Managing An SBA Disaster Loan

Receiving an SBA disaster loan can be a great step towards rebuilding after a disaster. That said, you should always be cautious and make sure that you follow all the loan terms to avoid having trouble later. We’ve assembled some quick tips below that may help you out.

  • You can find the terms of your loan in the Loan Authorization and Agreement. This document will have your approved amount, interest rate, monthly payment, maturity date, collateral, and insurance requirements.

  • Save your borrower’s copies and keep them in a safe place. They have important information about your loan. They should be in the loan packet the SBA gives you.

  • Save receipts from any purchases you make with your loan for 3 years after your loan has been fully disbursed. You will need to show how you spent 80% of your loan.

  • Only spend your loan as you are authorized to. The SBA will make this clear in the “Use of Proceeds” section in the Loan Authorization and Agreement. If you don’t, you could face a default of your loan, be responsible for paying 150% of the original amount, and even be criminally charged.

  • Talk with your case manager if you need to alter your loan. They can help you request a Loan Modification if you need to change how you spend loan funds. You can also request an increase or decrease of your loan by writing to your case manager within two years of your loan approval. You might need to provide documents, such as repair estimates.

  • SBA disaster loans can’t be used to improve your home. They can only help you restore it to its condition before the disaster. If you want more funds for improvements, the SBA might be able to help you with Mitigation Proceeds. You can check with your case manager about this.

  • Your loan may come with insurance requirements. If so, you need to maintain the required insurance. If you don’t, you may stop receiving disbursements of your loan, get a default on your loan, and be prevented from getting disaster assistance in the future. You can provide the SBA with a copy of your Insurance Declarations page as proof.

    • If you don’t have insurance, you will need to purchase the required insurance before the SBA will disburse loan funds greater than $25,000. The insurance coverage needs to be equal to 80% of the insurable value of your property.

    • If you get a disaster loan and the SBA takes a mortgage on your property, the SBA will need to be named as the Mortgagee or Loss Payee on your required insurance.