How to Get an SBA Disaster Loan

You may not have noticed, but in a post-credits scene at the end of every Dwayne Johnson movie, The Rock dusts off his shredded T-shirt and surveys the smoldering aftermath of the skyscraper or fleet of race cars or San Andreas neighborhood he’s just spent the last two hours destroying. Cocking one eyebrow, he stares into the distance and says to himself, “Well, time to fill out that SBA disaster loan paperwork.”

Not really, we just needed a hook to draw you in to an otherwise dry and serious topic.

What you’ve likely noticed in reality is Hurricane Michael hitting Florida with 155 MPH winds, causing damage that’s still being tallied; or Hurricane Florence inflicting over $17 billion in devastation on North and South Carolina; or the volcano in Kilauea, Hawaii, that’s cost island residents millions; or the hurricane trio of Harvey, Irma, and Maria that wreaked a total of $306 billion in damages in the US in 2017. Not even The Rock could keep up with that disaster schedule.

Between 2017 and 2018, there were a combined 240 federally declared disasters in the US. Hopefully, you and your business won’t be affected by one in the coming year—but should it happen, you may need to learn the ins and outs of an SBA disaster loan.

1. What is an SBA disaster loan?

An SBA disaster loan, as the name implies, is a Small Business Administration loan designed to offset damages and financial losses due to unforeseen major disasters, whether they’re tornadoes, hurricanes, earthquakes, floods, or other calamities. Unlike other SBA loans, which come from approved third-party lenders, federal disaster loans are granted directly by the government.

There are the four categories of SBA disaster loans:

• Business Physical Disaster Loans are given to business owners to replace or repair tangible assets, such as property, machinery and equipment, or inventory, should they not be covered by regular insurance. Any size of business, and most nonprofits, are eligible for this loan.
• Economic Injury Disaster Loans (EIDLs) are working capital loans that help businesses meet financial commitments they missed due to a disaster. Eligibility for this loan is limited to small businesses, agricultural co-ops, and private nonprofits.
• Home and Personal Property Disaster Loans aren’t necessarily just for business owners; they’re direct SBA loans designed to help repair or replace primary homes and personal property, including personally owned condo units and apartment buildings.
• Military Reservists Economic Injury Disaster Loans (MREIDLs) offer funding to cover a business’s personnel shortfalls due to active military employees being called up to duty. Amounts loaned depend upon a company’s business interruption insurance and regular operating capital.

2. SBA disaster loan interest rates and terms

Baseline interest rates and term lengths are fairly consistent across all four types of SBA disaster assistance loans, though rates and term lengths may still vary case by case. In the table below, you’ll notice a range of maximum interest rates. That’s because if you get  access to outside, non-SBA financing, you’ll have a higher interest rate. The SBA loan program sets its loan amounts, rates, and terms case by case.

3. SBA disaster loan eligibility requirements

If a business you own, or a primary residence, is located within an officially declared disaster area and that disaster’s impact has damaged property, you could be eligible for an SBA disaster recovery loan. Federally recognized disasters include tornadoes, hurricanes, earthquakes, floods, wildfires, typhoons, severe storms, drought, toxic algae, and volcanic eruptions. To be declared a federal disaster area, the governor of the state makes a request of the president, who then makes it official.

Business Physical Disaster Loan eligibility: Businesses of any size, and most private nonprofits, impacted with physical damage by an officially declared disaster.

Economic Injury Disaster Loan eligibility: Smaller businesses, agricultural co-ops, and most private nonprofits, impacted physically by an officially declared disaster and not eligible for financing elsewhere.

Home and Personal Property Disaster Loan eligibility: Primary residences with physical damage as a result of an officially declared disaster. Vacation and secondary homes are ineligible.

Military Reservists Economic Injury Disaster Loan eligibility: Military reservist employee, or employees, called up to active duty, causing a small business to be unable to function at full capacity, resulting in financial shortfall.

If your business doesn’t meet any of the above SBA disaster loan eligibility requirements, check out private-sector alternatives at Business.org’s “6 Best Small Business Loans of 2018.”

4. SBA disaster loan application process

You can apply for an SBA disaster loan online, by standard mail, or in person at a disaster recovery center. Your credit profile will be reviewed before an inspector visits your property to fully assess damages. Upon completion, an SBA loan officer will review outside insurance payouts and other financial assistance before determining your eligibility.

The SBA usually makes a decision between two and four weeks; if approved, closing documents will be sent by the administration. Loans may be altered or adjusted if unexpected additional repair costs arise or outside insurance comes through. A first disbursement of $25,000 will be made on business loans with five days of application approval.

Business owners should expect to provide the SBA with this information:

• Address of business
• Tax ID number
• Legal business entity type
• Business insurance details
• Personal contact information
• Personal financial statements
• Liability and debut schedules
• Recent business tax returns

Homeowners should expect to provide the SBA with this information:

• Personal contact details
• Salary/employment information
• Address and insurance details of damaged property
• Currently held assets and debts
• Extra expenses (tuition, alimony, child care, etc.)
• History of bankruptcies, delinquencies, judgements, lawsuits, or criminal records, if applicable

5. Disaster relief resources

• SBA Disaster Loan Assistance – Further information and applications for loans discussed above
• FEMA.gov – Information on FEMA grants and how they relate to SBA disaster loans
• AmeriCares – A US and international disaster relief organization
• InterAction – Listing of organizations that respond to disasters internationally
• ReliefWeb – Disaster relief community information and news
• Insurance Information Institute – Information on how to settle disaster insurance claims

6. SBA disaster loan FAQs

How do I get my SBA disaster loan disbursement?

After you’ve signed and returned the loan closing documents, an initial disbursement of $25,000 will be sent to you within five days of the SBA receiving the materials. You’ll be assigned a case manager who’ll guide you through meeting loan conditions and also schedule all future disbursements until you’ve received the entirety of the loan.

What’s the SBA disaster loan phone number?

For disaster loans specifically, you can contact the SBA at 800-659-2955 (voice) or 800-877-8339 (text). The contact email is DisasterCustomerService@sba.gov.

How do I apply for a FEMA grant?

The Federal Emergency Management Agency doesn’t offer grants (loans that don’t need to be repaid) to businesses, only individual homeowners and renters. But to qualify for a FEMA grant, you have to first apply for an SBA Home and Personal Property Disaster Loan before being considered.