The U.S Small Business Association’s Office of Disaster Assistance recently arrived in South Dakota to offer support in the wake of September’s storms, flooding, and tornadoes.
In order for the Office of Disaster Assistance to make its services available, a presidential major disaster declaration must be made for the area. In late November, President Trump issued a declaration for South Dakota which included the following counties: Brookings, Charles Mix, Davison, Hanson, Hutchinson, Lake, Lincoln, McCook, Minnehaha, Moody and Yankton, as well as the Flandreau Santee Indian Reservation and the Yankton Indian Reservation.
The declaration makes low-interest federal loans available for businesses or individuals who suffered damages from the natural disasters which occurred between September 9-26.
As part of this program, the Office of Disaster Assistance set up a SBA Business Recovery Center, as well as multiple Federal-State Disaster Recovery Centers throughout the area. Affected businesses or homeowners can visit these centers to learn more about the loan application process. The SBA Business Recovery Center focuses strictly on SBA loans, while Federal-State Disaster Recovery Centers offer assistance with FEMA grant applications as well.
Who should apply for an SBA disaster loan?
SBA public information officer, Corey Williams, is in charge of disaster assistance in Minnehaha, Brookings, Moody, and Lake counties. As such, he manages the SBA Business Recovery Center which is located in Sioux Falls, out of the Zeal Center for Entrepreneurship.
Though the SBA’s focus is small business, both business owners and individuals are eligible for disaster recovery loans. Williams explains that this is a result of FEMA’s maximum grant award of $35,000, which is not always enough to cover disaster-related losses.
“FEMA exists just to get you safe and on your feet, but not to make you whole,” Williams said. “The federal government, through the SBA, wants to make the homeowner, the renter, or the business owner whole.”
The low-interest federal disaster loans are intended to cover two areas of loss—physical damage and economic injury. Physical damage assistance would support the purchase or repair of affected buildings or equipment, while economic injury assistance covers the loss of working capital while the business is unable to function.
Businesses can apply for loans of up to $2 million, but it’s important to note certain limitations. Loans of up to $25,000 for either physical damage or economic injury are unsecured, but if the total exceeds $25,000 (up to $50,000 if both physical damage and economic injury are cited), it must be secured with collateral. Additionally, homeowners are limited to loans of up to $200,000 to replace disaster damaged real estate and up to $40,000 for damaged property.
Loan terms are up to 30 years, with no application or closing costs. Interest rates for businesses are as low as 4 percent, while rates for homeowners can be as low as 1.75 percent.
Preparing for disaster as a business owner
While the Office of Disaster Assistance is committed to helping business owners and individuals in times of need, Williams says educating people on disaster preparedness is even more critical.
In an ideal world, business owners would be prepared with enough insurance coverage to prevent the necessity of a loan.
“We can’t emphasize enough the importance of preparing for a major disaster,” Williams said. “It’s absolutely paramount. The main thing you want to do is make sure you’re safeguarded from future harm.”
Williams offers a few examples of policies that businesses should consider to cover disaster-related damage—the most common being flood insurance.
“Especially if you live or work along the river, it’s important to remember that flooding is not a part of regular property insurance,” he said.
A common mistake made by business owners is getting insurance that covers their real estate or building, but forgetting to safeguard the contents. Covering the cost of a building is important, of course, but it’s often surprising how quickly the cost of damaged equipment and inventory adds up.
Business owners should also consider business interruption policies, which cover the loss of income if a business has to close for a period of time due to a disaster.
Additionally, lacking the proper insurance can inhibit your ability to receive a federal loan. Flood zones A and V require business owners to carry flood insurance, and the SBA will not approve a loan for a business that has not fulfilled its requirement. You can view your location’s flood risk via FloodSmart.
How to apply
If a business or individual is interested in applying for an SBA loan, the first step is registering with FEMA online at disasterassistance.gov or by calling 800-621-3362.
Application questions can be directed to the SBA’s customer service center by calling 800-659-2995 or visiting the Business Recovery Center or one of the Disaster Recovery Centers. When you’re ready to apply, fill out the application online at disasterloan.sba.gov.
The deadline to apply for a physical damage loan is January 17, 2020, while the deadline for an economic injury loan is August 18, 2020.