Area flood victims reluctant to apply for federal loans

Associated Press

ROCHESTER, Minn. — The deadline to apply for federal flood relief assistance in southeastern Minnesota is just a few days away, and many affected homeowners are apparently reluctant to apply for federal loans.

But that could hurt them when it comes to obtaining aid from the state of Minnesota, which is requiring that flood victims ask for federal assistance from FEMA and the Small Business Administration before the state will offer any housing dollars.

So far in southeastern Minnesota, where a number of communities where stricken by flash floods in late August, over 4,800 people have received FEMA assistance. But only 29 percent of those homeowners have also applied for an SBA loan.

Minnesota Housing Finance Agency Commissioner Tim Marks said applying for that loan is a precondition to assistance from his agency. "As a condition to our program we want folks to make sure that they take advantage of federal assistance," he said.


Anyone denied an SBA loan will automatically qualify for state assistance, he said. The state’s Quick Start loan program doles out forgivable loans of up to $23,000.

The average SBA loan for this disaster is $46,000, with a monthly payment of about $200. If a resident doesn’t apply for the SBA loan, that person can’t get additional federal dollars either, said the SBA’s Carl Sherrill.

But Les Ladewig, mayor of hard-hit Rushford, said many of his constituents are reluctant to bury themselves deeper in debt as they try to recover from the disaster.

"There are some of those folks who are leveraged quite highly," Ladewig says. "Any additional debt would put them in a situation that is probably overwhelming."

Sherrill said the SBA isn’t making loans to people if it’s likely they wouldn’t be able to keep up with payments.

"We want to work and approve as many loans as we can, the second part of that though is that it doesn’t make sense for us or for the applicant for us to make a loan to them, which is going to be a federal obligation, if they do not have the resources to repay that," Sherrill said.

But Ladewig said state and federal officials must also realize that flood victims are in danger of getting buried in paperwork.

"I do know for some people the paperwork is overwhelming and stymieing so maybe that is the issue," he said.


The deadline for applications to FEMA and the SBA is the close of business on Monday, Oct. 22. So far, FEMA has issued nearly $18,000,000 in individual assistance.

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