[StBernard] News you can use - From Paul Perez

[Westley Annis]

I will be sending out information to people I believe to be either displaced
by Katrina or to people who are housing those of us displaced by Katrina.  I
am doing this to try and help us all.  I realize that many of us are getting
lots of e mails.  If you would like to be taken off of this list, please
reply to that effect and I'll remove you. 

On the other hand, if you know of someone who you think may benefit from
receiving information such as what I've sent here, please let me know that
and I'll add them to the list.

If you have a question on some financial, insurance or related topic, please
let me know.  I'll try to address it and share the information with
everyone!!

 

September 19, 2005

 

I received a question from a client concerning Small Business Administration
loans.  Note that the SBA makes loans. THEY DON'T MAKE GIFTS. You need to
pay back whatever you borrow from them.

 

Cutting through all the "government speak" on the SBA website (www.sba.gov
<http://www.sba.gov/> ) here's what it boils down to.

 

SBA has three type of loans available to the People of Katrina: Home Loans,
Business Loans, and Economic Injury Disaster Loans (EIDL).  

 

Home loans are pretty self-explanatory.  Business loans are there to help in
the replacement or repair of business equipment / property, and the EIDLs
provide money to tide small businesses over till their business gets up and
running again.

 

There are two tiers or SBA loan rates. Your tier depends on whether or not
you can get credit somewhere else.  If you can qualify for credit through
the usual sources (banks, investors, etc.) you must pay a higher rate than
if you were not able to borrow money from these other sources.  (Yet another
case of where the good guys - those who have hustled to maintain their
credit ratings, etc. are not eligible for benefits available to those who
have not been diligent in their past.  Go figure.)

 

In any event, if you can get credit commercially, your rate on a home loan
would be 5.375%, business loans would have an interest rate of 6.557%.

 

If you can not get credit anywhere else, your home loan would be at a rate
of 2.6877% while your business loan would be at a 4.0% rate.  EIDLs for
small businesses are at a rate of 4.0% as well and are only eligible to
those whose credit history or prognosis for the future does not allow them
to borrow money anywhere else.

 

If you'd like to apply for an SBA loan, go to the following link and
download and print all of the necessary forms.  It's self-explanatory once
you get there.

 

http://www.sba.gov/disaster_recov/loaninfo/dloanassit.html

 

DO NOT DRAG YOUR FEET ON THIS AS THERE ARE DEADLINES FOR APPLICATIONS!

 

The deadline for applications for home loans and business loans is
relatively close, October 28, 2005.

 

The deadline for applying for EIDLs is May 29, 2006.

 

You can call 1 800 659 2955 if you have any questions.

 

 

 

For those of you who prefer the "government speak", here's the language
gleaned from the SBA website.

 

 

 

Home Disaster Loans. Loans to homeowners or renters to repair or replace
disaster damages to real estate or personal property owned by the victim.
Renters are eligible for their personal property losses.

 

Business Physical Disaster Loans. Loans to businesses to repair or replace
disaster damages to property owned by the business, including real estate,
machinery and equipment, inventory and supplies. Businesses of any size

are eligible. Non-profit organizations such as charities, churches, private
universities, etc. are also eligible.

 

Economic Injury Disaster Loans (EIDL).   Loans for working capital to small
businesses and small agricultural cooperatives to assist them through the
disaster recovery period. EIDL assistance is available only to applicants

with no Credit Available Elsewhere - if the business and its owners cannot
provide for their own recovery from non-government

sources.

 

Credit Requirements:

SBA's disaster assistance is in the form of loans. Applicants must show the
ability to repay all loans. 

 

Collateral is required for all physical loss loans over $10,000 and all EIDL
loans over $5,000. SBA takes real estate as collateral where it is
available. Applicants do not need to have full collateral; SBA will take
what is available to secure each loan.

 

Interest Rates:

 

By law, the interest rates depend on whether each applicant has Credit
Available Elsewhere. An applicant does not have Credit Available Elsewhere
when SBA determines that the applicant does not have sufficient funds or
other resources, or the ability to borrow from non-government sources, to
provide for its own disaster recovery. An applicant which SBA determines can
so provide for its own recovery has Credit Available  elsewhere. 

 

Generally, SBA determines that over 90% of disaster loan applicants do not
have Credit Available Elsewhere.

 

Interest rates are determined by formulas set by law, and may vary over time
with market conditions. Currently (for disasters, which occurred on or after
August 1, 2005) the applicable interest rates are:

 

No Credit Available Elsewhere

 

Home Loans                              2.687%  

Business Loans                              4.000% 

Non-profit Organizations           4.000%

Economic Injury Loans                     4.000%

 

If you do have credit available elsewhere, SBA rates are:

 

Home Loans                              5.375%  

Business Loans                              6.557% 

Non-profit Organizations           4.750%

Economic Injury Loans                     Not available

 

Loan Term:

 

The law authorizes loan terms up to a maximum of 30 years. However, for
businesses with Credit Available Elsewhere, the law limits the loan term to
a maximum of 3 years.

 

SBA determines the term of each loan in accordance with the borrower's
ability to repay. Based on the financial circumstances of each borrower, SBA
determines an appropriate installment payment amount, which in turn

determines the actual term.

 

Loan Amount Limits:

 

Home Loan amounts are limited by SBA regulation to $200,000 to
repair/replace real estate and $40,000 to repair/replace personal property.
The actual amount of each loan, up to these maximums, is limited to the
verified uninsured disaster loss. Refinancing of existing mortgages on homes
is eligible in some cases up to the amount of the loan for real estate
repair/replacement. Loan amounts may be increased by up to 20% for devices
to mitigate against damage to the real property of the same type as the
disaster.

 

Business Loan amounts are limited by law to $1,500,000 for real estate,
machinery and equipment, inventory and all other physical losses. The actual
amount of each loan, up to this maximum, is limited to the verified
uninsured disaster loss. Refinancing of existing mortgages or liens on real
estate and machinery and equipment is eligible in some cases up to the
amount of the loan for real estate and machinery and equipment
repair/replacement. Loan amounts may be increased by up to 20% for devices
to mitigate against damage to the real property of the same

type as the disaster.

 

Economic Injury Disaster Loan (EIDL) amounts are limited by law to
$1,500,000. The actual amount of each loan, up to this maximum, is limited
to the actual economic injury as calculated by SBA, not compensated by

business interruption insurance or otherwise, and beyond the ability of the
business and/or its owners to provide.

 

The $1,500,000 statutory limit for business loans applies to the combination
of physical and economic injury, and also applies to all disaster loans to a
business and its affiliates. If a business is a major source of employment,
SBA has authority to waive the $1,500,000 statutory limit.

 

Loan Eligibility Restrictions:

Uninsured Losses. Only uninsured or otherwise uncompensated disaster losses
are eligible. Any insurance proceeds which are required to be applied
against outstanding mortgages are not available to fund disaster repairs

and do not reduce loan eligibility. However, any insurance proceeds
voluntarily applied to any outstanding mortgages do reduce loan eligibility.

 

Ineligible Property. Secondary homes, personal pleasure boats, airplanes,
recreational vehicles and similar property is not eligible, unless used for
business purposes. Property such as antiques and collections is eligible
only to the extent of its functional value. Amounts for landscaping,
swimming pools, etc. are limited.

 

Noncompliance. Applicants who have not complied with the terms of previous
loans are not eligible. This includes prior borrowers who did not maintain
required flood insurance.

 

Refinancing:

SBA can refinance all or part of prior mortgages, evidenced by a recorded
lien, when the applicant (1) does not have Credit Available Elsewhere, (2)
has suffered substantial uncompensated disaster damage (40% or more of the
value of the property), and (3) intends to repair the damage. Refinancing of
prior debts improves the victim's ability to afford the SBA disaster loan.

 

Relocation:

Use of SBA disaster loans for relocating is subject to limitations.
Generally, victims may relocate where they need to do so for reasons beyond
their control. If the victim is forced by state or local authorities to
relocate, the amount of eligibility is the replacement cost of the property
which must be abandoned.

 

Insurance Requirements:

To protect each borrower and SBA, SBA requires borrowers to obtain and
maintain appropriate insurance. Borrowers of all secured loans (physical
loans over $10,000 and economic injury loans over $5,000) must purchase and
maintain full hazard insurance for the life of the loan. Borrowers whose
property is located in a special flood hazard area must purchase and
maintain flood insurance for the full insurable value of the property for
the life of the loan.

 

DISCLAIMER:  This e mail is intended to help those of us who have been
impacted by Hurricane Katrina.  It may contain information that is somewhat
legal  in nature or affect your taxes.

 

References to legal or tax considerations are intended only to alert you in
a general way of those considerations which may effect you.  We do not
engage in the practice of law.   All legal considerations must be referred
to and passed upon by your attorney.  All tax considerations should be
reviewed by your tax preparer.

 

Paul V. Perez
Certified Financial Planner
 
Financial Network Investment Corporation, Member SIPC
2800 Veterans, Suite 204
Metairie, LA  70002
(504) 494 3144
(225) 248 6635

-------------- next part --------------
An HTML attachment was scrubbed...
URL: http://six.pairlist.net/pipermail/stbernard/attachments/20050919/2467fd45/attachment-0001.html