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Can you use an SBA disaster loan to pay a contractor to repair your home?

Yes, if the work is a repair your loan allows. SBA's rules say you must use disaster loans to restore or replace your primary home as nearly as possible to its condition before the disaster occurred, and that the loan authorization specifies the permitted use of loan proceeds. Both rules are quoted below.

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

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By InstaBids editorial team with AI research agents. Sources read: 22 October 2026 Updated 2026-10-22

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Key facts

What repairs can SBA home disaster loan money pay for?

Repairs that bring your primary home back toward its condition before the disaster, within limits. SBA's disaster assistance page says these loans cover disaster losses not fully covered by insurance or other sources, and that you may not use the funds to upgrade homes or make additions, unless required by the local building code; 13 CFR 123.7 and the SBA page are quoted below.

Source: SBA, Disaster assistance, read 22 October 2026.
Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

13 CFR 123.7, read 22 October 2026, in its own words: "You must use disaster loans to restore or replace your primary home (including a mobile home used as a primary residence) and your personal or business property as nearly as possible to their condition before the disaster occurred, and within certain limits, to protect damaged or destroyed real property from possible future disasters."

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

SBA's disaster assistance page, read 22 October 2026, in its section on home and personal property loans: "These loans cover disaster losses not fully covered by insurance or other sources." "You may not use the funds to upgrade homes or make additions, unless required by the local building code." On how the damage is priced, the same page says: "SBA’s inspectors will estimate the cost of damage once your application is completed and submitted."

Source: SBA, Disaster assistance, read 22 October 2026.

DisasterAssistance.gov, on the same SBA program, read 22 October 2026: "You don't need to own a business to get our help." "We provide long-term, low-interest loans for losses that insurance and other sources don’t fully cover."

Source: DisasterAssistance.gov, Home and Personal Property Disaster Loans, read 22 October 2026.

In our reading, a contractor's bid that mixes disaster repair with an upgrade the code does not require is worth splitting into separate lines, so the loan money goes only to the part it allows.

Do SBA's disaster loan rules mention paying a contractor?

Yes. 13 CFR 123.18(b) says malfeasance may include nonperformance of all or any portion of the work for which a contractor was paid, and 13 CFR 123.802 applies its subpart to all SBA Disaster Loan borrowers, including any contractors, subcontractors, and agents; both are quoted below.

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

13 CFR 123.18(b), read 22 October 2026, in its own words: “(b) For all disasters occurring on or after November 25, 2015, you may also request an increase in your loan if you suffered substantial economic damage or substantial risks to health or safety as a result of malfeasance in connection with the repair or replacement of real property or business machinery and equipment for which SBA made a disaster loan. See § 123.105 for limits on home loan amounts and § 123.202 for limits on business loan amounts. Malfeasance may include, but is not limited to, nonperformance of all or any portion of the work for which a contractor was paid, work that does not meet acceptable standards, or use of substandard materials.”

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

The paragraph before it, 13 CFR 123.18(a), gives two other examples of when a loan increase may be requested: “(a) Generally, SBA will consider your request for an increase in your loan if you can show that the eligible cost of repair or replacement of damages increased because of events occurring after the loan approval that were beyond your control. An eligible cost is one which is related to the disaster for which SBA issued the original loan. For example, if you discover hidden damage within a reasonable time after SBA approved your original disaster loan and before repair, renovation, or reconstruction is complete, you may request an increase. Or, if applicable building code requirements were changed since SBA approved your original loan, you may request an increase in your loan amount.”

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

13 CFR 123.801(a) and 123.802, read 22 October 2026: “(a) Disaster-Related Activities are any real property repairs, rehabilitations, replacements, or any associated activities financed in whole or in part by an approved SBA Disaster Loan.” "This subpart applies to Disaster-Related Activities and all SBA Disaster Loan borrowers, including any contractors, subcontractors, and agents of such borrowers conducting Disaster-Related Activities."

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

In our reading, if a contractor takes loan money and does not finish, or does poor work, the place to start is SBA itself, before you pay a second contractor out of pocket.

What does the rule say about misuse of loan proceeds?

SBA can treat it as wrongful misapplication. 13 CFR 123.9(a) defines wrongful misapplication as the willful use of any loan proceeds without SBA approval contrary to the loan authorization, and says non-use for authorized purposes for 60 days or more after receiving a loan disbursement check also counts; the text is quoted below.

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

13 CFR 123.9(a), read 22 October 2026, in its own words: “(a) For disaster loans authorized under Section 7(b), when SBA approves each application, it issues a loan authorization which specifies the amount of the loan, repayment terms, any collateral requirements, and the permitted use of loan proceeds. If you wrongfully misapply the proceeds of a disaster loan authorized under Section 7(b), you will be liable to SBA for one and one-half times the proceeds disbursed to you as of the date SBA learns of your wrongful misapplication. Wrongful misapplication means the willful use of any loan proceeds without SBA approval contrary to the loan authorization. If you fail to use loan proceeds for authorized purposes for 60 days or more after receiving a loan disbursement check, such non-use also is considered a wrongful misapplication of the proceeds.”

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

13 CFR 123.9(c), in its own words: “(c) If you misapply loan proceeds of any disaster loan under this Part, including an IDAP loan, you may face criminal prosecution or civil or administrative action.”

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

In our reading, paying a contractor in stages as each part of the repair is finished keeps the loan money tied to work you can show, and keeps it from sitting unused.

Can your contractor start if a local permit is stuck?

Possibly. 13 CFR Part 123, Subpart I preempts a State or Local Requirement that is the but-for cause of a delay that lasts more than sixty (60) days after complete applications were submitted, and it requires a certification by the borrower's builder; the rule and SBA's page on it are quoted below.

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

The eCFR shows this subpart as "Subpart I—Interaction With Non-Federal Requirements", with the source note "91 FR 3817, Jan. 29, 2026, unless otherwise noted." Its definition of the loan it covers, 13 CFR 123.801(b): “(b) SBA Disaster Loan is a loan authorized under 15 U.S.C. 636(b) pursuant to a major disaster declaration under 15 U.S.C. 636(b)(2)(A).” Its applicability date, 13 CFR 123.808: "This rule applies to disaster loans approved on or after January 1, 2025."

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

13 CFR 123.803, read 22 October 2026: “Preemption. Any State or Local Requirement shall be preempted where it is the but-for cause of a delay in conducting Disaster-Related Activities that lasts more than sixty (60) days following the date of the borrower's, or any contractor, subcontractor, or agent of such borrower's, submission of all applicable complete applications or requests for approval to the applicable State or local authorities to proceed with Disaster-Related Activities.”

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

13 CFR 123.805, in its own words: “An SBA Disaster Loan borrower and any contractors, subcontractors, or agents of such borrower, who seek to engage in Disaster-Related Activities without complying with a State or Local Requirement preempted under § 123.803 may only do so where the SBA Disaster Loan borrower has provided to SBA, prior to commencement of Disaster-Related Activities, through loan closing documentation modifications or other documents provided to the borrower by SBA, a certification by the borrower's builder(s) that the builder has so far, and will in the future, comply with and adhere to any applicable state and local rules and regulations not preempted under § 123.803. Such non-preempted rules and regulations include, but are not limited to, building codes, health and safety requirements, inspection requirements (which may be conducted by local government inspectors or qualified, independent third-party inspectors), and any other processes required to obtain a certificate of occupancy at the completion of Disaster-Related Activities. A borrower relying on preemption under this subpart shall be considered to be in default of the borrower's SBA Disaster Loan if the borrower fails to comply with the provisions of § 123.805 and shall be considered a violation of § 123.9.”

Source: 13 CFR Part 123, Disaster Loan Program, eCFR, read 22 October 2026.

SBA's page on options to bypass permitting delays, read 22 October 2026, says: "Eligibility: If you have applied for a local permit more than 60 days ago, but still haven’t received approval, you may qualify for this self-certification option." "Discuss with your contractor/builder: Review your situation with your contractor to confirm you meet the eligibility criteria." On the form for the contractor, it says: "This form must be signed by your builder/contractor. It certifies that the planned repairs/reconstruction comply with applicable building codes, safety measures, and other substantive requirements and that your builder will continue to follow all applicable state and local rules other than the permitting or other approval requirements the regulatory changes allow them to bypass." "If you do not have a builder/contractor, and you are the one overseeing repairs and getting permits or other approvals and you meet the requirements in the new regulations, you may sign the certification."

Source: SBA, Options to bypass permitting delays, read 22 October 2026.

In our reading, the form for the contractor is a written promise that goes on file with SBA, so read it together with your contractor before either of you signs it.

How should you hire and pay a contractor with loan money?

Match the contract to the loan, pay as work is done, and keep a paper trail SBA can follow. This is practical reasoning, not legal advice and not a finding from any agency.

  1. Before you sign a contract, ask SBA which repairs your loan authorization covers, and keep the authorization next to the contract.
  2. Ask each contractor for a written bid on the same disaster repair, with any upgrade or addition the local building code does not require on its own line, paid from other money.
  3. Pay in stages as parts of the job are finished, not the whole price up front.
  4. Keep the invoice, receipt and photos for every payment made with loan money.
  5. If the job stalls or the contractor stops showing up, tell SBA in writing before the loan money sits unused.
  6. If you find hidden damage, or the work is unfinished or poor, ask SBA about a loan increase before you hire someone else.

When does a contractor see your number on InstaBids?

Contact details stay hidden until the homeowner picks a contractor and they confirm the connection.

Source: InstaBids process and privacy, live-page excerpts, read 22 October 2026.

Post your job on InstaBids, and contractors can bid in writing on one written scope.

Homeowners anywhere in the US can post a job; once you send it, InstaBids finds contractors to bid on it.

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