WASHINGTON, D.C. - U.S. Senator Bob Casey (D-PA), Chairman of the Joint Economic Committee, has introduced legislation to help small businesses recover in the wake of recent natural disasters by reducing the interest rates for certain small business disaster loans.
“These residents have suffered an economic disaster and now a natural disaster,” said Senator Casey. “We need to do everything we can to help them get back on their feet, reopen their businesses and start hiring again. This bill is a common-sense step to help our communities recover.”
The bill, the Small Business Disaster Assistance Act of 2011, will adjust SBA disaster relief loan interest rates to 1% for businesses that do not have credit available elsewhere and 3% for businesses that do have access to credit available elsewhere. This will apply retroactively to loans made across the country since the beginning of Irene.
In September, Senator Casey wrote to Small Business Administrator Karen Mills requesting that the Administration take similar measures. A text of that letter is below:
Dear Administrator Mills:
I write today to request that the Small Business Administration (SBA) lower interest rates for disaster relief loans for residents and businesses affected by recent natural disasters in Pennsylvania. In the wake of Hurricane Irene and Tropical Storm Lee, the federal government must do everything in its power to help individuals and small businesses in Pennsylvania recover.
In my recent travel around the Commonwealth, I have witnessed first-hand the destruction caused by flooding. I have continually heard from affected homeowners and small business owners that the current rates for SBA disaster relief loans are prohibitively high in many cases. It is my understanding that the SBA has the authority to lower the interest rates on its disaster relief loans, and I strongly urge that you take such action without delay.
Lowering the interest rates on these loans will help communities that have been disproportionally impacted by the economic downturn. As you know, northeastern Pennsylvania was particularly hard hit by the flooding. This natural disaster comes in the midst of an economic downturn that has gone on too long and has affected the region to a greater degree than other parts of the state and country. The unemployment rate in the metropolitan statistical area that includes northeastern Pennsylvania lies at 9.4 percent, significantly higher than the Pennsylvania average at 8.2 percent and the national unemployment average. Moreover, the dual impact of the economic and natural disasters is not confined to northeastern Pennsylvania. Other counties in eastern and central Pennsylvania located along the Susquehanna River and its tributaries affected by Lee also suffer from high levels of unemployment. This is also the case in the Lehigh Valley and southeastern Pennsylvania counties in the Delaware River basin that were significantly affected by Irene.
These residents and businesses in eastern and central Pennsylvania that have suffered an economic blow must now contend with the fallout from a natural disaster. Many affected residents already have mortgages and other costs to pay on damaged properties. In addition, many of these same residents are either out of work or have someone in their family who is either unemployed or underemployed. Taking on a loan with high interest rates in addition to the costs residents have already incurred will be a real challenge for affected homeowners. Lowering the interest rate for these loans will relieve the tremendous economic burden facing these residents.
In addition to helping residents get back on their feet, we need to make sure that small businesses in eastern and central Pennsylvania are able to open their doors as soon as possible. Any unnecessary delay will only further exacerbate an already difficult economic situation. Ensuring that small businesses can reopen, rehire and recover lost revenue resulting from flooding is crucial to getting the regional economy back on track. SBA disaster relief loans are essential to helping small business owners on the pathway of economic recovery. Small business owners have informed my office that an interest rate of 4 percent is too costly a burden for them to take on, and I am concerned that some of the businesses will not be able to come back if the rates are not adjusted. I strongly encourage you to lower the interest rates so more business owners can benefit from this program. I am also aware that in the past the SBA has provided twelve month deferment of principal and interest payments for SBA serviced business and disaster loans. I strongly encourage you to consider taking this approach in Pennsylvania.
Thank you for your attention to this matter. I look forward to your prompt reply and quick action on this pressing matter.
Robert P. Casey, Jr.
United States Senator