NEWS STORY: Government changes SBA rule to include church stores in loan program

c. 1996 Religion News Service WASHINGTON (RNS)-The Clinton administration, seeking to remove obstacles to religious expression in the marketplace, said Friday (June 14) it has adopted a new regulation making it easier for religiously oriented businesses to qualify for federal small-business loan guarantees.”The administration … is concerned about increasing secularization (of America) through unintentional obstacles […]

c. 1996 Religion News Service

WASHINGTON (RNS)-The Clinton administration, seeking to remove obstacles to religious expression in the marketplace, said Friday (June 14) it has adopted a new regulation making it easier for religiously oriented businesses to qualify for federal small-business loan guarantees.”The administration … is concerned about increasing secularization (of America) through unintentional obstacles to the expression of faith in the marketplace,”said Philip Lader, administrator of the Small Business Administration (SBA).

In response, the SBA has rewritten and clarified its eligibility rules for small business enterprise to make it clear that the manufacture, sale or provision of religious goods and services is not a bar to SBA loan guarantees, Lader said at a White House briefing for reporters.


The SBA provides loan guarantees to some 7,000 banks that lend to for-profit small businesses-those with annual revenues of under $40 million and fewer than 50 employees. It currently carries a portfolio of $32 billion.”In the past, if a business included moral or ethical values or religious values (in its products), there was the presumption (by SBA loan officials) that it was ineligible for an SBA loan guarantee,”Lader said.”This is an issue where, when you talk about it in Washington, the eyes glaze over,”he added.”But it has a tremendous impact on Main Street.” Lader cited a number of examples of firms that now would be eligible for consideration of SBA loan guarantees. They include a for-profit daycare center that begins the day with prayer and conducts an occasional Bible class; a firm that produces religious software for computers; a Christian bookstore; and firms that manufacture crosses or other religious artifacts.

Terry Jackson, legal counsel for the Christian Booksellers Association, said his Colorado Springs, Colo.-based group, which includes 2,500 Christian bookstores and 600 suppliers, felt the new rule is”a very good action.”It means that we get to compete with other small businesses and not be discriminated against because of our religious views,”Jackson said.”There is a need for additional capital”in the Christian bookselling industry, he said.”I think as a result of this (new rule) we’ll see more loan applications.” But businesses”principally engaged in teaching, instructing, counseling or indoctrinating religion or religious beliefs, whether in a religious or secular setting,”will remain ineligible, according to the new rule.

Lader and Ronald F. Matzner, associate deputy general counsel of the SBA, acknowledged that the word”principally”remains undefined and could be a source of conflict in loan applications.”Clarification of that will come on a case-by-case basis,”Matzner said.

Added Lader:”We trust that there will be minimal abuse”of the new rule by religious groups.

Jackson also said he expects there will be”individual and isolated cases”where”overzealous”SBA bureaucrats reject an application and that such instances will also be handled on a case-by-case basis.

The prohibition on providing loans or loan guarantees to religiously oriented for-profit firms had its origins in 1953 when the SBA was established. At that time-early in the Cold War when concerns about communist infiltration ran high-the agency was regulated by the so-called”opinion-molders”rule that barred it from giving loans or loan guarantees to business that engaged in efforts to shape public opinion on political or other issues.

The”opinion-molder”rule was declared unconstitutional by a federal appeals court in 1989, and in 1994 the SBA issued a regulation repealing the rule. The new rule is a clarification of the 1994 regulation.


Lader said the new rule is not seeking to broaden the SBA loan guarantee program to include religious groups but to end the”chilling effect”that has made involvement in religion automatic grounds for ineligibility.

Lader and Matzner said there was”anecdotal”evidence before the rule change that some otherwise qualified religiously oriented firms had been verbally discouraged from applying for the loans. Since the new rule was issued in March, there have been a handful of inquiries, according to the officials, but no loans yet have gone all the way through the approval process.”One of the things we are trying to do today is to get out the word,”Lader said.

JC END ANDERSON

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