Democrats Call for Improved SBA Disaster Response

Apr 26, 2017

Lessons from Sandy & Katrina fuel need for reforms

Washington DC- At a hearing today before the House Small Business Committee, Democrats called for reforms and improvements to the Small Business Administration’s (SBA) Disaster Loan Program. For small business owners, the consequences of a natural disaster can devastate both infrastructure and sales, noted the Committee Ranking Member, Rep. Nydia M. Velázquez (D-NY).

“Natural disasters profoundly disrupt our lives and affect tens of thousands of households every year,” said Velázquez (D-NY). “These unanticipated events leave families and small businesses facing significant rebuilding costs.”

SBA offers low-interest loans to help repair physical damage as well as provide support after economic injury—a loss in customer business during the aftermath of a disaster. These loans are available not only for small business owners but also for households, and private and non-profit organizations suffering from the repercussions of a natural disaster.

In 2005, Hurricane Katrina, the costliest storm on record, devastated the Gulf Coast. Katrina left unprecedented damage costing approximately $108 billion. In 2012, Hurricane Sandy struck the mid-Atlantic, producing a total damage of $75 billion. In response to these catastrophic events, SBA’s disaster loan program faced delays, fraud and a failure to address what quickly became overwhelming need.

“It is critical that SBA process and disburse disaster loans quickly to maximize the likelihood small businesses will survive,” said Congresswoman Velázquez. 

In the hearing, Democrats drew attention to the programs’ past failures to both process applications and properly disburse funds in a timely manner. In a recent report by the SBA’s Office of Inspector General (OIG), audits found that by failing to properly train a workforce prepared for high volumes of applications, SBA was not able to provide timely assistance to loan seekers.

The SBA set a turnaround goal of twenty-one days to process disaster loan requests, however a report from the Government Accountability Office (GAO) found that for Sandy, the reality for loan-seekers was a forty-five day turnaround on average. Ultimately, less than half, just forty-two percent, of Sandy disaster loan applicants received assistance in the direct aftermath of the storm. 

As entire communities struggled to rebuild from the devastation of Superstorm Sandy, Ranking Member Velázquez introduced the 2015 RISE After Disaster Act, which re-opened the SBA’s disaster loan filing period for Sandy victims.

“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,” Velázquez added.

During the hearing, Members of the Committee from both sides of the aisle noted the importance of ensuring that the SBA’s disaster loan programs are executed efficiently and to the benefit of small business and homeowners suffering from the heartbreaking consequences of a natural disaster. Members pledged to take into account the lessons learned from past disasters when preparing for the future and to work together to make changes necessary for SBA’s disaster lending functions to operate as intended.

“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,” noted Velázquez.

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