Small Business Administration (SBA) Disaster Loans

The U.S. Small Business Administration (SBA) offers several types of disaster loans designed to help businesses, homeowners, renters, and non-profit organizations recover from declared disasters. These loans aim to provide the necessary funds to repair or replace property damaged in a disaster and to help businesses overcome economic injury. Here are the main types of SBA disaster loans:

1. Business Physical Disaster Loans: These loans are available to businesses of any size and most private nonprofit organizations. They can be used to repair or replace real estate, inventories, supplies, machinery, and equipment damaged or destroyed in a disaster. The aim is to restore the property to its pre-disaster condition. For more information, see Physical Damage Loans. 
2. Economic Injury Disaster Loans (EIDLs): EIDLs are targeted at small businesses, small agricultural cooperatives, and most private non-profit organizations that have suffered an economic injury and are unable to meet their obligations as a result of a disaster. These loans are intended to provide the necessary working capital to help businesses survive until normal operations resume after a disaster, covering financial obligations and operating expenses that could have been met had the disaster not occurred. For more information, see Economic Injury Disaster Loans. 
3. Home Disaster Loans: Homeowners and renters are eligible for these loans, which can be used to repair or replace homes and personal property damaged in a disaster. Homeowners may borrow up to repair or replace their primary residence to its pre-disaster condition. Both homeowners and renters are eligible to borrow funds to replace lost or disaster-damaged personal property, including vehicles. For more information, see Physical Damage Loans. 
4. Military Reservists Economic Injury Loans: If an essential employee is called up to active duty as a military reservist, the business they leave behind may be eligible for financial assistance through the Military Reservists Economic Injury Loans (MREIDL). These loans are designed to provide the necessary funds to help an eligible small business meet its operating expenses that it could have met but is unable to meet because an essential employee was called up to active duty in their role as a military reservist. For more information, see Military Reservist Loans. 

Each of these loan types has specific eligibility requirements, interest rates, and terms that are determined based on the applicant's financial condition and the extent of the disaster's impact. The SBA sets these terms to make recovery as feasible as possible for affected individuals and businesses.

SBA disaster loans for individuals primarily assist homeowners and renters in recovering from a declared disaster. These loans can be used to repair or replace damaged or destroyed personal property or real estate that isn't covered by insurance or other recoveries. Here's a detailed look at how these loans work for individuals:

Types of SBA Disaster Loans for Individuals

1. Home Disaster Loans: These loans help homeowners repair or replace damaged or destroyed real estate. Home disaster loans can also cover landscaping and certain other property damaged by the disaster. For more information, see Economic Injury Disaster Loans. 

2. Personal Property Loans: Renters and homeowners can apply for personal property loans to repair or replace personal property damaged or destroyed in a disaster. This includes, but is not limited to, furniture, clothing, computers, appliances, and cars. For more information, see Economic Injury Disaster Loans. 

The U.S. Small Business Administration (SBA) determines eligibility for disaster loans for individuals based on several key factors, aimed at ensuring that assistance is provided to those most in need and who meet the basic criteria for financial aid.

Here's an overview of how the SBA assesses eligibility for disaster loans for individuals, including homeowners and renters:

1. Declared Disaster Area: The individual's primary residence must be located in an area that has been officially declared a disaster area by the President, the SBA, or the Secretary of Agriculture. You can use the SBA search to find a disaster declaration by clicking here. 
2. Direct Impact: The individual must demonstrate that their property was directly impacted by the disaster. The damage must be to property that is eligible for repair or replacement under the SBA disaster loan program.
3. Credit Check: The SBA will conduct a credit check to assess the applicant's creditworthiness. Applicants do not need to have perfect credit, but they should have a credit history that demonstrates a reasonable ability to repay loans. Learn about repairing credit by clicking here. 
4. Ability to Repay: The SBA evaluates the applicant's financial statements and cash flow projections to determine their ability to repay the SBA loan. This includes reviewing the applicant's income, debts, and monthly expenses.
5. Insurance Claims: Applicants are required to pursue any insurance claims related to the disaster damage. If insurance proceeds are available, they must be used toward the repair or replacement of the damaged property. The SBA loan can then be used to cover costs that are not covered by insurance or other recoveries. Learn about insurance claims after a disaster by clicking here. 
6. Specific Purposes: SBA disaster loans for individuals must be used to repair or replace damaged property that is not fully covered by insurance or other recoveries. This includes repairing or rebuilding a primary residence and replacing personal property. The funds cannot be used for upgrades or additions unless required by building codes.
7. Duplication of Benefits: If the applicant is receiving assistance from other federal programs for the same purpose, the SBA will coordinate benefits to ensure there is no duplication. This may affect the loan amount or eligibility. Learn more about FEMA benefits by clicking here. 
8. Collateral for Larger Loans: For loans over $25,000, the SBA requires collateral to the extent possible. However, the SBA will not deny a loan for lack of collateral but will require borrowers to pledge what is available.
9. Legal Status: Applicants must be U.S. citizens, non-citizen nationals, or legal aliens to qualify for SBA disaster loans.
10. Economic Injury: For businesses and certain non-profits, the SBA also considers economic injury and the need for working capital to ensure the entity can continue operating until normal operations resume.

Homeowners and renters affected by a declared disaster may be eligible for SBA disaster loans to help cover losses not fully covered by insurance or other sources. 

• Homeowners can apply for up to $500,000 to replace or repair their primary residence. 
• Renters and homeowners may also borrow up to $100,000 to replace or repair personal property, such as clothing, furniture, cars, and appliances that were damaged or destroyed. 

Secondary homes or vacation properties are not eligible for these loans. However rental properties may qualify for assistance through SBA's business physical disaster loan program. 

Any proceeds from insurance coverage will be deducted from the eligible loan amount. 

Generally, to qualify for any type of SBA loan—disaster loan or otherwise—you’ll need to have a credit score between 640 and 670, or higher.

This being said, for any of the four loans in the official SBA disaster loan program, it will be up to the SBA to verify your credit and determine your eligibility. With an SBA Express Bridge loan, on the other hand, the SBA lending partner you’re working with will review your credit and decide whether you qualify.

Unfortunately, the SBA cites low credit scores as the most common reason applications are denied. Therefore, if you have average or poor credit, you’ll likely want to take steps to improve your credit score before applying for an SBA loan. Learn about repairing credit by clicking here. 

If your insurance covers some, but not all, of the damages after a disaster, you can still apply for an SBA disaster loan to help cover the remaining costs.

Learn more about insurance claims after a disaster by clicking here. 

Here's what you need to know and the steps you should take:

• Apply for an SBA Disaster Loan

  • Don't wait for your insurance settlement to apply for an SBA disaster loan. The SBA encourages you to apply as soon as possible after a disaster is declared.
  • When applying, disclose all insurance coverage related to the damage. This information will be considered in the loan evaluation process.

• Insurance Settlements

  • The SBA will ask about your insurance coverage as part of the loan application process. It's important to provide accurate and complete information.
  • If you receive an insurance settlement after applying for an SBA loan but before the loan is closed, you must inform the SBA. The loan amount might be adjusted based on the insurance proceeds you receive.
  • In some cases, the SBA may issue a loan based on the estimated damage, with the understanding that the loan amount will be reduced by any insurance recoveries designated for the same purpose.

• Loan Disbursement and Insurance Proceeds

  • If your insurance settlement covers only a part of the damage, the SBA disaster loan can be used to make up the difference for eligible repair or replacement costs.
  • The SBA may disburse loan funds with the understanding that insurance proceeds will be used first to cover the damages, and SBA loan funds will be used for any remaining costs. In some instances, the SBA may require you to pay down or pay off the SBA loan with the insurance proceeds.

• Coordination Between Insurance and SBA Loans

  • It's crucial to keep the SBA informed about the progress of your insurance claims and any adjustments to the settlement amount.
  • In situations where insurance proceeds are delayed, the SBA may consider providing a loan to bridge the gap, with the expectation that the loan will be repaid with the insurance proceeds once received.

• Using SBA Loans and Insurance Proceeds Together

  • You must use insurance proceeds as specified in your insurance policy, and SBA loan funds must be used for disaster-related damages not covered by insurance or other recoveries.
  • It's important not to use the funds for the same expenses to avoid duplication of benefits. The SBA loan should be used for repair or replacement costs that exceed the insurance coverage.

When applying for a disaster loan from the U.S. Small Business Administration (SBA), you'll need to gather several pieces of information and documents to complete your application. Being prepared with the right documentation can help streamline the process and potentially expedite the review and approval of your loan. Here’s a checklist of the information and documents generally required:

Personal Information

• Contact information: Name, phone number, email address, and mailing address.
• Social Security number: For individual applicants.
• Federal Tax ID number: For businesses and non-profit organizations.
• Insurance information: Details of any property or disaster-related insurance policies you hold.

Financial Information

• Personal financial statement: A detailed list of personal assets, liabilities, income, and expenses. The SBA provides a form for this purpose (Form 413).
• Tax returns: Copies of your most recent federal tax returns, including all schedules and attachments. For businesses, you'll also need to include the returns of each principal owning 20% or more of the business.
• Employer Identification Number (EIN): For businesses and non-profit organizations.

Property Information and Damage Assessment

• Property details: The address of the damaged property and a description of the damage.
• Repair and replacement estimates: Detailed estimates of the costs for repairs or replacement of damaged property.
• Photos of damage: If available, photographs to document the extent of the damage can be helpful.

Loan Application History

• Previous SBA loans: If you have received or applied for other SBA loans, including details of the loan and the status of your application.

Additional Documentation for Businesses

• Business financial statements: Profit and loss statements and balance sheets for the most recent completed fiscal year and year-to-date.
• Monthly sales figures: This may be required to demonstrate the impact of the disaster on your business operations.

Ownership and Affiliation

• Ownership details: Information on all owners with a 20% or greater stake in the business.
• Affiliates: Details of any affiliate businesses, including those owned by you or by business partners if applicable.

SBA disaster loans are primarily intended to help homeowners, renters, businesses, and nonprofit organizations repair or replace property damaged in a declared disaster to its pre-disaster condition. However, there are specific circumstances under which you might be able to use an SBA disaster loan to make upgrades. In summary, while SBA disaster loans primarily focus on restoring damaged property to its pre-disaster condition, there are provisions for funding certain upgrades, particularly those that are aimed at disaster mitigation or are required for code compliance.

Here's what you should know:

Home or Personal Property

• Mitigation Improvements: While the primary goal is restoration to pre-disaster condition, the SBA allows for a percentage of the loan amount to be used for improvements that protect your property against future damage from similar disasters. These mitigation measures could include elevating a home in a flood-prone area, installing storm shutters, or reinforcing the roof.
• Code Requirements: You may use the loan to make upgrades required to meet current building codes during the repair process, even if these upgrades were not part of the original structure.
• Voluntary Upgrades: Voluntary upgrades or improvements that do not relate to disaster mitigation or code requirements are generally not eligible for funding through an SBA disaster loan.

Business Property

• Mitigation Improvements: Similar to home disaster loans, a portion of a business disaster loan can be used for mitigation purposes to protect the business property from future damage.
• Code Compliance: Upgrades necessary to bring the damaged property up to current building codes can be included in the loan amount.
• Non-Eligible Upgrades: Like home loans, voluntary upgrades that do not address mitigation or code compliance are typically not covered by SBA disaster loans.

Considerations

• Approval and Limits: Any upgrades or improvements beyond simple restoration or required code compliance must be approved by the SBA and are subject to certain limits. The SBA will evaluate such requests on a case-by-case basis.
• Insurance Proceeds: If you receive insurance proceeds that are specifically earmarked for code upgrades or mitigation, this may affect the amount you are eligible to borrow from the SBA.

Yes, you can apply for more than one type of disaster loan if you're affected by a declared disaster and meet the eligibility criteria for each loan type. The U.S. Small Business Administration (SBA) offers different disaster loan options to address the various needs of individuals, businesses, and nonprofit organizations after a disaster. Here's how you can leverage multiple loan types:

Types of SBA Disaster Loans

1. Home Disaster Loans: Homeowners and renters can use these loans to repair or replace disaster-damaged real estate and personal property, including vehicles. For more information, see Physical Damage Loans. 
2. Business Physical Disaster Loans: Businesses and nonprofit organizations can apply for these loans to repair or replace disaster-damaged property, including real estate, inventory, supplies, and equipment. For more information, see Physical Damage Loans. 
3. Economic Injury Disaster Loans (EIDL): These loans provide working capital to small businesses and nonprofit organizations to help them meet their financial obligations that cannot be met as a direct result of the disaster. For more information, see Economic Injury Disaster Loans. 

Applying for Multiple Loans

• Different Needs: You may apply for one loan to repair physical damage to your home and another to cover economic injury for your business. Each loan serves a different purpose and has its own application process and limits.
• Combined Loan Limits: While you can apply for more than one type of disaster loan, there are overall limits to how much you can borrow. For instance, the maximum borrowing amount for physical and economic injury in a disaster period may have a combined cap, depending on the scale of the disaster and your specific circumstances.
• Separate Applications: You'll need to submit separate applications for each type of loan. Be clear about the purpose of each loan and the damages or economic injuries you are seeking to address.

Considerations: 

• Insurance Recoveries: If you receive insurance proceeds for your damages, this will be considered when determining your eligibility and the amount of your loan(s).
• Mitigation: In addition to repairs, you might be eligible to include a certain amount for mitigation measures to protect your property against future damage in your physical disaster loan application.
• Documentation: Keep thorough documentation of all damages and economic injuries, as you'll need to provide evidence for each type of loan application.

No, you don't have to accept an SBA disaster loan even if approved. If you're approved, you can decline the loan, accept a portion of it, or accept the full amount. It's entirely up to you based on your financial situation and needs. Remember, though, that if you decline and later decide you need the loan, you may have to reapply, depending on the circumstances and deadlines. 

The time it takes to get approved for a disaster loan from the U.S. Small Business Administration (SBA) can vary based on several factors, including the complexity of your loan application, the volume of applications the SBA is processing at the time, and how quickly you submit the required documentation. However, there are general timelines you can expect:

• Initial Review Process
  • Loan Application Processing: After submitting your application, the SBA typically takes about 2 to 3 weeks to make a credit decision. This timeline can be shorter or longer depending on the specifics of the disaster and the influx of applications.
• Property Verification and Loan Processing
  • Inspection and Verification: If your application progresses past the initial review, the SBA will schedule an inspector to assess the property damage. This process can take a few days to a few weeks after you submit your application, depending on the accessibility of the area and the number of inspections queued.
• Loan Approval and Disbursement
  • Loan Approval: Once your loan is approved, you will receive loan closing documents to sign. The SBA aims to decide on each application as quickly as possible, often within a few weeks of receiving all necessary information.
  • Disbursement: The first disbursement (a portion of the total approved loan amount) usually occurs within 5 days of receiving your signed loan closing documents. The SBA will then release additional funds based on the terms of your loan and the progress of your recovery efforts.
• Overall Timeline
  • The entire process, from application to the first disbursement, typically takes 4 to 6 weeks. This timeline can be affected by the factors mentioned above, as well as by how quickly you respond to requests for additional information or documentation.

If your SBA disaster loan application is denied, it's important to understand that there are steps you can take and options available for reconsideration.

Here's what you should know and consider doing:

1. Review the Reason for Denial

   • The SBA will provide you with a letter explaining why your application was denied. Common reasons include credit issues, inability to repay the loan, or insufficient damage assessment.

2. Request Reconsideration

   • If you believe the decision was made in error, or if you can address the reason for the denial, you have the option to request a reconsideration.
   • You must submit your reconsideration request in writing within six months from the date of the denial letter.
   • Include any additional information or documentation that addresses the SBA's reasons for denial. This could be improved financial information, evidence of creditworthiness, or additional estimates for repair costs.

3. Gather Additional Documentation

   • Depending on the reason for denial, you may need to gather additional financial documents, repair estimates, or letters of explanation that can help strengthen your case.

4. Submit the Reconsideration Package

   • Send the reconsideration package to the SBA, ensuring it includes all requested information and any new evidence to support your application. Make sure to keep copies for your records.

5. Appeal Process

   • If your application is denied again after reconsideration, you have the right to appeal the decision to the SBA’s Office of Hearings and Appeals (OHA). Details on how to file an appeal will be provided in the denial letter.
   • An appeal must be filed within 45 days after receiving the denial letter from the reconsideration process.

For more information, see 8(a) Eligibility Appeals. 

If you find yourself in a situation where you're unable to meet your loan repayment obligations for an SBA disaster loan, it's important to act promptly and communicate openly with the SBA. Here are steps you can take to address the situation:

1. Contact the SBA Immediately

   • Reach out to the SBA as soon as you realize you might have trouble making a loan payment. The sooner you communicate your situation, the more options you may have available.

2. Discuss Your Situation

   • Explain your financial difficulties to the SBA. Be prepared to provide details about your situation and any documentation that supports your case, such as a significant decrease in income or unexpected financial burdens.

3. Inquire About Deferment or Forbearance Options

   • Ask about the possibility of a deferment or forbearance, which can temporarily suspend or reduce your loan payments. The SBA occasionally offers such options to borrowers facing genuine financial hardship.

4. Consider a Repayment Plan

   • You might be able to negotiate a modified repayment plan that better fits your current financial situation. This could involve extending the loan term to reduce monthly payments or restructuring the loan in a way that makes repayment more manageable.

5. Look Into Loan Modification Programs

   • Depending on your circumstances and the nature of your hardship, the SBA may have loan modification programs available that could provide relief, such as adjusting interest rates or terms to lower payments.
6. Understand the Consequences of Default
   • Be aware of the potential consequences of defaulting on your loan, including damage to your credit score and possible legal action. Understanding these risks underscores the importance of seeking assistance early.

The SBA understands that borrowers may face challenges after a disaster and is typically willing to work with you to find a solution that helps you maintain your loan obligations without further straining your financial situation.

FEMA partners with other agencies to help meet the needs of disaster survivors. The U.S. Small Business Administration (SBA) offers low-interest disaster loans to homeowners and renters in a declared major disaster area. You don’t need to own a business to apply for SBA assistance.

You may have been referred to SBA after applying for FEMA disaster assistance. If you still have unmet needs, loans may help with home repair or replacement, personal property, vehicles, mitigation, business losses, and working capital for small businesses and most private nonprofits.

For disasters declared on or after March 22, 2024, you may choose to complete an SBA disaster loan application and it will not impact your eligibility for FEMA assistance.

For more information, see FEMA's Individuals and Households Program.