When disaster strikes, everyone needs a little help picking up the pieces and moving forward. Families need to rebuild their homes, social service organizations must double fundraising efforts to support their communities, and local entrepreneurs have employees to pay and services to provide. Federal Emergency Management Agency comes out to help people and celebrities raise awareness about the nonprofit’s needs, but who takes care of the small businesses?
Like FEMA, the US government has an agency that assists entrepreneurs after a disaster. The US Small Business Administration has three standing loans for businesses that need to repair damage or replace property in a federally declared disaster area. Applicants for an SBA loan will need to register with FEMA online and be ready to supply social security and employee identification numbers, deed or lease information, account balances and balance statements, and proof of insurance to apply to the SBA for any of these loans.
Business Physical Disaster Loans: These loans cover losses that insurance policies will not, including damage to property, equipment, inventory, and possibly upgrades to prevent future damage. Companies can apply for this SBA loan before hearing back from the private insurance company.
Military Reservists Economic Injury Loans: If a business owner or essential employee is a reservist and called to active duty, the MERIL is a helpful program to explore. The SBA can loan up to $2 million to cover operating costs (not profits) lost because of the absence. The business owner will need to prove that other credit is not available and supply collateral for this loan.
Home and Personal Property Loans: Interestingly, the SBA also provides loans to non-businesses affected by a disaster. These loans can be up to $200,000 to repair a primary residence, whether owned or rented, and up to $40,000 for property such as clothes, furniture, and cars. The SBA will work with applicants to ensure no duplicate coverage between personal insurance and the SBA loan.
These loans have similar terms, interest rates that do not exceed 8 percent, and repayment periods of up to 30 years. Remember these are only to repair damage or replace property after a disaster, if you need a loan to expand your business, you will need to research a different set of loans. Also, if there is a national economic disaster, such as what COVID-19 which negatively impacted small businesses country-wide, there may be additional loans available.