If a disaster impacts your business, you might need to make repairs or temporarily shut down. For some, the expenses associated with disaster recovery cause negative cash flow or even small business bankruptcy. SBA disaster assistance can provide you with the funding you need to protect and continue running your business.
There are a few types of disaster loan assistance applications available. Read on to learn about each type of loan, eligibility, and other rules.
What is SBA disaster assistance?
The SBA offers low-interest disaster loans to help business owners prepare for and recover from declared disasters and emergencies. The SBA Office of Disaster Assistance (ODA) is in charge of this disaster-related assistance.
Disasters and emergencies include incidents like:
- Hurricanes
- Wildfires
- Floods
- Droughts
- Pandemics
- Acts of terror
You can search for current presidential and SBA agency-declared disasters on the SBA’s website.
Business owners can use SBA disaster loan assistance proceeds to cover working capital, losses not covered by business insurance, or operating expenses. How you can use specific loan proceeds depends on the type of loan you apply for and receive.
| Want to learn about other types of federal assistance, like tax relief? Download our FREE whitepaper, “Business Guide to Navigating Through Disasters & Emergencies,” for the scoop. |
Types of SBA disaster loan assistance
If a declared disaster impacts your business, the type of loan you may apply for depends on your situation and needs.
The types of SBA disaster relief include:
- Physical damage loan
- Economic Injury Disaster Loan
- Military reservist loan
Read on for a detailed overview of each loan and what you can use them for.
Physical damage loans
A business physical disaster loan helps cover the cost of repairing and/or replacing damaged property. Businesses located in a declared disaster area can apply for up to $2 million to cover expenses not fully covered by insurance.
Physical damage loan recipients can use the funds to repair or replace real property, machinery, equipment, fixtures, inventory, and leasehold improvements.
Before applying for a physical damage loan, understand that the loan:
- Has an interest rate of under 4% (for applicants unable to obtain credit elsewhere) or under 8% (for applicants who can obtain credit elsewhere)
- Has a maturity rate of up to 30 years (but there are no pre-payment fees if paid off sooner)
- Requires collateral if over $25,000 (e.g., real estate)
For more information, check out the SBA’s physical damage loan page.
Mitigation assistance
Mitigation assistance isn’t a standalone loan (hence the lack of the word “loan” in the title!). Instead, it’s an SBA loan increase.
Here’s how it works: You can increase your SBA disaster loan by up to 20% of your physical damage cost to make mitigation improvements. Mitigation improvements help reduce your risk of future property damage caused by similar disasters.
When you’re rebuilding or repairing your business, you can apply for these extra mitigation assistance funds. You can use the assistance funds on mitigation projects.
So, what can you use mitigation assistance for? Here are a few examples:
- Flood mitigation: Add sump pump, seal roof deck, elevate structures, etc.
- Wildfire mitigation: Install fire-rated roof, mesh screening, non-combustible gutters, etc.
- Wind mitigation: Install hurricane roof straps, upgrade to wind-rated garage doors, etc.
- Earthquake mitigation: Strengthen buildings that are vulnerable to ground shaking, etc.
After receiving an SBA disaster assistance loan, you generally have up to two years to request a mitigation assistance increase.
For more information, check out the SBA’s mitigation assistance page.
Economic Injury Disaster Loan
An Economic Injury Disaster Loan (EIDL) provides working capital to small businesses struggling to pay their expenses due to a declared disaster or COVID-19. This type of loan is only available to businesses unable to obtain credit elsewhere.
Keep in mind that the COVID-19 EIDL is separate from non-COVID EIDLs. COVID EIDLs are only available to businesses impacted by the pandemic. Traditional EIDLs are available to businesses impacted by a declared disaster.
EIDL recipients can use the funds as working capital to cover ordinary and necessary operating expenses, such as:
- Rent
- Healthcare benefits
- Utility payments
- Fixed debt payments
Before applying for an Economic Injury Disaster Loan, understand that the loan:
- Has an interest rate of under 4%
- Has a maturity rate of up to 30 years (but there are no pre-payment fees if paid off sooner)
- Requires collateral if over $25,000 (e.g., real estate)
For more information, check out the SBA’s EIDL page.
Military reservist loan
A military reservist loan, or Military Reservist Economic Injury Disaster Loan (MREIDL), helps cover the cost of operating expenses. You can apply for an MREIDL loan if an essential employee who is a military reservist is called to active duty.
Affected businesses can apply for up to $2 million, but the SBA may waive the limit if your business is a major source of employment. You do not qualify for a loan if you have the ability to fund your own recovery.
Military reservist loan recipients can use funds to cover any ordinary and necessary operating expenses. You cannot use the funds to cover lost income or profits, refinance, or expand your business.
Before applying for a military reservist loan, understand that the loan:
- Has an interest rate of 4%
- Has a maturity rate of up to 30 years (but there are no pre-payment fees if paid off sooner)
- Requires collateral if over $50,000 (e.g., real estate)
For more information, check out the SBA’s military reservist loan page.
How to apply for an SBA disaster relief loan
Interested in applying for an SBA disaster assistance loan? First, check disaster declarations to see if there is one in your area before applying for SBA loan.
To apply for a physical damage loan, EIDL, or military reservist loan, you must:
- Apply online
- Complete IRS Form 4506-T, Request for Transcript of Tax Return, to give permission for the IRS to provide the SBA with your tax return information
You can view your SBA disaster loan assistance application status in your account.
Want to add mitigation assistance to your physical damage loan? Call (800)-659-2955 or find a Disaster Recovery Center.
This is not intended as legal advice; for more information, please click here.
