It's hard enough for entrepreneurs to manage the day-to-day rigors of business ownership, let alone cope with unprecedented damage caused by hurricanes, fires, floods and snow storms.
Fortunately, the Small Business Administration ("SBA") understands the sudden hardship business owners face from weather-related disasters and has a number of programs to help businesses recover from a crisis.
What should every business owner know about SBA disaster recovery programs long before a tragedy touches down in your home town?
Once the President, a state governor, the Secretary of Agriculture or the Secretary of Commerce declares a disaster, small business owners can apply for disaster recovery loans of up to $2 million. These loans carry a low interest rate and may be issued with repayment terms as long as 30 years. It's important to note that SBA disaster loan programs are only available for a short window of time after the declaration of a disaster, so it is important to act fast.
The SBA's most popular loan program helps business owners repair or replace damaged buildings, fixtures, inventory and equipment that are not covered by other commercial insurance. The SBA grants physical property disaster loans up to $2 million.
The SBA also offers an economic injury disaster loan called "EIDL", which can be an important source of working capital relief. To qualify for an EIDL, business owners have to demonstrate the inability to pay existing loans, rent and other ordinary and necessary operating expenses. Final loan amounts are based on actual economic injury, the creditworthiness of the business and its owners and other reasonable financial needs related to starting up the business again.
The SBA's website offers detailed information about its disaster loan program at www.sba.gov. Business owners can also talk to an SBA representative at 1-800-659-2955.
Even if your business is not affected by Super Storm Sandy, you can take steps today to make it easier for your company to deal with a disaster in the future. Here’s how:
Secure key documents. The most common reason why SBA assistance is delayed to businesses in need is lack of access to a company’s financial records, sales reports and information about equipment and other damaged asset values to help complete loan approval applications.
The recent hurricane should motivate all business owners to store extra copies of personal and business historical financial records, customer data and tax identification numbers at an offsite location or at online data centers that can be accessed anytime and from anywhere.
Communicate with creditors. It’s easy for business owners to become overwhelmed after a disaster, but this is the time when a few decisive actions can help businesses survive. At the top of any company’s survival plan should be contacting all creditors. You may be able to buy extra payment time provided you call them before they call you. Sympathetic creditors may relax payment terms or keep delinquent payment information away from credit bureaus. You also have to have creditor contact information stored offsite in the event of a system’s shutdown at your company’s offices in order to make the call.
Communicate with customers. Unfortunately, disasters represent an opportunity for competitors to poach business customers. To minimize your company’s vulnerability, reach out to top customers quickly. Layout plans to restore service and return to normal operations too. Again, take steps to have up-to-date customer contact information available to you during an emergency.
I am most proud to be an American in times of crisis. Everywhere you turn, people and businesses are pitching in to help their neighbors cope. It’s my hope that all small businesses that have been affected by Super Storm Sandy emerge quickly from the disaster with a renewed sense of pride and purpose.
Susan Schreter is a 20-year veteran of the venture finance community and entrepreneurship educator. Her work is dedicated to improving startup longevity in rural, urban and suburban America. She is the founder of www.takecommand.org, a community service organization that offers the largest centralized database of startup and small business funding sources in the U.S. Follow Susan on Twitter @TakeCommand.