United States Senator Mary L. Landrieu, D-La., Chair of the Senate Committee on Small Business and Entrepreneurship, held a hearing this morning entitled, "Hurricane Sandy: Assessing the Federal Response and Small Business Recovery Efforts" to examine the federal response to small business owners recovering from Hurricane Sandy.
Testifying before the Committee were: U.S. Small Business Administration's (SBA) Associate Administrator for the Office of Entrepreneurial Development, Michael Chodos; SBA Associate Administrator for the Office of Disaster Assistance, James Rivera; Mayor of Hoboken, New Jersey, Dawn Zimmer; State Director of New York State Small Business Development Centers, James L. King; and President and CEO of the Long Island Association, Kevin S. Law.
During the hearing, Sen. Landrieu questioned why the SBA has been slow to disburse SBA disaster loans.
"As of yesterday, the SBA had approved more than $205 million in disaster loans to approximately 32,600 homeowners, renters, and businesses," Senator Landrieu said. "This number is expected to grow significantly as the application deadline approaches later this month, but it simply isn't good enough. I am a results-oriented Senator and as Chair of this committee, and a senator from a state hit hard from disasters, I believe that one of the most important responsibilities of this committee is to ensure SBA is fully staffed, better prepared, and ready to quickly assist businesses following current and future disasters."
Sen. Landrieu also pointed out improvements in the SBA's response to disasters since Hurricanes Katrina and Rita struck the Gulf coast in 2005.
"After Hurricanes Katrina and Rita, the SBA response was slow; planning was insufficient; and staff and funding came up short," Senator Landrieu said. "Following the 2005 storms, it took 74 days to process a home loan and 66 days to process a business loan. Even longer for a disbursement of disaster funding. SBA is now taking 9 days to process home loan applications, while business loan applications for Sandy are averaging 10 days to process.
"SBA also pushed disaster victims for mountains of tax records when SBA -- the Federal government -- should have been able to get that information from the IRS themselves. These same disaster victims had in many cases just lost everything -- they did not have a house to live in; a restaurant to eat in; and a church to pray in. For this reason, I am pleased we have a much improved and more efficient SBA responding to disasters today."
Sen. Landrieu attributes this improvement in part due to reforms designed by the committee that were passed into law in 2008. Those reforms include:
Increasing SBA disaster loan limits for businesses from $1.5 million to $2 million;
New tools such as bridge loans or private disaster loans following catastrophic disaster;
Improved coordination between SBA, IRS and FEMA;
And allowing non-profits, for the first time, to be eligible for SBA Economic Injury Disaster Loans.
SBA is the primary Federal disaster-assistance loan program for private sector, non-agricultural disaster victims. Disaster loans are direct loans from SBA and eligibility is based on financial criteria. Interest rates fluctuate according to statutory formulas (interest rates are capped at either 4 percent and or 8 percent, depending on whether a borrower can receive a loan elsewhere). Eligible recipients are small businesses, homeowners, and nonprofits. There are two types of SBA disaster assistance: small business loans and homeowner loans.
Small Business Disaster Assistance: There are two types of small business disaster loans: Physical Damage loans and Economic Injury Disaster Loans.
Physical Damage Loans: Provides up to $2 million to qualified businesses of any size that have sustained uninsured losses. Funds can be used to repair or replace business property to pre-disaster conditions. Private, non-profit organizations such as charities, churches, private universities are also eligible.
Economic Injury Disaster Loans (EIDLs): Provides up to $2 million to qualified businesses that have suffered economic injury as a direct result of the disaster, regardless of whether the property was damaged. Funds are working capital loans. They are given so that small businesses can pay ordinary and necessary operating expenses that they would have been able to pay if the disaster had not occurred. Small agricultural cooperatives and most private, nonprofit organizations are eligible.
Homeowner Disaster Assistance: SBA also provides up to $200,000 for the repair or replacement of real estate and up to $40,000 to repair or replace personal property.
Last week, Sen. Landrieu sent a letter to SBA outlining several ways in which the United States Small Business Administration (SBA) could improve its disaster programs to assist small businesses impacted by Hurricane Sandy. In the letter addressed to SBA administrator Karen Mills, Sen. Landrieu addressed issues such as current disaster funding, assistance to aquaculture business and the agency's regional marketing/outreach during the ongoing recovery from the storm.
Earlier this week, Sen. Landrieu introduced a bill to aid small businesses with their disaster loans. S.3672 would ensure the business owners are not required to put up their personal house as collateral when they could provide sufficient business assets instead