SBA Business Physical Disaster Loan

The U.S. Small Business Administration (SBA) offers low interest loans to businesses and nonprofit organizations that have incurred damage in regions affected by declared disasters.

A business physical disaster loan can help to cover losses not covered by insurance or other disaster-related funding or financing. Interest rates on home and property disaster loans range from 4%-8% depending on if the applicant is able to obtain credit elsewhere. Loans can have terms of up to 30 years, with no penalties or fees for pre-payment.

Businesses of any size and most private nonprofit organizations can apply for a Business Physical Disaster loan of up to $2 million to recover from a disaster.

These loans can be used to repair or replace the following items damaged or destroyed in a declared disaster:

• Real property
• Machinery
• Equipment
• Fixtures
• Inventory
• Leasehold improvements

Additionally, if you make improvements that reduce the future risk of flood damage to your property, you may be eligible for up to a 20% increase in your loan.

Next Steps:

1. Confirm SBA has issued a disaster declaration in your area.
2. Apply online for an SBA disaster assistance loan. There is no-cost to apply and you are under no obligation to accept a loan if approved.
3. Submit a signed and dated IRS Form 4506-C giving permission for the IRS to provide SBA your tax return information.
4. Prepare for a site visit from an SBA inspector to assess the cost of your damage once you have returned your completed loan application.

Special Considerations:

• Collateral is required for loans of over $25,000.
• If you are required to apply insurance proceeds to an outstanding mortgage on the damaged property, you can include that amount in your disaster loan application.
• The interest rate will not exceed 4 percent if you cannot obtain credit elsewhere.
• For businesses and nonprofit organizations with credit available elsewhere, the interest rate will not exceed 8 percent.
• Repayment terms will depend upon your ability to repay the loan.
• You may not use the disaster loan to upgrade or expand a business, except as required by building codes.
• In addition to flood mitigation projects, the SBA also suggests mitigation projects for preventing/minimizing wind, wildfire, earthquake, and hail damage on its website.
• SBA must approve your proposed mitigation measures before any loan increase is granted.