A natural disaster can have massive consequences on every area of your life, including your small business. You might lose business as a result of the event, or you may suffer from expensive property damage. One option to alleviate the effects of a natural disaster on your small business is a natural disaster loan.
Natural disaster loans offer varying repayment schedules that depend on your ability to repay the loan, but most are considered long-term debt. A natural disaster loan is available only in regions officially declared natural disaster areas. Keep reading to learn vital information about this type of SBA loan.
1. A Natural Disaster Loan Is a Multi-Purpose Product
A top advantage of a natural disaster loan is that you can use it for a multitude of business expenses. If your business site suffers damage during the disaster, you can use the loan funds to make the necessary repairs.
You may also use the money to repair damaged equipment and cover your operating expenses. Use the loan to help alleviate your temporary reduction in income. When applying for the loan, you'll have a chance to specify if the loan is for property damage or economic loss.
2. Your Interest Varies Based on Whether or Not You Can Secure Credit Elsewhere
The interest rate for your SBA disaster loan will vary based on whether or not you can easily secure credit approval elsewhere. If you have a well-established business, solid credit rating, and a history of a profitable business, your interest rate will be higher than a business with little chance of procuring loan approval with a bank or other lender.
When you submit your loan application, you will need to indicate if you have other sources of available credit.
3. Landlords May Also Utilize the Loan
If you have rental properties in an area with a natural disaster, you can also apply for an SBA disaster loan. You don't have to reside in the effected region, but you must have at least one rental property in a country designed as a natural disaster region.
4. The Loan Process Can Be Lengthy
It can take weeks to receive final approval for your SBA disaster loan. If you have property damage from the disaster, an inspector will have to come out and evaluate the damage. In the meantime, you might explore other short-term loan options to alleviate your financial loan.
A microloan is an excellent alternative while you wait for your disaster loan to be approved and funded. Most microloans are intended to be short-term debt, but the term should be sufficient for you to receive the money from your disaster loan.