New Sba Regulations Allow Loans for Religious Businesses

The Clinton administration has adopted new regulations making federal loans available to small businesses that sell religious products or provide services that encourage religious beliefs and values.

Previous regulations prohibited the U.S. Small Business Administration from guaranteeing loans to any businesses promoting religious objectives or engaged in the expression or distribution of any religious ideas, opinions and values.

Although legal experts say such loans can probably pass constitutional muster, some Jewish groups expressed concern about potential implications for the separation of church and state.

Marc Stern, co-director of the legal department of the American Jewish Congress, said that “every time there’s a move” toward government subsidization of religion, “there’s an erosion of the notion of separation.”

He said, however, that in this particular case, the courts would probably find that “the government’s primary purpose was encouraging small business, not religion.”

Others welcomed the move as a potential benefit for Jewish business owners.

Abba Cohen, director and counsel of Agudath Israel’s Washington Office, said the regulations are “businesses-oriented” and are “far removed form the notion of endorsing religion or propagating religious views.”

“I think it’s a positive development,” Cohen added. “It brings greater acceptability to the notion of religion not only in our public life but in our everyday life.”

The new guidelines reflect President Clinton’s concerns about the increased “secularization” of society and continue the administration’s efforts to promote religious freedom, said Philip Lader, SBA’s administrator.

In November 1993, Cinton signed the Religious Freedom Restoration Act, which makes it harder for government to infringe upon the free exercise of religion.

Lader said the SBA’s new regulations were also crafted to reduce the burden of regulations on small American businesses and to expand their access to capital.

Under the new policy, businesses would only be disqualified from obtaining a loan if they were “principally” engaged in promoting or indoctrinating religion or religious beliefs.

Businesses already seeking loans under the new guidelines include religious bookstores, a religious software developer, a producer of religious gift items and a radio station featuring religious programming.

“If they are selling religious books, that does not make them ineligible” for an SBA loan, said Ronald Matzner, SBA’s associate deputy general counsel.

“But if they are engaged in teaching or counseling or indoctrinating religion, if they were having religion classes at night in the back room, that is something that our offices would have to take a look at on a case by case basis.”

The new regulations could assist Jews looking to go into a small business.

Matzner said, for example, that his wife once flirted with opening up a shop to sell tallitot, or Jewish prayer shawls.

Under the SBA’s old guidelines, Matzner said, she would have been ineligible for a loan, even though she had no intention to “propagate religion or indoctrinate anyone.”

UPDATE TO STORY: There is an update to the political analysis out of Jerusalem that appeared in the June 26 JTA Daily Dispatch. Please replace the 13th graf from the bottom that begins “Apart from two phone…” with the following:

Netanyahu’s foreign policy aide, Dore Gold, and Yasser Arafat’s deputy, Mahmoud Abbas, also known as Abu-Mazen, have spoken by phone and reportedly met secretly last week. But the diplomatic contact since the new government took office last week remains low-key.