In the coming weeks tens of thousands of businesses and homeowners will begin the process of trying to rebuild from the damage left in Hurricane Harvey’s wake. Properties throughout much of Texas have been completely destroyed. Days after Harvey’s devastating landfall, record-setting flooding remains throughout parts of Texas. The full extent of the storm’s damage has yet to be accurately surveyed. As the flood waters being to recede, Texans will begin returning to their homes and businesses. Months if not years of rebuilding lie ahead for the residents of the storm-ravaged Gulf Coast.
Estimates Of Damage Vary
Initial estimates of the potential damage inflicted by Harvey vary. Experts suggests the hurricane may eventually cost the region’s businesses between $30 and $100 billion. The storm may also result in another $30 billion worth of damage to homeowners.
FEMA’s Role In Disaster Recovery
The amount of money required to rebuild from such extensive destruction almost always requires homeowners to apply for a loan. The Federal Emergency Management Agency concentrates on short term assistance in emergency situations. FEMA primarily helps disaster victims pay for individual expenses such as temporary housing, immediate home repair, and medical expenses. FEMA explicitly does not provide disaster recovery assistance to businesses.
The SBA’s Little-Known Roll In Getting The US Back On Its Feet After A Disaster
The Small Business Administration’s primary mission is to bolster the US economy by helping small businesses get started and grow. But the agency has taken on an increasingly important role in channeling economic recovery funds to communities impacted by natural disasters. The SBA’s Office of Disaster Assistance has become the federal government’s primary vehicle for getting rebuilding capital into the hands of homeowners, nonprofit organizations, and small businesses. FEMA responds to the immediate needs of individuals in disaster response situations and the SBA provides the long term financing that businesses and homeowners need to rebuild.
Homeowners and Businesses Have Trouble Obtaining Financing After A Natural Disaster
Homeowners and businesses recovering from disasters traditionally have difficulty applying for traditional loans. Those impacted by a natural disaster frequently do not have the documentation traditional lenders require as part of the underwriting process. In the midst of a disaster, home and business owners often do not have access to computers, fax machines, and email making it difficult to communicate with lenders about the details of a loan. The SBA streamlines the steps demanded of those impacted by a storm such as Harvey who are applying for a loan. SBA representatives assist applicants in person at FEMA recovery centers.
Homeowners and Renters Should Look At The SBA’s Disaster Recovery Loan Offerings
SBA disaster recovery loans are not limited to businesses and nonprofit organizations. Homeowners and renters are also eligible to apply. Renters and homeowners can borrow up to $40,000 to repair or replace belongings destroyed by Hurricane Harvey. Homeowners have the option of applying for up to $200,000 to fund repairs of their primary place of residence. Under certain circumstances homeowners may qualify for a business loan to repair damage to their rental properties.
The SBA Has A Number of Loans Available To Assist Small Businesses With Disaster Recovery
Small businesses can request loans of up to $2 million to offset losses from economic and physical damage. The SBA can approve loans of up to $2 million for private nonprofit organizations, small agricultural cooperatives, and small aquaculture concerns that have suffered business-related economic damages. All businesses are eligible for loans of up to $2 million for physical damages caused by the storm.
The SBA Makes Eligibility And Interest Rate Decisions
The SBA determines eligibility and interest rates based on the financial characteristics of individual applicants. SBA loans come with low interest rates from 1.75 percent to 3.75 percent.
SBA Loans Are Not The Answer For Everyone
In spite of the attractive terms, some impacted by Hurricane Harvey may not be inclined to take the SBA up on the offer of a low-interest loan. The SBA is offering loans, not grants, and the money must be repaid. Businesses face an extended period without steady customers given the extent of the devastation left by Harvey. Uncertainty exists about when local infrastructure will be sufficiently repaired for local residents to return home.
Not Everyone Can Afford A Loan
Homeowners with mortgages might not be able to afford to rebuild. This has the potential to be a particularly serious issue for Harvey victims, over 40 percent of whom did not have flood insurance. The cost of repaying the loan in addition to the mortgage note may prove prohibitive for some homeowners. Retirees living on a limited income face a similar dilemma even if they no longer have a mortgage. For those who do not have sufficient income, a loan is simply not a practical answer.