Physical Disaster & Economic Injury Disaster Loans

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For those businesses that are underinsured or completely uninsured, a natural or man-made disaster can have a devastating effect on their financial situation. Fortunately, the U.S. Small Business Administration (SBA) offers financial assistance in the form of long-term, low-interest loans to businesses and private, nonprofit organizations affected by disasters.

There are two primary types of loans that are offered to businesses by the SBA - Physical Disaster and Economic Injury Disaster. Each type of loan has its own unique restrictions and limitations for use.

Physical Disaster Loans

Businesses of any size and private, nonprofit organizations located within a declared disaster area may apply for a loan to help replace or restore any damaged property to its pre-disaster condition. Qualified applicants can receive up to $2 million based on need, for the repair or replacement of: real property, machinery, equipment, fixtures, inventory, and leasehold improvements. In addition, loans can be increased by up to 20 percent of the total disaster damage to cover improvements specifically aimed at protecting property against a similar type of disaster in the future.

Economic Injury Disaster Loans

Small business, including small agricultural cooperatives and private, nonprofit organization located within a declared disaster can apply for an Economic Injury Disaster Loan. Such loans are meant to cover substantial financial injury suffered as a result of a disaster regardless of the existence of physical damage to your property. Substantial financial injury is the inability of the business to meet its financial obligations and pay normal operating expenses because its cash flow has been interrupted by the disaster. Meant to provide the necessary capital to help small businesses survive until normal operation can resume, loan amounts are based on actual economic injuries and your company’s financial needs. If you also apply for a Physical Disaster Loan, the $2 million maximum applies to the combined total of both loans.

The SBA provides long-term, low interest loans that can be used to cover the cost of damages and help businesses survive until normal operations resume after a disaster.

Interest Rates and Repayment

Interest rates on either loan can vary, but will not exceed 4 percent if you do not have credit available elsewhere (from non-federal sources). If you do have credit available elsewhere, the interest rate will not exceed 8 percent. The term of the loan can be up to 30 years, based on your ability to repay. All of these conditions will be determined by the SBA upon review of your application.

Applying for Assistance

Businesses seeking assistance must apply directly to the SBA. Once you have submitted a completed loan application, an inspector will be sent to estimate the cost of your damages. Applications can be filed by mail on online here.

For additional information, contact the SBA Customer Service Center at 1-800-659-2955 or email disastercustomerservice@sba.gov.

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