SBA offers loans to firms affected by military duty

Dollar amounts limited to actual economic injury

NEW YORK — When John Nimmo was called up by the reserves and sent to Afghanistan after the Sept. 11 terrorist attacks, the multimedia production company he co-owned ended up in a financial bind.

By Joyce M. Rosenberg
Associated Press Chicago Tribune

Nimmo’s partner, Jerry Sexton, said he worked 12- and 16-hour days during Nimmo’s eight-month absence from Denver-based Digital Metropolis. But "it hurt; we lost money," Sexton said.

In suburban Rochester, N.Y., Robert Parsons’ one-doctor veterinary practice was hobbled when he was called up last fall. His wife, Marla, has hired part-time veterinarians, but "we’ve been dramatically affected," she said.

Thousands of small businesses around the country have had to cope in recent months as employees–or in the case of these two companies, the owners–have been called to duty by the reserves. In some cases, the businesses have been hurt financially; in others, the problem is a loss of expertise.

It’s most difficult when the reservist is a sole proprietor.

Parsons quit her own job in November to manage her husband’s practice. She’s looking for a full-time vet and making do with part-timers two days a week.

To help tide the animal clinic over, Parsons received an economic injury disaster loan from the Small Business Administration. It has been a big help, but Parsons is well aware that when her husband returns, the loan will result in another bill that must be paid.

Digital Metropolis also got a loan to help after Nimmo was called up in 2001. Sexton said the money helped, but it was still a very stressful time.

"You become the sole proprietor and you make all the decisions," he said. "I can remember many nights, I’d be home at 10 or 11 at night, putting together proposals" for clients.

The partners are aware that they might be facing the same situation in the near future. "He’s on alert. He may have to go back," Sexton said of Nimmo.

Sexton and Parsons said that they would turn again to the SBA for more money.

The SBA’s economic injury disaster loans are more commonly known as a resource for businesses that are directly or indirectly hurt by disasters such as hurricanes, floods and ice storms. They also were available to businesses affected by the Sept. 11 attacks.

But the loans also are granted to companies whose business is hurt when essential employees are called up by the reserves. Like other economic injury disaster loans, these loans are intended to help companies cover their obligations until the employees are released from active duty. They are not meant to replace lost profits, however.

The amount a company can borrow will be limited to the actual economic injury that the SBA determines the business has suffered. The maximum interest rate on the loans is 4 percent, and the SBA will set the term of the loan after considering a company’s financial circumstances, up to a maximum of 30 years.

Like the SBA’s other economic injury disaster loans, companies are required to put up collateral if the loan amount is more than $5,000.

For many companies, the absence of an owner or key employee means a loss of know-how. Sexton had to deal with that problem at Digital Metropolis.

He noted that he couldn’t replace his partner overnight. "I had to try and hire someone in," he said, "and by the time they’re up to speed and get going, it’s still an impact on everything."

Where to turn if hurt by call-ups

Small businesses whose essential employees have been called up by the reserves can find information about Small Business Administration military reservist economic injury disaster loans at the SBA’s Web site, http://www.sba.gov /reservists/disloan.html. They can also call their local SBA offices.

A company that needs expertise or advice during an employee’s absence can get it for free from SCORE, an organization of retired business executives knowledgeable about a wide range of topics. The organization can be contacted online at http://www.score.org (the advice itself can be obtained online, a plus for a small business in a rural or remote area) or by phone at 800-634-0245.

SBA-sponsored Small Business Development Centers are another option. There are about 1,000 centers and satellite locations throughout the country, mostly at colleges but also vocational schools and chambers of commerce. A list can be found at http://www.sba.gov/sbdc.

–Associated Press

Copyright © 2003, Chicago Tribune

http://www.chicagotribune.com/business/smallbusiness/chi-0303170008mar17,1,3662018.story?coll=chi%2Dbusiness%2Dhed