SBA offers hurricane disaster loans
Oct 10, 2008 8:47 AM
Loans are available to businesses to repair or replace disaster-damaged property owned by the business, including real estate, inventories, supplies, machinery, and equipment, according to the information.
Economic injury disaster loans also are available to help small businesses meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster. The loans are intended to assist through the disaster recovery period. However, these loans are available only to entities and their owners who cannot provide for their own recovery from non-government sources, as determined by the SBA.
If a business' loan application is approved, the company may be eligible for mitigation funds to cover the cost of improvements that will protect the property against future damage. Examples of improvements include retaining walls, seawalls, sump pumps, etc.
Mitigation loan money would be in addition to the amount of the approved loan, but may not exceed 20 percent of total amount of disaster damage to real estate.
Credit requirements include:
- Applicants must have a credit history acceptable to SBA.
- Applicants must show the ability to repay all loans.
- Collateral is required for physical loss loans over $14,000 and all EIDL loans over $5,000. SBA takes real estate as collateral when it is available. SBA will not decline a loan for lack of collateral, but requires a pledge for what is available.
By law, the interest rates depend on whether each applicant has credit available elsewhere and are fixed for the term of the loan. Interest rates are periodically adjusted and will be promulgated for each disaster. The maximum term 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 based upon each borrower’s ability to repay.
The law limits business loans to $2 million for the repair or replacement of real estate, inventories, machinery, equipment and all other physical losses. Subject to this maximum, loan amounts cannot exceed the verified uninsured disaster loss. The $2 million statutory limit for business loans applies to the combination of physical and economic injury, and applies to all disaster loans to a business and its affiliates for each disaster. If a business is a major source of employment, SBA has the authority to waive the $2 million statutory limit.
Only uninsured or otherwise uncompensated (including insurance deductibles) disaster losses are eligible. Any insurance proceeds which are required to be applied against outstanding mortgages are not available to fund disaster repairs and do not reduce loan eligibility. However, any insurance proceeds voluntarily applied to any outstanding mortgages do reduce loan eligibility.
Ineligible property includes personal pleasure boats, airplanes, recreational vehicles, and similar property, unless used for business purposes.
Applicants who have not complied with the terms of previous SBA loans are not eligible. This includes borrowers who did not maintain flood and/or hazard insurance on previous SBA or Federally Insured loans.
Business owners may be eligible for the refinancing of existing mortgages or liens on real estate, machinery and equipment, in some cases up to the amount of the loan for the repair or replacement of real estate, machinery, and equipment.
Businesses also may be eligible for SBA disaster loan to relocate. The amount of the relocation loan depends on whether the company relocates voluntarily or involuntarily.
For more information, contact SBA Disaster Assistance Customer Service Center at 800-659-2955 or see the SBA Website.
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