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SBA Disaster Loan Credit Requirements: What Seals the Deal

Published July 2nd, 2020 by Cornerstone Capital Advisors

We like to think we're safe, but disaster can strike at any time. Right now we're facing a monumental disaster that's impacting the entire world. When there is so much uncertainty you need something that will make you feel financially safe.

That's where small business administration (SBA) disaster loans come into play. They can help keep your business safe during the harshest of times. 

Below we'll review SBA loans and what the SBA disaster loan credit requirements are. 

What Is an SBA Loan?

An SBA loan helps protect small businesses when some form of disaster strikes. This could be a natural disaster (e.g. hurricane) or a pandemic (e.g. COVID-19).

As part of the ongoing efforts against the current pandemic, there are two loans you can apply for: 

The standard SBA loan and the PPP apply for companies with 500 or fewer employees. The MSLP is for business with 10,000 or fewer employees.

SBA Disaster Loan Process

The SBA loan will only cover damage that your insurance provider will not. Contact your insurance provider before applying for an SBA loan. You can also contact FEMA to find out if there are any grants available to you.

Once you've explored those avenues, it's time to fill out the SBA Loan application online.

It's at this point you'll find out if you're in a declared disaster zone. You need to be in one of these areas to qualify. If you're in one of these locations but your business hasn't suffered from economic loss or damage you may not qualify. 

Make sure to gather all necessary documents before starting the loan process, such as:

  • Income tax information 
  • Business history
  • Financial statements (business and personal)
  • A list of your losses
  • Estimates for repairs/replacements 

SBA Disaster Loan Terms

A standard SBA loan has a maximum term of 30 years. The PPP loan has a 2-year term length.

Originally, the MSLP had a term length of 4 years, but as of June 8th, it has been increased to 5 years.

Credit Score and Repayment Ability 

To apply for an SBA loan you'll generally need a credit score between 620-640. Some lenders require a credit score of 700-800. 

However, if you have a lower credit score it doesn't mean you're automatically disqualified. 

Other factors will be considered when your application is being reviewed, such as: 

  • Rent history
  • Utilities
  • Insurance
  • Recent income

Furthermore, your credit score can impact your interest rates. The better your credit score the lower your interest rates will be.

To qualify for the loan you need to have some way to repay the loan. Looking at all your information will help the lender determine if you can repay it. 

There isn't one encompassing loan option. Your credit score and repayment ability can impact how much money you'll receive and how long your term length is.  

Available Collateral

For smaller loans, collateral will not be something you'll need to provide. If you're asking for a loan that exceeds $20,000, your lender will want some form of collateral to avoid financial risk. 

Do You Meet the SBA Disaster Loan Credit Requirements?

SBA disaster loan credit requirements are nothing to be afraid of. SBA lenders are willing to work with you and will take more than just your credit score in to account. Make sure you keep records of all your information to give yourself the best leg up possible. 

Reach out to us today if you have any questions or concerns. 


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