Democrats Seek Reforms for Small Business Disaster Lending

Press Release

As we approach the one-year anniversary of Hurricane Maria making landfall in Puerto Rico, House Small Business Committee Democrats today called for reforms to the Small Business Administration's (SBA) management of its disaster loan program. The disaster loan program helps small businesses and homeowners recover after a natural disaster from both economic and physical damage through low-interest loans through the agency's Office of Disaster Assistance.

"From Hurricanes that battered the U.S. Atlantic Coast and territories to wildfires on the West Coast, natural disasters in 2017 were unprecedented and utterly heartbreaking," Rep. Nydia M. Velázquez (D-NY), the Committee's top Democrat. "In Puerto Rico alone, thousands lost their lives, while millions more experienced prolonged power outages and structural damage. We now know that gaps in SBA's loan program created long waits, confusion and backlog for many small businesses and homeowners in Puerto Rico and on the Mainland."

Small firms are especially prone to devastation after disaster, with nearly 75 percent of small businesses admitting to not having a plan for disaster recovery. Moreover, FEMA has estimated that between 40 and 60 percent of businesses impacted by natural disasters fail to fully recover.

During the hearing, Democrats responded to three OIG reports breaking down SBA's response to each major 2017 Atlantic hurricane: Harvey, Irma and Maria. According to the OIG, among SBA's shortcomings was a failure to deploy adequate staff, utilize staffing management tools, provide translation services and answer a high volume of calls and emails. In a single week following the three disasters, more than 15,000 calls and 2,3000 emails went unanswered.

"As the OIG reports illustrate, SBA was not only unprepared for the sheer volume of disaster loan applications in 2017, but SBA's response to each disaster highlight ways in which the agency fell short," said Velázquez. "As our planet continues to warm, and back-to-back disasters become more common, SBA must ensure the disaster loan program operates efficiently and effectively so that entrepreneurs and homeowners harmed by disasters receive the assistance they need."

Stressing that SBA's response to major disasters has not been uniform, Democrats are encouraging the agency to adopt the OIG's areas for improvement, which include improving the Customer Service Center telephone system, hiring practices and utilizing staff management tools.

"I strongly urge SBA to implement strategic reforms to prevent similar shortcomings from happening in the future," Velázquez concluded. "If necessary, Congress should consider legislation to improve SBA's disaster lending program and the agency's disaster response functions."

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