An SBA disaster loan can be very helpful to you in times of need. The SBA loans are specifically targeted at helping small businesses that suffer a catastrophe. An SBA disaster loan is typically funded immediately after an SBA disaster occurs, in other words, prior to the borrower’s loan repayments. The SBA issues long-term, low-interest loans to many businesses, homeowners, renters and nonprofits.
These loans are designed to cover operational costs after a disaster occurs, not fully compensate for losses not covered by the insurance on a home or office building. In the case of a business, the SBA disaster loans can help a business to continue operating while in the process of rebuilding.
For homeowners, these loans can help a struggling homeowner pays the cost of essential repairs, without accruing additional debt that will cause more financial stress. For nonprofits, the SBA disaster loans can provide finances to support specific projects, such as expanding food distribution or providing shelter to families impacted by natural or human-caused disasters.
Because an SBA loan is backed by the Federal Housing Administration (FHA) and has a wider definition of “disaster loans,” there are several circumstances where an SBA loan can be authorized. Most often, when a commercial building or other property is damaged or destroyed, business owners cannot know how much they will be able to recover from insurance premiums or what property damage costs might be. As a result, they may wait to submit an insurance claim, putting their business at risk of not receiving any compensation.
eidl round 2 SBA disaster loans can be applied for through a lender or through an online portal. To make an application for a loan, borrowers must provide a completed business plan that details how the proposed loan will affect the operation, cash flow, and income of the business. Along with this paperwork, borrowers must also provide documentation on why the company is in danger of going out of business, as well as a list of assets and liabilities. Business owners should also discuss the steps they will be taking to make the business solvent during the period of the loan’s repayment.
As with conventional loans, borrowers have the option of paying interest rates directly to the lender or through their credit card account. In addition, they can choose to pay up front fees, incur certain administrative costs, or enter into deferred payment arrangements with their lender. With traditional loans, borrowers can also opt to take advantage of “step-up” or “payment” terms, which increase their loan amount over time. However, with SBA disaster loans, lenders do not need to consider any potential increases in interest rates.
Business owners who wish to apply for an SBA disaster loan must have a valid business plan that clearly outlines how the business intends to repay the loan and have a credit history that has been satisfactory. In addition, the business must show that the loan amount is sufficient to repay all debts and start the business up once again. If these prerequisites are met, then most lenders will issue the business a loan.
Business owners are also advised to take careful note of their lender’s terms and conditions regarding their loan, as many borrowers find that the conditions are too lenient for their needs. If the lender deems a borrower of a high-risk applicant, the borrower might be expected to pay higher interest rates or incur higher administrative fees.
