SBA Disaster Loans: Who is Eligible and What Types Are There?
The SBA offers a variety of disaster related loans that can help small businesses recovery from natural disasters and even prevent future damage. Whether to repair damaged property or equipment, or to help run the business in the recovery period, small businesses needing funding to bounce back from a disaster should explore their SBA options.
SBA disaster loans are actually available to homeowners and businesses alike. SBA disaster loans become available after a disaster is declared by the President, a governor, the Secretary of Agriculture, the Secretary of Commerce or the SBA itself. FEMA's website includes information on designated disasters. Businesses, non-profits and homeowners then have until a set deadline to submit their disaster loan application. For example, those in many Florida counties affected by Tropical Storm Fay have until June 6th to submit their application for SBA disaster loans.
Two types of SBA disaster loans apply to small businesses: Business Physical Disaster Loans and Economic Injury Disaster Loans. Physical disaster loans can go toward repairing real estate, buildings, equipment, supplies or other property damaged by a recognized disaster. Economic injury loans go toward working capital, to help the borrower make it through the recovery period.
The combined limit of these loans cannot exceed $2,000,000 unless the business is a major source of employment in the area and special SBA approval is granted. The loans feature fixed interest rates that differ depending on whether the applicant is deemed to have access to other credit. The maximum term of these loans is 30 years.
Damages covered by insurance are not eligible for repair through SBA disaster loans. Criteria considered for loan approval include credit history, ability to repay and what collateral can be offered.
Those who qualify, however, can also be eligible for mitigation funds to spent on preventative repair that will lessen the likelihood of damage in the future.
- SBA Disaster Assistance
- SBA Disaster Loan Fact Sheet [pdf] (SBA)
- Tell Your Neighbor About Disaster Assistance (Muncie Free Press)
- Tax Relief in Disaster Situations (IRS)
- Different Types of Commercial Insurance (FindLaw)