A natural disaster or emergency can cause a significant disruption in business revenue. The SBA offers disaster loans with relatively low interest rates to help businesses meet expenses and assist in rebuilding.
Getting approval for an SBA disaster loan can be a crucial lifeline for businesses affected by disasters. However, many business owners are unsure how long the approval process takes. This article will break down the timeline and steps for SBA disaster loan approval.
Overview of SBA Disaster Loans
The Small Business Administration (SBA) offers low-interest disaster loans to businesses located in declared disaster areas. These loans help businesses repair or replace damaged property, inventory, and other assets
Key things to know about SBA disaster loans:
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Available for declared disasters like hurricanes, floods, tornadoes, and wildfires. The SBA declares disaster areas based on physical damage assessments.
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Loans up to $2 million for physical damage. Additional loans available for economic injury.
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Low interest rates around 2,88% for small businesses as of August 2022
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Long repayment terms up to 30 years.
SBA disaster loans provide vital support for recovery. But to access funds, businesses must complete the application and approval process.
SBA Disaster Loan Approval Timeline
The SBA aims to make loan decisions within 2-3 weeks of receiving complete applications. However, the full timeline from application to funding takes about 5-8 weeks.
Here are the main steps and typical timeframes:
1. Application – 1 week
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Businesses apply through the SBA disaster loan portal.
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Applications require financial records, insurance info, and details on damage and economic injury.
2. Processing – 1-2 weeks
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SBA reviews application and follows up on any missing info.
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SBA arranges site inspections to verify disaster damage.
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Loan officer underwrites and decides on eligibility.
3. Decision – 1 week
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If approved, SBA sends loan closing documents.
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Business owner accepts loan offer and returns signed documents.
4. Funding – 1-2 weeks
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SBA disburses the loan into the business bank account.
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Initial disbursement is $25,000 within 5 days for urgent needs.
Total timeline: 5-8 weeks
So in total, expect around 1-2 months from disaster loan application to funding, though complex cases may take longer.
Tips for Faster SBA Disaster Loan Approval
While SBA disaster loans take time due to thorough review, some tips can help speed up the process:
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Apply ASAP – The quickest approvals go to early applicants before volumes get high.
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Prepare documents – Have required records ready to attach to the application.
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Respond quickly – Provide any additional info the SBA requests promptly.
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Accept offer – Accept the loan offer as soon as you get approval.
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Set expectations – Understand the timeline so delays don’t cause surprises.
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Ask questions – Contact the SBA disaster team with any questions.
Though SBA disaster loans aren’t the quickest financing option, their low rates and flexible terms provide critical aid. Being prepared and responsive helps get your business back on track sooner.
Comparison to Other SBA Loans
SBA disaster loans have a shorter approval timeline than other SBA loan programs like 7(a) and 504 loans. Here’s a comparison:
| Loan Type | Approval Time |
|---|---|
| SBA Disaster Loans | 2-3 weeks |
| SBA 7(a) Loans | 2-3 months |
| SBA 504 Loans | 1-1.5 months |
The accelerated timeline for disaster loans allows the SBA to deliver urgent aid to affected businesses. Non-disaster SBA loans take longer due to more extensive underwriting.
Disaster loans also have different uses, requirements, rates, and terms than other SBA loans. However, the SBA disaster loan program provides a vital source of financing after catastrophes.
Alternatives for Faster Financing
For business owners that need money urgently, SBA disaster loan timelines may still not be fast enough. Some alternative financing options include:
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Business credit cards – Can provide quick emergency funds but have high interest rates.
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Business lines of credit – Pre-approved revolving credit source that can fund urgent needs.
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Online business loans – Some alternative lenders offer accelerated approvals and funding.
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Invoice factoring – Sell outstanding invoices to quickly access a portion of receivables.
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Equipment financing – Quickly finance specific equipment purchases.
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Merchant cash advances – Receive a lump-sum in exchange for a share of future sales.
These options come with higher costs but provide quicker access to funds in a disaster. They can serve as a bridge while waiting for SBA loan approval.
Summary
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SBA disaster loan approval takes 5-8 weeks from application to funding.
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Being prepared with documents and responsive to the SBA can accelerate the process.
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Disaster loans have a much faster timeline than other SBA loans.
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When funding is urgently needed, alternatives like business credit cards and online loans may be quicker.
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SBA disaster loans remain the most affordable option for long-term rebuilding and recovery.
Understanding the approval process sets realistic expectations for securing SBA disaster aid. With some diligence, businesses can get approved in time to help recover from the crisis.
Types of disaster loans
SBA disaster loans come in different types, which can be used for different purposes. Types of disaster loans include: physical damage loans, Economic Injury Disaster Loans (EIDL) and military reservist loans. These loans don’t accrue interest for the first 12 months — after that, your interest rate depends on the purpose of the loan.
| Type of disaster loan | Maximum loan amount | Maximum term length | Estimated interest rate | Collateral required? |
|---|---|---|---|---|
| Physical damage loan | Businesses: $2 million Homeowners: $500,000 Renters: $100,000 | 30 years | 0% first year, then 4% to 8% | Yes, for loans above $50,000 in Presidential declarations and $14,000 in agency declarations |
| Economic injury disaster loan | $2 million | 30 years | 0% first year, then 4% | Yes, for loans above $50,000 |
| Military reservist economic injury disaster loan | $2 million | 30 years | 0% first year, then 4% | Yes, for loans above $50,000 |
SBA disaster loan requirements
Businesses of all sizes can apply for an SBA disaster loan. To qualify for one of these loans, your business will need to have operated and sustained damage in a declared disaster area. You’ll also need to apply within the program deadline. For physical damage loans, this is typically within 60 days of the disaster declaration. For EIDLs, you may have up to nine months after the disaster declaration to apply.
In addition, these standard SBA eligibility requirements also apply to disaster loans:
- Loans over $200,000 require a personal guarantee from every individual who owns more than 20% of the business.
- Your personal and business credit scores will be considered acceptable by the SBA.
- The business must provide an Employer Identification Number (EIN) and the applicant must be a U.S. citizen, non-citizen national or legal alien. Individual applicants must provide a Social Security number or proof of non-citizen national or qualified alien status.
- The business cannot operate in SBA-excluded industries such as gambling, adult entertainment or insurance.
How long does an SBA loan take to approve?
FAQ
How long does it take to be approved for an SBA disaster loan?
Type and Cost Share: Because this is a loan, there is no cost share. Application: SBA generally makes a decision on each application within seven to 21 days.Jan 16, 2025
How is the SBA disaster loan verification process?
SBA reviews your credit before conducting an inspection to verify your losses. An SBA verifier will estimate the total physical loss to your disaster-damaged property. A loan officer will determine your eligibility during processing, after reviewing any insurance or other recoveries.
What is the approval rate for the SBA disaster loan?
Of the 312,916 applications SBA accepted in the first stage of its application review, SBA approved 42 percent and declined 38.6 percent. Applications were declined primarily due to insufficient credit score or lack of repayment ability.
How are SBA disaster loans disbursed?