SBA disaster loans are low-interest, long-term loans given to individuals or businesses by the United States Small Business Administration (SBA) in areas where there is a declared disaster. These loans might be used for a variety of purposes, such as repairing damage or offsetting economic losses caused by a disaster. There are four main types of disaster loans — loans to repair homes and other personal property, loans to repair damage for businesses, loans to cover economic injury and loans to cover economic injury caused by deployment of a military reservist. Applicants for SBA disaster loans can request to borrow varying amounts, depending on the specific type of loan. Usually, interest rates for disaster loans are 4-8 percent over a 30-year term.
These loans for damage to personal property or homes can be given to renters or homeowners even if they do not own a business. Some of these loans are intended to be used for replacement of furniture, clothes, appliances or other household items that are damaged or destroyed in a disaster. Other times, these loans are given to repair affected homes or make upgrades that would help to prevent destruction in a future disaster. SBA disaster loans for homes and personal property usually cannot be used for rental properties, which can be covered by a business disaster loan.
Business disaster loans are given to business owners or nonprofit organizations to repair or replace buildings, machinery, inventory or other destroyed property related to the business or organization. A portion of the money from an SBA disaster loan might also be used to upgrade a property to protect against damage from similar disasters in the future. In addition, business disaster loans can be used to cover repairs to uninsured or under-insured property. The SBA accepts applications from businesses or nonprofit organizations of all sizes, not just small businesses.
Other types of SBA disaster loans can cover economic loss caused by a disaster. These loans might be available only for small businesses or farms, but nonprofit organizations of any size might also apply. After the application process is complete, an inspector will visit the applicant to assess the damage and determine the specifics of the loan.
A final type of SBA disaster loan covers economic losses that a business might suffer when a military reservist who is an essential employee is deployed, causing disruption of the business. These loans might be given only to small businesses that the SBA determines are unable to fund their own recovery without financial help from the federal government.