The small business disaster loan program is out of money

The Small Business Administration is running out of money for the disaster relief loans it offers to small businesses, homeowners and renters, delaying much-needed help for people seeking aid after the devastation caused by Hurricanes Helene and Milton.

The SBA offers economic injury and disaster loans to businesses and people affected by disasters. The SBA warned earlier this month that it could run out of funding without additional funding from Congress amid an expected surge in claims from Hurricane Helene.

Other disaster relief programs are available, including assistance from the Federal Emergency Management Agency (FEMA). FEMA assistance is not affected by the SBA deficit.

Helene was a Category 4 storm that first hit Florida’s Gulf Coast on September 26, dumping trillions of gallons of rain and leaving a trail of destruction for hundreds of miles across several states. Two weeks later, Hurricane Milton hit Florida.

To date, the SBA has received approximately 37,000 applications for assistance to those affected by Hurricane Helene and has made more than 700 loan offers totaling approximately $48 million. 12,000 applications have been received from people affected by Hurricane Milton.

The SBA is pausing new loan offers until it receives more funding, meaning loans that haven’t already been offered will be delayed by at least a month. However, SBA Administrator Isabel Casillas Guzman said people should continue to apply for loans.

“We know that rapid financial relief can help communities recover quickly and stabilize local economies,” Guzman said in a statement. She added that the SBA will continue to process applications so that aid can be disbursed quickly once funds are replenished.

The SBA said it may also be able to make a small number of new loan offers during this time if it receives more funding from loan cancellations or similar measures.

House Speaker Mike Johnson assured there would be strong support for providing the necessary funding when Congress returns after the November elections.

“There is no doubt that these devastating back-to-back storms have put a strain on the SBA funding program,” Johnson, a Republican, said in a statement. “But the Biden-Harris Administration currently has the disaster resources necessary to meet the immediate needs of the American people in these hurricane-affected areas.”

The speaker has refused to call lawmakers back to Washington to vote on aid after deadly hurricanes and has refused to do so now. He said Congress is monitoring this situation closely.

“When members return in just a few weeks, the administration should have an accurate estimate of the actual dollar amount needed and there will be strong bipartisan support to provide the necessary funding,” he said.

The SBA offers two different types of disaster loans. Physical disaster business loans are designed to repair or replace property damaged by a disaster, including real estate, supplies, supplies, machinery and equipment. Economic Injury Disaster Loans are working capital loans designed to help small businesses, small agricultural cooperatives, small aquaculture operations, and most private, nonprofit organizations meet financial obligations that cannot be met as a direct result of a disaster.

Businesses can receive loans of up to $2 million. Interest rates are just 4% for businesses and 3.25% for nonprofits.

The SBA also offers disaster loans of up to $500,000 to homeowners to repair or replace properties damaged or destroyed by the disaster. Homeowners and renters are eligible for up to $100,000 to repair or replace personal property damaged or destroyed by disasters.

FEMA’s Disaster Relief Fund is a pot of money the agency uses to respond to disasters. For example, the money will fund reimbursements to state and local officials for debris removal and rebuilding of public infrastructure damaged by disasters. FEMA also gives money to disaster survivors for things like rent while their homes are uninhabitable or for emergency needs like diapers.

FEMA Administrator Deanne Criswell has repeatedly said the disaster relief fund has enough money to help Helene and Milton. But Criswell has said the agency will ultimately need additional funding from Congress. If this does not happen, the agency would resort to so-called “financing for immediate needs.” That means the agency will stop making payments for previous disasters and save its money for life-saving operations in new disasters.

Further information on all government assistance programs can be found here.