Still dealing with the aftermath of Hurricane Irma? You may want to consider applying for a U.S. Small Business Administration disaster loan to help with recovery efforts.
While the deadline for loans to address physical damage has already passed, Florida businesses have until June 11 to apply for disaster loans to assist with hurricane-related economic injury. The SBA offers these working capital loans of up to $2 million to small businesses, small agricultural cooperatives and nonprofit organizations of all sizes to help them “meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster.”
“I would encourage any business that is still having some issues to apply before that June 11 deadline,” says Suzanne Specht, assistant director of the Florida Small Business Development Center (FSBDC) at Florida Gulf Coast University. “If they had an emergency bridge loan from the state of Florida and they’re still struggling and need a longer-term loan, then it would be a good idea to apply for an SBA disaster loan as well.”
Not sure where to start? Specht offers some tips and advice.
The FSBDC at FGCU offers free assistance with applying for disaster loans, along with all kinds of other no-charge help for small businesses. “People typically apply for these loans online, but if they’re not real comfortable with that we can assist them in doing the whole process,” says Specht.“We have a lot of experience with disaster loans.”
Gather the necessary documentation.
You’ll need your business tax returns for the past few years, and if you have 2017’s returns completed that’s even better. “The SBA is looking for economic loss,” says Specht. “The financial information shows what the business should have had if it had a normal season without a hurricane to estimate what kind of revenue loss it had.”
Small-business owners also need to submit their personal tax returns and pledge collateral for loans over $25,000. “The SBA will withdraw the application if it doesn’t have everything it needs to make a decision,” says Specht.
Check your credit.
It’s important to know where you stand on this. “If your business had some credit issues because of the hurricane, you’ll want to put a letter of explanation with the application package,” says Specht. “The SBA needs to know about that.”
The interest rate for the loan depends on whether an applicant has access to credit elsewhere. “If they can get a loan from a traditional bank, they still might be able to get an SBA disaster loan, but they might have to pay a higher interest rate,” says Specht.
Show that you can pay the loan back.
Revenue projections might be required to illustrate that you’ll have the cash flow to make loan payments. “Small- business owners need to demonstrate what their plan of action is to pay that loan back,” says Specht. “The SBA wants to get paid back.” Loan terms are offered for a maximum of 30 years, but businesses with credit available elsewhere can only get a maximum of seven years to pay off the loan.
Don’t wait for your insurance settlement.
Specht says a lot of local small busi- nesses are still working with their insurance companies to get payouts. “If you’re still trying to deal with your insurance, definitely apply for a disaster loan as well, because who knows how long it’s going to take for it to all settle out in the wash,” she says. The SBA will take anticipated payouts into consideration when deciding on a loan.
Take another look if you get turned down.
Specht and the rest of the team at the FSBDC have been helping business owners do just that, calling the SBA directly and working on reconsiderations. “We’ve had clients get turned down based on credit issues,” she says. “I can’t say how difficult it is to get one of these economic injury disaster loans. But I can say that for qualified businesses that have all the paperwork and all the attributes of what the SBA looks for—good credit, the cash flow to pay the loan back—those are the things that are going to get a small business owner approved.”
Plan for the next disaster now.
“You need to have a business continuity plan, and you need to start now,” says Specht. “A lot of business owners didn’t have a generator, a way to stay in contact with employees, things that if they would have prepared a little more in advance they would have survived a bit better.”
Specht saw some businesses without any cash reserves, so she recommends having a line of credit in place prior to a disaster. “Talk to the local banks you do business with and have some sort of reserves in place,” she says. “If you have those resources in place, you won’t be as subjected to the mercy of a hurricane.”