SBA disaster loans: Rates, requirements and how to apply

The United States has suffered major disasters in recent years, including wildfires, earthquakes, hurricanes, flooding, and the COVID-19 crisis. If your business was affected by a natural disaster, you may be eligible for disaster loans from the Small Business Administration (SBA).

These low-cost loans help businesses rebuild and get back to work. 

Search the SBA website for declared disasters here.

What are SBA disaster loans?

SBA disaster loans are low-interest loans provided by the Small Business Administration to businesses of all sizes, non-profit organizations, homeowners, and renters affected by declared disasters. These loans help cover losses not fully reimbursed by insurance or other aid.

The SBA provides this assistance through its Office of Disaster Assistance (ODA). The disaster loan program is the only form of SBA assistance not limited to small businesses — larger businesses can qualify for physical disaster loans if they meet certain requirements.

To qualify for any SBA disaster loan, your business must be located in a declared disaster area. The SBA works with FEMA and state agencies to determine which areas qualify.

Physical disaster loans vs EIDL: Quick comparison

Types of SBA disaster loans

The SBA offers four types of disaster loans: physical damage loans, mitigation assistance, economic injury disaster loans, and military reservist economic injury disaster loans. This article focuses primarily on disaster loans available to businesses.

All disaster loans now come with an automatic 12-month deferral period (increased from five months). No interest accrues during that time.

Business physical disaster loans

Business physical disaster loans help repair or replace property damaged during a disaster. Businesses in a declared disaster area can receive up to $2 million to repair or replace real estate and leasehold improvements, machinery and equipment, inventory and supplies, and fixtures.

These loans are designed to cover losses not fully covered by insurance. They're intended solely for recovery efforts and can't be used to upgrade or expand your business. Businesses that are a major source of employment may be eligible for more funds.

Real-world examples include hurricane damage to your storefront windows, roof, and interior fixtures, earthquake damage to manufacturing equipment and office computers, or wildfire destruction of inventory in your warehouse.

Economic Injury Disaster Loans (EIDL)

Economic Injury Disaster Loans provide working capital to help businesses meet financial obligations and operating expenses they can't pay because of a disaster's economic impact. The EIDL program provides up to $2 million in low-interest loans to businesses suffering substantial economic injury.

While many business owners became familiar with EIDL during the COVID-19 pandemic, these loans have been available for decades and continue to be offered for current disasters. EIDL is available to eligible small businesses, eligible non-profit organizations, and eligible small agricultural cooperatives located in a disaster area.

EIDL loans help businesses pay payroll, fixed debts, accounts payable, and other bills that can't be paid because of the disaster's impact.

EIDL grants and advances

This COVID-19 pandemic program is closed. During the COVID-19 pandemic, the CARES Act created an emergency grant (EIDL Advance) of up to $10,000 that did not have to be repaid. The Economic Aid Act , which passed December 27, 2020, modified this to provide Targeted EIDL Advances (grants) of up to $10,000 to certain small businesses. The American Rescue Plan, which passed March 11, 2021, added supplemental grants to businesses suffering severe economic loss.

If you received an EIDL emergency advance (also called the EIDL Grant or Targeted EIDL Advance) during the pandemic, it does not need to be repaid.

SBA disaster loan rates and terms

SBA disaster loans carry low fixed interest rates and long repayment terms. Interest rates are fixed for the life of the loan, are determined by formulas set by law, and can vary from disaster to disaster based on market conditions.

Rates and terms by loan type

For Business Physical Disaster Loans, your rate and terms depend on the "credit elsewhere test" — whether you have the ability to borrow from non-government sources at reasonable terms for disaster recovery. The SBA determines if you have credit available elsewhere.

If the SBA determines you do not have credit available elsewhere, your maximum interest rate will be 4% with terms of up to 30 years. If you do have credit available elsewhere, your maximum rate will be 8% with a maximum seven-year term.

The SBA sets installment payment amounts and maturity based on each borrower's ability to repay. All borrowers now receive a 12–month interest–free deferment period. Payments aren’t required during that time, and interest will not accrue.

Who qualifies for SBA disaster loans?

SBA disaster loan eligibility depends on your business type and the loan you're applying for.

For Business Physical Disaster Loans, eligible applicants include businesses of any size located in a declared disaster area as well as private non-profit organizations.

For Economic Injury Disaster Loans, eligible applicants include small businesses per the SBA’s Size Standards and private non-profits of all sizes.

Your business must be located in a declared disaster area and have suffered physical damage or economic injury as a result of the disaster.

How much can you borrow for an SBA disaster loan?

The loan amount you receive depends on the type of loan and your specific situation.

For Business Physical Disaster Loans, an SBA Loss Verifier will estimate the cost to repair or replace the disaster-damaged property. Since these loans are designed to return damaged property as nearly as possible to its pre-disaster condition, your loan amount will generally equal the cost to repair or replace the damage, minus insurance proceeds intended to cover those costs and any other aid received (such as grants).

You can borrow an additional 20% beyond the real estate damage if you make improvements that reduce the risk of future property damage, such as upgrading your building's roof to better withstand hurricane-force winds or installing storm shutters.

For EIDL, the SBA calculates the loan amount based on your actual economic injury. You don't request a specific amount. Instead, the SBA determines what you qualify for based on your financial information and the disaster's impact on your business.

What can you use SBA disaster loan funds for?

Allowed vs prohibited uses

Expanded guidance on mitigation measures

Previous regulations allowed loan funds only to protect damaged property from future similar disasters. The SBA has eliminated the requirement. You can now use disaster loan funds to implement mitigation measures to protect against any type of disaster.

This means if a hurricane damages your building, you can use loan funds (up to limits) for earthquake-resistant modifications, flood protection systems, fire suppression equipment, and any other protective measures, regardless of the original disaster type.

Relocation guidance

Generally, SBA loan funds may be used to relocate. However, by regulation, SBA disaster loan funds may not be used to relocate voluntarily outside the business area where the disaster occurred. If it's necessary for your business to relocate outside your local area due to the disaster, ask the SBA for guidance.

How to apply for an SBA disaster loan

To apply for disaster loan assistance, visit the SBA's website. There are deadlines that often apply, so don't wait to apply if you think you may qualify and need this assistance.

Follow these seven steps to apply for SBA disaster loans (for non-COVID disasters):

1. Register with FEMA (estimated time: 15 to 30 minutes)

You must obtain a FEMA registration number before you begin the application process. Go to DisasterAssistance.gov or visit the Login.gov help center for assistance.

2. Gather required documents (estimated time: 1 to 3 days)

You may need to provide your Social Security number, FEMA registration number, contact information, deed or lease information, insurance information, financial information (profit and loss statements, balance sheets), employer identification number, and IRS Form 4506-T (which allows the SBA to access your tax returns).

If records have been lost or damaged due to the disaster, ask the SBA for guidance. 

3. Complete and submit application (estimated time: 1 to 2 hours)

Fill out the necessary information on the application, including disaster declaration details, and submit through the SBA website.

4. Wait for SBA review (estimated time: 2 to 3 weeks)

The SBA will review your application and pull your credit report. They'll assess your eligibility and creditworthiness.

5. Undergo property loss verification (estimated time: 1 to 3 weeks)

For physical disaster loans, an SBA verifier will visit your property to estimate the total physical loss to your property and business.

6. Complete loan closing documents (estimated time: 1 to 2 weeks after approval)

If approved, the SBA will send you loan closing documents. Once the SBA receives the signed documents, you'll get an initial disbursement within five days. For physical damage, you'll receive an initial disbursement of $25,000. For economic injury or working capital, you'll get an initial disbursement of $25,000 in addition to any physical damage funds.

7. Work with your case manager (ongoing)

An SBA case manager will be assigned to you. The case manager ensures you get the full loan amount and helps you meet all loan conditions.

If your application is denied, you can apply for reconsideration. As of July 2023, the SBA removed the requirement to submit financial statements with every reconsideration or appeal request, making the process simpler.

SBA disaster loan repayment

SBA disaster loans are not grants, and they are not forgivable. Borrowers are expected to repay these loans in full. The exception is EIDL grants received during the pandemic that do not need to be repaid and are not considered taxable income at the federal level.

You make payments on your SBA disaster loan directly to the SBA. All disaster loans now include a 12-month interest-free deferral period. During this time, no payments are required and no interest accrues.

2 ways to repay your loan

You can repay by phone at 1-800-659-2955 or online through the MySBA Loan Portal.

What happens if you can't make payments

If you're struggling to make payments after the deferral period ends, contact your SBA case manager immediately. The SBA may be able to adjust your payment schedule, provide temporary forbearance, or work out a modified repayment plan based on your current financial situation.

Missing payments without communicating with the SBA can result in late fees and penalties, damage to your business and/or personal credit, acceleration of the full loan balance, and legal action to recover funds. Don't wait until you've missed payments –– reach out to the SBA as soon as you anticipate difficulty.

SBA disaster loans vs other financing options

SBA disaster loans offer unique advantages for businesses recovering from declared disasters, but they're not always the right option. Here's how they compare to alternatives.

SBA disaster loans may be a good option when your business is located in a declared disaster area, you need access to low-interest long-term financing, you can wait 30 to 90 days for funding, and traditional lenders won't work with your business due to disaster-related credit or financial issues.

Consider alternatives when your business isn't in a declared disaster area, you need funds within days not weeks, you don't want to deal with extensive documentation requirements, or you prefer working with private lenders.

Nav is not a lender. We help businesses understand financing options.

Brief comparison with other SBA loans

If your business wasn't impacted by a disaster or a disaster loan isn't a good fit, consider SBA Microloans, SBA 7(a) loans, or SBA 504 loans to purchase real estate, machinery, or equipment.

Pro tip: A business credit card with a 0% intro APR may help provide emergency funding for short-term emergencies. 

Check out Nav’s guide to SBA loans

Getting additional help and resources

If you're a small business owner recovering from floods, fires, or other natural disasters, SBA disaster loans can provide funds to rebuild property, replace inventory, cover working capital expenses, and get back to business.

SBA resource partners

Beyond disaster loans, the SBA offers free counseling and training through SCORE, which provides free mentoring from experienced business professionals who can help you rebuild and plan for the future. 

Small Business Development Centers (SBDCs) offer no-cost business consulting and training on topics like financial management, marketing, and disaster recovery planning. 

Women's Business Centers (WBCs) provide specialized support for women business owners, including assistance with disaster recovery.

Find your local SBA resource partners here.

Disaster-specific resources

FEMA's DisasterAssistance.gov provides information about federal disaster aid programs and helps you register for assistance. State emergency management agencies may offer additional disaster relief programs, grants, or low-interest loans.

Frequently asked questions