You have a thriving business, and it’s everything you’ve ever dreamed it would be. You get to be your own boss, choose what products you sell, and set your own hours. Your business is doing extremely well when disaster strikes. Your business becomes collateral damage to a natural disaster. You’re on the verge of losing everything you’ve worked so hard for, and you’re not sure where to turn next. This article will go over a few options for disaster loans tailored to small businesses, where to apply for them, and how to start the application process.
Business Physical Disaster Loans
You are eligible to apply for a Business Physical Disaster Loan if your business is located in an area that has officially been declared a disaster area. The Small Business Administration sets aside upwards of $2 million dollars for small businesses affected by a disaster. These loans are designed to replace:
- Real Property
- Structural Damage
This loan is for small businesses who suffered damage that isn’t fully covered by their insurance. It doesn’t matter what size your business is, if it’s located in a declared disaster area you can apply for this loan to return your business to its pre-disaster state. You can apply online by clicking here and filling out an application. You can also apply at a FEMA Disaster Recovery Center. Once your application is processed, the Small Business Administration will send out an inspector to assess the damage and make a report. You will get a letter in the mail specifying what the loan is to be used for, along with the check.
Economic Injury Disaster Loan
This loan is also provided by the Small Business Administration (SBA), and will only be granted if the Small Business Administration determines you are ineligible for other types of loans. This loan works by setting repayment terms based on what you can repay, but it can only go for a 30-year term. You will have to submit a loan application form along with an IRS form that grants the IRS permission to give your tax information to the Small Business Administration. A business may be able to qualify for both this loan and a physical disaster loan at the same time. You can apply by clicking here. This loan is designed to keep your business running until you can operate on your own without assistance. According to FindLaw, you will also need collateral to successfully get this loan, as it is designed to cover just what your business lost out on by the disaster, and nothing more.
The first step is choosing which loan will be in your best interest. You pick one and fill out the application either online, over the phone, or in person. An inspector will come out and estimate the cost of the damages and draw up a report. They will submit this report back to the Small Business Administration to review. Next, you should call your local SBA District Office and see which banks they recommend, and which lenders offer SBA loans. Call and set up a meeting with the lender, and come prepared. The lender will look at these categories to either approve or decline your application:
- Credit History
- Payment History
- Income Predictions
- Debt-to-Worth Ratios
- Collateral (most SBA loans won’t require collateral, but it’s a good idea to have an estimate on hand)
All of these factors will either help you or hurt you in a meeting with your lender. Before this meeting, you should make sure you are current on your taxes with the IRS. Also, bring a business plan that includes financial projections, and a list of what you plan to do with the loan. The Small Business Administration offers a free tool to help you make your business plan.
Another agency that will provide referrals for disaster assistance is the Federal Emergency Management Agency (FEMA). If your business has been damaged and is located in a federally declared disaster zone, you can apply for assistance through FEMA’s website. They will look at all of your information and make referrals for you to get assistance for your business. You will have to have these documents on hand:
- Annual Income
- Business Address
- Current Mailing Address
- Current Telephone Number
- Description of the Damage and Damaged Items
- Insurance Information
- Social Security Number
- Profit to Loss Ratios
- Business Certifications and Licenses
Again, FEMA will not provide you a loan directly, but they will put you in touch with organizations who will assist you. They will also help with the paperwork and legal aspect that comes along with having a business in a declared disaster zone.
Surviving a disaster is just the beginning. You will have to work hard and be resourceful to rebuild your business back to what it was before. These loans and resources will give you the help you need to recover your dreams and leave you with a business you can be proud of.