WASHINGTON – U.S. Senator Mary L. Landrieu, D-La., Chair of the Senate Committee on Small Business and Entrepreneurship along with Senators Claire McCaskill (D-Mo.) and Roy Blunt (R-Mo.) today, sent a letter to the U.S. Small Business Administration (SBA) requesting answers on the reasons behind the initially high decline rates on SBA disaster loans to businesses impacted by recent disasters.

“Immediately following Hurricanes Katrina and Rita in 2005, the SBA disaster loan application decline rates were extremely high and this was widely reported immediately following the storms,” the Senators wrote. “Gulf Coast states saw a similar situation unfold after the Deepwater Horizon oil spill last year and, more recently, after the tornadoes in Alabama. We are concerned that these high decline rates, coupled with negative media coverage, serve as a deterrent for businesses that may want to apply but are discouraged from doing so.”

Today’s letter requests more specific qualitative and quantitative data about the SBA disaster loan program. A few of the specific requests include:

• Applications received to date and loans dispersed for the recent tornadoes in Joplin, Missouri and northern Alabama;

• Annual month-by-month averages, based upon 10-year averages for approval rates of both Economic Injury and Physical Damage Disaster loans; and

• Explain why decline rates are so high immediately following a disaster and outline how the agency reaches out to businesses seeking disaster assistance

As of May 19, 2011, SBA had received 1,427 applications from disaster victims in Alabama following the April 2011 tornadoes. Of the applications, only 12 percent had been accepted and 88 percent had been declined not including loans which SBA withdrew or applications currently in processing. In addition, SBA received 920 applications from disaster victims in Louisiana following the Deepwater Horizon oil spill last year and as of mid May, only 27 percent had been approved and 73 percent had been declined.

On Tuesday of this week, Chair Landrieu also sent a letter to the SBA expressing continued concerns about the agency’s interpretation of duplication of benefits requirements following declared disasters. Following the 2005 hurricanes and 2008 Midwest flooding, according to a 2010 SBA Inspector General audit, the SBA retrieved close to $1 billion of U.S. Department of Housing and Urban Development (HUD) Community Development Block Grant (CDBG) funds sent to impacted States to assist homeowners. SBA used the recovered CDBG funds, which it determined duplicated SBA disaster loan proceeds, to reduce balances on disbursed and undisbursed SBA disaster loans for the homeowners. Chair Landrieu inquired with SBA on the underlying reasons behind this action, as well as whether similar actions had occurred in other impacted states since 2005. To see a copy of Senator Landrieu’s letter on the duplication of benefits, please click here.

To see a copy of today’s letter, please click here.