Business Loans

SBA Disaster Loans: Everything You Need to Know

Apr 04, 2020 • 10 min read
Upset small business owners
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      Small businesses nationwide are struggling with the fallout from the coronavirus crisis. New research suggests that 50% of business owners have felt the effects, and nearly 40% report a decline in revenue. These negative trends were mainly chalked up to fewer customers visiting business locations, customers being more reluctant to make purchases, and customers having access to less disposable income.

      Given the dire situation, the federal government is taking unprecedented action. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) will allocate $2 trillion for relief initiatives. Included in the package will be a one-time payment to many Americans. Individuals making up to $75,000 a year will receive a $1,200 payment. Married couples making no more than $150,000 will get $2,400, as well as a $500 payment for each child in their family.

      SBA disaster loans get a boost.

      In addition to the personal payments from the relief package, there are multiple benefits for small businesses in the CARES Act. These include:

      • Paycheck Protection Program (PPP): Get up to $10 million to cover payroll support expenses such as employee salaries, paid sick leave, paid medical leave, insurance premiums, mortgage payments, rent payments, and utility payments.
      • Economic Injury and Disaster Loan (EIDL) and Loan Advance: These loans are specifically relevant in situations where your business didn’t suffer any physical damage but was harmed nonetheless. You can receive up to $2 million to cover expenses you would’ve been able to pay if the disaster hadn’t occurred. Because of the severity of the coronavirus pandemic, you can actually apply for an advance of up to $10,000.
      • SBA Debt Relief: With this program, the SBA pays the principal and interest on new SBA 7(a) loans that are funded before September 25, 2020. If you have an existing SBA 7(a) loan, the SBA would pay the principal and interest for 6 months. Note that this benefit is limited to SBA 7(a) loans and wouldn’t be applicable for PPP loans or EIDLs.
      • SBA Express Bridge Loan: With values up to $25,000, these loans require less paperwork and hit your bank account much faster than a typical SBA loan. This program is intended to deliver faster relief to those who need it.

      Businesses can qualify for the expanded Small Business Administration (SBA) disaster loan program as long as they don’t employ more than 500 people. As with other SBA loans, this financing is not actually funded by the agency. Rather, the COVID-19 loans are facilitated by the SBA, and the money comes from banks and various independent lenders. The key element is that the SBA guarantees a portion of the loan, which lowers lenders’ risk and makes them more willing to work with those who have less-than-stellar credit history.

      SBA small business loans are intended to help small business owners overcome the negative effects of the coronavirus pandemic, so if you’ve struggled to make payroll, cover accounts payable, handle fixed debts, or pay your bills, you could qualify.

      Finally, the Families First Coronavirus Response Act could also help you during this challenging time. This federal action bolsters unemployment benefits and creates rules for emergency paid sick leave impacted by the pandemic.

      The regular lineup of SBA disaster loans.

      Multiple other SBA emergency loans for small businesses are available. While the details vary, they are all intended to help a business after physical or economic damage is caused by a declared disaster.

      An SBA disaster loan can be used to repair or replace real estate, personal property, machinery and equipment, and inventory and business assets. But don’t go thinking that you could use one to expand your operations. The rules clearly state that it’s only intended to restore things to the way they were before the disaster.

      Here’s a quick look at 3 different types of SBA disaster loans not directly related to federal action in response to the coronavirus crisis:

      For those living in a declared disaster area and who have been victims of a disaster, there may be relief available through these loans. It’s worth noting that even though these loans are provided through the SBA, you don’t need to actually own a business to qualify.

      If your business or organization is within a declared disaster area and sustained damage during that disaster, you can apply for one of these loans. Common examples include a hurricane or flood. These loans provide up to $2 million and are intended to help you replace or restore any damaged property.

      This loan is specifically earmarked for business owners who employ a military reservist called to active duty. In these situations, the SBA funding can help your business with operating expenses.

      Current declared disasters.

      In order to qualify for SBA assistance for more regionalized physical disasters, you will need to live in a designated disaster area.

      You can search for Presidential and SBA declared disaster areas by state and territory with the SBA’s online database. Recent examples include flooding in Tennessee and Mississippi, wildfires in Hawaii, and Hurricane Idalia.

      How to apply.

      Once a Presidential disaster is declared in your area, you need to first register with the Federal Emergency Management Agency (FEMA). To get started, call FEMA at 1-800-621-3362 or visit

      After you’ve gotten a registration number from FEMA, you’re ready to complete your SBA online application. You’ll need to have the following information handy:

      • Contact information for all applicants
      • Social security numbers for all applicants
      • FEMA registration number
      • Deed or lease information
      • Insurance information
      • Financial information such as income, account balances, and monthly expenses
      • Employer Identification Number for business applicants

      The SBA will review your application and then send an inspector to do an onsite review and to estimate the cost of your damage. The SBA makes these disaster loans a priority, so you can expect to hear back on their decision within a few weeks.

      One thing to note is that the most commonly cited reason for delays in the process is an incomplete application. With this in mind, spend a little extra energy making sure every detail is correct before you click submit.

      Also, don’t wait for any insurance settlements before you file your loan application. This common delay can cause borrowers to miss the filing deadline. If a settlement is made after you’ve applied, you can simply add the final insurance information at that time.

      Quickly compare loan offers from multiple lenders.

      Applying is free and won’t impact your credit.

      While every effort is made to ensure the accuracy of information when a story is published, the coronavirus pandemic and Paycheck Protection Program (PPP) have caused details to change at a rapid pace. Additional guidance from the government may change or clarify certain aspects of the forgiveness process and could result in changes to the information contained in these pages. For the most up-to-date information, please visit the COVID-19 section of our website. For more information, you can call us at (855) 853-6346. Lendio is not responsible for and provides no warranty as to the accuracy of this content. Lendio does not provide legal, accounting or tax advice. The information and services Lendio provides should not be deemed a substitute for the advice of such professionals who can better address your specific concern and situation.
      About the author
      Grant Olsen

      Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on and Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

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