These federal loans offer financial lifeline after flooding

The lingering remnants from Tropical Storm Ophelia — which dumped intense rainfall on Nassau County late last September — left a number of businesses and homeowners to pick up the pieces.

Dozens of Long Island homes were drenched, basements and personal property swallowed up. Businesses like Valbrook Diner in Valley Stream lumbered back to life in the ensuing clean-up after losing thousands in food, lost work for employees, and a damaged roof.

But some measure of financial relief, announced last month, is now available.

The federal government is offering up to $500,000 in low-interest home repair loans through the Small Business Administration. Businesses could be eligible for much more to replace lost inventory and equipment.

The final deadline to apply is Feb. 2, at SBA.gov website.

Gov. Kathy Hochul described the federal relief program as one that is aimed at “helping to alleviate the impacts of the flooding to all areas of our state disaffected by extreme weather events.”

When faced with the dilemma of how to pay for costly repairs and reconstruction after a disaster, federal loans provide a financial buffer otherwise made unavailable by standard loan and credit programs.

The problem of hefty interest rates sometimes incurred when financing repairs with conventional credit cards, for example, can be largely avoided through SBA loans, argued SBA spokeswoman Sharon Gadbois. That, she adds, is the biggest boon for homeowners and businesses.

“The interest rate for homeowners and renters can be as low 2.5 percent compared with say, 20 percent on a credit card,” Gadbois said. “That’s a big difference. That’s thousands of dollars you would avoid having to pay up.”

The SBA also can offer an interest-free repayment window at the start of the loan — usually for 12 months — and generally, borrowers have up to 30 years to pay it off. 

“When people go through some kind of catastrophic event such as flooding or a tornado that disrupts their home or lifestyle at home, it’s almost like there’s a little mini tornado going on in their mind,” Gadbois said. “And, so, everything stops. The spending stops. They have to redistribute or reassess what’s going on.”

Often that “reassessing” comes in the form of tightening their spending bills, laying off staff, or rolling back their business expenses, she said. The SBA loans are intended to reduce or reverse this financial downturn by stabilizing people’s expectations of their financial future, and thus keep their budgets in order and their businesses afloat.

But other forces at play may make these loans more appealing over others. Those already weighed down with repaying multiple credit cards or credit card loans may be less willing to take on more debt, no matter how generous the terms of repayment.

But Gadbois says it’s better to apply and have the option than to be shut out entirely.

“If you’re approved for the loan, you have up to 60 days to decide whether you want to take it or not,” she said. “Applying before the deadline is important because it preserves your options for you and your family.”