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SBA's Disaster Loan Program Explained

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SBA's Disaster Loan Program Explained

By kmurray, Contributor and Moderator
Published: March 31, 2014 Updated: April 1, 2014

Did you know that in the wake of a disaster, SBA provides low-interest disaster loans to homeowners, renters, businesses of all sizes and private, nonprofit organizations? In the aftermath of hurricanes, floods, earthquakes, wildfires, tornadoes and other disasters, SBA is the primary source of money from the federal government for long-term recovery assistance.

Am I eligible?

SBA’s Disaster Loan Program is not exclusively for small businesses. These low-interest, long-term loans are available for damage to private property owned by individuals, families, businesses of all sizes and private nonprofits not fully covered by insurance.

While property owners usually have some insurance coverage, often it does not cover all losses or even the type of hazard that caused the damage. And that’s where a disaster loan comes into play.

What can I use the loan for?

There are actually a few different types of disaster loans available. SBA can provide up to $2 million in disaster assistance for businesses.  This includes loans to cover physical damage and economic injury losses. Some applicants will qualify for both an economic injury loan and a physical disaster loan.  Meanwhile, the dollar limit for the combined loans is $2 million.

Physical damage is probably what you think of first when it comes to a disaster – the more tangible damages done during a disaster. Businesses and nonprofit organizations of all sizes can apply. A physical disaster loan can address losses not fully covered by insurance and can go toward repairing or replacing:

  • Real property
  • Machinery
  • Equipment
  • Fixtures
  • Inventory
  • Leasehold improvements

Economic injury means that because of a disaster, you’re unable to meet your business obligations and pay ordinary and necessary operating expenses. So, an economic injury disaster loan (or EIDL) provides the necessary working capital (of up to $2 million) to help your small business or private nonprofit organization survive until normal operations resume after a disaster.

Renters can also apply for disaster loans of up to $40,000 to repair or replace their disaster damaged personal property (like furniture, rugs, clothing, appliances—anything damaged by the disaster).  Homeowners may borrow up to $200,000 to repair or replace disaster damaged real estate, plus an additional $40,000 to cover personal property losses.

How does the process work?

  • After a presidential disaster declaration, first register with FEMA. In most cases, you'll be referred to SBA for possible loan assistance. Then you should apply online, which is the fastest way to receive a decision about your loan eligibility.
  • Your loan processing is next. SBA will conduct a credit check and an onsite inspection to determine your losses. A loan officer will work with you to approve or decline a loan.
  • Generally, within five days of signing SBA’s loan closing documents, your first disbursement is made. A case manager will work with you to meet all your loan conditions and schedule the rest of your disbursements until you receive the full loan amount.

So when disaster strikes, remember that SBA is here to help. Check out this short video to learn more about how, and get more details here about the disaster assistance program.

About the Author:

Katie Murray

Contributor and Moderator

I am an author and moderator for the the SBA.gov Community. I'll share useful information for your entrepreneurial endeavors and help point you in the right direction to find other resources for your small business needs. Our ongoing goal is to improve this site to meet your needs, so we're happy to receive your feedback and participation. Thanks for joining our online Community here at SBA.gov!

Comments:

This sounds like a great loan program. I work in the home restoration industry where I come across a lot of people that either don't have property damage insurance at all or don't have enough coverage to fully repair the water or fire damage they have. This low interest disaster loan could really help these people out. I'll have to read through the additional resources and learn a little more about this, but I really appreciate you sharing this post!
i have one small project and i need about 20.000 dollar for this project. I can borrow 20000 dollar amount of how thank viewed
Disaster relief is critically important when communities are impacted with extreme damage. Getting involved with communities and educating people on how to cope with catastrophe is important.

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