[StBernard] Small Business Disaster Assistance in Final Farm Bill

[Westley Annis]

Small Business Disaster Assistance in Final Farm Bill
After more than two years, legislation to improve financial aid to small
businesses heading for law.

 

WASHINGTON -After more than two and a half years of bipartisan efforts to
improve assistance to small businesses and individuals devastated by
disasters, legislation championed by Senators Mary Landrieu, D-La., John
Kerry, D-Mass., and Olympia J. Snowe, R-Maine, is now headed for law as a
part of the farm bill. This week, both the Senate and House of
Representatives overrode the president's veto of the legislation, pushing
its provisions toward law. The Senators have been working since September
2005 when the aftermath of Hurricane Katrina revealed the need to enact
legislation that will get disaster loans processed and into the hands of
victims more quickly. 

"Our Gulf Coast small businesses continue to suffer from the toll the 2005
hurricanes took on their livelihood, and these SBA disaster reforms are
absolutely necessary to their recovery," Sen. Landrieu said. "The
improvements to these loan programs will ensure that in the case of another
disaster, the SBA will be more efficient and more responsive, and I am
pleased that these provisions will be in place when the 2008 hurricane
season begins.

"As our South Louisiana businesses prepare for this hurricane season, our
small businesses in north and central Louisiana will also benefit from these
reforms should severe weather strike in the future."

Below is a summary of disaster loan program reform provisions in the Food,
Conservation and Energy Act of 2008:

 

CREATES BRIDGE LOAN PROGRAMS

The bill creates two programs for the private sector to administer
small-dollar, short-term disaster loans for businesses. In a catastrophic
disaster, the SBA can authorize private lenders to make 180 day loans of up
to $150,000 at not more then 1 percent over the prime rate to businesses
that are otherwise eligible for a disaster loan. In all disasters, private
lenders can make loans of up to $25,000 and receive an SBA guarantee within
36 hours for up to 85 percent of the loan amount. Both loans would be rolled
into a standard SBA disaster loan once it has been made. These bridge loans
will get financial assistance to businesses while they await processing or
disbursement of their conventional SBA loan or insurance payments.

UTILIZES THE PRIVATE SECTOR

This bill creates a program to allow private lenders to make disaster loans
after a catastrophic disaster. These loans will carry the same terms and
benefits as conventional SBA disaster loans. All lenders would be eligible
to make loans to small businesses, but only lenders who are preferred
lenders in the 7(a) program could make loans to individuals. The bill also
provides the SBA with authority to pay a fee to private lenders to process
loans during times when the SBA's processing capabilities are overwhelmed in
order to prevent application backlogs and ensure timely approval and
disbursement of loan proceeds. 

EXPANDS DISASTER ASSISTANCE TO AFFECTED BUSINESSES NATIONWIDE

The bill authorizes the SBA to make economic injury disaster loans to
businesses located outside the geographic area of a catastrophic disaster,
if they suffer economic injury as a direct result of the disaster. The
businesses must have suffered identifiable economic injury as a direct
result of the disaster, and this program will be available in periods for
which the Administrator has declared eligibility for additional disaster
assistance. 

RAISES LOAN AMOUNTS AND INCREASES DEFERMENT PERIODS

The bill raises the maximum amount of an SBA disaster loan from the current
level of $1,500,000 to $2,000,000, and raises the maximum amount of
unsecured disaster loans from $10,000 to $14,000. It also gives the SBA
Administrator the authority to make new disaster loans and refinance
existing loans from Hurricanes Katrina and Rita with a four year deferment
period. In addition, the bill allows non-profits located in the disaster
area to apply for economic injury loans.

 

ENHANCES DISASTER PREPAREDNESS, COMMUNICATION, AND COORDINATION

The bill adds several requirements to improve the SBA's coordination with
FEMA. The SBA will also be required to conduct biennial disaster simulation
exercises, create a comprehensive disaster response plan for various
disaster scenarios, and improve its communication with the public when
disaster assistance is made available. The bill also creates a new position
for a high-level disaster planning expert who will operate independently
from the Office of Disaster Assistance and will oversee the disaster
planning and readiness of the agency. Finally, the bill will ensure that the
SBA maintains adequate loan processing staff and reserve cadre.  

 

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