Georgia gubernatorial candidate Nathan Deal failed to disclose business loans totaling $2.85 million as required by state elections law.

The Associated Press Thursday reported Deal and a partner in his company, Gainesville Salvage and Disposal, had taken out loans from two banks in 2009, and that he failed to disclose the debt in filings with the State Ethics Commission.

After a debate before educators with Democratic rival Roy Barnes Thursday, Deal said the loans were business loans, not personal loans, and they should have been reported on his financial disclosures. He said he would correct the record and he did Thursday afternoon.

"I think it was an oversight," he said in response to a question from The Associated Press.

The revelation of previously undisclosed business loans came a day after the AJC reported Deal is facing personal insolvency because of his support of a failed business venture by his daughter and son-in-law.

The loans to Deal and business partner, Kenneth Cronan, were used to acquire an auto salvage yard in Metter, Ga., and to acquire an office building adjacent to their existing business on Athens Highway in Gainesville, said Brian Robinson, a Deal campaign spokesman.

“This is not more personal debt. It was for business expansion,” Robinson told the AJC. “It was to create jobs. This is what we need in Georgia.”

The loans are current and being paid monthly, Robinson said, adding that the capital helped the business add up to 10 employees over the past few years.

“The business is profitable,” Robinson said. The underlying collateral for the loans is also almost double what Deal and his partner owe, he said.

According to an amended filing with the State Ethics Commission, Gainesville Salvage and Disposal took out a $2.5 million loan with BB&T in May 2009. It is collateralized by a 34-acre property and commercial buildings and equipment valued at $5 million. A separate $350,000 loan with Verity Bank of Winder for the office building is backed by the building and 3.4 acres valued at $574,000.

Deal and Cronan also have personal guarantees on the loans, Robinson said.

Tony Plath, a University of North Carolina-Charlotte finance professor, said a lender would look at the underlying cash flow of a business, the quality of its collateral. Personal guarantees, while important, would be the third safety net.

Banks tightened credit standards severely in 2009 and would want to be sure a loan of such magnitude would be repaid, he said, adding it appeared the notes were “sound loans.”

On Wednesday, the AJC reported that Deal and his wife, Sandra, were in personal financial distress.

The couple invested $2 million of their own money in 2005 with their daughter and son-in-law in a sporting goods business that went bankrupt in March 2009. Deal's assets, including his private residence in Gainesville, are not enough to cover the outstanding debt, the result of a series of loans that began with a $506,000 security deed leveraged against the property where the business was to be located.

In July, Carrie and Clint Wilder, the Deals’ daughter and son-in-law, filed for bankruptcy, listing the business loan among their debts.

Nathan and Sandra Deal still owe $2.3 million, and face such dire financial troubles that they must sell their home to avert foreclosure or bankruptcy.

The former congressman and Gainesville Republican vowed Wednesday he would not file for bankruptcy. The $2.3 million loan, which is due in February.

Financial disclosures filed by Deal state that he is worth slightly less than $2.1 million, including his home in Gainesville, a cabin in Habersham County, the property of the sporting goods store and retirement accounts.

Deal campaign officials insist he will be able to meet his obligations and that his main business is profitable.

Last year, the AJC reported Deal had a 20-year no-bid business arrangement with the state, and that he personally intervened to preserve the contract.

In August 2009 Deal spoke with Georgia Revenue Commissioner Bart Graham and other state leaders to protect an obscure state program that earned his company nearly $300,000 a year. The newspaper's report led to a congressional ethics investigation that determined Deal possibly violated U.S. House rules. Deal resigned from the U.S. House before any formal accusation against him was made.

A federal grand jury subpoenaed records and testimony from a top state official last June. Deal has maintained he is not a target of the investigation.

Deal has said he intervened not to protect his interests but as a public servant concerned about risk of unsafe vehicles on the state’s roadways. State officials say the inspections were never intended to check for safety.