Interview with James Rivera, Associate Administrator
Office of Disaster Assistance
When a natural disaster strikes, the loss can be immeasurable, but it doesn't have to take you out of the game. From recovery loans, to tips on preparedness planning, in this podcast James Rivera highlights how SBA can help business owners, homeowners and renters before and after a disaster.
Transcript:
Ron Johnson: When a natural disaster strikes, the loss can be immeasurable, but it doesn't have to take you out of the game. Since its inception, the Small Business Administration has approved more than $50 billion in disaster loans to cover more than 1.9 million businesses, homeowners, and renters.
Hello, I'm Ron Johnson with the U.S. Small Business Administration, Your Small Business Resource. As part of our continuing series on disaster recovery, we welcome once again James Rivera. He's the Associate Administrator for SBA's Office of Disaster Assistance. Welcome, James.
James Rivera: Thank you, Ron. I appreciate this opportunity to share with you and the listeners how SBA can help disaster survivors before, during, and after disaster.
Ron Johnson: So, James, what is SBA's role in a disaster?
James Rivera: So, don't let the words “small business” in our agency's name mislead you. The disaster loan program is the only form of SBA assistance that's not limited to small businesses.
Following a major disaster, SBA is a primary source of federal funds for long-term recovery assistance for disaster survivors. The primary goal of the Office of Disaster Assistance is to help people and communities recover from disasters and rebuild their lives. We do this by providing financial assistance to homeowners, renters, non-profit organizations, and businesses of all sizes. In fact, the majority of SBA's disaster loans are made to homeowners and renters. Nearly 80 percent of all SBA disaster loans funded since 1953 have been approved to homeowners and renters. This represents about 53 percent of the total dollars of our approved loans. In addition to making loans, one other key aspect of SBA is to provide preparedness information.
Ron Johnson: Preparedness information. That's interesting.
James Rivera: Yes, it is, Ron. Research has shown us that businesses and households that prepare tend to recover quicker and easier.
Ron Johnson: Let's start with what happens after a disaster occurs. How does a damage area get declared?
James Rivera: So, this is the process. The request comes from the governor. The state requests a preliminary damage assessment from either the Federal Emergency Management Agency to obtain a presidential declaration or from the SBA to obtain an agency declaration. Regardless, SBA participates in each of these preliminary damage assessments in order to assess the amount of damage.
If the damage meets the criteria for presidential declaration and a declaration is made including individual assistance, SBA's disaster loan program is automatically activated. Once it's activated, homeowners, renters, and businesses of all sizes, including most private non-profit organizations, are eligible to apply for low-interest disaster loans. These loans can be used to repair or replace real estate, personal property and damaged or destroyed business assets such as machinery, equipment and inventory. Provided, of course, that the disaster survivor has not already received compensation for their loss, for example, like insurance.
Additionally, small business non-farm loans, small agricultural cooperatives, small businesses engaged in aqua culture, and most private non-profit organizations can apply for working capital loans to cover their economic injury losses.
Ron Johnson: Well, James, what happens if the damage doesn't meet the criteria for a presidential declaration?
James Rivera: That's a great question, Ron. The administrator of the SBA has the authority to make an administrative declaration provided the damage meets SBA's criteria. Generally, at least 25 homes or businesses would need to sustain at least 40 percent or more uninsured loss. This would allow the loan program to be activated. From an administrative declaration, individual and businesses are eligible and it's normally a smaller disaster. FEMA is not involved, and there are no federal grants available.
Ron Johnson: So, tell me more about these disaster home loans and how they can help.
James Rivera: Our disaster loans cover uninsured or under-insured losses. If the disaster survivor has no insurance, or even if they do have insurance, they still may have uncompensated losses, our loans help to fill these gaps. Our loans have flexible re-payment terms to make sure an SBA disaster loan is affordable. We have low fixed interest rates, not to exceed four or eight percent, but the current rate is two-and-a-half percent and five percent for homeowners. We can also structure a loan with a re-payment term of up to 30 years.
Actual loan terms are determined by damage eligibility. Homeowners may borrow up to $200,000 to repair or replace their disaster damaged real estate. And renters may borrow up to $40,000 to repair or replace their disaster damaged personal property. In certain cases, borrowers may be eligible for re-financing, relocation, and mitigating measures.
Ron Johnson: Do business loans have the same loan amounts?
James Rivera: No, they don't. Our business loans have the same flexible re-payment terms with current interest rates of four and six percent and with terms up to 30 years. Businesses are eligible to borrow up to $2 million. Business loans can be made for physical damage, economic injury, and for mitigating measures. Physical loans can be used to repair or replace business assets such as building, machinery, equipment and inventory. Economic injury loans can only be made to small businesses and can be used to pay for fixed debts and accounts payable, make payroll and pay other business expenses that cannot be paid because of the disaster's impact.
The combination of physical economic injury, disaster loans, and mitigation cannot exceed the $2 million loan cap. And the actual loan amounts are based on the amount of damage eligibility that occurred as a result of the disaster.
Ron Johnson: Now, I understand that SBA sends staff personnel to assist in the field where the disaster occurred.
James Rivera: Yes, Ron. SBA staff is deployed after presidential or agency declaration. We have customer service reps on the field that are available in these temporary centers located in or near the disaster area. Our representatives can issue loan applications, help survivors complete loan applications, they can accept applications, and they can even answer questions that may occur. Representatives also help close loans when we approve a loan to a disaster borrower.
Ron Johnson: Now, how does someone apply, James, for a disaster loan?
James Rivera: Well, SBA tries to make the process as easy as possible for the survivors, and we offer several ways on how you can submit an application. In a presidential declaration, anyone that has been referred to us from FEMA would automatically receive an application package in the mail. If, as a survivor, you have Internet connectivity, you can also apply online via our secured electronic loan application or they can print the application off and send it to our website, which is www.sba.gov. Of course, application packages are always available at each disaster recovery center, or you can call our customer service rep at 1-800-659-2955.
Even if you don't want a loan, returning a completed application is an important step in the disaster assistance process. As we process these applications, we look at eligibility, the amount of damage that the property incurred in the declared county. We look at individual's credit history to make sure they have acceptable credit, and we look at the re-payment ability to see that they can re-pay a loan. And if SBA can't offer you a loan -- and in some cases that's the actual situation -- we may offer other forms of assistance. If SBA cannot offer you a loan, you may be eligible for other forms of assistance but if you don't include the application, the assistance process does stop.
Ron Johnson: So, let's say I submit a loan application, what happens then?
James Rivera: So, once you submit a loan application, the process is, first, we'll screen the application to make sure that the application is complete and there are some basic eligibility requirements that are met. We will send out an inspector to do an onsite inspection, to estimate what it's going to cost to repair or replace the damage that occurred. We will process the loan and we will look at the financial on that -- we'll do a financial analysis and we'll set the loan terms. And then once we approve the loan, we'll set up a loan closing where we will provide you with the legal documents. And once we get the loan closing documents back, we'll actually disburse the loan so we can get you started to complete your repairs.
Ron Johnson: Excellent. So, in closing, is there something else you'd like to share with your audience?
James Rivera: Well, this is really one important fact. Unfortunately, not all individuals, whether they're a small business or whether they're a homeowner are actually ever prepared for disasters as the way they should be. At SBA, we see firsthand the importance of preparedness and have partnered with non-profit organizations, private sector business, and other federal agencies to provide preparedness tools free of charge; something as simple as reviewing your insurance coverage each year or storing back-up information at an offsite location can help prepare you. I would strongly encourage everyone to visit the preparedness section of the SBA website at www.sba.gov and start making preparedness plans to protect their family, home and their business.
Ron Johnson: Well, James, this is some great information. I hope, now, more people realize that SBA provides disaster loans to homeowners, renters, and businesses of all sizes.
Thanks to James Rivera, Associate Administrator for SBA's Office of Disaster Assistance for helping us better understand SBA's role in disaster recovery. Now, for information, contact SBA's disaster assistance customer service center by calling 1-800-659-2955 or e-mailing disastercustomerservice@sba.gov, or you can visit SBA's website at www.sba.gov. Now, for the deaf and hard-of-hearing individuals, they may call 1-800-877-8339.
Until next time, this is Ron Johnson with SBA, Small Business Administration, Your Small Business Resource.
[End of transcript]
