Was Your Application for an SBA Disaster Loan Denied? Here Are Your Next Steps

Here is your 7-step guide to moving forward from having your application for an SBA Disaster Loan denied.
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Denied An SBA Disaster Loan? Here Are Your Next Steps

So, you’ve taken the necessary steps to apply for an SBA Disaster Loan, only to have your application denied.  The SBA Disaster Loan program exists so that business owners recovering from physical or economic disaster can access low-cost capital.

Nonetheless, the program still leaves many requests for an SBA Disaster Loan denied for various reasons. If you’ve had your application for an SBA Disaster Loan denied, it’s hard to know where to go from there.

Recovering from a declared disaster is already hard enough, and being denied an SBA Disaster Loan can make it that much more trying. To help ease the stress of locating financial assistance for your recovery, we’ve compiled a guide to next steps if your application for an SBA Disaster Loan was declined.

Apply for Disaster Loan Alternatives

A Game Plan for Bouncing Back from a Denied SBA Disaster Loan Application

  1. Find out if appealing SBA Disaster Loan denial is an option for you.
  2. See if a FEMA grant funding increase is possible due to your SBA Disaster Loan denial.
  3. Choose another source of disaster assistance funding.
  4. Triple check this lender’s requirements.
  5. Ready the required paperwork.
  6. Apply for disaster assistance funding.
  7. Rebuild and recover.

First, Can You Appeal Your Denied SBA Disaster Loan Application?

If your application for an SBA Disaster Loan was denied, then you might be able to appeal this decision. If you think you’ve been wrongly declined for.

Why Was Your SBA Disaster Loan Denied?

Whether or not appealing SBA Disaster Loan denial will be worthwhile will depend on a variety of factors, but the main one will be why your SBA Disaster Loan application was denied in the first place.

A few reasons for being denied SBA Disaster Loan funding will reside in a bit of a grey area, so successful appeals of denied SBA Disaster Loan applications aren’t unheard of.

Let’s break down the most common reasons leaving applications for SBA Disaster Loans declined, and whether or not they merit an attempt to appeal:

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Inability to repay

For instance, one of the main reasons for having an application for a SBA Disaster Loan denied is the “Inability to repay.” Sounds pretty vague, right? Well, that’s because it is. Determining whether or not you demonstrate an ability to repay an SBA Disaster Loan is pretty subjective. And, even more, the SBA cannot consider any medical debt you have in making its decision for whether or not you qualify for an SBA Disaster Loan. If you think you’ve been denied for an SBA Disaster Loan on the grounds of “inability to repay” due to medical debt, then you should consider appealing.

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Credit history

Another reason for SBA Disaster Loan denial is your credit history. If you have limited or challenge credit history, then you’re likely going to have your application for an SBA Disaster Loan denied. That said, that the SBA can’t deny you due to medical debts will also apply to this credential. If you’re working with bad or average credit because of medical debts you carry, then you might be able to successfully appeal your denied SBA Disaster Loan application.

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No Collateral to Offer

One tough-to-appeal reason for denial? A lack of collateral to offer. If you apply for an SBA Disaster Loan of more than $25,000, then you’ll need to provide collateral to secure it. Of course, if your property is destroyed in a disaster, this will likely feel like an unfair conundrum. Unfortunately, there’s not much you can do to work around this collateral requirement for a larger SBA Disaster Loan. That said, you might be able to access FEMA grants if you’re denied an SBA Disaster Loan, so skip ahead to our section on using your SBA Disaster Loan denial as a door to federal grants for recovery.

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Steps Towards Appealing SBA Disaster Loan Denial

If you’ve decided that an attempt to appeal your SBA Disaster Loan decline, then you’ll need to submit your request for reconsideration to an SBA Disaster Assistance Processing and Disbursement Center (DAPDC for short) within six months of receiving your original SBA Disaster Loan denial. If six month have already passed since your initial application for SBA Disaster Loan was denied, you’ll need to submit a whole new application.

Your appeal request should contain documentation of the information that had lead you to attempt appealing your SBA Disaster Loan denial. Plus, you’ll also need to provide updated and more recent business financial statements with your appeal.

Should your appeal itself be denied, then the next step would be to appeal directly with the Director of the DAPDC. If you continue to this secondary appeal process, just know that—more often than not—the DAPDC Director’s decision is final.

An SBA Disaster Loan Denied Might Mean More FEMA Grant Funding

This is an important and perhaps surprising detail to note about an SBA Disaster Loan denial—it could be a good thing for your recovery. You have to be formally denied an SBA Disaster Loan to be eligible for certain forms of FEMA aid and assistance, like aid that would mitigate costs of replacing trade tools and personal property, among many others. So, if you need to access FEMA assistance for such costs, then having your application for an SBA Disaster Loan denied is actually a step forward in recovery.

In fact, if you’re not deemed eligible for an SBA Disaster Loan, then the SBA will likely refer you to FEMA grants that could cover one of the following disaster-related expenses:

  • Medical and dental expenses
  • Funeral and burial expenses
  • Car repair expenses
  • Clothing and household items, such as room furnishings and appliances
  • Tools required for work
  • Computers and schoolbooks required for education
  • Oil and gas for heating furnaces
  • Moving and storage expenses

All in all, having your application for an SBA Disaster Loan denied could open a door to even more affordable funding for your disaster recovery in the form of FEMA grants.  Be sure to explore your options for government grants before you move onto other forms of debt funding. Avoiding interest costs—no matter how small those costs turn out to be—could make your recovery from a declared disaster that much easier.

SBA Disaster Loan Application Declined for Good? Here’s Your Guide to Bouncing Back

Whether you’ve gone through all the steps of trying to appeal an SBA Disaster Loan decline, or your original SBA Disaster Loan decline was for unappealable reasons, then it’s time to move forward.

Again, before you look into more debt financing options as a contingency plan to SBA Disaster Loans, make sure that your denied SBA Disaster Loan application hasn’t open up a door for you to be eligible for a federal grant. If you’re able to qualify for them, small business grants will be your more affordable option—you won’t have to pay the grant back, and you won’t have to pay any interest.

If FEMA grants for recovering from a declared disaster aren’t accessible for your business, though, these are your next steps for finding recovery funding.

#1. Choose Your SBA Disaster Loan Contingency Plan Wisely

First, you’ll need to look into your small business funding options. Luckily, you’ve got a lot of lenders to sift through. That said, you’ll need to be pretty circumspect with who you take on debt from, now more than ever.  Be sure that you’re working with a trustworthy lender, and make sure that you can afford to pay back any debt you take on to recover from whatever physical or economic disaster that’s struck your community.

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For Easier Access Funding, Consider Fundbox

If you have any outstanding invoices at the moment, you might be able to access funding secured by them. Fundbox offers invoice financing so that business owners can access advances for their accounts receivables. Fundbox funding can ranges from as small as $1,000 to as large as $100,000, with repayment months from three to six months, and weekly discount rates of 0.5% to 0.7%. And once you repay your initial funding, you’ll be able to easily request more funds through your Fundbox account, much like an accounts-receivable business line of credit.

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For Quick Funding, Look to Kabbage

If you’re not working with any accounts receivable as you move forward from having your application for an SBA Disaster Loan denied, then Kabbage might be a better option for you. Kabbage provides unsecured short-term business lines of credit with credit limits from $2,000 to $250,000 that come with either six-month or one-year repayment term lengths. Unlike most other short-term lenders, Kabbage offers monthly payment schedules, rather than weekly or daily payment schedules.

Kabbage interest costs will be front-loaded to your first months of repaying any withdrawal you make. So, if you have a six-month repayment term, your first two monthly payments will carry interest of 1.5% to 10% of your owed amount, while the following four months will only carry 1% interest. For one-year repayment terms, your first four monthly payments will carry the higher interest rate range, while the remaining eight monthly payments will only carry 1% interest.

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For Longer-Term Funding, Look to Fundation

If you want to access longer-term funding for your recovery process, then Fundation will be a top option if SBA Disaster Loans or FEMA grants aren’t available. Fundation offers both term loans and lines of credit ranging from $20,000 to $350,000 with repayment terms from a year to four years long.

Interest rates for Fundation term loans and business lines of credit can be anywhere from 7.9% and 28.9%, but the longer-term repayment schedule makes Fundation funding much more manageable to pay back than any short-term funding that carries similar interest rates. Because borrowers repay Fundation debt over such a long span of time, their monthly payments will be that much more affordable.

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For Equipment Financing, Look to Balboa Capital

Finally, if you’re not able to access an SBA Disaster Loan or any FEMA funding for the cost of replacing any equipment you lost in a declared disaster, then Balboa Capital is a top-notch equipment financing lender to consider. The offer equipment loans from $2,000 to as large as $500,000. Repayment terms for Balboa Capital equipment financing will be pretty ideal, too: You’ll have not less than two years—and potentially as long as five years—to repay any equipment financing you borrow from Balboa Capital. Plus, interest rates start as low as 3.99% and span up to 25%.

#2. Triple Check This Lender’s Requirements

Each lender you consider applying for funding from will have their own unique requirements. If you had your application for an SBA Disaster Loan denied, you didn’t quite meet the specific SBA loan requirements for their Disaster Loans. But that doesn’t mean you’re not eligible for other forms of funding. Here are the requirements for each of the lenders that we highlight as alternatives to disaster funding from SBA Disaster Loans and FEMA grants.

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Fundbox Requirements

  • Sustained use of accounting software
  • Six months’ time in business
  • Must invoice customers

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Kabbage Requirements

For lines of credit less than $100,000:

  • Revenue of at least $50,00 a year or $4,200 a month
  • Personal credit score of at least 550
  • At least a year in business

For lines of credit of $100,000 or more:

  • Revenue of at least $1.5 million a year of $125,000 a month
  • Personal credit score of at least 680
  • At least three years in business

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Fundation Requirements

For loans or lines of credit of less than $200,000:

  • Annual revenue of at least $100,00
  • Personal credit score of at least 660
  • At least a year in business

For loans or lines of credit of $200,000 or more:

  • Annual revenue of at least $750,000
  • Personal credit score of at least 720
  • At least five years in business

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Balboa Capital Requirements

  • Annual revenue of at least $100,000
  • Personal credit score of at least 600
  • At least a year in business

#3. Ready Your Paperwork to Apply for Your SBA Disaster Loan Alternative

If you’ve taken care to make sure that you meet the requirements that a lender names, then your next step in securing recovery funds will be gathering all the necessary documents for applying to this lender.

Luckily, the list of SBA forms necessary for applying is often a far longer list than that of any other funding source. Odds are, because you’ve already applied for an SBA Disaster Loan, you’ll have many—if not all—of the documents you’ll need to apply for funding from another lender.

Here are document checklists for the four lenders we’ve highlighted.

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Fundbox Documents

An account—with accounting information—with an accounting software like:

  • QuickBooks Online
  • QuickBooks Desktop
  • Freshbooks
  • Harvest
  • Wave
  • Xero
  • SageOne
  • InvoiceASAP
  • Clio

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Kabbage Documents

  • At least three months of accounting software records

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Fundation Documents

For loans or lines of credit of $100,000 or less:

  • Three months of business bank statements

For loans of lines of credit greater than $100,000:

  • Six months of business bank statements
  • Two most recent business tax returns
  • Profit and loss statement
  • Up-to-date balance sheet
  • Up-to-date debt schedule

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Balboa Capital Documents

  • Certificate of Good Standing
  • Voided business check
  • Copy of your driver’s license

For equipment financing of more than $250,000, you’ll also need:

  • 2-year balance sheet
  • 2-year profit & loss statement
  • 2 years of business tax returns

#4. Apply for Your Funding

The next step to moving forward from having your application for an SBA Disaster Loan denied will be easy—simply apply for your chosen alternative source of funding! Because you’ve done all the prep-work that steps one through three have entailed, this step will be pretty simple, but—of course—no less crucial.

#5. Rebuild and Recover

Your last step to bouncing back from a declared disaster and a denied application for an SBA Disaster Loan? Receive your funds from your alternative source of funding and put them to use rebuilding and recovering. Though your alternative source of funding will likely be more expensive than an SBA Disaster Loan, be sure to keep on schedule up with your payments as you use your funds to rebuild—you’ll recover and be back in business in no time.

Editor's Note: Fundera exists to help you make better business decisions. That’s why we make sure our editorial integrity isn’t influenced by our own business. The opinions, analyses, reviews, or recommendations in this article are those of our editorial team alone. They haven’t been reviewed, approved, or otherwise endorsed by any of the companies mentioned above. Learn more about our editorial process and how we make money here.