The General Accounting Office began an investigation this week to determine how many small businesses directly affected by the September 11 terrorist attacks have been turned down for disaster-relief loans.
Rep. Nydia M. Velazquez, New York Democrat and ranking member of the House Small Business Committee, asked for the inquiry to find out why about 3,000 small businesses in New York and 144 in Washington did not receive loans from the Small Business Administration.
Mrs. Velazquez said several businesses in Manhattan’s Chinatown, which is in her district, were shut down after the attacks but never received any relief.
“Chinatown was not only directly impacted because of its proximity, but police departments shut down the streets, which caused a drop in tourism, the lifeblood for Chinatown business owners,” she said.
Congress allocated $600 million for disaster relief and extended the original application deadline from June 11, 2002, to Jan. 30 of this year for loans up to $10 million with a two-year deferment on principal and interest.
GAO spokeswoman Davi A’Gostino said the agency was in the early stages of the investigation, but projected to have preliminary findings by mid-July and a report at the end of September.
Mrs. Velazquez said the Small Business Committee will hold a hearing when the findings are published to determine any necessary changes in the loan-procurement process.
“We want the GAO to look at every application and based on the current laws give us a reason why so many of them were not approved,” she added.
But New York City received more loans for a higher amount than any other affected area, said Herb Mitchell, associate administrator for SBA’s disaster-assistance office. Those businesses received the most because the attacks affected a more concentrated area of business.
The SBA approved 54 percent of all loan applications in New York and 52 percent of applications in the Washington area, Mr. Mitchell said.
Historical business loan-approval rates have fluctuated from 44 to 75 percent, depending on geographical areas and the magnitude of the disaster.
Loan sizes for September 11 relief also have been larger, averaging at $150,000 compared with the general disaster loan of $55,000.
By the extended Jan. 30 deadline, 6,072 loans worth $512 million were sent to New York businesses and 156 loans worth $19 million were given to companies in the Washington area, primarily in Northern Virginia because of the proximity to the Pentagon.
Mr. Mitchell defended the work of the SBA, explaining that most small businesses could not repay the loans before the attacks, a requirement to receive money from the SBA.
Others were rejected for poor credit histories and insufficient payments to current or past government loans.
“Because we’re in the business of loans, we focus on whether or not the business had capabilities to pay back the loan before the attacks, we don’t focus on how the company will do in the future,” he said.