Statement of Ranking Member Nydia Velázquez before Committee hearing on SBA's Disaster Loan Program
Statement of the
The Honorable Nydia Velazquez
Oversight of SBA’s Disaster Loan Program
Committee on Small Business
Wednesday, July 8, 2015
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 costs when rebuilding. 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. Over the past 62 years, SBA has responded to thousands of natural disasters, including several major storms. One of the worst was Superstorm 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. For small business in particular, the first few weeks following a natural disaster are a critical period. 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 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. As processing delays mounted, the deficiencies in SBA’s management of the disaster loan program demanded a closer look from Congress. In early 2013, Committee Democrats released a report on the application backlog and processing delays. We found small businesses waited 46 days to get their application processed by SBA, a three-fold increase over previous Atlantic storms. To make matters worse, SBA had already been heavily criticized for its slow response to Hurricane Katrina and made commitments to process applications in 21 days.
To build on those findings and fully understand the causes of the delays experienced by Sandy victims, I requested the GAO report we are focusing on today. 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.
In 2008, bipartisan reforms were enacted to help the Agency respond to large disasters by bringing in the private sector to meet loan demand. These included the Immediate Disaster Assistance Program, the Private Disaster Loan Program, and the Expedited Disaster Assistance Loan Program. It is likely one or more of these programs, if implemented before Sandy made landfall, could have injected much-needed capital into the community immediately after the storm. These private loan programs could have also helped free up SBA resources by handling the small-dollar loan volume.
SBA provided GAO with a number of reasons for its failure to timely process disaster loans following Superstorm Sandy, however, they were all self-created. Clearly, significant changes need to be made in SBA’s administration of the disaster loan program. It is unacceptable that Sandy victims had to wait 46 days or longer to get vital funding to rebuild their businesses.
I look forward to hearing from today’s witnesses on the findings and recommendations contained in GAO’s report.
Thank you and I yield back.