SBA disaster loan program running out of money in wake of hurricanes

A key loan program is burning through cash while homeowners and businesses throughout the Southeast deal with the damage of Hurricanes Helene and Milton, according to Small Business Administration officials. 

SBA Administrator Isabel Casillas Guzman warned Congress in a letter obtained by The Washington Times that the agency’s disaster aid program could run out of money for new loans as early as next week without intervention from lawmakers. 

In the letter sent to the chairs of the House and Senate Financial Services and Appropriations committees on Thursday, Ms. Guzman wrote that the agency has already begun lending to people affected by Helene after completing over 16,000 applications.

She expected that lending from the program was projected to approach “historic levels” because of the damage. 

“Without additional funding from Congress, SBA will be unable to make new disaster loans in current and future disasters — a disruption that has not occurred since Hurricane Katrina,” she said. “SBA is managing 36 disasters across 24 states and is now experiencing a surge in disaster lending as a result of Hurricane Helene and Hurricane Milton that is quickly exhausting our remaining disaster lending balances.

“Without additional funding, SBA will be forced to halt disbursing disaster funds as soon as next week and will be unable to provide urgent financial relief to the small businesses, nonprofits, homeowners and renters impacted by Hurricane Helene, Hurricane Milton and other disasters.”

The Hill reported that the loan program has dwindled to $50 million, and officials hope Congress will approve $1.6 billion to top it off. 

Disaster loans of up to $500,000 can be used by homeowners to repair or replace disaster-damaged or destroyed real estate, while homeowners and renters can get up to $100,000 to repair or replace disaster-damaged or destroyed personal property, according to the SBA. Businesses can access loans up to $2 million.

Ms. Guzman’s plea comes after President Biden warned that the program would soon run out of money and called on Congress to return from its preelection recess to pass emergency spending legislation. 

On Friday, Mr. Biden told reporters that he had not spoken with House Speaker Mike Johnson, Louisiana Republican, about calling Congress back, but said the speaker should “step up.”

“We’re going to be going to the Congress. We’re going to need a lot of help. Going to need a lot more money as we identify specifically how much is needed,” the president said. “So I’m just telling everybody now — I don’t want to hear that this is going to be the end of it.” 

More broadly, lawmakers on both sides of the aisle have urged congressional leaders to call them back to pass more disaster funding for the Federal Emergency Management Agency, although agency officials have said FEMA has enough resources to deal with immediate responses to Helene and Milton. 

Before leaving Washington to hit the campaign trail, Congress passed a short-term funding patch that’s set to expire Dec. 20. The patch includes over $20 billion for FEMA and mechanisms to let the agency access the funding faster. 

FEMA Administrator Deanne Criswell told reporters on Wednesday that the agency has already burned through $9 billion and is down to $11 million in its disaster relief fund. 

Over 60 House Democrats pressed Mr. Johnson to call Congress back before the election. They acknowledged that while the agency may have the money to handle the immediate response to the back-to-back hurricanes, the current funding “falls critically short of what will be necessary to address the scale of destruction and the recovery needs.”

Mr. Johnson has maintained that the agency has what it needs to deal with the disasters, adding that lawmakers would tackle more disaster aid funding when they return Nov. 12, after the election. 

In her letter, Ms. Guzman wrote that even if the SBA’s program runs out of funding, it will continue to process applications so that when the coffers are refilled, the agency will be “poised to disburse funds quickly.” 

“Americans do not know where the next disaster will occur, but helping our fellow citizens recover from disaster is a responsibility we all share,” she wrote. “SBA looks forward to working with Congress to secure federal resources necessary to avert an unnecessary shutdown of SBA’s critical disaster lending program.”