News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

For Immediate Release
February 14, 2007

CONTACT: Kate Davis, Austin Bonner (202) 225-4038

SBA Unprepared to Respond to Future Large-Scale Disasters
Committee to call for new legislation to revamp agency disaster loan programs

WASHINGTON – Today, the House Small Business Committee held a hearing to examine a report released by the General Accounting Office (GAO) on the Small Business Administration’s response to Katrina that raises questions over SBA’s preparedness for future large-scale disasters.  This prompted lawmakers to pledge to step in and fix the existing problems.  Chairwoman Nydia M. Velazquez stated, “at this point, SBA has given us no reason to believe it can adequately respond to another Katrina – and that is simply not acceptable.”

“This is an agency that is still facing major problems with its disaster loan program due to its lack of planning and resources,” Chairwoman Velazquez said.  “Today’s hearing illustrated that SBA has a long way to go before it can adequately, fully serve this nation’s small businesses after a major disaster.”

During the hearing, Members heard testimony from the General Accounting Office (GAO), which released a report that found significant shortcomings in the SBA’s logistical planning efforts prior to Hurricane Katrina, as well as shortfalls in the agency’s efforts post-Katrina. The GAO’s report links the negative, often chaotic customer service experiences business owners testified about with root causes such as failures to plan for increased staff and office space, an untested computer system, and a loan approval process that could not catch up with the situation.  The report also highlighted the agency’s existing backlog of loans, and unprocessed applications.  To date, the agency has yet to disburse $6 billion of the $11 billion that was originally approved for disasters loans, leaving thousands of entrepreneurs still waiting for this critical assistance. GAO also found that SBA has not implemented a comprehensive plan, and has not established a timeline for its completion, raising serious concern over the agency’s ability to carry out critical disaster functions.  

“With the start of the next hurricane season only 4 months away, it is extremely concerning to know that SBA continues to deal with backlogs from Katrina a year and a half later, and is still not prepared to handle another large-scale disaster,” Chairwoman Velázquez said. 

While SBA claims to have made some changes to the program, testimony from business owners illustrated that these changes are not working and that further enhancements need to be considered by Congress.  Donna Colosino, owner of Crescent Power Systems in Baton Rouge, testified on her ongoing struggle to secure a disaster loan despite the fact that she has worked with at least 20 different SBA loan officers and has resent her loan application to the agency a dozen times because it was lost.  She was also working with the agency under the “new” case manager system; however, Donna’s experience shows there is no indication that this system would prevent future backlogs from re-occurring.  Such arduous happenings illustrate that the agency needs guidance in developing new plans, processes, and systems for responding to major disasters.

“It is clear that the agency’s initial steps are too little too late – and give small businesses minimal, if any, reason to be sure their needs will be met through the disaster loan program,” Chairwoman Velázquez said.  “The case manager system may seem like a quick fix for an existing backlog, but its effectiveness and usefulness for preventing future backlogs seems limited – reiterating Congress’ need to step in here.”  

Based on the findings from today’s hearings, the committee plans to develop legislation to restructure SBA’s disaster lending programs. With Gulf Coast small businesses still struggling, and uncertainty surrounding the agency’s ability to respond to future major disasters, lawmakers are determined to correct these issues within the SBA’s disaster loan program so entrepreneurs can be confident in the service and assistance they receive. 

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