Small business disaster loan program is out of money until new funds are approved
The Small Business Administration’s disaster loan program has run out of money, it announced on Tuesday, after warnings that funding would soon run out following increased demand from hurricanes Helene and Milton. The SBA added that the pause of disaster assistance loans it offers to small businesses, homeowners and renters will remain until Congress approves more funding.
President Biden said in a statement that Americans affected by recent disasters should still apply for the loans, and that Republican House Speaker Mike Johnson has promised the program would be replenished when Congress returns after the election. The SBA will process applications in the meantime, and disburse the funds when Congress provides the money, Biden said.
The SBA said that their loan application portal remains open, SBA’s disaster centers and in-person staff remain deployed across the country, and the agency will continue to accept new applications and ready borrowers to get their disaster loan offers as soon as possible once Congress appropriates funds. The program needs about $1.6 billion for the current fiscal year.
The SBA offers loans to businesses and people affected by disasters, as well as disaster assistance for homeowners, renters, nonprofits, and businesses of all sizes. The loans are geared toward providing immediate relief, to help businesses stay afloat and avoid bankruptcy. The government loans are seen as key, since right after a disaster private lenders may be reluctant to approve loans due to the uncertainty of the situation. There are other disaster relief programs available, including those from the Federal Emergency Management Agency, or FEMA, that are not affected by the SBA's current lack of funding.
SBA Administrator Isabel Casillas Guzman said on Tuesday: "While we await Congress to provide much-needed funding, we strongly encourage eligible businesses and households to apply for SBA disaster loans. SBA will continue to support homeowners, renters, businesses and nonprofits in processing their applications to ensure they receive assistance quickly once funds are replenished."
The SBA is currently supporting eligible applicants in 173 disaster declarations. Applications in the queue will receive loan offers after additional funding from Congress becomes available, and will be processed in the order in which they were received. The SBA also said that during this period, it will issue declines for new applicants who do not meet eligibility or underwriting criteria for a loan.
So far, the SBA has seen around 37,000 applications for relief submitted from those impacted by Hurricane Helene alone. For Hurricane Milton, SBA has already received over 12,000 applications. Borrowers who already have a loan offer will continue to receive disbursements.
SBA can make disaster loans up to $500,000 to homeowners to repair or replace disaster-damaged or destroyed real estate. Homeowners and renters may be eligible for up to $100,000 to repair or replace disaster-damaged or destroyed personal property. Businesses may be eligible for loans up to $2 million for both physical damage and economic injury from business disruption.
