SBA Disaster Loan Program Faces Possible Funding Shortage
Published: October 9, 2024
The Small Business Administration (SBA) has announced that its Disaster Loan Program could face a funding shortage by the end of the month, putting many small businesses at risk of being unable to access critical financial aid. The program, which provides low-interest loans to companies affected by natural disasters and economic crises, has seen a sharp increase in demand this year due to devastating hurricanes, wildfires, and other disasters across the country.
According to SBA officials, the program has already disbursed over $7 billion in loans to small businesses this fiscal year, exhausting much of its current budget. The agency fears running out of funds with applications continuing to pour in unless Congress steps in with additional allocations. This potential funding gap is causing concern among small business owners who rely on these loans to recover from disasters, pay employees, and keep their businesses afloat.
The SBA’s Disaster Loan Program is designed to help small businesses and nonprofit organizations recover from physical damage or economic harm resulting from declared disasters. These loans can cover repairs, replacement of machinery, working capital needs, and other recovery expenses. The program played a crucial role during the COVID-19 pandemic, extending support to countless small businesses across the country, and has continued to be a lifeline for those affected by natural disasters.
However, the program’s resources are limited. Since the start of the fiscal year, there has been a surge in demand fueled by an unusually high number of disaster declarations. SBA officials report that the number of approved loans is already 20% higher than last year, straining the agency's resources. The situation is compounded by recent hurricanes in the Southeast and wildfires in the West, which have led to a spike in new applications.
If Congress does not allocate additional funding, the SBA must prioritize the remaining funds, potentially leaving some applicants without access to disaster relief. “We are doing everything we can to process as many loans as possible with our funds,” said SBA Administrator Isabella Casillas Guzman. “However, without additional resources, we may not be able to meet the demand.”
Lawmakers on both sides have expressed concern about the potential funding shortfall. A bipartisan group of senators recently introduced a bill to boost the program's budget by an additional $10 billion, hoping to secure its future and reassure small business owners. “Small businesses are the backbone of our economy, and they need our support now more than ever,” said Senator Susan Collins (R-ME), one of the bill’s sponsors.
Advocacy groups are urging Congress to act quickly to prevent a funding lapse. The National Small Business Association (NSBA) has issued a statement calling on lawmakers to prioritize the Disaster Loan Program, emphasizing its importance in helping communities recover and rebuild. “A delay in funding could be devastating for businesses already struggling,” said Todd McCracken, NSBA’s president and CEO. “We urge Congress to act now to ensure the SBA can continue to provide this essential support.”
As the end of the month approaches, the pressure is mounting on Congress to find a solution. If additional funding is not secured, thousands of small businesses could be left without the aid they need to weather ongoing and future disasters.