KLIMAWIRE | The Small Business Administration, which provides billions for disaster recovery, has run out of money to help people and businesses affected by Hurricanes Helene and Milton, President Joe Biden said Tuesday.
The SBA said it is “pausing new loan offerings” through its multibillion-dollar disaster program because it has “depleted funds.”
Biden called the SBA’s low-interest disaster loans “an essential lifeline for small businesses, homeowners and renters affected by disasters.” Homeowners can borrow up to $500,000.
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The shutdown by the SBA, which has provided more than $25 billion in low-interest disaster loans since 2001, comes as hundreds of thousands of people and businesses in the Southeast have had to rebuild after devastating hurricanes.
The SBA said Tuesday it has received 49,000 applications from affected homes and businesses in Helene or Milton and approved just 700 loans totaling $48 million.
SBA Administrator Isabel Casillas Guzman urged people in affected areas to continue applying for disaster loans “when Congress gets the funds.”
Outages can delay repairs for people and businesses that would normally rely on an SBA loan to begin rebuilding.
“Without the SBA, all the businesses, all the restaurants, all the things that have had damage, places that don’t have insurance, there’s no help,” said Craig Fugate, who ran the Federal Emergency Management Agency during the Obama administration. “That loan program is the federal government’s way of helping out there.”
SBA disaster loans have helped families avoid declaring bankruptcy due to high rebuilding costs, said Ben Collier, associate professor of risk management and insurance at Temple University’s Fox School of Business.
House Speaker Mike Johnson said a statement on Tuesday “there is no question that these devastating storms have stressed the SBA financing program.”
“But the Biden-Harris Administration needs disaster funding right now to meet the immediate needs of the American people in these hurricane-affected areas,” Johnson added.
“Congress is closely monitoring this situation, and when members return in a few weeks, the administration should make a detailed assessment of the actual dollar amount needed and there will be strong bipartisan support to provide the necessary funding.”
Johnson he has consistently said he won’t call lawmakers to Washington, D.C., ahead of their scheduled November 12 return.
Rep. Darren Soto (D-Fla.) said in a post about X: “Congress needs to go back to DC to pass new @SBAgov @USDA & @HUDgov disaster funding ASAP.”
Biden and the SBA have warned that the SBA is running out of money to manage its disaster loan program and have called on Congress to quickly provide the money.
The SBA’s announcement coincides with FEMA’s funding cuts, which will force it to limit disaster assistance next month.
While FEMA provides emergency assistance of a few thousand dollars for minor home repairs, the SBA helps with permanent repairs.
Under the SBA disaster program, homeowners can receive up to $500,000 to repair or replace their homes. Businesses can take $2 million, and renters can take up to $100,000 to repair or replace damaged personal property. The loans, from private lenders, are backed by the SBA and have interest rates as low as 2.8 percent for residents.
Is FEMA next?
The SBA said it has repeatedly asked Congress for $1.6 billion to continue its disaster loan program this year. The amount does not include loans requested by Hurricane Milton “and/or other unknown future disasters.”
The interim budget passed by Congress in September “did not include additional funding” for the loan program “even days after Hurricane Helene made landfall,” the SBA said in a statement.
Guzman, the SBA administrator, spoke Thursday with House Small Business Chairman Roger Williams (R-Texas) but did not say exactly how much the agency needs, committee spokesman Matt VanHyfte said. The $1.6 billion funding figure is “not a firm number” because the storms are still happening, he said.
Damage to Helene and Milton could be as much as $250 billion, according to estimates.
In the six states hit by the two hurricanes, more than 435,000 people have applied for emergency assistance from FEMA, and more than $500 million has been disbursed, according to agency records and statements.
FEMA Administrator Deanne Criswell said Thursday the agency has already spent $9 billion of the $20 billion Congress approved for the fiscal year that began on October 1. Criswell warned that FEMA will soon have to limit disaster aid if Congress doesn’t provide additional money.
The SBA’s financial struggles are happening just over a year into the agency’s existence increased the maximum number of homeowners the disaster loan increased to $500,000 from $200,000 and the rental loans increased to $100,000 from $40,000.
The increases, which took effect on July 31, 2023, were not considered in the 2025 interim budget recently passed by Congress, said Fugate, the former FEMA administrator.
“They didn’t put enough money in the SBA” budget, Fugate said. “Congress knew that a higher borrowing limit would increase the amount of money they needed.”
Temple University’s Collier said, “If the government makes bigger loans to people, then that money won’t go as far. The program will need authority to make more (disaster loans) for the same amount of loans.”
The agency issued nearly $3 billion in disaster loans in 2023, with $2.3 billion to homeowners and renters and nearly $700 million to small businesses.
Reprinted E&E News Courtesy of POLITICO, LLC. Copyright 2024. E&E News provides essential news for energy and environmental professionals.
