After facing sharp criticism in the aftermath of Hurricanes Katrina and Rita, the SBA has revamped its small business and non-profit disaster loan program, streamlining the application process and speeding up the processing timeline.
Back in 2005, when Hurricane Katrina and Hurricane Rita hit less than a month apart, the agency was heavily criticized for its sluggish turnaround time and high decline rates, which were seen as hurting small businesses attempting to survive the crippling disasters.
The SBA has since trimmed the application form to only two pages and made both electronic and paper applications available to business owners. Applicants can also sign a release authorizing the IRS to provide relevant tax returns rather than individuals attaching the document themselves.
The type of loan available to small businesses and nonprofits comes directly from the government and is a 30-year, 4 percent, $2 million maximum loan to help owners replace the capital lost during a storm, even if no physical damage was done to their property. It is only available to owners in areas federally declared disaster sites.
There’s just one problem: business owners say they don’t want them.
In Hurricane Sandy’s aftermath, some business owners say the extra monthly expense of a loan repayment would put them over the edge. “Most of us are deeply overextended as it is,” says Monica Byrne, co-owner of the New York City restaurant Home/Made. “We’re all shut down. We have staff we can’t pay. We really need some support that’s not about loans.”
Because small businesses often operate on very thin margins, owners are asking for other forms of aids that do not have to be repaid. Rob Walsh, commissioner of New York City’s Department of Small Business Services, understands the business owners’ frustration but has few options to offer them.
“There’s contributions, promotions, benefits,” says Walsh. “It’s going to have to be the old-fashioned way.”
In the meantime, the SBA’s nonprofit Small Business Development Centers are helping small business victims of Hurricane Sandy assess the extent of their losses by photographing and documenting the damage.
Sandy’s economic damage is estimated to reach $50 billion, with only $10-20 billion covered by insurers.
Klein, Karen E. “The SBA Preps for a Flood of Disaster Loans” Bloomberg Businessweek. November 1, 2012.
Cowley, Stacy. “Sandy’s small business victims: We don’t want loans!” CNNMoney. November 2, 2012.