Economic Development:

Opinion Concerning the SBA Disaster Loan Program

B-202568: Published: Sep 11, 1981. Publicly Released: Sep 11, 1981.

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In March 1981, the Small Business Administration (SBA) found that its appropriation could not meet the requirements of its disaster programs for the remainder of the fiscal year. Excessive demands exhausted the funding apportioned to SBA, which necessitated an immediate suspension of the approval of disaster loans until the apportionment of additional funds could be obtained. Effective March 19, 1981, SBA revised its regulations to provide that physical loss disaster loans to businesses would only be made to the extent that the required financial assistance is not available from private sources. The revisions also provide that physical disaster loans to businesses shall not exceed 60 percent of the actual physical loss resulting from the disaster. Generally, agencies charged with the statutory responsibility of administering a government program are accorded great deference with respect to the promulgation and interpretation of regulations implementing the program. The courts and GAO have recognized the broad SBA discretion under statutory provisions authorizing the SBA business loan program. Thus, it is clear that the SBA authority to issue and amend its regulations cannot be questioned, provided that the regulations adopted are not in conflict with any relevant statutory requirements. GAO believes that the amended regulations do not conflict with the underlying disaster loan legislation. There is nothing in the relevant statutory provisions or their legislative history that sets either a minimum or maximum percentage of loss that SBA is required to cover when approving a disaster loan. While legislation clearly allows SBA to approve disaster loans without having to take into consideration the availability of credit from other sources, SBA is not prohibited from taking this factor into account if it so chooses. Since prior regulations are no longer applicable after the revised regulations have become effective, SBA did not exceed its authority in approving loan applications on and after the effective date of the revisions regardless of when the applications were filed. SBA is legally prohibited from incurring obligations in excess of the total amount of available funds. Therefore, it was within its authority to suspend approval of disaster loan applications temporarily. GAO concurred with the SBA actions in this matter.

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