The government's $5 billion effort to help small businesses recover from the Sept. 11 attacks was so loosely managed that it gave low-interest loans to companies that didn't need terrorism relief — or even know they were getting it.

And while some at New York's Ground Zero couldn't get assistance they desperately sought, companies far removed from the devastation — a South Dakota country radio station, hair salons in Monroe, a Virgin Islands perfume shop, a Mukilteo pet-grooming shop and more than 100 Dunkin' Donuts and Subway sandwich shops — had no problem winning the government-guaranteed loans.

Tracey Youngerman, co-owner of the Blue Ribbon Pet Salon in Mukilteo, said she had no inkling her $105,000 loan from the Small Business Administration had anything to do with the terrorist attacks. Her business didn't even exist on 9/11, she said.

Though the loan programs have ended, the government is inheriting a residual burden. Already, taxpayers have been forced to cover about 600 defaulted disaster loans — some approaching $1 million each — from companies that went bankrupt or closed. More defaults are expected.

The Small Business Administration, which administered the two programs that handed out Sept. 11 recovery loans, said it first learned of the problems from an Associated Press computer analysis of loan records obtained under the Freedom of Information Act.

The SBA said it was weighing whether an investigation was needed. But officials acknowledged they had intended to spread the post-Sept. 11 aid broadly because so many unexpected industries were hurt.

"We started seeing business [needing help] in areas you wouldn't think of — tourism, crop dusting, trade and transportation. ... So there were a lot of examples you wouldn't think of, at first blush," SBA Administrator Hector Barreto said.

Under one of the programs, SBA loaned money directly to companies that provided detailed statements on how they were hurt. The other program provided incentives — and guaranteed loans from default — so banks could lend money to companies they determined were hurt by the post-Sept. 11 economic downturn.

The government provided, approved or guaranteed nearly $4.9 billion in loans and took credit for saving 20,000 jobs. Most loans were well-below market rates — as low as 4 percent, documents show.

SBA officials acknowledged that the second program, the Supplementary Terrorism Activity Relief (STAR), left banks on an honor system to determine worthy loan recipients.

"One lender could have been really strict and specific about the borrower providing the documentation to prove that they were affected by the Sept. 11 attacks, and another banker may not have, or may have had ulterior motives for approving loans," said SBA spokeswoman Carol Chastang.

But while SBA officials expressed surprise at the AP's findings, banking officials said the agency encouraged the industry to use the post-Sept. 11 programs liberally, especially when steep budget cuts hit its normal guaranteed lending program in 2002.

"They had personnel at our conference stand up and say if you cannot find a reason to move the loan over to the STAR program, contact us and we'll help you find a reason to move it over," recalled Tony Wilkinson, president of the National Association of Government Guaranteed Lenders.

Banks had a strong incentive to approve as many loans as possible from the terror program. The banks profited from the interest while incurring little risk because the government guaranteed 75 percent to 85 percent of each loan.

And the annual fee the lenders paid to the SBA to get the government guarantee was slashed from 0.5 percent to 0.25 percent — meaning lenders saved an additional $5,000 a year for every $2 million they loaned under STAR.

Findings spark anger

Of the 19,000 loans approved by the two programs, fewer than 11 percent went to companies in New York City and Washington, D.C.

The loan patterns uncovered by the AP left some seething in the neighborhoods directly scarred by Sept. 11.

"I had nothing here," said Shirla Yam, who runs a clothing store in the former shadows of the World Trade Center towers — a store that got a $20,000 grant from a local advocacy group but no federal aid after Sept. 11. "I don't know if I'll be here next month."

Mike Yagudayev said the SBA would provide him only $20,000 of a $70,000 loan he requested to rebuild his hair salon flattened by the collapse of the twin towers in New York.

"I said, 'You know what, take it back. Twenty thousand is like an insult,' " he recalled.

Of the loans that went to businesses that weren't directly hurt by 9/11, he said, "You have to take it back and give it to us. Even now, I could use it."

392 in Washington state

In Washington state, 392 businesses received a total of more than $146 million in loans. Recipients included 34 gas stations, 27 hotels, 14 full-service restaurants and 13 dentists.

Others in the Northwest who got assistance included a chiropractor in Issaquah and an Oregon winery that sold pinot noir to New York City restaurants.

One recipient who said her company's loan was directly related to Sept. 11 was Noreen Stipan, president of Seattle trucking company Rontra Freight. She said the terrorist attacks hit her small company hard; insurance payments more than doubled afterward.

"It just about crippled us," said Stipan, whose company was approved for a $177,800 loan.

"It helped us, but we had to put a ton — a ton — of our own money in, too," she said. "And we had to pay it back."

Others said they had no idea their loans were related to Sept. 11.

"I didn't know. ... I was approved based upon what I gave them," said Youngerman, who started the Mukilteo pet-grooming business with her parents and applied for a small-business loan after they decided to acquire a nearby pet salon. In 2003, they were approved for a loan through a local bank.

Ken Kendall, owner of Great Clips for Hair, said he used his $116,000 loan to start two salons in Monroe, not knowing what fund it came from. "We're two beauty salons in the state of Washington that had nothing to do with 9/11," he said.

"I wouldn't have any idea of where the money was supposed to go. ... My understanding is it is federal money, but what was it truly earmarked for?"

Unwitting recipients

The AP's nationwide investigation located businesses in dozens of other states that said they did not know their loans were drawn from the Sept. 11 programs, suggesting at least hundreds of millions of dollars went to unwitting recipients.

A bank that provided an SBA-backed loan to a trucking firm in Indiana acknowledged it did not tell the recipient about the Sept. 11 connection.

"We don't have any indication there was any communication or provisions we shared with the client that these were funds from the government used to support them from Sept. 11," said Pat Schubah, first vice president of small-business banking at Indianapolis-based Union Federal.

Major lenders such as Wachovia and Wells Fargo declined to say how many loans they shifted into the terror-relief program, saying only that they followed the law.

AP writers Paul Foy in Utah, Amy Westfeldt and Ben Dobbins in New York, Steve Paulsen in Colorado, Carrie Spencer in Ohio and Stephanie Stoughton in Virginia contributed to this story, as did Seattle Times staff reporter Christina Siderius.