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Many small businesses and nonprofit organizations in a declared disaster area are eligible for an SBA loan to mitigate any uninsured losses and damages. — Getty Images/PeopleImages

Updated 9/10/21:

SBA announces significant enhancements to the COVID Economic Injury Disaster Loan (EIDL) program

The hard hit small business community will now be eligible for much needed additional financial assistance through several major enhancements that are being implemented as part of the U.S Small Business Administration’s (SBA) COVID Economic Injury Disaster Loan (EIDL) program. Effective immediately, applications are open for loans with borrowing limits of up to $2 million vs. the previous cap of $500,000. As part of the loan enhancements, repayments can now be deferred for 24 months from the date they were issued. Also announced, a 30-day exclusivity period during which loans of $500,000 or less will be reviewed, approved and distributed, allowing for easier and and more immediate access to a share of the estimated $150 billion in funds available for capital and operating expenses including payroll, equipment purchases and paying off debt. EIDL funds will additionally now be approved for pre-paying commercial debt and to alleviate federal business debt. A detailed outline of the key changes, important dates and guidance on how to apply is available on the SBA website. Note these changes apply to EIDL loans for COVID relief only. They do not apply to EIDL loans received for other natural disasters.

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With devastating natural disasters like hurricanes, floods and wildfires impacting businesses in regions across the United States, small business owners face a constant threat of physical and financial damage to their operations. If you are located in an affected area, it’s important to understand what concrete steps you can take to alleviate the economic impact on your business.

If you feel overwhelmed by taking the first step to save your business, don’t be. Many small businesses and nonprofit organizations in a declared disaster area are eligible for an SBA loan to mitigate any uninsured losses and damages. Taking the first step is as simple as visiting the SBA website and applying online.

For everything you need to know about applying for an SBA Disaster Assistance loan, visit our step-by-step guide.

What is a disaster relief loan?

The disaster loan program from the SBA is in place to provide economic relief to businesses impacted by natural disasters and civil unrest throughout the United States. The program is used extensively after detrimental events such as Hurricane Ida in Louisiana or the California wildfires, so businesses in the impacted areas can receive low-interest loans to get back on their feet.

Economic Impact Disaster Loans (EIDL) are the most common type of SBA disaster assistance and are granted to businesses that have suffered “substantial economic injury.” This means the business is unable to meet its obligations and/or cover necessary operating expenses due to the impact of a declared disaster.

EIDL funds have a maximum interest rate of 4% and a maximum term length of 30 years. Loans are usually capped at $2 million and may be used to cover many business expenses, like payroll, accounts payable, equipment and machinery purchases, real estate payments and other bills you cannot pay until normal operations resume after a disaster.

While you’ll be applying for a loan through the SBA, this loan program is a government-backed loan program.

The SBA also offers dedicated Business Physical Disaster Loans that can be used specifically for rebuilding physical structures following disaster-related damage. These loans may carry a maximum of 8% interest (depending on whether your business can receive credit elsewhere).

Finally, the SBA has been offering an ongoing special COVID-19 EIDL program for small businesses that have suffered financial losses during the pandemic. Due to the breadth and scope of COVID-19’s impact on the American economy, all U.S. small businesses are eligible for a disaster relief loan from the SBA. You can apply online to get started.

Who is eligible for EIDL assistance?

According to the SBA, all small businesses, small agricultural cooperatives and most private nonprofit organizations located within a declared disaster area (as defined by the SBA, the U.S. President or the Secretary of Agriculture) may apply for an Economic Impact Disaster Loan. Businesses of all sizes and most private nonprofits in a disaster area are eligible to apply for a Business Physical Disaster Loan.

How do SBA disaster loans work?

While you’ll be applying for a loan through the SBA, this loan program is a government-backed loan program. This means that while a normal bank will be providing you with a loan, the SBA will be guaranteeing that loan to the bank. It will cover the loss should your business be unable to pay back the loan to the bank.

As you apply and learn more about the SBA Disaster Assistance Loan process, be prepared to work with other partners to find funding.

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Published September 01, 2021