Faced with enormous demand for disaster loans, the U.S. Small Business Administration is asking banks for help.
The agency wants banks and other lenders to give leaves of absence to loan officers willing to work temporarily for the SBA and help it reduce a huge backlog of applications.
Anne Marie Frawley, the SBA's press secretary, said Wednesday that this is the first time the agency has sought private-sector assistance to make disaster-relief loans.
It was driven to do so by the scale of the devastation caused by Hurricanes Katrina, Rita, and Wilma, Ms. Frawley said. Through Tuesday the agency had received 216,000 loan applications since Katrina struck Aug. 29, and thousands of new ones are coming in daily, she said.
The SBA's primary mission is to guarantee loans to businesses that do not qualify for conventional financing. In disaster situations, however, it acts as a direct lender, a task it had always been able to fulfill without much difficulty.
But the agency has come under heavy criticism over its response to the recent storms. Bankers and lawmakers say it has been sluggish about getting money to business owners.
Critics of the SBA say it has approved only a few thousand of the loan requests it has received and cut even fewer checks. One New Orleans-area commercial lender, TriQuest Capital, has taken out radio and newspaper ads urging borrowers to call TriQuest at 1-888-SBA-2-SLO.
SBA Administrator Hector V. Barreto says the agency has taken a number of steps to expedite its disaster-relief procedures, including streamlining the applications for loans of less than $100,000 and relaxing documentation requirements. Now, he is looking to bankers for help.
Specifically, he is asking banks and other lenders to identify loan officers willing to spend at least two months working at the agency's processing center in Fort Worth. They would be hired as special government employees, Mr. Barreto said.
"This is an opportunity for our partners in the business lending community to assist those affected by the terrible disasters that have swept the Gulf Coast region," he said in a press release issued Tuesday.
Bernard H. Clineburg, the chairman, president, and CEO of the $1.5 billion-asset Cardinal Financial Corp. in Tysons Corner, Va., said bankers "absolutely" would respond to the SBA's call for help.
"There are a lot bankers that I know would do this," Mr. Clineburg said Wednesday.
The SBA is also looking to hire retired loan officers who have been out of the business less than 10 years. They would have to sign on for at least six months.
Bankers in the Gulf Coast region hardest hit by the hurricanes welcomed the initiative, but they are pressing the agency to outsource some of the underwriting chores to local banks that have been designated as certified and preferred lenders by the SBA.
As part of its flagship 7(a) lending program, the agency rewards lenders that have good track records. In the case of certified lenders, it agrees to rely largely on the lender's credit analysis in making a loan decision, which significantly shortens the approval process. Preferred lenders are the SBA's best performers, and the agency delegates full decision-making authority to them.
"There are a multitude of us in the market, we know the customers, we have organizational continuity, and we're in the best position" to make loan decisions "because we know who needs help," said Guy T. Williams, the president of the $552 million-asset Gulf Coast Bank and Trust in New Orleans. "We continue to want to partner with SBA."
Mr. Williams was quick to add that he was glad the SBA is seeking assistance from lenders.
"It's a worthwhile first step and I applaud them for doing it," he said.
James Ballentine, the American Bankers Association's director of community development, also commended the SBA but agreed that outsourcing the underwriting to local banks would have distinct advantages. For one thing, Gulf Coast bankers would not have to relocate.
Rep. Nydia M. Velazquez, D-N.Y., the ranking Democrat on the House Small Business Committee, said she and her colleagues have looked closely at the bankers' plan to outsource underwriting decisions. She said that is a better solution than hiring lenders as temporary government employees.
"If the Bush administration truly wants to fix the problem created by the mismanagement of the disaster-loan program by senior SBA officials," Rep. Velazquez said in a statement issued Wednesday, "they should give qualified lenders the ability to make disaster loans themselves rather than pressure the lending community to provide employees to work within a system that is clearly not operating properly."
