TYPE: Editorial

                                            LENGTH:   33 lines

$2.5 BILLION SBA ERROR CHECK MATH TWICE

You seldom see the words small and billion in the same sentence, but it turns out the Small Business Administration made a $2.5 billion error.

The federal agency didn't err in an estimate. It erred in calculating how much money is needed for reserves to cover bad loans. ``It's unbelievable,'' said Sen. Christopher Bond, R-Mo., ``that when you're dealing with tens of billions of dollars, that somebody can't do the math right.''

SBA loans help some 50,000 small companies a year. Small companies create most new jobs.

But thinking it would run out of money by the end of the summer, the SBA had cut the maximum amount it would lend to a single business from $1 million to $500,000 - with a total-loan limit of $80 million a week.

Until the error was discovered, SBA administrator Aida Alvarez insisted that demand had simply exceeded congressionally approved loan authority.

The SBA Bureau never did catch its error. The General Accounting Office did.

Now there will be $10.3 billion to lend over the rest of the year, instead of the $7.8 billion the agency thought it had. The difference is 32 percent. Fortuitously, it comes during National Small Business Week.

The moral of this story: Math matters and should be double-checked. If you're bad at math, you can make a $2.5 billion mistake.

But how can we ordinary people visualize $2.5 billion? Look at it this way: A check that overdrew your account by $2.5 billion would bounce clear to the moon.

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