Gulf Coast Businesses Slow to Claim Loans
A full nine months after Hurricane Katrina struck -- and with another storm season looming -- less than half of the Gulf Coast small businesses that were granted federal disaster loans have converted them into cash, according to the Small Business Administration.
To date, the SBA has processed nearly all of the 57,133 business loan applications it has received since Hurricane Katrina slammed into the Gulf Coast on Aug. 29 -- approving 21,132 loans worth over $2.1 billion for small businesses in Louisiana, Mississippi, Florida, Texas, and Alabama. Monday marked the deadline to apply for economic injury loans related to the storm.
So far, only 9,936 of those loans have been either fully or partially disbursed, said Carol Chastang of the SBA's Office of Disaster Assistance. "Ordinarily, we would have received most of the closing documentation by now," Chastang said, calling the slow rate of loan disbursements unusual compared to past disasters. "Given the devastation that occurred down there, a lot of business owners simply can't start rebuilding."
Many owners are worried their client base will never return to the area, while still others may have already relocated, Chastang added.
According to the U.S. Chamber of Commerce, more than 125,000 small and midsize businesses were disrupted by Hurricanes Katrina, which slammed into the Gulf Coast on Aug. 29, and Hurricane Rita, just two weeks later. As few as a third have reopened, estimates from local chambers of commerce show.
"The cry from small-business owners here is, if you want to help, it needs to be in the form of a grant, rather than a loan," said Richard Campanella, a Tulane University researcher who conducted a six-month survey of business re-openings in New Orleans since Katrina. Many businesses, Campanella said, are reluctant to take on loans if uncertain they will be able to repay them.
While the French Quarter is bustling again, Campanella estimates small businesses in the city's hardest hit neighborhoods have re-opened at a rate below 5%. "Even if they weren't badly flooded, they've lost most of their customers," he said.
Outgoing SBA administrator Hector Barreto has said getting money into the hands of these businesses is a "top priority."
Last week, Sen. Mary Landrieu (D-La.) and Sen. John Kerry (D-Mass.) had called on the government to extend the deadline for economic injury loan applications.
"Many businesses in Louisiana are still struggling to find the resources necessary to re-open and remain open," Laundrieu said in a statement.
Forecasts for this year's Atlantic hurricane season, which begins Thursday, are calling for 13 to 16 storms, including at least six major hurricanes, the National Oceanic and Atmospheric Administration said.