Small Business Disaster Loan—What You Need To Know

Small Business Loan Request Letter Small Business Disaster Loan—What You Need To Know

Everything You Need To Know About a Small Business Disaster Loan

Many small businesses are economically impacted by natural disasters and cannot carry on due to insufficient funds. For this purpose, the government has introduced relief programs to help businesses recover and operate normally.

In this article, we will tell you all you need to know about a small business disaster loan and explain how you can apply for it. If you face difficulties in the application process, subscribe to DoNotPay and draft a loan request letter without breaking a sweat.

Small Business Loans in a Nutshell

Small businesses and startups often need financing solutions to keep their business running.


If you are a business owner and incapable of funding the business yourself, you can apply for a small business loan. A loan can help cover various business-related expenses, such as:

  • Machinery and equipment purchases
  • Business expansion
  • Business acquisition
  • Salaries, rent, and utilities

You can choose from a variety of small business loans, depending on what you need them for. If your business suffered great financial losses due to a natural disaster, you should consider applying for a small business disaster loan.

What Is a Small Business Disaster Loan?

The U.S. Small Business Administration (SBA) offers Economic Injury Disaster Loans (EIDL) to help businesses that have been affected by natural disasters cover their expenses.

EIDL Small Business Loan in Detail

Consider applying for an EIDL loan if your business has suffered damage due to a natural disaster, such as:

  • Flood
  • Wildfire
  • Hurricane
  • Earthquake

By applying for this loan, you ask for funding to:

  • Pay for daily expenses
  • Invest in working capital
  • Buy real estate, equipment, or machinery
  • Pay any business debt or overdue payment

Bear in mind that you cannot use the original EIDL to expand your business or pay for startup costs.

You can get a maximum of $2 million, depending on your budget and needs. Here are the basic loan terms:

Loan Terms and Conditions Details
Repayment 30 years
Interest rate 3.75% for businesses

2.75% for non-profit organizations

Deferred payments Two years
Prepayment penalty None
Fees Less than $25,000—none

More than $25,000—$100

Greater than $500,000—$100

Collateral Required for loans higher than $25,000
Personal guarantee Required for loans higher than $200,000

Who Is Eligible for a Disaster Loan?

Small business owners need to meet certain requirements to apply for the EIDL loan, such as:

  • Being located and running a business in the United States
  • Having been in business for at least two years
  • Having a credit score of at least 570
  • Providing documentation on the loss of working capital due to a disaster
  • Operating a business of fewer than 500 employees
  • Having a valid IRS-issued Tax Identification Number (TIN)

How To Apply for a Small Business Disaster Loan

You should follow these instructions to apply for a small business disaster loan:

  1. Confirm that you are eligible for the loan
  2. Complete the loan application form
  3. Sign up on the SBA website
  4. Complete all the steps to create your account
  5. Upload all your relevant documents
  6. Respond to the SBA’s requests regarding documentations

The SBA takes several weeks to process your application. If you have already received a loan from the SBA and do not have any outstanding payments, you can apply for an increase in funds using the SBA portal account.

Other Disaster Loan Options

The SBA offers three other small business disaster loans, as follows:

  1. Physical damage loans—These are available to homeowners and renters for the repair and maintenance of personal property and vehicles. You can also apply for this loan to repair a commercial property
  2. Mitigation assistance—The loans help reduce property damage by protecting your business from forecasted or potential disasters, such as floods or earthquakes
  3. COVID-19 Economic Injury Disaster Loan—The SBA has started offering the COVID-19 Economic Injury Disaster Loan to businesses that have been financially impacted by the pandemic

Other Types of Small Business Loans

If a disaster loan is not a suitable option for your business, here are some other options you can consider:

  1. Term loans
  2. Business lines of credit
  3. Equipment loans
  4. Microloans
  5. Real estate loans
  6. Working capital loans
  7. Short-term loans

You are required to submit the following documents along with your loan application:

  • Income statement
  • Cash flow statement
  • Business and income tax returns
  • Business incorporation documents
  • Personal and business bank statements
  • Loan request letter

Whether you want to file your loan application with a bank or any other financial institution, you need to present a convincing loan request letter to increase your chances of receiving a loan. DoNotPay can help you draft one without breaking a sweat!

DoNotPay Can Help You Create a Loan Request Letter Instantly

Not sure whether you can write a compelling loan request letter? Rely on DoNotPay and allow us to help you in a matter of minutes. All you have to do is follow these instructions:

  1. Open DoNotPay in your web browser
  2. Go to the Business Loan Request Letter tool
  3. Enter your business and loan details
  4. Upload the required documents

If you are having trouble finding a reliable online lender, DoNotPay’s Find Online Business Loan Lender feature can provide the best suggestions.

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