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Sandy Federal Loans Took Twice as Long for Small Businesses, Report Says

By Nikhita Venugopal | October 23, 2014 7:12pm
 Congresswoman Nydia Velazquez released a report Thursday that highlighted the lack of preparedness of the Small Business Administration in its handling of loan applications after Hurricane Sandy.
Red Hook Winery
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RED HOOK — The United States Small Business Administration took more than double its standard time to process loan applications for businesses that had been affected by Hurricane Sandy, a new report found.

The SBA took an average of 45 days from receiving the application to giving its final decision on certain types of loans — exceeding its own 21-day benchmark, according to a report from the U.S. Government Accountability Office, which reviewed the federal agency’s handling of small business loan applications after Hurricane Sandy.

The report, released Thursday, concluded that the SBA was overwhelmed by the “large, unanticipated volume of applications early in its response to the disaster.”

Physical disaster loans, used for permanent rebuilding and replacement of uninsured or underinsured property damaged in a disaster, took an average of 45 days to process. Similarly, economic injury disaster loans, which provide funds for small businesses that can’t get credit elsewhere, took an average of 38 days — both higher than the SBA’s 21-day standard.

While the SBA has told the GAO that it is taking steps to address these challenges, it has yet to revise its protocol to deal with the barrage of loan applications soon after a disaster.

“As a result, SBA risks continuing to be unprepared for a large number of disaster loan applications to be submitted at the beginning of a disaster response,” according to the report.

The backlog of applications developed quickly after Sandy, the report said. The SBA drastically underestimated the number of staffers needed to process applications in a timely manner and the speed with which applications were submitted online. 

“The agency was not ready for the spike in applications it received,” said Rep. Nydia Velazquez at a press conference Thursday. “It plainly lacked the technology and personnel to handle Sandy."

Velazquez, who requested the report from the GAO, is the top Democrat in the House of Representatives' Small Business Committee. Her district includes Red Hook.

The report also found that the SBA had not implemented a guaranteed disaster loan program that Congress had mandated in 2008, following Hurricane Katrina, said Velazquez at the press conference at the Red Hook Winery.

That included the Immediate Disaster Assistance Program, which brings in private-sector lenders to help disaster victims financially with a 36-hour approval period.

Roughly 32 percent of the original 14,558 loan applications received after Sandy were withdrawn either by the SBA or the applicant — a rate higher than that following previous disasters like Hurricane Katrina or Irene, the report found.

Mark Snyder, owner of the Red Hook Winery at 175 Van Dyke St., applied for a loan through the SBA but withdrew his application after eight or nine months of endless requests for paperwork that resulted in delays, he said.

“The amount of hours that I spent trying to manage this loan made my recovery less effective,” said Snyder, who opened his winery in 2008.

Snyder spent roughly $2 million in recovery for the Red Hook Winery, which faced severe damage after Hurricane Sandy. He received funds through city loans, grants, community fundraising and his personal finances.

“While we’re still working to rebuild, it is critical that we improve our response to the next disaster,” Velazquez said. “The findings of the Government Accountability Office can help us achieve this goal.”