Financial Help During Coronavirus: How Does an SBA Disaster Loan Disbursement Work?

The effect of the COVID-19 pandemic on America’s GDP is likely to be even greater than that of the global recession in 2008. Small business owners are now needing to know how an SBA disaster loan disbursement works.

This catastrophic impact will affect all businesses, but small businesses may be in particular danger. Many will need help to survive. SBA disaster loans are one way to receive help.

Read on to learn more about an SBA disaster loan disbursement, and how it could help your business.

What is an SBA Disaster Loan Disbursement?

In situations that are serious enough to be declared “disasters” by the Office of Disaster Assistance, the Small Business Administration will step in to provide low-interest loans to all those affected by the crisis in question.

These parties could be businesses, homeowners, renters, or nonprofits. Generally, a disaster might only affect one or two of these groups or limited subsets of each.

This would be the case in the event of a natural disaster, like a hurricane or tornado. However, the COVID-19 pandemic has affected all of these groups. This has created an unprecedented demand for SBA disaster loans.

How Can I Apply for an SBA Disaster Loan?

You can apply for an SBA disaster loan online, by mail, or in person at a Disaster Recovery Center. Online is the most convenient method and, given current circumstances, probably the safest. Your application will contain the same details as any loan application would, such as the particulars of your business’s operations.

Once you apply for an SBA disaster loan, you will be able to apply for other FEMA grants as well, such as assistance packages for medical and dental programs. For this reason, it is a good idea to apply for this type of a loan even if you’re not sure whether you will make use of it or not.

The following are some of the details the SBA will take into account when deciding whether or not to approve your loan application.

Credit Score

The SBA will consider your credit score when deciding whether to provide you with disaster loan funding. Your credit score is a numeric representation of the quality of your credit history, based on your previous debts and how well you adhered to the repayment plans on them.

The minimum credit score requirement is usually between 620-640. However, if you fail to meet this threshold, the SBA will take other factors into account, such as your payment history in the respect of insurance, rent, and other non-debt-related expenses.


Your ability to put up collateral against a disaster loan may be relevant, especially for a loan larger than $25,000. This might be a vehicle, a piece of machinery, or some property if the loan amount is especially large.

Types of SBA Disaster Loan Disbursements

There are various types of SBA disaster loans. The type you should apply for will depend mainly on the nature of the declared disaster, as well as the capacity in which you are applying for the loan, i.e., whether you are a business or a homeowner.

Economic Injury Disaster Loan (EIDL)

These function as working capital loans for various types of small businesses. If you can’t meet obligations (such as rental or insurance payments) due to a declared disaster of some kind, this loan can help you. Economic Injury Disaster Loans can be as much as $2 million.

However, you won’t be able to look for any other financing while you’re receiving this, and you’ll have to prove that this is your only financing option. This is the type of loan that is most relevant for small businesses struggling due to the COVID-19 pandemic.

Homeowner Disaster Loan

This type of loan is directed at homeowners rather than businesses. If your primary residence has suffered some kind of physical damage due to a declared disaster, you can borrow up to $200,000 under this funding option. Secondary residences are not able to take advantage of this type of loan.

Business-Related Physical SBA Disaster Loan

These are available to businesses of all kinds, including nonprofits. They are for those businesses who have suffered physical property damage or loss due to a declared disaster. Since they are given to address a loss of physical property, they are not as relevant to the COVID-19 pandemic as Economic Injury Disaster Loans.

What Is the Repayment Structure for an SBA Disaster Loan?

The repayment structure for SBA disaster loans is somewhat different to that of ordinary loans. Because they are designed to help struggling families and to keep businesses afloat, rather than make a profit for the lender, SBA disaster loans offer longer repayment periods. These can stretch to as long as 30 years in some cases.

Alternatives to an SBA Disaster Loan

While an SBA disaster loan could be just what you need at this time, it’s not the only option. Traditional lenders are still operating throughout this crisis. In fact, many are going further than usual to try to attract new business at this challenging time.

Some of the traditional loan options that are available to small businesses include:

  • Term loans
  • Bridge loans
  • Lines of credit
  • Invoice factoring

At Your FundingTree, we’ll review your application thoroughly prior to matching you with lenders who will offer you the best possible deal. Depending on your circumstances, this might be an SBA disaster loan if that’s what you qualify for, or it might be a loan proposal from a private lender.

Getting the Help, You Need at This Difficult Time

The COVID-19 pandemic won’t be easy for anyone. Aside from the public health concerns, thousands of businesses will struggle, and many unfortunately will never reopen. However, if you’re willing to fight for survival, the SBA disaster loan disbursement program might be your best shot.

If you’re interested in taking out an SBA disaster loan, or any of the other types of financing we can easily assist you with, fill out an application today.