Feds Slow With Disaster Loans, Business Owners Say

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Oct. 10, 2005--Rae Anne Ryan credits the Small Business Administration with saving her travel agency after Sept. 11, 2001. Yet last week, Ryan, who after the attacks applied for and received an Economic Injury Disaster Loan, joined other frustrated Gulf Coast business owners in urging the SBA to speed up emergency loan approvals more than a month after Hurricane Katrina tore through their cities and towns.

"Small businesses require working capital to survive," Ryan told a House Small Business Committee hearing in Washington Friday.

The hearing followed complaints from local business owners, senators and members of Congress of long delays in processing federal emergency disaster loans following the Aug. 29 storm and Hurricane Rita weeks later.

The Gulf region is home to some 900,000 small businesses.

Though her Gulfport, Mississippi-based travel agency was spared the worst, Ryan and four of her 14 full-time employees lost their homes in the storm. Two other workers who fled the area are unlikely to return. And, with local residents struggling to get their lives back together, business has ground to a halt.

"Many of my colleagues spread across the Gulf region who own and operate small business travel agencies like mine are basically out of business," Ryan said.

More than a month after the Bush administration declared much of the Gulf Coast region a disaster area, the SBA, which oversees the loans, has cut less than two dozen checks worth some $207,000 for residents and small business owners alike, according to government figures.

As of last week, just 661 of 66,819 emergency loan applications, or fewer than 1%, had been approved. That accounts for just $41.45 million of several hundred million dollars at the SBA's disposal.

SBA chief Hector Barreto, under attack from both Democrats and Republicans, defended the agency's efforts and blamed interrupted communications systems for the agency's slow issuance of loans, saying loan inspectors have had difficulty staying in contact with home and business owners in the worst hit areas. Many disaster zones remain inaccessible, he said, making it impossible to verify losses and assess damages.

Also hampering efforts were glitches in the agency's new $23 million computer system, which was overwhelmed by a surge in online applications, according SBA associate administrator Herb Mitchell.

Whatever the cause, congresswoman Nydia M. Velazquez, the House Small Business Committee's ranking Democrat, called the pace of federal relief efforts "a disgrace."

"The SBA has failed the Gulf Region's small business," Velazquez told committee members. "Business owners have existing expenses to cover, employee salaries to take care of, and rent to pay. Clearly, they cannot afford to wait," she said.

Committee chairman Don Manzullo, an Illinois Republican who last month toured an SBA disaster recovery center in Louisiana, described demand from local business owners "simply staggering."

"No one can deny that certain assistance is necessary," Manzullo said, " but this committee will not open the federal feeding trough and waste precious taxpayer dollars on initiatives only tangentially related to Katrina and Rita just to say we are providing hurricane relief."

Still, Manzullo agreed changes were needed to speed up the process, outlining a legislative package in the works to increase the size and availability of low-interest loans to both homeowners and small employers, while suspending payments on SBA loans until small businesses can rebuild their customer base.

That's too much red tape for Louisiana Gov. Kathleen Babineaux, who has already moved to set up a state-run emergency loan service to pick up the slack and help kick-start stalled federal efforts. "Our businesses and their employees cannot wait that long," Babineaux said in Washington last week.

Last updated: Oct 10, 2005




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