Denial of Loans to Squid Fishers Under Scrutiny

As the state’s squid fleet teeters on the brink of financial collapse, a congressional oversight committee has asked the federal Small Business Administration to explain why it has refused disaster loans to a vast majority of those fishers who have applied.

Prompted by complaints from fishers and an inquiry by The Times, the House Committee on Small Business asked the agency Friday to justify its reasons for turning down more than 72% of the 122 applicants who haveapplied for assistance since April.

“It’s unusual when three-quarters of the industry is declined disaster assistance,” said committee counsel Charles Rowe. “Hopefully, we’ll be able to find out why that’s the case and, if there’s a problem, rectify it.”

Chaired by Rep. James M. Talent (R-Mo.), the committee oversees the Small Business Administration and other federal lending institutions and programs. Although it cannot force officials to make loans, the committee can draft new lending policies and its members can pressure the agency to change lending practices.

In what many in the industry have called an unprecedented disaster, the state’s 156-boat squid fleet has remained idle for almost a year after warm El Nino waters drove the schooling mollusks to colder waters farther out to sea.

The barren seas have caused most boats to be kept at their moorings while their owners scramble to scrape together enough money to hold onto their homes and keep creditors at bay.

According to industry and government estimates, the squid harvest has plummeted from more than 257 million pounds in last year’s six-month season to virtually nothing this year.

To help fishers and the industry ride out the season, the agency had said it would make Economic Injury Disaster Loans available to qualified fishers in April.

But for most, the glimmer of hope that the announcement provided has gone the way of the squid, as applicant after applicant has been turned down because they could not demonstrate an ability to repay the loan.

Those fishers say loan officers are using flawed accounting formulas that inflate costs and underestimate the value of the harvest, making it impossible for them and the industry to show a profit.

Small Business Administration officials, however, said recently that although they feel sympathy for squid fishers, they cannot grant loans to people who can’t meet their criteria.

Although committee officials have not yet received any answers from the Small Business Administration, Rowe said that because this is the first time the agency has made disaster loans available to fishers, loan officers may be turning down loans because they are unfamiliar with the industry.