Small Business Loan Options After Hurricane Ian

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Hurricane Ian made landfall in the United States on Wednesday, September 28, 2022, as a category 4 hurricane, hitting Southwestern Florida with record-setting wind speeds and deadly storm surges. Ian continued a path of destruction towards South Carolina, where the hurricane made landfall on Friday as a category 1 storm.

The total damage to the residents and businesses affected by Hurricane Ian, described by President Biden as “possibly the deadliest hurricane in Florida’s History,” is still being assessed.

Despite their shock, small business owners are out of necessity, already turning their focus to recovering and rebuilding. Disaster relief efforts include local and federal government disaster assistance and small business loan options designed to help affected entrepreneurs rebuild their businesses.

Disaster loan eligibility requirements

If you are a small business owner that operates a nonprofit or for-profit business in any of the areas affected by Hurricane Ian, our hearts are with you. There are loan programs and other types of financial assistance available from agencies like the Federal Emergency Management Agency (FEMA) and the U.S. Small Business Administration (SBA). Most assistance and loan programs require that the state or county in which your business operates has been declared a disaster by the President, FEMA, or SBA.

On Sept 24, 2022, President Joe Biden approved an emergency declaration for Florida. Since then, there have been declared disaster zones in South Carolina, Florida, Virginia, and North Carolina. While the declaration of a disaster typically indicates the availability of relief options, it is challenging to understand which individuals and businesses are eligible for disaster loans and financial assistance and what that means for entrepreneurs.

Disaster relief efforts, like those available through the SBA, are designed to help business owners get the funds they need to rebuild their companies with long-term, low-interest financing options. While the primary eligibility requirement is dictated by the location of the business and whether a disaster was declared, there are other eligibility requirements applicants should be aware of. Each business owner impacted by Hurricane Ian that applies for a loan through the SBA must also be able to show that they will be able to repay the loan. Some factors that affect eligibility include:

Creditworthiness

The creditworthiness of a small business owner will be analyzed during a business loan underwriting process to measure the business’s ability to repay the loan. Creditworthiness considers the payment history, net worth, value of remaining assets, annual revenues for two years prior to the disaster, the length of time the business has been open, other outstanding debt obligations, and industry trends. Many of the factors considered in determining creditworthiness make up the business’s credit score, which business owners can obtain through one of the credit bureaus, like Experian.

Personal credit score

In addition to analyzing your business’s credit history, some disaster loan applications will also consider the personal credit of the business owner. An individual’s credit score, or FICO score, is determined using several factors including payment history, amount of available credit, current debt schedule, length of open credit lines, and credit inquiries. Individuals can prepare for a disaster loan application by requesting a free credit report.

Loan options for small business owners affected by Hurricane Ian

The SBA offers two types of small business loans for entrepreneurs impacted by Hurricane Ian and individual assistance programs for renters and homeowners. Both business loan programs are intended to help small businesses that may not be able to rebuild or reopen without financing. To provide an affordable financing option, disaster loans backed by the SBA have interest rates that do not exceed 4 percent for borrowers that don’t have other available credit sources. If an approved borrower has available credit from another source, then the interest rates are capped at 8 percent. Those published interest rates represent the maximum allowed by the SBA, but the rates are sometimes adjusted depending on the specifics of the declared disaster.

Business Physical Disaster Loans

Physical disaster loans include funding options for business owners to repair or replace the business property that was damaged by the disaster. In the case of Hurricane Ian, business property includes commercial real estate, like buildings, storefronts, and warehouses. Other damaged properties may include, inventory and supplies, and equipment, like vehicles, IT hardware and computer software, commercial kitchen appliances, and other industry-specific machinery.

Physical disaster loan FAQs

What types of businesses can apply for an SBA physical disaster loan?

Private businesses and nonprofit organizations of any size that have been affected by a declared disaster are eligible.

What is the maximum loan amount for a physical disaster loan?

Physical disaster loans can be approved for up to $2 million. In some cases, the loan can be increased up to 20% to help the business owner rebuild property that will be protected against similar damage in the event of another disaster.

What are the repayment terms for a physical disaster loan?

The repayment terms for an SBA disaster loan include the maximum approved interest rate explained above and a maximum repayment term of 30 years. There are no loan fees charged by the SBA, but the lender that issues the funds may apply loan origination fees or other processing fees. Loans greater than $25,000 may also require that the borrower provide collateral at the time of approval.

Economic Injury Disaster Loans

Economic Injury Disaster Loans (EIDL) are a type of working capital loan designed to help small businesses, agricultural cooperatives, aquaculture entities, and private, not-for-profit organizations in disaster areas. The funding is issued to help businesses meet necessary financial obligations during the disaster recovery period, including other debt payments and operating expenses incurred if the disaster hadn’t impacted operations.

EIDL FAQs

What is the maximum loan amount for an EIDL?

EIDL loans can be approved for up to $2 million, like the physical disaster loans, but the maximum loan amount is based on the total calculated economic injury of the business.

What are the repayment terms for an EIDL?

The repayment terms include the same capped interest rates as physical disaster rates and terms up to 30 years. Fees are determined by the lender issuing the funds and eligibility requirements may determine the total financing costs incurred.

How to apply for a disaster loan

While no business is ever prepared for natural disasters, speedy preparedness will expedite your access to financial resources. SBA disaster loans work differently than other SBA loans like the SBA 7(a) loan or SBA Microloans. To apply for those loan programs, potential borrowers can work directly with an SBA-approved lender, like Biz2Credit. However, for small business owners interested in applying for a disaster loan, applications are completed directly with the SBA. Follow these steps to apply for an SBA disaster loan:

Prepare to apply

SBA disaster loan applications will not be reviewed unless the borrower has registered with FEMA prior to applying. To obtain a registration number, call FEMA at 1-800-621-3362 (TTY: 1-800-462-7585) or visit DisasterAssistance.gov. To speed up processing, be sure you have your FEMA registration number handy when you begin the loan application process.

Complete the application

SBA disaster loan applications can be completed via online application at www.sba.gov, at an SBA disaster center, or by calling the SBA at 800-659-2955 to request an application by mail. To complete an online SBA disaster loan application, you will need the following information:

• Name, address, and phone number of applicant
• FEMA registration number
• Social Security Number (SSN) of applicant
• Employer Identification Number (EIN) of affected business
• Deed or lease on business
• Business insurance information
• Financial statements

Attach or include required documentation

Before your loan application is completed, you’ll need to be sure you’ve included the proper documentation. In addition to the SBA Form 5, or business loan application, you’ll need:

• IRS Form 4506-T for all persons that have 20% or more ownership in the business
• The most recent Federal Income Tax Return for the business
• SBA Form 413 – personal financial statement for all owners
• SBA Form 2022 – schedule of liabilities

Review process

Once you’ve completed the SBA disaster loan application, the SBA will take action to approve or deny funding. During the first step in the review process, the SBA will review the creditworthiness of the applicant. If the credit history is acceptable, an SBA inspector will be sent out to make assessments on the total cost of the disaster damage. From there, a loan officer will determine if you are eligible and notify you if there is further information needed. Most SBA loan applicants receive a decision within 2-3 weeks. You can check your loan status on the SBA website by logging into your account.

How the disaster loan approval process works

Whether the application for an SBA disaster loan is approved or denied, there are next steps for a business owner needing to rebuild after Hurricane Ian.

What’s next for approved disaster loan applications?

If the SBA makes the decision to provide your small business disaster relief funding, you will be sent the Loan Closing Documents either by email or mail. Review those documents carefully and reach out to a business financing expert if you have any questions. Once reviewed, the documents can be signed and returned to the SBA. Within five business days of receiving your signed documents, the SBA will make an initial disbursement to you for $25,000 for physical damage and $25,000 for economic injury to get you started on repairs.

Each approved borrower will be assigned a case manager by the SBA. The case manager will work with you to make sure you’re aware of and meeting the conditions of the loan and inform you of when you will be eligible to receive the remaining disbursements. The case manager will also make recommendations to the SBA about any necessary increases or reductions to the approved total loan amount. Disaster loans may be adjusted if the insurance proceeds are more or less than expected.

What’s next for denied disaster loan applications?

If your SBA disaster loan application does not get approved, don’t panic. There are steps you can take to revisit the disaster loan financing options or access another financial assistance program. The most important thing to remember if your application is denied is that you’ll want to act quickly to secure alternative financing.

Contact the SBA

If you get a denial notice from the SBA, you’ll want to call them right away and ask for the details contributing to the decision. You can also request reconsideration, which is done through the Disaster Assistance Processing and Disbursement Center (DAPDC).

Apply for FEMA assistance

Receiving financial assistance from FEMA is also an option. You may have applied for a grant when you initially registered with FEMA. If you’ve been approved for a FEMA grant, you can request additional funding due to the denial of your loan application.  If you haven’t applied for a FEMA grant, it is a good time to apply.

Consider alternate financial assistance

Check with the local governments in your area to see what financial assistance they are providing for businesses affected by Hurricane Ian. To get connected with those resources, visit the Florida SBDC website or DisasterAssistance.gov. Social media is another great place to find help in your area, check the pages of your local news and law enforcement groups to find resources.

Final Thoughts

The damage to many small businesses is still being assessed as Hurricane Ian subsides for the Southeastern U.S. states, however, it is important that business owners suffering from loss act quickly. Just as with federal grant and SBA loan programs for Coronavirus and recent wildfires, there are application deadlines and limited funds available for Hurricane Ian as well.

Consider registering your business with FEMA, applying for a disaster loan with the SBA, contacting local resources, and working with a financial expert at Biz2Credit to complete an application or apply for faster financing in the meantime. Maryam Zadeh was able to get business funding in as little as 48 hours after working with Biz2Credit, and they can help your business too.