Small businesses discuss disaster recovery loan process

Wednesday April 24, 2013

WILMINGTON -- Feedback from local business owners for disaster recovery loans from the Small Business Administration has been heard and that can help make improvements to the application process.

"I am so astonished in what the town of Wilmington did to recover from the devastation of Irene," said U.S. Rep. Peter Welch, D-Vt. "I was here a few days after the flood. I don't know if any community had it worse."

On April 22, three business owners met with representatives from the Small Business Administration, Welch and Laura Sibilia of the Brattleboro Development Credit Corporation to discuss the recovery from Tropical Storm Irene, which struck Vermont in August 2011.

The idea of the meeting was to let business owners who had experienced difficulties in obtaining loans from the SBA voice their concerns as part of a statewide discussion on lessons learned since the storm.

Last April, after meeting with small business owners in Wilmington and Waterbury, Welch sent a letter to SBA Administrator Karen Mills, "urging her to create a new loan program tailored to the unique needs of very small businesses like those in Vermont that are often unable to comply with federal paperwork burdens in the aftermath of a devastating disaster like Irene," a press release from the Congressman said.

SBA Region Administrator Jeanne Hulit attended the meeting. She was interested in hearing how the SBA could "streamline the process, so we can have a quick turnaround," said Welch.

"Our goal is to review what was done, what the problems were and try to get some support for SBA, so they can have the tools they need," said Hulit.

SBA Supervisory Loan Officer Travis Brown, who was in Burlington during the days after Irene, was at that meeting, too.

"Obviously, we can do better," he said. "I'm interested in hearing your thoughts on how to do it better and faster ... Sometimes the best answer comes from folks like yourselves."

For starters, the loan application was too complex for some business owners. Selectboard Chairwoman and business owner Meg Streeter gave testimony to that point. She said that she didn't even try to fill out any paperwork for SBA loans.

Her small real estate business office had been ravaged by the storm. She has been in business for 26 years.

"I'm a good example of someone who got totally overwhelmed," said Streeter. "This fast tracking of smaller loans seems like a great idea." She suggested having local approval for loans in the future.

After Irene, when she went to the FEMA operations center, which was in Dover at the time, she decided she couldn't handle the SBA loan application process.

"Because there was a tenant in my flooded building, I probably wouldn't have been eligible to get a loan," Streeter said.

Alice Richter, general manager of the Crafts Inn, compared a Vermont Economic Development Authority loan, which came in a couple of days after she applied, to the SBA loans. The VEDA loans were smaller and designed to be for short term recovery plans.

"It's a long, drawn out process," said Richter of the SBA loans. "To me, it was very disorganized."

The Crafts Inn is a timeshare resort in Wilmington that was devastated by the flooding during Irene. An elevator was destroyed as well as the racketball courts and pool area. The telephone system was disconnected for some time, too.

"It was virtually dead," said Richter. "We had nothing."

Richter applied for a $400,000 loan through the SBA and needed to get signatures from all of share owners of the inn, which proved to be a daunting task because of all the other issues she had to worry about. Most of the timeshare owners live in Connecticut and Massachusetts.

The SBA responded that $515,000 would be the actual amount necessary for all the repairs, but the signatures were once again needed in order to re-apply.

"In reality, it took about $800,000 to get it back running," said Richter. "It was kind of a hassle to go through this and then go through it all over again."

She said it was a long haul for her and the paperwork was complicated.

"What makes it worse was where we kept all our files was downstairs," said Richter. "A lot was unrecoverable."

She then had to get a $1 million insurance plan for property and liability, which she was aware of until she thought she was through with the whole loan application process.

"Once you've gone 99 percent of the way, you're not going back," she said.

Steve Butler, owner of North Star Bowling, said it took about two weeks to get temporary electricity in his building.

"On Jan. 1, we were able to open the food portion of our business," he said. "It took us nine months to get the complete operation up. Currently, we are 95 percent functional."

Butler was familiar with the SBA loan process. He had been a banker and received a 15-year loan from SBA to start up North Star Bowling. He's been in business for 33 years.

"They needed current information," Butler said. "All my information was gone. There was no computer records left. No paper records left. I had my memory but they didn't want memory."

He wasn't surprised when the SBA turned him down for a disaster recovery loan.

"I was turned down because they told me I'd need $950,000," said Butler. "And I wouldn't be able to make the payments on anything close to that ... Based on my history and business records, I couldn't afford $10,000 a month or whatever it might be. I thanked them very much but went on my way."

He was forced to rebuild the bowling alley without floodproofing.

"I'm afraid if I would have waited to have (floodproofing) in place, I would have gone bankrupt," Butler said. "I probably wouldn't have done it if I knew how hard it'd be to rebuild ... I had no choice ... I could of walked away and I would have had nothing."

Although Butler had no difficulties in filling out the SBA paperwork, it took him 20 hours to complete the application.

Hulit said Congress has directed the SBA to set up a guarantee loan program for the SBA disaster recovery loans. The banks would give businesses an 85 percent guarantee. She said the idea is "to reduce the complexity of the paperwork."

There's no financial incentive for the banks though, she added. And the SBA already offers the same guarantee loan in its standard loan procedures.

"This was a non-start," said Hulit. "This isn't going to work ... It's not going to be easier."

She said the SBA is going back to the drawing board.

When Welch asked how to get the process right, Hulit spoke of a spring loan application with an applicant's credit score already on it.

"(This) has shortened the process," she said.

One other idea was to allow for electronic signatures, which was a budget request for 2014, Hulit said. And another idea was getting IRS records for the disaster recovery loan applications, so the applicant wouldn't have to fill that part out. She said in the standard SBA loans, the SBA gets the applicants' IRS records.

Hulit said the meeting had triggered some ideas to bring back to the drawing table.

Chris Mays can be reached at 802-254-2311, ext. 273, or Follow Chris on Twitter @CMaysReformer.


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