SBA provides emergency loans to homeowners
I first saw David Lewis scroll across my Facebook feed Aug. 27, kayaking a mutual friend’s kids over to her in the middle of Hurricane Harvey, reuniting mother and children during a lull in the rains.
Like many in his Houston neighborhood of Meyerland, Lewis’ own home was also flooded and he spent the next week ripping out the flooring, countertops, appliances and the bottom 4 feet of drywall in his house, dumping them to the curb. He’s managed to repair one of his three flooded cars.
As with many South Texas families with lives uprooted by one of the worst storms to ever hit the continental U.S., there’s a lot involved in the Lewis family trying to put their lives back on track. He and his wife and three children currently live behind another friend’s house, in an office space converted to a temporary apartment. To regain normalcy, time is of the essence. So is money.
Lewis considers himself to be very lucky in that he had flood insurance, he still has a job, and his employer has been very flexible. Still, they need a lot, and Lewis is applying for a Small Business Association emergency loan.
During normal times, the SBA supports business lending, working to subsidize the risks that private banks take when loaning to business customers.
These, obviously, are not normal times in post-Harvey Texas. Right now, the SBA is in a huge rush to lend as quickly as possible to not just businesses, but homeowners too, for both housing and personal property losses.
Primary lender
Also, the SBA is acting directly as a lender, not working through private banks. This brings some extraordinary advantages for people like Lewis affected by the storm, such as speed, lending criteria, funds availability and extremely attractive terms for those who qualify.
Gary Colton, spokesman for the SBA Office of Disaster Assistance, deployed to Houston on Aug. 31. Colton works for the team within the SBA that specifically responds to disasters. That’s when the SBA transforms itself from the mild-mannered Clark Kent-looking department of business lending into the federal government’s super-powered primary lender to disaster area businesses and households.
Colton says “we are the primary source of funds for recovery” and that they are looking for people to apply who say “I need help to recover.”
People like David Lewis.
Lewis is eager to rebuild his house. But there’s no point if the reconstruction doesn’t raise his house by about 6 feet. He luckily has flood insurance and might qualify for some aid to lift his house, but the cost is daunting, which he estimates in the hundreds of thousands of dollars.
He’s in the process of applying for an SBA loan for just that purpose. The faster he qualifies for a loan, the faster he can return himself and his family to relative normalcy.
Colton says approval takes about four weeks.
The SBA Office of Disaster Assistance has already approved $823 million in total loans, a number expected to rise dramatically in the weeks and months to come.
Deadline approaching
The deadline for businesses and households to apply for emergency SBA loans to repair property damage is Oct. 24. Businesses with working capital needs — distinct from physical property damage — have until May 2018 to apply.
Lewis said the SBA requires the same kind of information needed to apply for a mortgage, a process complicated by the flooding of his personal records. In responding to the specific needs of this crisis, the SBA doesn’t want people to hesitate to apply for loans, believing they can’t qualify.
In fact, the biggest obstacle the SBA faces, according to Colton, “is getting people to apply.” People can apply online or in person at any of the 40 FEMA locations in South Texas.
“People can go into any disaster recover center. The main emphasis is to apply. Don’t not take advantage because you don’t think you’ll get the loan,” Colton said.
For people and businesses who can’t get traditional credit, the SBA’s emergency lending terms are better than anything available from a traditional bank. Individuals can borrow up to $200,000 to repair or rebuild a home, plus $40,000 for personal property including cars, with a loan repayment plan as long as 30 years, at an interest rate of 1.75 percent.
Businesses can borrow up to $2 million for a combination of property damage and loss of cash flow as a result of the disaster, at an attractive 3.3 percent rate. Qualifying nonprofits can borrow at 2.5 percent.
The SBA also makes loans for relatively welloff borrowers who could qualify for credit elsewhere. In their cases the interest rate is closer to a market rate, 6.6 percent for businesses, 2.5 percent for nonprofits, and 3.5 percent for households.
Lend as much as possible
Finally, unlike a traditional bank, the SBA doesn’t really have a limit on how much it can lend to this situation. They’re goal is to lend as much as possible in the shortest amount of time possible to get the region on the road to recovery.
For anybody in affected areas seeking to rebuild their home or business, Colton wants them to call 800-659-2955 to ask the SBA about their emergency loan program or go online to www.sba.gov/ disaster-assistance.