How Do SBA Disaster Loans Work?

One of the primary purposes of the U.S. Small Business Administration is to protect and support small business owners. Sometimes, this support comes in the form of loans designed to stimulate business growth, such as 7(a) and 504 loans for things such as equipment purchases, real estate, and working capital. The SBA is also a place where small business owners can look for support in emergencies. An SBA disaster loan can help after destructive situations or economic emergencies.

What Are SBA Disaster Loans?

There is a large variety of programs that can come to a small business’s aid after disasters. The specific list of SBA disaster loan options changes depending on the funding provided by Congress. In the past, programs such as Paycheck Protection Program and SBA Debt Relief helped business owners to recover from a major public health emergency.

PPP Loans

PPP financing covered a variety of payroll essentials, including salaries, insurance premiums, medical leave, mortgage payments, and utility costs.

Debt Relief

This type of funding covered both interest and principle for certain SBA 7(a) loans. The coverage provided payments for a total of six months, helping to alleviate the financial burden on small businesses.

Loan Advance

These smaller loans are similar to alternative financing bridge loans. They provide a capital advance of up to $10,000. This infusion of capital can help to stabilize a business that is struggling because of a disaster. With working capital, owners can purchase needed inventory, cover lease payments or take care of other things necessary to keep operations going.

Economic Injury and Disaster Loans

One of the main types of SBA disaster loans, EIDL loans can provide significant financing to recover from large disasters. They can help business owners take care of urgent obligations, from the demands of client contracts to important agreements with suppliers.

Business Physical Disaster Loans

These loans revolve around natural disasters that harm a small business physically. In cases of flooding, earthquakes, fires, and similar disasters, the company’s main location may be partially or destroyed.

SBA disaster loans can help owners rebuild, keeping workers employed instead of allowing a small business to collapse. Loan amounts are generous, offering up to $2 million depending on the company’s previous revenue.

How Do Business Owners Apply?

The main requirement for SBA disaster loan applications is a presidential disaster declaration. This declaration comes from the Federal Emergency Management Agency. FEMA provides a registration number needed for the loan application.