Monday, August 9, 2010

What do you need to know about the process to apply for an Economic Injury Disaster Loan from the SBA?

Recently, the United States Small Business Administration (SBA) released a fact sheet as a result of Governor Crist’s certification that many Florida counties were currently at risk of economic injury as a result of the BP Oil Spill. Of course, that list of counties can and will expand depending on where the oil heads; officials estimate that 6,800,000 gallons leaked every day from April 20-July 15, 2010.

SBA Disaster Loans were a source of much needed very low-interest loans for Florida communities who were slammed by a series of hurricanes nearly 5 years ago. This will hold true again should expert predictions regarding our 2010 hurricane season prove true. Whether or not your community is impacted by the oil spill or a hurricane this year, it is important for you to know the mechanics involved in obtaining these kinds of funds. It is important to note that communities that do not maintain required flood insurance will not be eligible to obtain these low cost (3% for associations) loans which is yet another reason to purchase and maintain relatively inexpensive flood coverage.

The following is information reprinted directly from the SBA.

FLORIDA #12172 (Disaster # FL-00056) COUNTIES: Bay, Citrus, Collier, Dixie, Escambia, Franklin, Gulf, Hernando, Hillsborough, Jefferson, Lee, Levy, Manatee, Monroe, Okaloosa, Pasco, Pinellas, Santa Rosa, Sarasota, Taylor and Walton Counties and contiguous counties of Alachua, Broward, Calhoun, Charlotte, DeSoto, Gilchrist, Glades, Hardee, Hendry, Holmes, Jackson, Lafayette, Leon, Liberty, Madison, Marion, Miami-Dade, Polk, Sumter, Wakulla and Washington in the State of Florida; contiguous counties of Baldwin, Covington, Escambia and Geneva in the State of Alabama; and contiguous counties of Brooks and Thomas in the State of Georgia.

INCIDENT AND DATE: Deepwater BP Oil Spill
Occurred April 20, 2010 and continuing

Type of Disaster Loan:
• EIDL assistance is available only to entities and their owners who cannot provide for their own recovery from non-government sources, as determined by the U.S. Small Business Administration (SBA).

• Economic Injury Disaster Loans (EIDLs) – are working capital loans to help small businesses, small agricultural cooperatives and most private, non-profit organizations of all sizes meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster. These loans are intended to assist through the disaster recovery period.

Credit Requirements:
• Repayment – Applicants must show the ability to repay the loan.

• Collateral – Collateral is required for all EIDLs over $5,000. SBA takes real estate as collateral when it is available. SBA will not decline a loan for lack of collateral, but SBA will require the borrower to pledge collateral that is available.

• Credit History – Applicants must have a credit history acceptable to SBA.

Interest Rates:
• Businesses and Small Agricultural Cooperatives without Credit Available Elsewhere: 4.000%

• Non-Profit Organizations without Credit Available Elsewhere: 3.000%

Loan Term:
• The law authorizes loan terms up to a maximum of 30 years.

• SBA determines the term of each loan in accordance with the borrower’s ability to repay. Based on the financial circumstances of each borrower, SBA determines an appropriate installment payment amount, which in turn determines the actual term.

Loan Amount Limit:
• Economic Injury Disaster Loans (EIDL) – The law limits EIDL(s) to $2,000,000 for alleviating economic injury caused by the disaster. The actual amount of each loan is limited to the economic injury determined by SBA, less business interruption insurance and other recoveries up to the administrative lending limit. SBA also considers potential contributions that are available from the business and/or its owner(s) or affiliates. If a business is a major source of employment, SBA has the authority to waive the $2,000,000 statutory limit.

Loan Eligibility Restrictions:
• Noncompliance: Applicants who have not complied with the terms of previous loans are not eligible. This includes prior borrowers who did not maintain required flood insurance.

Insurance Requirements:
• To protect each borrower and the Agency, SBA requires borrowers to obtain and maintain appropriate insurance. Borrowers of all secured loans (over $5,000) must purchase and maintain hazard insurance for the life of the loan on the collateral property. By law, borrowers whose collateral property is located in a special flood hazard area must also purchase and maintain flood insurance for the full insurable value of the property for the life of the loan.

For more information about obtaining a loan from the SBA, contact SBA Disaster Assistance Customer Service Center at: (800) 659-2955 or

For more information about the BP Oil Spill and what communities should be doing right now to protect themselves, please visit

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