7 Things to Know About Disaster Loans for Businesses
When running a small business, you need to have an emergency plan in place to ensure that unavoidable disasters don’t have devastating consequences for your finances. With the right tools, you can bounce back from disaster quickly and with fewer long-term effects. A disaster could strike your company at any time including flood damage, fire damage, natural disaster, and vandalism. Disaster loans make it possible for you to repair the damages quickly and return to business as usual.
1. Disaster loans are provided at low interest. The US Small Business Administration (SBA) is the primary provider of disaster loans. They provide government-backed loans at very low interest rates, so you can repair damages without acquiring unnecessary debt. Interest rates vary but never exceed 4 percent, which is considerably lower than with traditional loans.
2. Disaster loans can cover up to $2 million in repairs. This enables businesses to repair most, if not all damage that befalls their store.
3. Disaster loans can be provided for economic damage as well as physical damage. Economic injury disaster loans are intended to assist businesses that are struggling after a local disaster. In times where local disasters hinder store profits, even if your store was physically undamaged, you may be eligible for an economic injury disaster loan. These loans are only available to businesses unable to endure the loss of business, which is assessed by the SBA on a case-by-case basis.
4. The loans can be paid back long-term. Payment plans are usually between 3 and 10 years, giving you ample time to rebuild your store profits prior to paying back the loan.
5. Both for-profit and non-profit businesses are eligible. Whereas nonprofits aren’t typically eligible for SBA loans, the SBA will assist them in times of disaster, so their business isn’t compromised as a result. Also, businesses of all sizes and income levels are eligible.
6. Your credit history will be reviewed. Prior to issuing the loan, the SBA will examine your credit history to determine eligibility. You need to have good credit in order to receive a disaster loan.
7. For large loans, collateral is required. The SBA will use your real estate as collateral to ensure you are able to pay back the loan. For small loans, collateral isn’t needed, but loans exceeding $25,000 will require collateral.
Disaster loans for businesses can help to mitigate any financial difficulties your company experiences on account of an unavoidable disaster. To ensure the success of your business, you need to be prepared with a comprehensive emergency plan so that unforeseen disasters don’t result in bankruptcy. With government-backed disaster loans, you can get the money needed to cover all damages at low-interest, and pay it back slowly over time. However, be cautious, as defaulting on a secured loan could result in losing your home. Why not consider Credibly for all your working capital needs?