SBA's Disaster Loan Program Ran Dry, Then Cut the Staff Anyway

The Small Business Administration's disaster loan program does two things that most people never see: it lends money directly to homeowners and small businesses after a declared disaster, and it services a loan book that stretches back to the COVID-19 Economic Injury Disaster Loan (EIDL) program — nearly 4 million loans totaling over $377 billion issued between March 2020 and May 2022 alone.▸ Both jobs ran into trouble in the same year, for the same underlying reason: the account is smaller than the workload, and in 2024–2025 it got smaller still.

The disaster loan program isn't funded like most federal programs.▸ Congress gives it a pool of "credit subsidy" money — the estimated long-run cost of the loans it's about to make — and that pool has to last until the next appropriation, no matter how many disasters happen in between. Going into FY2024, SBA carried forward $406.2 million in unspent subsidy funds and collected $40.6 million more in recoveries on old loans, for $446.8 million available. FY2024 disaster lending — $1.7 billion in loans, more than 27,000 of them, at a 20.55% subsidy rate — cost $341.4 million of that, leaving just $99.8 million to carry into FY2025.

$99.8 million looks like money in the bank until you remember what it has to survive.▸ Hurricanes Helene and Milton hit weeks into FY2025, and on October 15, 2024, SBA announced it had exhausted funds for new disaster loans — by then it had already logged roughly 37,000 Helene-related applications. Per the Congressional Research Service, that was the first credit-subsidy funding lapse since SBA began making disaster loans in 1953: for 67 days, the agency kept accepting and processing applications but couldn't issue new loan offers, queuing eligible borrowers until Congress acted. It acted on December 21, 2024, when the American Relief Act, 2025 (P.L. 118-158) delivered a $2.25 billion supplemental — more than five times what had run out.

While the front door was rationing new loans, the back office was servicing everything already on the books — mostly COVID-era EIDLs, a portfolio SBA's inspector general describes as "over 14 times what the agency was managing before the pandemic," when SBA typically serviced about 263,000 disaster loans worth roughly $9.4 billion.▸ Today it's about 3.8 million loans worth $336.4 billion, run out of a single processing center in Fort Worth, Texas.

As of October 8, 2024, that center had 1,492 staff — enough, OIG found, to call it "adequately staffed," clearing more than 23,500 servicing actions a month at a 5.44-day average cycle time.▸ By June 2025, per OIG's December 2025 follow-up, staffing had been cut to about 819 — a 45% reduction below the level the agency's own watchdog had just signed off on. OIG's verdict: "Since these staff reductions occurred after our review, OIG has not assessed any potential impact on the agency's servicing of the $336.4 billion COVID-19 EIDL disaster loan portfolio."

The cut wasn't unique to Fort Worth.▸ In March 2025 SBA announced an agency-wide reorganization eliminating about 2,700 of its roughly 6,500 positions — a 43% cut, saving a projected $435 million a year — while stating that "disaster assistance programs" would "not be impacted." The Fort Worth numbers say otherwise: the center that runs the disaster loan book was already cut well past the line OIG had called adequate.

Meanwhile the outreach borrowers depend on to even know their options has gone uneven.▸ A May 2026 GAO review of 76 disaster declarations found SBA's East regional office included updated, survivor-relevant rule-change information in 96% of its press releases and fact sheets — the West office, in just 5%. And in Los Angeles, more than a year after the January 2025 wildfires, SBA has now extended loan disbursement deadlines three times — most recently to July 1, 2026 — citing permitting backlogs that have slowed nearly 13,000 borrowers' ability to draw down $3.4 billion in already-approved loans.

Dollar and staffing figures span multiple SBA OIG reports, GAO's May 2026 review, and CRS's analysis of SBA's own monthly reports to Congress, each cited inline; portfolio figures include an estimated 1.1 million charged-off loans SBA has been temporarily exempted from transferring to Treasury for collection.