2023 has been nothing if not challenging for small businesses. Between hurricanes, flooding, wildfires, and the lingering effects of the pandemic, small businesses have had a lot to overcome. There have been 100 Presidential and SBA declared disasters in the US so far in 2023, including the Maui wildfires, Hurricanes Ian and Idalia, the I-95 bridge collapse in Pennsylvania, and severe storms and flooding throughout the US. 

Fortunately, there are resources available to help businesses both prepare for, and recover from natural disasters, and the U.S. Small Business Administration’s Disaster Loan program offers essential relief. 

Keep reading to learn how it may help your business. 

Coverage of the SBA Disaster Loan: What’s Included?

The SBA Disaster Assistance program offers low-interest loans to businesses, nonprofit organizations, homeowners, and renters located in regions affected by declared disasters. SBA also provides eligible small businesses and nonprofit organizations with working capital to help overcome the economic injury of a declared disaster.

The SBA disaster loan program is the main federal assistance program offered to repair and rebuild non-farm, private sector disaster losses. 

Business disaster loans are offered to businesses of all sizes as well as non-profits and offer up to $2 million to repair or replace the following: 

• Damaged or destroyed real estate
• Machinery and equipment
• Inventory and other business assets

This program is designed to cover losses not covered by insurance. 

Funds may be also used for certain types of structural improvements. The SBA gives these examples: “adding a retaining wall or sump pump, clearing out overgrown landscaping, building a safe room or elevating the property to lessen the effect of future disasters.”

Another part of the disaster loan program, the Economic Injury Disaster Loan (EIDL), offers loans to help mitigate the economic impact of a disaster. Not all damage after a disaster is physical. A business may also experience economic injury (lost sales, for example) due to a disaster. That’s where the EIDL program comes in.  

SBA Administrator Isabella Casillas Guzman announced important changes to the  disaster loan program on July 23, 2023. Among the changes, there is now a 12-month automatic deferment of payments, and interest will not accrue during that time. 

One of the biggest benefits of SBA Disaster Loans is that they offer excellent terms, with a combination of low fixed interest rates and sufficient time to recover from the disaster to pay back the loan. 

Interest rates are fixed for the entire life of the loan, and are determined by formulas set by law. They may vary from disaster to disaster with market conditions. 

Here are current interest rates for business physical disaster loans: 

• Up to 4% and terms of 15 years, or a maximum of 30 years if credit is not available elsewhere; 
• Up to 8% and maximum terms of up to 7 years if credit is available elsewhere. 

For EIDL loans, the rates are currently 4% for businesses and small agricultural cooperatives, and 2.375% for nonprofits. (There is no credit elsewhere interest rate for these loans.) 

What does “credit elsewhere” mean? For Business Physical Disaster Loans, SBA will determine whether the business has the ability to borrow from non-government sources at reasonable terms to provide for its own disaster recovery. The SBA will handle the credit elsewhere test — you do not have to prove this. 

In addition, businesses affected by physical disasters have up to two years to request an increase to their loan amount to help cover certain mitigation or code upgrade costs, or increased building costs. 

And a reminder that the SBA now automatically provides a 12-month interest-free deferment period for both homeowners and business borrowers. Payments are not required during that time, and interest will not accrue during that time. 

How to Apply for an SBA Disaster Loan

Disaster loans are not offered by participating SBA lenders, but come directly from the SBA. To apply for a disaster loan with the SBA, you may apply online using the SBA’s Disaster Loan Application, or you can apply directly to the SBA from your DisasterAssistance.Gov account:

1. Create or log in to your account
2. On the “Status” tab, find the section for “Other Government Agencies”
3. On the line for SBA, under the “Application Status” column, click “Apply”

If you’ve already applied for disaster relief with FEMA, your application can be transferred to the SBA.

The SBA requires “acceptable credit.” Rather than a minimum credit score, SBA Disaster Loan guidelines, requirements state that “satisfactory credit history is defined as a history that generally shows payments to creditors as agreed unless otherwise justified.” Applicants must be given the opportunity to explain any negative information in their credit reports, and must also be given copies of the reports used if requested. 

Credit reports must be obtained for principals of the business. When the loan amount is $200,000 or more, a business credit report must be reviewed as well (except for sole proprietorships.) 

If you’d like one-on-one help with your SBA disaster loan application, contact the SBA Customer Service Center at 1-800-877-8339 or email disaster customerservice@sba.gov.

For the most streamlined experience, you’ll want to apply online SBA disaster loan login page at www.DisasterAssistance.gov. However you do have the option of mailing in your SBA Disaster Loan application. However you’ll need to download and print a number of forms you can find here. 

Need more direct assistance? The Federal Emergency Management Agency (FEMA) Disaster Recovery Centers (DRCs) are accessible facilities and mobile offices you can visit to learn more about FEMA and other disaster assistance programs. Use the DRC locator to find local assistance. 

In addition, Small Business Development Centers also frequently offer SBA Disaster Loan assistance, and may be able to assist with this process or help make necessary referrals. Find your SBDC here. 

Preparation and Recovery: Tips for Businesses Facing Disasters

While it’s good to know these resources may be available if you need them, it’s also important to prepare for a possible disaster as much as you can. Any disruption to your business can be very expensive and increases the risk your business won’t survive. 

While it’s not easy to carve out time or resources to prepare for a disaster that you hope will never happen, planning ahead can help to reduce that disruption and help you get back to business sooner.

The SBA offers resources to help you think through potential risks and ways you can mitigate them.

Step 1: Assess your risk. The first step is to understand what types of disasters are most likely to interrupt your business, whether that’s floods, tornados, hurricanes, earthquakes or wildfires. 

Step 2: Create a disaster plan. What happens if disaster strikes? Who communicates with employees and customers? Who secures business property? How will IT resources  be secured? These are just a few of the things you’ll need to think through. 

A written plan can get everyone in your company working together if disaster strikes. Your business can use the free tools at Ready.gov/business to prepare. Use the Ready Business Toolkit series with hazard-specific versions for earthquake, hurricane, inland flooding, power outage, and severe wind/tornado. These free toolkits provide your business with a step-by-step guide to prepare. 

Step 3. Practice. Just as you experienced fire drills in school, businesses can practice disaster drills to make sure key elements of the plan are communicated, and to identify any weaknesses.

Again, Ready.gov offers some helpful resources here including a checklist for employee training along with additional resources, and resources for testing and exercises. 

The Economic Impact of COVID-19: A Special Case for SBA Loans

Typically disaster areas are declared by county. The COVID-19 pandemic was a notable exception. Very quickly, the entire US plus its territories were declared a disaster loan and businesses (and nonprofits) were eligible for low-cost loans of up to $2 million under the COVID-19 Economic Injury Disaster Loan (EIDL) program. 

In a related program, Congress authorized forgivable grants—Targeted EIDL grants— to small businesses of up to $10,000 (with more funds later approved). Those grants did not have to be repaid.

Finally, Congress also created Paycheck Protection Program loans (PPP loans) which did not have to be repaid. 

All of these financial assistance programs together helped some small businesses weather the pandemic so they could later resume business. 

A research report by the Congressional Research Service: SBA COVID-19 EIDL Financial Relief: Policy Options and Considerations (April 18, 2023), analyzed these programs in detail. It reported that:

• SBA approved 11.3 million PPP loans, totaling $785.8 billion, of which $755.7 billion has been forgiven; 
• SBA approved 601,058 Targeted EIDL Advance payment grants totaling over $5.2 billion; and  SBA approved 453,417 Supplemental Targeted EIDL Advance payment grants totaling over $2.3 billion. 

These programs provided significantly more funding than the traditional disaster loan program. 

SBA Disaster Loans After 2023’s Devastating Maui Wildfires

On August 10, 2023, SBA Administrator Isabella Casillas Guzman announced that low-interest disaster loans are available to residents of Maui, Hawai’i due to the disaster declaration made by President Biden. (See the press release here.) The SBA has created a dedicated page to the disaster at SBA.gov/hawaii-wildfires and also provides a fact sheet with more information. 

Update on the Maui Wildfire

Wildfires quickly swept through parts of the Hawaiian island of Maui on August 8, 2023. The town of Lāhainā was particularly devastated, however, there were other affected areas. Those fires include the Kula and Olinda fires, and the Pulehu/Kihei fire. Thousands of acres burned, and many homes, businesses, and historic sites were destroyed. 

The Maui County Government is posting updates about the fire on its website: MauiCounty.gov. 

What Started the Maui Fire?

The cause of the devastating wildfires in Maui is still under investigation as of September 20, 2023. Concerns have been raised over whether the power equipment owned by Hawaiian Electric may have contributed to the fires. However, experts agree that high winds from Hurricane Dora, along with worsening drought conditions, helped fuel the fast moving fires. 

What SBA Disaster Loans Are Available in Hawaii?

The SBA offers five types of federal disaster loans. These SBA programs are: Home, Business/EIDL (B/E), Non-profit, Stand Alone EIDL, Military Reservist EIDL (MREIDL). We’ve described the business disaster loans above, and you’ll find more details about business disaster loans here. 

It’s important to remind businesses in the area that even if they did not experience physical damage from the Hawaii wildfires, they may be eligible for low-interest Economic Injury Disaster loans to help meet working capital needs. 

With tourism to certain parts of west Maui reduced or restricted, businesses elsewhere on the island may need economic assistance. 

Other resources for private, state, and federal assistance include:

• DisasterAssistance.gov (Fema assistance) 
• American Red Cross RedCross.org (Get Help)
• Maui County Government updates

The County of Maui is also encouraging business owners to register at the revamped MauiNuiFirst.com website to showcase their products, services, and activities.