Small Business Administration will soon exhaust disaster loan funds

WASHINGTON — Small Business Administration officials warned Tuesday that the agency would “very soon” exhaust its funding for new disaster loans for homeowners and businesses in the wake of Hurricane Helene.

The agency has less than $100 million for new disaster loans, according to the officials, and will continue to process incoming loan applications after the money runs out, but Congress will have to approve additional funding for it to make new loan offers and cut checks.

The issue comes at a precarious time for the country. Federal and state officials are preparing for Hurricane Milton, the strongest storm in the Gulf of Mexico since 2005, to make landfall in Florida late Wednesday or early Thursday. Officials are also still responding to the devastating impact of Hurricane Helene in several Southeastern states.

“Our ability to fully support all of our disasters is going to be diminished, and that includes Milton,” Isabel Guzman, the agency’s administrator, said in an interview Tuesday evening.

It is unclear whether lawmakers will approve additional funding before the agency exhausts the money, however. Congress is not set to reconvene until Nov. 12.

Guzman said the money would “definitely run out” before then, adding that she hoped lawmakers would return to Washington sooner to replenish the agency’s disaster loan funds. The lack of funds could “delay a family’s ability to rebuild their home and get back in safely,” or a business owner’s ability to “quickly clean up” and “get their employees back to work,” she said.

“SBA is, of course, known for small businesses,” Guzman said. “But we help entire communities recover and help to ensure economic stabilization.”

Last week, President Joe Biden wrote in a letter to congressional leaders that lawmakers “must act to restore this funding.” He did not request a specific amount of money, and he did not explicitly call on members of the House and Senate to return immediately, but he said it would be critical for Congress to ensure that no major disaster programs “run out of funding during the congressional recess period.”

So far, congressional leaders have not called for lawmakers to return to Washington before Nov. 12. When asked whether he would call House members back earlier to pass additional disaster relief funds, Speaker Mike Johnson said Sunday that Congress would be back in session “immediately after the election.”

“The thing about these hurricanes and disasters of this magnitude is that it takes a while to calculate the actual damages, and the states are going to need some time to do that,” Johnson said during a Fox News interview. “We will help the people in these disaster-prone areas.”

He added that “it will all happen in due time, and we’ll get that job done.”

Sen. Chuck Schumer, D-N.Y., the majority leader, is also waiting for estimates from agencies on the ground, a spokesperson said.

The SBA provides low-interest loans to homeowners, renters, business owners and nonprofits through its disaster relief programs. Homeowners can get loans of up to $500,000 to repair or replace damaged or destroyed real estate. Homeowners and renters are also eligible for up to $100,000 to repair or replace personal property. Businesses can get loans of up to $2 million.

The lack of funding has alarmed some lawmakers and disaster relief experts.

“This is a really, really important engine of recovery, and it could be quite devastating, even if there is a short-term delay and a backlog of applications,” said Jeffrey Schlegelmilch, the director of the National Center for Disaster Preparedness at Columbia University. “Given the scope and scale of what’s going on, I don’t think we have time to wait.”

On Tuesday, Rep. Jared Moskowitz, D-Fla., introduced a bill that would provide the SBA billions more in funding to carry out relief efforts in response to Hurricanes Helene and Milton. “Congress should have proactively funded the SBA and FEMA before going on a monthslong recess during hurricane season,” he said in a statement.

The SBA has requested $1.6 billion in new funding from Congress for its disaster loan program for the full fiscal year, though Guzman said the agency would probably need more in light of Hurricane Milton. In 2023, the SBA lent nearly $3 billion — including more than $670 million for businesses and more than $2.3 billion for homeowners and renters — to help Americans recover from disasters.

SBA officials said that they had asked Congress for a replenishment many times over the past year and warned of the impending shortfall for months.

In his letter, Biden noted that the Federal Emergency Management Agency had enough money “for the immediate emergency response phase.” Congress recently approved an additional $20 billion for FEMA’s disaster relief fund.

But Biden said FEMA was facing a shortfall at the end of the year.

“Without additional funding, FEMA would be required to forgo longer-term recovery activities in favor of meeting urgent needs,” Biden wrote. “The Congress should provide FEMA additional resources to avoid forcing that kind of unnecessary trade-off.”

The president has been urging Congress to approve additional disaster relief funds for months. Biden requested money after fires in Hawaii and tornadoes in Mississippi, Iowa and Oklahoma. The administration also requested additional federal funds to help rebuild the collapsed Francis Scott Key Bridge near Baltimore.

This article originally appeared in The New York Times.

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