SBA turns down 240 LI disaster loan bids
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The U.S. Small Business Administration has declined roughly half of the economic injury disaster loan applications it received on Long Island for superstorm Sandy so far, according to data from the agency.
Issues blocking approval of the loans, which are made to small businesses and nonprofits, included bad credit and a lack of documented ability to repay loans, according to the agency.
The federal agency said that as of June 28 it had turned down 240 out of 526 applications received. It had approved 110 economic injury loans totaling $6.8 million, while 13 applications were still pending and 163 had been withdrawn.
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"We try to make as many loans as we possibly can," said James Rivera, associate administrator for disaster assistance at the SBA.
Even with screening for credit quality and revenue, losses on the taxpayer-subsidized loans run about 20 percent, he said.
Unlike loans to repair physical damage, economic injury loans are used as stopgaps to cover revenue lost because of a disaster.
"We'll make a loan for your fixed operating expenses, to pay your utilities, your rent, payroll," he said.
One issue that can affect a company's ability to repay -- on paper -- is whether it reports all its revenue to the Internal Revenue Service. The SBA uses IRS information in determining a business's revenue.
Gloria Glowacki, regional associate director at the New York State Small Business Development Center at Stony Brook, said this is a frequent problem for businesses seeking SBA or bank loans.
"We tell our clients all day every day . . . you can't have it both ways," she said. "You don't declare it, it doesn't count. You can't say 'wink, wink, nod, nod, this is how much I really got.' "
Glowacki said that businesses she's seen get approved "had better control of their business, they knew where their paperwork was," and "demonstrated projections that would show the ability to repay the loan."
Julie Marchesella, president of the Nassau Council of Chambers of Commerce and owner of a Merrick clothing store, said that fiscally strapped small business owners were hoping for grants rather than loans.
"Most of our small business owners and main-street business owners are not in a position to accept another loan," she said.
As of Tuesday, the SBA had approved 756 loans for both economic injury and physical damage on Long Island out of 2,748 applications.
Though the deadline for physical damage loans has already passed, the deadline for economic injury loans is July 31.