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Louis Jacobson
By Louis Jacobson December 5, 2012

A streamlined loan application, but continuing administrative problems

When Barack Obama was running for president in 2008, memories of Hurricane Katrina were still fresh in Americans' minds -- a reason why Obama promised to "fix the Small Business Administration bureaucracy so that it can step in during a disaster and provide assistance."

As it happened, the concern may have been exaggerated. A September 2006 report by the SBA's inspector general that took an in-depth look at a sample of 220 disaster loans did not find the agency primarily at fault for the delays widely reported in the media. Instead, the study found that among the 62 percent of loans in the sample that experienced delays, the hangups were "largely borrower driven," including indecision or reluctance about accepting the loan and paperwork that was completed inaccurately or incompletely.

Even so, the SBA has taken steps to streamline the application process for disaster loans.

According to the SBA, a new online application launched in June 2012 is simpler and less time-intensive. "The original electronic loan application, launched in 2008, guided applicants through a series of 80 screens, based on responses to questions aimed at determining eligibility," the agency said in announcing the new form. "Now, applicants for disaster assistance can fill out a form on SBA's secure website that looks exactly like the paper application, four pages for home loans, and three pages for business loans."

The response has been positive, an SBA spokeswoman said. The percentage of loan applications the SBA has received electronically doubled between the period November 2011 to April 2012 (25 percent) and the period May 2012 to October 2012 (55 percent).

The inspector general's office hasn't done an equivalent analysis of how SBA has done in processing disaster loans during the Obama administration. Two reports, however, address issues broadly related to this promise.

An audit conducted between March 2010 and October 2010 found that two disaster-loan servicing centers "did not have adequate, effective procedures and systems for processing insurance recovery checks," the report said. This led to "significant errors" in determining whether a check was valid or was a duplicate.

Meanwhile, an analysis of disaster loan administration following the Deepwater Horizon oil spill found that SBA actually over-staffed offices that dealt with local business owners seeking loans. The inspector general's criticism wasn't that SBA was processing claims too slowly but rather that it was slow to realize that demand for its services was so low and adjust staffing levels accordingly.

Overall, the streamlining of SBA's online application form appears to be an improvement, but the inspector general found that certain kinds of check processing activities have unacceptable levels of inaccuracies. On balance, we rate this a Compromise.

Our Sources

Small Business Administration Office of Inspector General, "Semiannual Report to Congress," Fall 2012

Small Business Administration Office of Inspector General, "SBA's Response to the Deepwater Horizon Oil Spill," April 7, 2011

Small Business Administration Office of Inspector General, "Disaster Loan Disbursements Following the 2005 Gulf Coast Hurricanes Katrina, Rita and Wilma," Sept. 19, 2006

Small Business Administration Office of Inspector General, "Processing of Insurance Recovery Checks at the Disaster Loan Servicing Centers," Feb. 10, 2011

Small Business Administration, "SBA Simplifies Online Disaster Loan Application," June 18, 2012

Email interview with Emily Cain, spokeswoman for the Small Business Administration, Dec. 4, 2012

Angie Drobnic Holan
By Angie Drobnic Holan November 23, 2009

SBA revising its Disaster Recovery Plan

We asked the Small Business Administration about its ability to respond to natural disasters.

Officials there said much progress was made in 2009 to improve response rates and efficiency in the areas of loan application, loan approval, loan disbursement, technology services, administrative services, and personnel services.

Officials said that average processing times for disaster loans in 2009 were seven days for homes and 15 days for businesses, compared to average times in 2006 of 74 days for homes and 65 days for businesses. Additionally, the agency"s pre-Katrina disaster staffing was 880 individuals, compared to 1,000 full-time and 2,000 additional on-call reserve staff today.

In November, the SBA revised and streamlined its Disaster Recovery Plan, a detailed plan for deploying trained SBA employees in the event of a disaster. SBA staff members and federal emergency response partners will participate in a disaster simulation in spring 2010 to test the agency"s readiness to respond to a catastrophic disaster.

We'll need to see how the SBA handles a real disaster, but for now there's been enough progress for us to rate this promise In the Works.

Our Sources

E-mail interview with Hayley Matz of the Small Business Administration

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