Small Business Administration depletes disaster loan funds

The Small Business Administration has requested $1.6 billion in new funding from Congress for its disaster loan program for the full fiscal year, although it is likely to need more. (Mike Belleme/The New York Times)

By Madeleine Ngo

The Small Business Administration has run out of funds to provide low-interest loans to homeowners and businesses to repair property damaged by disasters, the Biden administration said Tuesday.

The drawdown of funds comes as residents across the southeast are still recovering from the destructive impacts of hurricanes Milton and Helene. Federal officials urged eligible people to continue to apply for loans, which they would continue to process while they wait for lawmakers to pass “much-needed funding.” But Congress is not set to reconvene until Nov. 12, and congressional leaders have not committed to calling members back sooner to approve more funding for the SBA or the Federal Emergency Management Agency.

“Speaker Johnson has promised that this and other disaster programs will be replenished when Congress returns, so Americans should continue to apply for these loans,” President Joe Biden said in a statement, referring to Speaker Mike Johnson. “SBA will continue to process applications and will disburse loans as soon as Congress provides the needed funding.”

Isabel Guzman, the agency’s administrator, warned last week that the SBA would soon run out of funds, and she called on lawmakers to return to Washington to approve more money. Biden also urged Congress to “restore this funding” earlier this month.

Johnson said that federal officials had enough disaster funding to address the immediate needs of Americans in hurricane-affected areas. He has pointed to the additional $20 billion that Congress recently approved for FEMA’s disaster relief fund.

FEMA officials have said they have enough money for the immediate recovery needs of people affected by Hurricane Milton. But they have said that they will have to evaluate how quickly they are burning through funding. Alejandro N. Mayorkas, the homeland security secretary, has also warned that FEMA might not have enough funding to make it through the rest of the hurricane season.

“There’s no question these devastating back-to-back storms have stressed the SBA funding program,” Johnson said in a statement. “Congress is tracking this situation closely, and when members return in just a few short weeks, the administration should have an accurate assessment of the actual dollar amount needed and there will be strong bipartisan support to provide the necessary funding.”

A spokesperson for Sen. Chuck Schumer of New York, the majority leader, said last week that he was also waiting for estimates from agencies on the ground.

Some lawmakers have urged Congress to return to Washington sooner. Last week, more than 60 House Democrats signed a letter urging Johnson to bring the House back into session to approve more disaster relief funding for the SBA and FEMA.

The SBA provides low-interest loans to homeowners, renters, businesses and nonprofits whose property has been damaged because of disasters. Homeowners can get loans of up to $500,000 to repair or replace damaged or destroyed real estate. Homeowners and renters are also eligible for up to $100,000 to repair or replace personal property. Businesses can get loans of up to $2 million.

So far, the SBA has made more than 700 loan offers totaling about $48 million and received about 37,000 applications from people affected by Hurricane Helene. The agency has received more than 12,000 applications from those affected by Hurricane Milton.

The agency could continue to make a small number of new loan offers if money is made available through loan cancellations, agency officials said.

The SBA has requested $1.6 billion in new funding from Congress for its disaster loan program for the full fiscal year, though agency leaders have said they would probably need more after Hurricane Milton. In 2023, the SBA lent nearly $3 billion — including more than $670 million for businesses and more than $2.3 billion for homeowners and renters — to help people recover from disasters.