Some frustrated with lack of SBA assistance

Grace Leong

Tuesday, Dec. 11, 2001 | 10:52 a.m.

The maximum interest rate for special loans tied to the terrorist attacks is 4 percent and loan terms up to 30 years are allowed. The deadline for applications is Jan. 21, 2002.

LT Event Group, a small Las Vegas convention-support business that said it suffered a 70 percent plunge in business after the Sept. 11 terrorist attacks, thought it was eligible for the U.S. Small Business Administration's Sept. 11 Economic Injury Disaster Loan (EIDL) program.

The EIDL program, which became effective Oct. 22, provides financing to help eligible small businesses meet necessary operating expenses they could have met but are now unable to meet after the attacks.

But the Las Vegas event planner's hopes for a $75,000 disaster loan were dashed when the SBA rejected its application.

The government said the company wasn't "directly affected" by businesses that were closed or suspended as a result of the destruction of the World Trade Center or damage to the Pentagon on Sept. 11, said Anna Siefert, operations manager of the Nevada Microenterprise Initiative, a local organization that helps small- to moderate-income earners become entrepreneurs.

Siefert was one of several representatives of small business groups and local chambers of commerce that voiced concerns small businesses had in the aftermath of the attacks at a meeting Monday with SBA Administrator Hector Barreto.

Siefert said the eligibility criteria of such loans should be more clearly defined and broadened so that more small businesses in Nevada -- especially those in the hospitality and convention businesses, among the hardest hit by a severe dip in travel and tourism after the attacks -- can qualify for such loans.

The SBA said small businesses that are eligible for the loans include those that supplied services to businesses in or near the World Trade Center or Pentagon, and to businesses in an airport or an operation that was closed or suspended or disrupted as a result of national security measures. The program doesn't cover lost revenues or profits or losses caused by the economic downturn and the funds can't be used to refinance long-term debt or expand operations.

"Just because LT Event Group isn't in New York or Washington D.C., and isn't a major convention center owner doesn't mean it isn't directly involved. That company, which can hire up to 75 employees for one convention alone, immediately lost 70 percent of its business in the first week after Sept. 11," Siefert said.

Some 261 conventions were cancelled or postponed in Las Vegas after the attacks.

Barreto said he will review LT Event's application again. He stressed that although some small businesses, when they first apply, may not qualify for loans, they should take heart because they may eventually be approved after several reviews by the SBA.

"For example, we recently approved a company in New York that does helicopter rides around New York. Its business closed down after Sept. 11. And although it technically didn't fall into our standard (eligibility) classification, we found a way to allow them to qualify for the disaster loan," he said. "And even if we can't approve the EIDL loan for some small businesses, we can try to refer them to other programs."

Barreto said the SBA has received some 25,000 requests for EIDL loans since Oct. 22, and has provided more than $165 million to small businesses nationwide that have met the SBA's eligibility criteria. "Most of the requests are from New York and Washington D.C. of course, and we're averaging about $2 million in EIDL loans a week (that are provided to small businesses.)"

The SBA, a federal agency that directs low-interest loans to entrepreneurs to help spur business development, said it determines the term of each EIDL loan according to the borrowers' ability to repay.

He said the SBA may extend the deadline for loan applications to give small businesses -- especially retailers that are waiting for results of this year's holiday sales -- time to determine if they need the loans.

Of some 85,000 small businesses in Nevada, the SBA said some 50,000 are sole proprietorships and 35,000 are small businesses that include one or more employees. The SBA said about 11,000 of the 85,000 small businesses are women-owned and some 8,400 are minority-owned.

Thomas Gutherie, president and chief executive of Southern Nevada Certified Development Co., and a supporter of diversification of Nevada's economy -- which is dominated by the gaming industry and which experts earlier said makes it vulnerable to the turmoil that would result from a slowdown in tourism -- said the Sept. 11 attacks underscored the "urgent need for diversification."

"Thirteen thousand people lost their jobs in the casino-related industries in the Las Vegas area. The question is are they all going to go back to work in the gaming industry? Possibly," he said. "The gaming industry may over time absorb these people as business recovers. But if we had had a more diversified economy, we may not have been impacted so badly. Those who lost their jobs could have looked for alternative employment in other businesses."

Meanwhile, another small business concern mentioned was rising healthcare costs and health insurance premiums.

James Yu, president of the local Asian Chamber of Commerce, said many small Asian-owned businesses -- especially restaurants -- complained they were having difficulties paying medical insurance premiums for their workers.

"Some of these restaurant owners can't even afford to have health insurance for themselves because they're already struggling after paying federal wage taxes. They say there isn't enough for medical coverage," Yu said.

Barreto said that although health care "isn't an area handled by the SBA, the agency can become a voice for small businesses by working with domestic policy makers to help provide medical plans for small businesses."

Barreto said his goal as a small business administrator is to develop a system to monitor the growth rate of small businesses after they receive SBA loans.

"There's an over-preoccupation with the number of loans we fund. More efforts will be made in 2002 to focus on on how the SBA's efforts generate jobs, increase the survival rate of small businesses and help small businesses expand and grow."