Financing Post Hurricane Sandy Reconstruction

As Treasurer of our condominium association, given the 4-5 month expected turnaround for getting any flood losses reimbursed from NFIP insurance, I had the misfortune of researching financing options for repairing and rebuilding any damage from Hurricane Sandy. It is important to note that there are rules stated in the by-laws that require a certain majority for either an assessment or a loan, with the latter being more stringent.

First and foremost, request an advance from your insurance adjuster (this requires signing a form). You can read about the claim filing process by clicking "How to File a FEMA Flood Loss Insurance Claim." You can expect to receive an advance of no more than 10% of what the adjuster thinks is going to be your damage. Yet, I have seen advances of $5000-10000 being made on the spot during the loss scoping. Unfortunately, those who are filing repeat flood loss  claims cannot get an advance,  as noted in "Getting Paid for a Repeat FEMA Flood Loss Insurance Claim Is Going to be Tougher".

Besides this, there are the three choices of financing post hurricane construction.

Special Assessment to supplement General Reserve funds

Most condominium associations have a general reserve fund that can take on small repairs or unexpected costs. Of course, Hurricane Sandy's losses exceeded most reserves. A special assessment generally requires a majority vote, as explained in each condominium association's by-laws. A special assessment is the path of the lowest resistance, although it is most onerous to owners.

A bridge loan for construction from a bank

For Hoboken residents, a bridge loan can be a viable alternative since banks in town can help. Other than Hudson City Savings bank, which declined to provide a business loan for reconstruction, many local banks do provide loans to condominium associations, with monthly or quarterly maintenance as collateral. Loans are given for a period of six months to 5 years, plenty of time to recoup losses from flood insurance. A friend has had success with First RepublicNational Bank. BCB Community Bank's Bayonne office also underwrites these types of loans. Rates are a few basis points over prime, and collateral requirements vary, so contact the banks directly.

A SBA Disaster Loan for HOAs

If all else fails, you can contact the Small Business Administration for a disaster loan. Rates are much higher if you do qualify for other loans, so understand that this federally backed agency is the lender of last resort. You need all estimates for repairs, as well as some sort of documentation from your adjuster. You can read more here: http://www.sba.gov/content/fact-sheet-associations

According to their website:

Before SBA will disburse any loan funds, we must have confirmation that all the money necessary to complete the repairs is available. Therefore, we must have documentation supporting the total project cost of the repairs and the amount of anticipated insurance recoveries. The damages to the common areas must be clearly separated from the damage to the individual units to establish eligibility.

For additional information, please contact our Customer Service Center. Call 1-800-659-2955 (TTY: 1-800-877-8339) or e-maildisastercustomerservice@sba.gov

For additional tips please read: "5 Money Saving Tips for Hurricane Sandy Victims"