Charles Sargent Irrigation, Inc., No. 3912 (April 12, 1994) Docket No. SIZ-94-3-17-25 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. SIZE APPEAL OF: ) ) Charles Sargent Irrigation, Inc. ) ) Appellant ) Docket No. SIZ-94-3-17-25 ) Economic Injury Disaster Loan ) Application No. 7934-00045 ) Area 3, SBA Disaster Office ) Fort Worth, Texas ) DIGEST Where a firm that is seeking an economic injury disaster loan presents evidence in its loan application that its primary business activity is deep well water irrigation drilling and not the manufacture and sale of pumps and pump equipment, the Area Director correctly found that its primary business should be classified under Standard Industrial Classification code 1781 (Water Well Drilling). DECISION April 12, 1994 BLAZSIK, Administrative Judge, Presiding: Jurisdiction This appeal is decided under the Small Business Act of 1958, 15 U.S.C. §632 et seq., and the regulations codified at 13 CFR Part 121. Issue Whether the Area Director correctly classified an applicant for an economic injury disaster loan under Standard Industrial Classification code 1781 (Water Well Drilling). Facts On November 5, 1993, Charles Sargent Irrigation, Inc. (Appellant) filed an application with the Disaster Assistance Office, Area 3, of the Small Business Administration (SBA) for an economic injury disaster loan pursuant to Section 7(b)(2) of the Small Business Act. The application was based upon economic losses incurred by Appellant as a result of severe storms and flooding occurring in Nebraska and throughout the Midwest during the summer of 1993. SBA regulations restrict economic injury loans to small businesses, as defined by SBA size standards. See 13 CFR Part 121. In an informal determination dated November 12, 1993, the Loan Officer of the Area Processing Section found Appellant's and its affiliates to be engaged in deep well water irrigation drilling services and placed Appellant's primary business under Standard Industrial Classification (SIC) code 1781 (Water Well Drilling), having a $7 million average annual receipts size standard. The Area Processing Section found that Appellant's and its affi- liates' average annual receipts for the past three years were well above the $7 million size standard and, consequently, declined the loan assistance. By letter dated December 30, 1993, Appellant requested the Area Director to reconsider the denial of its application. In its request, Appellant asserted that the firm and its affiliates are primarily engaged in the sale of pumps and pumping equipment and not in deep well water irrigation drilling. Thus, Appellant argued, it should have been classified under SIC code 3561 (Pumps and Pumping Equipment), with a 500-or-fewer employees size standard. The Loan Application file contains a statement made by Appellant as part of its original loan application which states: Charles Sargent Irrigation, Inc. is probably the largest independent deep well irrigation drilling company operating in the Continental United States. The company has developed techniques for deep well drilling, which are superior in the industry. It has operated primarily in the midwest and western United States. The company has directly or indirectly, through assistance programs and leasing arrangements, participated in extensive drilling in the midwest. Appellant's SBA Form 355 shows that, combined with its affiliates, Appellant has over 100 employees. On February 17, 1994, the Area Director declined Appellant's request for reconsideration. The Area Director noted that [t]he size standard to which you [now] refer [SIC code 3S61] is for establishments primarily engaged in manufacturing pumps and pumping equipment and therefore is not relevant to your business activity. The Area Director further noted that the SIC code applicable to the sale of pumps and pumping equipment is SIC code 5083 (Farm and Garden Machinery and Equipment) or SIC code 5084 (Industrial Machinery and Equipment), both having a 100-or-fewer employees size standard. As noted before, Appellant and its affiliates have over 100 employees. Thus, the Area Director concluded that, even if Appellant's primary business was the sale of pumps and pumping equipment, Appellant would still not meet the relevant size standard. Appellant received the Area Director's denial on February 22, 1994, and by letter postmarked March 16, 1994, timely filed an appeal. */ Appellant now argues that it is basically engaged in the manufacture of pumps and pumping equipment and also sells those products. Thus, Appellant argues, its primary business should be classified under-SIC code 3561, with a 500-or-fewer employees size standard. Discussion Appellant has not presented any probative evidence to dispute the Area Director's finding that Appellant is not a small business for purposes of receiving disaster loan assistance. The record shows, as acknowledged by Appellant and quoted above from Appellant's loan application, that it is primarily engaged in deep well irrigation drilling, not the manufacture and sale of pumps and pumping equipment or engaged primarily in the sale of such equipment. Assuming, arguendo, that Appellant's principal business activity is, as it now claims, the sale of pumps and pumping equipment, the applicable SIC codes then would be SIC code 5083 or 5084, supra. Appellant's own evidence establishes that if either one of these SIC codes were applied, Appellant would not meet the respective size standards, supra. Here, the record is uncontroverted and based upon Appellant's own evidence, that Appellant's primary business activity is deep well irrigation drilling, not the manufacture and sale of pumps and pumping equipment, and that its business is best described under SIC code 1781, with a $7 million average annual receipts size standard. The record also establishes that Appellant and its affiliates have annual receipts exceeding that amount. Thus, Appellant was properly found to be other than small for purposes of receiving an economic injury disaster loan. Conclusion The appeal is DENIED. This constitutes the final decision of the Small Business Administration. See 13 CFR 121.1720(a), (b), and (c). ________________________________ Gloria E. Blazsik (Presiding) Administrative Judge ________________________________ Elwin H. White (Concurring) Administrative Judge _________________________________ G Stephen Wright (Concurring) Administrative Judge __________________ */ See 13 CFR 121.1705(a)(1)1.