While it's impossible to predict when natural disasters will strike, it's possible to plan for them. From earthquakes to hurricanes and oil spills, extreme weather (as well as man-made catastrophes) can bring your business and livelihood to a halt. Fortunately, several forms of disaster relief from nonprofits can help you open your doors as soon as possible.

"When an area is declared a disaster area by the President, various forms of federal assistance, including the SBA disaster loan program, become available," says Carol Chastang, public affairs specialist for the U.S. Small Business Administration (SBA). "Disaster Recovery Centers are set up during the recovery phase to help local businesses and residents get the assistance they need to rebuild their lives. Business owners can get help with everything from filing the loan application to developing a post-disaster business continuity plan."

Types of Funds Available

The SBA offers long-term, low-interest disaster loans with terms of up to 30 years to repair or replace property damaged during the disaster. Business Physical Disaster Loans of up to $2 million are available to cover the cost of repairing or replacing damaged property, such as inventory, supplies, machinery and buildings.

In addition, the SBA lends preventative funds, up to 20 percent of the approved loan amount, says Chastang. For example, business owners may choose to construct a safe room or storm shelter.

An Economic Injury Disaster Loan (EIDL) is another type of disaster relief from nonprofits. This program offers loans for working capital to small businesses to help them cover normal operating expenses throughout the disaster recovery period, even if the business didn't suffer physical damage.

How to Apply

The SBA has an electronic loan application available on its website. After the disaster loan application has been submitted, the SBA will review the business owner's credit before conducting an on-site inspection to verify the losses. The loan officer will contact the business owner to discuss the loan decision and next steps, and the business owner will be advised of the decision in writing.

"The SBA's goal is to arrive at a decision on the application in two to three weeks," says Chastang.

The initial disbursement for physical damage disaster loans and EIDLs is $25,000, and a case manager will be assigned to work with the borrower to help the business meet all loan conditions and schedule subsequent allotments until the loan is fully disbursed.

A Word of Caution

Unfortunately, there are people who will prey on others during their time of need. Following Hurricane Sandy in 2012, Chastang heard reports of scam artists disguising themselves as representatives of federal agencies, marketing their services to help business owners fill out the SBA disaster loan applications. "These 'representatives' were charging fees," she says, which is something a legitimate federal agency wouldn't do.

Business owners should also be aware of phony building contractors or inspectors, says Chastang. "To verify the contractor's validity, you can ask for their contractor's license and then contact your state's licensing/regulatory agency to find out if the contractor is legitimate," she advises. "It's also a good idea to request references."

Tags: Emergency Planning Loans