ug ¢ i & SEE VSR Cae The following questions and answers are typical of those received at the Small Business Administration offices in the flood areas and are offered to as- sist flood victims — home, property and business owners, in applying for Disaster Loans. HOME LOANS Is it too late to apply for a Disaster Loan from SBA? No. The deadline for applying has recently been extended to January 15, 1973. However, you are urged to submit your application as quickly as possible. There is nothing to be gained by delaying. I don’t understand the Urban Renewal Program. If my property is located in an area which may be part of Urban Renewal, should I de- lay applying for a loan until a determination is made? No. The decisions on which areas are to be in Urban Renewal will be made by local authorities and will be made soon — but you should still apply for your loan now. Once the loan is approved you may wait until the Urban Renewal deci- sions are announced to accept the money. If you find your property is in the Urban Renewal area you may cancel the loan at no cost to you. What is the purpose of an SBA Disaster Loan? The repair, rehabilitation or replacement of property damaged or destroyed without regard to whether the required financial assistance is available from private sources. This covers both personal and real property. What financial assistance is available? The maximum that SBA can loan to repair physical damage to a home is the amount of damage incurred less any insurance or other recovery. In no case may loans to repair physical damage to homes exceed $50,000. In addition, SBA may lend up to a maximum of $10,000 to repair or replace household goods and personal property. However, the maximum that SBA can lend one borrower for both purposes may not exceed $55,000, plus eligible refinancing. (See below). SBA disaster loans may be used to upgrade a home only when this upgrading is required by applicable codes or ordinances. This means that funds will not be pro- vided by SBA which will increase the size or capacity of any structure, as objects of art, rare stamp or coin collections, pleasure boats, campers and the like. What loan terms are available? Loans may be made for any period up to 30 years and will bear interest at the rate of 1% per annum. However, maturities are limited to the period necessary based upon applicant’s ability to repay. Is mortgage refinancing available? v When the uninsured damage exceeds 30% of the pre-disaster fair market value of a home, prior mortgages on the damaged real estate may be refinanced. The re- financing of prior liens will not be permitted to reduce monthly payments, including payments on the disaster loan, below the amount paid before the disaster, This amount of refinancing is in addition to the $55,000 maximum loan stated above. How are loan repayments handled? Up to $5,000 of the principal of the disaster loan may be forgiven by SBA. Generally, any balance due after cancelation must be paid in equal monthly installments, including interest. The first payment is usually due not later than five months after disbursement. A different schedule may be arranged when a borrower’s income is seasonal. ; In addition, principal payments may be temporarily suspended on loans made to individuals who rely for support on retirement benefits, survivor benefits, or dis- ability benefits, where their owned residence has sustained substantial (30% or more) damage and there would be substantial hardship in meeting the principal in- stallments. Interest installments, however, must be met. : When such hardship exists, and the applicant has the ability to repay the in- terest installments, he will be offered waiver of principal payments for a period of up to five years. Amortized payments will be scheduled to begin after that date unless a review shows that substantial hardship still exists. At that time the waiver may be extended. Suppose I apply for a $2,000 loan to repair my furnace and later learn request? OTEREI Yes. Any additional cost which you can justify will be considered so long as you are not upgrading your property. In ‘other words, the Disaster Loan Program is designed to put your property back in approximately the same pre-flood condition. repay? No. You are entitled only to the amount of your net loss after any recov- ery such as insurance. In any case where your net’loss is $5,000 or less you may than $5,000 you are required to repay only the portion above $5,000. Must I pay interest on the $5,000 which is forgiven? No. The payments on your loan are computed only on the portion which you must repay. : ) : Will SBA permit me to relocate? . ; Yes. But the amount to which you are entitled is limited to not more than your actual physical loss. : | PREPAREDNESS § Small Business Administration Disaster Loan Headquarters have been stafted with additional personnel for arrang- ing Disaster Loans. Please visit your nearest Small Business Administration office and save this advertisement as a handy reference for study. What is the purpose of SBA Business Disaster Loans? : The repair, rehabilitation or replacement of property damaged or destroyed without regard to whether or not the required financial assistance is otherwise avail- able from private sources. This covers real property, machinery and equipment, fix- tures, and inventory. What financial assistance is available? . SBA may approve business disaster loans for the restoration of real property, equipment, furniture and fixtures and eligible refinancing. All businesses which fall within SBA’s definition of “Small Business” may .. The loan may be used to upgrade a business property only when the upgrad- ing is required by applicable codes or ordinances. Funds will not be provided to in- crease the size or capacity of any structure. What loan terms are available? Business disaster loans to small businesses may be made for any period up to 30 years, depending upon the amount and type of loan and will bear interest at the rate of 1% per annum. However, maturities are limited to the period necessary based upon applicant’s ability to. repay. A a What about refinancing? When uninsured damage exceeds 30% of the pre-disaster value, refinancing of business mortgages is authorized up to the amount of the uninsured damage on the property, real or other, to be repaired or replaced. Is there a program for major employers? Under Section 237 of the 1970 Disaster Relief Act, SBA may make long-term, low-interest loans available to commercial industrial or other enterprises, regardless of size, which are major sources of employment in stricken areas, and have substanti- ally ceased operation as a result of the disaster. A major source of employment is defined as (1) a concern which employed 10% or more of the entire work force of a community no larger than a county; (2) a concern which employed 10% or more of the total work force in an industry within the major disaster area; or (3) any business firm within the major disaster area which employed 1,000 or more people. There is no limitation on the size of loans made under Section 237, How may proceeds of the loan be used? An SBA disaster loan may not exceed the actual tangible loss suffered by the disaster victims (except to the extent of permitted debt refinancing) less any re- covery from insurance or other sources, such as a Red Cross grant. When a disaster victim does not know immediately how much of his loss will be recovered from insurance or other sources, SBA will consider making a loan for the full amount of the loss, provided the applicant will apply such other funds, when collected, toward repayment of the loan. vi The borrower is obligated to use the proceeds of the loan for the purposes for which obtained. : Further, if borrower determines to do the repairs with his own labor, the cost of materials only may be financed by the loan. , SBA is required by statute to determine that the funds are used appropri- so disbursed but not supported by evidence of use as intended to restore property to predisaster condition must be returned to SBA and will be applied to the prin- cipal balance of the note. ; ; : The statute provides that “whoever wrongfully misapplies the proceeds of a loan shall be civilly liable to the SBA Administrator in an amount equal to one-and- one-half times the original principal amount of the loan.” What general provisions should I know about? SBA may limit any disaster loan to the amount the applicant apparently can repay, as indicated by his past earnings, when appropriate. ahi If it is necessary to construct a new home, new business, or institutional fa- cility on a different site — for example, on higher ground because of being located in a flood-prone area — the loan may be used for that purpose. A In the case of a loan to an individual, the loan may be used to repair or re- place damaged furniture and other household belongings, as well as real estate. A business disaster loan may be used to repair or replace buildings, fixtures, A loan to a charitable institution or other non-profit organization may be used to repair or replace buildings, furnishings, machinery or equipment. A disaster loan may in some cases be used for debt payment, where the funds are used to repay any temporary financing obtained prior to approval of the SBA loan, to start rehabilitation work. disaster loans. FRANK CARLUCCI President Nixon's Personal Representative Page 17
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