Small business administration: Disaster loan processing was faster, but planning improvements and pilot program evaluation were needed

Para la versión de esta página en español, ver a GAO-20-369.

What GAO found

The Small Business Administration (SBA) Disaster Assistance Office, which administers the disaster lending program, regularly makes disaster plans but does not deal in detail with risk and mitigation. risks in its planning documents. Specifically, the SBA’s current disaster preparedness and disaster recovery plan lacks an in-depth discussion of the risks (including prolonged power and communication outages) that could affect its disaster response. SBA’s disaster response includes deploying staff and establishing centers in disaster areas to accept loan applications. The aftermath of the 2017 hurricanes (Harvey, Irma and Maria) illustrate how risks affected the SBA’s disaster lending operations. For example, due to widespread power outages (especially in Puerto Rico), loan seekers often couldn’t submit applications electronically, and the SBA often couldn’t call or email applicants. As a result, SBA may not be sufficiently prepared to respond to challenges that arise during its disaster response efforts.

Changes made by the SBA to the loan application process since 2005 (such as the implementation of electronic applications) have improved timeliness. For the hurricanes of 2017, the SBA processed over 90% of all loan applications (including those that were quickly denied or withdrawn) under its 45-day target, with an average of less than 18 days for each hurricane. Overall, around 49% of applications submitted after the 2017 hurricanes were approved (see figure). Candidates and others GAO spoke to noted some application issues, including frequent changes in SBA contact staff and the need to return documents. Staff changes are due, among other things, to staff turnover, according to SBA officials. Many applicants in Puerto Rico have also encountered translation issues during their interactions with the SBA.

Disaster loan approval rates for three hurricanes in 2017

The SBA does not intend to evaluate its Pilot Express Bridge Loan Program, a loan guarantee program that began in October 2017 and is due to expire on September 30, 2020, and aims to provide small businesses with more financing. fast after disasters. As of September 2019, the SBA had received 93 applications, but most were incomplete and the SBA had only guaranteed two loans. The Office of Capital Access, which manages the pilot project, had not solicited comments from lenders on why so few loans were made. Without evaluating the design and implementation of the program, the SBA’s ability to make an informed decision about the future of the program, including assessing the potential demand for bridging loans, is limited.

Why GAO did this study

SBA helps most types of businesses regardless of size and others affected by natural and other disasters through its Disaster Lending Program. Disaster loans can be used to help rebuild or replace damaged property or continue business operations.

The GAO was asked to review the SBA’s response to three 2017 hurricanes (Harvey, Irma and Maria). This report examines (1) SBA’s planning and response to the 2017 hurricanes; (2) the disaster loan application and review process; and (3) the implementation of the pilot express bridging loan program.

GAO analyzed SBA planning documents; SBA’s disaster credit management system summary data for applications submitted between August 31, 2017 and September 24, 2018 (the period in which the SBA processed nearly all loan applications for each hurricane ); and SBA guidance on the bridge loan program. The GAO interviewed small business owners and officials from local governments, business advocacy organizations and small business development centers in Florida, Texas, Puerto Rico, and the U.S. Virgin Islands.

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