GAO-21-581R: Small Business Administration: Physical Disaster Loan Performance Before and After Changes in Statutory Collateral Requirements

Summary

GAO report GAO-21-581R, a letter dated August 27, 2021 to the Senate Committee on Small Business and Entrepreneurship (Chairman Benjamin L. Cardin, Ranking Member Rand Paul) and the House Committee on Small Business (Chairwoman Nydia Velázquez, Ranking Member Blaine Luetkemeyer). It formally transmits briefing slides, required by the Rebuilding Small Businesses After Disasters Act, comparing the performance of SBA physical disaster loans made before and after the RISE After Disaster Act of 2015. The letter states that the 2015 act, enacted on November 25, 2015, raised the limit for unsecured loans under SBA disaster declarations from $14,000 to $25,000. GAO compared loans from January 1, 2000, to September 30, 2020, and states that SBA had no comments on the report.

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“GAO-21-581R: Small Business Administration: Physical Disaster Loan Performance Before and After Changes in Statutory Collateral Requirements.” Original at www.gao.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/gao-21-581r-small-business-administration-physical-disaster-loan-perfo-8ad32890a1/, SHA-256 368dfb120c07232592fe77a86cf1c458fefbf5c255c0b8f46cf882b2cfee6e7f.

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441 G St. N.W.
Washington, DC 20548

August 27, 2021

The Honorable Benjamin L. Cardin
Chairman
The Honorable Rand Paul
Ranking Member
Committee on Small Business and Entrepreneurship
United States Senate

The Honorable Nydia Velázquez
Chairwoman
The Honorable Blaine Luetkemeyer
Ranking Member
Committee on Small Business
House of Representatives

Small Business Administration: Physical Disaster Loan Performance Before and After
Changes in Statutory Collateral Requirements

This letter formally transmits the attached briefing slides associated with the mandate included
in the Rebuilding Small Businesses After Disasters Act (see enclosure), which required GAO
to submit a report comparing the performance of physical disaster loans that the Small
Business Administration (SBA) made before and after the Recovery Improvements for
Small Entities (RISE) After Disaster Act of 2015.

SBA provides physical disaster loans to rebuild and replace uninsured or underinsured property
damaged in a declared disaster area. 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 can issue a disaster declaration for an event that does not rise to the
level of a presidential disaster declaration in response to a timely request by a state governor.
Physical disaster loans are available to homeowners, renters, businesses of all sizes, and
private nonprofit organizations. The RISE After Disaster Act of 2015 was enacted on November
25, 2015, and it amended the collateral requirements for physical disaster loans by raising the
limit for unsecured loans made under SBA disaster declarations from $14,000 to $25,000.

On June 24 and 25, we provided briefings to the staffs of your committees that compared the
performance of physical disaster loans issued under SBA disaster declarations before and after
the RISE After Disaster Act of 2015 from January 1, 2000, to September 30, 2020. To provide
this comparison, we (1) obtained data from SBA’s Office of Disaster Assistance and Office of
Capital Access for loans made under SBA disaster declarations from January 1, 2000, to
September 30, 2020; (2) reviewed relevant federal laws and regulations and SBA policies; (3)
interviewed SBA officials; and (4) performed various analytical techniques to compare the
performance of loans that were approved under SBA disaster declarations before the RISE
After Disaster Act of 2015 to the performance of those that were approved after the act.

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The slides in the enclosure have been updated since we briefed your staffs in June 2021.
Specifically, the slides were updated in August 2021 for the dates we conducted our audit and
for copyediting.

We conducted this performance audit from February 2020 to August 2021 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.

Agency Comments

We provided a draft of this report to SBA for comment. SBA had no comments on this report.

------------------

We are sending copies of this report to the appropriate congressional committees, the
Administrator of the Small Business Administration, and other interested parties. In addition, the
report is available at no charge on our website at https://www.gao.gov.

If you or your staffs have any questions concerning this report, please contact me at (202) 512-
9377 or clarkce@gao.gov. Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. GAO staff who made key contributions to
this report were Joshua Marcus (Assistant Director), Ryan Guthrie (Auditor in Charge), Michael
Chacon, and Melinda Cordero. Also contributing to the report were Princess Adrineda, Breanne
Cave, Justin Fisher, Maxine Hattery, John Karikari, Jason Kelly, Jason Kirwan, and Lisa Motley.

Cheryl E. Clark
Director, Financial Management and Assurance

Enclosure

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Enclosure I: Briefings to Senate Committee on Small Business and Entrepreneurship on
June 24, 2021, and to House Committee on Small Business on June 25, 2021

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