SBA loans available to businesses and homeowners for post-hurricane recovery

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OCEAN CITY — Appearing before a standing-room only crowd at the Ocean City Community Association meeting Saturday, Jan. 26, Michael Flores, the public information officer for the U.S. Small Business Administration, said he would like to assist Ocean City residents as they try to heal in the aftermath of Hurricane Sandy.

“In times of disaster, the Small Business Administration sends me around the country to talk about the process,” he said.

The meeting featured a panel of city officials, experts and representatives of the Federal Emergency Management Agency to talk about the post-Sandy recovery process, something Flores said the SBA would be there for in the long-term.

Last week, Gov. Chris Christie announced that New Jersey would adopt the Federal Emergency Management Agency’s new advisory base flood elevation maps. Flores said this means that many homeowners will be forced to raise their homes to protect them against future damage should another storm like Sandy hit.

He said that whether you rent or own your own home or business, if you are located in a declared disaster area and are the victim of the disaster, you may be eligible for assistance from the SBA, he said.

There are four types of disaster loans available. Home disaster loans to homeowners are designed to repair or replace disaster-damaged real estate or personal property; renters are eligible for loans for personal property losses, including automobiles.

Business physical disaster loans are designed to repair or replace disaster-damaged property owned by the business, including real estate, inventories, supplies, machinery and equipment. Businesses of any size are included. Private, nonprofit organizations such as charities and churches are included.

Economic injury disaster loans provide working capital to help small businesses and nonprofits meet ordinary and necessary financial obligations that cannot be met because of the disaster.

Borrowers must show the ability to repay the loan and provide some type of collateral.

Those interested in an SBA loan must first register with FEMA, Flores explained.

“You may receive some initial assistance from the government, after that you most likely will pivot to the SBA for a loan,” he said. “I know many of you don’t want to add debt, but it is a way to rebuild your family and rebuild your business.

“The storm was devastating. It tore families apart and lives upside down,” he said.

SBA interest rates vary, starting as low as 1.68 percent.

“Most are pushed to 30 years,” Flores said of the length of the loan.

Homeowners are eligible for up to $200,000 to help them rebuild; renters are eligible for up to $40,000 to cover the loss of personal property. Businesses may borrow up to $2 million, in some cases.

“You can slice it any way you want it,” Flores said. “The SBA will help you with the gap. You may have received some funding from another source.”

The SBA loan becomes “other needs” assistance, he said.

By law, the interest rate depends on whether each applicant has “credit available elsewhere.” Those with assets and the means to borrow from other sources – credit available elsewhere – pay a higher interest rate.

Homeowners without CAE are eligible for a loan at 1.68 percent, homeowners with CAE are eligible for a loan at 3.375 percent.

For business loans, with no CAE, the interest rate is 4 percent; with CAE it’s 6 percent.

For a nonprofit with no CAE, the interest rate is 3 percent; with CAE, its 3.125 percent.

Economic injury loans for small businesses are available only to those with no CAE at 4 percent; nonprofits with no CAE are eligible at a 3 percent interest rate.

The law restricts those with CAE to a maximum seven year term for a loan.

Secondary homes, Flores said, are not eligible unless they have been used for business purposes, such as a rental investment property. Borrowers must have maintained a flood insurance policy.

If a loan application is approved, some may be eligible for a mitigation loan, additional funds to cover the cost of improvements that will protect property against future damage, such as elevating a home or placing a seawall or retaining wall on a property.  

Mitigation loans may not exceed 20 percent of the total disaster damage to real estate and/or household improvements, he said.

In some cases, the SBA can refinance all or part of prior mortgages for homeowners and businesses, Flores said.

SBA disaster loans may also be utilized to relocate, depending on whether a disaster victim is doing so voluntarily or involuntarily.

For more information, call the SBA Disaster Assistance Customer Service Center at 1-800-659-2955, email This e-mail address is being protected from spambots. You need JavaScript enabled to view it or see  www.sba.gov.

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