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SBA Now Lends to Religion-Oriented Firms

Little-Publicized Rule Change Marks the End of a Years-Long Legal Fight

June 18, 1996|VICKI TORRES | TIMES STAFF WRITER

Thousands of religion-oriented small businesses are now eligible for Small Business Administration loans under a little-publicized rule change.

Companies that sell or make religious products, such as books, music, gifts and other items, are now eligible to apply for the $10.8 billion in loan guarantees budgeted by the SBA this year alone.

The rule change "is going to be very, very significant" for many small businesses, said Brad Dacus, an attorney representing the Rutherford Institute, a nonprofit legal defense organization that lobbied for the change.

"In nearly every sizable town and community, there's at least one or more [businesses selling] religious products and services," Dacus said, "whether it's a bookstore, counseling or something related to media industries."

The Christian Booksellers Assn. estimates that its 2,500 members, two-thirds of them independently owned stores or small businesses, account for $3 billion in annual sales nationwide. The Gospel Music Assn., which reports that gospel music sales have increased 22% annually since 1991, lists a number of smaller record companies among its 5,600 members.

Many businesses had been prohibited since the 1930s from receiving government-backed funds under the "opinion molders" rule of the Reconstruction Finance Corp. The agency prevented the federal government from guaranteeing loans to businesses, primarily newspapers and radio stations, that molded or influenced public opinion. If the loans were foreclosed upon, the government wanted to avoid accusations that it was controlling the media, said Eric Benderson, SBA associate general counsel in Washington.

After the SBA took over from the RFC in 1953, the rule was expanded to include bookstores, television stations, businesses with religious products and even dinner theaters and greeting card companies.

The SBA was sued separately by a New York feminist bookstore, an African American-oriented greeting card company and a Colorado dinner theater, among other non-media businesses, who claimed the rule was unconstitutional. But the SBA stuck to its position.

"We received numerous complaints over the years," said Terry Jackson, general counsel in Colorado Springs, Colo., for the Christian Booksellers Assn. Religious bookstore owners were told by banks that they were eligible for loans, only to be turned down at the last minute by the SBA, Jackson said.

In July 1994, the SBA, in an effort to foster economic development, finally dropped the opinion-molders rule. But the ban against religion-oriented businesses continued. Those businesses began their own legal fight until SBA officials changed the rules in March.

Businesses selling a religious product, book or item are now eligible for SBA-backed loans, but those involved in religious indoctrination or instruction are not, Benderson said.

For Ronald Ritter, 57, a retired Navy chaplain in Fallbrook in northern San Diego County, the rule change means he can reapply for a $100,000 loan he had been turned down for twice.

Ritter, owner of Apples 'n Roses, weaves dried grape vines from nearby vineyards into heart-shaped wreaths, stars and crosses decorated with wooden apples and silk roses. The message is distinctly Christian. The apple symbolizes the fall of man and the rose portrays the Rose of Sharon and man's restoration to grace.

In early 1994, Ritter applied for an SBA loan but was denied because of the opinion-molders rule. After the rule change that year, he reapplied but was turned down again under the religious-business restriction.

The denial prompted him to seek legal help from the Rutherford Institute, a Charlottesville, Va., organization that provides legal aid in cases involving religious rights. In denying him a loan, the government was actively discriminating against him because of his religious beliefs, Ritter claimed.

"It's supposed to be benevolent neutrality," he added, "not freedom from religion, but freedom of religion."

Dacus said the ruling lifts the hostility and discrimination that religious-oriented businesses faced from the government. The little-publicized but new policy has the potential to put religious-oriented businesses on an equal footing with other businesses for SBA-backed loans, he said.

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