Hurricanes, wildfires, earthquakes, volcanoes, mudslides — all can be devastating to the health of your small business.
In 2017, 40 percent of small businesses located within a FEMA-designated disaster zone reported natural disaster-related losses, according to the Federal Reserve. Forty-five percent of affected businesses reported asset losses of up to $25,000, while 61 percent reported revenue losses of up to $25,000.
Recovering from a natural disaster can be an uphill climb but the Small Business Administration offers relief in the form of Economic Injury Disaster Loans (EIDL). These loans can help you get your business back on solid ground.
How Economic Injury Disaster Loans Work
The EIDL program provides small businesses with funding to repair and rebuild following a natural disaster. As of 2018, qualifying businesses can borrow up to $2 million, which can be used for:
- Replacing or repairing damaged equipment or machinery
- Buying new inventory or replacing other assets, such as computers, that were damaged or destroyed
- Repairing or rebuilding your physical premises if they were damaged or destroyed
- Making improvements that could help reduce the risk of natural disaster-related damage in the future, such as installing generators or storm windows and doors
The main goal of the program is to help businesses that have been affected by a natural disaster get back to normal operations as quickly as possible. These loans are low-cost, with a maximum interest rate of four percent per year, with terms that can extend up to 30 years.
Who’s Eligible for a Disaster Loan?
In addition to small businesses, the EIDL program is also open to small agricultural cooperatives, small aquaculture operations and most private nonprofits.
It goes without saying that your business needs to be located in a federally declared disaster area to qualify. But, physical property damage to your business isn’t a requirement for eligibility.
There is one caveat, however. The program only offers these loans to small businesses if the SBA determines they’re unable to get credit elsewhere. If you’re able to get approved for an equipment or term loan, for instance, an EIDL wouldn’t be an option.
Covering the Gap When Insurance Falls Short
The SBA has a second program to help businesses that have physical property damages which aren’t covered by insurance. The Business Physical Disaster Loan program also offers up to $2 million to small businesses that need to repair or replace property, equipment, inventory or fixtures following a natural disaster.
The maximum interest rate is four percent if you’re unable to get credit elsewhere. If you have other borrowing options, the max rate tops out at eight percent. Like the EIDL program, repayment terms can stretch up to 30 years.
It’s possible to qualify for both an EIDL and a physical disaster loan — you’re just limited to borrowing $2 million total through both programs. You can submit an application for each loan program online to get the ball rolling on disaster relief for your business.