An already-struggling economy was dealt a staggering blow on September 11, and the result was keenly felt by those in the ground transportation industry. Airport activity was brought to a complete halt for several days. Upon resumption of airport operations, life as we know it was drastically different, and certainly not business as usual. The September disaster had many operators seeking financial assistance, such as deferring payments on car loans and help in paying operating expenses, in order to keep their businesses up and running. Those operators with businesses located in specific geographical areas affected by the disaster (i.e., designated disaster areas) were immediately eligible for financial help in the form of disaster loan assistance through federal agencies.
Contact FEMA The first step in seeking financial assistance after a disaster is to register with the Federal Emergency Management Agency (FEMA). FEMA is a federal disaster agency responsible for overseeing and coordinating all the federal, state and local disaster programs. FEMA will ask you several questions to determine your eligibility for various assistance programs. When you call FEMA, have your social security number, address, telephone numbers, household income and insurance information available. The phone interview will take approximately 20 to 30 minutes. Disaster recovery experts will determine an applicant’s eligibility for a particular assistance program on a case-by-case basis.
If you are referred to the U.S. Small Business Association (SBA), a loan application will be mailed to you, usually within 24 hours. When a disaster is officially declared by the president, the SBA works with federal, state and city partnerships to offer several types of loan assistance to small businesses. At press time, the SBA had approved 527 disaster loans for a total of approximately $54 million dollars in immediate assistance to businesses that had suffered substantial economic injury. This amount includes home disaster loans, physical disaster business loans, and business economic disaster loans.
In the past, SBA economic disaster loans have, by law, been area-specific (primary and contiguous counties directly affected by the disaster), and not event specific. Therefore, only those businesses located in officially declared disaster areas were immediately eligible for SBA assistance packages. Officially designated disaster areas as a result of September 11 include New York City and adjacent counties in New Jersey, Connecticut, Pennsylvania and Massachusetts as well as Arlington County in Virginia and adjacent counties in Virginia, Maryland and the District of Columbia.
New Jersey Area Assistance As an example, SBA disaster assistance in the form of Economic Injury Disaster Loans (EIDLs) became immediately available in six New Jersey counties declared disaster areas (Bergen, Hudson, Middlesex, Passaic, Sussex and Union). The criteria for getting a county designated for disaster relief assistance in New Jersey is that at least five businesses must have sustained at least a 40 percent loss in revenue. Once that criteria has been reached, the county is then eligible to apply for the designation.
EIDLs are low interest, working capital loans that are available to small business owners who suffered economic hardship due to a disaster. The loans are offered at 4 percent interest for a maximum of 30 years. EIDLs help small businesses meet necessary financial obligations which cannot be met due to the disaster, such as paying fixed debts, payroll expenses, accounts payable and other bills that might have been paid had the disaster not occurred. The total loan amount for any one-business entity cannot exceed $1,500,000, and the loan application deadline is June 11, 2002. Actual loan amounts are determined by the SBA based on the amount of disaster-caused economic injury and the needs of the business.
Jenny Puchta, a CPA that has worked with Gem Limousine in Woodbridge, N.J. for more than 20 years, went through the loan application process and found it relatively easy. “I completed the paperwork on a Friday, sent it via Federal Express on Friday night, and on Monday morning we received a phone call,” Puchta says. “By Thursday we received official approval.” The SBA asked Puchta for tax returns of the corporation and a schedule of sales for the last three years and year-to-date. “It moves quickly, the instructions are clear, and it’s not as difficult as getting some of the bank loans that we have applied for in the past,” she says. “We have not received any funds yet and we were told we would be getting a packet of information within 30 days.”
SBA Credit Requirements In order to be eligible for SBA financial assistance, there are two credit requirements:
1) Repayment. The SBA’s disaster assistance is in the form of loans. Applicants must show that they have the ability to repay the loans.
2) Collateral. Some type of collateral is required for all physical loss loans over $10,000 and all EIDL loans over $5,000. The SBA takes real estate as collateral where it is available. Applicants do not need to have full collateral; the SBA will consider what is available to secure each loan.
Interest rates depend on whether the applicant has credit available elsewhere. For those applicants that are unable to obtain credit elsewhere, the current interest rate is four percent.
Additional primary and contiguous counties in New York and Pennsylvania are also eligible for EIDL loans. For more details on specific locations, go to www.sba.gov/disaster.
Additional SBA Disaster Loans There are two additional types of SBA disaster loans.
1) Home Disaster Loans. These loans are available to homeowners or renters in order to repair or replace disaster damage to real estate or personal property owned by the victim.
2) Business Physical Disaster Business Loans. These are loans that are available to businesses in order to repair or replace disaster damages to property owned by the business, including real estate, machinery and equipment, inventory and supplies. Businesses of any size are eligible. Non-profit organizations are also eligible.
Business Physical Disaster Loans are currently available to businesses of all sizes, non-profit organizations, homeowners and renters located in the declared primary New York and New Jersey counties of Bronx, Delaware, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Sullivan, Ulster and Westchester. Nationwide Assistance
Operators nationwide have suffered business losses from the immediate and drastic changes in the travel industry and economy following the September 11 tragedy. The widespread economic impact of the terrorist attacks has recently prompted the SBA to widen access for financial assistance.
As of October 22, the SBA widened access to EIDLs to small businesses across the country. The application deadline for assistance is January 21, 2002. Regulations are published on the SBA’s Web site.
However, several additional proposals are in the works from Senators and Congressmen for crucial changes to the current SBA programs.
“The American Small Business Emergency Relief and Recovery Act of 2001,” (Senate bill 1499) is currently on the floor of the Senate. S1499 would provide national SBA assistance to our entire industry while allowing a forgiveness period on principle and interest on the loan repayment,” says Barry Lefkowitz, lobbyist for the National Limousine Association (NLA). “The forgiveness period is so critical to our people, because they need time to recover before they’re going to have to pay back principle and interest.”
Another crucial section of S1499 is the request that the SBA waive the ... for more details on this topic, check out the December issue of LCT!