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Natural disasters profoundly disrupt our lives and affect tens of thousands of households every year.  These unanticipated events leave families and small businesses facing significant rebuilding costs.

Typically, insurance covers monetary losses, but that’s not always the case.  Recognizing the gap in the market, Congress created SBA’s low-interest disaster loan program in 1953.  This program serves as a critical lifeline for disaster victims by providing assistance to both and businesses and homeowners.

Over the past 64 years, SBA has responded to thousands of natural disasters, including two of the worst -- Hurricane Katrina in 2005 and Hurricane Sandy in 2012. When Sandy made landfall, the impact was particularly severe in New York City. 

The storm destroyed infrastructure, inundated thousands of homes with floodwater, and disrupted our vibrant small business community.

As I saw firsthand, the first few weeks following a natural disaster are a critical period for small businesses.  It is estimated that 40 percent of impacted businesses fail to fully recover.  

One major reason is the lack of capital to rebuild.  As such, it is critical that SBA process and disburse disaster loans quickly to maximize the likelihood small businesses will survive.  

Unfortunately, soon after Sandy struck, it became clear SBA’s response was lacking.  GAO identified a number of reasons for the problems at SBA, including failing to quickly staff-up, underestimating the number of electronic submissions, and failing to implement private disaster loan programs signed into law 4 years prior. 

These programs – aimed at expediting disaster assistance by bringing in the private sector to meet loan demand – have yet to be implemented.

It was the agency’s response to Sandy that prompted me to author the “RISE Act”, legislation that reopened disaster-loan filing window for victims of Sandy. Thanks to that bipartisan law, more than 1,000 homeowners and businesses were able to secure an additional $50 million in emergency assistance.  The RISE Act also made a number of changes to the collateral requirements in the program and helped reduce delays in loan processing. 

Since Hurricane Sandy, SBA has made a number of other improvements.  It has enhanced its planning for disaster response, including processing of loan applications and taking some actions to improve available resources for business loan applicants.

However, challenges persist. The SBA IG has reported that the nature of disaster loans make them vulnerable to fraud and GAO has identified the need for better integration of disaster loan related resources for users.

Given that SBA has not had to respond to a large-scale disaster in recent years, it is imperative that the agency have planning efforts in place to be mobilized for such an occurrence. Should this require further legislative action by the Committee, I’m confident this is an area where the Chairman and I can again work together. All Members of the Committee want to ensure these programs operate efficiently and effectively – and that entrepreneurs harmed by disasters receive the assistance they need.

This hearing will give members the opportunity to examine the Disaster Loan program to ensure SBA is prepared for the next major disaster. I thank the witnesses for their participation and I yield back.