When business owners think of SBA loans, they often imagine large loans geared towards purchasing a real estate property or a piece of heavy machinery. Those needs are important, and they’re covered well by SBA 504 and 7(a) loans.
The available loans don’t stop there, however. Because the Small Business Administration is committed to helping America’s small businesses thrive, it has a few different loan programs available for a variety of situations. One that many business owners don’t know about is called an SBA disaster assistance loan. How does it work and when can you apply?
As you may have guessed, this type of SBA loan focuses on helping small business owners get through difficult times. Generally speaking, SBA loans for disaster assistance are designed for major national disasters and emergencies, such as flooding and wildfires.
There’s also a relatively new type of SBA disaster loan related to the coronavirus pandemic. Affected businesses that qualify can fill out an application for financial assistance. This loan can help with many needs, including economic damage and physical damage to the business.
This type of loan isn’t offered directly by the SBA. Instead, local lenders partner with the SBA to offer financing to affected business owners who apply. The requirements vary, but they’re typically related to proving that your company is an actual small business. Due to the urgent nature of this type of financing, it can be easier to qualify than with SBA 504 loans or 7(a) loans, though the amount of funding is usually less.
There are a few types of SBA loans for disasters. The COVID-19 EIDL loan is specifically for damages and substantial economic problems related to the COVID-19 pandemic. Any small business, agricultural business with fewer than 500 employees, or nonprofit organization with any number of employees can apply.
Many other types of disasters can apply, including flooding, hurricanes, wildfires, earthquakes, tornadoes, and other types of devastating natural disasters. For these other disasters, there’s a small catch. For the disaster to allow local small businesses to apply for an SBA disaster loan, there needs to be an emergency declaration made by the president or by the SBA itself.
Interestingly, disasters can also include civil unrest and acts of violence within a city. Owners have to check the SBA’s website for the corresponding emergency declaration.
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