Many small companies that received loans from the state-backed National Life Finance Corp. filed false financial reports and used false identities in applying for loans, Board of Audit officials said Thursday.
The board has called on National Life Finance to scrutinize loan candidates more thoroughly.
The findings came to light after the board checked about 4,800 cases involving a total of 15.1 billion yen in National Life Finance loans that went sour between fiscal 2001 and 2003.
The board found that some companies inflated their sales figures, fabricated company names or spent the loans on something other than capital expenditures, operational outlays and other nonauthorized purposes.
Some companies declared bankruptcy after receiving loans without paying principal or interest. In some cases, company owners disappeared after obtaining loans.
National Life Finance is not supposed to give out loans until it receives an endorsement from local chambers of commerce and other trade organizations that have monitored and advised the loan candidates for at least six months.
The board found that some endorsements were made without going through these processes.
Under the loan program, companies with 20 or fewer employees can obtain up to 10 million yen in loans at low interest rates without putting up collateral or a loan guarantor. National Life Finance, which extended 250 billion yen in 72,000 cases in fiscal 2003, received 9 billion yen in state subsidies in the three fiscal years to fiscal 2003.