How to Apply for an SBA Disaster Loan After Your Business Is Damaged or Disrupted

Which SBA disaster loan should your business apply for?

SBA provides different disaster loans for physical property losses and for disaster-related economic injury. The correct program depends on what happened to the business and what the declared disaster makes available.

Business Physical Disaster Loans

A business of any size or most private nonprofit organizations may qualify when business property is damaged in a declared disaster area. SBA states that these loans may provide up to $2 million to qualified businesses or private nonprofits for disaster losses not fully covered by insurance.

Eligible proceeds may be used to repair or replace real property, machinery, equipment, fixtures, inventory and leasehold improvements. They generally cannot be used to upgrade or expand the business except when required by building codes. SBA may also allow additional mitigation financing of up to 20% above verified real-estate damage for qualifying measures that reduce future disaster risk.

Economic Injury Disaster Loans for business interruption

EIDL is designed for working-capital needs rather than property repairs. Eligible small businesses, small agricultural cooperatives, qualifying aquaculture businesses and most private nonprofit organizations may qualify when they are directly affected by a declared disaster and cannot meet regular financial obligations because of that disaster.

Qualifying EIDL proceeds can cover ordinary and necessary expenses such as rent, utilities, fixed debt payments and continuation of health-care benefits. SBA says EIDL funds cannot be used to repair physical damage, expand facilities, buy fixed assets, refinance debt, pay dividends or bonuses, or repay loans to owners or principals.

A business can potentially qualify for both a physical disaster loan and EIDL, but the combined maximum is generally $2 million.

Confirm the disaster declaration and your location

SBA disaster lending is tied to specific declared disasters. A business should confirm that its physical location is included in the declaration and determine which loan types are available there. Some declarations make physical-damage loans available in the primary disaster counties while allowing EIDL assistance in additional adjacent areas.

This also determines the filing deadline. There is no single nationwide deadline for all SBA disaster loans. Recent SBA declarations show separate deadlines for physical property applications and economic injury applications, with EIDL deadlines often later than physical-damage deadlines.

Do not assume that another disaster's deadline applies to your business. Use the dates assigned to the declaration covering your location and submit as early as possible.

Prepare the SBA disaster loan application documents

SBA maintains SBA Form 5, Disaster Business Loan Application, for business disaster assistance. Online applicants enter the required information through SBA's disaster loan system.

SBA also requires IRS Form 4506-C as part of a disaster loan application so the IRS can provide federal income tax information directly to SBA. SBA's instructions state that this form must be submitted even when an applicant was not required to file a federal income tax return.

Business applicants must also provide liability information. SBA Form 2202, Schedule of Liabilities, is provided for responding to the liabilities requirement in SBA Form 5, although SBA permits applicants to use their own equivalent schedule.

For physical losses, be ready to provide insurance information. SBA states that insurance proceeds covering business property can be deducted from the eligible disaster loan amount.

Apply online through the SBA Disaster Loan Portal

Online applications are available through SBA's disaster loan system. After a completed physical-damage application is submitted, SBA inspectors estimate the cost of qualifying damage as part of the review process.

SBA also provides disaster-loan assistance by telephone and may operate Disaster Loan Outreach Centers or Business Recovery Centers for particular disasters. Availability and locations vary by declaration.

Understand rates, repayment terms and collateral

For Business Physical Disaster Loans, SBA's current program guidance states that the fixed rate will not exceed 4% for applicants unable to obtain credit elsewhere and will not exceed 8% for applicants able to obtain credit elsewhere. SBA decides whether credit is available elsewhere.

For EIDL, the fixed rate will not exceed 4%. Both programs may have maturities of up to 30 years, depending on the applicant's ability to repay.

SBA's current disaster guidance provides that the first payment is deferred for 12 months and interest does not accrue during the first 12 months. There are no prepayment penalties or fees under the stated program terms.

Collateral requirements depend on the loan type and amount. For EIDL, collateral is required for loans over $50,000. For business physical disaster loans, SBA requires collateral to the extent possible above specified thresholds that differ between Presidential and agency declarations. Real estate is SBA's preferred collateral, but SBA's rules also limit when a business owner's primary residence must be pledged for loans of $200,000 or less when other qualifying assets are available.

Use the loan only for approved disaster recovery costs

Keep physical-property recovery and working-capital needs separate. A Business Physical Disaster Loan may cover eligible repair or replacement of damaged business assets. EIDL is for ordinary financial obligations the business could have met if the disaster had not occurred.

A common mistake is treating EIDL as reimbursement for property repairs or expected lost profit. SBA specifically states that EIDL cannot be used to repair physical damage and that a loss of expected profits or a decline in sales alone is not substantial economic injury.

Apply even when an insurance claim is still pending

SBA disaster loans cover eligible losses that are not fully covered by insurance or other sources. Insurance proceeds for damaged business property can reduce the eligible loan amount. SBA has also advised disaster survivors not to delay filing an SBA application solely because an insurance settlement is still pending.

Because filing deadlines continue to run while insurance claims are being processed, submitting the SBA application on time can protect access to federal disaster lending while the final eligible loss is determined.

SBA business loans are different from FEMA household assistance

This procedure covers SBA financing for businesses and eligible private nonprofits. FEMA individual assistance serves different purposes and is not a substitute for an SBA business disaster loan. If the same disaster damaged your personal home or household property, see the separate Helpydo guide on applying for FEMA disaster assistance after home or property damage.

What happens after you apply?

SBA reviews eligibility, disaster impact and the applicant's financial condition. For physical-damage applications, SBA's damage-verification process helps determine eligible repair or replacement costs. SBA then determines the approved amount, interest rate, repayment term and any collateral requirements.

There is no single nationwide processing time published for every SBA business disaster loan. Processing depends on the disaster, application completeness, loss verification and the financial review. Applicants can use the SBA Loan Portal to check application status and manage an approved loan.