The Small Business Administration has a message for the thousands of businesses and homeowners who were summarily denied emergency assistance loans following Hurricane Katrina.
We didn’t really mean it.
Following a scathing hearing on Capitol Hill last month, during which government investigators revealed widespread irregularities in the SBA’s emergency loan program, the agency issued a statement saying it would give those who were denied loans until Jan. 31, 2008 to reapply.
The agency created the problem when it tried hurriedly in 2006 to clear its books of more than 95,000 unprocessed loan applications. Government investigators and former SBA loan officers testified that loans were cancelled if applicants could not be reached after three phone calls. In many cases, however, applicants were only called once, or not contacted at all.
According to local press reports, applicants could not be reached because their homes or businesses had been decimated by the storm, and they either had no phone service or were forced to relocate.
SBA Administrator Steven Preston said in the release the agency has taken a number of steps to correct problems that led to its bungled response immediately following the storm. In a related action, the Senate also passed a bill earlier this month to overhaul the agency’s emergency loan program.
Among the highlights, the bill allows private banks to make government-guaranteed disaster loans, and authorizes the SBA to hire private companies to help process disaster loans. The SBA would also be able to offer short-term loans to small businesses to cover expenses while their disaster loans are being processed.
Congress is expected to pass a final bill and send it to the president for his signature in September, after a conference committee works out differences between House and Senate bills. The storm’s second anniversary is next week.