Disaster relief loans from the SBA can help businesses rebuild

Thousands of businesses are affected as Tropical Storm Harvey and Tropical Storm Irma dumped torrents of rain across the Gulf Coast and beyond. How can these businesses apply for a disaster relief loan without being affected by the same delays that haunted Hurricane Sandy and Hurricane Katrina?

What the SBA disaster loan entails

There’s good news and bad news about disaster loans from the Small Business Administration, per Bob Coleman, a small-business, loan-training expert, and owner of Coleman Publishing.

• The good news: SBA disaster loan interest rates will not exceed 4 percent repayment and can be paid back over 30 years. Also, loans can be approved even if insurance recovery is still pending.
• The bad news: This is a debt that must be paid back, not a grant. Coleman says businesses will also need to do some leg work. For example, SBA workers will inspect the property and disaster fallout of each application. Businesses must also prove they can pay back the loan, which may prove difficult after being ravaged by Harvey.

“You have a business that’s been destroyed and they have to rebuild,” Coleman says. “Now, they have to show tax returns and financial status based on previous history that they can repay that these loans.”

Loans can be used for benefit of the business, Coleman says. While the SBA won’t allow people to take a business loan to fix their house — that’s a separate program — there are many ways businesses can use an SBA loan, including construction, inventory, and new computers.

Tips for disaster relief loan success:

• Disaster loans can be approved even if insurance recovery is pending.
• Have tax returns and proof you can pay back loans ready before applying.
• Have a specific plan for money – or personal finance statement – ready before applying.
• SBA will assess your property for disaster fallout prior to approval.
• SBA disaster loans are 4-percent repayment over 30 years.

Be prepared and be specific

The SBA sets a goal of approving or denying disaster loan applicants within two-to-three weeks. However, there’s a chance the process will be slowed due to the number of businesses applying after the recent disasters. Coleman suggests businesses have IRS forms and personal financial statements ready as soon as possible.

“If you’ve lost your documents, number one is that you can get your tax returns from the IRS by filling out a form, so I would do that,” Coleman says. “For those of us who use QuickBooks or Turbo Tax, it’s all saved. I would go to your bank and get to get PDF copies of your past bank statements. Get as much information upfront before you go in and talk to them.”

Coleman says businesses applying for a disaster loan should also have a specific plan for the money. A plan is more useful and specific and may help accomplish goals more efficiently. “Instead of saying, ‘I think you should give me $100,000; that will get me back in business,’ say, ‘I need to paint, I need to do this. I have addition improvements, it will cost me this. I have inventory, it will cost me this.’ Just lay it out.”

Positive signs

SBA head Linda McMahon says there will be 1,750 workers staffing the SBA disaster loan headquarters in Fort Worth, Texas to help speed the loan process.

“There was a lot of criticism under Sandy and under Katrina that these loans took a long time to obtain and fund,” Coleman says. “Hopefully the government has learned from their mistakes and can process these applications and get money in people’s hands a little bit faster.”