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.