PLANS Topic: 368 SBA Disaster Assistance for Businesses

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Vincent C. Ragland is President PLANS. PLANS can be reached at (312) 286-6886 and by Email at vncnt599@sbcglobal.net.

Through its Office of Disaster Assistance (ODA), the SBA is responsible for providing affordable, timely and accessible financial assistance to businesses following a disaster. Financial assistance is available in the form of low interest, long-term loans.

SBAs disaster loans are the primary form of federal assistance for the repair and rebuilding of

non-farm, private sector disaster losses. For this reason, the disaster loan program is the only form of SBA assistance not limited to small businesses.

Disaster Assistance has been part of the agency since its inception in 1953.

The application form asks you for the same information about the business and its substantial

owners and managers that is required for a bank loan. SBA personnel will explain the forms and give you assistance at no charge. You may use the services of accountants, attorneys or

other representatives if you wish, but be sure they are reliable and that their fees are reasonable.

You must report the use of a representative and the fees charged on your loan application.

The disaster loan is intended to help you return your property to its pre-disaster condition and,

under certain circumstances, for mitigating devices. Normally, SBA funds cannot be used to expand or upgrade a business. If, however, city or county building codes require such upgrading, then you can use the SBA loan for that purpose. Your loan will be made for specific and designated purposes. Remember that the penalty for misusing disaster funds is immediate repayment of one-and-a-half times the original amount of the loan. The SBA requires that you obtain receipts and maintain good records of all loan expenditures as you restore

your damaged property, and that you keep these receipts and records for three years.

The SBA can refinance all or part of prior mortgages, evidenced by a recorded lien, when the applicant: 1) does not have credit available elsewhere; 2) has suffered substantial, uncompensated disaster damage (40 percent or more of the value of the property); and 3) intends to repair the damage.

Loans of $14,000 or less do not require collateral. Loans in excess of $14,000 require the pledging of collateral to the extent it is available. Normally the collateral would consist of a

first or second mortgage on the damaged business property. In addition, personal guaranties by the principals of a business are required. To make a loan, the SBA must estimate the cost of repairing the damage, be satisfied that the business can repay the loan from its operations and take reasonable safeguards to help ensure that the loan is repaid. The SBA tries to make a decision on each application within seven to 21 days.

After the SBA approves the loan, they will tell you what documents are needed to close the loan. Once the SBA receives these documents, they can disburse the funds. Because disaster loans are subsidized, the SBA provides the money in installments, as you need it to repair or replace the damage.

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