Two thirds of low interest emergency SBA loans denied
In some areas of the country, low interest Small Business Administration loans that have been heavily pushed are not proving to help. This cash advance product has been promised to homeowners and business owners to help rebuild after emergencies. Offered at 4 to 6 percent interest, the SBA offers this supposedly quick loan solution to victims of floods, fires and the Gulf oil spill.
The purpose of SBA loans
In “everyday use,” SBA loans are intended to help small businesses build and develop. The SBA is actually a loan guarantee entity. It does not offer loans online but instead works with banks to provide loans. Disaster loans, also administered through the SBA, are given to both individuals and businesses who have been affected by disasters. Like all loans, SBA loans consider the credit of borrowers and their ability to repay. Unlike other loans, SBA loans are intended only for individuals who “are having difficulty accessing other credit.”
Denial rates for emergency loans
SBA emergency loans are often initiated or offered very soon after an emergency hits. In Massachusetts, for example, the SBA has announced that loans of up to $200,000 are available to homeowners to rebuild after floods. Businesses will be able to take out loans of up to $2 million, with interest rates as low as 2.75 percent. However, in Louisiana as many as 70 percent of SBA loan applications are being denied until BP pays out damage payments. In Tennessee, about 66 percent of flood emergency loans are being denied.
Appealing loan denial decisions
The incredibly high rate of denials for emergency victims who need a loan is causing a lot of frustration among disaster victims. SBA loan programs are intended to help, but they cannot help if most people cannot access the credit. The SBA does have an appeal process that allows applicants to provide new information, show proof of altered circumstances or correct information in the original applications. In the end, though, these loans usually end up going to individuals who show proof they can repay them — and that can be very tough to show after a disaster and in the tough economy.