Studies show that a high percentage of small businesses end in bankruptcy after a disaster strikes.    The Small Business Administration (SBA) provides low interest loans to small businesses as assistance to survive the economic hardship related to disasters.  The attacks of September 11th were not only a human tragedy, but also a financial and economic crisis for many different businesses and industries.  The range of businesses, from geographical location to specific industry, and the magnitude of damage were staggering.  In an attempt to save many of the small businesses affected by the tragedy, the SBA is now providing opportunities for loans.
Traditionally, the SBA has offered loans through the Economic Injury Disaster Loans (EIDLs).  EIDLs provide eligible small businesses with working capital to pay normal operating expenses that the business would have been able to pay if the event had not occurred, such as fixed debt, salaries, and accounts payable.  To be eligible for an EIDL, a small business must meet the criteria of no credit available elsewhere, meaning the business is not able to obtain financing from another source.    

Relating to the September 11th attacks, the scope of EIDLs has been widened.  One of the most significant differences between this disaster and previous disasters is that eligible small businesses across the nation will be able to access assistance, not just small businesses geographically located in the declared disaster regions.  This means that small businesses across the country that were directly or indirectly affected by the disaster may be eligible to apply for the loans.  In addition, due to legislative changes, small businesses may qualify for loans of to ten million dollars, which is a significant increase from the previous limit of one-and-a-half million dollars.  Some businesses will also qualify for a two-year deferment on principle and interest. 

Further aid for small businesses will result from the Defense Appropriations Act of 2002, which was signed by President Bush on January 10.  The legislation establishes the “Supplemental Terrorist Activity Relief” loan.  The purpose of the loan is to encourage banks and lenders to provide loans to small businesses that were affected directly or indirectly by the terrorist attacks.  The new loan program was required because lenders are becoming more conservative as a result of the economic recession and the September 11th attacks.  

The program reduces the fee the SBA charges lenders to guarantee new loans made to small businesses affected by terrorist events. For normal SBA loans, the fee is 0.5 percent of the outstanding balance of the guaranteed portion of the loan. The new program reduces the fee to 0.25 percent for the full term of the loan. The reduction in the fee will encourage lenders to make more loans to small businesses by increasing the potential gain of the lender from the loans, as the fee must be paid by the lender, not the business taking the loan.   

To receive the reduced fee, the lender must determine that the applicant was “adversely affected” by the attacks and must prepare and maintain a document summarizing why the applicant was adversely affect.  The SBA defines “adversely affected” as “a small business that has suffered economic harm or disruption of it business operations as a direct or indirect result of the terrorist attacks perpetrated against the United States on September 11, 2001.  Some examples of economic harm are: difficulty in making loan payments on existing debt; difficulty in paying employees or vendors; difficulty in purchasing materials, supplies, or inventory; difficulty in paying rents, mortgages, or other operating expenses and, difficulty in securing financing.”

 Further indications that the SBA and the government are loosening restrictions on small businesses loans include an announcement made on March 28, stating that the revue based size limit of travel agencies eligible for assistance from the SBA has been increased from one million dollars to three million dollars. Therefore, larger travel agencies will be able to apply for loans, increasing the number of eligible applicants.