The COVID-19 pandemic caught many small business owners unawares. Most of them had to close down while others struggled to survive. If your business was affected by the pandemic or any other natural disaster, then you may qualify for an SBA disaster loan.
What is the SBA loan disaster program?
The SBA loan disaster program is an initiative by the federal government to assist small businesses not covered by insurance to recover from losses resulting from a pandemic or natural disaster. Unfortunately, not many small businesses take advantage of SBA loans. Even those who get approved end up using the loan funds for purposes not intended.
If you want to know “What can you use sba disaster loans for?” the answer is in this article.
According to Lantern by SoFi, SBA loan disaster should specifically be used to cover losses that a business suffered as a result of the pandemic or any other natural disaster. This can either be repairing a building, purchasing inventory, paying employees, and so on.
Types of SBA disaster loans
- Economic injury disaster loan emergency advance
As a small business owner, you can apply for a loan advance of up to $10,000 to settle revenue losses caused by the COVID-19 pandemic. You don’t need to repay the advance.
- Paycheck protection program
This is an SBA program whose aim is to assist companies to retain workers. This type of loan is forgivable if it is used to pay rent, mortgage, payroll. 60 percent of the payroll must be used to pay employees.
- Business physical disaster loans
You can get a loan of up to $2 million to replace or repair a damaged building or equipment after a disaster. A business of any size can apply for this type of loan.
- Military Reservist Economic Injury Loans (MREIDL)
These are loans designed to help small businesses settle operation expenses, particularly if an important employee has been called to active duty.
- Home and personal property loans
A homeowner can apply for a loan of up to $200,000 to either repair or replace a home to its original condition before the disaster happens.
How to get an SBA disaster loan
Those applying for PPP loans can PPLAY for loans through SBA-accredited lenders. But the rest of the loans follow the steps below:
- Apply for the loan: SBA permits online applications for all its disaster loans but you can as well present a paper application in person or by mail. The decision to accept or reject the application usually takes two or three weeks.
- Get estimates: The SBA will review the credit history of the applicant and inspects your business to ascertain losses.
- Loan processing decision: Provide relevant documents like bank statements and income tax returns to the loan officer to prove you can repay the loan.
- Receive funding: If your application goes through, you will receive the first disbursement of about $25,000 for economic and physical injury loans.
- Work with the case manager: You will be assigned a case manager who will help you meet the requirements of the loan.
In a nutshell, getting an SBA loan is not as complicated as many people tend to believe. All you have is to follow the steps outlined above.