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FINANCIAL ASSISTANCE

Business Loans

The Small Business Administration made more loans in 1969 to aid small businesses than it did in 1968 and nearly doubled its volume of loans to minorities.

During 1969 SBA approved 5,385 loans amounting to $131 million to minorities, compared with 2,739 loans totaling $54 million in 1968.

There has also been a steady upward trend in the volume of SBA loans approved with bank participation or under SBA's loan guaranty plan. In 1969 banks provided $471 million in 10,964 loans approved in these two categories, compared with $403 million provided by banks in 9,037 loans in 1968.

Banks are currently providing 81 percent of the dollars made available through SBA business loans and 41 percent of the dollars made available through SBA economic opportunity loans.

Although there was increased emphasis on minority loans during the year, SBA registered the highest dollar volume of business loans in its history-$515 million in loans to 8,677 small firms, topping the previous record high in 1968 of $501 million in 9,226 business loans.

This record was made possible only because of the interest and participation of the Nation's banks. The banks put up $315.8 million with guarantees by SBA.

Curbs on Federal spending made it necessary to continue restraints on direct loans as well as on those loans where the bank and SBA both furnish part of the funds on an immediate basis. At yearend, several proposals were being considered to alleviate the shortage of funds by enlisting the help of privately controlled organizations such as pension funds.

Displaced Business Loans

In the latter part of 1968 legislation was amended to permit small firms which suffer economic injury as a result of their location near Federally-assisted construction projects to apply for displaced business loans, in addition to those which were actually displaced.

Demolishing and rebuilding for Federally aided construction projects leave many small businesses homeless. SBA's Displaced Business loans help small firms obtain new quarters.

Thus, while the total dollars for these loans ($38 million in 1969) were less than the $43 million in 1968, the number of loans made under the program (317 in 1969) was somewhat higher than the 287 loans approved in 1968.

Economic Opportunity Loan Program

The Economic Opportunity Loan (EOL) program, authorized under Title IV of the Economic Opportunity Act of 1964, as amended, is designed to assist poor people who want to start a new business or expand an existing small business.

The Administrator of SBA is authorized to promote a program of management and financial assistance with emphasis on private sector participation in loans not to exceed $25,000 as SBA's share, with a maximum maturity of 15 years.

In 1969, 4,488 EOL loans totaling $56.2 million were approved, a considerable increase over the 3,604 loans ($42 million) in 1968. Of the 1969

total, 2,003 loans ($28.1 million) were made in participation with banks. This reflects a significant increase in private sector participation. Of the total loans made, 42 percent were made by banks with SBA's guaranty.

Local Development Company Loans

In calendar year 1969, SBA had its highest volume both in numbers and dollars, in loans approved to local development companies since the program began in 1958.

A total of 524 loans were approved ($114 million) appreciably higher than the 475 local development company loans approved in 1968 with total SBA financing of $89 million.

Of this $114 million, approximately $50 million was furnished by SBA under the direct and immediate participation loan plans. SBA guaranteed bank loans totaling $10.8 million, and the balance was furnished by the private sector; that is, banks, insurance companies and pension funds, and the local development companies themselves for a 56.1 percent total private sector participation.

These local development company loans were made to 247 new business firms and to 277 firms already in existence.

In addition to protecting 14,852 existing jobs, an additional 19,340 jobs were created by these loans. For each of the 34,192 employment opportunities created, SBA provided $1,462 in loan funds.

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To help small businessmen compete for prime rental space in the commercial real estate market, SBA, under the lease guarantee program, assures the landlord that rental payments will be made. Thus, it is another type of credit assistance for the small businessman provided by SBA or in cooperation with private insurance companies.

Efforts to obtain private insurance company participation were continued during 1969. Thirteen companies have signed participation agreements under which SBA is a reinsurer for the private companies.

The insurance departments of 46 States have authorized participating insurance companies to operate under this program.

Through December 31, 1969, SBA had issued policies or commitments, directly or in participation with insurance companies, for 271 lease guarantees amounting to total guaranteed rentals of $165,909,739. Premiums on the rentals amounted to $4,042,008 of which SBA received $2,734,940.

gress has directed that premium rates be establishd on a sound actuarial basis.

On January 9, 1968, the eligibility for the program was expanded and the number of applications and guarantees has increased.

Responsibility and authority for approving applications up to $1 million in rents were delegated to field offices on September 15, 1969.

Liquidation and Disposal

During 1969, SBA continued its accelerated pace of collection of loans in liquidation. Recoveries to the Government exceeded $43.9 million, an increase over the preceding year of 31.4 percent.

In addition, over $16.4 million of severely defaulted loan balances were restored to current status. This record was achieved despite a 2.5 percent decrease in liquidation and disposal personnel during the period.

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Disaster Loan Program

The most costly disaster in SBA's history occurred when Huricane Camille struck the gulf coast area on August 17, 1969.

Through the end of August there had been 1,676 disaster loans approved ($14 million). During September, 1,856 loans were approved. ($14.1 million). By the end of the year, the total had reached 9,288 loans ($99.3 million).

The carryover into 1970 from disasters declared in 1969, including Camille, is expected to equal or exceed the total 1969 figures.

There were 60 disaster loan areas declared in 38 States and Puerto Rico during the year.

A major break from previous, more stringent limitations was made on October 1, 1969 when SBA raised its share of individual disaster home loans to a limit of $55,000 from $35,000. In addition, refinancing loans of an additional $50,000 are permitted in some cases.

The business loan ceiling was raised from $100,000 to $500,000 as SBA's share. In addition, a forgiveness feature of up to $1,800 of the excess over the first $500 of certain loans was provided.

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