“After the multiple disasters that hit the Gulf Coast, I and my staff have consistently heard from business owners, discouraged from applying for SBA disaster loans. When we have inquired further on the main reasons behind this hesitation, the top concern related to SBA requiring business owners to put up their personal home as collateral for smaller SBA business disaster loans,” Landrieu said Thursday when introducing the bill.
“While I do not want to see SBA tie up too much of a business's collateral, I also believe that if a business is willing and able to put up business assets towards its disaster loan, SBA should consider that first before attempting to bring in personal residences,” Landrieu said. “It is unreasonable for SBA to ask business owners operating in very different business environments post-disaster to jeopardize not just their business but also their home.”
Collateral is required for physical loans for more than $14,000 and Economic Injury Disaster Loans (EIDL) loans more than $5,000. Landrieu said in practice, SBA is requiring borrowers to put up a personal residence worth $300,000 or $400,000 for a business loan of $200,000 or less when there are other assets available.
Landrieu said she introduced the bill not just because of businesses affected by past storms in her home states, but also for businesses in Northeastern states that were hit hard by Hurricane Sandy this fall. The Senate will start working on a supplemental bill next week that will give more than $50 billion of federal aid to programs helping victims of the storm. Senate Majority Leader Harry Reid (D-Nev.) said he’d allow amendments to the package. Landrieu could file her bill as an amendment to the disaster relief package.
“This bill will greatly improve the SBA disaster loan programs for businesses ahead of future disasters,” Landrieu said. “If a business comes to the SBA for a loan of less than $200,000 to make immediate repairs or secure working capital, they can be assured that they will not have to put up their personal home if SBA determines that the business has other assets to go towards the loan. However, if businesses seek larger loans than $200,000, then the current requirements will still apply. This ensures that very small businesses and businesses seeking smaller amounts of recovery loans are able to secure these loans without significant burdens on their personal property.”