The U.S. Small Business Administration announced the availability of long term, low interest loans for people affected by chinook salmon fishery disaster declaration. However, some local fishermen say they are uninterested in taking out loans to recover from last season.
Businesses in affected areas in the Kenai Peninsula Borough, Lower Kuskokwim and Lower Yukon Rural Education Attendance Areas, the Matanuska Susitna Borough, and some neighboring areas, can apply for the loans until Aug. 21, 2013.
Applicants must have a credit history “acceptable to the SBA,” must prove that they can repay the loan and must provide collatoral for all loans over $5,000 according to the SBA fact sheet on economic injury disaster loans. While the SBA will not decline loans based on a lack of collateral it will require borrowers pledge collateral that is available.
Despite the myriad of requirements, Sam Dickey, deputy district director of the SBA’s Anchorage office, said people should apply rather than assume they were not eligible.
“They’ll make you a loan that is within your need and your ability to repay,” he said.
Typically, disaster loans are paid out pretty quickly, but fishermen may have to wait longer than usual.
“This may be an exception because right now we’re pretty busy with (Superstorm) Sandy,” he said.
Once a fisherman applies, the process could take as little as 10 days, up to weeks to complete, he said.
Business owners and permit-holders are eligible to apply. Crewmembers are not be eligible.
The loans are targeted to helping people whose businesses suffered negative economic consequences from the fisheries disaster, so fishermen are not the only people eligible to apply, said Bryan Zak, southwest regional director of the small business development center.
The center acts as an adviser for small businesses and is partnering with the SBA to help affected businesses apply for loans.
Zak said that unlike traditional loan application, people who applied for economic injury disaster loans would not know exactly how much they would be awarded.
“The call is going to be made by the SBA,” Zak said. “You’re sending them all this information, but you don’t know what you’re asking for.”
Aside from partnering with the SBA, the small business development centers, SBDC, focus on giving small business owners advice, and Dickey encouraged people to utilize those services.
“A huge number of businesses are never able to recover from a disaster,” Dickey said. “The SBDC can help you with those planning and logistical issues with coming back from a disaster. They are the experts in figuring out what you need to do to assure that your cash flow is opening ... it’s free help, avail yourself of it.”
Paul Shadura, a director of the Kenai Peninsula Fisherman’s Association and a setnetter, said the SBA’s collateral requirement could prove difficult for local setnet fishermen.
While some small businesses have buildings and stocked items they can sell, setnetters do not stockpile what they sell, he said.
“When it comes to setnet fishing, the only thing we really have is our setnet sites,” Shadura said. “(It’s worth) is apparent to the person who buys that site — at a high risk— but it makes it tough for a person to come up with the collateral for most fishermen to get loans. They’ll have to put up something else like their homes, or private properties.”
The maximum interest rate for the loan is four percent and the terms can be set for a maximum of 30 years, according to the SBA.
Brennan Norden, a sportfishing guide on the Kasilof River and setnetter, said he had no intention of applying for a loan even though his business floundered last year.
“I finish in the red pretty much ever year, having a small business you finish in the red a lot,” he said. “I was running it right on the cusp of making money and not making money.”
However, despite the shortfall Norden said he did not think borrowing money was a good option.
“That doesn’t make me any money, that makes the banks money. I have to pay interest on that,” Norden said.
While some fishermen may not currently feel like they need the loans, Dickey encouraged people to watch their finances closely for the next few months.
“Electricity went up, gas costs went up, all these other expenses go up and come next summer, they (may) in fact need some help,” Dickey said. “It may be months down the road that they really do need to apply.”
He also encouraged business owners to consider waiting to apply for loans until they had a better idea of exactly how much money they might need for the next season.
“It is worthwhile to apply if they think they need it, if they want to wait a few months to see what their situation is ... just don’t let the deadline pass. It’s like anything else, once that deadline is passed it’s over and there’s nothing you can do about it.”
Zak said staff in the SBDC offices would help potential applicants determine if loans were right for their businesses.
He said typically borrowing money to stay afloat was a risky business, however the generous terms of the SBA loans made them more attractive kind of debt.
He used the example of a fisherman who used a credit card to finance purchasing new nets for the last fishing season and now faced short-term high-interest debt.
“If they didn’t have this type of loan program available they would be in serious trouble with the credit card company,” he said. “It’s relief for them that they could then pay those cards off and or make sure they have money to start off next year and hope that maybe next year’s season was a little better.”
Dickey said the terms of the loan were generous because the SBA had “no interest” in making people’s financial situations worth.
“It does us no good to foreclose on your house, we don’t want it and you don’t either, it does us no good. We’d rather you pay us the $100 bucks a month and stay in your house,” Dickey said. “We’re very accommodating in terms of working with people. Typically if they are playing fair, we will play fair right back.”
Setnetter, Brent Johnson, said he longstanding policy not to borrow money.
Both Johnson and Shadura said the current state regulation on the setnet fishery did not inspire confidence that setnetters would be fishing often enough in the coming season to enable repayment on a loan.
“Doesn’t make much sense to me to borrow money when you’ve got an outlook on commercial fishing that’s iffy,” Johnson said. “If you just had a business that’s failed, then don’t you have to do something different so that you don’t continue to fail? Pumping more money into it, unless you’ve got a lot of money, seems like a bad idea.”
Shadura said loans may not best way for fishermen to support themselves.
“SBA loans are not going to make you whole again,” Shadura said. “It just allows you to maintain a business until your period of injury is over with and you can maintain your business from that point on, so it has a little difficulty in application in this situation.”
Rashah McChesney can be reached at email@example.com.