What You Need to Know About the SBA’s Disaster Programs

  • October 30, 2015

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The Small Business Administration (SBA) is an agency run by the government that supports small businesses and their owners. In addition to providing educational resources, helping the federal government contract with small companies, and backing loans made to small businesses, part of the SBA’s mandate is to assist companies and their communities to recover after disasters. The idea is to help affected small businesses get back on their feet and stay up to date with expenses while recovering.

Providing Relief Through Loans

The central method for aiding communities as they recuperate from the effects of a hurricane, fire, flood, or other disaster, is by making low-interest loans. In most of its programs, the SBA backs loans made by other lenders, but the agency actually makes disaster loans itself. The loans go towards the cost of rebuilding; the goal is to restore property and commerce to its pre-disaster condition. Loans can range up to $2 million, interest rates land below 4 percent for those without available credit elsewhere (8 percent if there is other available credit), and terms are up to 30 years. Owners can also apply to receive as much as 20 percent more than the actual damages in order to protect the property against future losses.

sba-disaster-reliefTypes of Loans

There are a two main loans to apply for, which are based on the type of disaster and the sort of business you run.

Physical Disaster Loan: These are loans available to all businesses, whether large or small, private or non-profit. They are specifically for physical damage in the wake of a disaster.

Economic Injury Disaster Loans: These are loans geared specifically to small businesses that have suffered “substantial economic injury,” meaning necessary financial obligations, expenses that the business would have paid if the disaster had not occurred.

Applying for a Disaster Loan

If you’ve experienced a disaster, first check to see if you are a declared disaster area by checking the updated list of incidents here. Next, complete the application, which you can do online. Applying is free, and the list of needed documents can be found here. The next step is to host an SBA inspector who will assess the cost of the damage and gauge your ability to repay.

The agency aims to turn applications around within two to three weeks; in the case of widespread disaster, this time can increase.

If You Don’t Qualify at the SBA…

The SBA is a top-notch resource, but it’s not the only help available. The Federal Emergency Management Agency makes grants to businesses; they may not cover all damages, but they can assist with replacing essential items, repairing vehicles, or covering storage expenses. (Of course, rants, unlike loans, don’t have to be paid back.) For agricultural businesses, look to the USDA’s Farm Service Agency, which can help producers who live in a declared emergency area, with loans of up to $500,000 intended to restore property, pay production costs, reorganize the operation, and cover essential living expenses. State governments often provide their own resources in times of disaster, and the International Revenue Service will sometimes grant tax relief to affected businesses.

Once you’ve revved back into gear from this particular crisis, thanks to government loans or grants, spend some time reading SBA’s resources about disasters. Though you can’t control weather, fire, or flooding, the agency’s documentation about preparing for disaster, picking insurance, making a plan, and recovering fully, which you can find here, may lead to an easier recovery next time.