- The Washington Times - Monday, October 17, 2005


Roughly $1 of every $5 in loans that the Small Business Administration directly made to companies hurt by the September 11 attacks has fallen into default, leaving the government with an uphill effort to recover millions of dollars in taxpayer money.

The agency is just now learning about the magnitude of businesses that went under or stopped making payments. Its September 11 direct disaster loan program often gave recipients two years before their first payments were due, according to documents reviewed by the Associated Press.

The SBA directly lent $1.2 billion to more than 10,000 companies that made specific arguments about how their businesses were hurt by the suicide hijackings in 2001 that destroyed the World Trade Center in New York and damaged the Pentagon in suburban Washington. A plane bound for Washington crashed in rural Pennsylvania.

Of that amount, $245 million is in default, the records show. The SBA investigators consider a loan in default if it has been charged off or liquidated or is more than 60 days delinquent.

SBA officials say they have written off less than $10 million of the default total and will make strong efforts to recover much of the rest of the money by collecting collateral, negotiating settlements with borrowers or bringing delinquent loans up to date.

The $245 million “does not represent the actual loss to the government, which, because of settlements and recoveries on collateral, will be less than this amount,” said SBA spokesman Michael Stamler.

Among the loans written off are a $992,000 loan to an Atlanta hotel; $986,000 to a Florida boat dealer; $620,000 to a Maine broccoli farm; and $38,900 to a Lubbock, Texas, computer store.

Even some who are making their payments are concerned about their recovery.

“Business just isn’t doing as well as it was in the past,” said Winnie Mou, owner of Manhattan Travel Inc., about a mile from the World Trade Center site. Her company began paying back its $11,600 loan last year.

Rep. Nydia M. Velazquez, who represents New York City and is the top Democrat on the House Small Business Committee, wants the SBA to extend the period before companies are required to make loan payments, hoping to ease the burden.

“A lot of these companies are just beginning to have to pay back their loans,” Mrs. Velazquez said. “What is the government going to tell them when they can’t?”

A second SBA-backed September 11 program, which guaranteed loans made by banks to businesses nationwide more broadly hurt by the economic downturn, has a much smaller default rate, records show.

Of the $3.7 billion lent by the Supplemental Terrorist Activity Relief program, $191 million has been charged off or liquidated or become 60 days overdue. That’s a 5 percent default rate, compared with about 20 percent for the SBA’s direct-lending program.

Historically, other government disaster lending programs have written off about 5 percent of loans. The largest SBA write-off in the past quarter-century came in the wake of the 1992 Los Angeles riots, when taxpayers absorbed $122 million of $356 million in loans, slightly more than a third.

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