As wildfires continue to ravage Southern California, thousands of business owners, homeowners and renters face the daunting challenge of rebuild from the ashes. For a number of them, the road ahead will be all the more difficult because they did not have insurance, or even enough, to cover their losses. For them, the U.S. Small Business Administration is a possible lifeline.
The SBA, which offers emergency loans to businesses, homeowners, renters and nonprofits, is among the few relief options for those who are uninsured or underinsured. Uninsured residents can also apply disaster assistance through the Federal Emergency Management Agency.
This article is provided free of charge to help keep our community safe and supported during these devastating fires.
Current wildfires are ravaging a state that was already in the middle of a house insurance crisis. Thousands of owners have lost their insurance in recent years, with providers withdrawing from fire-prone areas and raising prices in the face of growing risk.
“For those who will not receive that insurance payout, it is available,” SBA Director Isabella Casillas Guzman said in an interview during a recent trip to fire zones. “The loans are meant to fill gaps, and it’s very broad. »
About a third of businesses have no insurance and three-quarters are underinsured, Guzman said.
“There will be residual effects throughout the community,” she said. “Insurance will not cover this disaster.”
Businesses, nonprofits, and small agricultural cooperatives can apply for an Economic Injury Loan or a Physical Injury Loan through the SBA. Homeowners are eligible for property damage loans. Economic damage loans are intended to help businesses meet ordinary financial demands, while physical damage loans provide funds for repairs and restoration. People can apply online and loans must be repaid within 30 years.
Renters can receive up to $100,000 in assistance, homeowners up to $500,000 and businesses up to $2 million, Guzman said. Homeowners and renters who cannot access credit elsewhere can qualify for loans with an interest rate of 2.5%. The SBA determines that an applicant has no credit available elsewhere if it does not have other funds to pay for disaster recovery and cannot borrow from nongovernmental sources.
Interest rates for homeowners and renters who access credit elsewhere are just over 5%. Business loans can come with interest rates of 4% or 8%, depending on whether the business has other credit options.
An applicant must demonstrate that they are able to repay their loan and have a credit history acceptable to the SBA in order to be approved. The loans became available following President Biden’s declaration of a major disaster in California.
“We have already received hundreds of applications from individuals and businesses interested in exploring additional support,” Guzman said. “We know that economic disruptions may not be limited to the footprint of evacuation zones or power outages. »
People who don’t have insurance or whose insurance doesn’t cover all of their losses are eligible for the loans, Guzman said. Although many will use the funds to start from scratch after losing their assets to the fires, businesses still standing can also apply for assistance to cover lost revenue.
Guzman was unable to estimate the total value of loans the agency plans to offer in California, but said the organization is on solid financial footing after temporarily short of funds in October.
“The funding has been replenished by Congress and we hope to be able to coordinate closely with Congress,” Guzman said. “We are fully funded and in a good position to provide support.”