Colorado Watchdog: Small business loan guarantee goes to large chain hotel

March 24, 2015 04:40 AM
Original Article, click here.
Colorado_Watchdog

By Arthur Kane | Watchdog.org

 

Starwood Hotels and Resorts Worldwide Inc. touts itself in corporate filings "as one of the largest hotel and leisure companies in the world," with about $6 billion in annual revenue and more than 180,000 employees.

 

But in 2013 the Small Business Administration provided a $5 million loan guarantee — the maximum allowed under SBA regulations — to help build one of Starwood’s signature Aloft hotels in downtown Denver, according to a Watchdog.org review of a federal database obtained by openthebooks.com.

 

Openthebooks CEO Adam Andrzejewski said the SBA has gone far beyond its mission of helping small business, and lawmakers should review the program.

 

SBA CRITIC: Openthebooks CEO Adam Andrzejewski said taxpayers need to pay closer attention to Small Business Administration loan guarantees.

Watchdog.org’s Aloft information is "an incredible find and exactly why regular people need to look at the list of 35,000 $1 million-plus loans," he said.

 

But Chris Chavez, SBA regional communications director, said the Aloft deal fits SBA loan guarantee standards because the federal backing helped get favorable loan terms for the franchisee who built Aloft — not the huge multi-national corporation.

 

"When you buy into franchise, folks are on their own in coming up with the money," he said. "I think (Aloft) does add to downtown employment. It’s a win-win getting folks into the business."

 

The franchisee, Jonathan Gandhi, expressed the same sentiments, saying he followed the SBA guidelines and didn’t get any financial help from Starwood.

 

"You should do a little bit more research," he said when reached on his cell phone. "The SBA is available to anyone to apply as long as they meet certain requirements. We’re not funded by a huge corporation."

 

Gandhi declined to answer further questions and hung up.

 

Chavez said there’s no longer a risk to taxpayers for the type of loan Aloft received. About a decade ago, the SBA started charging lenders a fee to participate in the federal loan guarantee program, and those fees are used to pay for  non-performing loans in the 7A loan program.

 

But taxpayers still pay a large portion of the SBA’s budget, which in 2015 fiscal is more than $700 million, according to the agency’s congressional budget request.

 

SBA rules, based on U.S. Census statistics, say the loans can fund hotel projects with up to $32.5 million in revenue. For other industries, the guidelines list either revenue or number of employees, generally around 500 workers.

 

Starwood’s Securities and Exchange Commission filings don’t break out individual properties, so it’s unclear how much revenue Aloft Downtown generates or how many employees the hotel hired. It’s also unclear how much, if any, of the revenue from Denver’s Aloft Downtown goes to Starwood’s corporate offices.

 

Tony Gagliardi, state director for the National Federation of Independent Business, questioned SBA small-business definitions, saying 92 percent of his members have 20 or fewer employees.

 

"That has always been a problem of what’s the definition of a small business," he said. "In Colorado, if you talk to policy makers they’ll consider a small business 100 or fewer employees. We tried to run a bill to put that into statute, but it was killed in committee."

 

Gagliardi said he wouldn’t fault Starwood or its franchisee for taking SBA help, but he wondered why the federal agency needed to get involved with the project.

 

"It’s the government’s role I question," he said.

 

Chavez said the SBA’s goal is to increase employment, and he believes the agency has been successful in that task — with minimal costs to taxpayers.

 

"Most of the folks are employed by small businesses, and we provided financing for 1,441 companies for a total of $644 million last year," he said. "If just one person is employed by each of those companies, we provided employment to more than 1,000 people who wouldn’t otherwise have financing they could afford."

 

Original Article, click here.

Back to news
Donate_Button_Red
Sign the Petition