SBA could run out of funds for hurricane disaster loans

The Small Business Administration could run out of funds to support disaster loans for Gulf Coast hurricane victims while Congress is on its upcoming Memorial Day recess, according to estimates supplied to lawmakers, increasing pressure on House-Senate negotiators to complete work on the fiscal 2006 emergency war and hurricane relief spending bill.

Appropriators are looking for offsets within the bill and could cut as much as $200 million in SBA administrative expenses from the White House's $1.3 billion request for the agency. There should be enough money to get through the end of the fiscal year, as the average daily rate of obligations is slowing and a deadline for new loan applications has passed, officials said.

But with an estimated 14 days remaining until the SBA burns through its remaining $86.5 million in loan subsidy funds, without an agreement between Congress and the White House, the agency might not be able to disburse any money -- even for applicants whose loans have been approved.

The agency has enough money to support another $591.1 million in loans; the program is so popular with the victims of hurricanes Katrina, Rita and Wilma that SBA has approved more than $9.3 billion in loans to over 143,000 homeowners, renters and businesses in five states, with nearly $6 billion in Louisiana alone.

An SBA spokesman said 98 percent of loan applications have been processed, and the rate of expenditures "is slowing significantly as we reach the end of the pool." But the situation has warranted significant concern from the Senate Small Business Committee, which met with SBA officials Friday to assess the situation.

The panel has been monitoring the situation for several weeks, and Small Business Chairwoman Snowe -- whose Maine constituents might need the program after last week's flooding -- wrote SBA administrator Hector Barreto May 10 urging him to come up with a contingency plan.

SBA officials have since notified the committee of plans to continue processing applications, even if they cannot distribute loan funds. But a spokeswoman for Small Business ranking member John Kerry, D-Mass., said only about 13 percent of loans approved to this point have been delivered into the hands of Gulf Coast residents.

The agency found itself in a similar situation in February, when Congress was forced to grant an emergency infusion of $712 million before departing for the Presidents Day recess. That prompted House Science-State-Justice Appropriations Subcommittee Chairman Frank Wolf, R-Va., to draft report language accompanying the House's $92 billion supplemental stating the panel is "concerned by dramatic fluctuations in SBA's disaster lending subsidy estimates and will continue to monitor lending activity and expenditures."