Disaster-recovery loans not just for small businesses

Small Business Administration urges businesses, homeowners and renters to apply now

Staff Writer

By now, New Jerseyans dealt crushing blows from superstorm Sandy have likely contacted their insurance companies, and are aware of assistance available through the Federal Emergency Management Agency (FEMA), the Hurricane Sandy New Jersey Relief Fund and other organizations offering help to those in need.

However, a lesser-known source of help exists to help bridge the gap for those trying to get back to better, pre-Sandy times. The U.S. Small Business Administration (SBA) not only offers low-interest loans to small businesses, but also belies its name to extend a hand to homeowners and renters.

“If you think you’ll need it or you don’t know, just go ahead and [apply],” SBA spokesman Gary Colton said. “Insurance is always your first line of defense for homeowners and renters, but it doesn’t always cover all the costs.”

The same goes for FEMA, he said.

“But the SBA loan is designed to help you recover. … and get back to where you were prior to the storm,” he explained. The low-interest disaster loans are available to homeowners in amounts up to $200,000 to cover the repair or replacement of their primary residences; to homeowners and renters in amounts up to $40,000 to replace personal property, including vehicles; and to businesses of all sizes to cover up to $2 million in property damage or economic injury.

In addition, low-interest working capital loans are offered to small businesses and most private, nonprofit organizations — including charities and churches — that face challenges in meeting financial and other obligations as a result of the storm.

Businesses can qualify for SBA loans even if they have not suffered physical damage related to the storm. According to Colton, Economic Injury Disaster Loans (EIDLs) are designed to help businesses that suffered financially from a variety of causes — including power outages, road closures and even a lack of customers related to the storm’s aftermath. Such loans provide working capital for these businesses to help keep on top of paying bills and employee salaries, he said.

The SBA offers loans to persons and entities regardless of whether they demonstrate a true need for the funds. Interest rates — all of which are fixed — however, are based on whether an applicant has sufficient funds, resources or borrowing ability to provide for disaster recovery.

For individuals and businesses deemed to have the resources for recovery available from other sources, home loans are offered at a rate of 3.375 percent; business loans are offered at 6 percent; and nonprofit organization loans are offered at 3.125 percent.

For those without the resources to provide for their own recovery, home-loan rates come with 1.688 percent interest; business loans, 4 percent; and nonprofit organization loans, 3 percent. Economic-injury loans for businesses and small agricultural cooperatives are offered at 4 percent, and such loans for nonprofits are offered at 3-percent interest.

The rates are much better than one might find on the lending market, and it is easier to qualify, according to Colton.

“The credit requirements are probably more lax than if you were to go to your local bank or financial institution,” he said. “You still have to have a credit history that shows you pay your bills. It doesn’t have to be perfect, but it has to be reasonably good.”

Aside from a decent credit history, applicants must show evidence of their ability to repay the loan. In addition, for physicalloss loans exceeding $14,000 and for EIDL loans over $5,000, collateral is required.

Still, no one should let the fear of rejection stand in the way of applying for a SBA loan. Too many people assume that they will not qualify, or that they don’t need the loans.

“The worst thing we can do is tell you no,” he said. “And if you don’t apply, you’re already there.”

For those deemed unable to afford paying back the loans, and therefore ineligible to receive them, help can still come from FEMA.

For those who do qualify, the SBA does its best to tailor each loan to the needs of the applicant, Colton said. Terms can extend to a maximum of 30 years, and can be flexible in terms of the anticipated and actual amounts needed. In addition, because the costs of labor and material can increase, especially in times of disaster recovery, the SBA allows for borrowers to increase the amounts of their loans when deemed necessary.

“We look at every case individually,” he said. “The intent is to try to make the payment affordable, so people can survive. We don’t want to be a burden, we want to help people recover.”

Those interested in applying for loans for physical damage must do so by the Dec. 31 deadline. For EIDLs, the deadline is July 31, 2013.

“I can’t stress it enough — take advantage of the fact that it’s open to apply right now,” Colton said. “You don’t want to wait until you get your insurance settlement to apply.”

In fact, monies coming from insurance companies can be applied to the balance of a loan, he said.

Most of the application can be completed electronically, with the exception of an authorization that must be signed and returned to the SBA. That can be done by bringing the form to any FEMA Disaster Recovery Center, or by mail. Once the SBA has received all paperwork, a damage assessor is sent out within a few days. The whole process takes about a week to 10 days, according to Colton.

“It doesn’t take very long and it doesn’t cost anything, and you don’t have to take it, even if you are approved,” he said.

To apply for an SBA loan, first register with FEMA. Then, apply online at www.disasterloan.sba.gov/ela, in person at any FEMA Disaster Recovery Center (for information or locations, go to www.sba.gov/content/current-disasterdeclarations or call 800-659-2955), or by completing a paper application and mailing it to SBA at 14925 Kingsport Road, Fort Worth TX 76155.