Partners (Number 3, 2004)
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
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.
Accessing public and private resources
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 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
“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
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.
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 http://www.hopecoalitionamerica.org/.