SBA Disaster Loans: Interest Rates, Qualifications & 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 up to 30 years and interest rates starting at 1.75%. Applicants can receive initial funding five days after signing loan closing documents.

If you want to apply for an SBA disaster loan online, you’ll need to register for disaster loan assistance with SBA. You can do so here.

COVID-19: Small Business Relief

Small businesses that have been economically impacted by the COVID-19 outbreak may be able to receive a disaster relief loan through the Small Business Administration. These Economic Injury Disaster Loans (EIDL) are available in amounts of up to $2 million, at an interest rate of 3.75%, with repayment terms of up to 30 years.

States must apply to the SBA for disaster relief through this program. If your state is not yet on this list, contact your local agency of commerce to inform them of the impact the virus has had on your business. States can use this information to apply to the program—states must be able to prove to the SBA that at least five businesses have been impacted to be accepted, so your information could greatly assist in this process.

States Currently Eligible for COVID-19 Disaster Loans

As of April 23, 2020, all 50 states and the District of Columbia are eligible for COVID-19 Disaster Loans.

What an SBA Disaster Loan Is

SBA disaster loans are a safety net for businesses without sufficient insurance or other assistance. Businesses in a declared disaster region can receive loans up to $2 million with affordable interest rates and terms. The SBA processes loan applications within four weeks and disburses an initial $25,000 within five days of receiving signed closing documents.

SBA disaster loans are available to businesses, renters, and homeowners that suffer physical or economic damage because of a declared disaster. The president, SBA, and United States Department of Agriculture can declare eligible disasters. The most common disasters include droughts, hurricanes, tornadoes, and earthquakes.

Business owners can identify if their county is included in the declaration by reviewing the fact sheet or by contacting their local SBA office. Eligibility depends on many factors, and the SBA requires an application 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 to fill any funding gaps. The application requires extensive paperwork and can take up to four weeks for the SBA to process. Unlike other SBA loans, the SBA funds these loans directly and provides an initial advance of $25,000 within five days.

The application process can require multiple rounds of paperwork, and applicants have no guarantee of approval. 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. For this reason, an SBA disaster loan should seldom be the only disaster relief business owners and individuals apply for.

Individuals 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. After seeking initial relief, individuals should check if the disaster has made the SBA disaster list.

Who an SBA Disaster Loan Is Right For

An SBA disaster loan is an excellent solution for financing disaster relief to make up for the damage that insurance and any grants don’t cover. Business owners, renters, and homeowners that suffer economic or physical damage to their business might qualify. Nonprofits and agricultural cooperatives can also receive funding.

Candidates that an SBA disaster loan is 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 needing 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 FEMA and exhausting other assistance programs.
• Renters needing 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: Unlike many financing options, nonprofits and food cooperatives are eligible for SBA disaster loans. Typically, these groups can qualify for the same loans that for-profit businesses can apply for on the grounds of physical or economic damage.

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.
• Express bridge loan pilot program: Businesses in an affected disaster zone can receive an express bridge loan up to $25,000 while they await a decision on long-term financing. However, only businesses in the primary counties affected by a presidential disaster declaration can apply and must meet SBA 7(a) eligibility requirements.

How to Apply for an SBA Disaster Loan

An SBA disaster loan takes three steps from application to disbursement of funds. Applicants will need to submit an application, respond during the SBA review process to any additional information requests, and sign loan closing documents. Submitted applications take up to four weeks to review, and the SBA makes an initial disbursement within five days of 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. Applicants must be in a disaster-affected area, suffer accessible economic or physical damage to their business or place of residence, and 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 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 Loan

Business Disaster Loan

Military Reservist Economic Injury Loan

Applicants can increase their chances of a speedy approval process by preparing documents before applying. A complete application leaves less room for follow up questions and ensures that applicants can get funding sooner to resume business operations. The best way to gather documents includes contacting accountants and banks and pulling any available records that leave no gaps in the overall application.

SBA Disaster Loan Application Submission

Applicants that complete the required forms with supporting documentation are ready to submit an application. The SBA offers several application options, including in-person, online, and mail submissions. There is no best option, but the SBA recommends applying online when possible to avoid extended wait times.

Options to submit 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 allows applicants 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 four weeks. The loan officer will work with the applicant throughout the loan decision-making process. This process includes credit reviews, loss estimates, loan eligibility, requests for additional information, and a loan decision.

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 applicants to explain any derogatory remarks and missed payments on their credit history.
• Order an inspection & 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 & 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 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 five days of receiving the signed loan closing documents. After the initial disbursement, the schedule for receiving the remaining funds varies by loan type.

The disbursement schedules by loan type include:

• 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: The SBA disburses funds 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 should consider a loan 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.

SBA Disaster Loan Interest Rates

The SBA determines the interest rates for SBA disaster loans every quarter 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 up to 8%. Current SBA disaster loan interest rates are available on disaster declaration fact sheets.

SBA Disaster Loan Rates: Example

Rates for the disaster loan in our example and other SBA disaster loans are lower than other financing types. Individual disaster declarations have their own interest rates. However, these rates are almost always lower than other funding alternatives, like online business loans. There are also no prepayment penalties or fees associated with an SBA disaster loan.

SBA Disaster Loan Eligibility

Applicants need to meet some minimum requirements to qualify for SBA disaster loans. These include a disaster-affected area location, satisfactory credit history, and repayment ability. The SBA will also only cover uncompensated losses, which were uninsured at the time of the disaster and may require collateral for the loan.

The basic credit qualifications for an SBA disaster loan are:

• Location: Business and homeowner locations must be in a declared disaster area to qualify for funding. This includes temporary structures like an RV or mobile home at the location during a disaster.
• Credit history: Credit history is a factor in consideration and, while the SBA does not provide a specific credit score, it looks for a general history of on-time payments to creditors. 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.

The SBA also requires insurance on properties it takes as collateral or where funds are used for the property’s repair or replacement. Generally, commercial property insurance fulfills this requirement, but there may be situations where additional coverage is necessary, particularly if the business is located in a state that requires coverage for particular hazards, such as hail, windstorms, and earthquakes.

There may be additional requirements that vary based on the SBA disaster loan that borrowers seek. Each case presents many variables, and only the SBA can determine 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.

SBA Disaster Loan Terms

The SBA examines the damage and a borrower’s repayment ability when determining the loan amount it offers. It also sets repayment terms of 15 or 30 years, with the only exception being businesses that can qualify for outside financing, which receive terms up to seven years. The SBA offers deferment of payments for four to 15 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 9 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 15 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 up to 20 years.

SBA Loans Disaster List: Current Qualifying SBA Disasters

When a disaster strikes, first responders coordinate state and local recovery efforts. The state governor may petition the U.S. president or SBA for federal assistance after determining that local aid is insufficient. The U.S. secretary of agriculture and the U.S. secretary of commerce may make economic injury disaster declarations based on the impact of a disaster.

The two categories that disaster declarations fall into include:

• Presidential & SBA agency-declared disasters: Physical and economic disaster relief are both available for disasters in this category. The most common disasters include the impact of severe weather, such as hurricanes.
• 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 October 15, 2021. 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.

Secretary of Agriculture Declared Disasters: SBA Loans Disaster List

The following table provides the current secretary of agriculture declared disasters, updated as of October 15, 2021. Click the table to expand and view more information.

Assistance for Disaster Struck Areas

Applicants that are applying for SBA disaster loans also have additional resources. These include business counseling from organizations like SCORE, grants from FEMA, resources for emergency planning, and assistance for individuals. Each service may have different requirements, and program availability may vary by region.

Additional resources for disaster-struck areas include:

• Business counseling: Assistance on issues with business management, application submission, and general business advice.
• 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. The best way to find out about these programs varies by state, but applicants should explore these options as potential resources for recovery and preparedness.

Entities Ineligible for SBA Disaster Loans

While the SBA offers disaster loans to most businesses and private nonprofit organizations, businesses of certain types and characteristics are ineligible. These businesses include public entities, publicly owned nonprofit organizations, agricultural enterprises, and hobby businesses.

Entities ineligible for SBA disaster loans include:

• 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 nonagricultural 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 that businesses and private individuals that purchase disaster-affected property or those that assumed 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 for clarification.

Pros & Cons of the SBA Disaster Loan Program

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.

Pros of the SBA Disaster Loan Program

Benefits of the SBA disaster loan program include:

• Affordable financing: Interest rates may not exceed 4% for borrowers that cannot get credit elsewhere and 8% for borrowers that can.
• Expanded borrower scope: Unlike traditional SBA loans, the SBA disaster loan program includes businesses of all sizes and most private nonprofit organizations.
• Lack of collateral not prohibitive: The SBA will not decline a loan due to a lack of sufficient collateral. Instead, it requires that borrowers pledge any available collateral in those circumstances.

Cons of the SBA Disaster Loan Program

Drawbacks of an SBA disaster loan program include:

• Economic disaster loan restrictions: Businesses of all sizes can apply for physical disaster relief, but economic disaster relief is more limited. It’s only available to nonprofits, small businesses, and agricultural cooperatives that meet the SBA’s definition of small business.
• Only available for declared disasters: The disaster loan program is only available for disasters recognized by the SBA. These disasters must be declared by the SBA, U.S. president, U.S. secretary of commerce, or U.S. secretary of agriculture.
• Potentially extended loan approval period: The SBA states that the application review period takes up to four weeks, with possible extensions for assessments and additional information requests. However, applicants can apply before receiving insurance proceeds, so it’s best to start an application early.

SBA Disaster Loan Frequently Asked Questions (FAQs)

While this article has provided substantial information about the SBA’s disaster loan program as with any lending program, some questions are asked more frequently than others. The following are some of the most frequently asked questions about the SBA’s disaster loan program.

Can I get assistance for physical damage to a residential rental property that I own through an SBA disaster loan?

Residential property owners that lease their property can get assistance for physical damage with an SBA disaster loan. This determination is made by using the IRS definition. In general, if you lease the residential property for more than 14 days each year, the IRS considers it a rental property and not a residence.

How does the approval of an SBA disaster loan affect my eligibility for grants or other forms of assistance?

Other government agencies like FEMA and organizations offer alternative types of disaster assistance. As an example, one type of assistance is a grant, which doesn’t need to be repaid. The SBA recommends you check with the administering agencies and organizations before applying for an SBA disaster loan to determine if it will affect your eligibility.

How can I determine if the SBA considers my business small for an EIDL?

The SBA uses its traditional approach when determining if a business is small. A business is typically considered small by the SBA when it generates less than $750,000 to $38.5 million in annual revenue and has fewer than 100 to 1,500 employees, which varies by industry.

What are the common reasons that SBA disaster loan applications are declined?

A common reason for the SBA declining an application is a poor credit history. This includes a low credit score and unsatisfactory performance on prior SBA loans or other federal obligations like student loans. Another common reason is an inability to repay debt with a cushion. Generally, 1.25 times or better debt service coverage ratio (DSCR) is acceptable.

What if I waited too long to apply for an SBA disaster loan?

If you missed the application deadline, the SBA may grant an extension if the issue was unavoidable and outside your control. Examples include serious illness or death of the owners and temporary relocation outside the disaster area. To request an extension, provide the SBA with a letter of explanation in your loan application.

What if my event is not on the SBA’s current disaster list?

Disasters are initially managed at the local and state level. Once disasters move to the federal level, the SBA engages in outreach programs, publishes fact sheets, and issues press releases. You can check the SBA’s website to see if a disaster has been declared. Alternatively, you can contact a Disaster Field Operations Center office.

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 expect a review decision within four weeks.