WASHINGTON (TheStreet) -- A congressional panel today tackled the sticky issue of how to help small businesses that have been devastated by the ever-growing BP (BP) - Get Report oil spill in the Gulf of Mexico.
"Over 40% of businesses fail to recover following a disaster," said Nydia Velazquez (D-N.Y.), chairwoman of the House of Representatives Committee on Small Businesses. "In many cases, these businesses go under simply because they lack the financial resources necessary to restart their enterprises. In the case of the oil spill, however, it is different -- and much more complicated. It is not just about the money, but making sure that the leak is stopped and the physical damage is mitigated. Then, we will need to restore the public's trust in the Gulf as a center for commerce and tourism.
Economists estimate that the oil spill will affect more than 7 million businesses, more than 6 million of which will be small businesses with fewer than 10 employees, she said. "For entrepreneurs, this is a catastrophe of an unthinkable size and scale."
The commercial fishing industry accounts for more than 200,000 jobs and $5.5 billion in revenue, Veslazquez said. "Not only has the closure of fishing areas limited their ability to operate, but many are finding that the public's confidence in Gulf products has been eroded, creating another obstacle for the local economy."
The sole witness at the hearing was Kenneth Feinberg, administrator of the new Gulf Coast Claims Facility, which is meant to process all individual and business damage claims related to the oil spill. BP has set up a $20 billion escrow fund to go toward such claims.
"Hopefully, this $20 billion will be sufficient to pay such claims," Feinberg told the committee. "If it is not, it is my understanding that BP has agreed to supplement this escrow fund as needed to assure full and fair compensation to all individuals and businesses that are found to be eligible for payment."
Feinberg addressed the issue that many claimants, to date, have received only enough money to cover a month's worth of damages -- an insufficient amount, considering their livelihoods have been ruined for the foreseeable future. He said the facility is planning to produce larger lump sums. Feinberg added that the facility hopes to work with the Small Business Administration so that the SBA will have sufficient information about SBA loan applicants who have been affected by the oil spill.
Still, he acknowledged that he'll have to set monetary limits, even in a time when the spill seems limitless.
"There's not enough money in the world to pay every single small business that claims injury no matter where or when," he said.
The facility still needs to hammer out the limits of claim eligibility, he said. A restaurant in Boston that's taking a business hit based on not being able to order shrimp from Louisiana? Probably not eligible, he said. But the facility may reimburse beachfront businesses that have still-pristine beaches but are losing tourism money anyway.
Asked for some comforting words for devastated small businesses, "take heart, there is a program in place," Feinberg said. "File a claim. At least get the ball rolling so we can evaluate your claim and try to help you through this difficult time."
-- Reported by Carmen Nobel in Boston.
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