Own A California Business Impacted By Wildfires? Federal Disaster Relief Funds Are Available

Businesses physically impacted by the wildfires in nine northern California counties declared to be major disaster areas are now able to receive low-interest federal loans via the Small Business Administration (SBA). Support for businesses in 17 adjacent counties is also available — those businesses may apply for economic injury loans.

These financial aid tools were put in place after President Trump approved assistance for hurt individuals and businesses in the Lake, Napa, San Mateo, Santa Cruz, Solano, Sonoma, and Yolo counties on August 22. Monterey County was later added to the list. Update, September 14: The Federal Emergency Management Agency (FEMA) added Butte county to the list on September 13.

Businesses within the eight impacted counties are eligible to receive federal funding of up to $2 million, per the SBA’s fact sheet [PDF]. Should a business receive funds through the SBA, it can use the cash to “repair or replace disaster-damaged property.” The SBA defines physical damage as including real estate, inventories, supplies, machinery, and equipment.

Any sized business may apply to receive funding through the federal physical disaster program. Additionally, private, non-profit organizations (which include, but are not limited to charities, churches, and private universities) are also eligible.

Because the SBA is doling out loans to the impacted area (as opposed to grants), businesses will need to repay any funds received with interest. However, the interest rate is quite low: 3% for businesses with no credit elsewhere and 6% for businesses that do have other lines of credit. Non-profits will get an even lower interest rate of 2.75%.

Loan terms can reach up to a maximum of 30 years for businesses without additional credit and seven years for businesses with other credit sources. The exact term length is based on each borrower’s ability to repay their loan.

The 17 contiguous counties also eligible for funding include Alameda, Colusa, Contra Costa, Fresno, Glenn, Kings, Marin, Mendocino, Sacramento, San Benito, San Francisco, San Luis Obispo, Santa Clara, and Sutter. Update, September 14: FEMA added the Plumas and Yuba counties to the list on September 13. Tehama county has also been added.

Businesses within those counties can apply for a loan of up to $2 million through the SBA’s Economic Injury Disaster Loan (EIDL) program. Unlike the loans available for businesses located in the nine disaster counties, EIDL loans can’t be used for property damage; instead, the funds must be used to fulfill “necessary financial obligations that cannot be met as a direct result of the disaster.”

EIDL loans have similar interest rates to the physical disaster loans: 3% for businesses and 2.75% for non-profits.

How To Apply For California Wildfire Disaster Relief Loans

California businesses interested in applying for federal relief may do so via the SBA website. Applications for physical disaster relief loans can also be downloaded and mailed to the SBA:

To apply for a loan through the SBA, businesses need to:

• Create an account within the SBA’s disaster loan assistance portal (this process requires the applicant’s Social Security Number).
• Answer several basic questions to determine eligibility, loan type, and reason for aid.
• Fill out the disaster relief application (this requires such information as damaged property addresses, estimated loss, and insurance information).
• Fill out an IRS form to request the business’ tax transcript (the SBA will use this transcript to determine the applicant’s repayment ability).

Depending on the type of business, applicants may also be required to fill out additional forms.

The application window for physical disaster loans closes on October 21, 2020. The window for EIDL applicants closes on May 24, 2021.

Businesses will need to meet certain credit requirements set by the SBA in order to be eligible for a loan through either program. Businesses must:

• Have an acceptable credit history as deemed by the SBA
• Show the ability to repay all loans
• Provide collateral on loans above $25,000 (collateral may include real estate)

Other Avenues For Financial Relief

Because the recession generated by COVID-19 has created its own, ongoing economic damage, businesses impacted by the California wildfires may have difficulty finding other funding streams. However, there are a couple of places worth looking.

You may find support through the California Labor Federation’s page dedicated to wildfire disaster relief. The California Community Fund also operates a page for wildfire relief grants.

Additionally, you (or your employees) may qualify for tax relief. Check out the IRS’s website for more information.

For more general guidance on the SBA’s disaster relief program, visit Merchant Maverick’s in-depth article on the topic.