Senate Panel Faults Oversight of Post-9/11 Business Loans

by Mike Bevel, CollectionIndustry.com

You?d think something called a September 11 small business loan would be pretty self-explanatory, especially the part about who?s eligible. However, seems the Small Business Association was a little unclear on the subject, at least according to a Senate subcommittee?s review of the SBA?s loan program.

The loans, ostensibly for businesses directly adversely affected by the terrorist attacks, may have actually gone to folks not necessarily affected.

More than 7,000 small businesses received loans totaling $3.7 billion through the Supplemental Terrorist Activity Relief loan program. Small businesses anywhere in the United States were eligible for STAR loans, as long as they could show they were hurt economically by the events of Sept. 11, 2001.

Most of the loan applications, though, didn’t document how the businesses were harmed by September 11. This confirmed an earlier investigation by the SBA’s inspector general, which found that 85 percent of the loans lacked documentation.

Committee chair Sen. Olympia Snowe said it most succinctly: “The agency wholly abdicated that responsibility,” she said.

Congress is partially to blame for any misuse of STAR loans, the committee found, because of its “vague guidance” about who was eligible. The program was intended to be broad, but Snowe says its poor implementation “allowed almost every small business in the country to be eligible.” Still, it might have behooved the SBA to at least ask someone for a little guidance, rather than being publicly reprimanded by the Senate subcommittee.

On the flip side, and mentioned by Representative Nydia Velazquez of New York, many small businesses that needed help from the government after Sept. 11 didn’t get it. Disaster loans weren’t coordinated with other assistance, Velazquez says, and collateral and repayment terms didn’t take into account the unique nature of the terrorist attack, she says.

“It is deeply concerning to know our federal government is no better off than it was five years ago to assist the economic engines of this country — small businesses — after a terrorist attack,” Velazquez concluded.