(Washington, DC) — Senate Committee on Small Business & Entrepreneurship Ranking Member Ben Cardin (D-Md.) today called on the U.S. Small Business Administration (SBA) to expedite its process for providing small businesses and families with low-interest loans following the declaration of a natural disaster during a hearing on the agency’s Office of Disaster Assistance.
According to the Federal Emergency Management Agency, almost 40 percent of small businesses never reopen their doors after a disaster. SBA plays a key role in the federal government’s disaster relief efforts by making direct loans available to homeowners and to small businesses. These loans help families repair damage and replace personal property and provide small businesses with working capital to remain in business until they can reopen their doors. Although SBA has made progress in recent years to shorten wait times for disaster loans, the current average wait time of three weeks is often too long for cash-strapped small businesses.
“Well, quite frankly, for some businesses three weeks is too long,” Ranking Member Cardin said during his opening statement. “They need the money immediately in order to be able to keep their doors open.”
Following two historic and fatal floods in Ellicott City, Maryland in 2016 and 2018, SBA played a key role in the relief effort, establishing a Disaster Loan Outreach Center to provide information about low-interest loans to homeowners, renters and small businesses impacted by the flood days after the floods.
The Committee heard testimony from Mr. Jason Barnes—the owner of a toy store that was devastated by both Ellicott City floods.
Cardin praised Mr. Barnes’ resilience: “Mr. Barnes, you defied the odds. First to survive a flood being in business for a short period of time not having any cash to deal with that not knowing what to do next because you never thought you would have to go through this, you were still on a learning curve being a business owner and then twenty months later to go through a second experience. But, in the second experience you already understood how to keep a business open because you went through it the first time. It seems to me that the SBDC, the Small Business Development Center, really was your lifesaver. It really was your lifeline to understand how you could stay in business and that was exactly what we intended when we passed the RISE Act, to have help on the ground that understood the community and had the confidence of the community that could be there on a continuing basis. So I really do appreciate your courage.”
Nearly two years after the 2016 flood, more than 90 percent of the businesses impacted had reopened—nearly twice the normal survival rate for businesses impacted by natural disasters. Cardin lauded the coordinated relief effort, noting: “… you had the reinforcement of community organizations, you had neighbors helping neighbors, and all that was coordinated through the county and state and federal partners, which made a real difference with the confidence level to get back into business.”
Mr. Barnes agreed: “The disaster center was just a wealth of knowledge and resources to get everyone back up and running.”
“Senators, first of all, thank you for your help in putting together this hearing and for your leadership on this committee. It’s always a pleasure to work with Senator Rubio in the chair, but it’s also nice to have you in the chair, so welcome to that. This is a continuation of our hearings on the reauthorization of programs under the Small Business Administration.
“This hearing is going to be on disaster assistance programs, which is a critically important part of the SBA toolbox. Senator Ernst, I know the pain that you’ve gone through in your community in the Midwest with the continuing flooding, and you have our heartfelt feelings and we obviously want to come together as a nation to do everything we can to help the people that have been victimized and do everything we can to make the circumstances better.
“I experienced this firsthand in Maryland, in Ellicott City. Ellicott City experienced two deadly floods in a period of less than two years where floodwaters came down the main street, which is basically family-owned-type businesses, what a Main Street used to be, and still is, in Ellicott City, Maryland. This was a unique flood. We’ve had flooding before, where the riverbanks just rose, but this was so much rain in such a short period of time, the flow of the water caused the damage. I was there. I saw it firsthand the damage that was inflicted, the loss of life, the loss of property.
“Jason Barnes is here, from All Time Toys, and we’ll have a chance to hear from him on the second panel. But, I want to tell you, when I got there, I was so impressed to see the SBA already there. They were on the ground, working and helping, and providing the necessary information to the property owners. I’ll also acknowledge the SBDCs that were there.
“Now, we anticipated that and the law that we passed in 2015, the RISE Act, to empower the SBDCs to play a greater role in the recovery process. We provided resources for training, et cetera, and it worked. It was, I think, the right thing to do because, quite frankly, the resource partners know the communities best. So, the SBDCs, the women’s business centers, SCORE, these affiliates can really help with the people, with the businesses on the ground to give them firsthand advice on how to keep their businesses going. And, I think we need to take a look at the CDFIs to see whether we can use them in a better way in disaster relief.
“Our focus here is whether we can be more effective in the use of the tools that we have. That’s the reauthorization process. Senator Ernst mentioned the tools that are available. I won’t go back over them, but let me just tell you the numbers. As I understand it, 40 percent of small businesses cannot survive a major disaster. They never reopen. That’s a shocking number, so we need to try to do something better.
“One of the things you hear frequently is that they need quick access to capital. That’s why the SBA program for disaster relief is unique. It’s direct loans and it applies not just to small businesses but to property owners, residential property owners. So, it is a broader program and we have made a lot of progress in streamlining the process so they can get their capital quicker. I think now it’s about three weeks on average, in order to be able to get disaster loans from the SBA. Well, quite frankly, for some businesses three weeks is too long. They need the money immediately in order to be able to keep their doors open. As I understand it, also, we tried to do something about that in 2008 with new bridge loans that didn’t work. I’m not blaming anybody why it didn’t work. There was not, as I understand it, commercial bank interest. It just didn’t work. But, the need is still there. So, is there other things we can do to allow businesses to access capital sooner, in order to bridge and stay in existence? Fifty percent of those who qualify for the SBA disaster loans don’t qualify for it. So, if there’s a three-week determination and then they have to go to the next source, which might be through FEMA and HUD, can we coordinate that better so that they have clearer directions sooner as to what is available to keep them in business?
“The other thing I think we need to concentrate on is to recognize that small businesses need help to be prepared for disaster, for a plan of business continuation. You don’t think about it until after you’re out of business, but you really should be having those discussions and we should be able, through the SBA, to provide those types of services earlier. And, obviously, we also need to look at, and we do allow, funds that are made available through the SBA that deal with mitigation, to reduce the risks in the future. These are all important issues. We have an excellent panel, so I look forward to hearing from our witnesses.”