Introduction

It wasn’t the first time Josefa Mendoza’s home flooded, but it was the worst. When the 47-year-old event coordinator fled her South Texas property with her children and grandchildren in June 2018 during a severe storm, the water inside had risen to waist level.



She didn’t qualify for aid from the Federal Emergency Management Agency. So, like more than a million Americans since 2001, she applied for a federal disaster assistance loan from the Small Business Administration.



After a storm flooded Josefa Mendoza’s South Texas home, she was turned down for FEMA aid and sought help from the SBA. (Photo courtesy of Josefa Mendoza)

But most applicants don’t get one.



The low-interest loans are a major source of federal disaster assistance available to homeowners and renters as well as small businesses — if they’re eligible. The SBA has approved about 609,000 such loans from fiscal years 2001 to 2018 but denied roughly 860,000. That doesn’t include loan applications that were withdrawn, tens of thousands of which were closed by the SBA rather than at the request of the applicant.



As climate change increases the risk of more and worse disasters, the Center for Public Integrity wanted to find out what happens after these efforts to get aid. We acquired a dataset through a Freedom of Information Act request that details every approved, withdrawn and denied SBA disaster-loan application from the past 18 years. It provides the first public look at loan trends by disaster along with the reasons the SBA gave when it turned applicants down. We’re making the data available here.



“People hear a lot about FEMA. But the SBA is the primary source of homeowner assistance following most catastrophic disasters,” Kathleen Bergin, a lawyer who teaches disaster law at Cornell Law School as an adjunct professor, wrote in an email. “While FEMA grants are capped around $33,000, qualified homeowners could access more than $200,000 in loan assistance from the SBA.”



The most common reasons for rejection — not surprisingly — are financial. Ninety percent of SBA disaster loan denials since 2001 have been for “unsatisfactory credit history,” “lack of repayment ability” or both.



Thousands of applicants, though, faced more unusual reasons for denial. More than 4,500 applicants since 2001, for instance, have been denied “due to character reasons.” The SBA uses government records and information from an applicant’s statement of personal history, among other sources, to “consider behavior, candor, integrity, and disposition of criminal actions.”



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Last year was the biggest for the SBA’s disaster-loan program since the fiscal year that began about a month after Hurricane Katrina — still the most expensive U.S. storm on record — devastated New Orleans in late August 2005. In 2018, the agency both approved the most loans (110,000) and declined the most loans (117,000) since 2006. Grand total of SBA loans approved for recent Hurricanes Harvey, Irma, and Maria as of August 2019: more than $6.8 billion.



That’s likely to grow over time. A climate adaptation plan the SBA produced in 2014, which focuses in part on its Office of Disaster Assistance, warned that “increased numbers of severe weather events may increase demand for ODA’s resources.”



Yu Xiao, an associate professor of urban studies and planning at Portland State University, said one challenge with a program like SBA’s is that it’s not always a good idea to rebuild after a disaster — as much as applicants may want to stay put.



“If you were in their shoes, you would like to have some help from the federal government,” Xiao said. But rebuilding rather than relocating can sometimes lead to more damage in the future, she said. “It’s kind of subsidizing the households and the businesses in that disaster zone.”

