Overview of Disaster Assistance Loans
Disaster Loans for Homeowners/Renters
Insurance Proceeds
If you have insurance coverage on your personal property and/or home, the amount you receive from the insurance company will be deducted from the total damage to your property in order to determine the amount for which you are eligible to apply to the SBA. If you are required to apply insurance proceeds against an outstanding mortgage, the amount applied can be included in your disaster loan. If, however, you voluntarily apply insurance proceeds against an outstanding mortgage, the amount applied cannot be included in your disaster loan. If you have not made a settlement or are having trouble reaching an agreement with your insurance company, you may apply for a loan in the full amount of your damages and assign any insurance proceeds to be received to the SBA.
Interest Rates
The law requires a test of your ability to obtain funds elsewhere in order to determine the rate of interest that will be charged on your loan. This “credit-elsewhere” test applies to applicants for both personal property and real property loans.
The maximum maturity (repayment term) of an SBA loan is 30 years. However, the SBA will determine repayment terms on a case-by-case basis according to your ability to repay.
- Personal Property Loan: This loan can provide a homeowner or renter with up to $40,000 to help repair or replace personal property, such as clothing, furniture, automobiles, etc., lost in the disaster. As a rule of thumb, personal property is anything that is not considered real estate or a part of the actual structure. This loan may not be used to replace extraordinarily expensive or irreplaceable items, such as antiques, collections, pleasure boats, recreational vehicles, fur coats, etc.
- Real Property Loan: Homeowners may apply for a loan of up to $200,000 to repair or replace their primary home to its pre-disaster condition. The loan may not be used to upgrade the home or make additions to it. If, however, city or county building codes require structural improvements, the loan may be used to meet these requirements. Loans may be increased by as much as 20 percent of the verified losses to protect the damaged real property from possible future disasters of the same kind.
- Physical Disaster Loan: This loan can provide businesses of any size and private non-profit organizations with up to $2.0 million (actual loan amounts are based on amount of damage) to repair or replace real property, machinery, equipment, fixtures, inventory, and leasehold improvements. In addition, disaster loans to repair or replace real property or leasehold improvements may be increased by as much as 20 percent of the verified losses to protect the damaged real property against possible future disasters of the same type.
- Economic Injury Disaster Loan Program (EIDL): This loan can provide up to $2.0 million of financial assistance (actual loan amounts are based on amount of economic injury) to small businesses and most private non-profit organizations that suffer substantial economic injury, regardless of physical damage. An EIDL helps small businesses by providing relief from economic injury caused directly by the disaster and permits them to maintain a reasonable working capital position during the period affected by the disaster. EIDLs do not replace lost sales or revenue.
Insurance Proceeds
If you have insurance coverage on your personal property and/or home, the amount you receive from the insurance company will be deducted from the total damage to your property in order to determine the amount for which you are eligible to apply to the SBA. If you are required to apply insurance proceeds against an outstanding mortgage, the amount applied can be included in your disaster loan. If, however, you voluntarily apply insurance proceeds against an outstanding mortgage, the amount applied cannot be included in your disaster loan. If you have not made a settlement or are having trouble reaching an agreement with your insurance company, you may apply for a loan in the full amount of your damages and assign any insurance proceeds to be received to the SBA.
Interest Rates
The law requires a test of your ability to obtain funds elsewhere in order to determine the rate of interest that will be charged on your loan. This “credit-elsewhere” test applies to applicants for both personal property and real property loans.
- Applicants who can get credit elsewhere: The interest rate to be charged is based on the cost of money to the U.S. government, but will not be more than 8 percent per year.
- Applicants determined unable to get credit elsewhere: The interest rate cannot exceed 4 percent per year.
The maximum maturity (repayment term) of an SBA loan is 30 years. However, the SBA will determine repayment terms on a case-by-case basis according to your ability to repay.