WASHINGTON — Sens. John Kerry, Chairman of the Senate Committee on Small Business and Entrepreneurship, Olympia Snowe (R-Maine), Ranking Member, Tom Harkin (D-Iowa), Committee member, and Chuck Grassley (R-Iowa) sent a letter to the Small Business Administration (SBA) today urging the Administration to review its new standards for credit elsewhere and ensure that the requirements enable current and future disaster victims to obtain assistance. This call comes after the SBA altered its standards to determine which victims would be eligible for low-interest loans, which significantly raised the number of applicants offered loans at a higher rate.
After Katrina, all but 2 percent of applicants received low-interest loans capped at 4 percent to help them rebuild their homes and businesses. But reports from the Midwest floods show that the SBA is determining that a higher percentage of disaster victims are being offered loans at the higher rate. The victims in the Midwest are being offered more expensive loans - with rates capped at 8 percent and shorter repayment periods - at a rate fifteen times as great as after Katrina. This is due to changes made by the SBA to the standards for determining if victims are able to receive credit elsewhere. Victims who can receive credit elsewhere are given loans with the higher rates. The SBA must review these standards and ensure that they are not unnecessarily hurting disaster victims and slowing recovery efforts.
“The goal of the SBA in times of disaster should be to facilitate a quick economic recovery,” Kerry said. “But with this change, many of the small businesses vital to our economy could close at a time when their continued prosperity is more essential than ever. This standard must be reconsidered so victims will have the resources they need to rebuild their businesses and their lives.”
“With small businesses and homeowners struggling to recover from disasters in the Midwest and Gulf Coast, it is imperative that SBA offer loans at reasonable interest rates to those seeking to rebuild,” said Senator Snowe. “Entrepreneurs working to restart operations and create jobs, as well as families trying to restore their homes, should be subject to a fair credit elsewhere test that truly determines whether they can access affordable credit in the private market. The SBA must stand ready to quickly provide low-cost credit under the widest possible set of transparent standards when private lenders are unwilling to do so at competitive rates. I urge the SBA to review its current rules and ensure that they do exactly that.
”“Across Iowa, businesses and individuals are still reeling from the devastating floods and they need access to these loans to facilitate their recovery,” said Harkin. “The mission of the SBA is to assist with economic recovery after a disaster occurs, and the change they made in their lending criteria is counterintuitive to that.”
“Iowans are doing all they can to rebuild their lives, homes and businesses. Iowans are hurting and the Small Business Administration’s high loan rates are like kicking somebody when their down. People expect help from their government in times of need. Iowans aren’t asking for a free ride, just the same treatment and low rates as those given to victims of Hurricane Katrina,” Grassley said.
Click here to read the letter.