SBA will exhaust disaster relief funds by next week, chief says

The Small Business Administration, which provides low-interest loans to millions of disaster survivors, is set to run out of funding for hurricane victims within days, SBA Administrator Isabel Casillas Guzman told Congress late Thursday, as officials tally the extent of Hurricane Milton’s damage on the heels of Helene.

Without urgent action from Congress, the agency could be forced to stop offering new disaster assistance, Guzman wrote in a letter obtained by The Washington Post. SBA issues loans worth as much as $100,000 for renters, $500,000 for homeowners and $2 million for business owners. The agency has roughly $50 million left in disaster loan authority, but officials expect to run out in the next several days due to escalating demand.

“At a time when many disaster survivors are looking for help and support, a lack of SBA disaster loans will impact recovery across the nation,” Guzman wrote. “Homeowners will be unable to access low-interest rate loans to replace their personal property damaged in a storm. Small businesses will be unable to access SBA funding to replace damaged equipment or inventory and cover economic injury from business disruption. For those who have experienced physical damage to their properties, no SBA funding will be available to homeowners, renters, small businesses or nonprofits seeking to rebuild.”

If the agency runs out of funding, Guzman said it would continue processing loan applications up to the point of payment “so that we are poised to disburse funds quickly once Congress provides additional funds.”

The Federal Emergency Management Agency also provides disaster relief, and its budget is unrelated to SBA’s potential shortfall.

While touring Hurricane Helene damage in North Carolina on Wednesday, House Speaker Mike Johnson (R-La.) said the SBA “has plenty of money right now to serve the immediate needs,” and that Congress would prioritize additional disaster relief money when it returns from recess on Nov. 12, after Election Day.

“Of course we’ll replenish that fund, we’ll have to, because the magnitude of this storm is larger than anyone probably expected,” Johnson said of Hurricane Helene.

He added that his office was focused on expediting the federal response and clearing red tape so agencies could issue relief dollars faster. A spokeswoman for the speaker said additional congressional action would be “premature” without a damage assessment from the White House.

But Biden administration officials and some Democratic lawmakers worry that SBA will have exhausted its disaster resources by the time Congress returns, leaving even more uncertainty for disaster victims during the crucial recovery period.

A group of 63 Democrats wrote to Johnson on Wednesday calling for him to summon the House back to Washington and pass additional disaster relief funding now rather than wait. Lawmakers passed a short-term extension of government funding late last month, which runs through Dec. 20, but they didn’t add any extra money to disaster relief accounts at FEMA or SBA beyond extending the agencies’ budgets at current funding levels.

“We knew when we left that they didn’t have any money in the middle of hurricane season. We knew the communities disaster loans and the SBA loans they give out to make sure that small businesses can survive and get through this sort of damage in their community, we knew they needed the money, and yet we didn’t give it to them,” Rep. Jared Moskowitz (D-Fla.), who previously served as Florida’s top emergency management official, told The Post. “That’s hurting our small-business families that are suffering in these states now. They can’t wait until we return on [Nov. 12] to mess around with this.”

Moskowitz introduced legislation earlier in the week to provide the SBA with an additional $8 billion for disaster loans.

President Joe Biden wrote to congressional leaders last week urging them to send new resources to the SBA before lawmakers’ recess period ends. That would require Congress to convene early – something leaders of both parties are loath to do in the middle of campaign season – or approve funding with the unanimous approval of all 535 members of the House and Senate, an even more unlikely possibility, though one that could be logistically possible even without most members returning to Washington.

“It is critical that Congress ensures that no critical disaster programs, such as the SBA disaster loan program, run out of funding during the congressional recess period,” Biden wrote. “I also urge that after the Congress comes back into session on November 12th, you will act with all appropriate speed and provide comprehensive disaster relief.”

The SBA’s disaster loan program provides crucial assistance for hurricane victims who lack flood insurance or whose claims are denied by their carrier, said Jeffrey Schlegelmilch, the director of the National Center for Disaster Preparedness at Columbia University.

“When homeowners have their homes completely destroyed or damaged, insurance doesn’t always cover that,” Schlegelmilch said. “So this program really becomes a lifeline for both property owners and business owners.”

On average, a tiny fraction of households in the inland counties hit hardest by Helene had flood insurance, according to a Post analysis of recent data from the National Flood Insurance Program. In Buncombe County, N.C., where an entire town disappeared beneath floodwaters, less than 1 percent of households had flood insurance, the analysis found.

The SBA’s disaster loan program typically offers much lower interest rates than commercial lenders. Interest rates are as low as 4 percent for businesses, 3.25 percent for nonprofit organizations and 2.813 percent for homeowners and renters, according to the agency.

Still, the SBA program provides loans that eventually must be repaid, whereas other federal relief programs offer grants or rebates. And some disaster survivors are ineligible for the SBA program because of their poor credit history. That makes the payments – while still a crucial source of help for many – less attractive than other forms of aid.