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LED Secretary Requests SBA Policy Change to Reduce Number of Declined Loan Applications Related to the BP Oil Spill

BATON ROUGE (July 2, 2010) -

Louisiana Economic Development Secretary Stephen Moret wrote to the U.S. Small Business Administration today requesting a policy change to reduce the number of declined loan applications related to the BP oil spill.

The full text of the letter is below:

Ms. Karen G. Mills
U.S. Small Business Administration
409 3rd Street, SW
Washington, DC 20416

RE: Enacting a policy change to reduce the high rate of declines for SBA disaster loan applications related to the BP oil spill disaster

Dear Administrator Mills:

I am writing again to request your immediate action to address an important issue that is impacting hundreds of small businesses in Louisiana that have been economically damaged by the BP oil spill.

In a previous letter to you on June 24, we requested that SBA implement a policy change that would allow an exception to the normal underwriting standards of SBA to specifically allow repayment in the form of BP claims, if needed, in lieu of SBA's normal process for assessing credit history and repayment ability. In that letter, I noted that my economic development team has had multiple conversations with SBA managers about our concerns and potential solutions. Our understanding from those conversations is that SBA could change its internal policy to allow expected BP claim proceeds to be assigned as needed to SBA to ensure repayment of any loans made, thereby significantly reducing any potential losses that SBA might otherwise experience. In fact, as I noted in the June 24 letter, we were told that SBA utilized a somewhat similar process after the Exxon Valdez disaster to help small businesses impacted by that spill.

Your response to our June 24 request, in a letter dated June 28 from SBA's Associate Administrator for Disaster Assistance James Rivera, stated the following: "[SBA's] experience has been that entities that may have caused disasters are typically reluctant to acknowledge any specific claim in advance, even when there may be a general acknowledgement of responsibility. Accordingly, SBA has historically not considered potential claim recoveries as part of its analysis of repayment ability. Nevertheless, SBA is in discussions with those working with the new independent BP claims facility just announced by President Obama to explore whether SBA would be allowed to obtain information regarding the facility's standards and process for evaluating BP claims. Such information might be useful to SBA in its evaluation of an applicant's repayment ability." However, the June 28 letter from Mr. Rivera did not address the possibility of changing SBA's internal policy on this matter or the apparent precedent for a somewhat similar process to recognize claim proceeds in a way we have been told helped small businesses impacted by the Exxon Valdez disaster.

While we appreciate your efforts to work with the independent BP claims facility to obtain information that might be useful to SBA in its evaluation of an applicant's repayment ability, we also request that you respond specifically to the possibility of changing SBA's internal policy in this regard, especially in light of the apparent precedent for a somewhat similar process after the Exxon Valdez disaster. In particular, please provide details on the process used to recognize and/or assign claims following the Exxon Valdez disaster and explain whether implementing a similar process for the BP oil spill disaster is a solution for helping small businesses seeking SBA disaster recovery loans while they await payment of legitimate BP claims. Thank you in advance for your swift consideration of our request.


Stephen Moret
Louisiana Department of Economic Development

cc: Bobby Jindal, Governor of Louisiana
Mary Landrieu, U.S. Senator
David Vitter, U.S. Senator
Rodney Alexander, U.S. Representative
Charles Boustany, U.S. Representative
Anh "Joseph" Cao, U.S. Representative
William "Bill" Cassidy, U.S. Representative
John Fleming, U.S. Representative
Charlie Melancon, U.S. Representative
Steve Scalise, U.S. Representative



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