U.S. Small Business Administration Publication DA‑1 (8/96 edition)

 

 

               DISASTER ASSISTANCE

    LOANS FOR HOMES & PERSONAL PROPERTY

 

 

 

If you are the victim of a disaster, you may be eligible

for financial assistance from the U.S. Small Business

Administration ‑ even if you don't own a business. That's

right, as a homeowner, renter and/or personal‑property

owner, you may apply to the SBA for a loan to help you

recover from a disaster.

 

This brochure describes the type of assistance available and

answers the most frequently asked questions about the SBA's

disaster assistance program for individuals. Where it is

practical, assistance with completing the application will

be available.

 

ASSISTANCE AVAILABLE

 

As an individual, there is one basic loan, with two

purposes, available to you:

 

Personal Property Loan: This loan can provide a homeowner

or renter with up to $40,000 to help repair or replace

personal property, such as clothing, furniture,

automobiles, etc., lost in the disaster. As a rule of thumb,

personal property is anything that is not considered real

estate or a part of the actual structure. This loan may not

be used to replace extraordinarily expensive or irreplaceable

items, such as antiques, collections, pleasure boats,

recreational vehicles, fur coats, etc.

Real Property Loan: Homeowners may apply for a loan of up

to $200,000 to repair or restore their primary home to

its pre‑disaster condition. The loan may not be used to

upgrade the home or make additions to it. If, however, city

or county building codes require structural improvements,

the loan may be used to meet these requirements. Also, loans

may be increased by as much as 20 percent to protect the

damaged real property from possible future disasters of the

same kind.

 

Note: A renter may apply only for a personal property loan.

 

Insurance Proceeds: If you have insurance coverage on

your personal property/home, the amount you will receive

from the insurance company will be deducted from the

total damage to your property in order to determine the

amount for which you are eligible to apply to the SBA.

 

If you are required to apply insurance proceeds against

an outstanding mortgage, the amount applied can be included

in your disaster loan. If, however, you voluntarily apply

insurance proceeds against an outstanding mortgage, the

amount applied cannot be included in your disaster loan.

 

If you have not made a settlement or are having trouble

reaching an agreement with your insurance company, you

may apply for a loan in the full amount of your damages

and assign any insurance proceeds to be received to the

SBA.

 

Interest Rates on Loans: The law requires a test of your

ability to obtain funds elsewhere in order to determine

the rate of interest which will be charged on your loan.

This credit‑elsewhere test also applies to applicants

for both personal property and real property loans.

 

Applicants Determined Able to Obtain Credit Elsewhere:

 

The interest rate to be charged is based on the cost of

money to the United States government, but will not be

more than 8 percent per year.

 

Applicants Determined Unable to Obtain Credit Elsewhere:

The interest rate to be charged will be half of the interest

rate charged to applicants determined to be able to obtain

credit elsewhere, but will not be more than 4 percent per

year.

 

Term of Loan: The maximum maturity, or repayment term of

an SBA loan, is set at 30 years. However, the SBA will

determine repayment terms on a case‑by‑case basis according

to your ability to repay.

 

 

FREQUENTLY ASKED QUESTIONS ABOUT SBA LOANS

 

Q. How much can I borrow?

 

A. The amount of money that the SBA will lend to you will

be based upon the actual cost of repairing or replacing

your home and/or personal property, minus any insurance

settlements or other reimbursements or grants. The total

loan amount is subject to the limits set out above.

 

Q. Must I use my own money or try to borrow from a bank

before coming to the SBA?

 

A. No.

 

Q. I already have a mortgage on my home. I can't afford

a disaster loan plus my current mortgage payment. Can the

SBA refinance my mortgage?

 

A. In certain cases, yes. To be eligible for mortgage

refinancing, SBA must determine that (a) you are unable to

obtain credit elsewhere; (b) your property has been de‑

stroyed or substantially damaged, and the property will be

repaired or replaced; and (c) the amount to be refinanced

will not exceed the amount of the real estate damage. An

SBA disaster loan officer can provide you with more de‑

tailed information on your specific situation.

 

Q. What information do I need to submit for a home and/or

personal property loan?

 

A. The necessary information is specified in the loan

application. In all cases, it includes an itemized list

of personal property losses with repair or replacement

costs of each item. It also includes permission for the

IRS to give the SBA information from you last two years'

federal income tax returns. If you have pictures of the

damaged property, you can include them as well.

 

 

Q. Will the SBA check the losses I claim?

 

A. Yes. Once you have returned your loan application, an

SBA loss verifier will visit you to determine the extent

of the damage and the reasonableness of the loan request.

 

 

Q. How soon will I know if I qualify for a loan?

 

A. That depends on how soon you file a complete SBA loan

application. The SBA disaster relief program is not an

immediate, emergency relief program such as Red Cross

assistance, temporary housing assistance, etc. It is a

loan program to help you in your long‑term rebuilding

and repairing. To make a loan, we have to know the

cost of repairing the damage, be satisfied that you can

repay the loan, and take reasonable safeguards to help

make sure the loan is repaid. The SBA loan application

asks for the information we need. The faster you can

return it to us, with all the needed information, the

faster we can work on it. We try to make a decision on

each complete application within seven to 21 days. Appli‑

cations filed early can be completed in a much shorter

time. We process applications in the order received, so

it is in your interest to file early. Be sure your appli‑

cation is complete; missing information is the biggest

cause of delay.

 

Q. How soon can I expect the money?

 

A. Loans over $10,000 have to be secured. We won't

decline a loan just because you do not have enough

collateral, but we do ask for whatever collateral is

available. This means that after a loan is approved

there are other steps you must take. Usually, the

security consists of a first or second mortgage on the

damaged real estate. After we approve the loan, we

will tell you what documents are needed to close the

loan. You return the loan closing documents to us, we

can order the checks. You will receive the money in

installments, as you need it to repair or replace the

damage.

 

Q. Should I wait for my insurance settlement before I

apply to the SBA?

 

A. No. If you do not know how much of your loss will be

covered by insurance or other sources, the SBA will con‑

sider making a loan for the full amount of the loss, up

to our loan limits, provided that you assign the insurance

check to the SBA to reduce the amount of the loan.

 

Q. I would like to get a contractor's estimate for the

cost of repairing damage to my home, but I'm having

trouble finding one. Should I hold up my application

until I get the estimate?

 

A. No, you might miss the deadline for filing your appli‑

cation while waiting for a contractor's estimate. If you

have an estimate, include it. The SBA will verify any

damage estimates listed on your loan application. Also,

the sooner you file a completed application, the sooner

the SBA can process it.

 

Q. If I receive a disaster loan, may I spend the money

any way I want?

 

A. No. The disaster loan is intended to help you return

your property to the same condition it was in before the

disaster. Your loan will be made for specific and

designated purposes. Remember that the penalty for

misusing disaster funds is immediate repayment of one and

a half times the original amount of the loan. The SBA

requires that you obtain receipts and maintain good

records of all loan expenditures as you restore your

damaged property and that you keep these receipts and

records for three years.

 

Q. If my home is completely destroyed, can the SBA lend me

money to relocate my home somewhere else?

 

A. If you are unable to obtain a building permit to

rebuild your home or replace it at its original site, the

cost of relocating your home might be included in the

loan amount. If, however, you decide to relocate your home

without being required to, an SBA loan can be obtained

only for the exact amount of the damage. SBA can not make

loans involving some relocations. An SBA disaster loan

office can provide you with more detailed information on

your specific situation.

 

Q. I am a farmer. My home was damaged, and so were my

barns, fences, and some of my crops. Am I eligible to

apply for SBA assistance?

 

A. You may apply to the SBA for a loan to cover the damage

to your home and its contents only. But it may be in your

interest to seek assistance first from the Department of

Agriculture for all your damage.

 

Q. Are secondary homes or vacation homes eligible for

loans?

 

A. No, not as homes. They may be eligible for business

disaster loans under certain conditions.

 

Q. Are there any other limitations?

 

A. Yes. Generally, loans will not be made for damage to

personal pleasure boats, planes, recreational vehicles,

antiques, collections, etc. Also, amounts for

landscaping, family swimming pools, etc. are limited.

 

Q. Is there a minimum monthly payment, and when would the

first payment be due?

 

A. The SBA does not have a minimum monthly payment. Pay‑

ments vary depending upon income and expenses, size of

family and other circumstances that may affect your re‑

payment ability. Generally, the first payment is not due

until five months after the date of the loan.

 

Q. I had to remove debris from my property after the

disaster. Can this expense be included in my loan

application?

 

A. Yes, but your own labor and that of family members

cannot be included. Amounts paid to others and any

equipment rental can be listed as part of repairs to real

estate. Remember that the maximum loan limit on real

estate damage is $200,000, and debris removal is

included in the limit.

 

Q. May people over the age of 65 apply for help from the SBA?

 

A. Yes. loans are made without regard to age.

 

Q. I've heard that SBA loan applications are complicated

and hard to complete. It this true?

 

A. No. The application form asks you the same information

that any bank would request before lending you money. If

you need help, SBA disaster personnel are available to ex‑

plain the forms and give you assistance at no charge. You

may use the services of an accountant or attorney if you

wish, but be sure they are reliable and that their fees

are reasonable. If you choose to use an attorney or an ac‑

countant, you must report their fees on your SBA loan ap‑

plication form.

 

Q. Are damages to cars and mobile homes eligible?

 

A. Generally, yes. The loan would be only for uninsured

losses.

 

Q. Do I need flood insurance to get a loan?

 

A. If you are in a special flood hazard area, you must

have flood insurance before we can disburse a loan. The

amount of insurance required is the insurable value of

the property in the special flood hazard area but not to

exceed the maximum flood insurance available under the

National Flood Insurance Act.

 

 

For More Information

 

The SBA delivers loans through four Disaster Area Offices

located in Niagara Falls, N.Y.; Atlanta, Ga; Ft. Worth,

Tx; and Sacramento, Calif. When a disaster occurs, infor‑

mation on SBA assistance is available through a toll‑free

number published locally.

 

To access the agency's electronic public information services,

you may call the following:

 

SBA OnLine: electronic bulletin board ‑ modem and computer

required

(800) 697‑4636 (limited access)

(900) 463‑4636 (full access)

(202) 401‑9600 (D.C. metro area)

Internet: using uniform resource locators (URLs)

SBA Home Page: http://www.sba.gov

SBA gopher: gopher://gopher.sba.gov

File transfer protocol: ftp://ftp.sba.gov

Telnet: telnet://sbaonline.sba.gov

 

DA‑1 (8/96)