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Committee Examines Assistance to Small Businesses Affected by Hurricane Katrina

On September 22, the Senate Small Business and Entrepreneurship Committee held a hearing to evaluate the impact of Hurricane Katrina on small businesses.

Highlighting the Small Business Administration’s (SBA) efforts to provide relief to small businesses affected by the hurricane, SBA Administrator Hector Barreto said that the Office of Disaster Assistance (ODA) “is staffing up to meet the demands of this disaster, as it does for all disasters, by hiring temporary employees to verify losses, provide customer service to the victims on the phone and in the field, and process and disburse loans. ODA is currently hiring over 200 employees. We have over 2,000 disaster employees on board right now and we expect to hire perhaps as many as another 2,000 to meet the needs of those affected.” He also noted that ODA employees “are in over 30 disaster recovery centers, and more are opening every day. At each of these DRC’s, there are customer service representatives and loan officers providing Katrina victims with one-on-one assistance, issuing loan applications, helping to fill out applications, and answering program questions. They are also accepting completed applications, forwarding them to Fort Worth, and making follow-up telephone calls to victims who have not returned their applications. We also plan to establish a Business Assistance Center in the New Orleans area. As soon as it is safe for the residents of New Orleans to go home, SBA will be there to help them.”

With regard to contracting opportunities for small businesses, Administrator Barreto explained that the “Office of Government Contracting is meeting with Small and Disadvantaged Business Utilization officers from all major agencies to help focus on small business opportunities. SBA is also working with the General Services Administration to establish up-to-date sourcing lists for small businesses and helping small businesses enter the Central Contractor Registration database of small businesses available for contracting for reconstruction and cleanup in the Gulf region. While the Administration’s priority is always working to provide needed emergency services as quickly as possible, SBA is committed to making sure that our small business customers receive fair opportunities to help in the rescue, relief and reconstruction efforts.”

Mary Lynn Wilkerson, state director for the Louisiana Small Business Development Centers (SBDC), detailed the small business community in New Orleans and other areas of Louisiana: “In the eleven critical parishes most severely impacted by Katrina, there are more than 70,525 businesses with less than 500 employees, and there are 140 businesses with more than 500 employees. Businesses with 19 and fewer employees make up 85% of the total businesses in the greater New Orleans MSA [Metropolitan Statistical Area]. Minorities make up 36% of Louisiana’s population. They own 14% of the firms in Louisiana, but minority businesses represent only 1.8% of total sales and 2.7% of total payroll. Women-owned businesses own 23.9% of firms, but represent only 4% of total sales and 5.6% of total payroll. These businesses already have a difficult time with access to capital and their survival rate will be greatly impacted by their inability to obtain sufficient capital during this very difficult time.” Ms. Wilkerson explained that in the aftermath of Hurricane Katrina, “SBDC service centers in Louisiana and Mississippi cannot handle the demand that is coming and we have no resources to increase the number of counselors in our centers. There are many CPAs, bankers, and other professionals that have been negatively impacted and with additional resources, we could contract with these individuals to provide services to Louisiana businesses.” She urged Congress to increase the SBA disaster loans from $1.5 million to $10 million; defer loan payments for one year; allow the SBA to refinance existing debt; extend the October 28 deadline for physical injury applications; and provide additional funding for the SBDC programs in Alabama, Mississippi, and Louisiana.

Alta Baker, a small business owner in Jennings, Louisiana, testified on behalf of Women Impacting Public Policy (WIPP). She said that “according to the Center for Women’s Business Research, over 47,000 women-owned businesses were operating in New Orleans prior to Katrina. They provided 100,000 jobs and generated $11 billion in sales. In the three most heavily damaged states, Louisiana, Mississippi and Alabama, about 371,000 women-owned businesses employed nearly 700,000 people and produced $80 billion in sales. As we all know, many of these businesses suffered severe damage or went out of business completely.” She explained that after the hurricane, many WIPP members volunteered to assist women-owned businesses in affected areas, and the National Association of Women Business Owners led a coalition effort to link business resources and opportunities to women entrepreneurs in affected areas. Noting the importance of small business contracting opportunities, Ms. Baker expressed her concern that the second emergency supplemental spending bill for FY2006 (P.L. 106-62) “contained a provision that is very troubling to WIPP. The new law raised the limit of micropurchase threshold from $2,500 to $250,000. WIPP believes that this not only invites waste, fraud and abuse in federal contracts, but also undermines the ability of small businesses to help in the recovery effort. The small business reserve sets aside federal contacts that are less than $100,000. Since the threshold has been raised to $250,000, which can be bought with a credit card, we believe that the small business reserve is rendered useless. We applaud the Committee’s pledge to modify this contracting change so that small businesses will be treated fairly with regard to procurement.”

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