If you have ever considered starting a business, then you might want to think again. Not all businesses succeed, but many fail within the first two years. This failure can be attributed to a variety of factors, including poor business decisions, poor financial strategies, limited financial resources, supportive lending practices by lenders, and the inability to secure additional funding from traditional banks. There are many other ways a business owner can fail, but if they fail to adequately prepare for unexpected disasters, they run the risk of losing their most valuable asset – their customers.
An SBA disaster Loan is provided immediately following a declared disaster. The SBA issues these long-term, low-interest loans to private nonprofits, small businesses, homeowners and minorities. Typically, business owners will receive up to $2.5 million to repair or restore non-operational assets, like: damaged property, replaced property, furniture, supplies and machinery.
These loans are intended to provide the support that private nonprofits and small businesses need in order to continue operating and helping the community. Private nonprofits and small businesses often cannot obtain traditional loans from banks and other traditional institutions due to a lack of collateral, a high level of risk, and due to the difficulty of securing credit from these institutions.
When an eidl second round SBA disaster Loan is obtained, lenders will require various financial documents in order to determine whether or not you qualify for this emergency financing program. Business owners will typically be required to submit a completed grant proposal, a completed business plan, and documentation detailing how the funds will be spent.
Private nonprofits and small businesses may also be required to submit a property tax appraisal, an inspection report and/or a declaration of hardship. These types of loans are usually referred to as “rainy day” loans, because they are generally made with an anticipated interest rate of at least fifteen percent.
Because these loans are unsecured loans, business owners are not required to provide collateral or extensive financial documentation in order to obtain this funding. In many cases, companies that are in distress may not have available cash on hand to meet the costs of paying back an emergency loan. As a result, lenders offering SBA disaster loans are not concerned with a business owner’s personal credit, bank accounts or other collateral.
One of the biggest benefits of obtaining an SBA loan to cover expenses associated with a disaster is the fact that most lenders will work closely with a company or business in order to ensure that payments are made and that the loan is repaid quickly.
Most private foundations and federal agencies offer SBA disaster loans. They are particularly popular among small businesses, because they can be offered to business owners with a lower cost than many similar financing options. Because most private foundation grants and programs do not require private borrowers to repay their loans, they can often be obtained at a significantly lower cost when compared to other loan options available to borrowers. For example, most private foundations will not require applicants to pay down the entire principal balance on their grant in order to receive funding, unlike most federal loan programs.
