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Many 9/11 disaster loans in Maryland not being repaid

In the aftermath of the Sept. 11 terrorist attacks, an Upper Marlboro janitorial company received $50,000 in a loan from the U.S. Small Business Administration to make up for economic losses.

A florist in Owings Mills also received $50,000 as an SBA disaster loan. And a new car dealer in Gaithersburg received $223,300.

After the attacks on the World Trade Center and the Pentagon a decade ago, the U.S. Small Business Administration gave out nearly $16 million in loans to Maryland-based businesses that claimed to be hurt by the disaster.

Many of the loans were not repaid, and at least a dozen of the companies are out of business.

The 116 recipients ranged from travel agencies to engineering services to high-end women’s clothing stores, according to public records made available through the journalism organization Investigative Reporters and Editors.

The data that was culled includes only basic information about the businesses and the loans they received. It does not indicate why loans were approved, and does not include supporting application information.

SBA disaster loans are meant to help homeowners, renters, businesses and nonprofit organizations rebuild after a disaster. These loans were available to any business nationwide, and were promoted through press releases, according to SBA spokeswoman Carol Chastang.

The loans that were given to Maryland businesses were mostly economic injury disaster loans, which provide working funds after a disaster until normal operations resume.

Chastang wrote in an email that to get loans, the small businesses had to document how the 9/11 attacks and any federal action that followed — such as airport closings or restrictions on border access — caused “substantial economic injury.”

Today, many of the Maryland recipients of the loans are no longer in business. Telephone numbers of more than a dozen of the businesses that received loans were disconnected, and many business websites had been taken down.

Without individually examining each loan application, it’s impossible to tell why companies received loans. However, Chastang wrote that there are ways that businesses could have been affected by the terror attacks that are not obvious. For example, a clothing store or florist that gets tourist traffic might have seen less of it because fewer people were traveling directly after the attacks. Importers also may have been affected by international shipping clampdowns and new regulations.

Loans of all sizes were given to Maryland companies after the terror attacks. According to the data, each loan was worth an average of $137,188, but the amounts were much larger and much less than that.

The largest loan was for $732,500, and the smallest were for $5,000.

According to Chastang, the loans carried 4 percent interest rates, and had up to 30-year payback terms. They were working capital loans, intended to pay fixed debts like payroll, utilities and other bills that became harder to pay in the aftermath of the attacks.

In Maryland, just over half of the loans were paid off. The remaining funds were not collected. Some were written off by the SBA as uncollectable — about $4 million in Maryland — while others are still being collected.

Chastang wrote that nationwide, the SBA approved 4,994 of these Sept. 11 related loans, costing a total of $558 million. A total of 974 disaster loans, or 19 percent of all loans nationwide, were charged off. When a business defaults on an SBA disaster loan, she wrote, the SBA follows standard workout and collection practices, using tools like deferments or payment restructuring to help struggling borrowers.