Editorial · October 17, 2017
SBA Disaster Loans: How Businesses Apply for Relief
SBA disaster loans are low-interest loans from the U.S. Small Business Administration for businesses hurt by a declared disaster. A business does not need to have been damaged to qualify for one kind of loan. This guide explains who can apply, how much they can borrow, and when the deadlines fall.
Who can apply
The SBA lends to businesses of all sizes, to private nonprofit groups, to homeowners and to renters. The key test is location. Each SBA release lists the declared areas whose businesses can apply, so a declaration names the counties or towns that qualify.
This season, three big storms led to declarations. Hurricane Harvey hit Texas in August. Hurricane Irma reached the U.S. Virgin Islands on Sept. 6. Hurricane Maria struck Puerto Rico beginning on Sept. 17. Each declaration lists the places that can apply for help.
Sources: SBA news releases VI 15293 (Sept. 8, 2017) and PR 15322 (Sept. 23, 2017).
Two kinds of business loans
The first kind is the physical disaster loan. A business or nonprofit can borrow up to $2 million to repair or replace damaged property. That covers real estate, machinery, equipment, inventory and other business assets.
The second kind is the Economic Injury Disaster Loan. It gives working capital, which is cash to pay everyday bills while sales are down. The SBA says these loans are available even if the business had no physical damage. Small businesses and most private nonprofits can apply for them.
Some towns next to a declared area can apply only for the economic injury loan. Puerto Rico's declaration lists four such towns. Check the declaration for your own county or town before you apply.
Sources: SBA news release TX 15274-11 (Oct. 10, 2017); SBA news release PR 15322 (Sept. 23, 2017).
Rates, terms and extra money
In its September releases, the SBA put interest rates as low as 3.305 percent for businesses and 2.5 percent for private nonprofits. Terms can run up to 30 years. The SBA sets the loan amount and terms to fit each applicant's case.
A borrower may also ask for more money to guard against the next storm. The SBA says a loan can rise by up to 20 percent of the verified physical damage. That money can pay for upgrades that cut the risk of the same kind of damage. For homes, this can include a safe room or storm shelter.
Homeowners can borrow up to $200,000 to repair or replace a damaged home. Homeowners and renters can borrow up to $40,000 for damaged personal property, such as a car.
Sources: SBA news releases VI 15293 (Sept. 8, 2017) and PR 15322 (Sept. 23, 2017).
How to apply
Start by registering with the Federal Emergency Management Agency. You can do this at DisasterAssistance.gov or by calling 800-621-3362. The SBA says you do not need to wait for your insurance to settle or for a contractor's estimate. Registering on time keeps your chance to apply open.
Then fill out the SBA's electronic loan application at disasterloan.sba.gov/ela. You can also get one-on-one help at a Disaster Recovery Center or a Business Recovery Center. The SBA Customer Service Center takes questions at 800-659-2955 and can send forms. A paper application goes to the SBA Processing and Disbursement Center in Fort Worth, Texas.
The SBA's releases do not list the papers a business should gather, so ask the Customer Service Center what yours will need. Keep records of the damage and of your costs as you go.
Sources: SBA news releases TX 15274-11 (Oct. 10, 2017) and PR 15322 (Sept. 23, 2017).
Deadlines for this year's storms
Each declaration has its own dates, and they differ for property damage and for economic injury. Here is what the SBA has published.
- Hurricane Harvey, Texas: property damage by Oct. 24, 2017. Economic injury by May 25 of next year.
- Hurricane Irma, U.S. Virgin Islands: property damage by Nov. 6, 2017. Economic injury by June 7 of next year.
- Hurricane Maria, Puerto Rico: property damage by Nov. 20, 2017. Economic injury by June 20 of next year.
For Texas, the property damage date is one week away. Registering with FEMA before it is also part of the process.
Sources: SBA news releases TX 15274-11 (Oct. 10, 2017), VI 15293 (Sept. 8, 2017) and PR 15322 (Sept. 23, 2017).
How fast the SBA is moving
On Oct. 10, the SBA said it had approved more than $1 billion in disaster loans for Texas businesses and residents after Harvey. That came 46 days after the storm. The SBA noted that it took 90 days to reach that mark after Hurricane Sandy.
The total included more than 858 business loans worth $82 million. The rest went to residents. Business owners who are still unsure should talk to the SBA early, because the first deadline is close.
Source: SBA news release TX 15274-11 (Oct. 10, 2017).
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