THE ROAD BACK: WTC Aid Slow To Reach Small Businesses

Dow Jones Newswires

(The Road Back is an ongoing look at how Wall Street and the New York metropolitan area have reacted to, and been affected by, the Sept. 11 terrorist attacks on the World Trade Center.)

   By Phyllis Plitch and Lynnette Khalfani
   Of DOW JONES NEWSWIRES

NEW YORK -- Filmmaker Manabu Nagaoka has watched the demand for his work - music videos, television programs and travel commercials with a New York backdrop - wither away in recent months.

So he's been videotaping his own plight, documenting a journey through the bureaucratic maze of disaster relief.

It's a trip shared by many of his downtown comrades. More than two months after the World Trade Center attacks, hundreds of small businesses and self-employed professionals in Lower Manhattan have yet to fight through the red tape that stands between them and financial assistance.

Many who have navigated the system are walking away disillusioned, despite the best intentions of a multitude of agencies and private companies.

After enduring what he described as a classic runaround - including "a one-hour lecture" from an emergency relief worker, repeat visits to government agencies and nonprofit organizations, confused volunteers and a pile of paperwork - Nagaoka was finally rewarded for his efforts.

The payoff: a $1,500 business grant and $200 a week in disaster unemployment compensation - not enough to pay the sky-high liability insurance required to film in New York. Nagaoka, the father of a kindergartner, also received $850 for personal living expenses.

"It's not enough for anything," Nagaoka said, referring to his weekly stipend.

Small-business owners aren't alone in their concerns.

Critics who worry that the needs of small businesses aren't being met include Kevin Curnin, a lawyer at Stroock & Stroock & Lavan who helped assemble a network of attorneys to offer pro bono aid to victims of the attacks.

"I think it's critical at this point we find a faster and more efficient way to put some emergency funds into the hands of the small business owners," said Curnin. "We keep hearing about massive amounts of money, but it's yet to trickle down to the mom-and-pop stores."

Public and private loans have been available to small businesses since early after the attacks. Those, such as Nagaoka, who have learned the disaster aid ropes, have been able to tap into cash from Safe Horizon, which has been treating distressed downtown businesses as victims of the attack, funneling $1,500 in grant money to individual businesses to hold them over.

Until recently, most of the available financial aid has been in the form of loans, at least as many small business owners see it. But last week, the city and state came through with small business grants, setting aside $5 million and $20 million respectively for direct aid, an acknowledgment that the various loans available - including a $250 million emergency bridge loan program - were not quite cutting it.

In addition, a loan and grant program administered by Seedco, a New York nonprofit organization, plans to announce financial distributions next week.

The hardships borne by small businesses have larger implications for downtown New York, which has lost tens of thousands of jobs and is trying to rebuild and recapture its vitality.

Among the concerns of Wall Street firms grappling with a return to the Financial District is whether the area will have the usual products and services for their workers. Without more aid, many small businesses such as bars, delis, shoe repair shops and bookstores, "would disappear," Curnin said.

Seedco, one of the few disaster relief programs targeted specifically to downtown businesses, is expected to begin distributing grants of up to $25,000 Tuesday.

The New York nonprofit organization has been recruited to help dole out $7 million in grants and low-interest loans - funds from its own coffers as well as donations - to retailers and light manufacturers with 50 employees or less. But its pot of money falls far short of the expected need. With hundreds of businesses lining up for the grants, Seedco President Bill Grinker estimates that $20 million is needed.

While the business community may not have been first in line for receiving financial resources and attention, Grinker said that's the way it should be as more pressing human needs had to be addressed first in the wake of the disaster.

"You can't do everything at once," he said. Still, Grinker sees a "major problem" in a lack of coordination between funding sources.

"It's sort of hard for a small business guy to figure out where to go, and he's got each agency, which has its own hoops to jump through, and it's complicated," he said.

For downtown merchant David Goldman, tapping into $10,000 in state funding directed at retailers in a designated radius was a cinch. As the proprietor of Computer Book Works on Reade Street, four blocks from the World Trade Center, Goldman fit perfectly into the profile. He was one of nine grant recipients who last week collected a total of $75,000.

But for nonretailers seeking city grants of up to $10,000, there's a catch. First they must apply for a disaster loan - whether they want to borrow or not. If they don't, and can wait up to 21 days, they can walk away with a $2,500 grant. As of late Tuesday, only one $10,000 check had been written.

And for entrepreneurs who have operated their businesses without borrowing, relief loans are not an attractive option.

"It's going to put me in a position of taking on debt," said Suellen Epstein, who is trying to revive her downtown gymnastics school for children. "It's not how I wanted to design my financial life." (See related story under code N/SML.)

Though more than $100 million has been lent out by the U.S. Small Business Administration, the federally funded program has hardly played the role of all-benevolent lender. The agency has rejected more than half the businesses seeking aid because they failed to meet eligibility requirements.

As of late last week, of the 4,279 SBA applications filed in New York, most of which are seeking help for "economic injury," 1,167 have been granted and 1,021 were still being processed, the agency said.

Officials running the nationwide program say its mandate is to look at businesses prior to a disaster. If a company was already in deep financial trouble, there's a good chance it will be turned down for a loan.

In most disasters, 20% of SBA loans go to businesses and 80% pay housing costs for homeowners, renters and displaced individuals. In this case, though, the opposite scenario has played out, with businesses taking the lion's share of the SBA's loans, according to Herbert Mitchell, who runs the program nationally as associate administrator of disaster assistance.

People who have lost their homes have more options under federal programs. But for business owners, Mitchell said, "there's not a safety net."

-By Phyllis Plitch, Dow Jones Newswires; 201-938-2357; phyllis.plitch@dowjones.com

-By Lynnette Khalfani, Dow Jones Newswires; 201-938-4381; lynnette.khalfani@dowjones.com

(The Road Back is an ongoing look at how Wall Street and the New York metropolitan area have reacted to, and been affected by, the Sept. 11 terrorist attacks on the World Trade Center.)

    By Lynnette Khalfani and Phyllis Plitch
    OF DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--It was the nail clipper that drove her over the edge.

For 23 years, Suellen Epstein has run a gymnastics studio, teaching tumbling skills to as many as 150 kids a week in her downtown neighborhood.

But when business dried up after the World Trade Center attacks, Epstein began the arduous process of divining whether city, state or federal aid might provide her with the money she needs to keep her business going.

Her foray started with an "intimidating" visit to an enormous government building at 141 Worth Street in Manhattan. To get into the facility, Epstein first had to make it through metal detectors, a baggage screening area and security checkpoints manned by gun-toting guards.

"It was such a scary experience," she says of her trip to the disaster assistance center.

At one point, Epstein, 53, was stopped and told to go home and return without some nail clippers she'd been carrying - cutters purchased to snip her kitten's nails.

Incredulous that anyone could believe the clippers might be a bona fide weapon or that she - standing at just 5-foot-3 inches tall - could represent a serious threat, Epstein asked security personnel to hold the clippers until she returned. They refused and told her to go hide the clippers in some bushes outside.

"I just fell apart, hysterically laughing and crying at the same time," she recalled.

Epstein's frustrations echo those of many small business owners hurt by the World Trade Center attacks. With hundreds of millions of dollars being funneled to disaster relief agencies, Epstein feels a bit like an overlooked victim of the Sept. 11 tragedy.

It's not like she hasn't reached out for help.

She spends at least three hours each day crisscrossing the city from one economic assistance center to another trying to learn about new or changing aid programs, check up on eligibility requirements or find out which agencies are helping people in her situation.

"It's frustrating," she says. "It's almost like I'm in the business of trying to get money for myself."

At the government building - after hiding the offending clippers in a nearby park - Epstein contended with long lines, a dizzying array of forms and literature, complicated applications, as well as various city, state and federal agencies.

The center, which at its peak serviced up to 500 business owners a day, was simply overwhelming for Epstein, she said.

A volunteer did help her make sense of the Small Business Administration loan application, highlighting the sections that she'd need to fill out and alerting her to important areas of the form.

To her dismay, however, Epstein soon learned that in order to qualify for grants, business owners were first required to apply for a loan, even if they wouldn't ultimately take the loan. Epstein said she's gotten the sense that the process was intentionally difficult - perhaps to weed out those not desperately in need.

"I don't think anyone (from the government agencies) wants to just give away the money, even though it's obvious I'm in dire financial straits," she said.

"I'm very worried that I may fall through the cracks and not get grant money," she added.

Epstein's biggest complaint - a sentiment echoed by many small business owners - is that too few grants are being offered to those in need. For now at least, many business owners are balking at loans for a multitude of reasons. With the economy limping along, they are reluctant to take on debt.

Additionally, the SBA is requiring business owners to pledge their homes or other assets as collateral - a demand many find untenable. The prospect of losing their businesses - and then perhaps sacrificing their homes as well if things turn increasingly sour - makes many wary.

"I'm on the downhill slope," said Epstein.

Over the past month, the former dancer has turned into a walking office, lugging around a 10-pound brown leather backpack.

The contents include: a metal card case with her students' phone numbers, a portfolio of disaster relief forms from FEMA and the SBA, a stack of her business brochures, three years of personal and business tax returns, a list of agencies offering aid, a personal phone book and agenda, cell phone, and a supply of bottled water.

Despite many days spent seeking financial help, Epstein so far has collected nothing besides disaster unemployment compensation - a weekly payment that she says represents a tiny fraction of her previous earnings.

While some small business owners have thrown up their hands, Epstein has become an activist about getting aid and information.

She can rattle off where numerous city, state and federal agencies are located throughout New York.

She knows which offices have computers for public use, where checks are doled out on the spot for food or rent, and which buildings have telephones and fax machines for New Yorkers like herself who still lack phone service.

On Nov. 8, Epstein turned in her SBA loan application to an aid center at 110 Maiden Lane, a low-key place where easy-going staffers are quick to offer visitors chocolates and other candies. The facility, which serves less than 50 clients a day, is much more to Epstein's liking because it's smaller and less difficult to navigate.

If her SBA money comes through, it won't be too soon.

Already, Epstein has been late paying crucial bills, including her life insurance premiums.

In the meantime, she's recently resumed teaching her weekly gymnastics classes, but has only 20 or so pupils, far fewer than before.

To snare those kids, she had to reassure worried parents that her 12-story building is safe and, in some cases, pick up students from bus stops because some streets are closed and key subway service is out of commission in her neighborhood.

Friday evening, Epstein pursued grant money at a state office on 54th Street -- "the Pataki place" as she calls it, referring to Gov. George Pataki.

"Apparently, I am not eligible because of the industry I'm in," she said, adding that "many other artists" have also been denied aid. "So far, nobody knows exactly where I fit into the grant situation but I'm talking to a lot of people. Hopefully somebody will talk to me soon about where I can get some help."