By Joyce M. Rosenberg, AP Business Writer
NEW YORK (AP) — Thousands of small business owners across the South are turning to the federal government for financial help following the oil spill in the Gulf and last month's devastating tornadoes and floods.
The Small Business Administration's disaster loans are aimed at helping companies recover from uninsured losses suffered during natural or man-made disasters. They also help companies cover their expenses when disaster prevents them from operating.
Companies of any size can get disaster loans. There are two types: One covers physical damage from a disaster, while the second, called an economic injury disaster loan, is available to companies that have suffered substantial economic harm from a disaster.
The loans carry lower interest rates than a borrower would have to pay for a traditional loan. The rate for businesses unable to get credit elsewhere was 4% as of April 12. Those that could get credit elsewhere would pay 6%. The maximum term for a loan is 30 years.
Owners can learn about SBA disaster loans at the agency's Web site. Here is a quick guide to the loans:
PHYSICAL DISASTER LOANS
These loans provide money to replace or repair damaged property owned by a business that is located within a federally declared disaster area. So businesses in Alabama devastated by tornadoes or those in Tennessee that suffered damage during last month's storms are eligible.
Damaged property includes buildings, equipment, vehicles, inventory and supplies. The loans are for companies that have no insurance or whose losses exceed their insurance coverage. The loans are limited to the amount of damage, up to a maximum of $2 million.
The SBA may also lend a company additional money to cover the costs of what's known as disaster mitigation improvements. Those are changes such as the installation of sump pumps that are designed to limit damage in the future.
A company that is located in an area known as a special flood hazard area can be denied a loan if it was legally required to obtain flood insurance and did not do so. Companies can be required to have flood insurance under the terms of a prior SBA disaster loan or as a condition for taking out a mortgage.