Cavalry Has Arrived With Landmark Loan : SBA Can Rescue Other Quake-Damaged Companies
At first, it figured to be another dreaded brick in the road toward the San Fernando Valley’s financial ruin; another firm that had found persuasive reasons to abandon California for parts East.
This time, the problem was massive earthquake damage, so much of it that Dan Sandel’s Chatsworth-based Devon Industries Inc. might have simply merged with its Ohio plant rather than rebuild here. Sandel had no earthquake insurance, and part of the wreckage at his production facility included $2.8 million in machinery that had been reduced to scrap metal. California’s supposedly “inhospitable” business climate also figured heavily in the possible exodus of this self-made Israeli entrepreneur and naturalized American.
This, however, figures to be a good-news story for the Valley and for Los Angeles as a whole. We could certainly use one.
It was announced this past week that the federal Small Business Administration was expected to approve the largest loan made yet by the agency since the quake. It would mean that Sandel would: receive a $10-million low-interest loan, swallow his gripes about the California business climate, rebuild his largest plant, replace destroyed machines, upgrade operations and remain in the Valley.
If this loan proceeds apace, kudos will also be in order for the Valley Industry and Commerce Assn. (VICA). For companies with fewer than 1,000 employees, SBA disaster loans are normally limited to no more than $1.5 million. That amount would not even have covered Sandel’s equipment losses. But VICA, whose clout in past years has been questionable at best, successfully lobbied the SBA to let companies with as few as 250 employees qualify for large loans.
That opened up the large loan eligibility ranks for Sandel’s company, and for several other small and mid-size firms that are desperately in need of the help.
Good-news stories generally carry a caveat of some kind, however. This one also involves the SBA and the number of requests for assistance that it has received. For every story like Sandel’s, there are dozens more business owners who are teetering on the brink of financial disaster. The scope of it alone is amazing, even in comparison to other major disasters.
In the first month after Florida was struck by Hurricane Andrew, the SBA received 5,704 disaster loan applications from its victims. The SBA received just 4,663 applications within the first month of last year’s devastating Midwest floods. By the time a month had passed after the Northridge quake, the SBA had received 46,023 applications, and it was running weeks behind its own standards for verifying damage.
The delays have even caused some initial applicants to drop out of the process. If your business did this, you have made a huge mistake and should return to the process as soon as possible.
SBA loan money was not forthcoming for nearly a year after the 1987 Whittier Narrows earthquake, according to a study funded by the National Science Foundation, even though the Whittier business district had sustained massive damage. By contrast, groups such as Operation USA, an international, nonprofit, disaster relief and development organization, believe that the SBA is doing a much more efficient job now with a larger and more complicated lineup of aid requests.
Even so, this is no time for groups such as VICA or local elected officials to relax. The Sandel case points out the importance of encouraging prompt SBA assistance. Without such possibilities, the Valley would have lost all or part of a business with 375 employees, one that has also played a key role in the community by employing and housing formerly homeless people. Its rescue is an important symbol of what is needed to recover from the Northridge quake.
