What is an SBA Disaster Loan and How Do You Qualify for One?
Has covid-19 hit your business hard? If you’re dealing with the fallout from the pandemic or another disaster, you may want to take out an emergency loan. It could be just what you need to keep your business alive until things get back to normal.
There are many different types of loans in the small business world. Here’s what you need to know about SBA disaster loans and how to qualify for one.
What the SBA Does
The SBA, or Small Business Administration, is a government agency that exists for the sole purpose of helping small businesses succeed. They offer free startup advice as well as information on government contracts and funding.
The SBA Disaster Loan is highly sought after in times of emergency. Following the outbreak of covid-19 in 2020, the SBA helped over six million small businesses with their EIDL, or Economic Injury Disaster Loan program.
The History of Disaster Loans
Disaster loan assistance is nothing new. The first official disaster relief in the U.S. was approved by Congress in 1802.
Congress took action after a massive fire in Portsmouth, Hew Hampshire threatened to wipe out sea-based commerce. At that time, a significant amount of trade was conducted at sea, so losing a major port to fire was a devastating emergency.
While they did not issue loans for the merchants, they did suspend payments the merchants owed. This was effectively a form of disaster relief, and it gave the industry time to recover.
How to Qualify for an SBA Disaster Loan
Today’s SBA disaster loan assistance is available at low interest. It goes to small businesses that are in desperate need due to no fault of their own. Floods, tornados, hurricanes, fires, and pandemics all qualify for this kind of relief.
Business owners can apply for loans that cover physical damage, operating expenses, and loss of their home or personal property. There are even loans intended to cover business interruptions due to employees being called to active duty.
To qualify for assistance, you must meet certain criteria. First, you need to be in a disaster-declared county. Secondly, you’ll need to demonstrate economic injury and how you’ve lost business and property because of the disaster.
If you have questions about disaster loan assistance, speak with a qualified financial advisor. They are familiar with all the requirements and can explain what they are and how the process works.
What You Can Do With an SBA Disaster Loan
An economic injury disaster loan can help you pay employees, make rent and mortgage payments, repair property, purchase repair tools, and replace inventory. In some cases, you can even use the funds to replace your home furnishings and clothing.
To qualify for a disaster loan there are certain rules and limitations to be aware of. For example, you may not be able to replace certain luxury items with a disaster loan. Items already covered by insurance likely won’t be eligible.
Additionally, there may be a collateral requirement if you borrow over a certain amount. The SBA also checks credit, so your credit will need to be in good standing to qualify.
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