[StBernard] State Sends Letter to SBA Regarding SBA Loans for Small Businesses Affected by Oil Spill

[Westley Annis]

State Sends Letter to SBA Regarding SBA Loans for Small Businesses Affected
by Oil Spill

BATON ROUGE - Louisiana's Secretary of Economic Development Stephen Moret
today sent a letter to the U.S. Small Business Administration requesting a
policy change that would allow an exception to the normal underwriting
standards of SBA to specifically allow repayment in the form of BP claims,
if needed, in lieu of SBA's normal process for assessing credit history and
repayment ability. 

The full text of the letter is below.

June 24, 2010

Ms. Karen G. Mills
Administrator
U.S. Small Business Administration
409 3rd Street, SW
Washington, DC 20416

RE: Reducing the high rate of declines for SBA disaster loan applications
related to the BP oil spill disaster 

Dear Administrator Mills:

I am writing to request your immediate act! ion to address an important
issue that is impacting hundreds of small businesses in Louisiana that have
been economically damaged by the BP oil spill.

As you are well aware, Louisiana has suffered severe economic and ecological
damage from the BP oil spill. Our seafood industry is experiencing huge
economic losses that have only been partially mitigated by a frustratingly
slow and inadequate BP claims process. Our precious wetlands are suffering
incalculable, permanent damages, while our tourism industry faces escalating
losses. More recently, we have begun to face the loss of many thousands of
jobs associated with the federally imposed deepwater drilling moratorium.
The moratorium will not only impact large oil and gas companies but it also
will result in the closure of many small businesses that depend on the
deepwater drilling industry. Likewise hundreds of small businesses are under
severe strain due to other effects of the oil spill.

According to ! BP, more than 21,000 claims have been filed by individuals
and busines ses in Louisiana that have been damaged by the BP oil spill.
Hundreds of these claims have been filed by small businesses that do not
have the financial capacity to weather an extended wait for reimbursement of
their impact claims by BP. 

These vulnerable small businesses, many of which already were struggling to
survive due to damages they incurred from recent hurricanes, are exactly the
kinds of businesses that could most benefit from the SBA's disaster recovery
loan programs. Unfortunately, we recently learned that more than 70 percent
of the initial Louisiana applicants for SBA's loan programs were denied.
According to the SBA, most of these applications were denied due to credit
concerns and/or SBA's assessment of the repayment ability of these
companies. Yet in many cases these small businesses have legitimate claims
with BP that could be utilized to fulfill their loan obligations once their
claims have been adjudicated and paid.


As you may ! be aware, my economic development team has had multiple
conversations with SBA managers about our concerns and potential solutions.
Our understanding from those conversations is that SBA could change its
internal policy to allow expected BP claim proceeds to be assigned as needed
to SBA to ensure repayment of any loans made, thereby significantly reducing
any potential losses that SBA might otherwise experience. In fact, we were
told that SBA utilized a somewhat similar process after the Exxon Valdez
disaster to help small businesses impacted by that spill.

Given that BP has committed to fully compensate those negatively impacted by
the oil spill, we request that you implement a policy change that would
allow an exception to the normal underwriting standards of SBA to
specifically allow repayment in the form of BP claims, if needed, in lieu of
SBA's normal process for assessing credit history and repayment ability.
Such a mechanism would be particularly helpful f! or those small businesses
with more complex claim issues that may take a significant amount of time to
fully resolve.

Thank you in advance for your swift consideration of our request. 

Sincerely,



Stephen Moret
Secretary
Louisiana Department of Economic Development

cc: Bobby Jindal, Governor of Louisiana 
Mary Landrieu, U.S. Senator
David Vitter, U.S. Senator
Rodney Alexander, U.S. Representative
Charles Boustany, U.S. Representative
Anh "Joseph" Cao, U.S. Representative
William "Bill" Cassidy, U.S. Representative
John Fleming, U.S. Representative
Charlie Melancon, U.S. Representative
Steve Scalise, U.S. Representative

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