The 2005 hurricane season trashed more than wide swaths of Florida and the Gulf Coast, it also left the Small Business Administration's Office of Disaster Assistance in tatters.
After hurricanes Katrina, Rita and Wilma, the SBA ultimately approved almost 18,000 emergency loans worth $894 million to businesses and homeowners -- but not before the agency's sluggish response came under attack in the press and on Capitol Hill. Amid the attack, SBA Administrator Hector Barreto resigned last year.
The man picked to fill his shoes was Steven Preston, the former chief executive of ServiceMaster, a multi-billion-dollar lawn care, housekeeping and pest control company.
Preston talked to The Miami Herald about what business owners can do to prepare themselves and what the SBA has done to avoid a repeat of the troubles of 2005.
Q: When you took the job about a year ago, you told Congress that one of your top priorities would be reforming the disaster assistance program. How far along are you in that process?
A: We have made terrific progress. The first thing that was clear is that we had to take care of people suffering from the 2005 Gulf hurricanes, and we worked very quickly to dramatically reengineer our processes for disbursing money to victims. When I came in that summer we had about 120,000 people backlogged in the system. Very quickly that [backlog] was down to a much, much smaller number. Today it's really just people who are waiting to determine whether or not they will borrow the money to get back in their homes or where they are going to go . . . We are up to $5.6 billion now in the hands of people rebuilding in the Gulf.
The second thing was to make sure the operational structure was prepared to handle a much larger disaster. We have significantly expanded our systems capacity, our facilities and our ability to hire people as well as instituting a more efficient operation.
The third thing, which we are preparing to do right now, is to provide a disaster plan to Congress to show how we are prepared and specifically how we would deal with a disaster of a very significant magnitude.
Q: A lot of the small businesses Ive talked to here said one of their biggest problems was the complexity of the process: They would submit forms, there would be an error, they would be kicked back months later and it would take much longer. Has the process been simplified?
A: Yes, in some cases it has been. But the challenge really is we are making a loan for real estate. In many cases people are providing collateral [and] they are filling out loan documents, which a lot of people arent terribly accustomed to doing. One of the things we changed is that we are giving everybody a case manager. Once they have gotten approved for a loan, they will have a person assigned to them to walk them through the process, help them understand what they need to do.
What I tell people is that even if we have low-cost, long-term money for people, if they cant get it in their hands quickly, it doesnt do them much good.
Q: What has been done to make sure the SBA has the surge capacity required if a large number of people get hit by a hurricane?
A: The surge capacity really falls into three areas: systems, people and facilities. We have tested the equipment to look as far as having 8,000 people working on it at the same time. Thats about 3½ times [more] people than were on it at any point during Katrina. No. 2, we have more people on the team full-time right now and many, many more people that [we] have identified to hire back on a temporary basis. We go out and actually develop a reserve corps -- they come in once or twice a year for training -- and then theyre on-call. That reserve corps is much larger than it has ever been. The third thing we have in place is, in addition to the facilities we are using all the time, we have additional backup facilities just in case of a surge.
Q: The House and Senate have been working on bills to streamline the disaster loan process. How important is that legislation to your work?
A: The House has passed a bill; the Senate is also working on disaster legislation. The big piece of news in those two pieces of legislation is the concept of using the private sector to help the government in disaster lending. In one case, the House bill contemplates that banks would do our processing for us. We would make the loans but they would process them. In the other case, in the Senate, it really looks more towards actually having banks make loans that the government helps support.
I think its very important to understand how best the private sector can play [a role] if the SBAs capacities are outstripped. If we do engage the private sector, my advice has been consistently: Make sure it's a private sector solution that the private sector will actually adopt. [But] based on our capacity, the requirement for the private sector would only kick in in a very, very dramatic mega-catastrophe.
Q: In the past the SBA has done its best to process all loans within 21 days. Is that still the goal?
A: The benchmark we point to is 21 days from the time we get a completed application to an approval. . . . In a normal situation we are turning those around much faster.
Q: What can small business owners do to expedite the [disaster loan] process?
A: It's important, as a small business owner is thinking about disaster preparedness, to have their records backed up. Make sure your financial and tax records are backed up somewhere so that if your facility gets hit in a disaster, you have a place to go retrieve that very important information. I would also remind people to have information on customers, vendors and employees as well, because thats very important to getting back on your feet.
Following a disaster if your facility has been damaged or you are out of business for awhile, you will often be asked to recreate a financial picture of your business for bankers, grant providers and the SBA. And having that available will expedite your ability to do so.
Make sure you know what kind of insurance you have. Its very important to understand the fine print.
FIND OUT MORE ABOUT THE SBA
Web: SBA.gov
Address: SBA District Office, 100 S. Biscayne Blvd., 7th Floor, Miami, FL 33131
Phone: 305-536-5521
