Small Business Administration (SBA) Disaster Loans
Small Business Administration (SBA) Disaster Loans
SBA provides low-interest disaster loans to help businesses and homeowners recover from declared disasters, they include:
Home Disaster Loans
Business Physical Disaster Loans
Economic Injury Disaster Loans (EIDL)
These loans are available to homeowners, renters, and business owners. Owning a business is not a requirement. They MUST be paid back. An SBA loan can affect your eligibility for other FEMA programs.
Loans to homeowners or renters to repair or replace disaster damages to real estate or personal property owned by the victim. Renters are eligible for their personal property losses. Homeowners and renters may apply to the SBA for loans to help recover uninsured and underinsured losses from a disaster.
Homeowners may apply for a real property loan to repair or restore their primary residence to its pre-disaster condition, to protect the damaged property from a similar disaster in the future, and to make upgrades and changes required by city building codes.
Renters and homeowners may also apply for a personal property loan to repair or restore personal property items, including automobiles, furniture, or clothing, damaged or lost in a disaster.
Loans to businesses to repair or replace disaster damages to property owned by the business, including real estate, machinery, equipment, inventory, and supplies. Businesses of any size are eligible. Non-profit organizations such as charities, churches, private universities, etc. are also eligible. They may also be used to mitigate against future damage with improvements, such as grading or contouring of land, relocating or elevating utilities or mechanical equipment, building retaining walls, etc.
Loans for working capital to small businesses and small agricultural cooperatives to assist them through the disaster recovery period. EIDL assistance is available only to applicants with no Credit Available Elsewhere - if the business and its owners cannot provide for their own recovery from non-government sources.
Small businesses that do not have Credit Available Elsewhere and are unable to meet ordinary and necessary financial obligations due to the disaster are eligible for an EIDL. EIDL proceeds may only be used for working capital necessary to enable the business or organization to alleviate the specific economic injury caused by the disaster and to resume normal operations.
By law, the interest rates depend on whether each applicant has Credit Available Elsewhere. An applicant does not have Credit Available Elsewhere when SBA determines that the applicant does not have sufficient funds or other resources, or the ability to borrow from non-government sources, to provide for its own disaster recovery. An applicant which SBA determines can so provide for its own recovery has Credit Available Elsewhere. Generally, SBA determines that over 90% of disaster loan applicants do not have Credit Available Elsewhere. Interest rates are determined by formulas set by law, and may vary over time with market conditions.
The law authorizes loan terms up to a maximum of 30 years. However, for businesses with Credit Available Elsewhere, the law limits the loan term to a maximum of 3 years.
SBA determines the term of each loan in accordance with the borrower's ability to repay. Based on the financial circumstances of each borrower, SBA determines an appropriate installment payment amount, which in turn determines the actual term.
Uninsured Losses. Only uninsured or otherwise uncompensated disaster losses are eligible. Any insurance proceeds which are required to be applied against outstanding mortgages are not available to fund disaster repairs and do not reduce loan eligibility. However, any insurance proceeds voluntarily applied to any outstanding mortgages do reduce loan eligibility.
Ineligible Property. Secondary homes, personal pleasure boats, airplanes, recreational vehicles and similar property is not eligible, unless used for business purposes. Property such as antiques and collections is eligible only to the extent of its functional value. Amounts for landscaping, swimming pools, etc. are limited.
Noncompliance. Applicants who have not complied with the terms of previous loans are not eligible. This includes prior borrowers who did not maintain the required flood insurance.
Repayment. SBA's disaster assistance is in the form of loans. Applicants must show the ability to repay all loans.
Collateral. Collateral is required for all physical loss loans over $10,000 and all EIDL loans over $5,000. SBA takes real estate as collateral where it is available. Applicants do not need to have full collateral; SBA will take what is available to secure each loan.
FEMA referred me to SBA
Being referred to the Small Business Administration (SBA)
After you apply for disaster assistance, you may receive a letter from FEMA referring you to SBA. Submitting an SBA disaster loan application is a necessary step to being considered for other forms of disaster assistance. You do not have to accept the loan, and it is free to apply. If you are approved for the loan and turn it down, you have six months to change your mind and re-activate the application if you discover additional damage or if your insurance settlement is not enough to cover your repairs.
To meet the needs of disaster survivors, FEMA partners with other agencies. SBA disaster loans are intended to help cover the cost of damages and losses not covered by insurance or funding from FEMA for both personal and business. Since the FEMA Individuals and Households Program does not provide grant assistance to businesses, or rental properties that are not occupied by the owner as a primary residence, FEMA applications of this type are automatically referred to the SBA for disaster loan consideration.
Loan amounts and terms are set by SBA and are based on each applicant’s financial condition. If SBA finds that you cannot afford a loan, they will automatically refer you to FEMA’s Individuals and Households program. Your file will be reviewed to determine if you qualify for additional grant assistance.
Secondary homes or vacation properties are not eligible for these loans. However, qualified rental properties may be eligible for assistance under the SBA business disaster loan program.
If your disaster loan application was denied by the SBA you can appeal this decision. If you do decide to appeal your SBA disaster loan decline, then you’ll need to submit your request for reconsideration to an SBA Disaster Assistance Processing and Disbursement Center (DAPDC) within six months of receiving your original denial. If six months have already passed since your initial application for an SBA disaster loan was denied, you’ll need to submit a whole new application.
Note: Your appeal request should contain documentation of the information that has led you to attempt to appeal the denial. You’ll also need to provide updated and more recent business financial statements with your appeal.
Should your appeal itself be denied, then the next step would be to appeal directly with the Director of the DAPDC. If you continue to this secondary appeal process, it’s important to be aware that—more often than not—the DAPDC Director’s decision is final.
SBA Loans for Businesses
Businesses of all sizes and private nonprofit organizations may borrow up to $2 million to repair or replace damaged or destroyed real estate, machinery and equipment, inventory, and other business assets. SBA can also lend additional funds to businesses and homeowners to help with the cost of improvements to protect, prevent or minimize the same type of disaster damage from occurring in the future.
Businesses may receive an EIDL and a business physical disaster loan
The maximum loan amount is $2 million, which may be waived if a business is a major source of employment
The mitigation loan amount may not exceed 20% of the verified loss amount
Interest rates depend on whether the applicant is a for-profit or non-profit organization and whether it has Credit Available Elsewhere
Businesses with Credit Available Elsewhere – 2.855%
Businesses without Credit Available Elsewhere – 5.710%
Non-Profit Organizations regardless of Credit Available Elsewhere – 2.000
The maximum loan term is 30 years
Collateral is generally required for loans in excess of $25,000
Loss of anticipated profits or a drop in sales is not considered economic injury for an EIDL
Business Loan amounts are limited by law to $1,500,000 for real estate, machinery and equipment, inventory and all other physical losses. The actual amount of each loan, up to this maximum, is limited to the verified uninsured disaster loss. Refinancing of existing mortgages or liens on real estate and machinery and equipment is eligible in some cases up to the amount of the loan for real estate and machinery and equipment repair/replacement. Loan amounts may be increased by up to 20% for devices to mitigate against damage to the real property of the same type as the disaster.
Homeowners & Renters
Home Disaster Loans
If you are in a declared disaster area and have experienced damage to your home or personal property, you may be eligible for financial assistance from the SBA — even if you do not own a business. As a homeowner, renter, and/or personal property owner, you may apply to the SBA for a loan to help you recover from a disaster. You can apply online for an SBA disaster assistance loan. SBA will send an inspector to estimate the cost of your damage once you have completed and returned your loan application. You must submit the completed loan application and a signed and dated IRS Form 4506-C giving permission for the IRS to provide SBA with your tax return information.
Homeowners may apply for up to $200,000 to replace or repair their primary residence. The loans may not be used to upgrade homes or make additions unless required by the local building code. If you make improvements that help prevent the risk of future property damage caused by a similar disaster, you may be eligible for up to a 20 percent loan amount increase above the real estate damage, as verified by the SBA.
In some cases, SBA can refinance all or part of a previous mortgage when the applicant does not have credit available elsewhere and has suffered substantial disaster damage not covered by insurance.
Disaster loans up to $200,000 are available to homeowners to repair or replace damaged or destroyed real estate. Homeowners and renters are eligible for up to $40,000 to repair or replace damaged or destroyed personal property
- The mitigation loan amount may not exceed 20% of the verified loss amount
- Interest rates depend on whether the applicant has Credit Available Elsewhere
- Individual with Credit Available Elsewhere – 3.125%
- Individual without Credit Available Elsewhere – 2.855%
- The maximum loan term is 30 years
- Collateral is generally required for loans above $25,000
- Loan proceeds may not be used to repay any debts on personal property, secured or unsecured unless an individual incurred the debt as a direct result of the disaster
- Homeowners and renters must register with FEMA
Home Loan amounts are limited by SBA regulation to $200,000 to repair/replace real estate and $40,000 to repair/replace personal property. The actual amount of each loan, up to these maximums, is limited to the verified uninsured disaster loss. Refinancing of existing mortgages on homes is eligible in some cases up to the amount of the loan for real estate repair/replacement. Loan amounts may be increased by up to 20% for devices to mitigate against damage to the real property of the same type as the disaster.