Why has my SBA disaster loan been denied?

If your EIDL is denied and you don’t win the appeal, you can consider applying again after six months have passed. This can be a good time to improve your credit score, cash flow and financials, which can make it more likely that your business will be approved. Of course, six months is a long time to wait if your company can’t function because of damages from a disaster. 

Here are a few SBA disaster loan alternatives to consider for your small business:

FEMA grants

If you’ve been formally denied by the SBA for a disaster loan, the silver lining is that this makes your eligible to apply for a FEMA grant. These grants are made available to those impacted by disasters and can be used for business purposes such as vehicle repairs and equipment or tool replacement. You can also use them for personal expenses like hospital or medical bills, funeral expenses, replacing household items (including clothing), moving and storage and more. 

FEMA grants also don’t have to be repaid, which means you don’t have to worry about interest or repayment terms. This can be extremely helpful to small business owners recovering from a disaster. 

Line of credit

A business line of credit allows you to spend money up to a set credit limit and repay it over time, usually through monthly payments. You can use this money for regular business expenses including commercial mortgages or rent, equipment purchases, payroll, inventory and more. 

Unlike a loan, you only pay interest on the money you use in your line of credit. You may also be able to use your available credit again as you pay off the money you spend, much like with a credit card. It’s important to note that lines of credit tend to have higher interest rates or annual percentage rates (APRs) than loans, so it’s a good idea to pay off your balance as quickly as you can. 

Term loans

Term loans or traditional loans may be available to your business through banks, credit unions or other financial institutions. Of course, if your loan application for an EIDL was denied, it may be difficult to find a term loan that your business will qualify for. 

However, some online or alternative lenders are more willing to lend to newer businesses or those with poor credit history than banks or credit unions. Usually these loans come with shorter repayment terms or higher interest rates to compensate for the risk the lender takes out, but they also tend to fund faster and have shorter application processes than other loan types. 

Equipment financing

Many financial institutions work specifically in equipment financing, which can help you get funds to purchase or lease equipment. If you operate in a specific industry like manufacturing, farming or trucking, there are many companies that work to help small businesses find financing in these areas. 

Invoice financing

With invoice financing, you basically use any unpaid invoices as collateral to get a lump sum of cash from a financing company. You then repay the money in a similar manner to a term loan in set increments with interest. This can be a good idea for businesses that have long repayment terms for their customers but need cash upfront.