SBA Criticized For Lack Of Post-Disaster SME Loans

The Small Business Administration has made major headway in its effort to support U.S. SMEs through access to funding and other resources. The government agency recently launched a new online portal for small businesses in search of working capital, and SBA head Maria Contreras-Sweet recently vowed to take more aggressive action in providing SMEs with necessary financing through alternative lending and credit unions, reducing application fees and making the small business loan application easier.

The efforts seem to be working. According to recent data, the SBA facilitated more than $11.4 billion in SME loans for the year, ending April 25 — the highest level seen since 2011.

But there is one aspect of small business finance where some critics say the SBA is failing.

Recent reports from Politico pointed out that the seven-year-old loan program launched by the SBA to provide financing to small businesses crippled by natural disasters hasn’t lent out a single loan under the venture.

In an interview with the publication, Government Accountability Office Director of Financial Markets and Community Investment William B. Shear slammed the SBA for this revelation. “Frankly, they didn’t do squat. They really didn’t do squat,” he said. “They really dropped the ball.”

According to reports, the SBA faced criticism in Congress last week for its failure to deliver emergency loans to small businesses. The backlash followed several GAO reports that detail the lack of funding under the program, as well as what some policymakers say is the SBA’s inability to explain why it has failed to follow through with these types of loans.

For Rep. Yvette Clarke (D-NY), the reports signal that the SBA still has room for improvement. “There’s a lot of work that needs to be done within the agency to get the kinks worked out,” the lawmaker said, adding that the situation will likely worsen without intervention. “With climate change, we’re going to be facing disasters like this in highly populated areas, and they have to be able to be far more efficient and more transparent.”

Politico said that the SBA emergency loan program was established in the wake of Hurricane Katrina and aims to provide funding to small businesses in, at most, three days. The government would back the risky loans, and banks would receive 85 percent of its value should it go bad. Reports said that the SBA requested and received $3 million for a pilot program to establish loan guidelines and interest rates but apparently never went further with the venture.

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