SBA shifts relief into high gear

Associated Press

NEW YORK — Small businesses around the country are beginning to feel the impact of the terrorist attacks on the World Trade Center and the Pentagon. And they’re turning to the federal government with questions and requests for help.

The Small Business Administration, which makes direct disaster relief loans to small companies, has already begun approving loans, said Carol Chastang, a spokeswoman for the agency in Washington, D.C.

Chastang advised businesses seeking assistance to put in their applications as soon as possible to avoid a bottleneck as more companies seek aid.

"Early on, we can turn them over quicker," she said, but the number of inquiries has already reached 2,500 a week.

Small businesses in Manhattan affected by the destruction of the World Trade Center, as well as those in several counties of neighboring New Jersey, are eligible for the loans because they are located in what has been declared a disaster area by the federal government.

But there are many other small businesses around the country — independent travel agencies, for example — that are suffering as well and wondering if there’s any relief available for them.

"Our agency is talking with the administration about what we can do to help businesses all over the country," Chastang said. "Nothing is in place yet, but we are aware of this issue and we understand a lot of businesses are hurt by this."

Companies interested in applying for disaster loans should call the Federal Emergency Management Agency, which is coordinating recovery efforts. Its toll-free number is 800-462-9029. Businesses will be immediately connected with the SBA, Chastang said.

SBA disaster loans, made directly by the government and not through a bank, fall into two categories.

The first, physical disaster loans, provide money to rebuild and replace real and personal property, and actually are not limited to small businesses — companies of all sizes, nonprofit organizations and homeowners and renters can obtain them.

The second, an economic injury disaster loan, is available only for small businesses, and only those that cannot get credit through other means. These loans provide necessary working capital for a company unable to carry out its normal operation. The business does not need to have suffered physical damage itself to obtain an economic injury loan.

The ceiling on disaster loans to businesses is $1.5 million for physical losses or economic injuries, or a combination of both. How much you can borrow depends on how much damage a company has suffered. It also depends on your insurance — your business can borrow from the SBA only for uninsured or otherwise non-reimbursed losses.

There is a catch — you might need to put up collateral.

Chastang said collateral is required for all physical loss loans over $10,000 and all economic injury loans over $5,000. The SBA takes real estate as collateral where it is available, she said.

But, the spokeswoman said, "Applicants do not need to have full collateral; SBA will take what is available to secure each loan."

The SBA’s Web site (www.sba.gov) has a big section on disaster assistance and loans that can provide more information. Chastang said companies can also ask their local SBA offices for information.

According to the Web site, the required information is similar to what any lender would need: a detailed list of losses with an estimate of repair or replacement costs, your company’s federal income tax information, a brief history of the business and its financial statements.

By looking at your company, SBA will determine the loan rate and the length of the loan — up to a maximum of 30 years. There’s no set formula; it will depend on your company’s circumstances.

If a company is unlikely to be able to repay — for example, if it was already in trouble before a disaster — it can be much harder to get a loan. SBA expects the loan to be repaid from a company’s earnings.