CLIMATEWIRE | The Small Business Administration, which provides billions for disaster recovery, has run out of money to help people and businesses that were hit by Hurricanes Helene and Milton, President Joe Biden said Tuesday.
The SBA said it is "pausing new loan offers" through its multibillion-dollar disaster program because "it has exhausted funds."
Biden called SBA's low-interest disaster loans "a crucial lifeline to small businesses, homeowners and renters affected by disasters." Homeowners can borrow up to $500,000.
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The halt by the SBA, which has provided more than $25 billion in low-interest disaster loans since 2001, comes as hundreds of thousands of people and businesses across the Southeast have to rebuild following the devastating hurricanes.
The SBA said Tuesday that it has received 49,000 applications from households and businesses damaged by Helene or Milton and approved just 700 loans, worth a total of $48 million.
SBA Administrator Isabel Casillas Guzman urged people in the damaged areas to continue to apply for disaster loans, which will be provided "once Congress appropriates funds."
The pause could delay repairs by people and businesses that would ordinarily rely on an SBA loan to begin rebuilding.
"Without SBA, all the businesses, restaurants, all those things that have had damages, where they don't have insurance, there's no assistance," said Craig Fugate, who ran the Federal Emergency Management Agency in the Obama administration. "That loan program is how the federal government helps there."
SBA disaster loans have helped households avoid declaring bankruptcy under massive rebuilding costs, said Ben Collier, associate professor of Risk Management and Insurance at Temple University's Fox School of Business.
House Speaker Mike Johnson said in a statement Tuesday that "there's no question these devastating back-to-back storms have stressed the SBA funding program."
"But the Biden-Harris Administration has the necessary disaster funding right now to address the immediate needs of American people in these hurricane affected areas," Johnson added.
"Congress is tracking this situation closely, and when members return in just a few short weeks, the administration should have an accurate assessment of the actual dollar amount needed and there will be strong bipartisan support to provide the necessary funding."
Johnson has consistently said he will not call legislators back to Washington before their scheduled return Nov. 12.
Rep. Darren Soto (D-Fla.) said in a post on X, "Congress needs to go back to DC to pass new @SBAgov @USDA and @HUDgov disaster funding ASAP."
Biden and the SBA have been warning that the SBA is about to run out of money to administer its disaster-loan program and urged Congress to provide money quickly.
The SBA announcement coincides with FEMA's dwindling funds, which will force it to restrict disaster aid as early as next month.
While FEMA provides emergency assistance of a few thousand dollars for minor home repairs, SBA helps with permanent repairs.
Under the SBA disaster program, homeowners can borrow up to $500,000 to repair or replace homes. Businesses can borrow up to $2 million, and renters can borrow up to $100,000 to repair or replace damaged personal property. The loans, from private lenders, are backed by the SBA and have interest rates as low as 2.8 percent for residents.
The SBA said it has repeatedly sought $1.6 billion from Congress to continue its disaster-loan program this year. The figure does not include loans necessitated by Hurricane Milton "and/or other unknown future disasters."
The temporary budget that Congress approved in September "did not include supplemental funding" for the loan program "even as Hurricane Helene was just within days of making landfall," the SBA said in a statement.
Guzman, the SBA administrator, spoke Thursday with House Small Business Chair Roger Williams (R-Texas) but did not say exactly how much the agency needs, committee spokesperson Matt VanHyfte said. The $1.6 billion funding figure is "not a firm number" because storms are still happening, he said.
The combined damage from Helene and Milton could be as much as $250 billion, according to estimates.
In the six states hit by the two hurricanes, more than 435,000 people have sought emergency aid from FEMA, which has allocated more than $500 million, according to agency records and statements.
FEMA Administrator Deanne Criswell said Thursday that the agency had already spent $9 billion of the $20 billion that Congress approved for the fiscal year that began Oct. 1. Criswell warned that FEMA will have to restrict disaster aid soon if Congress does not provide additional money.
The SBA's financial struggles are occurring just over a year after the agency increased its maximum homeowners' disaster loan to $500,000 from $200,000 and increased renters' loans to $100,000 from $40,000.
The increases, which took effect July 31, 2023, were not accounted for in the temporary fiscal 2025 budget that Congress recently approved, said Fugate, the former FEMA administrator.
"They didn't put enough money in the SBA" budget, Fugate said. "Congress knew the higher loan limits were going to increase the amount of money they needed."
Collier of Temple University said, "If the government's going to provide larger loans to people, then that money's not going to go as far. The program's going to need authority to provide more [disaster loans] even given the same number of borrowers."
The agency provided nearly $3 billion in disaster loans in 2023, including $2.3 billion to homeowners and renters and nearly $700 million for small businesses.