In the aftermath of the floods that devastated southeastern Louisiana, many businesses will be in need of financial assistance for uninsured or under-insured losses. The U.S. Small Business Administration (“SBA”) offers financial assistance to businesses in declared disaster areas through low-interest, long-terms loans.
Business Physical Disaster Loans. Businesses of all sizes, as well as private, non-profit organizations, may borrow funds to repair or replace damaged or destroyed real estate, machinery or equipment, and inventory and other business assets. A physical disaster loan may be increased up to 20 percent of the confirmed physical loss, and the increase can be used to make improvements to mitigate potential future disasters.
Economic Injury Disaster Loan. Small businesses may borrow funds to help meet working capital needs caused by the disaster, regardless of damage to physical property. Economic injury loans are available to small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, non-profit organizations of all sizes that have suffered substantial economic injury. Substantial economic injury means that the business or organization is unable to meet its obligations and pay its ordinary and necessary operating expenses.
The statutory limit for SBA business loans is $2 million and applies to the combination of physical, economic injury, mitigation, refinancing, and all disaster loans to a business and its affiliates for each disaster. A business or organization must have either physical damage or economic harm and be located in a disaster-declared parish to qualify. The interest rate on the loans is capped at 4 percent if credit cannon be obtained elsewhere and 8 percent when credit is available elsewhere. The term of the loans will not exceed 30 years.
A Disaster Loan Application may be submitted online with the SBA at or may be mailed to U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, Texas 76155-2243. A completed Form 4506-T must be submitted with the loan application to give the IRS permission to provide SBA tax return information. All loan applicants must first register with FEMA and obtain a registration number. Businesses can register with FEMA.
As of the date of this article, the initial federal disaster declaration included the parishes of Tangipahoa, St. Helena, East Baton Rouge, and Livingston. Additional parish declarations are expected as further damage assessments are conducted.