Partners (Number 3, 2004)

Help for Small Business in the Wake of the Storm

Small business recovery after a natural disaster is a slow and difficult process. This proved particularly true in Florida and other affected areas of the Sixth District in the wake of this summer’s destructive hurricane season.

Fortunately, the lessons learned from previous natural disasters can be useful for small business owners as they access resources for rebuilding now and adopt loss-mitigation strategies for the future.

An immediate issue for a damaged business is loss of cash flow. Affected businesses may have to shut down operations for weeks or even months. The resulting loss of revenue makes it difficult for a small business to keep staff on the payroll. Even if a business is ready to open again following a disaster, loss of power and stranded suppliers may make it impossible to resume operation.

Furthermore, since most small business owners live and work in the same community, they may also have to deal with personal losses.

Hurricane Andrew provided many lessons to relief experts in 1992. First, assistance efforts need to start immediately, and it should be clear to the community that resources are sufficient to sustain the recovery. Furthermore, both business owners and residents need a constant stream of information and guidance about how to deal with their losses.

All of this activity directed toward recovery fosters a sense of hope in the community so they can focus on rebuilding rather than on all that was lost.

Planning ahead for the unexpected
Planning ahead improves the recovery process following a disaster. Emergency management teams work before, during, and after large disasters. Businesses need to adopt the same philosophy by forming an emergency plan that identifies resources to protect its assets from loss—even in a recovery.

Many businesses think that having insurance is all the preparation they need. However, it is far more likely for businesses to be under-insured and to lack coverage for certain types of damages. Taking some time, at least once a year, to make sure that critical assets are protected is important.

Although insurance will be the first line of defense in covering the physical damages to the business, there are other damages that will take weeks or months to settle in addition to those that fall outside the realm of insurance. For example, insurance cannot replace employees who move away to find housing. It also will not help with impassable roads, lost customers, or wealth erosion in the community.

Photo by Michael Rieger courtesy of FEMA.

Accessing public and private resources
When a business’s insurance and its own savings are not enough for rebuilding, help must be sought from outside. Public and private resources are available to relieve devastated areas, but businesses must take the initiative to seek help.

Federal resources are most often mentioned in relation to relief efforts; however, these resources are the most overlooked and under-utilized. Many residents and small business owners either do not realize that they are eligible for relief or wait for it to come to them without making a request to an agency.

Government disaster relief resources for small businesses and employees
Federal assistance for communities dealing with disasters comes from the Federal Emergency Management Agency (FEMA). FEMA directs three general types of programs: individual assistance, public assistance, and hazard mitigation. These federal relief programs target uninsured and under-insured losses, both to individuals and to businesses. FEMA also helps local governments replace or repair public property, such as traffic lights, parks, or schools.

Federal assistance is offered through both loans and grants. Low interest, long-term loans are the most common form of support for businesses. These loans are available through the Small Business Administration (SBA), which acts as a direct lender. The SBA usually only offers guarantees on small business loans made by lenders using SBA guidelines, but it makes exceptions after a natural disaster to expedite relief efforts.

John Dunn, assistant director of development, says that the SBA extends more flexibility in its business-size eligibility and underwriting standards to provide disaster relief. However, certain standards will still apply. “Poor credit history or a past loan default with SBA may keep a business from accessing relief,” Dunn points out. He stresses, however, that every business should contact FEMA to discuss its needs.

Some business owners decide to lay off employees if their business is not able to resume full operations. Individuals not eligible for existing unemployment compensation programs can apply to the Disaster Unemployment Assistance (DUA) program for help. DUA provides unemployment benefits and re-employment services to individuals who become unemployed due to disaster. It is especially helpful to persons who are self-employed, farmers, and migrant or seasonal workers.

FEMA and the SBA maintain disaster relief specialists around the country for immediate dispatch to an area affected by disaster. They set up disaster recovery centers and employ a large number of local workers who are trained to staff the centers. These centers become the point of contact for many of the services offered to individuals and businesses. Assistance can also be requested by phone or online, but the centers are most convenient during power outages.

Lessons learned from Hurricane Andrew
Hurricane Andrew underlined the importance of business resumption in protecting the demographic profile of a community. Keeping jobs and shoring up revenues help the community leverage disaster assistance for a complete recovery. “But working to simply replace is not always effective,” says Maria Pellerin Barcus, executive director of Carrfour Supportive Housing Inc. She says that rebuilding is more complicated than that.

Photo by Andrea Booher courtesy of FEMA.

“People lost their house or their job, or both,” she explains. “So they simply left the area.” Rebuilding what was there before the damage, she points out, is not always the best way to recover. For some people and some businesses, moving away from the area is the best thing. “Many times the community will ‘shrink’ after a large scale disaster,” she says.

Barcus notes that although relief funds often target the affected community, it will take the stricken area up to 12 months or more to rebuild housing and commercial space fully. Surrounding communities that were unaffected or less affected by the disaster will be able to offer immediate housing or work space for those displaced. “Funding that is allowed to be employed in these neighboring communities,” she suggests, “really helps people recover.”

The displacement caused by Andrew’s damage resulted in unanticipated ripple effects in the area. Barcus says there was such an intense focus on replacing housing in the hardest hit section of the county, that comprehensive development planning was overlooked. As a result, a high concentration of affordable housing exists in the southern county, far from where jobs eventually resurfaced.

The role of nonprofits
Nonprofit organizations, especially business development funds, can play several roles in the recovery process and need to stay informed about recovery efforts. Nonprofits may be asked to redirect their services to help with the recovery. But each organization will need to decide whether this type of assistance matches its mission and capacity.

Nonprofits may also be more effective than federal agencies in informing community residents about the types of assistance available, as well as helping them complete the required applications. If disaster recovery programs do not meet the needs of a particular population, nonprofits can serve as effective advocates for special help from local government or service agencies.

Recovery from disaster is not easy for anyone. It is a difficult time in a community even for residents and businesses that do not suffer damage. Getting back to normal requires being prepared, staying informed, and having lots of patience. The past hurricane season in Florida tested everyone, but things are now moving ahead.

This article was written by Ana Cruz-Taura, regional community development director in the Atlanta Fed’s Miami Branch.

Additional information on assistance for Florida hurricane victims is available at and

Note: The U.S. Department of Homeland Security Citizen Corps, Federal Emergency Management Agency, USA Freedom Corps, and Operation HOPE, Inc. (OHI) have created a tool to help Americans minimize the financial impact of a natural disaster or national emergency. To download a free copy of the Emergency Financial First Aid Kit (EFFAK), please visit the website at

Florida Small Business Loans Bridge the Gap

Small businesses, always vulnerable to economic downturns, are especially affected by the disruption and physical damage caused by natural disasters. Florida has responded with a special loan program to help stricken entrepreneurs reopen their doors.

Florida Small Business
Emergency Bridge loan program

First activated in the aftermath of Hurricane Andrew, the Florida Small Business Emergency Bridge (SBEB) loan program provides short-term emergency funds to businesses in need of immediate cash flow to begin repairs and replace inventory. The bridge loan program has since helped to minimize the economic impacts of the winter storm of 1993, the northwestern Florida floods of 1994, Hurricane Opal, and Hurricane George.

Short-term loans available through the program are intended to “bridge the gap” between a major catastrophe and the time required for a business to mobilize resources to cope with the damage. Eventually profits from revived businesses, receipt of payments on insurance claims, and secured long-term loans, including disaster loans from the U.S. Small Business Administration (SBA), will be available to business owners, but SBEB provides help right away.

The Florida SBEB program goes into effect whenever a state or federal disaster area is declared in any Florida county. Small businesses (those with less than one hundred employees) in the areas affected by the four hurricanes last season were eligible for short-term loans up to $25,000.

With maturities of 90 to 180 days, SBEB loans are interest-free. No payments are due during the term of the loan. Eligible businesses must have been operational for one full year prior to the hurricane and able to verify physical damage.

Counties authorized to participate in the program administer bridge loans in cooperation with the State of Florida, Enterprise Florida Inc., and local banks. Participating financial institutions originate and underwrite loan applications as a public service and do not charge fees to potential borrowers.

A five-member committee, including representatives from three local banks, one community representative, and one representative from Enterprise Florida Inc. or the Governor’s Office of Tourism, Trade, and Economic Development, reviews the applications as quickly and efficiently as possible. The time from receipt of the application through the loan closing can be as little as 72 hours.

At the end of November 2004, 1,688 loans had been approved for a total loan value of $35.3 million. Applications were accepted up to 60 days after the natural disaster event.

“We know the last few weeks have been extremely difficult for those business owners impacted by Charley and now Frances,” said Governor Bush. “Restoring our vibrant small business community is key to Florida’s recuperation from the recent storms, and this ‘Bridge Loan’ program is an integral part of our recovery effort. By offering an immediate source of cash flow for businesses most in need, these short-term loans can serve as a bridge from being ‘out of operation’ to ‘we’re back in business’!”

This article was written by Janet Hamer, regional community development manager in the Atlanta Fed’s Jacksonville Branch.


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