The Small Business Administration’s (SBA) Office of Disaster Assistance provided 63 loans to Fallbrook businesses and residents following last October’s Rice Fire. The loans totaled $7,552,700.
The SBA received a total of 189 applications from Fallbrook (including Rainbow) following the declaration of disaster. The applications consisted of 146 residential assistance requests and 43 quests for business loans.
The SBA approved 53 residential assistance loans totaling $7,056,200 and 10 business requests for a cumulative $496,500.
One business application from Bonsall was received but the loan was not granted. No requests for SBA assistance were received from Pala.
In the five-county disaster area the SBA received 2,451 requests for assistance and approved 784 loans totaling $92,762,600.
The ratio of submitted applications to approved loans does not translate into a high rejection rate.
Businesses, homeowners and renters who were impacted by the fires were advised to apply immediately rather than wait for a possible insurance settlement. Many applicants settled with their insurance companies prior to the completion of the SBA loan process and thus withdrew their requests for SBA loans.
Additionally, some loan requests were more appropriately handled by the Federal Emergency Management Agency (FEMA) or by the Farm Service Agency, and applicants were referred to those agencies.
“Disasters have a spectrum of victims,” said Ron Foss, a communications specialist for the Office of Disaster Assistance field office in Sacramento, which serves the western portion of the United States.
The Small Business Administration has two divisions.
The day-to-day SBA function is to provide loans to start or expand businesses; the SBA guarantees a percentage of the loan which is to be obtained from a local commercial lender.
The SBA also has an Office of Disaster Assistance in which loans are provided directly from US Treasury appropriations. The rates for the disaster assistance loans are set by market rates and the vast majority of the loans are provided to homeowners and renters rather than to businesses.
“Our role is to try to find a way to fund the long-term recovery,” Foss said.
In a Presidentially declared disaster the SBA often refers applicants it cannot help to FEMA.
The SBA reviews the applicants’ pre-disaster financial situation, and if it does not make sense to restore the home or business to the pre-disaster condition FEMA can provide a “fresh start” loan.
Approximately 60 percent of disaster victims who register with FEMA – mostly those who are underinsured or uninsured – are referred to the SBA. “We are really for people who can’t command the most favorable rates in the marketplace,” Foss said.
Although the SBA is a subprime lender, it still has standards.
“We cannot be an equity-based lender,” Foss said. “We must look at a person’s income and their debts and be satisfied that they have the ability to repay the loan.”
The SBA may reject a loan if the applicant is overextended in other loans, has bad credit or cannot repay the loan. Those rejected applicants are referred to FEMA.
In some instances the SBA will reject a loan and not refer an applicant, most notably for defaulting on past Federal obligations such as student loans, tax liens or past SBA loans.
FEMA is also not involved if the declaration of disaster is an agency declaration rather than a Presidential declaration.
“If we can’t help somebody, there really isn’t any FEMA for them to fall back on,” Foss said. “In that case the state has to pick it up.”
The Farm Service Agency (FSA) is the Federal agency whose emergency loans are intended to help farmers recover from losses due to natural disasters (if heavy winds caused the spread of fires, they are considered to be natural disasters even if the fires were caused by arson or negligence).
FSA emergency loan funds may be used to restore or replace property, pay all or part of production costs associated with the disaster year, pay essential family living expenses, reorganize the farming operation and refinance certain debts.
Any crop losses must be handled by the FSA rather than the SBA.
“The only thing we can do with a farm or a ranch is help them out with a ranch house, the driveway leading up to it and personal property outside,” Foss said.
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