Extra Help for Small Businesses after a Disaster

How to qualify for SBA disaster recovery loans

Q.   I am the co-owner of an exterior cleaning company.  We live in the South where water is restricted because of a severe drought.  We have commercial cleaning contracts but can't do the work because of water conservation regulations. I am behind on credit card payments and I won't have any cash to start back when we are allowed to use water again.   This is our second year in business and I don't want this to be the last.

A.   Flooding and wind storms in the Pacific Northwest, fires in the West, and persistent droughts in the Southeast!  It's hard enough for entrepreneurs to manage the day-to-day rigors of business ownership, let alone cope with a major environmental disaster.

I am sympathetic to the frustration and helplessness you must feel each day.  You want to serve your customers, but can't because of circumstances outside of your control.

Fortunately, the Small Business Administration ("SBA") understands the sudden hardship water dependent businesses face when supplies are restricted.  To help you and your business through this crisis, the SBA offers a variety of disaster assistance programs.

Once the President, a state governor, the Secretary of Agriculture or the Secretary of Commerce declares a disaster, small business owners can apply for disaster recovery loans of up to $1.5 million.  These loans carry a low interest rate and may be issued with repayment terms as long as 30 years.   It's important to note that SBA disaster loan programs are only available for a short window of time after the declaration of a disaster, so it is important to act fast.

The SBA's most popular loan program helps business owners repair or replace damaged buildings, fixtures, inventory and equipment that are not covered by other commercial insurance.  The SBA also offers an economic injury disaster loan called "EIDL", which is likely to be your source of working capital relief.   To qualify for an EIDL, business owners have to demonstrate the inability to pay existing loans, rent and other ordinary and necessary operating expenses. Final loan amounts are based on actual economic injury, the creditworthiness of the business and its owners and other reasonable financial needs related to starting up the business again. Kathy Cook, Government Relations Specialist with the SBA's Disaster Assistance Center in Atlanta, Georgia says that emergency loan assistance is often slowed down by the availability of business financial records, sales reports and information about equipment and other damaged asset values.

Says Cook, "Business owners should keep copies of personal and business historical financial records and tax identification numbers at an offsite location or at online data centers that can be accessed with ease from any location."

The SBA's Web site offers detailed information about its disaster loan program at www.sba.gov.  Business owners can also talk to an SBA representative at 1-800-659-2955.

Here's another tip to help you manage your business during this crisis. While it is completely understandable that you would like to avoid nagging business problems, your best approach is to call creditors before they call you.  Tell them your plans to stay in business and how you intend to apply for SBA loan assistance.  Sympathetic creditors may relax payment terms or keep delinquent payment information away from credit bureaus.

Also consider writing a letter to all past customers.  Tell them that you look forward to serving them again once water conditions improve. 

I hope some rainy days come to your community very soon.  I also hope that many years from now you will reminisce about how your business emerged after a disaster with a renewed sense of pride and purpose.

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