DISASTER ASSISTANCE

Nobody can predict when a disaster will take place, let alone how bad it will be. If your business has suffered substantial economic injury and is located in a declared disaster area, it could qualify for assistance from the U.S. Small Business Administration (SBA) regardless of whether or not the damage was due to a lack of planning or preparation. Assistance from the SBA comes in the form of Economic Injury Disaster Loans (EDIL), which are for businesses that have been determined not capable of acquiring credit elsewhere. The SBA can only provide assistance when a business cannot recover by using its own resources and normal lending routes.

The definition of substantial economic injury is essentially the inability of a business to meet its obligations and pay its ordinary and necessary operating expenses; therefore just because a business is showing a loss of profit or a decline in sales, they are not necessarily qualified for an EDIL. The EDIL is intended to help a business maintain a secure financial condition until it is back to normal, thus the money cannot be spent in any way the owner sees fit. The funds cannot be used for expansion or purchasing a new line of inventory either, that would qualify as misuse of disaster funds, which is subject to stiff penalties. The money can be used to pay short-term notes, accounts payable and installment payments on long-term notes but only to the extent that the business could have made the payments had the disaster not happened.

The loan maximum is $1.5 million, which includes both economic injury and physical damage assistance, but the amount is ultimately determined based on actual economic injury and financial needs. The loan interest rates cannot exceed 4% per year and the term cannot exceed 30 years, but the actual term is determined based on ability to pay, so it can vary.

Disaster assistance is also offered by FEMA (Federal Emergency Management Agency) to individuals, families and businesses whose property has been damaged or destroyed and whose losses are not covered by insurance. To qualify, the losses must have occurred in an area covered by a disaster declaration (http://www.fema.gov/news/disaster_totals_annual.fema). You must also file a claim with your insurance. Even if you are covered by your insurance, you may still be eligible for assistance if: your insurance settlement is delayed, your insurance settlement is insufficient to meet your disaster-related needs or if you have exhausted the Additional Living Expenses (ALE) from your insurance company. Like the SBA loans, the disaster assistance offered by FEMA is not arranged for economic gain, nor is it intended to restore your damaged property to its condition before the disaster; it is basically just to help those in need.