WASHINGTON (AP) _ A federal loan program that has traditionally been a lifeline for small businesses after disasters is proving to be a poor fit for many New York business people affected by Sept. 11.
More businesses have been rejected than approved for Small Business Administration loans related to the attacks on the World Trade Center. But more telling, many say, is that an unusually high rate of business owners who sought applications never bothered to apply.
``There is no template for an urban disaster in a concentrated area like this,'' said Kevin Corbett, a state economic development official.
While careful to praise the SBA for doing a good job under most circumstances, Corbett said the loan program has proved to be a ``bad fit'' for the trade center disaster.
Much of the problem centers on the uncertainty among business people over when _ and to what extent _ the local economy will improve.
Although the government late last year extended the grace period before repayment must begin, many business owners were initially dissuaded by the usual requirement that repayment begin within five months. The biggest obstacle for many is the requirement that most borrowers put up collateral, such as their home, to secure the cash.
``They can't afford to put their home or life savings down for a loan without some way to judge when they're going to have the revenue to repay it,'' said Kathy Wylde, president of the business advocacy group New York City Partnership.
That's true for the family-owned Conca Cocina Pizzeria, just a few blocks north of the World Trade Center.
The restaurant was closed for two months because of the terrorist attacks; since it reopened, business is down 40 percent. Manager Fred Spatola said the pizzeria didn't consider an SBA loan because of concerns about its ability to rebound in time to make repayments.
Wylde said a crucial time is at hand now because small businesses had, on average, about three months cushion of cash. That has either run out _ or is about to _ and is forcing some hard decisions, she said.
The disappearance of the mom-and-pop stores, small companies and family-run eateries that drew their life from the twin towers could change the fabric of downtown and further wound the already fragile economy there, advocates say.
So far, the SBA has approved 2,813 loans for a total of $226 million, with the average loan about $92,000. But 2,900 loan applications have been turned down for things like a spotty credit history, a heavy debt load or failure to meet qualifications as a small business. The acceptance rate is typically higher. On average, between 50 and 60 percent of applicants are accepted, SBA spokeswoman Colleen Hiam said.
And only about 30 percent of the 25,700 people who requested SBA applications have actually applied. That rate is typically much higher: between 40 percent and 50 percent usually apply after disasters such as earthquakes or hurricanes.
In weather-related disasters, though, there is usually a much clearer idea when business will fully resume, Corbett said.
Some changes could help. A push by Sens. Hillary Rodham Clinton and Charles Schumer late last year resulted in legislation to extend the grace period for SBA repayment to two years on Sept. 11 loans, giving businesses more time to get on their feet. The New York Democrats also succeeded in making non-profits and financial institutions eligible for SBA loans.
SBA officials said they have had to apply existing regulations to circumstances that were unprecedented and unforseen. William Leggiero Jr., area director for disasters in the SBA's Niagara Falls office, which is handling trade center applications, noted the agency is processing applications quickly _ 10 days on average.
But the SBA has also been criticized for not distributing enough of the money in hard-hit lower Manhattan.
``The money is going all over the place. Not enough loans are going to businesses directly affected by the World Trade Center,'' said Valerie Lewis, a spokeswoman for the Alliance for Downtown New York.
SBA officials acknowledged that only 50 percent of the loans approved have been to businesses south of 14th Street _ the neighborhood near the trade center _ but said they can only process loans for those people who apply.
``The lion's share is still going to downtown Manhattan,'' Leggiero said. Overall, he said, 77 percent of the Sept. 11 loans went to businesses throughout Manhattan.
Some downtown businesses are pinning their hopes on grants instead of SBA loans. The New York City Partnership and the Alliance for Downtown New York are distributing a combined $15 million in private help.
Corbett, the chief financial officer for Empire State Development Corp., the state's economic development arm, said this agency has handed out $20 million in grants for small businesses. They've spent double that, $40 million, on a marketing campaign of ads to bring business back to New York City.
The group is also now finalizing details to allocate the first $2.7 billion in federal community development money, with a large portion of that expected to flow to small businesses, Corbett said.