Following his listening tour Rep. Welch wrote a letter to Karen Mills, administrator for the US Small Business Administration, explaining that the SBA disaster loan programs did not provide immediate relief, but rather, required three years of financial paperwork that for some, had been washed away in the flood. “Others did not have the systems in place to access information in time to meet the deadline,” wrote Welch. “The documentation required for a loan was simply too onerous for too many damaged and distressed small businesses.”
Welch asked Mills to consider creating a microloan category of disaster loans tailored to meet the needs of businesses with fewer than 50 employees. On Monday, Welch brought along SBA administrator Jeanne Hulit, and SBA supervisory loan officer Travis Brown, to provide an update on what the SBA is doing to make loan application processes easier and more fluid for Vermont small businesses.
Representing businesses in Wilmington were Sandy Kingsley from Blue Mountain Produce, Craft Inn general manager Alice Richter, North Star Bowl owner Steve Butler, and Meg Streeter Realty owner Meg Streeter.
Welch pointed out that paperwork was a major problem he had heard about from multiple business owners on his first post-Irene trip. “Paperwork made it difficult if not impossible for some,” said Welch. “What we know is with small businesses, getting that loan is tough enough and we need to find out a way to streamline that process and have a quick turnaround with these loans.”
Welch also pointed out that SBA loan applications are sent to a processing center in Fort Worth, Texas, a place that has no idea of how small business runs in Vermont, and no personal understanding of an individual business’s history of cash flow.
Richter explained that the Crafts Inn was hit hard by flooding that knocked out all of the building’s utilities. Her first reaction was to get a Vermont Economic Development Authority loan which she said was easy to apply for online and showed up in her mailbox within days. Richter said that when she applied for an SBA loan, however, she didn’t know what she was getting herself into. Richter asked for a $400,000 loan, but the SBA decided she needed more, giving her $515,000 instead.
The process of getting signatures from the other members of the inn’s board of directors dragged the process out as each of the seven directors had to have copies of forms FedExed to their residences twice, as faxed copies were not accepted by the SBA. After applying immediately after the flood in early September, it took three crucial months for the inn to receive a loan, with construction crews standing by to begin work. Richter said she was able to salvage a ski season, but the inn missed out on the important foliage season.
Richter said the complexity of the process and the amount of paperwork made the loan process tedious and worrisome.“ If I had to do it over again I don’t know if I would” said Richter.
Butler said that while about 70% of the work is complete rebuilding North Star Bowl, he was unable to secure an SBA loan. “All my information, financial and other, was gone after the flood. I had no records on paper or computer, I had memory, but they don’t want to hear memory.”
Butler was turned down for a $950,000 loan, but explained he decided to rebuild because he simply had no choice. “For me to rebuild in a floodplain without flood-proofing is not smart, but I was worried to wait because I would go bankrupt. I might not have if I knew how hard it was going to be, but I had no choice. I could walk away and have nothing, or rebuild and have nothing worth anything because I didn’t flood-proof. It’s a double-edged sword.”
Streeter said that she didn’t even bother with applying for an SBA loan after seeing the application process. “If the SBA can create a local approval fast track, it would help those who didn’t have the time or energy to apply for even a VEDA loan. The SBA should look at quick turnarounds for smaller amounts.”
Hulit explained that most SBA loans are guaranteed loans, which is convenient, but the SBA is looking to reduce the complexity of the paperwork involved, as well as change small loan advancement by setting up a streamlined application based on credit score. Another change proposed in the SBA’s 2014 budget would help those like Richter by using electronic signatures for most forms.
Brown told Welch that Vermont had the best distribution program he had seen in the country, but the process for getting business owners cash needs to be quicker. “We need to be able to address the immediate, because our focus has always been long term.”
While there have been great accomplishments since the last time he was in town, Rep. Welch said there was no shortage of work that still needs to be done. “I was so astonished at what the town of Wilmington did to recover from basically ground zero,” said Welch. “I don’t know that any community had it worse and to come in from the outside and see the downtown area so devastated, and it was hard to conceive people could put it back together. No matter how hard you work, how hard you do your job, it always seems like the world is stacked against you, and the flood on top of it.”