The size of the loss incurred by disaster victims can vary considerably. One person may need only to replace a roof, while another may need to rebuild a home from the ground up. One may be able to live with relatives and continue working, while another may have no near-by support network, and may no longer have a job or business. The more severe and widespread the disaster, the less likely other personal sources of help will be available.
Finding out What Help Is Available
Information flow can be confused and chaotic after any major disaster. Victims may hear about possible assistance from a wide variety of sources. FEMA, state and local government officials and SBA directly advertise and work with the media and the community to inform the public about the available assistance. Victims also may learn of the programs through friends or other individuals. FEMA has an on-line registration process. During the Gulf Coast hurricanes many victims registered on-line and did not have the benefit of personal interviews with FEMA or SBA representatives.
Victims arriving at a state-federal disaster recovery center receive information about available state and federal programs. They learn, for example, about grants from FEMA, loans from SBA, disaster unemployment assistance, and food stamps, all of which have different eligibility requirements and purposes. This information can be confusing. In addition, at least in this early stage, victims may be unsure of what, if any, insurance settlement they can expect.
Businesses may learn about the SBA loans by going to FEMA, or through the media, but they may also hear about them from other sources, such as SBA’s website or SBA’s Disaster Call Center. They also might contact their district or regional SBA office to find out if help is available. Also, the local office of the Department of Commerce as well as business development non-profits in the disaster area usually work to inform people about SBA’s disaster loans.
20 House Report accompanying HR 1361, 110th Congress (March 2007).
21 Op Cit. GAO-05-697R. IRS rescinds debt for a variety of reasons, such as the debtor having paid the debt in full or the debtor having filed for bankruptcy protections, which makes the debt ineligible for collection through the
Applying for an SBA Disaster Loan
SBA Customer Service Representatives work to explain the eligibility rules and application process. But even if the applicant understands the requirements, the process can be frustrating.
For example, even when SBA is successful in making quick referrals to FEMA—helping to ensure quicker service to home owners and renters ineligible for SBA assistance—the fact of having been referred to SBA, only to be turned down and referred back to FEMA, can be exasperating.
Figure 2-3. Assisting Prospective Disaster Loan Applicants
Source: Academy Staff Photo, January 2007
Applicants may contact SBA to inquire about the status of their loan or to notify SBA of a change in their circumstances. SBA may contact applicants about incomplete or unclear applications. Consequently, at this point, applicants could be dealing with a Customer Service Representative in a DRC —not necessarily the representative they met with originally—or with someone from the Processing and Disbursement Center or Customer Service Center; or they might have contacted their local SBA office in an effort to get clarification, not realizing the distinction between SBA district offices and disaster loan staff. Often, small businesses have relationships with the local SBA offices, and it is natural for them to contact these offices. In many cases, however, staff in these offices do not know details of disaster loan requirements, and certainly do not have knowledge of specific applicants’ cases. Again, frustration can grow.
Proving that Applicants Qualify for a Disaster Loan
During the loss verification and underwriting stages applicants may be involved in trying to recreate records, or locate papers and people who could help prove their loss and that they have the ability to repay a loan. They are usually required to accompany the Loss Verifiers to the damaged property location. At the same time, they may be working with FEMA and other agencies to get short-term emergency assistance, looking for work, and deciding if they need to relocate, even temporarily, away from the disaster area.
Generally, this process—from application submission to loan approval—takes only a few days, limiting, but not eliminating, applicant uncertainty and frustration. The average time varies by type of loan and size of disaster, but SBA tries not to let the process take more than 21 days. In fact, SBA reports that in 2004, 85 percent of loans were processed to this point in 11 days for home loans, 14 days for business physical loss loans, and 13 days for business economic loss loans.
If, for whatever reason, the process takes longer, frustration can grow, as occurred in the aftermath of the Gulf Coast hurricanes. SBA reports that in 2006 average approval times, for 85 percent of applications, grew to 74 days for home loans, 66 days for business physical loss loans, and 29 days for business economic injury loans. Some applicants complained that the process was made more difficult because documents were lost in the mail, or information was not entered into the DCMS system, thereby requiring the applicant to resubmit the information. They also complained about getting conflicting and unclear answers to questions.
Closing the Loan and Receiving Payment
Once approved, applicants may not be sure that they actually want to take the SBA loan. They may be waiting, for example, to see what their insurance settlement will be and when they will receive it. Or they may expect the state to create a grant program for which they might be eligible. SBA generally gives applicants 60 days to return the closing documents and decide whether to accept the loan. But after the Gulf Coast hurricanes, the average time before closing was much, much longer; at one point it was 337 days. SBA granted lengthy extensions to the closing deadline because of the extreme uncertainty about whether and when communities would recover in the aftermath of those storms.
Once loans are closed, SBA reports that in well over 90 percent of cases the initial disbursements, those for unsecured amounts and economic injury, are made within 5 days. In the aftermath of the Gulf storms, however, even this rate fell to 55 percent. And the amounts of those initial disbursements may be disappointing. Borrowers are sometimes surprised to find that they will not get the full amount of the loan at closing. Some, most often home owners, find the initial loan amount ($10,000 for homeowners) too low to be useful.
The process of finding the documents needed to secure a loan and obtain insurance coverage can be difficult. After the Gulf Coast storms this was especially difficult. For example, SBA found that a large number of approved loans were not being disbursed because borrowers in Orleans Parish had difficulties obtaining copies of the title to their homes; the Parish office responsible
for issuing them had huge backlogs. Delays also occurred because building permits were at times hard to obtain and because home owners and businesses found it difficult to find contractors. Though data are not available, SBA recognizes that, given the complexity and burden of this process, many just gave up and looked elsewhere for assistance.