These Financial Lifelines Can Help Your Small Business Survive When Disaster Strikes
Is your small business resilient enough to weather unexpected storms?
Putting out figurative fires and getting flooded with daily demands may be part of running a small business. But when Mother Nature dishes out an actual flood, fire or other disaster, the impact on small businesses can be devastating.
Some companies never recovered from the wounds caused by Hurricane Harvey, which temporarily disabled a majority of Houston-area businesses. During the December 2017 Southern California wildfires, local small businesses that were lucky enough to escape a fiery fate still suffered other effects such as staffing issues due to freeway closures. And more recently, travel- and tourism-related enterprises on Hawaii’s Big Island took a hit as news of the erupting Kilauea volcano chased away potential customers.
Property damage, data loss, telecommunication outages, absent employees and disrupted supply lines may, at times, be unavoidable consequences of a catastrophic event such as a fire, flood, earthquake, volcano, drought, landslide or severe storm. Fortunately, most small businesses are resilient enough to survive these disasters and financial lifelines exist to help them weather life’s unexpected storms.
Following are invaluable resources for small businesses in need of disaster assistance:
SBA Disaster Loans
To qualify, your business or home must be in an affected area as stated by a disaster declaration. This site allows you to search by state and county to see if the incident is a “Presidential and SBA Agency Declared Disaster” or a “Secretary of Agriculture Declared Disaster.”
The U.S. Small Business Administration has two loan programs to help disaster victims: one is for physical damages and the other is for economic injury. The SBA allows businesses in disaster-declared areas to borrow up to $2 million for any combination of property damage or economic injury. These low-interest loan programs serve businesses of any size, as well as private nonprofit organizations and homeowners and renters.
- SBA Business Physical Disaster Loans. If you live in a disaster-declared area and experience property damage as a result, an SBA Business Physical Disaster Loan can help you cover losses not fully compensated by insurance. These loans can be used to cover the costs of repairing or replacing physical items that were damaged or destroyed in a declared disaster, including real estate, personal property, machinery and equipment, and inventory and business assets.
- SBA Economic Injury Disaster Loans. Even if your property was not damaged in a disaster, you can still apply for a working capital loan to help your business resume normal operations. An SBA Economic Injury Disaster Loan allows you to fulfill financial obligations and pay operating expenses that could have been met had the disaster not occurred.
If you have questions about SBA disaster loans, can contact your SBA District Office.
Emergency Farm Loans
In April, the U.S. Department of Agriculture designated multiple counties across Utah as natural disaster areas due to losses and damages caused by a recent drought. Farmers and ranchers in these areas are eligible for the Farm Service Agency’s emergency loan program, which is designed to help agricultural businesses rebuild and recover from sustained losses due to drought, tornado, flood or other calamity.
Business Line of Credit
Opening a business line of credit now will ensure your small business has access to short-term, working capital in the event of an emergency. Credit lines, like Zions Bank’s business line of credit, give you the flexibility to borrow only what you need when your business needs it, so you so you only pay interest on the amount of money you actually use. If you don’t qualify for disaster assistance, a business line of credit can be a lifesaver in covering your company’s short-term cash needs.
While the Federal Emergency Management Agency does not offer disaster assistance to small businesses, it does provide referrals to help businesses get the help they need. In the event of a disaster, register with FEMA by visiting www.disasterassistance.gov or calling (800) 621-FEMA (3362).
IRS Tax Law Provisions
Special tax laws may help businesses recover financially from the impact of a disaster. If you live in a federally declared disaster area, you may be eligible for an expedited refund by claiming disaster-related losses on the previous year’s tax return — usually by filing an amended return. Check with your tax adviser for more information.
In the event of a disaster, let your lender know about your financial situation so they can work with you. Also check to see if a Disaster Recovery Center has been set up in your area, where you can get advice and assistance from representatives of multiple government agencies, including the SBA.
Did you know that your small business could be listed as a government-approved small business contractor to provide supplies and services for affected areas after a disaster? More information is available on the SBA website.