Home and Personal Property Disaster Loans
SMALL BUSINESS ADMINISTRATION
HOME AND PERSONAL PROPERTY DISASTER LOANS
INDIVIDUAL ARTISTS AND CULTURAL WORKERS
The SBA Home and Personal Property Disaster Loan is for individuals seeking assistance with personal losses only. Arts organizations or arts-related businesses (including artists that operate as an LLC) should apply for an SBA Business Physical Disaster Loan and/or an Economic Injury Disaster Loan.
DESCRIPTION OF PROGRAM
A disaster loan from the Small Business Administration is a low-interest loan offered at a point of extreme need with the aim of helping individuals retain and repair their home and personal property after a declared disaster.
Homeowners may borrow up to $200,000 to replace or repair their primary residence.
Renters and homeowners may borrow up to $40,000 to replace or repair personal property such as clothing, furniture, cars, and appliances that was damaged or destroyed in a disaster.
If you make improvements that help reduce the risk of future property damage caused by a similar disaster (“mitigation”), you may be able to increase your loan amount by up to 20 percent over the cost of the physical damage.
See examples of disaster mitigation improvements that might be covered by an increased SBA loan at ussba.github.io/brand/assets/sba/resource-partners/ disaster-mitigation-factsheet-508.pdf
These loans help with disaster losses not fully covered by insurance or other sources. SBA Disaster Loans carry low interest rates set by law and generally feature low fixed monthly payments. Interest rates are determined based on the date of the disaster and are fixed for the life of the loan. Repayment generally begins 12 months after the date of the loan closing, during which time interest will accrue.
Individuals cannot apply directly to the SBA. You must create an account through FEMA as part of your SBA application process. Businesses, however, can go directly to the SBA.
Create an account with the Federal Emergency Management Agency (FEMA). If you
have insurance, file your insurance claim before applying to the SBA.
Application: It may take several hours to several days to complete the SBA application, depending on the state of and access to your financial records. The quickest and most efficient way to apply for a Home and Personal Property Loan is through the SBA’s online portal. The most time-consuming part of this process will be gathering the financial statements and other paperwork required to complete the application. Applicants with insurance should not wait for their claim to be settled before applying to the SBA.
Review: SBA representatives will estimate the costs of damages, review your application, repayment ability, and credit score, and make a decision within two to three weeks.
Closure and disbursement: Once loan documents are signed and returned, an initial disbursement can be made within five days.
IMPORTANT TIME-SENSITIVE STEPS
Registration Deadline: In order to apply to the SBA, you must register with FEMA to seek disaster assistance within 60 days of the declared disaster.
Application Deadline: You must apply for an SBA Physical Disaster Loan within 60 days of the disaster declaration. However, in some instances, deadlines get extended. Check the application deadline with the SBA website or an SBA representative.
File a claim with your insurance company immediately. Do not wait for your insurance company’s response to start the application process. If you do not have insurance, you may still apply for an SBA loan. You may be required to obtain insurance as a part of your SBA loan agreement.
DECISION POINT 1
IS THE PROGRAM LIKELY TO BE RELEVANT TO MY SITUATION?
Has there been a presidential declaration of disaster? If not, has the SBA made a disaster declaration?
Has it been less than 60 days since the declared disaster?
Has your residence or personal property been damaged as the direct result of a disaster?
Did the damage occur within the declared time frame of the incident?
Is your residence or property in the designated area?
If you have insurance, have you filed an insurance claim?
Do you keep financial records and/or do you have access to your financial statements?
Do you have proof of ownership/occupancy?
WHAT YOU NEED TO APPLY
The SBA recommends that you call to speak to a customer service representative before you begin the application process: 800-659-2955. To apply, you will need the following information to fill out the SBA Disaster Loan Application and provide the required supporting documents:
FEMA registration number
Contact information for primary and joint applicants
Social Security numbers for all applicants
Income and employment information
Information about assets and debts
Insurance information – homeowners, renters, vehicle, and flood insurance
Consent to have your bank, insurance company, employers, and other creditors release your information
Tax authorization to verify income for two years
Current paystubs if you have changed employment in the past two years. If you are a freelance artist you may be eligible for a Business Disaster Loan. See the next section.
Insurance disclosure, insurance claim, adjustment, settlement
If you own your residence, a complete, legible copy of the deed, including the legal description of the property
If the damaged property is your primary residence, proof of residency at the damaged address
If you have damage to an automobile or other vehicle, proof of ownership (a copy of the registration, title, bill of sale, etc.)
DECISION POINT 2
IS IT WORTH MY TIME AND EFFORT TO APPLY?
An SBA Home and Personal Property Disaster Loan can be extremely useful if your residence or property has been damaged in a disaster and your insurance coverage is not adequate. This loan program is an essential resource for individuals and families hit by disaster. The process can be more involved than the private-sector loan process, requiring more paperwork and taking more time, but if you are approved, the guaranteed low interest rate and long repayment period can be a realistic option for recovery. If you are worried that you will not qualify or be able to repay a loan, you should still complete the SBA application process so that the SBA can refer you back to FEMA where you will be considered for additional grant assistance. You cannot access those FEMA grant programs directly; you must be referred by the SBA.
Like any lender, the SBA will evaluate the amount of risk involved in taking you on as a borrower. You may face some hurdles in the process, but these loans are designed to be accessible. You should apply and work with the SBA even if you have a credit challenges or limited repayment ability.
In order to qualify for an SBA disaster loan, the Small Business Administration will per- form a routine credit check to ensure that you meet its credit requirements. If your credit score is on the low side, the SBA will consider other factors, such as recent income and your history of rent, utilities, insurance, and other payments, to determine whether you qualify.
If you are in need of an SBA disaster loan larger than $25,000, you will need to pledge available collateral. Collateral is any proper- ty or asset of value that a lender can use to secure the loan if there is substantial risk. For example, the SBA may consider real estate property as collateral for a large loan. If you were unable to meet the terms of the loan, you would forfeit the collateral. The SBA will not decline a loan for lack of collateral.
As with any loan, the lender needs to consider your ability to pay back the loan in full. You too should consider whether you can afford to take on another monthly payment, especially if the disaster has affected your employment and/or income.
If approved, you must acquire and maintain insurance during the life of the loan, including but not limited to flood insurance or hazard insurance. If the disaster that caused the damage isn’t covered by hazard insurance, you will be required to obtain insurance against the specific type of event that caused the damage (e.g., earthquakes, which are not covered by general hazard insurance). For some individuals, the limited availability and cost of these types of insurance may be prohibitive.
Other circumstances that may affect your ability to qualify are bankruptcy, criminal conviction in association with protests or “obscene” content, other arrests or criminal convictions, prior federal loans, and conflicts of interest if a spouse or family member works for the SBA.
Once approved, a case manager will be assigned to work with you to help you meet all loan conditions. They will schedule disbursements until you receive the full loan amount.
Payments on SBA loans usually begin 12 months from the date of the loan closing. Your loan officer will explain the deferral period that is in effect when you apply. Your loan may be adjusted after closing due to your changing circumstances, such as increasing the loan for unexpected repair costs or reducing the loan if you receive funds from insurance.
SBA Disaster Loans carry low, fixed-interest rates set by law, and generally feature low fixed monthly payments. Interest rates may vary for different disasters and market conditions, but the interest rate on each loan is fixed for the term of the loan.
I don't think I can afford a loan. Why should I apply?
If you are a homeowner or renter and the SBA determines you cannot afford a loan, the SBA will automatically refer you to FEMA’s Other Needs Assistance (ONA) program. The FEMA ONA program is a safety net available only to individuals and families and is not available to businesses. It is intended to help meet essential needs not met by any other form of assistance, including SBA disaster loans. Please note that if you were referred to the SBA for assistance and do not complete the SBA loan application you cannot be referred to FEMA even if the SBA would have been able to determine you cannot qualify for a loan.
Should I wait for my insurance settlement before I file my loan application?
No. Do not miss the filing deadline by waiting for an insurance settlement. The SBA can approve a loan for the total eligible losses and later adjust the loan eligibility or amount if you receive insurance funds. You are also under no obligation to accept the loan.
What is the interest rate?
For applicants unable to obtain credit elsewhere, the interest rate will not exceed 4 percent. The SBA determines whether you can obtain other credit at reasonable terms and conditions in the amount needed to recover from the disaster. For example, if you have a few thousand dollars available on your credit card but your recovery needs are much greater, the SBA won’t consider this a viable source of credit for disaster recovery and will not take this into account when setting your interest rate.
What are the loan terms?
The maximum term is 30 years. The SBA sets the installment payment amount and corresponding maturity based upon each borrower’s ability to repay.
What can I use my disaster loan for?
Although the SBA can lend additional funds to make improvements that help prevent future disaster damage (called “mitigation”), you cannot use loan funds for upgrades or expansions that don’t protect your home in a disaster.
What if I decide to relocate?
You may use your SBA disaster loan to relocate. The amount of the relocation loan depends on whether you relocate voluntarily or involuntarily. If you are interested in relocation, an SBA representative can provide you with more details on your specific situation.
What if circumstances change and I can't repay my loan?
If you and your family struggle to recover, or changed circumstances make it challenging to pay back your loan, you must stay in communication with your loan officer and come up with a workable payment plan. SBA loans are not forgivable, and you don’t want to default.