SBA Raises Loan Cap to Aid Larger Firms

Dozens of businesses too large to benefit from the federal government’s first round of earthquake relief loans are likely to qualify in the future for the program, the head of the Small Business Administration said Thursday.

Erskine B. Bowles said the federal agency will raise its $1.5-million loan cap for many companies that need more cash to stay in business and preserve jobs.

Bowles made the announcement in Los Angeles after meeting earlier in the day with city officials, lenders, business people and landlords. Representatives of several other federal agencies also announced regulatory changes that they said will accelerate the region’s recovery.

The SBA administrator was responding to complaints from many medium-size businesses that they were falling through a gap in federal relief regulations.

But Bowles said loans greater than $1.5 million will be approved for companies that employ more than 1,000 workers or more than 10% of the labor force in a particular industry. “I think that will do enough so that most of the medium-size businesses qualify,” he said.

The SBA loans can be repaid over as much as 30 years at interest rates as low as 3.63%.

Bowles said the relief applications in Los Angeles continue to dwarf those in other natural disasters, with more than 260,000 individuals already interviewed by SBA employees and about one-tenth that number filing applications for business and housing loans. In comparison, 18,790 victims had been interviewed during the same period following Hurricane Andrew.

During a disaster the SBA, which normally provides business loans, is also authorized to make loans to repair or replace homes and personal property.

Several other federal agencies said they are taking steps to encourage lenders to ease credit arrangements with business people and property owners who suffered quake damage.

Comptroller of the Currency Gene Ludwig said his agency will not judge national banks adversely if they extend credit to borrowers at higher than standard loan-to-value ratios. Bank examiners will also not blame those banks for high delinquency rates.

Federal Housing Administration officials said they have strongly recommended to lenders that they hold off on late mortgage charges, suspend reporting of delinquencies to credit bureaus and help borrowers to refinance, if possible.