WASHINGTON – Today the Senate Committee on Small Business and Entrepreneurship passed comprehensive legislation to improve the government's Disaster Loan Program and ensure disaster victims receive timely assistance. The program was mismanaged and ineffective in the aftermath of Hurricanes Katrina and Rita in 2005. Although some improvements have been made to the program over the last six months, the Administration requires additional tools to be able to swiftly and effectively respond in the aftermath of a disaster. The legislation was sponsored by Senators John Kerry (D-Mass.), Olympia J. Snowe (R-Maine), Mary Landrieu (D-La.), and David Vitter (R-La.).

"This legislation is critical to providing our small businesses with a swift, comprehensive federal response in the aftermath of a large scale disaster," said Kerry, Chairman of the Committee on Small Business and Entrepreneurship. "The SBA needs to have the tools made available in this bill in order to respond quickly and effectively to the needs of disaster victims."

The House Small Business Committee passed legislation earlier this month to improve the Disaster Loan Program. Now both bills are headed to consideration by the full Senate and House. The Senate unanimously passed a similar version of this legislation last year.

"All of the improvements to the SBA's Disaster program are targeted to allow the agency to be more nimble and effective in the vital role of long-term economic recovery," said Senator Snowe. "Such changes are clearly needed and I am hopeful that with these new resources, the Agency will be better equipped to respond to future disasters."

"Hurricanes Katrina and Rita impacted 125,000 small and medium-sized businesses Gulfwide, and in Louisiana alone, more than 18,000 businesses were totally destroyed. The federal government has an important role in helping businesses get back on their feet. This bill provides significant reforms to ensure that SBA is better prepared to deal with future disasters, be they natural or manmade," said Landrieu.

"Small businesses are the backbone of Louisiana's economy and this legislation provides critical improvements in the SBA's ability to provide timely assistance," said Vitter. "Specifically, I believe the Private Disaster Loan program, which allows banks to make SBA-guaranteed loans directly to victims, is needed to streamline the recovery process and quickly get our small businesses back on their feet."

At today's markup, Kerry offered a substitute amendment that made minor changes to the Small Business Disaster Response and Loan Improvements Act (S. 163) to streamline the bill and address some of the Small Business Administration's concerns. The bill would:
  • Create a new presidential declaration of "Catastrophic National Disaster," which will allow the SBA to issue nationwide economic injury disaster loans to small businesses affected by a large-scale disaster;

  • Establish a Private Disaster Loan (PDL) program that allows banks to make loans directly to victims after meeting SBA criteria. The SBA will provide an 85 percent guarantee for these loans;

  • Require the SBA to draft rules within one year that would create a new "expedited disaster assistance business loan program." These short-term loans would have low interest rates similar to regular disaster loans. This would provide businesses with short-term assistance while they await other forms of federal assistance or insurance payouts following future disasters. It specifically addresses one of the major issues following Hurricanes Katrina and Rita – a lack of access to immediate capital to keep businesses afloat;

  • Allow the SBA to provide relief to fuel-dependent small businesses when energy prices increase at extraordinarily high rates.

  • Provide key tools for processing disaster loan applications more quickly by authorizing the SBA to enter into agreements with qualified private contractors to process disaster loans and requiring the SBA to analyze and report to Congress on how the disaster loan application process can be improved; and

  • Increase the role of SBA district offices in processing and disbursing disaster loans during large scale disasters, as well as in providing technical assistance to disaster victims during the loan application process.