Can my small business apply for a disaster loan?

If you run a small business or business located within a declared disaster area, you may qualify for assistance in the form of loans from the US Small Business Administration (SBA). According to the SBA, there are three types of disaster loans: Home Disaster Loans, Business Property Damage Recovery Loans, and Economic Injury Disaster Loans (EIDLs).

  • Home Disaster Loans: Available to homeowners or renters to repair or replace disaster-damaged real estate or personal property, including vehicles. The SBA says its regulations limit mortgage loans to $200,000 (for real estate repair or replacement) and $40,000 (for personal property repair or replacement), respectively.
  • Business Disaster Property Damage Recovery Loans: Available to businesses of any size to repair or replace business property, including real estate, inventory, supplies, machinery and equipment, that was damaged by the disaster, the SBA says. Private non-profit organizations such as charities, churches, private universities, etc. are also eligible. Business loans are limited to $2,000,000 and apply to a combination of physical and economic injuries. The limit applies to all business disaster loans for each disaster.
  • Economic Injury Disaster Loans: These are working capital loans available to small businesses and non-profit organizations to help them meet their ordinary and necessary financial obligations and assist them during the disaster recovery period. Loans are limited to $2 million and apply only to the economic injury determined by the SBA, less business interruption insurance and other qualified financial assistance. EIDL assistance is available only to those who cannot finance their own recovery.

ARE THERE ANY RESTRICTIONS ON LOAN ?

The SBA says there are some restrictions on who qualifies for a loan:

  • Uninsured Losses – Only uninsured or uncompensated disaster losses are eligible.
  • Ineligible Property: Second homes, personal pleasure boats, airplanes, RVs, and similar properties will not be accepted unless used for commercial purposes. Properties such as antiques and collections qualify only to the extent of their functional value. Quantities for gardening, swimming pools, etc., are limited.
  • Default: Applicants who have not met the terms of previous SBA loans do not qualify.

ARE THERE ANY REQUIREMENTS FOR CREDITS?

Here are some additional requirements for eligibility, according to the SBA:

  • Credit history: The SBA considers credit history.
  • Repayment: The SBA requires the applicant to demonstrate the ability to repay the loan.
  • Collateral: Loan applicants for physical losses greater than $25,000 in disaster declarations and for all EIDL loans greater than $25,000 must provide collateral, for which the SBA says real estate is allowed. The SBA will not reject a loan for lack of collateral, but does require the applicant to provide what is available.

WHAT ARE THE INTEREST RATES?

Legally, interest rates depend on whether each applicant has credit available elsewhere, the SBA says. If the SBA determines that you have the ability to finance your own recovery, you are considered to have available credit elsewhere.

For applicants who cannot obtain credit elsewhere, the interest rate will not exceed 4%. For those who can get credit elsewhere, the interest rate will not exceed 8%, according to the SBA.

WHAT ARE THE TERMS OF THE LOAN?

The maximum term of a loan is 30 years. However, the law restricts businesses with credit available elsewhere to three years. The SBA sets the installment payment amount and due date on a case-by-case basis.

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