9 Tips for Successfully Applying for an SBA Disaster Loan Disbursement
In March 2020 the US has declared a 50-state disaster, something that has never before happened in the history of the United States. Because of the swift spread of the coronavirus, many small businesses have been hit hard by the economic impacts of the pandemic and are now in need of an SBA Disaster Loan disbursement.
The virus’s economic effects are expected to be felt long into the future. Business owners are questioning whether they will be able to survive this unprecedented disaster.
Fortunately, the SBA disaster loan program offers a few different loan disbursement types that you can apply for. These SBA loans are designed to help you keep your business operating into the future.
These loan types cover both economic and natural disasters, and have some of the lowest interest rates available. Their rates are typically between 2.75% and 3.75% APR, depending on current market conditions.
The terms of SBA disaster loans are also generous, generally giving a period of repayment of up to 30 years. The factors make SBA disaster loans an ideal financing solution for tough times.
However, before you apply for an SBA disaster loan, you should find out how to ensure that the application process is a success. Otherwise, you may have this valuable source of relief slip through your fingers. Read on for 9 tips for applying for an SBA disaster loan.
1. Know About the Different SBA Disaster Loan Types
Before applying for an SBA disaster loan, it’s important that you know about the different types of disaster loans that the SBA offers.
The two that are receiving the most attention at the moment are the SBA Economic Injury Disaster Loan Program (EIDL) and the SBA Paycheck Protection Program (PPP). These SBA loan programs are designed to assist businesses who have suffered economic injury by providing them with low interest-bearing loans and manageable repayment terms.
Due to the COVID-19 pandemic, the SBA has determined it will allow a deferment for payments. Borrowers taking out an Economic Injury Disaster Loan (EIDL) or a loan via the Paycheck Protection Program (PPP) will not have to make a payment on them during the first six months to a year, depending on which SBA loan you choose. Before you submit an SBA loan application, decide which of the two disaster loans will be best for helping your current situation.
Another type of disaster loan is the SBA Business Physical Disaster Loan. These loans are designed for businesses that have suffered a financial hit due to a natural disaster such as a tornado or hurricane.
Besides these three main loan types, there are SBA loans offered to veterans, reservists, active-duty military, and their families through the Office of Veterans Business Development (OVBD).
2. Determine If You Qualify for an SBA Disaster Loan Disbursement
When looking to apply for an SBA disaster loan the first thing you need to do is figure out if you qualify. The way to do this is to ascertain whether your area has been declared a disaster zone.
If you are wanting to apply for an Economic Injury Disaster Loan (EIDL) or a loan through the Paycheck Protection Program (PPP), the SBA has declared that small business owners in the U.S. are now eligible to apply.
However, if you have been impacted by a natural disaster, then you will need to check whether your area is a registered disaster zone before applying.
3. Get Your Information Organized
Once you have figured out what loan type you require, and whether or not you are eligible, the next important step is to get your information organized.
The list of information you will need to submit is extensive and includes:
- IRS Form 4506-T for the business and all of the owners
- A copy of the most recent tax returns for your business along with all schedules
- Personal financial statements for each business owner
- Current sales figures
- A liabilities schedule
- Current profit and loss statements (these need to be year-to-date)
- Social security numbers for applicants
- Lease/deed information
- FEM registration number
- Employer identification number
- Insurance information
- Bank statements
In addition to this information, if you are applying for a loan through the Paycheck Protection Program (PPP) or an Economic Injury Disaster Loan (EIDL) you might need to provide proof of lost revenue. For a Physical Disaster Loan, you will need to estimate the value of the property damage you have experienced.
For this, you will need to provide evidence of damage, as well as document the levels of damage.
4. For Physical Damage You Will Need to Initiate Your Insurance Claim First
If you are applying for an SBA loan for a natural disaster you will also need to initiate your insurance claim first. The SBA will only grant you a loan amount for damage not covered by your insurance. That is why it is important to start this process before you apply for a disaster loan through the SBA.
5. Fill out the Application Form in Full
It is required that you fill out the SBA application form for disaster loans in full. Do not leave any areas blank, as this will likely cause delays in the application process. If you are having trouble with any of the fields, it is better to speak directly to the SBA to clarify how to fill in any problematic fields.
6. Figure out What Collateral You Can Pledge
Before submitting an application for an SBA disaster loan disbursement, you will also need to decide what assets you are prepared to use as collateral.
For example, the SBA requires that Economic Injury Disaster Loans (EIDL) over $25,000 are backed by collateral. At the same time, the SBA states that they will not decline a loan for lack of collateral, however, you will be required to pledge collateral if it is available.
Therefore, it is important that you give thought to what collateral you can afford to use to back your SBA disaster loan.
7. Check Your Credit Report
When you apply for a disaster loan through the SBA, they or the loan provider will check your credit report to ascertain what your credit repayment history is like.
To heighten your chances of approval it is a good idea to pull your credit report and check for any discrepancies or errors beforehand. If you do see errors, you should take this up with the credit reporting agency in writing and have these errors rectified before you submit your SBA loan application.
To ensure that all your bases are covered, you will need to pull your personal credit report from the three main reporting agencies which are Experian, Equifax, and TransUnion.
If you are applying for a natural disaster relief loan disbursement for your home, you will also need to run your personal credit report. Prior to submitting an Economic Injury Relief Loan application or applying for a loan through the Paycheck Protection Program (PPP), you should pull your business’s credit report. If your business does not yet have an established credit history, you can use your personal credit report.
8. Apply Early
If you are applying for an SBA disaster loan disbursement for relief from a major emergency (such as the COVID-19 pandemic) you should aim to submit your application as early as possible.
Widespread disasters like the current pandemic, or a category 5 hurricane, inevitably cause a higher demand for relief in the form of SBA disaster loans. To ensure that your application is processed as speedily as possible you should try and get your information ready as soon as possible so that you can apply by the earliest date.
However, be sure to take the necessary time required to gather your supporting documents and information. On March 6th, 2020 the first COVID-19 emergency funding bill was signed into law. This bill provides the SBA with $20 million to help leverage $7 billion in funds the SBA will be appropriating for disaster relief loans for small businesses. This boost in funds should ensure that all approved businesses will be able to receive some sort of loan relief.
9. Apply Online for an SBA Disaster Loan Disbursement
The final tip for ensuring a fast and smooth application process for an SBA loan is to apply online.
For SBA disaster loans you have the option to apply online, submit a paper loan application via mail, or apply in person at the closest SBA office to you.
Applying via mail or in-person can draw out the process. If there is an issue with your paperwork or the information that you provide, you will have to spend time going back-and-forth with the SBA.
Alternatively, you can submit your application online. Online applications are a more streamlined process. This should reduce potential delays.
The SBA states that online applications are the fastest method and facilitates a faster decision about your loan eligibility.
To apply online you can go directly through the SBA website, or you can use an SBA loan application program such as ours.
Do You Need to Apply for an SBA Disaster Loan Disbursement?
If you need to apply for an SBA disaster loan disbursement, you should act promptly. Especially if you are in need of an Economic Injury Disaster Loan (EIDL) or a loan through the Paycheck Protection Program (PPP).
Once you have prepared your information, checked your credit score, and (in the case of physical disaster loans) instigated your insurance claims process—you will be ready to fill out the SBA application form.
One of the fastest ways to do this is to utilize our online loan application process. You can find out more about how it works here, or contact us if you have any questions. We will be happy to assist.