WASHINGTON – After more than two and a half years of bipartisan efforts to improve assistance to small businesses and individuals devastated by disasters, legislation championed by Senators John Kerry (D-Mass.), Olympia J. Snowe (R-Maine), Mary Landrieu (D-La.), and David Vitter (R-La.) today is one step closer to becoming law. The provisions were included in the final Farm Bill which negotiators released today. The Senators have been working since September 2005 when the aftermath of Hurricane Katrina revealed the need to enact legislation that will get disaster loans processed and into the hands of victims more quickly.

“This past weekend’s storms that killed more than 20 people and devastated lives from Oklahoma to Georgia underscore the importance of delivering disaster aid quickly. Whether it’s flooding or fire, after a disaster people can’t afford to navigate a maze of federal bureaucracy. Our disaster reform provisions will cut through the red tape, increase resources, bring private lenders into the response, and help bridge the gap while disaster victims begin the process of rebuilding their lives,” said Senator Kerry, Chairman of the Committee on Small Business and Entrepreneurship.

“I am pleased that Small Business Disaster Assistance legislation has been made part of the Farm Bill,” said Senator Snowe, Ranking Member of the Committee on Small Business and Entrepreneurship. “This legislation, which is a product of consensus and compromise over the last two and a half years, equips the SBA with the tools necessary to provide a more comprehensive and aggressive response to future disasters. It is important that the federal government be nimble and effective when responding to future disasters, and I am hopeful that this critical legislation will help the SBA be better equipped to do so.”

"The SBA disaster reforms package included in the Farm Bill conference report is a key step forward for our Gulf Coast small businesses,” said Senator Landrieu. “Business owners and homeowners seeking SBA assistance following future disasters will encounter a more efficient, responsive agency because of these reforms. Our Louisiana small businesses communicated loud and clear that we needed SBA reform, and this legislation was one of my top priorities to secure before the upcoming hurricane season.”

“Small businesses are a significant component of our national economy, and in small towns and rural areas throughout the country they are the principle providers of local jobs,” said Senator Vitter. “Disaster recovery programs were crucial to Louisiana businesses during their recovery from the 2005 hurricanes. The sheer scale of the devastation suffered throughout our state demanded that we take a good look at our disaster recovery programs and identify the areas that needed significant improvement. Private disaster loans and the loan limit increases are two such lessons. The inclusion of these provisions in the farm bill is a positive development and one that will help minimize business interruptions and job losses as a result of a natural disaster.”

Below is a summary of disaster loan program reform provisions in the Food, Conservation and Energy Act of 2008:


The bill creates two programs for the private sector to administer small-dollar, short-term disaster loans for businesses. In a catastrophic disaster, the SBA can authorize private lenders to make 180 day loans of up to $150,000 at not more then 1 percent over the prime rate to businesses that are otherwise eligible for a disaster loan. In all disasters, private lenders can make loans of up to $25,000 and receive an SBA guaranty within 36 hours for up to 85 percent of the loan amount. Both loans would be rolled into a standard SBA disaster loan once it has been made. These bridge loans will get financial assistance to businesses while they await processing or disbursement of their conventional SBA loan or insurance payments.


This bill creates a program to allow private lenders to make disaster loans after a catastrophic disaster. These loans will carry the same terms and benefits as conventional SBA disaster loans. All lenders would be eligible to make loans to small businesses, but only lenders who are preferred lenders in the 7(a) program could make loans to individuals. The bill also provides the SBA with authority to pay a fee to private lenders to process loans during times when the SBA’s processing capabilities are overwhelmed in order to prevent application backlogs and ensure timely approval and disbursement of loan proceeds.


The bill authorizes the SBA to make economic injury disaster loans to businesses located outside the geographic area of a catastrophic disaster, if they suffer economic injury as a direct result of the disaster. The businesses must have suffered identifiable economic injury as a direct result of the disaster, and this program will be available in periods for which the Administrator has declared eligibility for additional disaster assistance.


The bill raises the maximum amount of an SBA disaster loan from the current level of $1,500,000 to $2,000,000, and raises the maximum amount of unsecured disaster loans from $10,000 to $14,000. It also gives the SBA Administrator the authority to make new disaster loans and refinance existing loans from Hurricanes Katrina and Rita with a four year deferment period. In addition, the bill allows non-profits located in the disaster area to apply for economic injury loans.


The bill adds several requirements to improve the SBA’s coordination with FEMA. The SBA will also be required to conduct biennial disaster simulation exercises, create a comprehensive disaster response plan for various disaster scenarios, and improve its communication with the public when disaster assistance is made available. The bill also creates a new position for a high-level disaster planning expert who will operate independently from the Office of Disaster Assistance and will oversee the disaster planning and readiness of the agency. Finally, the bill will ensure that the SBA maintains adequate loan processing staff and reserve cadre.