SBA Disaster Loans: What You Need to Know

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The Small Business Administration (SBA) is the primary source of lending for both businesses and individuals affected by disasters. If you own a home or business that has been damaged by a disaster, you may be eligible to apply for assistance from the SBA.

What is an SBA Disaster Loan?

The Small Business Administration lends funds directly to business owners and individuals affected by a declared disaster, such as a hurricane, drought or tornado. This is the only loan program offered by the SBA where the administration lends directly to borrowers in almost all other cases, the SBA just guarantees loans that other lenders make.

Business physical disaster loans: These loans let business owners repair or replace real assets, such as property, machinery or equipment, fixtures, inventory, or leasehold improvements. These loans are meant to offset losses not fully covered by your insurance. Businesses of any size and most private nonprofits are eligible to apply for these loans.

Business economic injury disaster loans (EIDL): EIDLs are essentially working capital loans. These loans are meant to help businesses meet financial obligations they would have met otherwise if not for the disaster. Only small businesses, small agricultural co-ops and private nonprofit organizations are eligible.

Home and personal property disaster loans: Homeowners, including owners of condominium units, are eligible to borrow directly from the SBA to repair or replace the value of their primary home and personal property. You don’t need to own a business to apply for those loans; you only need to be affected by a declared disaster to be eligible.

Military reservists economic injury loans (MREIDL): MREIDLs provide funding to small businesses to meet operating expenses they could have met if an essential employee hadn’t been called to active duty. The amount lent is limited by the company’s business interruption insurance and whether the owners have sufficient funds to continue operating normally.

Express Bridge Loan Pilot Program: This program allows for qualified SBA 7(a) lenders with SBA Express authority to deliver expedited disaster loans of up to $25,000 during emergencies. In order for the program to be active, the borrower must be located in a federally declared disaster area. This pilot program is effective until September 30, 2020 and differs from other disaster loans because the loan is provided through Express Lenders, not the SBA. This is advantageous as it provides business owners with more immediate funding as they consider applying for more longer term financing. More information on this program can be found here.

SBA Disaster Loan Interest Rates and Terms

This loan program is the only program in which the SBA lends funds directly to businesses and individuals. As such, the SBA determines the loan amounts, repayment terms and interest rates for all loans. The SBA will set specific interest rates for each disaster.

Business Physical and Economic Disaster LoansHome and Personal Property Disaster Loans
Maximum Loan Amount$2 million
  • $200,000 for primary home
  • $40,000 for personal property
Maximum Repayment Term30 years
Maximum Interest Rates
  • 4% if you don’t have financing available elsewhere*
  • 8% if you do have financing available elsewhere
FeesNone from SBA, but applicant is responsible for any third-party fees
CollateralOnly for loans over $25,000**
Personal GuaranteeYesN/A
Joint applicants allowed?YesYes

*EIDLs have a maximum interest rate of 4%, but they are only available to businesses that cannot get credit elsewhere.

** The SBA won’t deny an application for a homeowners loan if the applicant cannot put up sufficient collateral.

The interest rates listed above are absolute maximums. Because the SBA sets different rates for each disaster, actual interest rates will vary. After Hurricane Irma, for instance, the interest rates for physical disaster loans were 3.305% for businesses with no credit available and 6.61% for businesses with credit available. Home and personal property loans carried rates of 1.75% and 3.5%, respectively. Economic injury loans had interest rates of 3.305% for small businesses and agricultural co-ops and 2.5% for nonprofits.

Eligibility Requirements

If you live or own a business in an area that was impacted by a declared disaster, you may be eligible to apply for a loan. To see a list of current declared disasters, visit the SBA website. Examples of disasters include hurricanes, wildfires, severe thunderstorms, drought, and flooding.

Business Physical Disaster LoansBusiness Economic Injury Disaster LoansHome and Personal Property Disaster LoansExpress Bridge Loan Pilot Program
  • Any size business and most private nonprofits affected physically by a declared disaster
  • Small businesses, small agricultural cooperatives and most private nonprofits affected economically by declared disaster
  • Business most not be able to get financing elsewhere
  • Own a primary residence that was affected by a declared disaster
  • Secondary and vacation homes are not eligible
  • Any small business located in Primary Counties declared disaster areas or in any Contiguous Counties
  • Business must have been operating during time of disaster

Application Process

If applying for a direct SBA loan, you can apply online, in-person at a disaster center or by mail. If applying for the EBL Pilot Program, you can apply directly with a lender if they are an SBA Express Lender. After you apply, the administration will review your credit profile before inspecting your property for damages. An inspector sent by the SBA will estimate the total loss to your home or business location. Once the inspection is complete, a loan officer will determine your eligibility for a loan by reviewing any insurance payments or other financial assistance. You are encouraged to apply for a loan even if you haven’t received compensation from your insurer.

The SBA tries to process applications within two to four weeks. This will be shortened if you are applying for an SBA Express loan. If approved, the administration will send loan closing documents for you to sign. Your loan may be adjusted after closing if there is a change in your circumstances, such as unexpected repair costs or insurance compensation. For business loans, the SBA will make an initial disbursement of $25,000 within five days of approving the application.

The information you provide to the SBA depends on what type of loan you’re seeking. The only exception to this is that all applicants will need to grant the SBA access to pull personal tax return information from the IRS.

For home loans, applicants will need to obtain a Registration ID Number from the Federal Emergency Management Agency (FEMA). Applicants will need to provide the following information to the SBA:

  • Personal and contact information
  • Employment and salary information
  • Address and insurance information for damaged property
  • Current assets, including cash, retirement savings and vehicles
  • Current debts, including mortgages, credit card debt or installment loans
  • Extraordinary expenses, including child care, alimony and tuition
  • Information about any bankruptcies, delinquencies, judgments, lawsuits or criminal records

Business owners will need to provide the following information during the application process:

  • Business address
  • Tax identification number
  • Legal entity type
  • Business insurance information
  • Personal and contact information of business owners
  • Personal financial statements
  • Schedule of liabilities and debts
  • Most recent business tax returns

The SBA may require additional information from business owners, such as current profit and loss statements, monthly sales figures or balance sheets. If the SBA requests these documents, you must provide them to the agency within seven days.

Justin is a Sr. Research Analyst at ValuePenguin, focusing on small business lending. He was a corporate strategy associate at IBM.