COVID-19 put the SBA's failures on the national stage, but if you think the EIDL disaster was unprecedented, you haven't been paying attention. The SBA has been failing disaster victims for decades. Hurricanes, wildfires, floods, tornadoes—every time Americans need help most, the SBA finds new ways to make things worse.
The pattern is always the same: disaster strikes, the SBA promises help, applications flood in, processing grinds to a halt, legitimate victims are denied, and the agency blames everyone except itself.
- Hurricane Katrina (2005): 18+ month processing times
- Hurricane Sandy (2012): $500M in applications still pending years later
- California Wildfires (2018): 70% denial rate for legitimate claims
- Hurricane Maria (2017): Puerto Rico victims still waiting
- COVID-19 (2020): $200 billion lost to fraud
Hurricane Katrina: The Original SBA Disaster
When Katrina devastated the Gulf Coast in 2005, the SBA was supposed to be part of the solution. Instead, they became part of the problem.
Victims waited 18 months or longer for loan decisions. Applications disappeared into processing black holes. The SBA's antiquated computer systems crashed repeatedly. People lost homes, then lost businesses, then lost hope—all while the agency promised help that never came.
The GAO found that the SBA had:
- No disaster preparedness plan
- Insufficient staff to handle the volume
- IT systems incapable of processing applications
- Inconsistent eligibility determinations
- Zero accountability for failures
Sound familiar? Twenty years later, they still haven't fixed any of it.
"I applied for an SBA disaster loan three weeks after Katrina. I didn't get a decision for 14 months. By then, I'd already lost my restaurant and declared bankruptcy. The loan they finally approved? It was too late to save anything."
Hurricane Sandy: Lessons Never Learned
Seven years after Katrina exposed the SBA's failures, Hurricane Sandy hit the Northeast. The agency had plenty of time to prepare. They didn't.
Small businesses along the Jersey Shore and in New York waited months for decisions. The denial rate was suspiciously high. Business owners who had never missed a payment in their lives were told their credit wasn't good enough—even though their credit was destroyed by the same disaster they were applying for help with.
The SBA denied applications from businesses that were literally underwater, claiming they couldn't verify economic injury. What more verification do you need than photos of flooded storefronts?
Years after Sandy, the OIG found that hundreds of millions in applications were still unprocessed or improperly denied. The agency's response? Hire a few more people and promise to do better next time.
The Wildfire Failures
California's increasingly severe wildfire seasons have created a new category of SBA disaster victims. Paradise, Santa Rosa, Napa Valley—entire communities burned to the ground. The SBA's response? Bureaucratic torture.
Wildfire victims face unique challenges the SBA refuses to accommodate:
- Documentation destroyed: When your entire business burns down, you don't have tax records. The SBA still demands them.
- Property valuation disputes: The SBA often disagrees with property values, leading to lower loan amounts than needed for rebuilding.
- Insurance coordination: The SBA requires you to exhaust insurance first, but insurance companies take years to settle. You can't rebuild without money.
- Timeline mismatches: By the time the SBA approves a loan, rebuilding costs have increased 30-40%.
"The Camp Fire took everything—my auto shop, my house, 30 years of records. The SBA wanted documentation I didn't have anymore. I spent months recreating everything. They still denied me because my 'projected revenue didn't justify the loan amount.' My revenue projection was based on not having a building. Of course it was lower."
Hurricane Maria: The Forgotten Disaster
Puerto Rico was devastated by Hurricane Maria in 2017. The SBA's response was, charitably, inadequate.
Puerto Rican business owners faced:
- Applications only available in English initially
- Internet and phone outages making it impossible to apply
- Documentation requirements impossible to meet without power
- Processing times measured in years, not months
- Denial rates significantly higher than mainland disasters
Five years after Maria, some applications were still pending. Businesses that could have been saved with timely assistance closed permanently. The SBA treated an American territory like an afterthought.
The Pattern That Never Changes
After every disaster, the same script plays out:
Phase 1: The Promise
SBA leadership holds press conferences. They promise swift assistance. Politicians praise the government response. Hope exists.
Phase 2: The Flood
Applications overwhelm the system. Staff can't keep up. Technology fails. Backlogs build.
Phase 3: The Denial
Denial letters go out. Often for reasons that make no sense. Appeals clog the system further.
Phase 4: The Forgotten
Media attention moves on. Victims are left navigating bureaucracy alone. Years pass. Businesses close.
Phase 5: The Report
GAO or OIG releases damning findings. Congress holds hearings. SBA promises reforms. Nothing changes.
Phase 6: The Next Disaster
Repeat from Phase 1.
Why It Never Gets Fixed
The SBA's disaster loan program fails for the same reasons every time:
Chronic Understaffing: The SBA maintains a skeleton crew between disasters, then scrambles to hire temporary workers who have no idea what they're doing.
Ancient Technology: Their systems date to the Reagan administration. They've spent hundreds of millions on "modernization" that never materializes.
Rigid Requirements: Documentation requirements designed for normal business lending don't make sense when businesses are destroyed by disasters.
No Accountability: Nobody gets fired. Nobody faces consequences. Leadership rotates and blame gets diffused.
Structural Incentives: The SBA gets credit for offering disaster loans. They don't get penalized for denying them or processing them slowly.
Every disaster exposes the same failures. Every post-disaster investigation reaches the same conclusions. Every reform effort produces the same minimal results. The SBA is institutionally incapable of helping disaster victims at scale.
The COVID Disaster Was Predictable
When COVID hit, anyone familiar with the SBA's disaster loan history knew exactly what would happen. The only surprise was the scale of the failure.
The agency that couldn't process Hurricane Katrina applications in under 18 months was suddenly responsible for the largest economic disaster in American history. They responded by removing all fraud controls and hoping for the best.
They didn't learn from Katrina. They didn't learn from Sandy. They didn't learn from Maria or the wildfires. They just scaled up their incompetence to match the scale of the disaster.
What Disaster Victims Should Know
If you're dealing with an SBA disaster loan—current or future—here's the reality:
- Document obsessively. The SBA will lose your paperwork. Keep copies of everything.
- Expect delays. Whatever timeline they give you, triple it.
- Prepare for denial. Have a plan B that doesn't depend on SBA funding.
- Get Congressional help early. Don't wait until you're desperate.
- Consider alternatives. Private financing, grants, insurance—exhaust everything before counting on the SBA.
The SBA disaster loan program sounds like a lifeline. In practice, it's a lottery where most tickets are losers, and even winners wait years to collect.
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