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SBA Disaster Loans are for Uninsured Losses

ATLANTA, Sept. 20 /PRNewswire/ -- Ohio disaster victims are reminded that SBA disaster loans are for losses not covered by insurance, grants, or other forms of disaster assistance, there can be no duplication of benefits. If a mortgage-holder on real property, business machinery and/or equipment has legal control of the insurance proceeds and requires that the proceeds be applied to reduce the lien balance, then those funds would not be deducted from the uncompensated physical loss.

If the applicant elects to apply the insurance proceeds to the reduction of an existing mortgage or if the applicant requests the lender to demand payment, then the insurance proceeds would be considered a duplication of benefit and must be deducted from the uncompensated physical loss.

Disaster victims should not wait to settle with their insurance companies before applying for disaster loan assistance. SBA encourages victims of the severe storms, flooding and tornadoes that occurred on August 20-28, 2007 to return their completed applications, even if they have not settled with their insurance company.

"Waiting to file an application could cause unnecessary delays in receiving disaster assistance, and could cause disaster survivors to miss the SBA application deadline," said Frank Skaggs, Director of SBA Field Operations Center East. "SBA's Disaster Loan Representatives are available at Disaster Recovery Centers located throughout the disaster area to answer questions and provide one-on-one assistance with completing the applications."

Disaster loans up to $200,000 are available to homeowners to repair or replace damaged or destroyed real estate. Homeowners and renters are eligible up to $40,000 to repair or replace damaged or destroyed personal property. Businesses of any size and private non-profit organizations may borrow up to $1.5 million to repair or replace damaged or destroyed real estate, machinery and equipment, inventory, and other business assets.

For small businesses only, SBA offers Economic Injury Disaster Loans (EIDLs) to help meet working capital needs caused by the disaster. EIDL assistance is available regardless of whether the business suffered any property damage.

Anyone who has not registered with FEMA can call the FEMA registration line at 1-800-621-FEMA (3362). Individuals with hearing or speech impairments should call (TTY) 1-800-462-7585. Disaster survivors can also register online at www.fema.gov.

Those unable to visit the Centers and have registered with FEMA may obtain an application by calling the SBA's Customer Service Center at 1-800-659-2955 (1-800-877-8339 for the hearing-impaired) Monday through Friday from 8 a.m. until 9 p.m. and Saturday from 9 a.m. to 5:30 p.m. EDT. Business loan applications can also be downloaded from the SBA website at www.sba.gov/services/disasterassistance. Completed applications should be returned to the Centers or mailed to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX. 76155.

The filing deadline to return applications for physical property damage is October 26, 2007. The deadline to return economic injury applications is May 27, 2008.

For more information about the SBA's Disaster Loan Programs, visit our website at www.sba.gov/services/disasterassistance.

Source: U.S. Small Business Administration

Web site: http://www.sba.gov/
http://www.sba.gov/services/disasterassistance

Applying for a Business Loan: Putting Your Best Foot Forward

by John Day

Remember the book called “Catch 22”? It is now commonplace to call a “Damned if you do, and damned if you don’t” situation a “Catch 22”. This is a predicament that many small business owners have found themselves in. Running short of cash, the owner goes to the bank to borrow money, only to find that they don’t qualify for a loan because they don’t have enough money. This is quite maddening to the business owner who laments, “If I had enough money, I wouldn’t be asking for the blankety-blank loan!”

Seems kind of stupid, but you have to understand what bankers are up against. Number one, they have to have some assurance that they are going to be repaid. They have to sell this loan to the “loan committee” of the bank, and they are not about to present a package that will make them look foolish. Furthermore, they have auditors who look very closely to make sure the loans were issued according to bank policies and procedures. If a loan officer has too many loans that “go south”, then his/her track record starts to affect his/her career.

This is why you find many loan officers who go strictly “by the book”. These people refuse to look at any extenuating circumstances that might indicate that you would be a “good risk” regardless. Unless you fit into their narrow criteria of “risk” you might as well forget it. It is best to find a bank manager or loan officer who has plenty of self-confidence, is familiar with how small businesses operate, and is willing to look at the big picture. They can sense whether a loan applicant is solid or shaky. This is the point at which you, the applicant, will want to put your best foot forward.

You may find that as long as you have substantial equity in a home, good credit, and adequate cash flow that you are a tasty morsel in the mouth of a loan officer. However, if you are short in any of these areas, you are going to have to overcome the banker’s natural skepticism.

First impressions are paramount. If you are not organized, you are dead meat. If you are asking to borrow money, then you must possess the skills necessary to pay the money back. These are skills, such as, the ability to think and plan ahead, and the discipline required to operate your business in a professional manner. This means having the know-how to gather information and organize it in such a way that you can make meaningful and timely decisions. Ask any banker and they will tell you of countless business customers that come in seeking a loan who don’t even know what a financial statement is. There are many other business customers who seek loans that do have a financial statement but haven’t a clue as to what it means. This does not bode well for first impressions.

Compare the individual who comes to the bank, nicely dressed, well groomed and possesses not only a financial statement that he/she understands, but has a plan as to how he/she will pay the loan back. This phenomenon is so rare that a banker will usually sit up and take notice.

If the reason you are short on cash and need a loan is because you are a poor manager who is in denial about your failing business, it will be obvious to the banker. Bankers are objective. They are not going to throw good money after bad. However, if you have a healthy business and you want to finance a new piece of equipment that will enhance your revenue earning capacity then your request will seem reasonable. Perhaps you need a line-of-credit to shore up your cash flow during less productive seasons, and you plan to pay back the line during productive seasons. These are the kind of stories that make good business sense to a banker.

To back up your story, you will need a Balance Sheet and Profit & Loss Statement that reflects the history of your business activity. Included should be an analysis of your business trends using some key business ratios. If the numbers look good, then go for the loan. Remember though, you can’t rely on the banker to recognize all the positive aspects of your business, therefore, you should provide a narrative of how your business works and why the requested funds for the business will help you make more money.

John W. Day, MBA is the author of two courses in accounting basics: Real Life Accounting for Non-Accountants (20-hr online) and The HEART of Accounting (4-hr PDF). Visit his website to download for FREE his 3 e-books pertaining to small business accounting and his monthly newsletter on accounting issues. Ask John questions directly on his Accounting for Non-Accountants blog .

John Day may be contacted at http://www.reallifeaccounting.com or jday@reallifeaccounting.com

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