The Small Business Administration provides homeowners with loans that help in rebuilding a business or home after a natural disaster. However, if the borrower goes into default, the SBA can foreclose. Read further to learn more about the SBA's disaster loans, along with their foreclosure and SBA Offer in Compromise process.
The Basics of the SBA Disaster Loan
The Small Business Administration offers fixed rate, low interest loans and a Tax Offset Program to fix homes, businesses and property destroyed or damaged in a federal disaster area. Loans may be used to replace or repair:
- Commercial or private real estate
- Personal dwellings
- Machinery and equipment
- Business inventory
Business owners, renters and homeowners are all eligible for SBA loans in most cases. The sections below list the most common types of disaster loans, along with the groups of borrowers most likely to benefit.
Personal Property and Home Loans
Homeowners can apply for a loan of up to $200,000 to restore a primary residence to the same condition in which it was before the disaster. Homeowners and renters may borrow $40,000 or less to replace or repair personal belongings such as clothing and furniture that are damaged or destroyed.
The SBA offers loans to business owners who incur financial losses during a natural disaster. These disaster loans can be used to replace or repair non-covered equipment that's lost during a storm, fire or earthquake.
Disaster Economic Injury Loans
Businesses can also qualify for loans to help pay necessary and recurring operating expenses until things are back to normal. If a business suffers economic losses because of a disaster, it can get a loan even if no damage occurs.
Foreclosure of SBA Loans
Because disaster help is given as a loan rather than a grant, the borrower must legally agree to a repayment plan. These loans are available directly from the agency or through participating lenders, and are serviced accordingly. For certain loans, borrowers must provide collateral such as a security interest in or a lien on the property. If the person goes into SBA loan default, the loan can be foreclosed in or out of the judicial setting after the borrower receives an SBA demand letter. A lawyer can help a borrower consider options to avoid an SBA loan foreclosure, such as bankruptcy or an SBA Offer in Compromise.