What You Should Know About SBA Disaster Loans

With the onslaught of natural disasters that have occurred over the past few years, many businesses have suffered the loss or damage of assets, and more. These physical and economic damages have caused many businesses to have to shut their doors, or reduced their production and output.

To help combat some of the problems for homeowners, renters, and businesses — both private and non-profit — the SBA provides low-interest disaster loans to help repair or replace real estate, property, machinery, equipment, inventory, and other business assets that may have been destroyed or damaged by a declared disaster.

SBA has disaster offices throughout the country, where they provide low-interest, long-term loans. There are a variety of SBA loans, including:

• Home and personal property loans- These loans are available to those in declared disaster areas, and those who are known as the victims of a disaster. Even though they are from the SBA, you do not have to be a business to get them.
• Business physical disaster loans- Any business or private, non-profit organization located in a declared disaster area that incurred damage during the disaster can apply for a loan to help replace or repair the said damage.
• Economic injury disaster loans- This is a loan for small business or private, nonprofit organizations that have suffered economic injury, even if they did not suffer physical damage, due to a declared disaster.
• Military reservists economic injury loans- These loans are only for eligible small businesses to help them meet ordinary and necessary operating expenses that it could have met, but are now unable because an important employee was called into active duty because of a disaster.

The loans that are of greatest importance to businesses are physical disaster loans and economic injury disaster loans. Here is a little more information about said loans:

Physical Disaster Loans

• Businesses of all sizes and private, nonprofit organizations may apply.
• Loan amounts can be up to $2 million.
• Loans must be used to repair or replace damaged real estate, equipment, inventory and fixtures.
• Loans may not be used for expansion unless required to be up to code.
• The loan may be increased up to 20% of the total amount of disaster damage (verified by SBA) to prevent future damage by disasters of the same type.
• Loans are to cover under-insured loses or uninsured losses.

Economic Injury Disaster Loans

• Small businesses, small agricultural cooperatives and certain private, nonprofit organizations of all sizes that suffer from substantial economic injury may be eligible to apply.
• Loans may be up to $2 million.
• Loans may be used to meet necessary financial obligations that they would have been able to pay had the disaster not occurred.

For both loans, interest rates won’t exceed 4% if the business does not have credit available elsewhere. The repayment term may be up to 30 years, and will depend on the business’s ability to repay. If the business has credit available somewhere else they interest rate won’t exceed 8%. The loans may be applied for directly to the SBA, at which time the SBA will send out an inspector to estimate damage, if the loan is awarded, funds may only be used under the stipulated SBA guidelines.