Reports are indicating that this year could bring one of the most active hurricane seasons in history. For small businesses, particularly those in coastal regions, this news isn't just about weather; it's about potential economic devastation. At Loan Mantra, we understand the unique vulnerabilities of small businesses. We know that proactive preparation isn't just wise, it's essential for your survival. Disaster relief for small businesses is vital to success after the storm. But how can you prepare before emergency strikes?
Here's how small businesses can mitigate the economic impacts of natural disasters, specifically hurricanes.
Disaster Relief for Small Businesses: Prepare NOW
The economic impact of hurricanes on small businesses can be catastrophic. Beyond the immediate physical damage to property and inventory, storms trigger a cascade of challenges:
- Disrupted Operations and Lost Revenue: Even without direct damage a small business can be impacted by disaster. Power outages, road closures, and evacuation orders can halt operations for days or weeks, leading to significant lost income.
- Supply Chain Disruptions: Your ability to receive materials or ship products can be severely hampered, impacting production and delivery.
- Loss of Customers: Local customers may be focused on their own recovery, reducing demand for non-essential goods and services. Tourist-dependent businesses face a particularly steep challenge as a direct result to physical conditions.
- Insurance Shortfalls: While insurance is vital, policies may not cover all damages. Likewise, claims can take time to process, delaying much-needed funds. It is important to know whether your business is in a covered disaster area before disaster strikes.
- Long-Term Economic Lingering: Population displacement, shifts in property values, and changes in business investment can alter the economic landscape for years. This not only deters new business but potentially leads to downward economic trends.
The grim reality is that a significant percentage of small businesses that shut down due to a disaster never reopen. Preparing now can be the difference between weathering the storm and permanent closure.
How to Prepare: A Small Business Action Plan
A comprehensive Business Continuity Plan is the roadmap to recovery and an expeditious template to acquire disaster relief for small businesses. Your Plan should outline steps to take before, during, and after a storm, and address critical aspects of your operations. In drafting the plan, you will be better prepared to understand insurance needs and to plan for potential disasters. After completing the plan, you will be in better stead to receive financial assistance.
Business Continuity Planning
Here are some potential questions to ask yourself as you draft you develop and draft your Business Continuity Plan following any natural disaster. These suggestions, however, have been templated for hurricane assistance:
- Assess Your Risks and Vulnerabilities: Identify the specific threats to your business. Are you most at risk because of flooding, wind damage, power outages, or supply chain disruptions? Understand how each could impact your operations.
- Check FEMA's Flood Map Service Center for flood risk information.
- Protect Your Physical Property:
- Inspect and reinforce roofs, windows, and doors. Consider shutters or plywood.
- Secure or move any outdoor equipment and materials that could become projectiles during major disaster declarations.
- Implement flood protection measures, such as sandbags or flood walls, especially for low-lying entrances.
- Avoid storing critical equipment in basements. Ensure generators are operational and have fuel reserves.
- Safeguard Your Data: Back up all critical business data (customer information, financial records, inventory) to secure cloud-based systems. Be sure to safeguard information at all off-site physical locations.
- Establish Communication Plans:
- Create updated employee contact lists and a clear communication strategy to enact before, during, and after the storm.
- Develop a plan for communicating with customers (e.g., website banners, social media updates, email alerts about closures or operational changes).
- Identify key employees who can serve on a recovery team. Assign their roles and responsibilities.
- Prepare for Remote Operations: If possible, establish systems and procedures for remote work. This allows your team to continue operations even if your physical location is inaccessible. Utilize cloud tools for file sharing and collaboration.
- Diversify Revenue Streams: Explore online ordering, delivery services, digital consultations, or gift cards and memberships to maintain cash flow. This will allow operations to continue, even if your physical store is closed.
Review and Strengthen Your Insurance Coverage
This is non-negotiable. Every small business should know their coverage policy and contingencies. Too often, small business owners check their coverage after a disaster only to discover they aren’t properly covered. Here are some tips as it relates to insurance:
- Property Insurance: Ensure your policy covers the specific types of damage you might encounter from a hurricane, including wind and water damage.
- Flood Insurance: Standard property insurance often excludes flood damage. If you're in a flood-prone area, obtain separate flood insurance.
- Business Interruption Insurance: This crucial coverage compensates your business for lost income and extra expenses (like payroll, taxes, and loan payments) incurred during a temporary shutdown due to a covered event. It's often an add-on to your property policy.
- Document Everything: Maintain accurate financial records (revenue, expenses, asset purchases) as this will be vital for any insurance claims or additional disaster assistance. Photograph and/or video any damage immediately after a storm.
Test Your Plan
Regularly practice your emergency response and business continuity plans with your staff. This helps identify weaknesses and ensures everyone knows their role when a real crisis strikes. It also readies qualification for disaster relief for small businesses.
Other Options for Small Businesses Concerned About Natural Disasters
Even with the best preparation, natural disasters can still deliver a severe blow to small businesses. Here are critical resources and options for small businesses facing the economic aftermath:
Small Business Administration (SBA) Disaster Loans
The SBA offers low-interest disaster loans to help businesses recover from declared disasters. These are often a lifeline for businesses of all sizes, non-profits, and even homeowners.
- Business Physical Disaster Loans: These cover the repair or replacement of damaged business property, including real estate, machinery, equipment, inventory, and supplies.
- Economic Injury Disaster Loans (EIDL): EIDLs provide working capital to help small businesses meet ordinary and necessary financial obligations that cannot be met due to a disaster, even if there's no physical damage. This can cover expenses like health care benefits, rent, utilities, and fixed debt payments.
- Mitigation Assistance: You may be eligible to increase your physical damage loan to include funds for mitigation projects that reduce future damage.
How to Apply: Apply online through the SBA website. The SBA will send an inspector to estimate damage once your application is complete. You can also visit a Disaster Recovery Center (DRC) or call their customer service center.
FEMA Grants and Assistance
While FEMA primarily assists individuals and governments, they offer programs that indirectly benefit businesses:
- Hazard Mitigation Assistance Grants: These grants provide funding for eligible measures that reduce long-term risk to people and property from future disasters.
- Disaster Recovery Centers (DRCs): These centers offer information and advice about community, state, and federal agencies, and other available assistance for your business.
State and Local Programs
Many states and local governments offer their own grant and loan programs to support businesses impacted by disasters. For example, some states provide grants for working capital or loans for rebuilding. Check with your state's emergency management agency or economic development office for specific programs. Loan Mantra’s State Resources index can help you locate these kinds of agencies and offices.
Alternative Funding Solutions: Disaster Relief for Small Businesses (Post-Disaster)
While not disaster-specific, these options might become critical if traditional avenues are slow or insufficient.
- Merchant Cash Advances (MCAs): If your business has consistent credit card sales, an MCA could provide quick access to capital, though they often come with higher costs. It is advisable to borrowers to exhaust all other borrowing options before taking out an MCA loan from private lenders.
- Lines of Credit: If you have an existing business line of credit, it can offer flexible access to funds for immediate needs.
- Community Development Financial Institutions (CDFIs): These non-profit organizations often provide affordable loans and financial services to underserved communities and can be a good resource for businesses in recovery.
- Crowdfunding: For some businesses, appealing to the public through crowdfunding platforms can generate quick support, especially if your story resonates with a wider audience.
- Non-Profit Organizations and Community Support: Many local and national non-profits offer direct assistance, resources, or connections to funding for businesses affected by disasters.
Don't Wait – Act Now!
The forecast for this hurricane season is a stark reminder that preparedness is paramount. Take proactive steps to create a robust business continuity plan, secure adequate insurance, and understand available disaster relief options. With this preparation, your small business can significantly increase its resilience and improve its chances of riding out the storm.
At Loan Mantra, we are committed to helping small businesses navigate financial challenges with our financial experts and award-winning financial technology. While we hope for a quiet hurricane season, being prepared is the best insurance you can have. Start your planning today and reach out with questions. Our friendly team of experts is here to help.