SBA Disaster Loans: What They Are & How To Apply

Small Business Administration (SBA) disaster loans provide businesses with affordable financing for disaster recovery. Businesses, nonprofit organizations, homeowners, and renters are eligible for funding with repayment terms of up to 30 years and interest rates starting at 1.75%. Approved applicants can receive initial funding approximately one week after signing loan closing documents.

The President of the United States, SBA, and US Department of Agriculture can declare eligible disasters. The most common disasters include droughts, hurricanes, tornadoes, and earthquakes. Business owners can see if their county is included in the declaration by contacting their local SBA office or by looking at our updated list, which you can access via the table of contents on the left.

Eligibility depends on many factors, and an application must be submitted to make an exact determination. The SBA encourages applicants to seek outside relief before applying to fill any funding gaps.

How SBA Disaster Loans Work

Once the SBA declares a disaster, renters, homeowners, and business owners can apply for disaster relief online through the SBA disaster loan website. The application requires extensive paperwork and can take up to eight weeks for the SBA to process. Unlike other SBA loans, the SBA directly funds disaster loans.

Applicants are not guaranteed approval. For this reason, an SBA disaster loan should seldom be the only disaster relief business owners and individuals apply for. The exact reasons that the SBA denies loan applicants vary, but SBA loan officers will work to help potential borrowers get approved in case the application is rejected.

The situations that an SBA disaster loan may be right for include:

• Businesses that suffered economic damage: Businesses of any size that experienced economic damage from a disaster can apply for funding from the SBA to borrow up to $2 million. The SBA considers economic damage to include extended closures and a reduction in business traffic.
• Businesses that suffered physical damage: Businesses that suffered physical damage can also apply for financing to recover from a declared disaster. Some common physical damage claims include real estate, machinery, equipment, and inventory.
• Homeowners who need funding to repair a primary residence: Homeowners may apply for a loan of up to $200,000 from the SBA. They can use this loan to repair or rebuild a primary residence damaged by a qualified declared disaster after registering with the Federal Emergency Management Agency (FEMA) and exhausting other assistance programs.
• Renters who need funding to replace personal property: Renters and homeowners may apply for a loan of up to $40,000 from the SBA to repair or replace personal property damaged by a qualified declared disaster. Personal property can include furniture and belongings but excludes cash and collectible items like stamps.
• Businesses with employees called for active military duty: Businesses that suffer sustained economic damage because a key employee is called for active military duty can qualify to borrow up to $2 million.
• Nonprofits and food cooperatives affected by a disaster: Although ineligible for many SBA financing options, nonprofits and food cooperatives are eligible for SBA disaster loans. These groups typically can qualify for the same loans as for-profit businesses on the grounds of physical or economic damage.

Those seeking relief after a disaster should first contact their insurance companies, the Federal Emergency Management Agency (FEMA), and other agencies and organizations offering grants or other assistance. Insurance relief is the most common first option, especially for commercial flood insurance.

Types of SBA Disaster Loans

Types of SBA disaster loans include:

• Business physical disaster loans (BPDL): Businesses that suffer physical damage to real estate, equipment, inventory, and other assets can qualify to borrow up to $2 million in funding.
• Economic injury disaster loans (EIDL): Businesses that suffer economic damage because of a loss of business for extended periods can receive working capital up to $2 million. Unlike business physical disaster loans, only those businesses that meet SBA size standards can qualify for these loans.
• Military economic injury disaster loans (MEIDL): Businesses that suffer economic losses because the military calls key staff members to active duty during a military conflict can receive up to $2 million in funding from the SBA.
• Home disaster loans: Homeowners can apply to replace or repair a primary residence and receive SBA disaster loans up to $200,000. Applicants may also qualify for a 20% increase of the loan amount beyond real estate damage to prevent the risk of future property damage from a similar disaster.
• Personal property disaster loans: Renters and homeowners may borrow funds to replace personal property, which includes clothing, furniture, and vehicles. The total loan amount is available up to $40,000, and borrowers can combine it with home loans.

SBA Disaster Loan Interest Rates

The SBA determines the interest rates for SBA disaster loans on a quarterly basis and publishes applicable rates in a disaster declaration. Applicants that cannot get financing through a nongovernment source will receive maximum rates of 4% while applicants with additional available credit can receive rates of up to 8%.

Rates for SBA disaster loans are lower than other financing types, and these rates are almost always lower than other funding alternatives such as online business loans. There are also no prepayment penalties or fees associated with an SBA disaster loan. Current SBA disaster loan interest rates are available on disaster declaration fact sheets.

SBA Disaster Loan Rates: Example

SBA Disaster Loan Terms

The SBA examines the damage and a borrower’s repayment ability when determining the loan amount it offers. The SBA offers deferment of payments for up to 24 months, but interest still accumulates during that time. The terms of an SBA disaster loan include:

• Application deadline: Individual application deadlines are published on fact sheets. However, business disaster loans typically have a time frame of 60 days, economic disaster loans extend up to nine months, and military-economic injury extends up to a year.
• Loan amount: The SBA limits the size of individual disaster loans by its assessment of the physical or economic damage sustained by the applicant. Businesses can qualify for a combined $2 million while home disaster loans are available up to $200,000 and personal property loans are available up to $40,000.
• Repayment term: SBA disaster loan repayment terms can extend up to 30 years. The SBA determines the repayment term by evaluating an applicant’s financial circumstances. The most common terms are 15 and 30 years. Business owners that can qualify for financing elsewhere can only receive terms up to seven years.
• Repayment schedule: The SBA requires monthly payments from applicants but may consider adjusting the payment frequency in some cases. It does not offer any guidance around which factors it considers when making a determination, so applicants should discuss a different repayment schedule with an SBA disaster loan specialist.
• First payment due date: Every SBA disaster loan has at least a four-month deferment on payments but will continue to accrue interest. Based on applicant circumstances, the SBA can provide deferment on payments for up to 24 months from loan disbursement.

Compared to other types of SBA loans, disaster loans have generous repayment terms that result in smaller monthly payments and give borrowers an opportunity to recover. Even SBA 504 loans, which businesses typically use to purchase real estate and equipment, have shorter repayment terms of up to 20 years.

SBA Loans Disaster List: Current Qualifying SBA Disasters

The two categories that SBA disaster declarations currently fall into include:

• Presidential & SBA agency-declared disasters: Physical and economic disaster relief are both available for disasters in this category. Examples include the impact of severe weather such as hurricanes.
• US Secretary of Agriculture-declared disasters: Only economic disaster relief is available for disasters declared under this category. The most common disasters include extended droughts or rainy seasons.

Military economic injury disaster loans go into effect during a period of military conflict. The SBA does not publish this information on its website or in the Federal Register. Businesses suffering economic losses because a key member of staff was called to active military duty should contact the SBA directly.

Presidential & SBA Agency Declared Disasters: SBA Loans Disaster List

The following table provides the current Presidential and SBA declared disasters, updated as of September 2022. Click the table to expand and view more information. Visit the Disaster Declaration links provided to view more details, such as specific SBA disaster loan interest rates for the event and local SBA contact information.

US Secretary of Agriculture Declared Disasters: SBA Loans Disaster List

The following table provides the current US Secretary of Agriculture declared disasters, updated as of September 2022. Click the table to expand and view more information.

How to Apply for an SBA Disaster Loan

There are three steps from application to receipt of funds with an SBA disaster loan. First, applicants will need to submit an application, then respond during the SBA review process to any additional information requests, and finally, sign loan closing documents. Submitted applications take up to eight weeks to review, and the SBA makes an initial disbursement approximately one week after loan closing.

Applicants must meet several requirements to qualify for a loan. These include general requirements for financing like credit score, income, and collateral, in addition to some SBA disaster loan-specific requirements:

• Those impacted must reside or have their place of business in a disaster-affected area
• Individuals and businesses need to show that they suffered accessible economic or physical damage to their business or place of residence
• Applicants must have exhausted other disaster relief options

The SBA is flexible about requirements for its disaster loan, giving borrowers ample opportunity to apply, justify shortcomings in credit or collateral, and verify damages. Borrowers are encouraged to apply, even if they don’t strictly meet exact requirements. Gathering paperwork can take some time, therefore we recommend applicants start early.

SBA Disaster Loan Eligibility

There are minimum requirements to meet before qualifying for SBA disaster loans:

• Location: Business and homeowner locations must be in a declared disaster area to qualify for funding. This includes temporary structures like RVs or mobile homes at the location during a disaster.
• Credit history: Credit history is a factor in consideration. While the SBA does not provide a specific credit minimum, if your credit score is at least 625, your chances of approval will be higher. The SBA provides applicants with an opportunity to explain any missed payments and permits medical debt charge-offs and recent bankruptcy.
• Repayment ability: Using the fixed debt method, the SBA evaluates an applicant’s income and debts to establish a maximum loan amount. The SBA seeks to calculate a monthly payment that leaves borrowers with sufficient cash to meet necessary living expenses. It then uses that payment to determine a loan amount and term.
• Uncompensated losses: Only uninsured or otherwise uncompensated losses can be financed with SBA disaster loans. The SBA makes case-by-case determinations on the losses that it covers, so borrowers should contact the SBA for a determination.
• Collateral: The SBA approves loans up to $25,000 with no collateral requirements. It makes a determination of required collateral on a case-by-case basis. The SBA will not decline a loan because of a lack of collateral but requires applicants to pledge whatever collateral is available.

There may be additional requirements that vary based on which SBA disaster loan a borrower seeks. Each case presents many variables, and the SBA ultimately determines the specific eligibility of an applicant. Businesses and individuals unsure of their eligibility should speak to an SBA disaster loan specialist about the details of their situation.

Entities Ineligible for SBA Disaster Loans

While the SBA offers disaster loans to most businesses and private nonprofit organizations, organizations of certain types and characteristics are ineligible:

• Public entities and publicly owned nonprofit organizations: Nonprofit organizations that are publicly owned and other public entities like cities, towns, and counties are ineligible for funding under the SBA disaster loan program.
• Agriculture enterprises: The SBA is not authorized to provide physical disaster relief to agricultural enterprises, which includes farmers, ranchers, and aquaculturists. It can provide relief to a nonagricultural venture of an agricultural enterprise, so long as the income and operations of the non-agricultural venture are separate and distinct.
• Hobby businesses: If the SBA determines a business is a hobby, it becomes ineligible for any funding under the SBA disaster loan program. When making this determination, the SBA considers factors, such as the legal status of the business, licensing, and efforts of the owner to operate as a business.

It is important to note that businesses and private individuals that purchase disaster-affected property or those that assume the risk by not complying with required safety measures and insurance requirements are also ineligible for funding. Applicants unsure about their eligibility can contact the SBA in person at a Disaster Recovery Center, by email, or by phone.

SBA Disaster Loan Application Requirements

SBA disaster loan application requirements vary based on the loan that applicants apply for. Each one will need to include identifying information such as Social Security numbers, addresses, and tax releases from the IRS. Businesses will need to provide identifying information, sales history, outstanding liabilities, and the personal financial records of all owners with at least a 20% stake in the company.

Personal Property, Home, and Sole Proprietor Disaster Loans

Business Disaster and Military Reservist Economic Injury Loans

SBA Disaster Loan Application Submission

Applicants that complete the required forms with supporting documentation are ready to submit an application. A complete application leaves less room for follow-up questions and delays in the process. The best way to gather documents includes contacting accountants and banks and pulling any available records that fill gaps in the overall application. The SBA offers several application options but recommends applying online when possible to avoid extended wait times.

Options for submitting an SBA disaster loan application include:

• Online: Applying online is a convenient option that reduces wait times and ensures that the SBA receives all documents.
• In person: Applicants can apply in person where a Disaster Recovery Center is available. This gives applicants an opportunity to discuss loan specifics and ask questions.
• By mail: Applicants can also mail an application to the SBA. Applicants should verify that the address on their application is correct, retain a copy for their records, and ensure that sufficient postage is applied.

SBA Processing & Disbursement
14925 Kingsport Road
Fort Worth, TX 76155

SBA Disaster Loan Approval Process

Once the SBA has received a loan application, it will assign a loan officer to the case and make its loan decision within eight weeks. The loan officer will work with the applicant throughout the loan decision-making process. The approval process for an SBA disaster loan includes:

• Review of an applicant’s credit: The SBA reviews the credit history of an applicant to determine whether it can make a loan. At this stage, the SBA may contact the applicant for an explanation of any derogatory remarks and missed payments on their credit history.
• Order an inspection and estimate total losses: If the credit review is satisfactory, the SBA will ask an inspector to estimate the total amount of physical loss an applicant’s disaster-damaged property has sustained. This determines the total funding amount that a borrower can receive.
• Determine applicant eligibility: The loan officer will also work to review any insurance or grants that may reduce the funding amount. The SBA can provide funding before insurance pays out, and borrowers often discover other sources of aid in this process.
• Request additional information and complete loan processing: Applicants that have not supplied the required information to the SBA must submit it promptly. This can include missing documents and supporting information based on the applicant’s eligibility and credit review process.
• Discuss loan decision: After the SBA makes a loan decision, it contacts the applicant to discuss the next steps. In the case of a denial, the SBA will explain the reason for denial and any actions that the applicant can take to be reconsidered. In the case of an approval, the SBA will ask applicants to sign loan documents and await funding.

SBA Disaster Loan Disbursement

Once the SBA approves a disaster loan, applicants will receive a package of loan closing documents for signature. The SBA will provide approved applicants with an initial disbursement of $25,000 within one week of receiving the signed loan closing documents. After the initial disbursement, the schedule for receiving the remaining funds varies by loan type:

• Physical disaster loan: The SBA disburses funds over a six- or 12-month period as borrowers complete the necessary repairs and renovations.
• Economic disaster loan: Funds are disbursed in a single lump sum soon after borrowers sign the loan closing documents.
• Military reservist economic injury loan: The SBA disburses funds quarterly unless there is a sound business reason to provide the funds in a single lump sum.

The SBA also works with applicants to modify existing SBA disaster loans. Some reasons that borrowers may need a modification include loan increases due to unexpected expenses and loan reductions in the event of additional insurance proceeds. Applicants can submit any loan modifications requests to their assigned SBA disaster loan officer.

Assistance for Disaster-struck Areas

Applicants that are applying for SBA disaster loans also have additional resources. Each service may have different requirements, and program availability may vary by region.

• Business counseling: Counseling from organizations like SCORE and the Small Business Development Center (SBDC)
• FEMA: Assistance on disaster preparedness and applications for grants based on current disaster damage
• Ready.gov: Sample emergency plans, preparedness checklists, and business continuity templates
• Individual government benefits: Individual benefits that cover basic life necessities and assistance with expenses in the event of a disaster

Besides these resources, local and state governments often provide additional assistance to small business owners and individuals affected by a disaster. Such assistance will vary by location, but applicants should explore these options as potential resources for recovery and preparedness.

SBA Disaster Loan Program Pros & Cons

SBA disaster loans provide qualified applicants with affordable financing during crisis periods. Disaster loans are available to renters, homeowners, and businesses with minimal restrictions. However, only declared disasters qualify, and the application and approval process can take several weeks.

Bottom Line

SBA disaster loans provide affordable disaster recovery funding to qualified businesses, homeowners, and renters. Funding amounts vary based on the damage, but repayment terms can extend up to 30 years. Applicants can complete an application online and should receive a decision within eight weeks.