Guajataca Dam damage on Sept. 28, 2017, in Quebradillas Municipality, Puerto Rico, caused by heavy rains from Hurricane Maria. (Eliud Echevarria/FEMA)

GAO on SBA Disaster Loan Program: Timeliness Improves but Risk Planning Improvements Needed

The Government Accountability Office (GAO) has reviewed how the Small Business Administration (SBA) planned for and responded to Hurricanes Harvey, Irma, and Maria in 2017, among other things.

GAO found that SBA’s Office of Disaster Assistance, which administers the Disaster Loan Program, regularly develops disaster plans but does not discuss risks and risk mitigation in detail in its planning documents. Specifically, the review found SBA’s current Disaster Preparedness and Recovery Plan lacks an in-depth discussion of risks (including extended power and communications outages) that could affect its disaster response. 

SBA’s disaster response includes deploying staff to and establishing centers in disaster areas to accept loan applications. The aftermath of the 2017 hurricanes (Harvey, Irma, and Maria) illustrates how the risks affected SBA’s disaster loan operations. For example, because of widespread power outages (particularly in Puerto Rico), loan applicants often could not submit applications electronically and SBA often could not call or e-mail applicants. 

GAO’s report that was publicly released on March 9 noted that changes SBA made to the loan application process since 2005 (such as implementing electronic applications) improved timeliness. For the 2017 hurricanes, SBA processed more than 90 percent of all loan applications (including those quickly declined or withdrawn) within its 45-day goal, averaging less than 18 days for each hurricane. Overall, about 49 percent of applications submitted after the 2017 hurricanes were approved. 

Applicants and others with whom GAO spoke noted some application challenges, including frequent changes to SBA contact staff and having to resend documents. According to SBA officials, staff changes resulted from turnover, among other reasons. Many applicants in Puerto Rico also encountered translation challenges during interactions with SBA.

SBA has no plans to evaluate its Express Bridge Loan Pilot Program, a loan guarantee program that began in October 2017 and is set to expire on September 30, 2020, and is intended to offer small businesses quicker funding after disasters. As of September 2019, SBA had received 93 applications, but most of them were incomplete and SBA had guaranteed only two loans. The Office of Capital Access, which manages the pilot, had not sought feedback from lenders on why so few loans had been made. 

GAO is making five recommendations to SBA, including that it more comprehensively document risks and plans to mitigate these risks and evaluate the implementation of the Express Bridge Loan Pilot Program. 

Read the full report at GAO

 

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