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Can My Small Business Apply for a Disaster Loan?

If you operate a small business located within a declared disaster area, you may be eligible for financial assistance in the form of loans from the U.S. Small Business Administration (SBA). According to the SBA, there are three types of disaster loans: Home Disaster Loans, Business Physical Disaster Loans, Economic Injury Disaster Loans (EIDLs).

A small business owner counting money.

  • Home Disaster Loans: Available to homeowners or renters to repair or replace real estate or personal property damaged in the disaster, including vehicles. The SBA says its regulations limit home loans to $200,000 (repair or replacement of real estate) and $40,000 (repair or replace personal property), respectively.
  • Business Physical Disaster Loans: Available to businesses of any size to repair or replace property owned by the business, including real estate, inventories, supplies, machinery and equipment, that was damaged by the disaster, the SBA says. Private, non-profit organizations such as charities, churches, private universities, etc., are also eligible. Business loans are limited to $2,000,000 and apply to the combination of physical and economic injury. The limit applies to all disaster loans to a business for each disaster.
  • Economic Injury Disaster Loans (EIDLs): These are working capital loans available to small businesses and non-profit organizations to help them meet their ordinary and necessary financial obligations and assist them through the disaster recovery period, the SBA says. The loans are limited to $2 million and apply only to the economic injury determined by SBA, less business interruption insurance and other qualified financial assistance. EIDL assistance is available only to those who cannot provide for their own recovery.

Are There Any Loan Eligibility Restrictions?

The SBA says there are some restrictions about who is eligible for a loan:

  • Uninsured Losses: Only uninsured or otherwise uncompensated disaster losses are eligible.
  • Ineligible Property: Secondary homes, personal pleasure boats, airplanes, recreational vehicles and similar property are not eligible, unless used for business purposes. Property such as antiques and collections are eligible only to the extent of their functional value. Amounts for landscaping, swimming pools, etc., are limited.
  • Noncompliance: Applicants who have not complied with the terms of previous SBA loans are not eligible.

Are There Credit Requirements?

Here are some additional requirements for eligibility, according to the SBA:

  • Credit history: The SBA takes credit history into account.
  • Repayment: The SBA requires that the applicant show the ability to repay the loans.
  • Collateral: Applicants for physical loss loans greater than $25,000 in disaster declarations and all EIDL loans greater than $25,000 must provide collateral, for which the SBA says real estate is permissible. SBA will not decline a loan for lack of collateral, but requires the applicant to provide what is available.

What are the Interest Rates?

Legally, the interest rates depend on whether each applicant has credit available elsewhere, the SBA says. If the SBA determines that you have the ability to provide for your own recovery, you are deemed to have credit available elsewhere.

For applicants unable to obtain credit elsewhere, the interest rate will not exceed 4 percent. For those who can obtain credit elsewhere, the interest rate will not exceed 8 percent, according to the SBA.

What are the Loan Terms?

The maximum term of a loan is 30 years. However, the law restricts businesses with credit available elsewhere to a maximum three-year term. SBA sets the installment payment amount and corresponding maturity on a case-by-case basis.

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