The people of the U.S. Virgin Islands continue to rebuild after the massive destruction caused by Hurricanes Irma and Maria over the past month. Many are still in need of financial assistance to recoup the losses they have suffered and make necessary repairs to their properties.

The large amounts of flooding and damage can be especially disastrous for small businesses in the territory, which often operate on razor-thin margins as it is. According to the Federal Emergency Management Agency (FEMA), approximately 40 percent of small businesses fail after a natural disaster simply because the costs of recovery are too great. The costs become even more prohibitive if a business does not have a separate flood insurance policy.

How do SBA loans work?

The U.S. Small Business Administration (SBA) has a variety of physical disaster loan options, along with some economic damage loans, available for small businesses. Both of these types of loans have caps of $2 million to repair or replace machinery, equipment, inventory, real estate and other business assets. The program already has been quite active due to the destruction of Hurricane Harvey in Texas, and it’s now an option being used by many people throughout the U.S. Virgin Islands and other territories in the region.

These loans can also be used by both homeowners and small business owners. Individual homeowners and renters can borrow up to $40,000 to replace damages to personal property and up to $200,000 to repair or replace damages to their primary residence. Personal property, for these purposes, is anything not considered real estate or a physical part of the actual structure of a residence. Loans may not be used to replace irreplaceable and extraordinarily expensive items, such as collections, antiques, recreational vehicles, boats and fashion items.

To qualify for the program, home and business owners must have sustained physical damage to their properties and be in an area where a disaster has been officially declared by the federal government.

All recipients must pay back SBA loans, although they usually come with low interest rates. The agency will only approve loans to applicants who have demonstrated a reasonable ability to repay the loan over time. The terms of each loan are established based on the borrower’s ability to repay.

Federal law gives the SBA some powerful tools to make these loans as affordable as possible to home and business owners, including low/fixed interest rates, long-term loans (of up to 30 years) and refinancing of existing real estate liens, in some circumstances. There are no upfront fees or early payment penalties for SBA loans.

For more information about obtaining a disaster loan from the SBA, work with an experienced attorney serving the U.S. Virgin Islands. Together, we will continue to recover from the enormous storms that have hit our region.

Tom Bolt is Managing Attorney of BoltNagi, a widely respected and well-established business and corporate law firm serving individuals and organizations throughout the U.S. Virgin Islands and is assisting in the Territory’s recovery as Chair of the Advisory Board for The Salvation Army and facilitating Disaster Legal Services.