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Owners Warned About Disaster Loan Scams

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Oct. 25, 2005--Amid complaints of costly delays in processing federal disaster loans, small business owners in the Gulf Coast are being warned about tempting shortcuts from scam artists posing as federal officials, the Small Business Administration said Friday.

Nearly two months after Hurricane Katrina tore through their homes and businesses on Aug. 29, victims still awaiting SBA loans are seeing roadside billboards offering help in fast-tracking the application process -- for a fee.

In recent weeks, they've also reported receiving calls from individuals posing as SBA inspectors seeking upfront payments of $3,000 per application. Classified ads in local newspapers are also offering help for "a small processing fee."

The SBA does not charge fees for disaster loan applications.

Last week, the agency, which oversees emergency loans for residents and small businesses in federally declared disaster zones, warned applicants to be on the lookout for "scam artists posing as federal officials."

"The SBA will not tolerate the defrauding of those who have already lost so much," said SBA Administrator Hector Barreto. He vowed to prosecute "those taking advantage of the disadvantaged" to the full extent of the law.

The federal government has set up a Hurricane Relief Fraud Hotline, and is encouraging residents and business owners alike to report suspected fraud, the SBA said.

The recent scams are feeding on growing frustration among business owners who have yet to see a penny in government assistance to rebuild their offices, restaurants and shops in the nearly two months since the storm slammed into the Gulf Coast.

At a congressional hearing earlier this month, government figures showed less than two dozen local home and business owners had received loans worth $200,000, despite some 66,000 applications on file. Of those remaining, just 661, or less than 1%, had been approved.

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

Since the hearing, the SBA has moved to streamline the application process, waiving the need to file tax and business records covering the past three years, among other requirements. It has also pledged to expedite loans under $100,000 for businesses meeting specific requirements, such as satisfactory credit, a gross income over $25,000 and an SBA loan history.

Meanwhile, the agency is reminding loan applicants that help is available free of charge at any Disaster Recovery Center or SBA Business Assistance Center throughout Louisiana, Alabama, Mississippi, Florida and Texas. In addition, the SBA's customer service line (1-800-659-2955) has extended daily operating hours, from 6 a.m. to 1 a.m. Eastern Daylight Time, to answer any questions.

Last updated: Oct 24, 2005




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