Disaster Loans After a Hurricane, Tornado, or Other Natural Disaster

The U.S. Small Business Administration (SBA) provides loans to homeowners, renters, and business owners to help them rebuild their home or business following a natural disaster, like a hurricane.

The U.S. Small Business Administration (SBA) gives low-interest loans to help homeowners, renters, and business owners following a natural disaster. But if you default on the loan payments, you could face a foreclosure. Read on to learn more about SBA disaster loans and foreclosure of these loans.

What Are SBA Disaster Loans?

SBA disaster loans are low-interest, fixed-rate loans—up to $2 million—to help people who’ve gone through a declared disaster that has caused either (or both) physical damage to a business or home, or economic injury.

A borrower may use SBA disaster loan proceeds for the following purposes, depending on the loan type:

  • To repair physical damage to a business or to property. A borrower may use loan proceeds to fix or replace real estate, personal property, machinery equipment, inventory, furniture, fixtures, leasehold improvements, and business assets.
  • To help ease economic injuries. A business owner may use a SBA disaster loan to help meet business obligations, as well as pay ordinary and necessary operating expenses.
  • To refinance or complete mitigation projects. Borrowers may sometimes use loan funds to refinance existing mortgages or complete mitigation projects to protect a property against future damage.

Different Types of SBA Disaster Loans

Here are the various kinds of SBA loans that are available for different types of disaster victims.

Loans for homeowners and renters. If you’re the victim of a disaster, you might be eligible for a SBA loan (a physical damage loan) even if you don't own a business. Renters, homeowners, and personal-property owners may borrow as much as $40,000 to fix or replace clothing, furniture, cars, or appliances that are damaged or ruined in the disaster. Homeowners may apply to get as much as $200,000 to fix or replace a primary residence. Second homes aren’t eligible for this type of loan, but qualified rental properties (investment properties) might be eligible under a business loan program.

Loans for business owners. The SBA offers two types of loans to businesses that are damaged by a disaster: Business Physical Damage loans and Economic Injury loans. Business Physical Damage loans may be used to repair or replace damaged real property and business equipment. Economic Injury loans help pay for ordinary and necessary operating expenses until normal operations resume if the business suffered economic injury as a result of a disaster, even if no physical damage occurred.

(Learn more about SBA’s special loan programs to help individuals and businesses after a natural disaster.)

Where to Apply for a Loan and Get More Information

You can apply online for an SBA disaster loan. For more information about SBA disaster loans, go to the SBA website.

To learn more about other available disaster programs, go to www.DisasterAssistance.gov.

Foreclosure of SBA Disaster Loans

Borrowers of SBA disaster loans must agree to pay the money back. For some loans, a borrower might have to offer collateral like:

  • a lien on the damaged or replacement real estate
  • a security interest in personal property, or
  • both.

If the borrower doesn’t make the loan payments after putting up real property as collateral, the property may be foreclosed either judicially or nonjudicially, depending on state law and whether or not the mortgage contract contains a provision granting a power of sale.

Avoiding Foreclosure

If you are having trouble making your SBA loan payments due to reasons that are substantially beyond your control and are worried about an impending foreclosure, you may ask that the SBA suspend your loan payments or extend the loan maturity date—or both—to give you some relief.

Even if you don’t have a SBA loan, if you are facing a potential foreclosure after a hurricane, tornado, flood, or other natural disaster, you might qualify for some other type of foreclosure relief.

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