Financial Relief for California Small Businesses
If you’re a small business in California that’s been impacted by severe winter storms, there is relief available. In this article, we’ll go over the various financial relief options available to small businesses impacted by the federally-declared disaster.
SBA: Business Physical Disaster Loans
If your business has experienced physical damage, the Small Business Administration (SBA) is offering low-interest disaster loans to help you repair or replace damaged property. We’ve gathered all the information you need to know about these loans and how to apply for them.
Eligibility
Businesses located in declared-disaster areas that have incurred property damage can apply for the loan. There are no restrictions on the size of the business.
Loan Amount
The SBA is offering loans of up to $2 million to qualified businesses. The business physical disaster loan will only cover business losses that are not already covered fully by insurance. You must deduct any insurance proceeds for the damaged business property from the loan amount.
Use of Funds
You can use the loan proceeds to repair or replace any of the following -
- Real property
- Machinery
- Equipment
- Fixtures
- Inventory
- Leasehold improvements
You cannot use the loan to upgrade or expand your business unless required by building codes. Instead, the loan can be used to restore the property to its pre-disaster condition. If you have an outstanding mortgage on the damaged property and are required to apply insurance proceeds to it, you can include that amount in your disaster loan application.
If you decide to make improvements to your property that will help reduce the likelihood of future damage by a similar disaster, then you can qualify for a 20% increase in loan amount
as verified by the SBA.
Interest Rate and Repayment Terms
If you cannot obtain credit elsewhere, the maximum interest rate will be 4%. For businesses and nonprofit organizations with credit available elsewhere, the maximum interest rate will be 8%. The SBA determines whether the applicant has credit available elsewhere. Depending on your ability to repay the loan, the repayment terms can be as long as 30 years.
Collateral Requirements
You are required to provide collateral for loans over $25,000. If your loan is $200,000 or less, you do not need to provide your primary residence as collateral. Instead, you can provide other assets that have equal quality and are valued equal to or greater than the loan amount.
Information Required to Complete the Application
In order to apply for the loan, you must first register with the Federal Emergency Management Agency (FEMA). You can call FEMA at 1-800-621-3362 or visit DisasterAssistance.gov to get your FEMA registration number.
In order to complete your SBA application, here’s all the information you’ll need to have
- Contact information for all applicants
- Social security numbers for all applicants
- FEMA registration number
- Deed or lease information
- Insurance information
- Financial information (e.g. income, account balances and monthly expenses)
- Employer Identification Number (EIN) for business applicants
How to Apply
You can either apply online for an SBA disaster loan or submit a paper loan application. When you submit your loan application, the SBA will send an inspector to estimate the cost of your damage.
You must also submit a signed and dated IRS Form 4506-C. This form gives the IRS the permission to send your tax return information to the SBA. The deadline to apply for business physical disaster loan is March 16th, 2023.
Business economic injury disaster loan (EIDL).
The SBA also offers the Economic Injury Disaster Loan (EIDL). This loan is designed to help you if your small business has experienced substantial economic injury and is located in a declared disaster area.
Where the Physical Disaster Loan assists with physical damage from the disaster, the EIDL assists with economic loss from the disaster. We’ve gathered all the information you need to know about these loans and how to apply for them.
Eligibility
If your business is located in one of the declared disaster areas, suffered substantial economic injury, and are one of the following business types, you may be eligible for an EIDL:
- Small business
- Small agricultural cooperative
- Most private nonprofit organizations
Substantial economic injury means that the business is unable to meet its obligations and is unable to pay its ordinary and necessary operating expenses.
The declared disaster areas can be found here. The primary counties affected are Merced, Sacramento, Santa Cruz, Monterey, San Luis Obispo, Santa Barbara, and San Joaquin. The contiguous counties affected that may also be eligible are Fresno, Madera, Mariposa, San Benito, Santa Clara, Stanislaus, Tuolumne, Amador, Contra Costa, El Dorado, Placer, Solano, Sutter, Yolo, San Mateo, Kings, Kern, Ventura, Alameda, and Calaveras.
EIDL is only available during the time that the business is affected by the disaster. Once normal operations resume, the small businesses will no longer receive working capital. EIDL is only available to small businesses when SBA determines that those businesses are unable to receive assistance elsewhere.
Loan Amount
The SBA is able to provide up to $2 million to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. The loan amount that you receive will be based on your actual economic injury and your company’s financial needs, regardless of whether the business suffered any property damage.
The maximum combined loan amount that a business can receive is $2 million. This means that a business can qualify for both the physical disaster loan and the EIDL. And if that is the case, the total of those two loans cannot surpass $2 million.
Use of Funds
The funds that you receive from these loans should be used for working capital and normal expenses such as:
- The continuation of health care benefits
- Rent
- Utilities
- Fixed debt payments.
Interest Rate and Repayment Terms
The maximum interest rate on EIDL will be 4 percent per year. The term of these loans will not be more than 30 years. Recipient repayment terms will be determined by your ability to repay the loan.
Collateral Requirements
Like the physical disaster loan, for EIDL you are required to provide collateral for loans over $25,000. If your loan is $200,000 or less, you do not need to provide your primary residence as collateral. Instead, you can provide other assets that have equal quality and are valued equal to or greater than the loan amount.
Info for application
Like the physical disaster loans, in order to apply for EIDLs, you must first register with the Federal Emergency Management Agency (FEMA). You can call FEMA at 1-800-621-3362 or visit DisasterAssistance.gov to get your FEMA registration number.
In order to complete your SBA application, here’s all the information you’ll need to have
- Contact information for all applicants
- Social security numbers for all applicants
- FEMA registration number
- Deed or lease information
- Insurance information
- Financial information (e.g. income, account balances and monthly expenses)
- Employer Identification Number (EIN) for business applicants
How to Apply
You can either apply online for an EIDL or submit a paper loan application. The same paper application is used for both the Physical Disaster loans and the EIDL, you just check EIDL rather than physical damage. When you submit your loan application, the SBA will send an inspector to estimate the cost of your damage.
You must also submit a signed and dated IRS Form 4506-C. This form gives the IRS the permission to send your tax return information to the SBA. The deadline to apply for economic injury disaster loan is October 16th, 2023.
