Drought-Affected Business Owners Get Disaster Loans
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UPDATED: Nov 14, 2012
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The U.S. Small Business Administration (SBA) is offering federal disaster loans to Northern U.S. residents to offset losses from recent droughts.
The affected drought disaster states include Michigan, Minnesota, Montana, New Jersey, New York, North Dakota and South Dakota. Drought and excessive heat that started in the summer reached a peak mainly during September and October.
One affected state, Minnesota, was labeled as 100 percent in drought by October. Over 30 percent of the state was labeled as being in extreme drought. As a result, a multitude of lakes, dams and beaches are barred from swimmers due to the low water levels. On Oct. 17, Lake Minnetonka reached the lowest level in 12 years, dipping to over 927 feet above sea level.
Droughts can cause serious repercussions for business owners and residents including initial crop damage, increased prices for food, unemployment and long-term damage to the ground.
Several counties in New Jersey and New York were approved for the drought disaster loans in late October but due to the effects of Hurricane Sandy, the Northeast is now recovering from another type of disaster: flooding.
Alfred E. Judd, Director of SBA’s Disaster Field Operations Center West, said the loans “offset economic losses because of reduced revenues caused by the drought.”
“SBA eligibility covers both the economic impacts on businesses dependent on farmers and ranchers that have suffered agricultural production losses caused by the disaster and businesses directly impacted by the disaster,” Judd said in a release.
The SBA has approved over 1.9 million disaster loans since 1953, totaling $48 billion. Once the President declares a location as a disaster area, the SBA loan program is automatically open for residents and business owners. One example occurred in Wisconsin; a drought emergency was declared for Douglas County on July 31. By mid-August, 38 disaster loans had been approved amounting to $1,587,800.
The SBA offers disaster loans of up to $2 million with interest rates of three percent for non-profit organizations and four percent for small businesses. The loans are used for both short-term and long-term purposes. In some cases, people take out disaster loans to cover the short-term costs before insurance companies provide them with repayment. Legally, the loans can cover fixed debts, payroll and accounts payables, but not lost sales or profits.
“When the Secretary of Agriculture issues a disaster declaration to help farmers recover from damages and losses to crops, the Small Business Administration issues a declaration to eligible entities affected by the same disaster,” Frank Skaggs, director of SBA’s Field Operations Center East in Atlanta, said in a press release.
The loan applications even cross county and state borders.
“The Small Business Administration recognizes that disasters do not usually stop at county or state lines. For that reason, counties adjacent to primary counties named in the declaration are included,” Skaggs said.