Small Business Administration: Disaster Loan Processing Was Timelier, but Planning Improvements and Pilot Program Evaluation Needed

SBA assists most types of businesses regardless of size and others affected by natural and other declared disasters through its Disaster Loan Program. Disaster loans can be used to help rebuild or replace damaged property or continue business operations.

GAO was asked to review SBA's response to three 2017 hurricanes (Harvey, Irma, and Maria). This report examines SBA's (1) planning for and response to the 2017 hurricanes; (2) disaster loan application and review process; and (3) implementation of the Express Bridge Loan Pilot Program.

GAO analyzed SBA planning documents; summary data from SBA's Disaster Credit Management System for applications submitted between August 31, 2017, and September 24, 2018 (the period in which SBA processed nearly all loan applications for each hurricane); and SBA guidance on the bridge loan program. GAO interviewed small business owners and officials from local governments, business advocacy organizations, and Small Business Development Centers in Florida, Texas, Puerto Rico, and the U.S. Virgin Islands.

The Small Business Administration's (SBA) Office of Disaster Assistance, which administers the Disaster Loan Program, regularly develops disaster plans but does not discuss risks and risk mitigation in detail in its planning documents. Specifically, SBA's current Disaster Preparedness and Recovery Plan lacks an in-depth discussion of risks (including extended power and communications outages) that could affect its disaster response. SBA's disaster response includes deploying staff to and establishing centers in disaster areas to accept loan applications. The aftermath of the 2017 hurricanes (Harvey, Irma, and Maria) illustrates how the risks affected SBA's disaster loan operations. For example, because of widespread power outages (particularly in Puerto Rico), loan applicants often could not submit applications electronically and SBA often could not call or e-mail applicants. As a result, SBA may not be adequately prepared to respond to challenges that arise during its disaster response efforts.

Changes SBA made to the loan application process since 2005 (such as implementing electronic applications) improved timeliness. For the 2017 hurricanes, SBA processed more than 90 percent of all loan applications (including those quickly declined or withdrawn) within its 45-day goal, averaging less than 18 days for each hurricane. Overall, about 49 percent of applications submitted after the 2017 hurricanes were approved (see figure). Applicants and others with whom GAO spoke noted some application challenges, including frequent changes to SBA contact staff and having to resend documents. According to SBA officials, staff changes resulted from turnover, among other reasons. Many applicants in Puerto Rico also encountered translation challenges during interactions with SBA.

SBA has no plans to evaluate its Express Bridge Loan Pilot Program, a loan guarantee program that began in October 2017 and is set to expire on September 30, 2020, and is intended to offer small businesses quicker funding after disasters. As of September 2019, SBA had received 93 applications, but most of them were incomplete and SBA had guaranteed only two loans. The Office of Capital Access, which manages the pilot, had not sought feedback from lenders on why so few loans had been made. Without evaluating program design and implementation, SBA's ability to make an informed decision on the program's future, including assessing potential demand for bridge loans, is limited.

GAO is making five recommendations to SBA, including that it more comprehensively document risks and plans to mitigate these risks and evaluate the implementation of the Express Bridge Loan Pilot Program. Overall, SBA agreed with the recommendations, but described actions that partially address the recommendation for evaluating the pilot. GAO maintains it should be fully implemented, as discussed in the report.

In August and September 2017, Hurricanes Harvey, Irma, and Maria  made landfall in the United States, affecting nearly 26 million people.  The National Oceanic and Atmospheric Administration estimated the cost  of the three hurricanes at $265 billion, with the most damage occurring in  Florida, Puerto Rico, Texas, and the U.S. Virgin Islands.

The Small Business Administration (SBA) is known primarily for its  financial support of small businesses. In contrast, its Disaster Loan  Program, which is administered by SBA’s Office of Disaster Assistance  (ODA), assists most types of businesses regardless of size, private  nonprofit organizations, homeowners, and renters affected by declared  disasters. In October 2017, SBA also began the Express Bridge Loan  Pilot Program to supplement the agency’s direct disaster response  capabilities and more quickly provide financial assistance to small  businesses.

You asked us to examine SBA’s response to the 2017 hurricanes. This  report examines SBA’s (1) planning for and initial response to the 2017  hurricanes; (2) loan application and review process (including changes  since Hurricane Katrina in 2005), timeliness, and approval rates; and (3)  implementation of the Express Bridge Loan Pilot Program.

To answer these questions, we visited two areas each in Florida, Texas,  and the U.S. Virgin Islands, and three areas in Puerto Rico. We selected  these areas based on the high numbers of approved home and business  disaster loans, high population, geographic diversity, presence of a Small  Business Development Center (SBDC), and presence of an SBA district  office. In each area, we interviewed small business owners and officials  from local government, business advocacy organizations, and SBDCs  about SBA outreach and their experiences with the disaster loan  application and review processes. While the results of these interviews  are not generalizable to all areas affected by the 2017 hurricanes, they  provided insight into the experiences of small businesses and local  communities with the SBA Disaster Loan Program. We analyzed the  results of these interviews with qualitative analysis software to identify  common themes and patterns.

To evaluate SBA’s planning for and initial response to the 2017  hurricanes, we reviewed SBA planning documents in effect for the  hurricanes: SBA’s 2017 Disaster Preparedness and Recovery Plan and  its 2014 Disaster Playbook. We also reviewed SBA’s 2017 and 2018  Staffing Strategies and models SBA used to guide its response, and  reports issued by the SBA Office of Inspector General (OIG). To  examine SBA outreach, we reviewed marketing and outreach plans from  2012 and 2018 and a sample of outreach materials SBA used during its  response. We compared SBA’s planning efforts against federal internal  control standards for identifying, analyzing, and responding to risks, and  against Federal Emergency Management Agency (FEMA) guidance on  disaster planning. We compared SBA’s outreach efforts against federal  internal control standards for internal communication and against key  consumer education practices.

To evaluate SBA’s loan application and review process, we reviewed  prior GAO and SBA OIG reports on the Disaster Loan Program to help  identify changes made since Hurricane Katrina in 2005. We also  analyzed summary data from SBA’s Disaster Credit Management System  (DCMS) for applications submitted between August 31, 2017, and  September 24, 2018. SBA completed processing for more than 99  percent of the applications for each hurricane during the period covered  by our data. Because the 2017 hurricanes occurred in quick succession  and SBA treated them as one event, we compared the combined data for  the 2017 hurricanes to those for Hurricane Sandy and the combined data  for Hurricanes Katrina, Rita, and Wilma, which SBA also treated as one  event. We assessed the reliability of the DCMS data by reviewing  related documentation, interviewing knowledgeable agency officials, and  reviewing related internal controls. We determined they were sufficiently  reliable for describing characteristics associated with SBA’s processing of  applications.

To evaluate implementation of the Express Bridge Loan Pilot Program,  we reviewed Federal Register notices and a program guide. We  interviewed officials from the Office of Capital Access (OCA), which  administers the loan guarantee program, and officials from three lenders  to discuss their perspectives on and awareness of the program. We  selected one lender because it had made loans under the pilot program,  another because it had begun the most applications for the program, and  the third because it was a 7(a) lender located in a state affected by  Hurricane Florence or Michael. We chose those hurricanes because  they occurred in 2018, about 1 year after SBA began its pilot. We  compared SBA’s plans to evaluate the Express Bridge Loan Pilot  Program against guidance for designing evaluations. Appendix I  describes our objectives, scope, and methodology in greater detail.

We conducted this performance audit from September 2018 to February  2020 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Federal agencies can respond to a disaster when effective response and  recovery are beyond the capabilities of affected state and local  governments. In such cases, the President can declare a major disaster  in response to a request by the governor of a state or territory or the chief  executive of a tribal government. The SBA Administrator also can issue  an agency physical disaster declaration for events that do not rise to the  level of a major Presidential disaster declaration in response to a timely  request by a state governor.

The National Response Framework governs any type of federal disaster  or emergency response. Under this framework, FEMA has lead  responsibility and offers disaster assistance. At least 30 other federal  agencies, including SBA, also administer disaster assistance programs  and activities.

The Small Business Act authorizes SBA to make direct loans to help  businesses, nonprofit organizations, homeowners, and renters repair or  replace property damaged or destroyed in a declared disaster (declared  by the President or SBA). ODA is responsible for administering the SBA  disaster loan program, primarily through the following offices:

Customer Service Center is a single nationwide point of contact for  disaster survivors who have questions about SBA disaster loans. It  provides a call center, email response, disaster application mailings,  and pre-application entry.

Field Operations Centers coordinate disaster field operations and  publicize ODA’s Disaster Loan Program before and after disasters.  Field Operations Centers establish, staff, and maintain field  operations in declared disaster areas, including Disaster Recovery  Centers, Business Recovery Centers, and Disaster Loan Outreach  Centers.

Processing and Disbursement Center screens all applications,  reviews and processes those that are complete, closes all approved  loans, and disburses loan proceeds.

In addition, ODA works with resource partners, such as SBDCs, to  provide disaster assistance to businesses. SBDCs help SBA by  conducting local outreach to disaster victims; assisting those who have had their business loan application denied  or withdrawn with applications for reconsideration or re-acceptance; assisting declined applicants in remedying issues that initially  precluded loan approvals; and providing business loan applicants with technical assistance, including  to reconstruct business records, to better understand requirements to  complete a loan application, and for compiling financial statements  and collecting required documents.

The Small Business Act authorizes SBA to make available two different  types of direct disaster loans to survivors located in a declared disaster  area (see table 1):

Physical disaster loans are for the permanent rebuilding and  replacement of uninsured or underinsured disaster-damaged property.  They are available to homeowners, renters, most types of businesses  regardless of size, and nonprofit organizations. Businesses in  agriculture-related industries—also known as agricultural  enterprises—are not eligible.

Economic injury disaster loans help meet working capital needs  (until normal operations resume) for most disrupted small businesses  and private nonprofit organizations that utilized all reasonable  available funds and were not able to obtain credit elsewhere after a  disaster declaration. The loans cover operating expenses the  businesses could have paid had the disaster not occurred.

Business eligibility for the loans also differs. Certain businesses of all  sizes are eligible for physical disaster loans, but only small businesses  are eligible for economic injury disaster loans. Small businesses that did  not sustain physical damage from a disaster cannot apply for physical  disaster business loans but can apply for economic injury disaster loans.  And, applicants seeking both types of loans may be approved for one  type of disaster loan but denied for the other.

SBA procedures generally require that applications for a physical disaster  loan be submitted no later than 60 days following the disaster declaration  and no later than 9 months after this date for an economic injury disaster  loan. SBA may authorize an extension of the filing period, and did so for  each of the 2017 hurricanes.

Applicants can apply for a loan (1) at a FEMA Disaster Recovery Center,  (2) at a Business Recovery Center or SBA Disaster Loan Outreach  Center, (3) by mail, or (4) online through SBA’s electronic loan application  system. SBA requires applicants seeking any disaster loan to submit  documents with their application package, including permission for SBA  to access applicants’ tax return information.

SBA’s regulations contain underwriting criteria that require reasonable  assurance of repayment. The regulations state that SBA must have  reasonable assurance that all disaster loan applicants can repay their  loans based on SBA’s analysis of the applicants’ credit or personal or  business cash flow.

Processing of disaster loan applications involves several stages (see fig.  1). For example, loss verifiers conduct desktop or on-site inspections for  physical disaster loan applications to estimate the cost of restoring  damaged property to predisaster condition. The verified loss becomes the  basis for the loan amount. Loan officers determine eligibility during  processing, taking into consideration any insurance or other recoveries,  and make the decision to approve or decline an application. Case  managers work with borrowers through the disbursement process (until  the loan is fully disbursed).

To plan for its response to Presidentially declared disasters, SBA  maintains long-term disaster planning documentation, conducts disaster  simulations, maintains an outreach plan, and creates action plans for  specific disasters.

Disaster planning documents. SBA’s major planning documents for  disasters include its Disaster Preparedness and Recovery Plan and  its Disaster Playbook. The Disaster Preparedness and Recovery Plan  outlines SBA’s responsibilities as part of federal disaster response  efforts. The plan is intended to ensure a broad scope of coordination,  awareness, and support throughout the organization, and describes  how SBA conducts its disaster-related missions. The plan also  includes appendixes describing different aspects of SBA’s disaster  response operations, including SBA’s forecasting and modelling to  predict internal resource requirements such as staff. The document is  revised annually. The Disaster Playbook outlines the roles and  responsibilities of ODA departments, resource partners, and other  private-sector partners at each major phase of the disaster recovery  process. For example, it describes the steps taken by each ODA  department to receive and process incoming disaster loan  applications. According to SBA officials, the Disaster Playbook that  guided the disaster response for the 2017 hurricanes was issued in  2014.

Disaster simulations. SBA also participates in external and internal  disaster simulation exercises. SBA participates in the FEMA-led  National Exercise Program, which is a 2-year cycle of exercises that  examine and validate capabilities in the National Preparedness  System mission areas.

SBA’s internal disaster simulations occur at SBA’s biennial Senior  Leadership Summit. SBA is required by law to conduct an internal  disaster simulation exercise at least once every 2 fiscal years. The  exercises are designed to improve understanding of preparedness  concepts, identify opportunities or problems in SBA’s response to  disasters, and discuss solutions for improvement.

Outreach plan. SBA maintains a marketing and outreach plan with  the goal of continuing and strengthening lines of communication with  stakeholders to build strong and productive partnerships. The plan  describes how SBA promotes awareness of the risk of natural  disasters, the need to be prepared, and SBA’s role in disaster  recovery. The plan also outlines areas of responsibility, disaster event  scenarios, strategies for achieving its outreach goals, and  implementation of outreach efforts. According to the plan,  implementation of outreach efforts should include distribution of SBA  disaster information products by public information officers and SBA’s  resource partners, including SBDCs.

Action plans. SBA Field Operations Centers create disaster-specific  action plans to guide disaster responses. According to officials from  the centers, action plans outline projected resource requirements,  such as staff, and may include descriptions of the impending disaster  scenario, SBA leadership responsibilities, and operational support  requirements.

SBA has designated response levels that correlate staffing levels with  anticipated numbers of applications. SBA has four response levels based  on the number of loan applications it expects to receive (see fig. 2). Each  level has different goals for staffing and processing applications. The  2017 hurricanes triggered a level III response from SBA.

SBA established the Express Bridge Loan Pilot Program to supplement  the agency’s disaster response capabilities. The pilot program became  available for use on October 16, 2017, and is set to expire on September  30, 2020.

The pilot allows 7(a) lenders with SBA Express lending authority to deliver  SBA-guaranteed financing for disaster-related purposes to eligible small  businesses on an emergency basis while the businesses apply for and  await long-term financing.

The businesses must be located in, or contiguous to, communities with  Presidentially declared disasters and have a pre-existing banking  relationship with the 7(a) lender. Loan applications are subject to a  streamlined underwriting process to ensure that small business owners  receive a quick decision.

SBA Conducted Broad Outreach, but Lacks Guidance to Help It Plan for and Respond to Disasters

SBA’s Disaster Planning Does Not Incorporate Risk Analysis or Guidance on Developing Action Plans for Specific Disasters

SBA’s major disaster planning documentation lacks an in-depth  discussion of risks SBA could face when responding to disasters. The  Disaster Preparedness and Recovery Plan states that SBA must assess  risk from two perspectives. First, it must address risk to its own resources  and capabilities through its employee safety and continuity of operations  plans to preserve its mission-essential functions, including the Disaster  Loan Program. Second, SBA must evaluate the demands various disaster  scenarios can place on the agency regardless of the impact to its own  assets.

However, the Disaster Preparedness and Recovery Plan does not include  a description of potential risks that may prevent SBA from successfully  executing the Disaster Loan Program or discuss how SBA is to conduct  risk analysis. Furthermore, SBA’s Disaster Playbook does not include any  mention of risk and risk-mitigation techniques. Federal internal control  standards state that management should identify, analyze, and respond  to risks related to achieving defined objectives.

For example, the types of challenges SBA faced in executing its response  to Hurricane Maria in Puerto Rico and the U.S. Virgin Islands represent  potential risks to the program because they could compromise SBA’s  ability to successfully execute the program. These challenges included

Loss of electricity: Electrical outages restricted SBA’s ability to  quickly establish operations and help survivors access disaster  loans. According to SBA officials, ODA established its base of  operations at the SBA District Office in San Juan (which had  generator power) because they had difficulty locating other usable  office space due to power outages. In a report issued after the 2017  hurricanes, SBA noted that periodic outages also prevented applicant  access to the online Disaster Loan Application Portal.

Other infrastructure damage: Physical infrastructure damage  restricted SBA’s mobility around Puerto Rico and the U.S. Virgin  Islands following Hurricane Maria, delaying SBA’s execution of the  Disaster Loan Program. According to SBA officials, there were no  flights into or out of the islands, and driving was difficult due to  damage to and debris on the roads.

No or intermittent communications services: According to SBA  officials, telephone lines were down and cellular phone service was  intermittent in Puerto Rico immediately after Hurricane Maria, which  made communicating with staff and disaster survivors more difficult.

We present applicant, other stakeholder, and SBA perspectives on these  and other challenges later in this report.

SBA officials told us that the agency contracts with an outside firm to  conduct monthly portfolio analysis reports. Officials also told us that they  use this report to identify areas of credit risk and make adjustments to  program parameters, such as minimum acceptable credit scores.  However, officials told us that they do not formally document other types  of risks, including operational risks, or the steps taken to mitigate these  risks. For example, SBA’s major planning documentation does not  include any discussion of steps taken by ODA to mitigate the risk to the  program posed by the major infrastructure damage that occurred in  Puerto Rico after Hurricane Maria.

Without identifying risk elements associated with its disaster response  and documenting how it plans to mitigate these risks, SBA may not be  adequately prepared to respond to challenges that arise during its  disaster response efforts.

The action plans created for the 2017 hurricanes contained varied  information and in some cases did not discuss certain resource  requirements for responding to the disaster, such as equipment needs.  For example, the Hurricane Harvey action plan is less detailed than the  plans for Hurricanes Irma and Maria and only discusses the anticipated  staffing needs and strategies to meet those needs. The action plans for  Hurricanes Irma and Maria identified additional resource needs and  issues unique to a particular location.

FEMA provides guidance on developing disaster plans for local, state,  and federal government planners to guide their on-site response to  disasters. These plans should focus on managing personnel,  equipment, and resources that play a direct role in the response. The  plans are to define how specific actions will be performed to achieve a  planned outcome and include the “who, what, where, and when” in  describing deployment and direction of resources.

SBA officials told us they created a template to help in estimating staffing  needs, but SBA has not identified whether any other elements, such as  those defined by FEMA, should be included in these plans. Moreover,  SBA has not provided guidance to the Field Operations Centers that is  specific to preparing action plans for impending disasters. In addition,  SBA’s major disaster planning documents, the Disaster Preparedness  and Recovery Plan and the Disaster Playbook, do not mention action  plans. According to SBA officials, these plans are internal documents,  and the template and the Field Operations Center director’s prior  experience creating action plans are sufficient guidance.

Without identifying the key elements of a disaster action plan and  providing additional guidance to staff on how to incorporate these  elements in future action plans, SBA’s Field Operations Centers may miss opportunities to better tailor their response to individual disasters,  decreasing the effectiveness of their responses.

As discussed previously, SBA participates in external and internal  disaster simulation exercises to help it prepare for disasters. For instance,  SBA participated in the 2019 National Level Exercise, which simulated  the interagency response to a large earthquake in Tennessee.

Prior to the 2017 hurricanes, SBA conducted an internal disaster  simulation at its biennial leadership seminar in 2016. SBA simulated a  series of three progressively more challenging events, including a  simulated earthquake that, according to SBA officials, took out power to  two major West Coast cities. According to SBA officials, this exercise  helped them prepare for the widespread power outages encountered  during the disaster response in Puerto Rico after Hurricane Maria.

SBA officials told us that after an internal simulation, SBA prepares a  report that summarizes the events and recommends disaster response  improvements. For example, after the 2016 simulation, SBA determined it  did not currently have the resources to adequately respond to a large  event. Suggested improvements to increase SBA’s response capacity  included establishing timelines for screening and training of new hires.

SBA Increased Staffing and Established Business Recovery Centers during Its Initial Response to the 2017 Hurricanes

In response to the 2017 hurricanes, SBA forecasted the need for  additional staff and hired staff as outlined in its Staffing Strategy. SBA  also encountered several challenges associated with its hiring and  training processes.

The Staffing Strategy used by SBA in its response to the 2017 hurricanes  describes the types of staff SBA hires for disaster response, how SBA  determines and manages staffing levels, and factors to consider when  hiring new or returning staff. For example, the guidance describes  business needs SBA should consider when making hiring decisions, such  as workload, special skills required, and cost-saving measures.

Before an impending disaster, SBA uses a model to forecast staffing  levels. According to SBA officials, the model helps identify the expected  number of staff needed in each ODA office and peak need based on the  anticipated number of applications received. The officials noted that  predicted applications typically peak about 3–4 weeks into the disaster  response. Key assumptions and inputs to the model include  the target application review and decision time frame;  the requirements for specialized staff skills such as loss verification,  loan processing, and legal review in the application process;  staff productivity and training requirements;  the total expected loan volume; and  the type of disaster.

As shown in figure 3, SBA’s actual staffing lagged behind its predicted  levels for the first 4 months following the 2017 hurricanes. Officials told  us that SBA encountered challenges quickly hiring and getting new staff  on board immediately following the 2017 hurricanes.

Due to the rapid need for qualified staff to respond to the 2017  hurricanes, SBA faced a variety of self-identified challenges in hiring the  staff.

Recruitment: ODA lacked a national recruitment strategy and vehicle  for advertising vacant positions. In addition, SBA processed resumes  manually, without the ability to effectively match resumes with  required skillsets. Due in part to its manual processes, it took SBA  time to hire qualified human resources specialists to process the large  number of applicants for positions, which affected the ability to hire  and deploy new staff to disaster areas.

Hiring: Because of the size of the 2017 hurricanes, ODA initially was  unable to effectively support staffing needs of centers. In addition,  SBA officials said that the agency had to hire Puerto Rican attorneys  because secured loans must be signed by a notary and in Puerto  Rico, notaries must be lawyers.  “On-boarding”: ODA’s on-boarding processes were manual, heavily  paper-based, and inefficient and caused delays in processing new  staff. In addition, not enough time was devoted to the on-boarding  process, and delays, disruptions, and unforeseen issues routinely  extended the process.

Training: New staff required significant training that SBA did not have  time to provide. Shortened or omitted training created a greater need  to provide on-the-job training.

In response to these challenges, SBA’s after-action report for the 2017  hurricanes and its 2018 Staffing Strategy made recommendations to  improve SBA’s hiring processes. These recommendations included establishing regular intermittent postings;  creating an enhanced recruitment toolkit that includes social media,  advertisement, third-party partnerships, and an outreach plan; establishing interagency agreements for detailee staff; developing a template for deployment of staff;  reviewing and updating position descriptions; building an applicant pipeline; developing an on-boarding plan; and  implementing an integrated technology solution that includes  recruitment, hiring, on-boarding, benefits, training, performance  management, and “off-boarding.”

SBA officials told us they have begun implementing these  recommendations. For example, the agency consolidated its hiring  processes for new staff through USA Staffing, a federal online  recruitment, evaluation, and hiring system.

SBA establishes outreach locations for businesses and individual disaster  survivors, including Business Recovery Centers, in disaster areas. The  SBA OIG noted that while the centers are designed to assist business  owners, staff also were available to assist homeowners and renters.  Based on our analysis of SBA data, SBA operated six such centers in  response to Hurricane Harvey, 18 in response to Hurricane Irma, and 85  in response to Hurricane Maria.

According to SBA officials, the number of Business Recovery Centers  opened is dependent on two key data points—the number of declared  counties with the greatest impact from the disaster and the business and  population density. Officials told us that SBA opened the most centers in  response to Hurricane Maria in Puerto Rico because of the high number  of affected municipalities. Staffing levels at the centers are based on the  number of businesses categorized as major and on population density,  and then refined based on actual daily activity at the center. See figure 4  for a photograph of SBA staff at a center in a municipal sports complex in  Bayamón, Puerto Rico.

In some locations we visited, SBA worked with its district office or local  SBDCs to set up and staff Business Recovery Centers. For example, the  Field Operations Center–East and the Florida SBDC Network created a  staffing and deployment plan that outlined center locations in the Florida  counties most affected by Hurricane Irma. The Florida centers were jointly  staffed by SBA and SBDC employees, and included a mobile center.

According to SBA officials, SBA and SBDC representatives drove the  mobile center to locations without a dedicated Business Recovery Center,  such as the Florida Keys.

Similarly, the Field Operations Center–East created a staffing and  deployment strategy for Business Recovery Centers with SBA’s District  Office in Puerto Rico. They established fixed and mobile centers and  each week staff traveled to multiple municipalities without fixed centers.  The SBA District Office coordinated with local mayors and other officials  to select the locations and ensure the public was informed. SBA officials  noted that staff visited all the Puerto Rican municipalities over about 7  months.

SBA Conducted Outreach after the 2017 Hurricanes, but Has Not Incorporated Region-Specific Risks or Evaluated Its Efforts

SBA’s outreach for the 2017 hurricanes included local partners, generally  was favorably regarded by stakeholders we interviewed, and met  statutory requirements. But SBA’s current guidance on outreach efforts  does not incorporate region-specific risks (such as those encountered  after the 2017 hurricanes), and SBA has not evaluated its efforts.

According to SBA officials, SBA relied on public information officers, staff  at recovery centers, local partners such as SBDCs and local government,  and media contacts to disseminate information about the Disaster Loan  Program to disaster survivors. When communicating with disaster  survivors was difficult immediately after Hurricane Maria struck Puerto  Rico, SBA officials told us they worked with the only operational radio  station on the island to broadcast information about the program.

During our site visits to selected areas in the states and territories most  affected by the 2017 hurricanes, stakeholders—including business  owners and local SBA partners—told us they generally were satisfied with  SBA’s outreach efforts to disaster survivors. Officials at one SBDC told us  that they believed SBA public information officers did a good job reaching  out to local businesses and keeping the SBDC informed about upcoming  SBA disaster loan presentations and media outreach and went door-to- door to reach small businesses. Similarly, officials at an SBDC in Puerto  Rico told us that SBA staff visited all the municipalities in their region, and  that they participated in presentations about disaster assistance with SBA  and FEMA. Nine of the 24 business owners with whom we talked told us  they first learned about SBA’s disaster loans from prior experience with  the loans or through the agency’s outreach efforts (presented online or on  other media). As discussed in more detail below, SBA does not have  metrics that allow it to assess the effectiveness of its outreach efforts.

Outreach materials SBA provided to us contained required statutory  elements. By statute, if a disaster is declared, SBA must make “every  effort to communicate through radio, television, print and web-based  outlets, all relevant information needed by disaster loan applicants.”  SBA must include (1) the date of the declaration; (2) cities and towns in  the areas of the declaration; (3) loan application deadlines related to the  disaster; (4) all relevant contact information for victim services available  through SBA (including links to SBDC websites); (5) links to relevant state  and federal disaster assistance websites, including links that provide  information on assistance available through FEMA; (6) information on  eligibility criteria for SBA loan programs, including where applications can  be found; and (7) application materials that clearly state SBA’s function as  the federal source of disaster loans for homeowners and renters.

We reviewed SBA Disaster Loan fact sheets available for Hurricanes  Harvey, Irma, and Maria and other outreach materials distributed to  disaster survivors and found they collectively included the required  elements (see fig. 5 for examples). For example, the Hurricane Harvey  fact sheet contains the date of the declaration and counties included in  the declaration, as well as information about SBA’s function to provide  disaster loans, the types of loans available, loan eligibility requirements,  deadlines, and contact information for SBA disaster assistance.

SBA’s guidance on outreach does not include steps on identifying  regional disaster risks. In 2009, we recommended that SBA develop  procedures to enable it to meet the region-specific requirements of the  Small Business Act. Specifically, we recommended that SBA include  likely scenarios for certain regions prone to disasters. In 2012, SBA  completed a marketing and outreach plan that stated SBA would develop  webinars for specific regional risks. However, SBA’s 2018 Marketing and  Outreach Plan did not mention or incorporate regional challenges such as  those SBA encountered responding to the 2017 hurricanes in Puerto Rico  and the U.S. Virgin Islands.

SBA officials told us that they experienced challenges in conducting  outreach to the territories. As previously mentioned, SBA used the only  operational media outlet in Puerto Rico—a radio station—immediately  after Hurricane Maria to broadcast information. SBA officials told us that  language barriers also presented a challenge during the response to  Hurricane Maria. Outreach materials had to be printed in both Spanish  and English (see fig. 6).

Federal internal control standards state that management should  internally communicate the necessary quality information to achieve the  agency’s objectives. However, SBA’s guidance on outreach does not  identify regional disaster risks. SBA officials told us that they have not  considered documenting these challenges in their outreach guidance,  although they may do so in the future.

Without updating its outreach guidance to discuss region-specific  challenges, such as those faced in responding to disasters in the U.S.  territories, SBA misses a key opportunity to better ensure staff are  adequately prepared to conduct outreach in similar situations and  locations.

SBA does not have metrics for how well its outreach efforts informed  disaster survivors about the Disaster Loan Program. Although SBA  surveyed a sample of disaster loan applicants in August 2018, the survey  did not include questions specific to applicants’ perception of SBA’s  outreach efforts that the agency could use to measure the success of its  efforts. Officials told us the survey was primarily used to evaluate SBA’s  loan processing and not its outreach efforts.

In past work, we convened an expert panel to discuss challenges with  consumer education and key planning components to overcome these  challenges. One of the key practices identified in the expert panel was  the need to establish metrics to measure success in achieving the  objectives of an outreach campaign. For example, process metrics can  help ensure the quality, quantity, and timeliness of a campaign, and  outcome metrics evaluate how well the campaign influenced the attitudes  and behaviors of the target audience.

Without metrics evaluating its disaster outreach efforts, SBA will not be  able to determine how well and to what extent its outreach efforts have  informed disaster survivors about the Disaster Loan Program.

SBA Expedited Its Application Processing, but Applicants Cited Continuing Challenges

Since 2005, SBA has streamlined its loan application and review process  and recognized such changes resulted in a need for earlier staff  activation. SBA’s approval rate for all disaster loan applications following  the 2017 hurricanes was approximately 49 percent and Hurricane Maria  had the highest approval rate (62 percent). Disaster loan applicants, SBA  resource partners, and SBA officials identified challenges that affected  application or review processes, including burdensome documentation  requests and translation issues.

SBA Changes Expedited and Simplified Loan Application and Processing, Creating Need to Activate Staff Earlier

Since 2005, SBA has made changes to its disaster loan program to  streamline the loan application and review process. Some of the changes  SBA implemented include

Using electronic loan applications. In 2008, SBA created an online  portal for the Disaster Loan Program, which eliminated the need for  applicants to mail in applications or visit a recovery center. According  to SBA officials, they typically receive paper applications within 14  days and electronic loan applications within 1–2 days after a disaster.  They also indicated that increased usage of electronic loan  applications has reduced data entry errors and improved loan  processing times. The vast majority (96 percent) of the approximately  340,000 applications SBA accepted after the 2017 hurricanes were  submitted electronically.

Expediting declines for applicants with poor credit. According to  SBA officials, in 2005 SBA established automatic declination for  applicants with poor credit (instead of moving forward with full  processing of all applications). SBA refers homeowners who are  automatically declined to FEMA for a potential grant and refers such  businesses to resource partners for assistance. Overall, more than  half (55 percent) of the approximately 146,000 applications declined  after the 2017 hurricanes were automatically declined.

Expediting approvals for applicants with strong credit. In 2014,  SBA revised its disaster loan program regulations for physical disaster  loans to allow it to consider an applicant’s credit instead of only  looking at a full cash flow analysis when determining an applicant’s  ability to repay. Overall, SBA processed 28 percent of the  applications approved after the 2017 hurricanes using this revised  method.

Using desktop verification. In 2017, SBA began conducting desktop  verification to evaluate the cause and extent of property damage. The  process involves an initial loss verification through interviews with the  applicant and use of third-party information (such as from a tax  assessor’s website or Google maps) to estimate the cost of repairs.  SBA is to conduct a post-desktop review following the initial  disbursement using FEMA’s inspection report, SBA’s on-site  inspection, or supporting documentation to validate the initial  estimate. In a September 2019 report, the SBA OIG found that the  use of desktop loss verification contributed to SBA meeting its  timeliness goals for processing loan applications for the 2017  hurricanes.

Standardizing loan terms. In 2017, SBA established 15- and 30-year  fixed terms for loans, which streamlined the loan process by using the  loan amount (instead of income) to determine repayment. According  to SBA officials, the use of fixed loan terms is consistent with standard  private-sector lending practices and therefore is easier for borrowers  to understand.

SBA also has continued to make technological changes to streamline  DCMS and the web portal. The DCMS version SBA used for the 2017  hurricanes supported up to 10,000 concurrent users. According to SBA  officials, they have been transitioning to DCMS 2.0, which is expected to  support more concurrent users. As noted in SBA’s fiscal year 2019  Congressional Budget Justification and its 2017 Annual Performance  Report, SBA anticipates that DCMS improvements will increase loan  officer productivity from processing three to processing six loan  applications per day. Similarly, SBA integrated new features into the  online portal to improve applicants’ access to information resources  during the application process. For example, applicants can readily  access general questions and information, check the status of their  applications, receive status notifications, and electronically upload and  sign documents such as Internal Revenue Service Form 4506-T.

According to SBA officials, electronic loan application and other changes  have reduced SBA’s processing times. For Hurricanes Harvey and Irma,  the number of applications to be processed peaked about 2 months after  each disaster; applications for Hurricane Maria peaked nearly 3 months  after the disaster (see fig. 7). The number of business applications to be  processed peaked more than 3 months after Hurricane Sandy made  landfall on October 29, 2012.

Our analysis of SBA data found that despite a high volume of  applications, SBA exceeded its goal for the 2017 hurricanes of processing  at least 85 percent of applications from receipt to decision within 45 days  (see fig. 8). More specifically, SBA processed 96 percent of its  applications within 45 days. As noted previously, SBA’s processing goal  varies based on expected application volume. The average processing  times for loans submitted after Hurricanes Harvey, Irma, and Maria were  16, 16, and 18 days, respectively. In general, SBA processed loans for  homeowners faster than loans for businesses after the 2017 hurricanes.  In contrast, SBA did not meet its 21-day processing goal after 2012’s  Hurricane Sandy and developed a backlog of more than 6,000  applications that lasted approximately 4 weeks.

The SBA OIG noted issues with and recommended two improvements to  how SBA calculates processing time from acceptance to decision. In a  June 2014 report, the OIG found that SBA included times for  automatically declined applications in its average processing times. The  OIG recommended SBA report processing times for automatically  declined applications separately from applications requiring more  processing. In the summary data SBA provided for the 2017 hurricanes,  SBA continued to include automatically declined applications, which  require significantly less time to process than other accepted loans, in its  average processing times.

The OIG also found SBA’s computation did not include all the processing  time for applications previously submitted and withdrawn, but later  reaccepted. SBA used only the days elapsed between the reacceptance  and the decision date. As discussed in more detail later in the report, SBA  and applicants can withdraw and later resubmit applications. The OIG  recommended that SBA establish processing time goals that consider the  full processing time for withdrawn applications that later are reaccepted.  According to OIG officials, the OIG closed this recommendation although  SBA did not implement it because SBA officials stated that system  limitations would not allow for this measurement to be readily  accomplished and reaccepted loans require a level of analysis and  diligence that justifies separate measurement of processing time.

Although SBA officials told us there are no timeliness goals associated  with closing a loan, approved borrowers have up to 60 calendar days  from the date of the loan authorization and agreement to sign and return  all loan closing documents to close the loan. For Hurricanes Harvey and  Irma, SBA took less than 50 days on average to close a loan, with  business loans taking the longest. For Hurricane Maria, it took more than  53 days on average to close loans. In comparison, for Hurricane Sandy  SBA took 66 days on average from approval to close a physical disaster  business loan and 43 days for an economic injury loan.

After the 2017 hurricanes, SBA also met its disbursement goal of  providing initial disbursements to 95 percent of borrowers within 5 days of  loan closing. On average, SBA provided initial disbursements to  approved borrowers within about 4 days of closing. SBA also had met its  initial disbursement goal following Hurricane Sandy.

As a result of SBA’s changes to its loan processing and review functions,  SBA reduced its overall processing times. For the 2017 hurricanes, SBA  took about 70 days on average to go from acceptance to initial  disbursement, which is much less time than it took for Hurricane Sandy  and the 2005 Gulf Coast hurricanes (see fig. 9).

According to SBA officials, increased usage of electronic loan  applications and expedited loan processing has resulted in the need to  activate staff earlier, although SBA still faced challenges doing so. The  number of applications that SBA received peaked at 95,000 applications  in October 2017. SBA began adding staff immediately after the  hurricanes, but the number of staff in ODA’s Processing and  Disbursement Center did not peak until December 2017 (see fig. 10). In  contrast, following Hurricane Sandy, application numbers peaked in  December 2012 but ODA’s Processing and Disbursement Center did not  reach peak staffing until March 2013.

While hiring processes were ongoing, SBA temporarily utilized staff from  other SBA divisions to assist with reviewing applications. ODA then hired  additional loan officers and also used other SBA employees and detailees  from other federal agencies to process loans. By October 2017, ODA had  more than quadrupled processing staff (from 536 in August to 2,302 in  October), and the workload for those staff had peaked (see fig. 11). Each  loan officer averaged more than 50 new loan applications in September  2017, but by January 2018 the average decreased to about six or fewer  new applications per month. As discussed earlier, SBA anticipates its  DCMS update will double loan officer productivity.

Overall Approval Rates for the 2017 Hurricanes Were Higher Than for the 2005 Gulf Coast Hurricanes, but Lower Than for Hurricane Sandy

In response to the 2017 hurricanes, SBA accepted about 340,000  applications and approved about 141,000 of them, making about $7.2  billion in loans (see fig. 12). SBA accepted the most applications for  Hurricane Irma, but about half of the total approved loan amount was for  applicants affected by Hurricane Harvey.

Overall, SBA’s approval rate for all disaster loan applications following the  2017 hurricanes was approximately 49 percent (see fig. 13). Of the  three 2017 hurricanes, Hurricane Maria had the highest approval rate, 62  percent. The approval rate for physical disaster loans for homeowners  was higher for Hurricane Maria (64 percent) than for Harvey (46 percent)  and Irma (42 percent). There was not much variation in approval rates for  physical and economic injury disaster loans for businesses.

As shown in figure 14, the overall approval rate for loan applications was  lower for Hurricanes Harvey, Irma, and Maria than for Hurricane Sandy,  but higher than the combined rate for Hurricanes Katrina, Rita, and  Wilma.

Following the 2017 hurricanes, SBA declined about 146,000 loan  applications. The primary reasons for declining applications were lack of  repayment ability and unsatisfactory credit history. Other common  reasons included unsatisfactory history on a federal obligation and that  the damaged property was not an applicant’s primary residence or a  qualified rental property.

Declined applicants can request that SBA reconsider their applications.  SBA received about 15,000 such requests after the 2017 hurricanes. Of  the requests SBA accepted, about half had their applications approved,  and about 30 percent were denied. Applicants who have their  reconsideration requests denied can appeal SBA’s decision. Ninety-one  percent of applicants who were denied after the 2017 hurricanes and  subsequently appealed won their appeal.

We also discuss withdrawal and cancellation rates for the 2017 and prior  hurricanes in appendix II.

Applicants and SBA Identified a Number of Challenges Faced after the 2017 Hurricanes

Disaster loan applicants, SBA resource partners, and SBA officials we  interviewed in Florida, Puerto Rico, Texas, and the U.S. Virgin Islands  identified a number of challenges that affected the application or review  processes following the 2017 hurricanes.

Challenges Identified by Applicants and SBA Resource Partners

Disaster loan applicants and SBA resource partners we interviewed  identified the following challenges that applicants had when applying for  SBA disaster loans following the 2017 hurricanes:

Providing required loan documentation. Eight (of the 24) business  loan applicants and officials from 10 entities, including from five  SBDCs, felt that meeting SBA’s loan documentation requirements  was time-consuming or burdensome. Following the hurricanes,  applicants experienced difficulty readily producing required  documentation (such as insurance policies, property titles, and tax  returns) because of extensive physical damage and power issues or  outages. Additionally, 11 applicants reported that follow-up requests  from SBA for additional documentation delayed processing, added  confusion, or led some to withdraw their applications.

According to the results of a 2018 customer satisfaction survey  conducted for SBA, the satisfaction of business loan applicants with  the disaster loan application process had decreased by 9 percentage  points since the previous survey in 2017. The lowest-rated aspects  of the application process for businesses were “ease of attaining  information required for completing the application,” the “amount of  paperwork involved,” and the “overall ease of filling out the  application.”

According to SBA officials, they are statutorily required to request  certain information from disaster victims who apply for a disaster loan.  Although more documentation is requested for business loans than for  home loans, the officials believe the information requested from  business applicants is similar to information requested from  individuals applying for a loan at a commercial bank. In response to  previous recommendations we made, SBA recently has taken steps to  streamline the application process by improving accessibility and  consistency of loan-related information and requirements in paper and  electronic resources. For example, SBA added a list of frequently  asked questions to its Disaster Loan Application Portal with a list of  documents required to file an application. The paper applications for  both home and business loans list potential additional documents that  SBA may request as well as when they may be required.

Officials from all three SBDCs in Puerto Rico told us that applicants in  Puerto Rico particularly had difficulty accessing tax documentation in  a timely manner. SBA has an automated process to request and  obtain tax transcripts from the Internal Revenue Service for final  approval of loans. However, in Puerto Rico SBA must use a manual  process with the Departamento de Hacienda (Puerto Rican taxing  authority). Further delays occurred due to widespread physical  damage to infrastructure, including the Departamento de Hacienda.  As a result, SBA permitted applicants in Puerto Rico to postpone  submitting tax documentation until later in the application process.  Instead of submitting tax documentation during the loan decision  process, SBA allowed applicants to submit such documentation  during conditional commitment (the point at which SBA’s  recommendation for loan approval is contingent on the applicant  submitting additional required documents). In addition, ODA co- located loan officers with staff from the commitments department to  facilitate prompt access to the tax transcripts they were awaiting from  the Departamento de Hacienda.

Meeting flood insurance requirements. Officials from two Florida  entities told us many of the small businesses with which they worked  had problems submitting insurance documentation as part of their  application. Officials from one SBDC in Puerto Rico told us they had a  client who was unable to obtain flood insurance. By law, SBA requires  borrowers whose damaged or collateral property is located in a  special flood hazard area to obtain and maintain appropriate flood  insurance for the term of the loan.

Delays also occurred as a result of miscommunication between SBA  and loan applicants about flood insurance requirements, according to  an applicant we interviewed. That business owner told us that when  he submitted a disaster loan application for physical and economic  injury damages, SBA informed him the insurance requirements  applied only to the physical damage portion of the loan. However,  SBA later told the individual that insurance coverage was necessary  for the entire loan, not just physical damages.

Frequent changes in loan officers or case managers. More than  two-thirds (17 of 24) of the business owners we interviewed and  officials at four of the nine SBDCs told us they (or their clients) worked  with more than one case manager or loan officer during the loan  application process. Two small business owners said they had  interacted with as many as nine. These changes led to the applicants  having to repeat or resubmit information. In addition, they  sometimes received different answers to questions when a new loan  officer or case manager was assigned.

SBA officials told us that SBA does not track the extent to which  applicants work with multiple loan officers and case managers but that  applicants should generally have only one of each. According to SBA  officials, one loan officer is typically assigned to an application until a  loan decision is made. Once a loan is approved, one case manager is  assigned until the loan is fully disbursed. However, according to  SBA officials, an applicant may interact with more than one loan  officer and case manager for reasons such as staff turnover and staff  downsizing. In addition, whenever an applicant requests  reconsideration of a declined application, the application is to be  assigned to a new loan officer for processing. According to SBA  officials, a newly assigned loan officer or case manager should be  able to use DCMS to access an applicant’s loan file, including records  of past communication between prior loan officers and the applicant,  loss verification reports, and previously submitted documents. When  an applicant electronically submits a document through the web  portal, ODA scans and uploads it into DCMS (typically in 24–48  hours), at which point it is viewable in DCMS. The officials explained  that document storage methods in DCMS are uniform, which should  minimize the possibility of documents being improperly stored.

Poor customer service and translation issues. Five of the  applicants (of 24) and officials from four entities we interviewed said  disaster loan applicants perceived a lack of SBA responsiveness after  submitting their applications. Staff from two of the entities attributed  this lack of responsiveness to SBA having an inadequate amount of  staff to handle the number of applications. SBA officials indicated that  Processing and Disbursement Center staff strive to contact each  applicant within 3 days of assigning a loan officer and within 5 days of  assigning a case manager. They also stated the center should contact  each applicant at least every 30 days using whatever available forms  of communication, including mail, email, and telephone. But two  applicants told us they only heard from their case manager after the  applicant initiated the contact. Nine applicants also stated that when  they did talk to their loan officer or case manager that person was not  very helpful. For example, officials from one SBDC told us they talked  to some loan officers on behalf of their clients and those loan officers  were not able to clarify what documentation their clients needed to  provide to SBA to complete their applications.

One Puerto Rican applicant and officials from all three Puerto Rican  SBDCs told us that applicants in Puerto Rico faced translation issues.  They believed SBA had insufficient staff who spoke Spanish, which  made it difficult to communicate with applicants regarding status  updates and requests for additional documentation. The SBA OIG  reported that SBA officials estimated that some disaster survivors  waited more than 45 minutes for an interpreter or experienced  dropped calls. In addition, officials from one Puerto Rican SBDC told  us SBA only would accept official responses in English and believed  that many applicants were denied in part because the documents with  applicants’ personal and financial information were in Spanish. The  SBDC officials were told only an SBA translator could translate official  documentation between SBA and applicants from English to Spanish.  According to SBA officials, they tried to hire as many Spanish- speaking staff as possible and relied on a contractor to provide  interpretation services during telephone communications with  applicants. But the volume of calls was higher than anticipated,  resulting in long wait times and many lost telephone connections.  Following Hurricane Maria, SBA replaced the contractor with three  new language service providers, which SBA used during its response  to Hurricanes Florence and Michael in 2018.

Disbursement delays. Eight business disaster loan applicants and  officials from three SBDCs told us that applicants experienced delays  receiving disbursements after their initial disbursement. Although  applicants said they received initial disbursements within expected  time frames, subsequent disbursements took longer than anticipated.  For example, three small business owners told us it took more than a  year from the time they applied to receive their full loan disbursement,  and two others had to contact their federal representative to help get  their disbursements because of delays. SBA data show that after the  2017 hurricanes it took, on average, about 141 days after applying for  a loan for businesses to receive their full disbursement, including an  average of 63 days from closing to final disbursement.

Similarly, business respondents to the 2018 customer satisfaction  survey conducted for SBA expressed concerns about the timeliness of  disbursements following loan closing. The lowest-rated aspect of the  loan closing process was “timeliness of receiving loan funds after the  closing was complete.” As a result, the firm that conducted the survey  recommended that SBA examine data on the timing of loan  disbursements over the past several years, determine whether the  timing had changed significantly, determine the root causes of any  notable changes, and develop plans to address any root causes.

SBA guidance requires approved borrowers to arrange for and obtain  all loan funds within 6 months from the date of the loan authorization  and agreement. However, SBA may extend the time frame on a case- by-case basis for ongoing projects. According to SBA officials, there  are no timeliness goals for subsequent disbursements because the  time frame for receiving further disbursements is contingent on the  borrower’s ability to meet insurance requirements, secure a contractor  to repair damages, and submit receipts to SBA. SBA also has  improved features within the web portal so that borrowers can now  use direct deposit to receive disbursements and commence repairs  more quickly. Additionally, the portal now enables borrowers to  electronically submit receipts for repairs or invoices to loan officers,  who in turn can verify the use of disbursed funds and make additional  disbursements much sooner than before.

During interviews and in an after-action report, SBA also identified  challenges it experienced after the 2017 hurricanes that included a  prolonged loss of electricity, DCMS performance issues, and unique loan  closing requirements in Puerto Rico.

Loss of electricity. As discussed previously, a prolonged loss of  electricity adversely affected application submission and loan  processing, especially in Puerto Rico.

DCMS performance issues. SBA officials said the agency increased  staffing to process incoming loan applications and the multitude of  concurrent users caused technical issues and delays. Loan applicants  also encountered periodic system outages. SBA released DCMS  updates throughout the first few months of its response to the 2017  hurricanes to address system performance issues. As previously  mentioned, SBA expects that DCMS 2.0 will address concurrent user  issues.

Unique loan closing requirements in Puerto Rico. SBA officials  said they were initially unaware of loan closing requirements unique to  Puerto Rico, which led to processing delays. They told us that  secured loans must be signed by a notary, who in Puerto Rico must  be a Puerto Rican-licensed attorney. As a result, SBA had to hire  additional locally licensed attorneys and devote resources toward  training attorneys and other staff involved in processing and closing  loans in Puerto Rico, a process hampered by the previously  discussed hiring challenges for the 2017 hurricanes. SBA has been  implementing changes to its hiring process for future disasters.

SBA Implemented the Express Bridge Loan Pilot Program, Issuing Few Loans, and Has No Plans to Evaluate It

Express Bridge Loan Pilot Has Issued Very Few Loans, and SBA Generally Did Not Target Outreach to Disaster-Prone Areas and Has No Plans to Evaluate the Pilot

Number of loans. As of September 2019, lenders had issued two loans  totaling $50,000 under SBA’s Express Bridge Loan Pilot Program. The  loans were issued by one lender in 2018 to small businesses in North  Carolina and South Carolina recovering from Hurricane Florence.

Outreach. SBA generally has not targeted its outreach for the program to  disaster-prone areas. According to SBA officials, to market the pilot  program OCA issued two Federal Register notices and a program guide,  and encouraged district office staff to notify area lenders of the program.  Additionally, SBA officials told us that before anticipated disasters, they  have mentioned the program on quarterly telephone conferences  attended by 1,000–1,500 7(a) lenders, and referred to the pilot in press  releases. One lender told us that it was notified of the pilot program  through an SBA policy notice with program guide attached, while another  noted receiving an email promoting the program. According to SBA  officials, this same email was sent to OCA field staff to be shared with all  7(a) Express lenders before the 2019 hurricane season. Internally,  according to SBA officials, OCA has made information on the Express  Bridge Loan Pilot Program available to all SBA employees on an internal  website.

However, OCA has not marketed the Express Bridge Loan Pilot Program  to ODA. OCA officials were unaware of any conversation with ODA  (whose staff are on the ground after disasters and therefore most likely to  interact with small business owners) about the pilot program, but  assumed that ODA officials had high-level information about the pilot.  However, staff we interviewed from both Field Operations Centers were  unaware of the program.

OCA also has not targeted its external marketing to partners, such as 7(a)  Express lenders and SBDCs, in disaster-prone areas. Although SBA  officials told us that they made presentations at a 2019 lender conference  in Florida, they did not point to similar outreach in other disaster-prone  areas. The small business owners and SBDC officials with whom we  spoke in Florida, Puerto Rico, Texas, and the U.S. Virgin Islands  generally were unaware of the SBA Express Bridge Loan Program.  During our February 2019 interview with the Florida Department of  Economic Opportunity (which helps administer the state’s bridge loan  program), officials stated they were unaware of program specifics and  asked if it had started.

Evaluation. SBA officials do not currently plan to evaluate the program or  determine why so few loans have been issued. SBA officials explained  that the Express Bridge Loan Pilot Program’s performance during the  2019 hurricane season would determine whether SBA would continue or  terminate the program after its pilot period. When SBA announced the  pilot, SBA stated it planned to evaluate the program using three principal  measures: (1) the number of small businesses served, (2) the percentage  of loans made that were paid off or down using lower fixed-rate disaster  loans versus those held to term, and (3) the default rate on Express  Bridge Loans compared to regular SBA Express loans of similar size in  the 7(a) portfolio. SBA officials told us they were not planning to conduct  an evaluation because only two loans had been made, which the officials  believe is not a large enough sample size to conduct a meaningful  evaluation of the program.

Although SBA has guaranteed only two loans issued under the Express  Bridge Loan Pilot Program, the program received 93 applications. While  most of the applications were not completed, they suggest a potentially  larger demand for the program than initially indicated by the two  completed loans. We discuss demand for bridge loans in more detail in  the following section.

SBA has guidelines for evaluating pilot programs. SBA issued a Policy  Notice on September 29, 2016, that called for it to evaluate any pilot  program. SBA subsequently incorporated this requirement in one of its  standard operating procedures.

In addition, our guide for designing evaluations states that an evaluation  gives an agency the opportunity to refine the design of a program and  provides a useful tool to determine whether program operations have  resulted in the desired benefits for participants. We also previously  reported that an evaluation can be valuable in determining why goals  were not met, and can provide feedback on both program design and  execution. Such an evaluation can help determine what program  changes might be warranted to achieve the desired impact.

In the absence of loan data, an evaluation could include consideration of  feedback from lenders in disaster-prone areas on the pilot or their  experiences with other bridge loan programs, such as the Florida  program discussed in the following section. According to SBA officials,  SBA had not actively solicited lender feedback on the current pilot since it  became operational. However, SBA sought feedback from lenders on  prior efforts to develop a bridge loan program. SBA officials told us that  lenders commented on a prior proposal for a bridge loan pilot (the  Immediate Disaster Assistance Program) and indicated that private  lenders were not interested in participating in such a pilot because they  considered disaster relief to be a governmental responsibility.  Additionally, SBA officials told us during our previous work looking at the  Immediate Disaster Assistance Program that they performed initial  outreach to lenders—such as those who participated in SBA’s Gulf  Opportunity Pilot Loan Program in the aftermath of Hurricanes Katrina  and Rita—to obtain their reaction to and interest in the program.

The current pilot provides a similar opportunity to obtain feedback from  lenders on loan terms that could affect their willingness to participate in  this or a potentially redesigned program. For example, one 7(a) lender  with whom we spoke did not like the Express Bridge Loan Pilot Program  due to the maximum loan amount and the SBA guaranteed percentage.

Without evaluating the pilot program, including assessing potential  demand and why so few loans have been made and the sufficiency of its  outreach efforts, OCA will have limited information to inform its decision  on the future of the pilot, including loan terms it may offer. Additional  feedback, such as from lenders, could help SBA determine if design  changes are warranted.

Interviews with Affected Small Business Owners and Use of Florida’s Bridge Loan Program Indicate Demand for Bridge Financing

The very low level of loans guaranteed under SBA’s bridge loan pilot  contrasts with the desire for such loans indicated by our interviewees and  the experience of the Florida Small Business Emergency Bridge Loan  program. We interviewed small business owners and those who work  with small businesses. Almost two-thirds of all the entities (16 of 26) we  interviewed and six small business owners told us that businesses  needed immediate financial support after a disaster (for example, to help  remove debris, make repairs, and replace inventory). Although many  businesses ultimately receive insurance payments to help cover losses,  the payments may not be received for several months. Representatives  from one municipality told us a lot of people, including the city itself, still  were awaiting their insurance payments more than a year after the  disaster. To help fund their immediate recovery, small business owners  with whom we talked often relied on their own savings, credit cards, or  other sources of credit. However, these financing sources typically have  interest rates higher than those offered by the Express Bridge Loan Pilot  Program. In addition, it can take applicants approved for SBA Disaster  Loans months to receive funds—time that could determine whether a  business remains in operation.

Florida’s Small Business Emergency Bridge Loan program provides small  business owners with interim disaster financing, similar to the Express  Bridge Loan Pilot Program, but some structural differences exist (see  table 2 for a comparison of principal terms and features). In particular, the  Florida program uses public funds rather than being funded by financial  institutions. Officials of the Florida Department of Economic Opportunity,  which administers the program in partnership with the Florida SBDC  Network and a third-party fiscal administrator, told us the Florida program  is not focused on generating a return on investment. Rather, the  program is focused on helping small businesses bridge the gap between  the time their businesses incur damages and the time they secure other  financial resources. Although SBA officials told us that the State of  Florida’s program is not a valid comparison to SBA’s Express Bridge  Loan Pilot Program because the loans for SBA’s program are made by  private, for-profit lenders, the Florida program demonstrates demand for  bridge financing for small business owners.

Officials from the Florida Department of Economic Opportunity stated that  when the Governor’s office activates the Florida Small Business  Emergency Bridge Loan program, the department uses various outreach  media, including social media, public-private partners, and state  emergency response to disseminate information about the program. The  program’s fiscal administrator and the Florida SBDC Network also  circulate information about the program, including by providing hyperlinks  to the loan application on their websites. Finally, the program has been in  place since 1992, which likely contributed to word-of-mouth about the  program.

According to officials of the Florida Department of Economic Opportunity,  following Hurricane Irma the program received 1,167 applications, of  which 883 were approved, totaling $35 million in disaster bridge financing.  Following Hurricane Michael, the program received 742 applications, of  which 590 were approved, totaling $34.3 million in disaster bridge  financing.

Florida Department of Economic Opportunity officials attributed the wide  utilization of the Florida Small Business Emergency Bridge Loan to  expedited access to funding and favorable terms. For example, the  program offers survivors a zero percent interest rate for the term of the  loan, which is generally 1 year. Given the difference in loan terms  between Florida’s program and SBA’s pilot program, the demand for  SBA’s higher-interest loans may not equal the demand for Florida’s loans.  However, in disaster areas in which there is no state bridge loan program,  SBA’s pilot program could meet at least some of the need for bridge  financing.

Following Hurricanes Harvey, Irma, and Maria in 2017, SBA faced  difficulties in delivering its disaster loans due to the magnitude of the  storms and resulting infrastructure damage, especially in Puerto Rico and  the U.S. Virgin Islands. Nevertheless, SBA accepted about 340,000  applications and approved about 141,000 of them, making more than $7  billion in loans to help business owners, homeowners, renters, and  nonprofits recover.

However, the planning documents and guidance to the field that SBA  used to guide its response to the 2017 hurricanes did not identify risks  and focus on risk assessments or include detailed instructions on how to  prepare disaster-specific action plans. And after the 2017 hurricanes, the  documents and guidance, including for outreach on disaster loans, has  not incorporated lessons learned—particularly as they related to region- specific risks that could hamper the operations of the Disaster Loan  Program. By identifying risks and enhancing guidance on actions plans  and outreach efforts, SBA can better design its plans for and  implementation of disaster response efforts and help ensure staff are  adequately prepared to conduct operations in situations such as those  encountered in Puerto Rico and the U.S. Virgin Islands. SBA also has not  established metrics to measure the success of its outreach efforts. By  establishing metrics, such as including questions when surveying disaster  loan applicants on their perception of SBA’s outreach efforts, SBA would  be better able to determine how well its outreach efforts have informed  disaster survivors about the Disaster Loan Program and make  adjustments to improve the effectiveness of such efforts.

SBA also can improve its Express Bridge Loan Pilot Program, which  offers small businesses the opportunity to quickly receive funding after  disasters. The success of a Florida program offering a similar product and  our own work suggest considerable demand for bridge loans. SBA has no  plans to evaluate the program because it has issued so few loans. While  SBA does not have the information needed to conduct a loan  performance evaluation, it has the opportunity to conduct an evaluation of  the pilot program’s design and implementation. Such an evaluation could  help determine why so few loans were issued, what role program design  and internal and external outreach may have played, and what, if any,  changes to the pilot might be warranted. By evaluating the Express  Bridge Loan Pilot Program, including obtaining lender feedback, OCA will  be able to make an informed decision about the program’s future.

We are making the following five recommendations to SBA:  The Associate Administrator for the Office of Disaster Assistance should  identify and document risks associated with its disaster response and  plans to mitigate these risks in its disaster planning documentation.  (Recommendation 1)

The Associate Administrator for the Office of Disaster Assistance should  identify the key elements of a disaster action plan and provide additional  guidance to staff on how to incorporate these elements into future action  plans. (Recommendation 2)

The Associate Administrator for the Office of Disaster Assistance should  update its outreach plan to include information on region-specific risks or  challenges, such as those encountered after the 2017 hurricanes.  (Recommendation 3)

The Associate Administrator for the Office of Disaster Assistance should  establish metrics to measure the success of its outreach efforts during the  response to a disaster. (Recommendation 4)

The Associate Administrator for the Office of Capital Access should  evaluate the implementation of the Express Bridge Loan Pilot Program to  determine why so few loans have been made and if any design changes  may be warranted before the end of the pilot. Such an evaluation could  include assessing SBA’s outreach efforts and seeking feedback from  lenders. (Recommendation 5)

We provided a draft of this report to SBA for review and comment. In  written comments, which are reproduced in appendix III, SBA stated that  overall it agreed with the report’s recommendations and provided  comments, as summarized below.

SBA described actions it planned to take to address the first four  recommendations, which if implemented as planned would address them.

For the first recommendation to identify and document risks—and  plans to mitigate those risks—in its disaster planning documents, SBA  noted that ODA would work with SBA’s Office of Continuous  Operations and Risk Management, which updates and publishes the  annual Disaster Preparedness and Recovery Plan, to identify and  document known risks associated with SBA’s disaster response and  implement a risk-informed approach to its direct response and  recovery operations. SBA expected that its fiscal year 2021 plan  would include this information.

For the second recommendation to identify the key elements of a  disaster action plan and provide related guidance to staff, SBA agreed  and noted that ODA would develop the key elements of and templates  for a disaster action plan, provide guidance to Field Operations  Centers, and coordinate with the Office of Continuous Operations and  Risk Management on including the information in appendixes to the  Disaster Preparedness and Recovery Plan.

For the third recommendation to update its outreach plan to include  information on region-specific risks or challenges, SBA agreed and  stated that ODA would update its outreach plan to include risks and  challenges experienced during the 2017 hurricane season.

For the fourth recommendation to establish metrics to measure its  disaster outreach efforts, SBA agreed and noted that it would explore  potential new metrics to measure the effectiveness of its outreach  efforts, such as adding a question about the efforts to the annual  American Customer Satisfaction Index survey.

For the fifth recommendation to evaluate the implementation of the  Express Bridge Loan Pilot Program to determine why so few loans have  been made and if any design changes may be warranted before the end  of the pilot (which could include assessing SBA’s outreach efforts and  seeking feedback from lenders), SBA described some actions it planned  to take in response to the recommendation that would partially address it.  The agency also commented on some of our findings, which we discuss  below. We maintain our recommendation.

In its comments, SBA noted it would seek feedback from SBA  Express Lenders during the upcoming spring National Association of  Government Guaranteed Lenders conference on their interest and  participation in the pilot. SBA also noted that it would provide ODA  with information and a set of frequently asked questions about the  pilot program that ODA could distribute to small business owners at  Business Recovery Centers. Although beginning to seek lender  feedback and improving its internal outreach are good first steps, SBA  would still need to conduct an evaluation to determine if any design  changes were warranted to fully address the recommendation.

SBA stated it did not currently have adequate data to evaluate the  effectiveness of the program because only two loans had been  funded. It also noted that while there were more than 90 incomplete  applications for the Express Bridge Loan Pilot Program, the agency  had concluded that there were not sufficient data to suggest the  applications were actual attempts to originate loans and that lenders  likely started the loans in error. In the draft report, we acknowledged  only two loans had been issued and included SBA’s views about why  other applications were not completed. As we note in the report, in the  absence of loan data an evaluation instead could focus on the pilot’s  design and implementation, and include feedback from lenders.  Therefore, we maintain that SBA can and should evaluate the pilot  program.

SBA noted it previously sought feedback from lenders on the  Immediate Disaster Assistance Program (a prior proposal for a bridge  loan program) and at that time, there was very little lender interest in  the program. The draft report included this information and noted that  the current pilot provides a similar opportunity to solicit lender  feedback, including on loan terms. In response to this, SBA stated  that making significant changes to the size and guarantee on the pilot  loans based on lender feedback would affect the subsidy for the  program. However, SBA will not know how lenders feel about the  current pilot or what types of changes they might recommend until it  seeks lender feedback. Lenders could call for changes to the program  that were minor but still would improve their willingness to participate.  In addition, if lender feedback suggested that the program would not  work without significant changes and additional subsidy, such  information could inform future actions to address borrower demand  for bridge loans.

SBA also stated that it did not believe our comparison of the Express  Bridge Loan Pilot Program to the Florida Small Business Emergency  Bridge Loan was appropriate. SBA stated the Florida program  provides direct loans in contrast to SBA’s limited guarantee to lenders,    and had been in existence since 1992 and was well known (versus a  2017 program start and less knowledge about SBA’s program). We  highlighted both differences in the draft report. SBA also stated the  Florida program has a larger pool of eligible applicants because it is  not limited to Presidentially declared disasters or delivered only by  certain lenders, as is the case with the SBA program. However, we  note that the SBA program is available nationwide and the Florida  program is limited to the state. In summary, SBA stated in its  comments that the characteristics of the Florida program contributed  to the demand for the program. We acknowledged this in the draft  report, stating that given the differences between the programs, the  demand for SBA’s loans may not be equivalent to the demand for  Florida’s loans. Despite the program differences, we continue to  believe that including a discussion of the Florida Small Business  Emergency Bridge Loan program in the report was appropriate  because its use indicates demand for bridge financing. In disaster  areas in other states with no state bridge loan program, SBA’s pilot  program, with changes determined to be appropriate, could meet at  least some of the demand for bridge financing identified by people we  interviewed.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees and the Administrator of SBA. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff members have any questions about this report, please  contact William B. Shear at (202) 512-8678 or shearw@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. Major contributors to this report  are listed in appendix IV.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to examine the Small Business Administration’s  (SBA) (1) planning for and initial response to Hurricanes Harvey, Irma,  and Maria (hereinafter referred to as the 2017 hurricanes); (2) loan  application and review process (including changes since Hurricane  Katrina in 2005), timeliness, and approval rates; and (3) implementation  of the Express Bridge Loan Pilot Program. We focused our review on  Florida, Texas, Puerto Rico, and the U.S. Virgin Islands—the states and  territories most directly affected by the 2017 hurricanes.

For all of our objectives, we visited two areas each in Florida, Texas, and  the U.S. Virgin Islands, and three areas in Puerto Rico. We selected  these areas based on the high numbers of approved homeowner and  business disaster loans, high population, geographic diversity, presence  of a Small Business Development Center (SBDC), and presence of an  SBA district office. To help ensure geographic diversity, we selected  locations from different metropolitan statistical areas in each state and  Puerto Rico. In each location, we conducted a group interview with small  business owners who applied for a disaster loan with SBA to learn about  their experiences applying for a loan and working with SBA while their  loan was processed and funds disbursed, and their need for bridge  financing. These small businesses were recruited by representatives of  the local SBDC and were selected to represent a range of outcomes  (approved, denied, and withdrawn applications). Overall, we interviewed  24 small business owners across the nine areas we visited.

In addition to small business owners, we met with officials from the SBDC  and the local SBA district office responsible for each of the areas we  visited. We also met with officials from seven local governments that  oversaw eight of the areas we visited—either from a mayor’s office or  economic development office. Lastly, we interviewed officials from six  chambers of commerce or business associations, one in every area  except one. While the results of these interviews are not generalizable to  all areas affected by the 2017 hurricanes, they provided insight into the  experiences of small businesses and local communities with the SBA  Disaster Loan Program. In addition to the site visit interviews, we  interviewed officials from SBA’s Office of Disaster Assistance, including  officials from both Field Operations Centers and the Processing and  Disbursement Center, to discuss the Disaster Loan Program and SBA’s  response to the 2017 hurricanes.

For our analysis of open-ended responses from these interviews, we  used a software program designed for analyzing qualitative information.  For each open-ended response, we coded, organized, and analyzed  responses under a number of relevant themes. Specifically, team  members independently reviewed a segment of the interview transcripts  to code the responses to identify themes. Once each analyst had  completed coding his or her respective sections, the documents were  merged into a master file that was reviewed by the engagement’s  methodologist. Possible alternative categorizations of the material were  discussed and resolved jointly. This code-based method constituted our  primary approach to validating the results of our analysis. All  categorizations were sourced to the original interviews through the use of  the qualitative analysis software.

To evaluate SBA’s planning for and initial response to the 2017  hurricanes, we reviewed SBA planning documents in effect for the  hurricanes—SBA’s 2017 Disaster Preparedness and Recovery Plan and  its 2014 Disaster Playbook—as well as the targeted action plans SBA  created for each of the hurricanes and summaries of exercises SBA  conducted. We also reviewed the Office of Disaster Assistance’s after- action report following Hurricanes Harvey, Irma, and Maria; SBA’s 2017  and 2018 Staffing Strategies; models SBA used to guide its response;  and reports issued by the SBA Office of Inspector General (OIG). We  used these sources to identify challenges SBA faced planning for and  responding to the 2017 hurricanes, including those it faced responding to  Hurricane Maria in Puerto Rico and the U.S. Virgin Islands and with its  hiring.

We reviewed SBA data on hiring and compared SBA’s staffing modeling  efforts to the actual staff activated after the 2017 hurricanes. We  determined that these data were sufficiently reliable for the purposes of  discussing SBA’s staffing after the 2017 hurricanes by interviewing  knowledgeable officials about the data. We compared SBA’s planning  efforts against federal internal control standards for identifying, analyzing,  and responding to risks, and against Federal Emergency Management  Agency guidance on disaster planning. To examine SBA outreach on  disaster loans after the 2017 hurricanes, we reviewed marketing and  outreach plans from 2012 and 2018 and a sample of outreach materials  SBA used during its response to Hurricanes Harvey, Irma, and Maria. We  compared SBA’s outreach efforts against federal internal control  standards for internal communication and against key consumer  education practices.

To evaluate SBA’s loan application and review process, we reviewed  prior GAO and SBA OIG reports on SBA’s Disaster Loan Program to help  identify changes SBA made since Hurricane Katrina in 2005. We also  analyzed summary data from SBA’s Disaster Credit Management System  for applications submitted between August 31, 2017, and September 24,  2018. The August date corresponds to the date SBA received the first  applications from the 2017 hurricanes and the September date to the  one-year anniversary of Hurricane Maria, the last of the three 2017  hurricanes. SBA completed processing more than 99 percent of the  applications for each hurricane during the period covered by our data.  Because the hurricanes occurred in quick succession and SBA treated  them as one event, we compared the combined data for the 2017  hurricanes to those from Hurricane Sandy and the combined data for  Hurricanes Katrina, Rita, and Wilma, which SBA also treated as one  event. We determined these data were sufficiently reliable for describing  characteristics associated with SBA’s processing of applications by  reviewing related documentation, interviewing knowledgeable agency  officials, and reviewing related internal controls. We used the results from  our thematic qualitative analysis and interviews with SBA officials to identify challenges associated with applying for or processing applications  following the 2017 hurricanes.

To evaluate SBA’s implementation of the Express Bridge Loan Pilot  Program, we reviewed Federal Register notices and a program guide  SBA published about the program. We interviewed SBA officials from its  Office of Capital Access about their implementation of the program, and  officials from three lenders to discuss their perspectives on and  awareness of the program. We selected one lender because it had  made loans under the pilot program, another because it had begun the  most applications for the program, and the third because it was a 7(a)  lender located in a state affected by Hurricane Florence or Michael. We  chose those hurricanes because they occurred about 1 year after SBA  began its pilot (in September and October 2018, respectively), allowing  time for SBA to fully launch the pilot. We also interviewed officials from  the Florida Department of Economic Opportunity to discuss the Florida  Small Business Emergency Bridge Loan Program, which it helps  administer. We compared SBA’s plans to evaluate the Express Bridge  Loan Pilot Program against guidance for designing evaluations.

We conducted this performance audit from September 2018 to February  2020 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Appendix II: Withdrawal and Cancellation Rates for 2017 and Prior Hurricanes

This appendix presents withdrawal and cancellation rates for disaster  loan applications the Small Business Administration (SBA) accepted after  Hurricanes Harvey, Irma, and Maria (the 2017 hurricanes), after  Hurricane Sandy in 2012, and after Hurricanes Katrina, Wilma, and Rita  (the 2005 Gulf Coast hurricanes).

Withdrawal and Cancellation Rates for 2017 Hurricanes Were Lower Than for Previous Hurricanes

For the 2017 hurricanes, withdrawal rates were generally comparable for  each type of disaster loan, as shown in figure 15.

Of the disaster loan applications SBA accepted for Hurricanes Harvey,  Irma, and Maria, about 52,000 were withdrawn from consideration by  SBA or the applicant. Of these, approximately 32,000 were withdrawn by  SBA, and the rest were withdrawn at the applicant’s request. The leading  reason for an SBA withdrawal was a lack of contact with the applicant to  discuss disaster damages (inability to verify losses). Other common  SBA-initiated reasons for withdrawals were the Internal Revenue Service  having no record of the applicant filing taxes in the required time period  and an applicant’s failure to provide requested additional information. The  main reason for withdrawal by applicant was a change of plans.

Applicants who withdrew their applications or had applications withdrawn  by SBA could request that SBA reaccept their application. Nearly half (48  percent) of the approximately 52,000 withdrawn applications were  submitted for reacceptance. Of those, 67 percent were approved, 20  percent were declined, and 13 percent were withdrawn again.

As shown in figure 16, the overall withdrawal rate for the 2017 hurricanes  was lower than that for Hurricane Sandy and the combined rate for the  2005 Gulf Coast hurricanes. Across each of the disasters, home disaster  loan applications had the lowest withdrawal rates while nonprofit  applications had the highest withdrawal rates.

Among the 2017 hurricanes, Hurricane Harvey had the most cancelled  disaster loans (10,945) with an overall cancellation rate of 25 percent  (see fig. 17).

More than half (56 percent) of the cancelled loans were due to the  borrower’s decision, including receiving sufficient support from other  sources and reluctance to incur additional debt. Of the loans SBA  cancelled, the most common reasons included the borrower’s failure to  complete and return all loan closing documents and an adverse change in  the borrower’s credit or financial condition that required a referral to the  Federal Emergency Management Agency’s Individuals and Household  Program.

As shown in figure 18, the overall cancellation rate for the 2017  hurricanes was lower than that for Hurricane Sandy and the combined  rate for the 2005 Gulf Coast hurricanes.

Appendix III: Comments from the U.S. Small Business Administration

Appendix IV: GAO Contact and Acknowledgments

In addition to the contact name above, Paige Smith (Assistant Director),  Daniel Newman (Analyst in Charge), Laura Gibbons, Marshall Hamlett,  Marc Molino, Patrick Netherclift, Barbara Roesmann, Jessica Sandler,  Cynthia Saunders, and Nina Thomas-Diggs made significant  contributions to this report.

Para la versión de esta página en español, ver a GAO-20-369.

We reviewed how the Small Business Administration planned for and responded to Hurricanes Harvey, Irma, and Maria in 2017, among other things.

After the hurricanes, SBA accepted about 340,000 disaster loan applications and approved about 141,000, making more than $7 billion in loans to help business owners, homeowners, renters, and nonprofits recover. Loan processing averaged 18 days or less.

SBA’s disaster plans lack an in-depth discussion of how to deal with risks such as extended power outages that could curtail its response. We made 5 recommendations, including that SBA better document risks and how to mitigate them in its disaster plans.