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The libertarian Cato Institute in 2011 called for abolishing the SBA and said the loan program gives politicians a chance to brag about helping small businesses. Tad DeHaven, budget analyst for Cato, questioned the value of providing small business loans for low-paying jobs at gas stations and sub shops.

"One, a lot of these businesses will fail, and that is therefore wasted capital," said DeHaven. "(And) the banks love this program. It's basically free money for them."

Depending on the loan program, the SBA guarantees can be as high as 100 percent but those in 7(a) typically are 75 percent or 85 percent. When the loan defaults, the SBA purchases the guaranteed portion of the loan from the lender while the lender and SBA try to collect what they can. Then the SBA turns the remaining unpaid portion over to Treasury for continued collection efforts.

Treasury officials can garnish wages or federal payments, withhold tax refunds, take all but $750 a month in Social Security and send collection agencies after the borrower. But Treasury officials say collection efforts are hindered if the borrower is a limited liability company or some other corporate entity that dies when the business fails.

"It is difficult," said Ronda Kent, assistant deputy commissioner of debt management services for the U.S. Treasury bureau of fiscal services. "These are debtors who have not paid timely and other people have foreclosed on their collateral, if that was available."

A new corner

SBA officials contend they've turned a corner -- with purchases of defaulted guaranteed loans declining to $2.6 billion in fiscal 2012 from $3.4 billion the prior year, according to the agency's fiscal 2012 financial report. The report says the loan volumes are rising and the risk portfolio is decreasing as a greater proportion of the portfolio is for loans approved since 2009.

"All key metrics on our loan portfolio have been improving, including the percentage of loans that are in a deferred, past due, delinquent and liquidation status," Hulit said. "Generally, if the economy improves, future subsidy costs may be reduced as the corresponding default risk is reduced."

The SBA and Federal Deposit Insurance Corp. jointly monitor lenders and Hulit said 150 were removed from the SBA program between fall 2008 and June 2012.

New SBA loans to Quiznos and Cold Stone Creamery tailed off drastically since 2009, the newspaper's analysis found.

Quiznos franchises reached a high of 626 SBA 7(a) loans in 2004, but those have fallen every year since. In 2012, Quiznos franchises received only five SBA loans. The same is true for Cold Stone Creamery franchises, which received only two SBA loans last year. Subway, by contrast, has tapered off somewhat, but still received 173 SBA loans last year.

"Over the last four years, SBA supported more than $106 billion in lending to more than 193,000 small businesses and entrepreneurs," said Emily Cain, SBA spokeswoman. "And today we are using our streamlined lending programs and products to get capital to communities that are still struggling and to fill market gaps, and we are continuing to expand access to our loan programs."

Path forward

Ultimately bad loans not only cost taxpayers but also the borrowers and lenders who pay fees based on projected losses. There has been talk of raising those fees to ensure the program is self-sustaining, but Craig Street, director of SBA lending for Huntington National Bank, said that could make the loans too expensive.

Street is a huge backer of the program because he said the guarantee provides banks with a comfort level to invest in promising companies that are good risks even though their balance sheets don't meet conventional lending standards.

KeyBank's Moshier said avoiding the mistakes of the past involves getting back to basics: good solid underwriting and understanding risk.

"I don't care if it is SBA lending, conventional lending, mortgage lending. Slow and steady wins the race," Moshier said. "You live another day. It doesn't mean you are not making loans. You are not making stupid loans."