Additional Resources
Week 4: SBA Regulation Section 312 Duplication of Benefits
By Murray Wennerlund published 1-12-2024
SBA Regulation
As per 13 C.F.R. §123.101(c), SBA Disaster Loan applicants cannot receive a home disaster loan if their damaged property can be restored using insurance, gifts, or compensation proceeds. Such amounts should be deducted from claimed losses or paid to SBA as principal if received after loan disbursement.
In a case, I discovered SBA officers processed loans based on insurance estimates, claiming it was quicker than waiting for insurance payouts. The SBA assured a swift loan process, indicating later recapture of insurance funds as duplication of benefits to be applied towards the loan's principal. Homeowners were often better off declining the SBA loan and awaiting insurance payments. It was observed that SBA processed loans up to 12 months after the initial round, potentially violating 13 C.F.R. §123.101(c).
If you are approved for the SBA disaster loan and you have received grant assistance that duplicates the damage covered by the SBA loan, such grant assistance must be deducted from your loan eligibility as described in section 123.101(c) of the regulations.
You are not eligible for a home disaster loan if: (applies to both business and personal loans.)
- You have been convicted, during the past year, of a felony during and in connection with a riot or civil disorder or other declared disaster;
- You acquired voluntarily more than a 50 percent ownership interest in the damaged property after the disaster, and no contract of sale existed at the time of the disaster;
- Your damaged property can be repaired or replaced with the proceeds of insurance, gifts or other compensation, including condemnation awards (with one exception), these amounts must either be deducted from the amount of the claimed losses or, if received after SBA has approved and disbursed a loan, must be paid to SBA as principal payments on your loan. You must notify SBA of any such recoveries collected after receiving an SBA disaster loan. The one exception applies to amounts received under the Individuals and Household Program of the Federal Emergency Management Agency solely to meet an emergency need pending processing of an SBA loan. In such an event, you must repay the financial assistance with SBA loan proceeds if it was used for purposes also eligible for an SBA loan;
- SBA determines that you assumed the risk (for example, by not maintaining flood insurance as required by an earlier SBA disaster loan when the current loss is also due to flood);
- Your damaged property is a secondary home (although if you rented the property out before the disaster and the property would not constitute a “residence” under the provisions of Section 280A of the Internal Revenue Code (26 U.S.C. 280A), you may be eligible for a physical disaster business loan);
- Your damaged property is the type of vehicle normally used for recreational purposes, such as motorhomes, aircraft, and boats;
- Your damaged property consists of cash or securities;
- The replacement value of your damaged personal property is extraordinarily high and not easily verified, such as the value of antiques, artworks, or hobby collections;
- You or other principal owners of the damaged property are presently incarcerated, or on probation or parole following conviction for a serious criminal offense;
- Your only interest in the damaged property is in the form of a security interest, mortgage, or deed of trust;
- The damaged building, including contents, was newly constructed or substantially improved on or after February 9, 1989, and (without a significant business justification) is located seaward of mean high tide or entirely in or over water; or
- You voluntarily decide to relocate outside the business area in which the disaster has occurred, and there are no special or unusual circumstances leading to your decision (business area means the municipality which provides general governmental services to your damaged home or, if not located in a municipality, the county or equivalent political entity in which your damaged home is located).
Resource: Title 13 C.F.R Section 123.101
If the SBA declines your application, request the Status and Code. This Status and Code will guide your path to access recovery funding.
Status and Code:
