Arizona firms rocked by 9/11 attacks got federal help to stay afloat - East Valley Tribune: Arizona

Quantity of AZ 9/11 disaster loans, by industry

Arizona firms rocked by 9/11 attacks got federal help to stay afloat

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Posted: Sunday, September 11, 2011 11:30 am | Updated: 2:30 pm, Sun Sep 11, 2011.

WASHINGTON – Rooms sat empty at Lisa McCulloch’s Grand Canyon International Hostel and her Dubeau Hostel after Sept. 11, 2001.

Between closed airports, canceled flights and an extended chill on travel, fewer travelers came by her Flagstaff hostels in the months and years after the attacks on cities more than 2,000 miles away.

“We … had to kind of scramble to try to figure out how we could keep our doors open,” McCulloch said.

The answer for her company and scores of other businesses in Arizona came from the federal Small Business Administration. It approved $12.5 million in 9/11 disaster loans in Arizona – including $29,400 for McCulloch – and more than $500 million nationwide over the next three years, the first time the agency ever offered disaster assistance outside a declared disaster area.

The SBA approved loans for 136 businesses and one individual in Arizona, according to data provided by the National Institute for Computer-Assisted Reporting. Not all the businesses wound up accepting the loans, which are paid back with interest.

Arizona had one of the highest repayment rates in the nation, according to the NICAR data.

The loans allowed McCulloch to renovate rooms in the hostels and make them available for monthly rent, which helped keep the business afloat during winter months when “we usually are struggling anyway,” she said.

That was the goal, said Mark Stamler, an SBA spokesman.

“Businesses that close up shop for a period after an extended disaster have a small likelihood of reopening,” he said. “If they get capital and operating funds to … keep going, then their chances of survival are much higher. That’s why we do those loans.”

McCulloch said the federal assistance prevented any layoffs at the hostels. Nationwide, SBA 9/11-related loans saved a total of 117,274 jobs outside the declared disaster areas of New York and Washington, D.C., said SBA spokeswoman Carol Chastang in an email.

SBA loans usually provide assistance for natural disasters that cause physical damage to homes and property. But when the World Trade Center attacks destroyed thousands of businesses in the New York area, it sent shockwaves throughout the national economy.

“In essence, the entire country was deemed a disaster area,” according to a 2003 Government Accountability Office report.

Loans went to companies in every state and more than half went to businesses outside the immediate Washington and New York disaster areas, according to the GAO. It said nine out of 10 businesses receiving disaster loans “suffered economic injury, but no physical damage.”

One of those was Phoenix-based Amour Cosmetic Manufacturing, whose owner learned that a client’s business was destroyed when the twin towers fell, wiping out 60 percent of Amour’s income.

Amour’s owner, who asked that his name not be used, was approved for a $34,200 loan after he was contacted by an SBA representative. The assistance covered about three months of expenses before the company started earning money again, the owner said.

“It helped us to get off the ground,” he said, but it would be longer before the company would get back to business as usual.

“It took a couple of years before we started having our affairs back in (New York City),” the owner said.

Nearly 20 percent of disaster loans, nationally and in Arizona, went to manufacturing businesses, including Amour Cosmetic and 30 other Arizona companies.

The SBA adjusted its policies for travel agencies, which were hit especially hard by the attacks because of the “chilling effect on travel,” Chastang said. It expanded loan eligibility for those companies by raising the previous income cap from $1 million to $3 million.

An $85,000 disaster loan helped Terra Travel, with offices in Phoenix and Mesa, get through what owner Paul Seiferth called “a couple of rough years.”

The company’s business dropped about 25 percent after 9/11 and did not fully recover until 2004, he said.

The loan “did help us during those years,” Seiferth said. He compared it to when “the government does loans for farmers, say for bad years (with) crops, and it helps the farmer maybe make it through that period of time.”

Terra Travel, McCulloch’s hostels and Amour Cosmetic all paid off their loans and continue to do business today.

For McCulloch, as for other Arizona businesses, the loans helped her return to a sense of normalcy in the years after 9/11.

“It definitely was a necessary infusion of money in order for us not to have to sell or close our doors,” she said.

Max Levy is a reporter for Cronkite News Service.

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