The Turnaround
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SBA said to be probed on Katrina help
Report: Backlog of emergency loan applications builds while help remains a trickle.
October 18, 2005: 7:04 AM EDT

NEW YORK (CNN/Money) - Government investigators have launched probes of the Small Business Administration's disaster loan program in the wake of complaints of problems responding to victims of Hurricane Katrina, according to a published report Tuesday.

USA Today reports that both the federal Government Accountability Office and the SBA inspector general's office are conducting investigations into problems with delays in getting help to businesses hit by the hurricane six weeks after the storm.

The paper says an SBA report shows that, as of Oct. 12, there had been 53,948 loan applications received from the region, with 1,049 loans approved and only 58 checks, totaling $533,400, sent out.

The paper also reports that six weeks after Hurricane Charley hit Florida in 2004, there had been 4,265 loan applications approved, or more than four times as many as for Katrina. The value of the approved loans from Katrina victims comes to $67 million, while the value of loans to Charley victims in the same time frame came to $199 million.

The paper reported two weeks ago that SBA field workers and loan officers said part of the problem is a new loan-processing computer system that is cumbersome and has been out of service frequently since it went into use in December.

Five agency employees described the problems to the paper but asked that their names not be used because they fear losing their jobs.

The paper reports that, in a presentation to SBA employees in Dallas in April, managers described a reorganization of the agency's Office of Disaster Assistance that included centralizing all loan processing in Fort Worth. But that office was only scheduled to have "start-up capability" on Sept. 30 a month after Katrina stuck and not achieve "full capability" until Sept. 30, 2006, according to a copy of the presentation seen by the paper.

The agency's top disaster official, Herb Mitchell, told the paper the process has been accelerated, and the system can handle the workload. He also said the agency is now waiving some of the paperwork for business loans. The agency said it has 2,300 people working 12 to 14 hours a day to help hurricane victims.

"The production is going up every day," he told the paper.

Still USA Today reports that the backlog of unprocessed loan applications from businesses, homeowners and renters has more than doubled in the last two weeks, up from 24,488.

One victim of the storm, Wes Wyman, who owns a lumber supply business in Algiers, La., across the Mississippi River from New Orleans' French Quarter, told the paper he will have to close down in two weeks, laying off its 90 employees, due to problems dealing with the SBA disaster loan procedures.

He said it took him and his partner more than a week and an accountant's help to complete the application, which was four inches thick. He said he was rejected for a loan because he was judged too large to qualify, even though he used an SBA loan to start his company three years ago.

"It doesn't seem like anybody ever thought about having to help businesses out this quick, in this circumstance," he told the paper.

For more the looming problem for small businesses and individuals hit by Hurricane Katrina, click here.  Top of page

Disasters (General)
Personal Debt
Financial and Business Services
Small Business Administration
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