[StBernard] Melancon Introduces Comprehensive SBA Reform Bill

[Westley Annis]

	WASHINGTON, DC- U.S. Rep. Charlie Melancon announced today he has
introduced a bill with House Small Business Committee Chairwoman Nydia
Velázquez (D-BY) to dramatically reform the Small Business Administration
and improve its response to Hurricane Katrina and Rita victims, as well as
the next major disaster.  Rep. Melancon is an original co-sponsor of The
Relief for Entrepreneurs:  Coordination of Objectives and Values for
Effective Recovery (RECOVER) Act of 2007, which was introduced yesterday
evening.
	 
	"The SBA's response to Hurricanes Katrina and Rita was nothing short
of a fiasco," Rep. Melancon said.  "Distraught storm victims were kept
waiting months for the loans they urgently needed to start rebuilding their
homes and businesses, and many gave up on the SBA before they ever got any
help at all.  The RECOVER Act will not only help Katrina and Rita survivors,
it will work to fix many of the SBA's problems and inefficiencies that
Katrina and Rita laid bare, and I thank Chairwoman Velázquez for her
leadership on this comprehensive reform legislation."
	 
	Chairwoman Velázquez added, "The RECOVER Act is a first step in
providing much needed relief to Gulf Coast small businesses.  It also
ensures the administration is prepared to handle large scale disasters in
the future.  Mr. Melancon played an instrumental role in developing this
legislation, and ensuring employers in the Gulf Coast will be able to get
the timely assistance they so desperately need today and tomorrow."
	 
	Last month, Rep. Melancon testified before the Small Business
Committee about the SBA's failed response to Hurricanes Katrina and Rita.
The agency was understaffed, poorly trained, poorly managed, and overall
unprepared to respond effectively to the urgent need for disaster relief
loans. For instance, at the time of the hearing in February 2007 - almost a
year and half after Katrina and Rita made landfall - only 38% of SBA loan
applications had been approved and funded. Rep. Melancon testified that the
delays and poor communication from the SBA effectively discouraged many
disaster victims from ever completing the loan application process, leaving
them on their own to try to rebuild their homes and businesses.    
	 
	The RECOVER Act will better prepare the SBA to handle future
disasters by requiring, among other reforms, that the agency to develop a
comprehensive disaster response plan, improve employee training, streamline
their information tracking system and follow-up process, and more
efficiently distribute disaster loans by partnering with private lenders.
Rep. Melancon addressed this last issue when he signed on as an original
co-sponsor of the Small Business Disaster Response and Loan Improvements Act
of 2007, introduced last month with Rep. Richard Baker (R-LA).  Two key
aspects of that legislation are included in the RECOVER Act: allowing for
larger maximum loan amounts and permitting private, SBA-approved lenders to
originate, process, approve, and servic! e SBA disaster loans.
	 
	Rep. Melancon was also instrumental in writing a section of the
RECOVER Act that increases the flexibility of SBA regulations governing the
approval of disaster loan applications.  Specifically, the provision permits
small businesses that were not a major source of employment prior to the
disaster, but which subsequently become a major source of employment
following a disaster, to qualify for disaster loans beyond the current
statutory limit.  As Rep. Melancon testified in February, some businesses
along the Gulf Coast were denied sufficient loans because the SBA judged
their applications solely based on their pre-storm capabilities - not on the
new realities they were trying to adj! ust to and their ability to meet
post-storm demands.  
	 
	"Instead of nurturing struggling small businesses as they adapted to
the new environment following Katrina and Rita, the SBA often strangled them
with red tape and tripped them up with bureaucratic hurdles," said Rep.
Melancon. "The RECOVER Act will make the SBA a more flexible agency that is
better able to help Americans recover from major disasters and try to get
their lives back to some semblance of normal."
	 
	The text of the bill can be found by clicking here
<javascript:void(0);> .  A section-by-section summary is below.
	 
	
	Relief for Entrepreneurs:  Coordination of Objectives and Values for
Effective Recovery (RECOVER) Act of 2007

	 

	Title I
	 
	Sec. 101 Comprehensive Disaster Response Plan 
	This provision will require the SBA to develop, implement, and
maintain a comprehensive written disaster response plan.  The plan should
include an assessment of risks associated with various types of disasters in
each of the agency's 10 districts.  This plan should also integrate plans to
integrate agency resources and personnel in responding to the various
disasters it identifies.  The plan should include strategies to meet rapidly
expanding IT, HR, and office space needs within the agency and should have
appropriate guidelines for coordination with other federal agencies.
	 

	Sec. 102 Annual Disaster Simulation Exercise 

	This provision will require the SBA to undertake at least one
agency-wide disaster simulation exercise each year that includes, at a
minimum, not less than half of the agency's disaster reserve corps and
includes stress-testing of vital agency systems.
	 
	Sec. 103 Disaster Reserve Corps
	This provision will require SBA to maintain a disaster reserve corps
of 1,000 individuals who receive annual training, and, to the greatest
extent practicable, are cross-trained to perform more than one function
relating to disaster response.
	 
	Sec. 104 Plans To Secure Additional Space
	This provision will require the SBA to develop long-term plans to
secure additional space to accommodate an expanded workforce in times of
disaster.
	 

	Sec. 105 Coordination of Disaster Assistance Programs With FEMA 

	This provision will require the SBA establish uniform guidelines in
consultation with the director of FEMA providing for the coordination of
their assistance programs.  Specifically, the SBA must establish guidelines
to ensure that applications for disaster assistance are submitted to the
appropriate agency as quickly as possible.
	 

	Sec. 106 Associated Administrator for Disaster Assistance

	This provision will require the SBA to create a new position within
the agency, the Associate Administrator for Disaster Assistance, appointed
by the President, who will be responsible overseeing the SBA's entire
disaster assistance program.  Two Director positions will also be
established and will report directly to the Associate Administrator.  The
Director of Disaster planning will develop and implement the all aspects
SBA's disaster readiness plan, including the agency's annual disaster
simulation exercise.  The Director of Disaster Lending will direct the
agency's 7(b) disaster loan program.
	 
	Title II
	 
	Sec. 201 Incident of National Significance
	This provision will bring the preexisting "Incident of National
Significance" within the Small Business Act to permit affected businesses to
receive economic injury and mitigation disaster loans.
	 
	This provision will be made retroactive to businesses affected by
the 2005 Gulf Coast Hurricanes.
	 
	Sec. 202 Information Tracking and Follow-up System 
	This provision will require the SBA develop, implement, and maintain
a centralized information system to track all communications (written,
e-mail, and phone) between disaster victims and SBA personnel concerning the
status of their application.  At a minimum, this system must record the
method of communication, the date of the communication, the identity of the
SBA employee involved, and a summary of the subject matter of the
communication.
	 
	This will also require the SBA to provide follow-up communications
to disaster victims as their disaster loan proceeds through critical stages
of the origination, approval, and disbursement process.
	 
	Sec. 203 Immediate Disaster Assistance Program
	This provision provides the SBA with authority to make immediate,
small dollar, short term loans to small businesses physically damaged in a
disaster, contingent upon the business applying for and meeting basic
criteria for a subsequent SBA disaster loan.
	 
	Sec. 204 Increased Deferment Period 
	This provision will provide disaster victims with an option of
receiving a four year deferment period for disaster loans.  
	 
	Sec. 205 Revised Repayment Terms 
	This provision requires the repayment period to begin from the date
that the final loan disbursement is made and requires that repayment amounts
be based solely on funds that have been disbursed.
	 
	Sec. 206 Revised Disbursement Process 
	This provision will require that approved funds for SBA disaster
loans be disbursed upon a schedule with increased minimum disbursement
levels to better meet the needs of disaster victims.
	 
	Sec. 207 Revised Collateral Requirements 
	This provision will revise the collateral requirements so that
business owners are not required to pledge their homes for business loans
less than $100,000.
	 
	Sec. 208 Enhanced Lending Authority for Preferred Lenders 
	This provision will create a program that permits Preferred SBA
lenders to originate, process, approve, and service disaster loans for a
small fee.  This program may be initiated at the discretion of the
Administrator, during incidents of national significance, and whenever the
SBA's average time for disaster loan approvals in any single disaster runs
longer than 30 days.  This provision will also permit the Administrator to
suspend, revoke, or condition a lender's PLP status in the event that the
loans they make experience an inordinate number of defaults.
	 

	Sec. 209 Disaster Processing Redundancy

	This provision will require the SBA to maintain a backup disaster
processing operation in a separate geographic location from the primary
processing operation.  
	 

	Sec. 210 Grant Program 

	This provision will provide the SBA with authority to offer grants
of up to $100,000 for businesses most severely affected by the 2005 Gulf
Coast Hurricanes that were in existence at least two years prior to the
disaster, that are economically viable, that have applied for and been
rejected for a conventional disaster assistance loan, and that reestablish
their business within the same or in a contiguous county or parish in which
they were originally located.
	 

	Sec. 211 Waiver of Prohibition on Duplication of Certain Benefits

	This provision will permit the Administrator to waive grant
assistance from consideration as compensation for damage or destruction
caused as a result of natural or other disasters.  This provision will be
retroactive to the 2005 Gulf Coast Hurricanes.
	 
	Sec. 212 Increase Legislative Limit 
	This provision will increase the legislative limit on disaster loans
from $1.5 million to $3 million.
	 
	Sec. 213 Net Earnings Clause Prohibited  
	This provision will preclude the imposition of annual "Supplemental
Payment" terms on loans in excess of $1 million during the first five years
of repayment
	 
	Sec. 214 Economic Injury Disaster Loans to NonProfits
	This provision will permit private nonprofit organizations to
qualify for disaster assistance.
	 
	Sec. 215 Applicants That Will Constitute a Major Source of
Employment Due to Changed Economic Circumstances
	This provision permits small businesses that were not a major source
of employment prior to the disaster, but which subsequently are a major
source of employment following the disaster to qualify for disaster loans
beyond the current statutory limit.
	 
	Title III
	 

	Sec. 301 Annual Report on Disaster Assistance 

	This provision will require the SBA to submit to Congress a report
on the Disaster assistance program performance during the pervious fiscal
year.  This report will cover changes in staffing, technology, and a review
of challenges encountered and overall results.  Additionally, during an
incident of national significance, the SBA must make monthly reports to
Congress with basic information on their disaster response.
	 
	
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