Storm Watch: Making Sure SBA's Disaster Loan Program is Prepared

Press Release

Officials from the Government Accountability Office (GAO) and the U.S. Small Business Administration (SBA) told the House Small Business Committee today that SBA's disaster relief loan program continues to struggle with long processing times, fraudulent claims, and post-disaster communication with small businesses.

While witnesses praised the RISE After Disaster Act, bipartisan legislation crafted by the Small Business Committee and signed into law in 2015, they noted that SBA still has much work to do to ensure they are prepared when the next disaster strikes.

"The Disaster Loan Program provides direct loans to help businesses of all sizes, homeowners, and renters rebuild following a federally declared or certified disaster," said House Small Business Committee Chairman Steve Chabot (R-OH). "But in the wake of past major disasters--such as Hurricane Katrina and Hurricane Sandy--SBA has fallen short. Disaster victims have had to wait weeks and months for their loans to be processed. And in already desperate and confusing times, they have been left confused by SBA's role within the federal government's complex and duplicative disaster response."

"Unlike past hearings, we are not in the wake of a major catastrophe. That provides us a unique opportunity to examine the steps SBA is currently taking to prepare for the next one, whenever and wherever it may strike," Chairman Chabot added. "As Administrator McMahon stated in her confirmation hearing, "[d]isasters don't pick a time, they happen. And we need to be prepared for those disasters.' This Committee wants to help SBA and Administrator McMahon make sure it is prepared."

When Disaster Strikes: Getting SBA Relief to Small Businesses In Need

"The Disaster Assistance Program is a vital component to the nation's response plan for homeowners and business owners in the wake of significant disasters," testified Hannibal "Mike" Ware, the Acting Inspector General of the SBA. "As such, it is critical that the program is operated in the most effective and efficient manner. Having implemented corrective actions for dozens of OIG recommendations since Hurricane Katrina, it is evident the Office of Disaster Assistance (ODA) is better positioned to provide assistance to disaster victims, though every disaster tests SBA's ability to deliver anew."

"Each disaster has unique circumstances and poses unforeseen challenges that SBA personnel must adapt to and overcome to be successful," added Ware. "The need to disburse loans quickly, and in some instances in large volumes, poses many complications and may create opportunities for dishonest applicants to commit fraud and SBA personnel to make errors in the lending process. Having effective internal controls, robust technology design and resources, and training programs are keys to mitigating risks to the taxpayer."

Getting the Word Out: SBA Post-Disaster Communication Challenges

"SBA has taken some actions to enhance information resources for business loan applicants but could do more to improve its presentation of online disaster loan-related information," testified William Shear, the Director of Financial Markets and Community Investment at United States Government Accountability Office (GAO). "In 2016, GAO found that SBA took or planned to take various actions to improve the disaster loan program and focused on promoting disaster preparedness, streamlining the loan process, and enhancing online application capabilities."

"However, GAO found that SBA had not effectively presented information on disaster loans (in a way that would help users efficiently find it), had not consistently described key features and requirements of the loan process in print and online resources, or clearly defined financial terminology used in loan applications," observed Shear. "Absent better integration of, and streamlined access to, disaster loan-related information, loan applicants may not be aware of key information and requirements for completing the applications."

SBA-FEMA Partnership

"Our primary focus is to provide low-interest, long-term loans for privately-owned property losses as part of the recovery effort in coordination with other Federal, state, local, Indian Tribal and territorial government partners," explained James Rivera,Associate Administrator Office of Disaster Assistance (ODA) at SBA. "The SBA and the Federal Emergency Management Agency (FEMA) partner to ensure disaster survivors obtain the maximum amount of assistance for which they are eligible. SBA and FEMA share information to ensure no benefits are duplicated when providing assistance. In events where a Presidential disaster declaration including Individual Assistance is authorized, disaster survivors should first contact FEMA since in order to apply for an SBA loan, they will need to obtain a FEMA Registration ID Number."

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