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Following Hurricane Katrina, the United States government provided $45 billion in loans and rebuilding funds to individuals and businesses for the purpose of repairing the damage caused by the hurricane. However, it is not yet clear what impact this assistance had on small businesses in affected areas. In particular, the role of Small Business Administration (SBA) loans has yet to be fully examined. Though few doubt the benefits of short-term and immediate disaster relief, there is some debate on the benefits of SBA loans. Evidence suggests that receiving business loans may do more harm than good if the loan ultimately increases debt load. In this study we contribute to the disaster relief literature through completing the first analysis regarding the receipt of SBA loans after Hurricane Katrina. We find that there are several characteristics which increase the probability of application for a loan, but there is a set of different characteristics which determine the amount ultimately received. Further, results indicate that targeting programs for certain groups were unsuccessful in directing loans to these groups.

The Effectiveness of Post-Katrina Disaster Aid: The Influence of SBA Loans on Small Businesses in Mississippi