Case Study

Evaluation of Characteristics and Perceptions of Disaster Assistance Mitigation Loan Option Borrowers

Challenge: The U.S. Small Business Administration (SBA) needed an evaluation to understand why certain borrowers apply for the SBA’s disaster mitigation increase option and others do not. The agency also wanted to improve communication strategies to increase uptake of the mitigation option.

As part of the SBA’s Office of Disaster Assistance (ODA) Disaster Assistance Loan Program, low-interest loans are provided to homeowners and businesses to help them recover from declared natural and other disasters. Under this program, borrowers are eligible for expanded financial support to purchase mitigation measures post-disaster if (1) there has been verified damage to real estate and (2) the loan already includes funds for physical losses.

Approximately 2.15 percent of homeowners and 1.86 percent of business owners who received the physical disaster loan and were eligible for the mitigation funds in FY 2013–2018 also chose to take mitigation funds. The evaluation objective was to answer: What are the characteristics and perceptions (e.g., perceived susceptibility, benefits, and barriers) of disaster survivors who are eligible for the mitigation increase option?

Solution: The Summit Team conducted a mixed-methods evaluation and offered recommendations on future research and data collection, increasing awareness of the mitigation option through communication with borrowers, and increasing awareness of the mitigation option through improving internal SBA processes for loan officers.

Over the course of the evaluation, the Summit Team created a logic model and customer journey map and conducted a literature review of behavioral theories, an environmental scan of disaster communication materials, administrative data analysis, and interviews with both disaster survivors and SBA loan officers.

The Summit Team found that borrowers who took the mitigation option were more likely to be flood survivors, live in a high-flood-risk zone, have higher incomes and better credit scores, have hazard insurance, and have lower interest rates. However, both borrowers and loan officers faced significant challenges that included a lengthy application process and confusion for the former and a lack of knowledge and resources on the topic for the latter.

Result: The Summit Team empowered the SBA with evidence-based conclusions and recommendations the agency needed to better understand the behavior of its borrowers. The team organized these recommendations based on feasibility and impact so the SBA could choose the easiest to implement and most impactful to the agency's mission.

A final report, titled Evaluation of Characteristics and Perceptions of Disaster Assistance Mitigation Loan Option Borrowers, can be viewed on the SBA’s website.