Small Business Administration: Response to September 11 Victims and Performance Measures for Disaster Lending
Published: 2003-01-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The September 11 terrorist attacks and subsequent federal action had a substantial impact on businesses in both the declared disaster areas and around the nation. In the aftermath of the attacks, the Congress, among other actions, appropriated emergency supplemental funds to the Small Business Administration (SBA) to aid September 11 victims. Given the uniqueness of this disaster and changes in the program, GAO analyzed SBA's lending to September 11 victims, as well as the loan program's performance goals and measures.
section_title: What GAO Found
paragraphs: As part of its response to the September 11 terrorist attacks, SBA modified several aspects of its Disaster Loan Program and its processes. For example, SBA increased the maximum loan amounts available and decreased the amount of documentation required for certain loans. By the end of fiscal year 2002, approximately $1 billion in loans had been approved for victims of the attacks. On average, SBA processed business loans to September 11 victims in an average 13 days compared with 16 days for business loans to other disaster victims in fiscal year 2001. Like other federal programs, SBA has developed a multiyear strategic goal for the Disaster Loan Program--helping families and businesses recover from disasters--and has developed annual goals and measures to assess its yearly progress toward attaining their strategic goals. GAO reviewed the measures and found that they have numerous limitations. For instance, these measures do not capture the notable progress the program has made in improving its loan processing--progress that ultimately affects disaster loan applicants and borrowers. The inadequacies of SBA's measures are especially evident when considered in light of the agency's performance in responding to the September 11 terrorist attacks. GAO attributes some of these limitations to the nature of the measures SBA uses to describe the performance of the Disaster Loan Program, while others can be attributed to the description of the program's performance. Without better performance measures and plans, the Congress does not have an accurate description of SBA's annual progress toward helping Americans recover from disasters.

section_title: Letter
paragraphs: An important part of the mission of the Small Business Administration  (SBA) is to make loans to help individuals and small businesses recover  from disasters. In fiscal year 2002, SBA approved about 22,000 disaster  assistance loans totaling $1.3 billion through its Disaster Loan Program.  Approximately $1 billion of that total was for loans SBA made in response  to the September 11 terrorist attacks. SBA reports on its performance in  fulfilling its mission, including the performance of its Disaster Loan  Program, through annual performance reports, which measure  performance toward achieving goals SBA sets for its various programs. The  documents and measures SBA includes can help the Congress monitor and  direct SBA’s performance in responding to disasters.
The needs of small businesses and SBA’s response in the wake of the  September 11 disaster were the subject of hearings by your committee. At  your request, we previously provided your committee with a report on  overall assistance to small businesses in the Lower Manhattan area after  September 11. Subsequently, you asked us to provide you with information  specifically on disaster assistance SBA provided after the terrorist attacks.  This report responds to your request that we review and analyze (1) SBA’s  response to the September 11 terrorist attacks and (2) SBA’s performance  plans and measures for its Disaster Loan Program.
In conducting our review, we obtained and analyzed SBA’s data on disaster  assistance loans made through September 30, 2002, documents related to  disaster lending policy and procedures, and documents related to Disaster  Loan Program planning and performance measurement. We also  interviewed SBA officials from headquarters and each of the four SBA  Disaster Area Offices (DAO). See appendix I for a detailed description of  our scope and methodology. We conducted our work between June 2002  and January 2003 in accordance with generally accepted government  auditing standards.
subsections: section_title: Background
paragraphs: When disasters such as floods, tornadoes, or earthquakes strike, federal,  state, and local government agencies coordinate to provide assistance to  disaster victims. SBA, through its Disaster Loan Program, is part of this  concerted effort. In the event of a disaster, SBA, the Federal Emergency  Management Agency (FEMA), and other government agencies join together  to conduct a preliminary damage assessment to estimate the physical  damage of the disaster on the affected region. Among other criteria, if there  is extensive physical damage, the governor of the affected state can  request that the U.S. President declare that a major disaster or emergency  situation exists, in which case federal assistance is made available to  disaster victims, and FEMA takes the lead in coordinating response and  recovery efforts. The presidential disaster declaration specifies the area  that is eligible for federal assistance, referred to as the “immediate”  disaster area in this report. In addition, SBA provides certain loans to  disaster victims in the counties adjacent to the immediate area; we refer to  these counties as the “contiguous” disaster area. In the immediate area of  the disaster, homeowners, renters, nonprofit organizations, and nonfarm  businesses of all sizes are eligible to apply for SBA loans for the repair and  replacement of uninsured physically damaged property. In both the  immediate and contiguous areas of the disaster, small businesses with no  credit available elsewhere are eligible to apply for loans to cover economic  losses.
Once a declaration has been made, officials from one of SBA’s four Disaster  Area Offices—located in California, Georgia, New York, and Texas—arrive  at the disaster site to begin making preparations to serve disaster victims.  According to SBA’s procedures, disaster loan officials secure office space— sometimes in FEMA-operated Disaster Recovery Centers for presidential  declarations—and begin meeting with victims to explain the disaster loan  process, issue loan applications, and, if requested, assist victims in  completing applications. Appendix II summarizes the series of steps  involved in accepting, reviewing, approving or declining, and disbursing  disaster loans.
SBA provides loans to households and businesses without credit available  elsewhere at a maximum rate of 4 percent and up to a 30-year term. For  households or businesses with credit available elsewhere, SBA provides  loans at a maximum rate of 8 percent and, for businesses, up to a 3-year  term. Business loans are available up to $1.5 million, loans for physical  damage to homes are available up to $200,000, and loans for the repair or  replacement of personal property are available up to $40,000.
Like other federal programs, the performance of SBA’s Disaster Loan  Program is reported in accordance with the Government Performance and  Results Act (GPRA) of 1993. The purpose of GPRA is to shift the focus of  federal management and decisionmaking from a preoccupation with the  number of tasks completed or services provided to the real differences the  tasks or services make to the nation or individual taxpayer. GPRA requires  agencies to set multiyear strategic goals in their strategic plans and  corresponding annual goals in their performance plans, measure  performance toward the achievement of those goals, and report on their  progress in their annual performance reports.
The strategic plans, which cover a period of at least 5 years, are the starting  point in setting annual goals for programs and in measuring progress  toward achieving those goals. Final annual performance plans, first  required for fiscal year 1999, are sent to the Congress soon after the  transmittal of the President’s budget, and provide a direct linkage between  an agency’s longer-term goals and mission and day-to-day activities.  Related annual performance reports describe the degree to which  performance goals were met. According to Office of Management and  Budget (OMB) guidance, strategic goals, and performance goals in annual  plans may be identical. According to GPRA, if a performance goal becomes  impractical or infeasible to achieve, the agency is to explain in the  performance reports why that is the case and what legislative, regulatory,  or other actions are needed to accomplish the goal, or whether the goal  ought to be modified or discontinued. Table 1 lists GPRA requirements for  each of these documents.
Both the strategic plan and the performance plan describe the relationship  between a program’s goals, outputs, and outcomes. As noted previously,  according to OMB guidance, outputs are the level of activity that can be  produced or provided over a given period of time or by a specific date.  Outcomes are the intended results, effects, or consequences that occur  from carrying out program activities. In the case of the Disaster Loan  Program, SBA has described the outputs as disaster loans to individuals  and businesses, while program outcomes include restored housing and  increased survival of businesses. OMB guidance allows agencies to divide  outcomes into two categories: end and intermediate outcomes. End  outcomes are the results of programs and activities compared to their  intended purpose. Intermediate outcomes show progress toward achieving  end outcomes. These outcomes are often required for programs when end  outcomes are not immediately clear, easily delivered, or quickly achieved.
OMB guidance indicates that performance plans should include measures  of outcomes when the outcomes can be achieved during the fiscal year  covered by the plan. Otherwise, the guidance recognizes that the  performance plans will predominantly include measures of outputs rather  than outcomes. In addition to OMB guidance, SBA program managers can  obtain guidance in the preparation of performance goals and measures  from GAO, and more recently, from an SBA primer.
section_title: SBA and the Congress Responded to Small Businesses Affected by the September 11 Attacks
paragraphs: In the weeks and months following the terrorist attacks, SBA and the  Congress faced the challenge of responding to the lingering effects of the  attacks and subsequent federal actions on small businesses throughout the  country. SBA responded first in Lower Manhattan, meeting with potential  borrowers within 2 days of the attacks. Its response expanded as areas  near the site of the attack on the Pentagon and more of the New York City  area were designated disaster areas. Ultimately, SBA helped small  businesses around the country with disaster lending. After small  businesses raised concerns about the Disaster Loan Program’s ability to  help businesses recover from the attacks, SBA and the Congress modified  the program, raising loan limits and deferring interest payments, expanding  eligibility for economic injury loans to small businesses around the country,  modifying its size standards for small businesses, expediting its loan  approval and disbursement processes, and providing translators for loan  applicants. By the end of fiscal year 2002, SBA approved more than 9,700  loans for a total of $966 million to assist in the recovery efforts of  September 11 victims nationwide.
subsections: section_title: SBA’s Response Covered Small Businesses Nationwide
paragraphs: SBA’s response to the terrorist attacks began September 11, when SBA  officials arrived in Lower Manhattan to begin coordinating the agency’s  efforts. The President declared the attack on the World Trade Center a  major disaster area on September 11. Unlike most of the disasters SBA had  been involved in, the economic effects of the terrorist attacks were felt  throughout the country. SBA’s initial disaster area in New York City and  New Jersey eventually expanded to include additional counties in New  York, New Jersey, Connecticut, Massachusetts, and Pennsylvania. On  September 21, the President declared the Pentagon attack as a major  disaster, establishing counties Maryland and Virginia and parts of the  District of Columbia as disaster areas. As the United States began to deploy  military personnel in response to the terrorist attacks, small businesses  nationwide affected by the loss of employees called up as military  reservists were eligible to apply for a disaster loan under the Military  Reservist Economic Injury Disaster Loan (EIDL) program. As discussed  later in this report, small businesses across the nation that were adversely  affected by the lingering effects of the attacks and subsequent government  action, such as airport closings and the precipitous drop in tourism, were  also eligible to receive disaster loans under SBA’s Expanded EIDL program.  In essence, the entire country was deemed a disaster area.
As shown in figure 1, more than half the loans went to small businesses  outside the area of the attack sites in New York City and at the Pentagon,  with businesses in Florida and California receiving the second and third  largest share of loans. In general, businesses beyond the immediate sites of  the attacks received slightly more than those close by, in part because these  businesses did not have the additional resources available to them that  were available in New York City. As shown in figure 2, the loans were  spread among industries, with no single type of business accounting for  most of the funds. The manufacturing sector received the largest amount of  funds. Other major industries receiving the most loan funds were  professional, scientific, and technical services; transportation and  warehousing; wholesale trade; and accommodation and food services.
By the end of fiscal year 2002, SBA approved more than 9,700 home and  business loans totaling $966 million for victims of the September 11  attacks. The agency expects to disburse $924 million—or 96 percent of the  amount approved—due to loan increases, decreases, and cancellations.  Individual loan disbursement amounts range from $300 to $1.5 million.  Eleven percent of September 11 loan disbursements were for $50,000; the  most frequently disbursed amount. Appendix IV presents more details on  SBA’s September 11 disaster lending.
section_title: SBA and the Congress Modified the Disaster Loan Program in Response to Complaints from Small Businesses
paragraphs: In the weeks and months following the terrorist attacks, small business  owners complained to the Congress about SBA’s Disaster Loan Program.  Small business owners’ complaints, which SBA officials regarded as  valuable feedback, involved issues such as: (1) the effect of the attacks on  small businesses nationwide, (2) SBA’s communication with applicants  with low English proficiency, (3) size standards for small businesses, (4)  the loan underwriting criteria, and (5) the time required to receive loan  approval. These complaints prompted SBA and the Congress to make  several modifications to the Disaster Loan Program for September 11  victims, which we discuss in the following sections. Figure 3 provides a  timeline of those changes; see appendix III for a summary of regulatory and  statutory changes.
Small businesses complained that eligibility for SBA loans was limited to  firms located within the declared disaster areas, yet the September 11  terrorist attacks had caused economic injury to small businesses  nationwide. Small business owners from across the nation, representing  small airports as well as aircraft maintenance, travel, and tourism firms,  reported losses in revenue as a result of the attacks, which forced them to  furlough and/or terminate numerous employees. These small businesses  identified SBA as a potential source of assistance to help them recover  from the economic injury caused by the attacks.
In response to these concerns, in October 2001, SBA issued regulations to  make economic injury disaster loans available to small businesses  nationwide, an unprecedented change to the Disaster Loan Program,  according to SBA officials. SBA’s Expanded EIDL program enabled  businesses outside the declared disaster areas to apply for loans to meet  ordinary and necessary operating expenses that they were unable to meet,  due to the attacks or related action taken by the federal government  between September 11 and October 22, 2001.
Small businesses in New York City also complained that the application  process was particularly confusing and time-consuming for applicants with  low English proficiency. To address these concerns, SBA printed  informational packets in other languages, such as Spanish and Chinese, and  also provided multilingual staff on-site who could speak Mandarin Chinese,  Croatian, Arabic, and Spanish and was prepared to send employees with  additional language capabilities to New York City.
Small businesses, such as travel agencies, also argued that existing size  standards—guidelines used to determine whether a firm was a small  business on the basis of its annual revenue or number of employees—were  overly restrictive. In February 2002, SBA modified the size standards for all  September 11 loan applicants, allowing them to take advantage of recent  inflation-based adjustments. In addition, in March 2002, SBA increased  the threshold specifically for travel agencies adversely affected by the  attacks from $1 million to $3 million annual revenues. In July 2002, SBA  began to apply this increased size standard to all travel agencies, not just  those affected by the terrorist attacks. In commenting on a draft of this  report, SBA officials noted that the agency planned to increase the size standard  for travel agencies generally, but applied that change sooner for travel agencies  affected by the attacks.
Small businesses affected by the terrorist attacks also complained that  SBA’s underwriting criteria were too restrictive. For example, two small  business owners objected to SBA’s requirement for collateral for their  loans. They testified that SBA withdrew their applications because they  would not use their homes as collateral. They argued that it was too risky  to use their homes as collateral, especially since the survival of their  businesses was uncertain. A New York Small Business Development  Center official also questioned the appropriateness of SBA’s disaster loan  underwriting criteria. He said that SBA should account for the location of  the businesses affected by the attacks—New York City—where some  factors relating to the high cost of doing business fall outside the norms.
While SBA approved millions of dollars in loans, 52 percent of the loan  applications were withdrawn or declined. SBA officials said that the agency  makes every effort to approve each application by applying more lenient  credit standards than private lenders. However, the officials said that they  adhered to their credit standards to minimize losses and program costs.  SBA data indicate that the 52-percent rate for withdrawing and declining  September 11-related loan applications was not out of line when compared  with other disasters, or with private lenders. By comparison, one bank in  New York City reported a 42-percent decline rate for September 11-related  loans, while another bank reported an 80-percent decline rate. The primary  reasons SBA identified for withdrawing September 11 loan applications  was that no Internal Revenue Service (IRS) record, which could provide  independent documentation of the applicants’ income, was found, and the  applicant failed to furnish additional information requested by SBA.  According to SBA officials, the most common reasons for declining  September 11 loan applications were the applicant’s inability to repay the  loan and unsatisfactory credit. According to SBA, these are also the  primary reasons that nearly two-thirds of all SBA disaster loan applications  in fiscal year 2001 were withdrawn or declined by SBA.
Applicants complained that the elapsed time between submitting an  application and loan approval was too long. SBA responded to these  complaints by implementing procedures in October 2001 to expedite two  stages of the process - loan application processing and disbursement of  loan funds. To expedite loan processing, loan officers calculated economic  injury loan amounts based on the applicant’s annual sales and gross  margin, instead of conducting a more extensive needs analysis. As of the  end of fiscal year 2002, on average,SBA processed September 11 business  loans in 13 days, compared with 16 days for disaster assistance business  loans processed in fiscal year 20. To expedite disbursement of funds to  September 11 victims in the World Trade Center and Pentagon disaster  areas, SBA decreased the amount of documentation needed to disburse up  to $50,000. Last, the Niagara Falls DAO made extensive use of printing  selected loan documents in the field, enabling field staff to schedule loan  closings within 1 or 2 days of the loan approval. SBA made initial  September 11 loan disbursements within about 2 days of receipt of closing  documents, compared with 3 days for initial disbursements for other  disaster assistance loans, according to agency officials. See appendix II for  a summary of the steps in processing SBA disaster loans.
Despite SBA’s efforts to be responsive to the needs of small businesses  affected by the terrorist attacks, business owners testified that SBA’s  existing disaster program did not have the ability to provide adequate loans  to small businesses within the declared disaster areas. In January 2002, the  Congress enacted supplemental appropriations to SBA for $150 million and  made several changes in the disaster loan program specifically for small  businesses affected by the September 11 attacks. The changes included  raising the maximum loan amount from $1.5 million to $10 million and  deferring payments and interest accrual for 2 years.
The Emergency Supplemental Act of 2002 also created the Supplemental  Terrorist Activity Relief (STAR) Program that provided assistance to small  businesses affected by the terrorist attacks through the 7(a) loan guaranty  program, which is not part of the Disaster Loan Program. The 7(a) program  is intended to serve small business borrowers who cannot otherwise obtain  financing under reasonable terms and conditions from the private sector.  Under this program, private-sector lenders provide loans to small  businesses, which are guaranteed by SBA. Under the STAR program, SBA  reduced the on-going fee charged to lenders on new 7(a) loans from 0.50  percent of the outstanding balance of the guaranteed portion of the loan to  0.25 percent. Although the fee reduction for lenders is the key feature of the  STAR program, SBA officials anticipate that by making 7(a) loans more  cost-effective for lenders, lenders will, in turn, make more small business  loans and share the cost savings with their borrowers. As of the end of  fiscal year 2002, SBA guaranteed about 4,700 STAR loans for $1.8 billion.  (See app. III for a comprehensive list of modifications made to SBA’s  Disaster Loan Program for September 11 victims.)
SBA officials believed that many of the complaints about the disaster  program resulted from the mismatch between victims’ expectations of  SBA’s disaster program and the nature of the program. For example, when  some victims were told that they could receive “assistance” from SBA, they  assumed that the assistance would be in the form of grants instead of loans.  SBA officials noted that the media usually does not draw distinctions among  FEMA grants, SBA loans, and other forms of assistance available. SBA officials  told us that they tried to minimize the public confusion about the nature of  the assistance available from SBA by working closely with the media and  public officials so that disaster victims would receive accurate information  about SBA assistance.
section_title: Disaster Loan Program Performance Measures and Plans Have Limitations
paragraphs: As stated earlier, the strategic plan describes the multiyear strategic goals.  The performance plans describe the corresponding annual performance  goals and the measures or indicators that will be used to assess progress in  meeting them. During the past several years, we and SBA’s Inspector  General have reviewed SBA’s performance plans and found the plans had  significant limitations. Our review of the disaster lending portion of the  2003 performance plan found that the limitations identified in the previous  reviews remain. We attribute some of these limitations to the specific  nature of the measures SBA uses to describe the performance of the  disaster lending program, while other limitations can be attributed to the  description of program’s performance in the plan itself.
subsections: section_title: Limitations in the Performance Measures
paragraphs: In the past 5 years, SBA has used nine different measures to assess the  performance of the Disaster Loan Program. Both we and SBA’s Inspector  General have raised numerous concerns about these various measures in  the past. The Inspector General found that SBA used inconsistent and  subjective measures, and we found that the document used to report  program performance to the Congress lacked key information that would  have provided a more accurate picture of both the Disaster Lending  Program’s performance measures and the results. We observed in our June  2001 report that SBA needed to improve the quality of the measures that it  used to assess its performance.
On the basis of our review of the 2003 performance plan, we have found  that, as a group, the measures SBA currently uses to assess performance— the current measures (table 2, measures 4 to 9) continue to have numerous  limitations, despite the guidance provided in SBA’s performance primer.  First, the three output measures do not capture the notable progress the  program has made in improving its loan processing; improvements that  ultimately benefit disaster loan applicants and borrowers, such as better  staffing processes and management of staff duties. Second, two of the three  outcome measures are actually output measures and the third—a customer  survey—has an important limitation. Third, other than the customer survey,  SBA does not have measures to assess the intermediate or end outcomes of  its Disaster Lending Program.
Officials from SBA’s Disaster Area Offices questioned whether the three  output measures—field presence within 3 days of a disaster declaration,  processing loan applications within 21 days, and disbursing initial loan  amounts within 5 days of receiving the closing documents—were  appropriate indicators of timely service to disaster victims since they did  not, for example, capture recent program improvements. SBA has had a 98- percent success rate in meeting the target for establishing a field presence  each fiscal year since 1998. In light of this fact, one official characterized  this measure as artificial and noted that it does not drive staff to improve  their performance. Officials from the area offices said that improvements  in planning, interagency coordination, and technology now can enable  them to have staff onsite and preparing to assist disaster victims within 1  day of a disaster declaration. For example, field coordinators in two offices  recently developed a database that tracks the level of staffing and other  resources used to respond to various types of disasters. The coordinators  used this information to help them more efficiently determine the  resources required to respond to new disasters. Such preparedness  enabled SBA officials to be in Lower Manhattan preparing to serve disaster  victims the same day as the September 11 attacks. According to DAO staff,  if there are delays in establishing a field presence, it is generally because  SBA is waiting for decisions from state officials.
SBA data and comments from DAO officials raise questions about the  appropriateness of the second output measure—processing loan  applications within 21 days of receipt (table 2, measure 5). One official  suggested that providing timely, or well-timed, assistance does not always  mean providing assistance in the shortest period of time. Rather, providing  timely assistance means providing it when the disaster victims need it.  While the 21-day measure does capture the elapsed time for multiple loan  processing steps, the current target for this measure does not reflect  improvements in past performance. The target was set at 70 percent for  fiscal year 2000 and 80 percent for fiscal year 2001, and SBA’s performance  significantly exceeded this target each year. Moreover, the actual time  required for processing averaged 13 days in fiscal year 2001 and 12 days in  fiscal year 2002. In fiscal year 2001, as indicated earlier, SBA’s average  processing time for business loans was about 16 days. Home loans, which  according to DAO officials are less complex, were processed during this  period in an average of about 12 days. According to SBA data, the average  processing time for both business and home loans improved in fiscal year  2002. The average loan processing time for business loans in fiscal year  2002 was about 13 days. The average time required to process the  September 11 business loans was also about 13 days. The average  processing time for the simpler home loans in fiscal year 2002 was about 10  days. Thus, SBA exceeded its performance target for both of these  measures in fiscal year 2002.
DAO officials attributed their faster processing times to several  agencywide improvements that have expedited loan processing. For  example, in the past SBA relied on hiring new and previously employed  temporary staff to help permanent personnel to process loans. This  strategy required DAO staff to train significant numbers of new temporary  staff on SBA loan processing procedures, with each new disaster. In 2000,  SBA implemented the Disaster Personnel Reserve Corps. Each DAO now  has a list of reserve corps members who are already trained in SBA  procedures and potentially available to assist in responding to disasters.  According to DAO staff, utilizing the corps members enables SBA to  potentially expedite processing by allowing temporary staff to begin  processing loans immediately, because reservists are recruited and trained  prior to the occurrence of the disaster. According to one DAO official, using  the reserve corps helped her office attain the 21-day processing goal in  fiscal year 2001. DAO staff also attributed faster loan processing to  increased automation. Although, according to DAO staff, calculations to  determine an appropriate loan amount are made electronically for all loans,  some steps in loan processing are conducted manually. In 2000, SBA  established the Home Expedited Loan Officer Report (HELOR) system so  that loan decisions for home and personal property loans under $25,000  can be made automatically, based primarily on credit scores, rather than  manually by the loan officer.
DAO staff also cited DAO-level strategies that have expedited processing  locally. For example, in the past, DAO staff who inspected a victim’s  property to estimate the amount of property loss, referred to as loss  verifiers, manually completed report forms and submitted the reports to  the DAOs using a courier service. In 2002, one DAO pilot tested having their  loss verifiers complete their inspection reports in the field using hand-held  computers and submit their reports to DAO using electronic mail. One DAO  official estimated that this automated approach reduced loan processing  time and eliminated courier service expenses.
In 2002, SBA began reporting data on the third output measure—ordering  initial disbursements within 5 days of receiving closing documents (table 2,  measure 9). Yet, DAO staff suggest that the target for this measure also  does not reflect past performance and was set at a low threshold.  According to DAO staff, before 2002, SBA had an internal goal of ordering  disbursements within 3 days of receiving closing documents. When SBA  included this measure in the performance plan, the disbursement target  was increased to 5 days. SBA headquarters officials commented that the 5- day standard was set to accommodate counting weekend and holidays  because the data system SBA uses to track disaster loan processing could  not distinguish between workdays and non-workdays. Nonetheless, DAO  officials are accustomed to the stricter 3-day standard, they indicated that  the 5-day standard can be met with ease. For example, SBA made the initial  disbursements on all approved September 11 loans in an average of about 2  days, and in fiscal year 2002, on average, SBA also made initial  disbursements within an average of 2 days of receipt of closing documents.  Moreover, according to one DAO official, the disbursement target was  increased as DAOs were expediting their disbursement process. For  example, as part of its response to September 11 borrowers, the Niagara  Falls DAO reduced the amount of documentation required for September  11 victims from the World Trade Center and Pentagon disaster areas to  receive disbursements of between $25,000 and $50,000, so that the DAO  could more quickly disburse the remaining amounts. Since they found this  strategy to be successful, the DAO official will recommend to his  supervisors that this procedure be used for all future disasters. However,  because the 5-day disbursement measure focuses only on the initial  disbursement, it cannot capture other improvements that have been made  to the multistep disbursement process.
In commenting on a draft of this report, SBA indicated that the output  measures were established based on what was determined to be a  reasonable level of service based on an average year taking into account  the amount of resources required. Because of the unpredictability of  disasters, officials did not think it would be feasible to adjust production  levels simply based on 1 year’s performance. In addition, they noted that  large disasters could still generate more volume than SBA could handle quickly,  especially if the pre-disaster staffing levels in all area offices were low and a  large-scale recruitment and training effort were necessary. Even with some of  the program improvements, they believed it would be very difficult and  costly to maintain such levels during periods of multiple major disasters.  Although SBA acknowledged that there may be a basis for modifying the  output measures mentioned (effective field presence, processing loan  applications in 21 days, and ordering initial disbursements within 5 days of  loan closing), the officials believed that the modifications in the measures  should be based on an average level of projected activity taking into  consideration some of the permanent improvements they have made to the  program.
subsections: section_title: Two Out of Three Outcome Measures Actually Assess Outputs
paragraphs: SBA officials indicated that the remaining three measures—number of  homes restored to predisaster condition, number of businesses restored to  predisaster condition, and customer satisfaction (table 2, measures 7, 8,  and 6)—are used to assess the effect, or outcomes from lending to disaster  victims. These outcome measures have limitations that are similar to the  output measures. First, while the restoration of homes and businesses is a  stated outcome in SBA’s strategic and performance plans, SBA does not  actually measure the number of homes and businesses restored. As  indicated earlier, headquarters officials said that SBA reports on the  number of home loans approved as a proxy measure for the number of  homes restored to predisaster condition. The agency also uses a proxy  measure—the number of business loans approved—for the number of  businesses restored to pre-disaster condition.
The proxy measures that are used to report disaster loan outcomes have  several limitations. First, these measures assess program outputs, loans  approved, and not the stated outcomes—restoration of homes and  businesses. Second, this proxy measure likely overestimates the number of  homes and businesses restored. As SBA staff explained, even when loans  are approved, borrowers might cancel the loan or reduce the amount of the  loan to avoid using their homes as collateral. For example, about 10  percent of the loans approved for September 11 victims were subsequently  cancelled by borrowers.
Third, these indicators use annual numbers, which are not useful standards  since they are highly dependent on factors outside of SBA’s control, such as  the number of disasters that occur during a given fiscal year. A more useful  indicator would be the percentage of homes and businesses receiving loans  that were restored each year to pre-disaster conditions, which would  enable a yearly comparison of performance. However, various SBA officials  indicated that it is not easy to obtain evidence on the percentage of homes  or businesses that have been restored after a disaster. One DAO official  pointed out that though he supported conducting on-site progress  inspections to measure whether homes or businesses have been restored,  they are currently able to conduct on-site inspections for only a tiny  fraction of the properties due to their limited travel budget. He has had to  increasingly rely on the integrity of the applicants and SBA reviews of the  borrowers’ receipts. Other staff indicated that some alternative strategies,  such as reviewing pre- and post-disaster property tax assessments as a  proxy measure for the restoration of homes, would also be problematic  because of different economic conditions in different communities.
To measure another outcome—customer satisfaction (table 2, measure  9)—SBA uses the results of its survey of successful loan applicants. SBA  also uses this survey to evaluate the impact of the program. Yet, SBA’s  method for conducting the survey has significant limitations. First, the  survey measures the satisfaction of only a portion of the customers that the  Disaster Loan Program serves. Every DAO director we interviewed  indicated that all disaster victims are SBA customers and that a broader  population should be surveyed. In 2001, we and SBA’s Inspector General  made the same suggestion to SBA. As we indicated then, the current survey  method is likely to produce positively skewed responses. SBA  headquarters officials indicated that they are resistant to surveying those  who were denied loans because they presumed the applicants’ responses  would be negative. Yet, as described earlier in this report, it was the  complaints from September 11 applicants that informed SBA of problems  in the existing loan program and led the agency to revise the disaster  program to better serve disaster victims. SBA does not currently plan to  expand its fiscal year 2002 survey to a sample of all loan applicants.  Second, the target set for this indicator, 80 percent, is set below what the  program has reportedly achieved in the past; for example, 97 percent in  1998 and 1999, and 81 percent in 2000.
section_title: Measures Do Not Assess Intermediate or End Outcomes
paragraphs: Our review of the 2003 performance plan found that five of the six  measures (table 2, measures 4, 5, 7, 8, and 9) that are currently used to  assess the performance of SBA’s disaster lending focus on narrow program  outputs rather than intermediate or end outcomes. As mentioned earlier,  OMB guidance states that the plan should include outcomes when their  achievement is scheduled during the fiscal year. In addition,  recommendations from the Inspector General and guidance from us and  within SBA have encouraged the use of outcome measures for this  program. Only the customer satisfaction measure has the potential to  assess one of the stated end outcomes from the Disaster Loan Program.  The other intended outcomes from disaster lending, which might be  measured annually or bi-annually, such as jobs retained or housing  restored, are not measured. SBA may be able to measure, for those loans  that are fully disbursed by the first or second quarter of the fiscal year, the  percent of homes or businesses that have been fully restored at year’s end.
In addition, SBA does not measure potential intermediate or end outcomes  for the Disaster Loan Program. For example, as described earlier, some  September 11 loan applicants criticized SBA’s underwriting criteria as too  restrictive. In the past, SBA used two intermediate outcome measures, loan  currency, and delinquency rates as listed in table 2, to reflect the quality of  disaster loans. Yet, these measures were not included in the 2001  performance plan. Another potential intermediate outcome from the  underwriting process, the retention of appropriate insurance, is not  measured. As indicated in appendix II, SBA requires loan applicants to  obtain insurance related to the nature of the disaster in order to receive a  disaster loan. As one DAO official suggested, having insurance, such as  flood insurance, potentially reduces the number of disaster loans required  in areas that experience recurring disasters. As we reported previously, a  greater reliance on insurance can reduce disaster assistance costs and  could reduce the effect of a disaster on its victims.
SBA headquarters staff said that, while they recognize that the proxy  measures for the restoration of homes and businesses are inadequate and  are aware that the customer survey only assesses the satisfaction of a  portion of their customers, they have a limited ability to develop and use  better outcome measures. The staff indicated that the very nature of  disaster lending is unpredictable, so it is difficult to set performance targets  for intermediate or end outcomes. A headquarters SBA official said that  they are reluctant to measure and report intermediate or end outcomes that  they cannot control. For example, one DAO official suggested that SBA  cannot ensure that businesses that receive a disaster loan will survive.  Other factors he suggested, such as differences in the willingness of people  from different regions to acquire debt, will affect the borrower’s decisions.  Other DAO officials indicated that conducting some end outcome  measurement methodologies would be expensive, such as conducting on- site inspections of a sampling of homes and businesses to determine if they  have been restored.
section_title: Limitations in the Performance Plan
paragraphs: We identified at least five features of the description of the Disaster Loan  Program in the 2002 and 2003 performance plans (see table 3) that make it  difficult to assess whether SBA is making progress in attaining its strategic  goal. First, as discussed earlier, strategic goals and performance goals in  annual plans may be identical, which is the approach SBA uses for the  strategic and performance goals for the Disaster Loan Program. Between  the 2002 and the 2003 performance plans, the performance goal changed  from an outcome-oriented goal--helping families recover from disasters— to an output-oriented goal—streamlining disaster lending, without the  required explanation. GPRA requires agencies to explain why they change  performance goals, and OMB generally recommends that agencies used  goals that are outcome-oriented.
Second, the 2002 and 2003 performance plans do not define the linkages  between each program output and each intermediate or end outcome. The  plans do not explain how the outputs—disaster loans—are related to the  performance indicators—field presence, customer satisfaction, and  application processing timeframes. Third, the plans do not explain how the  performance measures or indicators are related to either program  outcomes or outputs. Fourth, the plans do not explain if the targets for the  performance measures are set in anticipation of performance improving,  regressing, or remaining the same. For example, some targets are at or  below the actual performance in previous years. Fifth, performance  indicators are added to the plans, or dropped—as shown in table 2— without explanation. These omissions make it difficult to understand how  and if SBA expects to improve or sustain its loan processing performance.
The performance plans also contain incomplete or inaccurate information  on some performance indicators. For example, despite OMB and SBA  guidance, validation and verification information on field presence and  loan processing measures is omitted, making it difficult to assess the  quality of performance data. In addition, the 2003 performance plan  indicates that data on the number of homes restored to pre-disaster  condition are based on-site inspections of homes. However, SBA officials  indicated that they use a proxy measure—the number of original home  loans approved—as the actual source of data for homes restored to pre- disaster condition.
section_title: Conclusions
paragraphs: The September 11 terrorist attacks presented SBA with challenges it had  never before faced. First, it had to provide loans to individuals and  businesses near the disaster site as well as to small businesses located  throughout the country. Rather than providing most of its loans for the  repair and replacement of physical structures, SBA found itself dealing  with large numbers of economic injury loans to businesses with amended  guidelines. Second, given the extent of the economic effects in the wake of  the attacks, SBA had to work with the Congress to modify the Disaster  Loan Program so that larger loans could be provided to a broader  population of disaster victims. Input from small business owners and  advocates at congressional hearings was key to the changes that were  made—changes that, whether temporary or permanent, will be useful for  SBA and other federal agencies to consider in responding to future  disasters.
In this and previous work, we found that SBA’s Disaster Loan Program  performance measures do not fully or adequately reflect the program’s  actual performance. Viewing the performance measures in light of SBA’s  response to the September 11 attacks underscores this finding. First, two  current output measures describe only discrete steps of multistep  processes, and some output measures use performance targets that have  already been achieved or exceeded. Second, most of SBA’s measures assess  program outputs instead of assessing measurable outcomes. We recognize  the challenge of identifying end outcome measures, such as restoring a  business to predisaster condition given the many factors involved in a  business’ success. However, we note that intermediate outcome measures  can provide meaningful information about the effect of SBA’s program. But  SBA’s plan does not use intermediate outcome measures to link its output  measures to the intended outcomes of the program. The one outcome  measure SBA uses—a customer survey—is directed only at disaster victims  who received loans. SBA misses the opportunity to get feedback from  applicants who did not get loans. Yet SBA’s response to September 11 was  modified partly as a result of the concerns small businesses expressed.  Moreover, the limitations in the program’s performance measures and  plans mean that congressional decisionmakers do not have an accurate  description of SBA’s progress to help them make informed decisions in  directing and funding the Disaster Loan Program.
section_title: Recommendations
paragraphs: In order to better demonstrate program performance, we recommend that  the Administrator of SBA direct the Office of Disaster Assistance to  revise the performance measures for disaster lending to (1) include  more outcome measures; (2) assess more significant outputs, such as  service to applicants or loan underwriting; (3) report achievements that  can be compared over several years, such as percentages; and (4)  include performance targets that encourage process improvement  rather than maintaining past levels of performance;  revise and expand its current research to improve its measures and  evaluate program impact. To improve its current measures SBA should  conduct research, such as surveying DAO staff and reviewing the  disaster, lending, and performance literature, to identify and test new  outcome measures. To evaluate its program impact, SBA needs to revise  its survey approach to survey all disaster loan applicants and to employ  other methods, such as periodic analyses of regional statistics, to assess  the economic impact of the program on local communities; and  revise the disaster section of the performance plan to (1) establish  direct linkages between each output and outcome and the associated  performance measure; (2) accurately describe proxy measures as either  an outcome or output measures; (3) accurately describe the validation  and verification of performance measures; and (4) explain additions,  deletions, or changes in the current goals or measures used from the  previous year.
section_title: Agency Comments
paragraphs: We requested SBA’s comments on a draft of this report, and the Associate  Administrator for Disaster Assistance provided written comments that are  presented in appendix V. SBA generally agreed with our recommendations  and said that they intended to review the existing performance measures  and research new ways to evaluate program impact. SBA also provided  some technical corrections and comments, which we incorporated as  appropriate in this report.
We are sending copies of this report to the Ranking Minority Member of the  House Committee on Small Business, the Chairman and Ranking Minority  Member of the Senate Committee on Small Business and Entrepreneurship,  other appropriate congressional committees, and the Administrator of the  Small Business Administration. In addition, this report will be available at  no charge on GAO’s Web site at http://gao.gov.
If you have any questions about this report, please contact M. Kay Harris,  Assistant Director, or me at (202) 512-8678. Key contributors to this report  were Kristy Brown, Sharon Caudle, Patricia Farrell Donahue, and John  Mingus.
section_title: Scope and Methodology
paragraphs: To review the Small Business Administration’s (SBA) response to the  September 11 terrorist attacks, we interviewed officials from the Office of  Disaster Assistance (ODA) at SBA headquarters and officials from each of  the four SBA Disaster Area Offices. In addition, we interviewed officials  from SBA’s Office of the Inspector General. We also reviewed documents  related to disaster lending policy and procedures, the agency’s response to  the September 11 attacks, and other program documentation. In addition,  we reviewed congressional testimony as well as regulatory actions taken  by SBA, and legislative action by the Congress, in response to the terrorist  attacks.
To analyze SBA’s lending to September 11 victims, we obtained data from  SBA’s Automated Loan Control System (ALCS), the system used by SBA to  track disaster loan applications, approvals, and disbursements. We used  these data to calculate descriptive statistics on the numbers of disaster  loans, disbursement amounts, and other characteristics of the disaster  lending to September 11 victims. We limited our analysis to loan funds  approved through September 30, 2002. For our analysis of type of industry,  we used the North American Industry Classification System (NAICS) code  from the database and grouped the results by the first two letters of the  code, which designate the general industry type. We determined the five  industry types that received the largest percentage of SBA September 11  loans nationwide, grouping the remaining industries in the “other”  category. We conducted similar analysis by industry for each type of  September 11-related declaration. We ascertained how information for the  ALCS database was collected and maintained to determine its reliability,  and we found the information to be reliable for our purposes. We  repeatedly consulted with SBA headquarters officials, including those  responsible for managing ALCS, during our analyses to ensure our  understanding of various data elements was correct. We also obtained  summary statistical reports from SBA describing disaster lending during  fiscal years 2001 and 2002.
To review and analyze SBA’s performance plans and measures for its  Disaster Loan Program, we reviewed SBA’s strategic plan for the 2001-2006  period and performance plan for fiscal years 2002 and 2003. A  knowledgeable staff member from our Strategic Issues Team also reviewed  the plans for compliance with the Office of Management and Budget’s  (OMB) guidance on the Government Performance and Results Act (GPRA)  of 1993 guidance. We also reviewed SBA’s Inspector General’s recent  review of the disaster section of recent performance plans, SBA’s primer on  performance measurement, and our recent reviews of SBA. Our overall  assessment of SBA’s performance plans was generally based on our  knowledge of the Disaster Loan Program and OMB’s guidance on  developing strategic and performance plans.
We conducted our work between June 2002 and January 2003 in  Washington, D.C.; Niagara Falls; Atlanta; and Fort Worth in accordance  with generally accepted government auditing standards.
section_title: SBA Disaster Response, Loan Processing, and Loan Disbursement Procedures
paragraphs: State and federal officials conduct a preliminary damage assessment to estimate the extent of the disaster  and its impact on individuals and public facilities. SBA participates in the damage assessment when the  damages include homes and businesses.
The President, USDA, or SBA makes a disaster declaration.
SBA establishes field presence – SBA staff arrive at the disaster site and take actions to initiate delivery  of disaster assistance.
SBA loan officers meet with disaster victims, explain the loan process, and issue applications at the  Federal Emergency Management Agency (FEMA) or SBA disaster offices.
SBA screens the submitted applications for completeness and to make sure all necessary documentation  has been provided.  -Home loan application package includes the application, listing of property damage, and authorization  for SBA to access applicant’s tax information.  -Business loan application package includes the application, a schedule of liabilities, and personal  financial statements and tax information authorization for each proprietor, partner, affiliate, or other type  of owners.
Physical loan applications are forwarded to loss verifiers who conduct on-site appraisals of the damaged  property to estimate the cost of restoring the property to pre-disaster condition.
Economic injury applications may be sent directly to a Disaster Area Office (DAO) for processing.
Once the application arrives at the DAO, SBA staff review the application, examining such issues as  duplication of benefits; credit history; criminal record; tax returns; history on other SBA loans; and the  history on other federal debt.
The applicant’s losses or economic injury are calculated.   The loan officer determines whether the applicant has satisfactory credit and the ability to repay the loan;  the legal department determines whether there are any legal or regulatory restrictions on receiving a  disaster loan.
If the applicant meets SBA’s underwriting criteria, then the loan is approved, using the amount of verified  losses as the basis for the loan amount.
Closing documents are prepared and mailed to the applicant.
Applicants are required to obtain insurance. Hazard insurance is required before disbursement over $10,000 for  physical loans, and over $5,000 for economic injury loans. Flood insurance is required for properties located in  Special Flood Hazard areas before any disbursement can be made.
Maximum initial disbursement without collateral: physical loans - $10,000; economic injury loans – $5,000  Initial disbursement with collateral, preferably the applicant’s home: $25,000.   Total disbursements with proof of ownership of the damaged property: physical loans and economic injury  loans - $25,000.
Total disbursements with proof of title insurance: physical loans and economic injury loans - $250,000.
section_title: Regulatory and Statutory Changes to SBA’s Disaster Loan and 7(a) Program in Response to the September 11 Terrorist Attacks
paragraphs: For small businesses in declared disaster area,  maximum disaster loan amount is $1.5 million,   small non-profit institutions and select financial   maximum disaster loan amount is $10 million,   small nonprofit institutions and select financial  and insurance firms were ineligible for economic  injury assistance,  and insurance firms eligible for economic injury  assistance,  interest begins to accrue when disbursement is   no interest accrues for 2 years following   payments of principal and interest are deferred   payments of principal and interest are deferred  for 4 months. for 2 years following issuance.
For 7(a) lenders:  7(a) loan fee = .50 percent of outstanding  balance.
For 7(a) lenders to small business adversely  affected by attacks: 7(a) loan fee = .25 percent of outstanding  balance.
Economic injury loans available only to small  businesses within the declared disaster area,  directly affected by the disaster.
Economic injury loans available to small  businesses nationwide, adversely affected by the  disaster or by related action taken by the federal  government.
Inflation-adjusted size standards, generally  effective February 2002, were effective  September 11, 2001, for businesses applying for  economic injury loans as a result of the terrorist  attacks.
Threshold for “small” travel agencies is $1 million  in annual revenues.
For World Trade Center and Pentagon areas,  businesses do not have to sustain physical  months of gross margin, with maximum loan  amount the lesser of (1) 3 times the SBA verified  physical loss or (2) $100,000. if business in operation, economic injury loan  amount based on up to 3 months gross margin,  with maximum loan amount of $200,000; and  if business not in operation, economic injury  loan amount based on up to 6 months gross  margin, with maximum loan amount of  $350,000.
For EIDL applicants nationwide without any  property damage,  The loan amount was limited to the lesser of 2  months gross margin or $50,000.
Expedited disbursement process Disbursements greater than $25,000 require a  title search.
For World Trade Center and Pentagon areas,  title search is not required for disbursements up  to $50,000.
section_title: Data on SBA Disaster Loans Made to Victims of September 11 Terrorist Attacks
subsections: section_title: SBA Responds to Multiple Disaster Areas
paragraphs: SBA’s response to the September 11 disaster commenced immediately after  the terrorist attacks occurred, when SBA disaster officials established  communication with FEMA and state emergency management officials. By  the afternoon of September 11, disaster officials from SBA’s Niagara Falls  DAO were in Lower Manhattan coordinating the agency’s recovery efforts  with the overall federal response. Once the President declared the World  Trade Center attack a major disaster, SBA designated the immediate  disaster area of the World Trade Center (“WTC Immediate”) as the five  boroughs of New York City, and the contiguous area of the World Trade  Center (“WTC Contiguous”) as including two other counties in New York  and four counties in New Jersey. SBA officials began meeting with disaster  victims on September 13.
Following the President’s declaration of the Pentagon attack as a major  disaster on September 21, SBA established the immediate area of the  Pentagon, which was comprised of Arlington County, Virginia, and the  contiguous area of the Pentagon, which included additional counties in  Maryland, and Virginia (“Pentagon Contiguous”), and parts of the District  of Columbia. FEMA extended the declared disaster areas on September 27  as the widespread impact of the terrorist attacks became more apparent.  The immediate area of WTC was extended to include 10 additional counties  in New York, including the 2 counties initially included in the WTC  Contiguous area. The extension also added additional counties in New  York and New Jersey, as well as counties in Connecticut, Massachusetts,  and Pennsylvania to the existing WTC Contiguous area. See figure 4 for a  map of the disaster areas. As the United States began to deploy military  personnel in response to the terrorist attacks, small businesses affected by  the loss of employees who serve as reserve military personnel were eligible  to apply for a disaster loan under the Military Reservist EIDL Program.
subsections: section_title: SBA Has Provided September 11 Disaster Loans to a Range of Small Businesses Nationwide
paragraphs: We obtained and analyzed SBA data on the loans it approved in response to  September 11, 2001, through September 30, 2002. The distribution of  September 11 lending varied significantly by amount, geographic location  of recipients, and the types of loans. Nearly half of the September 11 loan  funds disbursed by the end of fiscal year 2002 was distributed to disaster  victims from New York. The balance was disbursed across the country  through the expanded EIDL Program. Unlike other recent disasters, almost  all of the disbursed loan funds went to businesses rather than homeowners.
subsections: section_title: September 11 Lending Nationwide
paragraphs: In just over 1 year, SBA approved more than 9,700 home and business loans  totaling $966 million for victims of the September 11 attacks, disbursing  about $895 million, or 93 percent, by the end of fiscal year 2002. The peak in  monthly disbursement amounts for all September 11 loans was in January  2002 at $120 million. The agency expects to fully disburse $924 million—or  96 percent of the amount approved—due to loan increases, decreases, and  cancellations. As of the end of fiscal year 2002, about 10 percent of  approved September 11 loans were cancelled by borrowers, compared  with 16 percent of approved disaster loans in fiscal year 2001. The greatest  percentage of loan cancellations occurred in the immediate area of WTC,  where 13 percent of the loans in this area were cancelled. The contiguous  area of the Pentagon experienced the greatest percentage of loan  increases, where 11 percent of September 11 loans were increased from  their original approved amount. Given the difference between the approved  amounts and the disbursed amounts—due to loan increases, decreases,  and cancellations—we have chosen to describe the distribution of  September 11 loans in terms of the actual disbursed loan amounts.
September 11 loan disbursement amounts range from $300 to $1.5 million,  with a median amount of $50,000. Fifty percent of disbursements were  between $18,700 and $119,700. Eleven percent of September 11 loan  disbursements were for $50,000, the most frequently disbursed amount. In  commenting on our draft SBA, indicated that the agency applied the  expedited EIDL process for “stand-alone” EIDLs, that is, applicants without any  property damage. The loan amount was limited to the lesser of 2 months gross  margin or $50,000, which SBA described as the reason why the most commonly  disbursed amount was $50,000. The distribution of September 11 loans also  varied by state, type of loan, declaration area, and by business industry.
section_title: September 11 Lending by Type of Loan
paragraphs: Typically, about 80 percent of approved SBA disaster loans are home loans  to repair physical damage to homes and personal property. However, about  97 percent of September 11 loans were disbursed to businesses. Even in  New York City, only 6 percent of loans were disbursed to households. SBA  officials attribute this difference from the historic lending pattern to the  fact that the physical damage caused by the terrorist attacks was  concentrated in the World Trade Center business district and at the  Pentagon. Seventy percent of the businesses receiving September 11 loans  had 10 or fewer employees, while 50 percent had 5 or fewer employees.  Businesses with more than 100 employees received less than 2 percent of  disbursed loan funds.
Overall, only about 9 percent of September 11 loan applicants in the  declared disaster areas sustained physical losses compared with about 80  percent of disaster loan applicants in fiscal year 2001. Consequently, 92  percent of September 11 loans went to small businesses that suffered  economic injury, but no physical damage, and about 5 percent of the loans  were disbursed to businesses with physical damage from the attacks.
section_title: September 11 Lending by State
paragraphs: Although SBA provided loans to affected small businesses nationwide,  about 45 percent of all disbursed September 11 loan funds were distributed  to applicants in New York State. Of that 45 percent, approximately 36  percent was disbursed to disaster victims in New York City. As shown in  figure 1, Florida received the second greatest percentage of disbursed  September 11 loans (11 percent), followed by California (6 percent), New  Jersey (4 percent), Texas (3 percent), and Virginia (3 percent).
More than half of all September 11 loan funds were disbursed to small  businesses outside of the immediate and surrounding areas of the World  Trade Center and the Pentagon. SBA data indicate that, in general,  businesses located closest to the WTC disaster site received smaller loans  than businesses near the Pentagon and nationwide. For example, the  median disbursement in the immediate area of WTC, specifically New York  City, was about $40,000, while the median disbursements under the  expanded EIDL Program and in the area of the Pentagon were $50,000 and  $60,000, respectively. SBA disaster officials reasoned that firms near WTC  may have received smaller SBA loan disbursements because there were  other resources available to them, whereas SBA was the sole source of  assistance for affected small businesses outside of New York City. In  addition, SBA officials suggested that since many September 11 loan  recipients in New York City were service-oriented firms, they had fewer  operating expenses than the more capital-intensive loan recipients  nationwide.
SBA loan disbursement data appear to indicate that a wide variety of  businesses received September 11 loans. As shown in figure 2, no one  sector of the economy received a substantial portion of these loans. We  summarized SBA’s loan data according to the type of business that received  the loan. The manufacturing sector received the greatest percentage of  September 11 loans, though this represents only about one-sixth of these  loans. We combined business types with less than 7 percent of the loans  into an “other” category, which includes such sectors as retail trade and  waste management.
As shown in figure 6, the distribution of the loan disbursements by industry  for the expanded EIDL was similar to the distribution for all September 11  loans, with the manufacturing sector receiving the second largest portion  of these loan disbursements. In contrast, to the distribution of loan  disbursements at the national level, the greatest percentage of disaster loan  funds in New York City, and the immediate and contiguous areas of the  Pentagon was disbursed to the professional, scientific, and technical  service industry.
section_title: Comments from the Small Business Administration
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