HR-3557-119
Referred to the House Committee on Small Business.
Sponsored by Joe Neguse (D-CO)
What it does
This bill would amend the Small Business Act to require the Small Business Administration (SBA) to set the interest rate to zero percent and defer all principal payments for the first 12 months after disbursement on any SBA disaster loan issued for disasters declared on or after the bill's enactment date. The 12-month relief period would begin on the date the loan funds are actually disbursed to the borrower.
Who benefits
Small business owners and certain homeowners and nonprofits who receive SBA disaster loans following federally declared disasters. Businesses in disaster-prone regions (e.g., areas prone to hurricanes, wildfires, floods, or tornadoes) would benefit most frequently. Borrowers who are still rebuilding revenue and cash flow in the immediate aftermath of a disaster would gain the most direct financial relief. Local economies in disaster-affected areas may benefit indirectly from faster small business recovery.
Who is hurt
The federal government — and by extension taxpayers — would forgo interest revenue and delay principal repayment during the 12-month deferral window, increasing the net cost of the SBA disaster loan program. The SBA's revolving disaster loan fund could face reduced liquidity if large-scale disasters generate high loan volumes. Private lenders offering competing disaster recovery financing products may face indirect competitive disadvantage.
Supporters argue
Supporters argue that the first year after a disaster is precisely when small businesses are least able to service debt, as revenue is disrupted, physical assets are damaged, and rebuilding costs are highest. They contend that requiring interest payments and principal repayment to begin immediately undermines the purpose of disaster loans, which is to help businesses survive and recover — not to add financial burden during the most vulnerable period. Bipartisan sponsorship (Reps. Neguse and Ciscomani) suggests the policy addresses a practical gap that affects disaster-affected communities regardless of geography or political affiliation.
Opponents argue
Opponents argue that waiving interest and deferring principal for all disaster loans — regardless of borrower financial condition — is a blunt instrument that forgoes federal revenue even for borrowers who could afford to begin repayment. They contend that the policy increases the long-term cost to taxpayers and may reduce the SBA disaster loan fund's capacity to respond to future disasters, particularly if multiple large-scale events occur in close succession. A more targeted approach, such as need-based deferral, could achieve similar relief at lower fiscal cost.
Constitutional context
No significant constitutional tension exists here. Congress has clear authority to set the terms of federal lending programs under the Spending Clause and the Necessary and Proper Clause (Art. I, §8). This bill modifies an existing statutory program's loan terms directly by legislation, raising no major questions doctrine concerns under West Virginia v. EPA (2022) because Congress — not an agency — is making the policy change.
Checks and balances
Congress gains direct control over SBA disaster loan terms by statute; the SBA Administrator is directed to implement the zero-interest and deferral provisions with limited discretion, and Congress retains oversight authority through the Small Business committees.
Historical precedent
During the COVID-19 pandemic, the SBA automatically deferred payments on existing Economic Injury Disaster Loans (EIDLs) and waived interest accrual for defined periods, establishing a functional precedent for this type of loan relief within the same program.