Auditing the Storm: A Look At Low-Interest Disaster Loans
After a federally-declared disaster, the U.S. Small Business Administration issues low-interest loans to help homeowners and businesses recover. The agency disbursed over 20-million dollars to Oklahomans following last year’s severe weather outbreak in the central part of the state.
As part of the series between The Oklahoma Tornado Project and Oklahoma Watch tracking federal aid, Kate Carlton Greer looks into exactly what it takes to get one of those loans.
On any given weekday, semi trucks and cars whiz past the Bricktown Hotel and Convention Center, two miles east of Downtown Oklahoma City. On May 31, 2013, though, the roads were much emptier.
Most of the severe weather that day occurred out in El Reno and then spawned storms through South Oklahoma City, Moore and Norman. Several businesses near the Bricktown Hotel and Convention Center escaped seemingly unscathed, but owner Tom Seabrooke says damage to his property was significant.
“The roof was torn off,” Seabrooke says, “so a bunch of rooms got soaking wet. There was just a lot of damage… hail damage on the roof.”
Seabrooke got less from his insurance company than he was hoping so he applied to the Small Business Administration’s disaster loan program. The money comes from the U.S. Treasury and consists of low-interest loans to help restore properties to their pre-disaster conditions.
Last November, his business was approved for a loan of nearly three-quarters of a million dollars, the largest, single disaster loan issued in the state.
SBA spokesman Rick Jenkins says there are three main questions the agency asks before approving disaster loans.
“Is the damage eligible?” Jenkins asks. “Does the applicant have the ability to repay a loan because they are low-interest loans? And does the applicant have a credit history that shows that have a willingness to repay their obligations? In other words, do they have a reasonable credit history that shows they pay their bills on time?”
During the next step of the process, a field inspector verifies the damage at each property site.
“They go and walk through the property with the applicant,” Jenins says, “whether it's a homeowner or a business owner or a renter and with that individual, we find out what it is that they've lost.”
The application then goes to a loan officer – someone who looks into an applicant’s credit history. Seabrooke has had financial trouble in the past and was behind on the hotel’s mortgage when the storm hit, but Jenkins says the agency tries to be flexible here.
“We try to make every loan that we can make,” Jenkins says, “but we still have a responsibility to the taxpayers to make sure that disaster loans can and will be repaid.”
There were nearly 2,500 SBA applications submitted in Oklahoma after the 2013 storms, but less than 40 percent were approved. Most borrowers deemed to be eligible are offered an interest rate below market value. Homeowners generally receive a rate under 2 percent. For businesses, it’s 4 percent. Some applicants may receive a higher rate though. It all boils down to one thing.
“It's what we call credit-elsewhere,” Jenkins says. “For those who are well off and who can fund their recovery without the need of federal disaster assistance, they can still get a loan at the market rate.”
Seabrooke’s financial situation guaranteed him a lower rate. But it’s a lengthy process for the SBA to reimburse him for repair costs, and he’s only spent a fraction of his loan so far.
Even with the loan, he says the future of his business look bleak. But without the help, he says his hotel would’ve definitely closed.