SBA disaster loans provide significant financial support to small businesses recovering from financial or physical damage after a declared disaster. These low-interest loans come with long repayment terms to cover costs that are not insured, such as easing upgrades and operating expenses. Disaster loans often fund faster than other SBA loan programs and help your business get up and running faster.
If you are dealing with difficulties from a disaster, it can be helpful to know how SBA disaster loan assistance works.
What is an SBA Disaster Loan?
SBA disaster loans are provided by US small business administrators to those affected by declared disasters, such as floods, hurricanes, wildfires, etc., if insurance does not cover damage or pay them in full.
These loans can be used by small businesses, nonprofits, homeowners and tenants of all sizes to repair or replace damaged property. They can also provide financial relief if a business loses revenue due to a disaster or if mandatory employees are called to aggressive military duties.
People who can use SBA disaster loans
Companies operating in officially declared disaster zones can apply for an SBA disaster loan. It can also be applied to private nonprofits, homeowners and tenants affected by declared disasters.
Types of SBA Disaster Loans
Provision of SBA Disaster Loans includes physical damage, mitigation assistance, economic injury disaster loans (EIDLs), and military reserve loans. Each loan will support individuals and businesses affected by a variety of disasters, including hurricanes, floods, wildfires, civil unrest, droughts, tornadoes and other declared emergencies.
|
Loan type |
Loan amount |
Terminology length |
interest rate |
collateral |
|
Physical damage |
Up to $2 million |
30 years |
Up to 4% if you can’t obtain other funding. Up to 8% if possible |
In the case of the presidential declaration, only loans exceeding $50,000, and in the agent declaration, $14,000 |
|
Mitigation support |
Up to $2 million |
30 years |
Up to 4% |
no |
|
Economic Injury Disaster Loan (EIDL) |
Up to $2 million |
30 years |
Up to 4% |
Loans above $50,000 only |
|
Military Reserve Loan |
Up to $2 million |
30 years |
Up to 4% |
Loans above $50,000 only |
Physical damage loans
Physical Damage Loans are designed to provide financial assistance to businesses, homeowners and tenants who have suffered physical damage due to the declaration of a disaster. These loans can be used to repair or replace damaged properties that are not fully covered by insurance, such as buildings, equipment, and inventory.
The maximum loan amount varies depending on the applicant. Renters and homeowners can receive up to $100,000 to repair or replace personal property, while homeowners can earn up to $500,000 for repairs or replace major residences. Businesses and nonprofits can receive up to $2 million for repairs or replacements.
- Device
- Equipment
- stock
- Improvement of leasehold rights
- machine
- real estate
Mitigation support
Mitigation Assistance will provide up to $2 million in financial assistance to businesses and homeowners with up to 20% additional disaster financing funds to build upgrades for future disaster preparation and protection. This support will help fund projects focused on wind, flooding, wildfires, earthquakes and any mitigation.
The project includes infrastructure improvements, building materials remodeling and upgrades. Ultimately, these measures will help reduce the cost of damage caused by declared nature and other disasters.
Economic Injury Disaster Loan (EIDL)
EIDLS provides working capital up to $2 million to cover necessary and regular operating expenses and financial obligations that businesses were unable to meet due to the impact of the disaster. This will allow small and medium-sized businesses, small-scale agricultural cooperatives, and most private nonprofits to close the gap during difficult times and help them recover from set-offs from the economy.
Only small businesses that cannot fund other locations are eligible to apply for EIDL Disaster Assistance.
Military Reserve Loan
Military reserve loans are designed to support small businesses experiencing financial difficulties when key employees are called to active duty in military reserves. These loans provide up to $2 million in working capital to cover operating expenses.
SBA Disaster Loan Requirements
All business loans There are requirements that include requirements provided by the SBA. To qualify as a SBA disaster loan, business, private nonprofit organization, homeowner, or tenant;
- It is located in an officially declared disaster area
- Suffering from the economic impact or serious economic injury of a declared disaster
- Provide evidence of creditworthiness and ability to pay off loans
- follow Corporate SBA size standards
- If you borrow more amounts than you need it, provide collateral
How to get a disaster loan
Getting a disaster loan requires three steps. The employer must complete the application, inspect, review and sign the loan document on the property.
1. application
Before applying for an SBA disaster loan, you must ensure that the SBA or the President has declared a disaster in your area. Once you have checked the status of your declaration and decided which loan type to accommodate, you can complete your disaster loan application online, directly at the Discovery Recovery Center, or by mail within the filing period.
When applying for a disaster loan, you must provide the following information:
- Applicant’s contact information and Social Security Number
- FEMA registration number
- Insurance information
-
Employer Identification Number (EIN), if applicable
- Financial information showing income, monthly expenses and account balance
- Real estate certificate or lease information
-
Give the IRS permission to provide tax return information to the SBA to use IRS Form 4506-C
- SBA Form 413
- Personal guarantees from owners with more than 20% of the business investment
2. inspection
The SBA reviews the application and schedules an SBA disaster loan inspection to assess the total loss of your property. The lender will then review other details such as insurance, creditworthiness, collateral and suggest the amount of the loan. This process usually takes within three weeks of receipt of the application.
SBA disaster loan processing times vary depending on the annual application volume, and take more than 2-4 weeks per year for higher volume applications.
The SBA provides updates regarding the status of your loan application. To check your status, log in to your SBA account or keep an eye on the updates via email.
3. Closures and fundraising
If your loan is approved, the SBA will send you a closure document to review and sign it. Read the contract thoroughly and ask your case manager questions before signing it.
You must receive your initial fund expenditure within 5 business days. If additional funds are required, the assigned case manager will schedule payments if it is up to 20% of the original amount.
Pros and cons of SBA Disaster Loans
Like any type of loan, you need to weigh the pros and cons of an SBA disaster loan to determine whether it’s right for you.
Conclusion
It’s not uncommon for small businesses to request it Funding to cover costs. Disaster loans are an invaluable resource for individuals and businesses even in times of crisis, as the goal of the SBA is to help small businesses succeed. Low interest rates and flexible repayment terms allow these loans to provide much-needed financial support for recovery and reconstruction efforts.
